10-Q

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

   (Mark One)

Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended April 30, 2010

Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Commission File Number:    0-7928

(Exact name of registrant as specified in its charter)

Delaware	11-2139466
(State or other jurisdiction of incorporation /organization)	(I.R.S. Employer Identification Number)
68 South Service Road, Suite 230, Melville, NY	11747
(Address of principal executive offices)	(Zip Code)

(631) 962-7000

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

 Yes                  No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

 Yes                  No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer                                         Accelerated filer                                               

Non-accelerated filer                                           Smaller reporting company

Indicate by check mark whether registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

 Yes                  No

APPLICABLE ONLY TO CORPORATE ISSUERS:

As of June 1, 2010, the number of outstanding shares of Common Stock, par value $.10 per share, of the registrant was 28,309,540 shares.

COMTECH TELECOMMUNICATIONS CORP.

 INDEX

		Page
PART I.   FINANCIAL INFORMATION
Item 1.	Condensed Consolidated Financial Statements
	Condensed Consolidated Balance Sheets – April 30, 2010 (Unaudited) and July 31, 2009	2
	Condensed Consolidated Statements of Operations – Three and Nine Months Ended April 30, 2010 and 2009 (Unaudited)	3
	Condensed Consolidated Statements of Cash Flows – Nine Months Ended April 30, 2010 and 2009 (Unaudited)	4
	Notes to Condensed Consolidated Financial Statements	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	22
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	40
Item 4.	Controls and Procedures	40
PART II.   OTHER INFORMATION
Item 1.	Legal Proceedings	41
Item 1A.	Risk Factors	41
Item 6.	Exhibits	42
	Signature Page	43

1

PART I

FINANCIAL INFORMATION

COMTECH TELECOMMUNICATIONS CORP. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

Item 1.	April 30, 2010			July 31, 2009
Assets	(Unaudited)			(as adjusted- See Note 2)
Current assets:
Cash and cash equivalents	$	568,277,000			485,450,000
Accounts receivable, net		107,695,000			79,477,000
Inventories, net		75,077,000			95,597,000
Prepaid expenses and other current assets		9,745,000			13,398,000
Deferred tax asset		13,919,000			15,129,000
Total current assets		774,713,000			689,051,000
Property, plant and equipment, net		33,549,000			38,486,000
Goodwill		149,253,000			149,253,000
Intangibles with finite lives, net		50,102,000			55,272,000
Deferred financing costs, net		5,022,000			6,053,000
Other assets, net		1,271,000			556,000
Total assets	$	1,013,910,000			938,671,000
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	43,798,000			19,233,000
Accrued expenses and other current liabilities		47,216,000			51,741,000
Customer advances and deposits		10,951,000			19,571,000
Interest payable		3,031,000			1,418,000
Income taxes payable		8,296,000			563,000
Total current liabilities		113,292,000			92,526,000
Convertible senior notes		200,000,000			200,000,000
Other liabilities		2,420,000			2,283,000
Income taxes payable		5,088,000			4,267,000
Deferred tax liability		8,321,000			10,466,000
Total liabilities		329,121,000			309,542,000
Commitments and contingencies (See Note 20)
Stockholders’ equity:
Preferred stock, par value $.10 per share; shares authorized and unissued 2,000,000		-			-
Common stock, par value $.10 per share; authorized 100,000,000 shares; issued 28,518,477 shares and 28,390,855 shares at April 30, 2010 and July 31, 2009, respectively		2,852,000			2,839,000
Additional paid-in capital		344,142,000			335,656,000
Retained earnings		337,980,000			290,819,000
		684,974,000			629,314,000
Less:
Treasury stock (210,937 shares)		(185,000	)		(185,000	)
Total stockholders’ equity		684,789,000			629,129,000
Total liabilities and stockholders’ equity	$	1,013,910,000			938,671,000

See accompanying notes to condensed consolidated financial statements.

2

COMTECH TELECOMMUNICATIONS CORP. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

	Three months ended April 30,						Nine months ended April 30,
	2010			2009			2010			2009
				(as adjusted- See Note 2)						(as adjusted- See Note 2)
Net sales	$	216,303,000			128,545,000			521,251,000			464,346,000
Cost of sales		141,512,000			81,040,000			333,185,000			270,385,000
Gross profit		74,791,000			47,505,000			188,066,000			193,961,000
Expenses:
Selling, general and administrative		25,628,000			23,062,000			70,256,000			78,009,000
Research and development		11,383,000			11,410,000			34,138,000			38,057,000
Amortization of acquired in-process research and development (See Note 7)		-			-			-			6,200,000
Amortization of intangibles		1,754,000			1,805,000			5,283,000			5,394,000
		38,765,000			36,277,000			109,677,000			127,660,000
Operating income		36,026,000			11,228,000			78,389,000			66,301,000
Other expenses (income):
Interest expense		1,980,000			928,000			5,913,000			4,647,000
Interest income and other		(315,000	)		(404,000	)		(728,000	)		(2,307,000	)
Income before provision for income taxes		34,361,000			10,704,000			73,204,000			63,961,000
Provision for income taxes		12,565,000			3,094,000			26,043,000			22,614,000
Net income	$	21,796,000			7,610,000			47,161,000			41,347,000
Net income per share (See Note 6):
Basic	$	0.77			0.27			1.67			1.61
Diluted	$	0.67			0.27			1.48			1.55
Weighted average number of common shares outstanding – basic		28,291,000			27,779,000			28,254,000			25,708,000
Weighted average number of common and common equivalent shares outstanding – diluted		34,086,000			28,093,000			34,074,000			28,540,000

See accompanying notes to condensed consolidated financial statements.

3

COMTECH TELECOMMUNICATIONS CORP. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	Nine months ended April 30,
	2010			2009
				(as adjusted- See Note 2)
Cash flows from operating activities:
Net income	$	47,161,000			41,347,000
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization of property, plant and equipment		8,780,000			9,016,000
Amortization of acquired in-process research and development		-			6,200,000
Amortization of intangible assets with finite lives		5,283,000			5,394,000
Amortization of stock-based compensation		5,758,000			7,049,000
Amortization of fair value inventory step-up		-			1,520,000
Deferred financing costs		1,039,000			3,502,000
Loss on disposal of property, plant and equipment		87,000			10,000
Provision for allowance for doubtful accounts		159,000			9,000
Provision for excess and obsolete inventory		6,233,000			3,020,000
Excess income tax benefit from stock award exercises		(252,000	)		(2,532,000	)
Deferred income tax benefit		(935,000	)		(1,516,000	)
Changes in assets and liabilities, net of effects of acquisitions and sale of certain assets and liabilities:
Accounts receivable		(28,377,000	)		4,321,000
Inventories		12,129,000			9,632,000
Prepaid expenses and other current assets		3,916,000			(5,719,000	)
Other assets		(715,000	)		47,000
Accounts payable		24,565,000			(16,964,000	)
Accrued expenses and other current liabilities		(4,373,000	)		(13,219,000	)
Customer advances and deposits		(8,513,000	)		(2,014,000	)
Other liabilities		137,000			188,000
Interest payable		1,613,000			(1,050,000	)
Income taxes payable		8,813,000			1,371,000
Net cash provided by operating activities		82,508,000			49,612,000
Cash flows from investing activities:
Purchases of property, plant and equipment		(4,202,000	)		(10,430,000	)
Purchases of other intangibles with finite lives		(113,000	)		(100,000	)
Proceeds from sale of certain assets and liabilities		2,038,000			-
Payments for business acquisitions, net of cash acquired		-			(205,360,000	)
Net cash used in investing activities		(2,277,000	)		(215,890,000	)
Cash flows from financing activities:
Proceeds from exercises of stock options		1,477,000			7,979,000
Proceeds from issuance of employee stock purchase plan shares		993,000			988,000
Excess income tax benefit from stock award exercises		252,000			2,532,000
Transaction costs paid associated with issuance of convertible senior notes		(118,000	)		-
Origination fees paid associated with line of credit		(8,000	)		-
Principal payments on other obligations		-			(108,000	)
Net cash provided by financing activities		2,596,000			11,391,000
Net increase (decrease) in cash and cash equivalents	$	82,827,000			(154,887,000	)
Cash and cash equivalents at beginning of period		485,450,000			410,067,000
Cash and cash equivalents at end of period	$	568,277,000		$	255,180,000

See accompanying notes to condensed consolidated financial statements.

(Continued)

4

COMTECH TELECOMMUNICATIONS CORP. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)

(Unaudited)

	Nine months ended April 30,
	2010		2009
			(as adjusted- See Note 2)
Supplemental cash flow disclosures:
Cash paid during the period for:
Interest	$	3,132,000		2,105,000
Income taxes	$	18,436,000		21,661,000
Non cash investing activities:
Common stock issued in exchange for convertible senior notes (See Note 13)	$	-		94,146,000

See accompanying notes to condensed consolidated financial statements.

5

COMTECH TELECOMMUNICATIONS CORP. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(1)   General

The accompanying condensed consolidated financial statements of Comtech Telecommunications Corp. and Subsidiaries (“Comtech,” “we,” “us,” or “our”) as of and for the three and nine months ended April 30, 2010 and 2009 are unaudited.  In the opinion of management, the information furnished reflects all material adjustments (which include normal recurring adjustments) necessary for a fair presentation of the results for the unaudited interim periods.  Our results of operations for such periods are not necessarily indicative of the results of operations to be expected for the full fiscal year. For the three and nine months ended April 30, 2010 and 2009, comprehensive income was equal to net income.

The preparation of our financial statements in conformity with accounting principles generally accepted in the United States of America requires us to make estimates and assumptions that affect the reported amount of assets and liabilities, and disclosure of contingent assets and liabilities, at the date of the financial statements, and the reported amounts of revenues and expenses during the reported period. Actual results may differ from those estimates.

Our condensed consolidated financial statements should be read in conjunction with our audited consolidated financial statements, filed with the Securities and Exchange Commission (“SEC”), for the fiscal year ended July 31, 2009 and the notes thereto contained in our Annual Report on Form 10-K, and all of our other filings with the SEC.

(2)   Impact of Adoption of New Accounting Standards Codification and Adoption of New Accounting Standards

Adoption of Financial Accounting Standards Board Accounting Standards Codification

On August 1, 2009, we adopted the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) which was issued in June 2009. The FASB ASC requires that, in addition to rules and interpretive releases of the SEC and federal securities law, and except for certain accounting standards which were grandfathered, we are required to use FASB ASC in our current and future financial statements as the source for all authoritative generally accepted accounting principles, which is commonly referred to as “GAAP.” Our adoption of FASB ASC had no impact on our financial position or results of operations. However, as a result of the adoption of FASB ASC, except for grandfathered accounting standards, historical references to original accounting standards adopted or utilized by us in prior periods reflect references that are contained in the FASB ASC.

Adoption of New Accounting Standard Relating to Historical Reporting of our 2.0% Convertible Senior Notes

On August 1, 2009, although our 2.0% convertible senior notes were no longer outstanding, we were required to retroactively adjust the historical reporting relating to our 2.0% convertible senior notes in accordance with FASB ASC 470-20, “Debt - Debt with Conversion and Other Options.” FASB ASC 470-20 requires that we retroactively separate the imputed liability and equity components of our 2.0% convertible senior notes in our consolidated balance sheet on a fair value basis and record interest expense at our estimated imputed non-convertible debt borrowing rate of 7.5%. The adoption of FASB ASC 470-20 did not impact our historically reported diluted earnings per share for any fiscal year end. On November 13, 2009, we filed a Report on Form 8-K with the SEC which contains our financial statements for the historical fiscal years ended July 31, 2005 through July 31, 2009, as retroactively adjusted for the adoption of FASB ASC 470-20.

The required retroactive application of FASB ASC 470-20 resulted in the following adjustments to our historically reported Consolidated Statement of Operations for the three and nine months ended April 30, 2009: (i) an increase in interest expense of $887,000 and $3,229,000, respectively; (ii) a decrease in provision for income taxes of $328,000 and $1,196,000, respectively; and (iii) a decrease in net income of $559,000 and $2,033,000, respectively. The retroactive application also resulted in the following adjustments to our Consolidated Balance Sheet at July 31, 2009: (i) an increase of $13,020,000 to additional paid-in capital; and (ii) a decrease of $13,020,000 to retained earnings. Our comparative financial statements for the year ending July 31, 2010 will contain similar adjustments to historical financial information for fisca l 2009.

6

Adoption of New Accounting Standard Relating to Future Business Combinations

On August 1, 2009, we adopted FASB ASC 805, “Business Combinations,” which applies prospectively to business combinations for which the acquisition date is on or after August 1, 2009. Except as we note below, accounting standards relating to our prior acquisitions have been grandfathered. Amongst other items, the new accounting standard requires that: (i) acquisition costs be recognized as expenses; (ii) known contractual contingencies at the time of the acquisition will be considered part of the liabilities acquired that are measured at their fair value; all other contingencies will be part of the liabilities acquired that are measured at their fair value only if it is more likely than not that they meet the definition of a liability; (iii) contingent consideration based on the outcome of future events will be recognized and measured at the time of the acquisition; and (iv) a bargain purchase will require that the excess of fair value over purchase price be recognized as a gain attributable to the acquirer. In addition, if the fair value of assets or liabilities cannot be reasonably determined, then they would generally be recognized in accordance with ASC 450-20, “Contingencies – Loss Contingencies.”

Accounting standards relating to our historical acquisitions have been grandfathered, except for the accounting standards relating to the resolution of acquisition-related tax contingencies. FASB ASC 805-740, “Business Combinations – Income Taxes,” requires that any adjustments to our historical acquisition-related tax contingencies be recorded in our consolidated statement of operations when our estimates change or when the item is resolved. At August 1, 2009, we had approximately $3,566,000 of tax contingencies recorded in our Consolidated Balance Sheet relating to our historical acquisitions.

As further discussed in Note 21 “Subsequent Events,” the accounting for our planned acquisition of CPI International, Inc. (“CPI”) will be accounted for under FASB ASC 805.

Adoption of New Accounting Standard Relating to Financial Instruments

On August 1, 2009, we adopted FASB ASC 825, “Financial Instruments,” which requires us to disclose for annual and interim reporting periods, the fair value of financial instruments for which it is practicable to estimate that value and the method(s) and assumptions used to estimate the fair value. These disclosures are included in our current reporting in Note 5 “Fair Value Measurement.”

(3)   Reclassifications

Certain reclassifications have been made to previously reported financial statements to conform to our current financial statement format.

(4)   Stock-Based Compensation

We issue stock-based awards to certain of our employees and our Board of Directors and we recognize related stock-based compensation for both equity and liability-classified stock-based awards in our consolidated financial statements. These awards are issued pursuant to our 2000 Stock Incentive Plan and our 2001 Employee Stock Purchase Plan (the “ESPP”).

Stock-based compensation for equity-classified awards is measured at the date of grant, based on an estimate of the fair value of the award and is generally expensed over the vesting period of the grant. Stock-based compensation for liability-classified awards is determined the same way, except that the fair value of liability-classified awards is remeasured at the end of each reporting period until the award is settled, with changes in fair value recognized pro-rata for the portion of the requisite service period rendered.

Stock-based compensation for awards issued is reflected in the following line items in our Condensed Consolidated Statements of Operations:

	Three months ended April 30,						Nine months ended April 30,
	2010			2009			2010			2009
Cost of sales	$	159,000			208,000			466,000			560,000
Selling, general and administrative expenses		1,827,000			1,727,000			4,301,000			5,258,000
Research and development expenses		346,000			404,000			991,000			1,231,000
Stock-based compensation expense before income tax benefit		2,332,000			2,339,000			5,758,000			7,049,000
Income tax benefit		(839,000	)		(747,000	)		(2,134,000	)		(2,367,000	)
Net stock-based compensation expense	$	1,493,000			1,592,000			3,624,000			4,682,000

7

Of the total stock-based compensation expense before income tax benefit recognized in the three months ended April 30, 2010 and 2009, $72,000 and $111,000, respectively, related to awards issued pursuant to our ESPP. Of the total stock-based compensation expense before income tax benefit recognized in the nine months ended April 30, 2010 and 2009, $235,000 and $276,000, respectively, related to awards issued pursuant to our ESPP.

Included in total stock-based compensation expense before income tax benefit in the three months ended April 30, 2010 and 2009 is a benefit of $19,000 and a benefit of $43,000, respectively, as a result of the required fair value remeasurement of our liability-classified stock appreciation rights (“SARs”) at the end of each of the respective reporting periods. Included in total stock-based compensation expense before income tax benefit in the nine months ended April 30, 2010 and 2009 is a benefit of $13,000 and a benefit of $94,000, respectively, related to SARs. Stock-based compensation that was capitalized and included in ending inventory at both April 30, 2010 and July 31, 2009 was $277,000.

We estimate the fair value of stock-based awards using the Black-Scholes option pricing model. The Black-Scholes option pricing model includes assumptions regarding dividend yield, expected volatility, expected option term and risk-free interest rates. The assumptions used in computing the fair value of stock-based awards reflect our best estimates, but involve uncertainties relating to market and other conditions, many of which are outside of our control. Estimates of fair value are not intended to predict actual future events or the value ultimately realized by the employees who receive stock-based awards.

There were no new stock-based awards granted during the three months ended April 30, 2010. The per share weighted average grant-date fair value of stock-based awards granted during the three months ended April 30, 2009 approximated $11.01. The per share weighted average grant-date fair value of stock-based awards granted during the nine months ended April 30, 2010 and 2009 approximated $9.32 and $15.53, respectively. In addition to the exercise and grant-date prices of the awards, certain weighted average assumptions that were used to estimate the initial fair value of new stock-based awards in the respective periods are listed in the table below:

	Three months ended April 30,					Nine months ended April 30,
	2010		2009			2010			2009
Expected dividend yield		-		0	%		0	%		0	%
Expected volatility		-		40.44	%		38.00	%		40.36	%
Risk-free interest rate		-		1.38	%		1.33	%		2.80	%
Expected life (years)		-		3.52			3.50			3.61

Included in total stock-based compensation expense before income tax benefit for the three and nine months ended April 30, 2010, is an expense of approximately $494,000 which represents the estimated fair value of an increase in the respective contractual terms of 222,500 previously granted stock-based awards for eight employees. These stock-based awards were fully vested and their respective contractual lives were nearing expiration. In determining the fair value of the increase in contractual terms, we utilized the following weighted average assumptions: (i) expected life (years) of 0.88; (ii) expected volatility of 32.93%; (iii) risk free interest rate of 0.33%; and (iv) expected dividend yield of 0%.

Stock-based awards granted during the nine months ended April 30, 2010 and 2009 have exercise prices equal to the fair market value of the stock on the date of grant, a contractual term of five years and a vesting period of three years. All stock-based awards granted through July 31, 2005 have exercise prices equal to the fair market value of the stock on the date of grant, a contractual term of ten years and generally a vesting period of five years. We settle employee stock option exercises with new shares. All SARs granted through April 30, 2010 may only be settled with cash.Included in accrued expenses at April 30, 2010 and July 31, 2009 is $102,000 and $115,000, respectively, relating to the cash settlement of SARs.

We estimate expected volatility by considering the historical volatility of our stock, the implied volatility of publicly traded call options on our stock, the implied volatility of call options embedded in our 3.0% convertible senior notes and our expectations of volatility for the expected life of stock-based awards. The risk-free interest rate is based on the U.S. treasury yield curve in effect at the time of grant. The expected option term is the number of years we estimate that stock-based awards will be outstanding prior to exercise based on prior exercise patterns. The expected life of awards issued after July 31, 2005 and through July 31, 2007 was determined using a “simplified method” which is generally the sum of the vesting term and the contractual term, divided by 2. Effec tive August 1, 2007, the expected life of the awards issued was determined by employee groups with sufficiently distinct behavior patterns.

8

The following table provides the components of the actual income tax benefit recognized for tax deductions relating to the exercise of stock-based awards:

	Nine months ended April 30,
	2010			2009
Actual income tax benefit recorded for the tax deductions relating to the exercise of stock-based awards	$	472,000			3,770,000
Less: Tax benefit initially recognized on exercised stock-based awards vesting subsequent to the adoption of accounting standards that require us to expense stock-based awards		(213,000	)		(1,238,000	)
Excess income tax benefit recorded as an increase to additional paid-in capital		259,000			2,532,000
Less: Tax benefit initially disclosed but not previously recognized on exercised equity-classified stock-based awards vesting prior to the adoption of accounting standards that require us to expense stock-based awards		(7,000	)		-
Excess income tax benefit from exercised equity-classified stock-based awards reported as a cash flow from financing activities in our Condensed Consolidated Statements of Cash Flows	$	252,000			2,532,000

At April 30, 2010, total remaining unrecognized compensation cost related to unvested stock-based awards was $7,147,000, net of estimated forfeitures of $672,000. The net cost is expected to be recognized over a weighted average period of approximately 1.5 years.

In June 2010, the Company authorized, in accordance with the Company’s 2000 Stock Incentive Plan, 643,500 stock-based awards. Total unrecognized stock-based compensation, net of estimated forfeitures, related to these awards was approximately $6,407,000. These awards have exercise prices equal to the fair market value of the stock on the date of grant, a contractual term of ten years and a vesting period of five years (except for 75,000 stock-based awards which have a contractual term of five years and a vesting period of three years).

(5)   Fair Value Measurement

The value of our 3.0% convertible senior notes that are included in our Condensed Consolidated Balance Sheet, as of April 30, 2010, reflects historical cost, which is equal to its original issuance value. As such, changes in the estimated fair value of our 3.0% convertible senior notes are not recorded in our consolidated financial statements. As of April 30, 2010, we estimate that the fair value of our 3.0% convertible senior notes was approximately $213,500,000 based on recent trading activity.

As of April 30, 2010, the only assets that are included in our Condensed Consolidated Balance Sheet at estimated fair value is approximately $326,923,000 of our cash and cash equivalents which were invested in money market mutual funds. FASB ASC 820 requires us to define fair value as the price that would be received from the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. As such, using the fair value hierarchy described in FASB ASC 820, we valued our money market mutual funds using Level 1 inputs that were based on quoted market prices. If we acquire different types of assets or incur different types of liabilities in the future, we might be required to use different FASB ASC fair value methodologies.

(6)   Earnings Per Share

Our basic earnings per share (“EPS”) is computed based on the weighted average number of shares outstanding. Our diluted EPS reflects the dilution from potential common stock issuable pursuant to the exercise of equity-classified stock-based awards and convertible senior notes, if dilutive, outstanding during each period.

Equity-classified stock-based awards to purchase 2,019,000 and 1,595,000 shares, for the three months ended April 30, 2010 and 2009, respectively, were not included in our diluted EPS calculation because their effect would have been anti-dilutive. Equity-classified stock-based awards to purchase 2,042,000 and 1,273,000 shares, for the nine months ended April 30, 2010 and 2009, respectively, were not included in our diluted EPS calculation because their effect would have been anti-dilutive. Liability-classified stock-based awards do not impact and are not included in the denominator for EPS calculations. The following table reconciles the numerators and denominators used in our basic and diluted EPS calculations:

9

	Three months ended April 30,				Nine months ended April 30,
	2010		2009		2010		2009
			(as adjusted- See Note 2)				(as adjusted- See Note 2)
Numerator:
Net income for basic calculation	$	21,796,000		7,610,000		47,161,000		41,347,000
Effect of dilutive securities:
Interest expense (net of tax) on 2.0% convertible senior notes		-		-		-		2,866,000
Interest expense (net of tax) on 3.0% convertible senior notes		1,117,000		-		3,351,000		-
Numerator for diluted calculation	$	22,913,000		7,610,000		50,512,000		44,213,000
Denominator:
Denominator for basic calculation		28,291,000		27,779,000		28,254,000		25,708,000
Effect of dilutive securities:
Stock options		307,000		314,000		332,000		491,000
Conversion of 2.0% convertible senior notes		-		-		-		2,341,000
Conversion of 3.0% convertible senior notes		5,488,000		-		5,488,000		-
Denominator for diluted calculation		34,086,000		28,093,000		34,074,000		28,540,000

(7)   August 1, 2008 Acquisition of Radyne Corporation

On August 1, 2008, we acquired Radyne Corporation (“Radyne”) for an aggregate purchase price of $231,393,000 (including transaction costs and liabilities assumed for outstanding share-based awards). In accordance with grandfathered accounting standards that were not included in the FASB ASC, we allocated the final aggregate purchase price for Radyne as set forth below:

Fair value of Radyne net tangible assets acquired	$	66,296,000
Fair value adjustments to net tangible assets:
Acquisition-related restructuring liabilities (See Note 11)		(2,713,000	)
Inventory step-up		1,520,000
Deferred tax assets, net		441,000
Fair value of net tangible assets acquired		65,544,000
Adjustments to record intangible assets at fair value:				Estimated Useful Lives
In-process research and development		6,200,000		Expensed immediately
Customer relationships		29,600,000		10 years
Technologies		19,900,000		7 to 15 years
Trademarks and other		5,700,000		2 to 20 years
Goodwill		124,873,000		Indefinite
Deferred tax liabilities		(20,424,000	)
		165,849,000
Aggregate purchase price	$	231,393,000

The fair value of technologies and trademarks was based on the discounted capitalization of royalty expense saved because we now own the assets. The fair value of customer relationships and other intangibles with finite lives was primarily based on the value of the discounted cash flows that the related intangible asset could be expected to generate in the future.

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The fair value ascribed to acquired in-process research and development projects of $6,200,000 was based upon the excess earnings approach utilizing the estimated economic life of the ultimate products to be developed, the estimated timing of when the ultimate products were expected to be commercialized and the related net cash flows expected to be generated. These net cash flows were discounted back to their net present value utilizing a weighted average cost of capital. The fair value of $6,200,000 was expensed immediately during the three months ended October 31, 2008. The $6,200,000 of in-process research and development projects acquired consisted of four projects and whose development was completed during fiscal 2010.

(8)   Accounts Receivable

Accounts receivable consist of the following:

	April 30, 2010		July 31, 2009
Billed receivables from the U.S. government and its agencies	$	63,132,000		33,125,000
Billed receivables from commercial customers		42,265,000		43,813,000
Unbilled receivables on contracts-in-progress		3,701,000		3,791,000
		109,098,000		80,729,000
Less allowance for doubtful accounts		1,403,000		1,252,000
Accounts receivable, net	$	107,695,000		79,477,000

Unbilled receivables on contracts-in-progress include $3,373,000 and $3,791,000 at April 30, 2010 and July 31, 2009, respectively, due from the U.S. government and its agencies. There was $13,000 of retainage included in unbilled receivables at both April 30, 2010 and July 31, 2009. We believe that substantially all of the remaining unbilled balance will be billed and collected within one year.

(9)   Inventories

Inventories consist of the following:

	April 30, 2010		July 31, 2009
Raw materials and components	$	51,402,000		64,209,000
Work-in-process and finished goods		38,496,000		43,132,000
		89,898,000		107,341,000
Less reserve for excess and obsolete inventories		14,821,000		11,744,000
Inventories, net	$	75,077,000		95,597,000

Our inventories include amounts directly related to long-term contracts (including contracts-in-progress). The amount of inventory directly related to long-term contracts, which primarily relate to our contracts for the U.S. Army’s Movement Tracking System (“MTS”) and the U.S. Army’s Force XXI Battle Command, Brigade-and-Below command and control systems (also known as Blue Force Tracking (“BFT”)), was $16,223,000 and $21,144,000 at April 30, 2010 and July 31, 2009, respectively.

Although we have received recent contract ceiling increases for both our MTS and BFT contracts, if one or both of these contracts are not renewed or if we do not receive further contract ceiling increases, the level of our current and future MTS and BFT inventories or our outstanding purchase commitments could be excessive and we may be left with large inventories of unusable parts that we would have to write-off. Any such charges could be material to our consolidated results of operations in the period that we make such determination.

At April 30, 2010 and July 31, 2009, $3,429,000 and $4,724,000, respectively, of the inventory balance above related to contracts from third party commercial customers who outsource their manufacturing to us.

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(10)   Accrued Expenses

Accrued expenses and other current liabilities consist of the following:

	April 30, 2010		July 31, 2009
Accrued wages and benefits	$	17,905,000		20,411,000
Accrued warranty obligations		11,865,000		14,500,000
Accrued commissions and royalties		3,923,000		3,603,000
Accrued acquisition-related restructuring liabilities (See Note 11)		-		161,000
Other		13,523,000		13,066,000
Accrued expenses and other current liabilities	$	47,216,000		51,741,000

We provide warranty coverage for most of our products for a period of at least one year from the date of shipment. We record a liability for estimated warranty expense based on historical claims, product failure rates and other factors. Some of our product warranties are provided under long-term contracts, the costs of which are incorporated into our estimates of total contract costs.

Changes in our product warranty liability during the nine months ended April 30, 2010 and 2009 were as follows:

	April 30, 2010			April 30, 2009
Balance at beginning of period	$	14,500,000			12,308,000
Provision for warranty obligations		5,330,000			6,115,000
Warranty obligations acquired from Radyne		-			1,975,000
Warranty obligation transferred with sale of certain assets and liabilities (See Note 11)		(400,000	)		-
Reversal of warranty liability		(888,000	)		(62,000	)
Charges incurred		(6,677,000	)		(5,624,000	)
Balance at end of period	$	11,865,000			14,712,000

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(11)  Radyne Acquisition-Related Restructuring Plan and Other Cost Reduction Actions

Radyne Acquisition-Related Restructuring Plan

In connection with our August 1, 2008 acquisition of Radyne, we immediately adopted a restructuring plan to achieve operating synergies. In connection with this plan, we vacated and subleased Radyne’s Phoenix, Arizona manufacturing facility and integrated Radyne’s satellite earth station manufacturing and engineering operations into our high-volume technology manufacturing center located in Tempe, Arizona. In addition, Radyne’s corporate functions were moved to our Melville, New York corporate headquarters.

The Radyne acquisition-related restructuring was completed in fiscal 2009.

In connection with these activities, we recorded approximately $2,713,000 of estimated restructuring costs, including $2,100,000 related to facility exit costs and $613,000 related to severance for Radyne employees who were informed they were terminated on August 1, 2008. In accordance with grandfathered accounting standards that were not incorporated into FASB ASC, we recorded these costs, at fair value, as assumed liabilities as of August 1, 2008, with a corresponding increase to goodwill. As such, these costs are not included in our Condensed Consolidated Statement of Operations for the nine months ended April 30, 2009. The estimated facility exit costs of approximately $2,100,000 reflect the net present value of the total gross non-cancelable lease obligations of $12,741,000 and related costs (for the period of November 1, 2008 th rough October 31, 2018) associated with the vacated manufacturing facility, less the net present value of estimated gross sublease income of $8,600,000. We estimated sublease income based on the terms of fully executed sublease agreements for the facility and our assessment of future uncertainties relating to the real estate market. Although we are attempting to sublease the facility, we currently believe that it is not probable that we will be able to sublease the facility beyond the executed sublease terms which expire on October 31, 2015. Costs associated with operating the manufacturing facility through October 31, 2008 were expensed in the Condensed Consolidated Statement of Operations for the three months ended October 31, 2008.

The following represents a summary of the acquisition-related restructuring liabilities as of April 30, 2010:

	Net Accrued July 31, 2009		Net Cash Outflow			Accretion of Interest		Net Accrued April 30, 2010		Total Costs Accrued to Date (1)		Total Net Expected Costs (2)
Facilities	$	2,444,000		(515,000	)		113,000	$	2,042,000	$	2,042,000	$	4,141,000
Severance		-		-			-		-		613,000		613,000
Total restructuring costs	$	2,444,000		(515,000	)		113,000	$	2,042,000	$	2,655,000	$	4,754,000

(1)   Facilities-related restructuring costs are presented at net present value; accreted interest from inception to date that was recorded in interest expense is $232,000.

(2)   Facilities-related restructuring costs include accreted interest.

At April 30, 2010, net accrued restructuring costs of $2,042,000 represents $2,420,000 for accrued lease run-out costs (which is included in other liabilities in our consolidated balance sheet) less $378,000 for sublease rental payments received in excess of lease payments made (which is included in prepaid expenses and other current assets in our consolidated balance sheet). Interest accreted on the facility-related costs during the three and nine months ended April 30, 2010 was approximately $34,000 and $113,000, respectively, as compared to $35,000 and $77,000 for the three and nine months ended April 30, 2009, respectively, and is included in interest expense for each respective fiscal period.

Other Cost Reduction Actions

In August 2009 we sold certain assets and liabilities relating to our video encoder and decoder product lines. During the nine months ended April 30, 2010, we received $2,038,000 which represents the entire purchase price paid by the buyer.

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(12)   Credit Facility

In June 2009, we entered into a three-year $100,000,000 unsecured revolving credit facility (“Credit Facility”) with a syndicate of lenders. The Credit Facility provides for the extension of credit to us in the form of revolving loans, including letters of credit, at any time and from time to time during its term, in an aggregate principal amount at any time outstanding not to exceed $100,000,000 for both revolving loans and letters of credit, with sub-limits of $10,000,000 for commercial letters of credit and $25,000,000 for standby letters of credit. The Credit Facility includes a provision pursuant to which we may request that the lenders increase the maximum amount of commitments by an amount not to exceed $50,000,000. The maximum amount of credit available under the Credit Facility, including such increased commitment s, cannot exceed $150,000,000. The Credit Facility may be used for working capital and other general corporate purposes.

At our election, borrowings under the Credit Facility will bear interest either at LIBOR plus an applicable margin or at the base rate plus an applicable margin. The interest rate margin over LIBOR ranges from 2.25 percent, up to a maximum amount of 2.75 percent. The base rate is a fluctuating rate equal to the highest of (i) the Prime Rate; (ii) the Federal Funds Effective Rate from time to time plus 0.5 percent; and (iii) two hundred (200) basis points in excess of the floating rate of interest determined, on a daily basis, in accordance with the terms of the agreement. The interest rate margin over the base rate ranges from 1.25 percent up to a maximum amount of 1.75 percent. In both cases, the applicable interest rate is based on the ratio of our consolidated total indebtedness to our consolidated earnings before interest, taxes, depreciation and amortization (“Consolidated EBITDA”). As defined in the Credit Facility, Consolidated EBITDA is adjusted for certain items.

The Credit Facility contains certain covenants, including covenants limiting certain debt, certain liens on assets, certain sales of assets and receivables, certain payments (including dividends), certain repurchases of shares of our common stock, certain sale and leaseback transactions, certain guaranties and certain investments. The Credit Facility also contains certain financial condition covenants including that we (i) maintain a minimum Consolidated EBITDA as adjusted for certain items and defined in the Credit Facility, (measured, on a consolidated basis, based on the four prior consecutive fiscal quarters then ending); (ii) not exceed a maximum ratio of consolidated total indebtedness to Consolidated EBITDA, each as defined in the Credit Facility and or adjusted for certain items, and; (iii) maintain a minimum fixed charge rati o, as defined in the Credit Facility and or adjusted for certain items; in each case measured on the last day of each fiscal quarter.

The Credit Facility includes certain events of default, including: failure to make payments; failure to perform or observe terms, covenants and agreements; material inaccuracy of any representation or warranty; payment default relating to any indebtedness, as defined, with a principal amount in excess of $7,500,000 or acceleration of such indebtedness; occurrence of one or more final judgments or orders for the payment of money in excess of $7,500,000 that remain unsatisfied; incurrence of certain liabilities in connection with failure to maintain or comply with the Employee Retirement Income Security Act of 1974 (“ERISA”); any bankruptcy or insolvency; or a change of control, including if a person or group becomes the beneficial owner of 50 percent or more of our voting stock. If an event of default occurs, the interest rate on outstanding borrowings increases by an incremental default rate and the lenders may, among other things, terminate their commitments and declare all outstanding borrowings to be immediately due and payable together with accrued interest and fees. All amounts borrowed or outstanding under the Credit Facility are due and mature on June 24, 2012, unless the commitments are terminated earlier either at our request or if certain events of default occur.

At April 30, 2010, we had $8,260,000 of standby letters of credit outstanding related to our guarantees of future performance on certain customer contracts and no outstanding commercial letters of credit.

At April 30, 2010, had borrowings been outstanding under the Credit Facility, the applicable interest rate margin above LIBOR and base rate borrowings would have been 2.75 percent and 1.75 percent, respectively. We are also subject to an undrawn line fee based on the ratio of our consolidated total indebtedness to our Consolidated EBITDA, as defined and adjusted for certain items in the Credit Facility. Interest expense, including amortization of deferred financing costs, related to our credit facility recorded during the three and nine months ended April 30, 2010 was $165,000 and $464,000, respectively. There were no such fees in the nine months ended April 30, 2009.

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(13)   Convertible Senior Notes

3.0% Convertible Senior Notes

In May 2009, we issued $200,000,000 of our 3.0% convertible senior notes in a private offering pursuant to Rule 144A under the Securities Act of 1933, as amended. The net proceeds from this transaction were $194,541,000 after deducting the initial purchasers’ discount and other transaction costs of $5,459,000.

The 3.0% convertible senior notes bear interest at an annual rate of 3.0% and are convertible into shares of our common stock at an initial conversion price of $36.44 per share (a conversion rate of 27.4395 shares per $1,000 original principal amount of notes) at any time prior to the close of business on the second scheduled trading day immediately preceding the maturity date, subject to adjustment in certain circumstances. We may, at our option, redeem some or all of the 3.0% convertible senior notes on or after May 5, 2014. Holders of the 3.0% convertible senior notes will have the right to require us to repurchase some or all of the outstanding 3.0% convertible senior notes, solely for cash, on May 1, 2014, May 1, 2019 and May 1, 2024 and upon certain events, including a change in control. If not redeemed by us or repaid pursuant to the holders’ right to require repurchase, the 3.0% convertible senior notes mature on May 1, 2029.

The 3.0% convertible notes are senior unsecured obligations of Comtech. We intend to use the net proceeds of the offering to fund our acquisition strategy and for general corporate purposes.

2.0% Convertible Senior Notes

On January 27, 2004, we issued $105,000,000 of our 2.0% convertible senior notes in a private offering pursuant to Rule 144A under the Securities Act of 1933, as amended. The net proceeds from this transaction were $101,179,000 after deducting the initial purchaser’s discount and other transaction costs of $3,821,000, of which $2,685,000 was allocated to deferred financing costs (as it represented the imputed debt issuance costs) and $1,136,000 was allocated to additional paid-in capital (as it represented the imputed equity issuance costs). The 2.0% convertible senior notes had a stated annual interest rate of 2.0%.

The 2.0% convertible senior notes were general unsecured obligations of Comtech. All of our U.S. domiciled wholly-owned subsidiaries had issued full and unconditional guarantees in favor of the holders of our 2.0% convertible senior notes. These full and unconditional guarantees were joint and several.

Interest expense, included in our condensed consolidated statement of operations for the three and nine months ended April 30, 2009, associated with the 2.0% convertible senior notes, includes interest at our imputed non-convertible debt borrowing rate of 7.5% and the amortization of other deferred financing costs related to the 2.0% convertible senior notes.

As of February 12, 2009, all of the 2.0% convertible senior notes were converted by the noteholders, and we issued 3,333,327 shares of our common stock, plus cash in lieu of fractional shares. As such, since February 13, 2009, there were no 2.0% convertible senior notes outstanding.

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(14)   Income Taxes

At April 30, 2010 and July 31, 2009, total unrecognized tax benefits, excluding interest, were $6,971,000 and $6,613,000, respectively. At April 30, 2010 and July 31, 2009, the amount of unrecognized tax benefits that would impact our effective tax rate, if recognized, was $6,971,000 and $3,047,000, respectively. The unrecognized tax benefits at April 30, 2010 that would impact the effective tax rate if recognized reflects the impact of our adoption of FASB ASC 805-740 “Business Combinations – Income Taxes,” on August 1, 2009.  Unrecognized tax benefits result from income tax positions taken or expected to be taken on our income tax returns for which a tax benefit has not been recorded in our financial statements. Of the total unrecognized tax benefits, $5,088,000 and $4,267,000 were recorded as non-current income taxes payable in our Condensed Consolidated Balance Sheets at April 30, 2010 and July 31, 2009, respectively.

Our policy is to recognize interest and penalties relating to uncertain tax positions in income tax expense. At April 30, 2010 and July 31, 2009, interest accrued relating to income taxes was $533,000 and $564,000, respectively, net of the related income tax benefit.

Consolidated tax returns filed by Comtech Telecommunications Corp. for years prior to fiscal 2006 are not subject to examination by the U.S. federal tax authorities. In fiscal 2008, the Internal Revenue Service (“IRS”) completed its audit of Comtech Telecommunications Corp.’s federal income tax returns for fiscal 2004 and fiscal 2005. The completion of these audits did not result in any material change to our income tax provision.

During the nine months ended April 30, 2010, we reached an agreement with the IRS relating to the allowable amount of federal research and experimentation credits utilized and interest expense relating to our 2.0% convertible senior notes on our federal income tax return for the fiscal year ended July 31, 2006. This agreement with the IRS did not result in any material change to our income tax provision for the nine months ended April 30, 2010.

During the nine months ended April 30, 2010, we were notified by the IRS of its intention to conduct an audit of Comtech Telecommunications Corp.’s federal income tax return for fiscal 2008. The IRS continues to audit Comtech Telecommunications Corp.’s federal income tax return for fiscal 2007.

Consolidated tax returns filed by Radyne Corporation prior to the acquisition by Comtech Telecommunications Corp. for tax years prior to calendar year 2006 may no longer be examined by the U.S. federal tax authorities under the applicable statutes of limitation. Although it could do so in the future, the IRS is not currently examining any of the federal income tax returns filed by Radyne Corporation for tax years prior to the acquisition by Comtech Telecommunications Corp. As of August 1, 2008, Radyne Corporation is included in the consolidated federal income tax returns of Comtech Telecommunications Corp.

If the final outcome of the fiscal 2007 and fiscal 2008 IRS audits or any potential future audits differ materially from our original income tax provision, our results of operations and financial condition could be materially impacted.

(15)  Stock Option Plan and Employee Stock Purchase Plan

We issue stock-based awards pursuant to the following plan:

2000 Stock Incentive Plan – The 2000 Stock Incentive Plan, as amended, provides for the granting to all employees and consultants of Comtech (including prospective employees and consultants) non-qualified stock options, SARs, restricted stock, performance shares, performance units and other stock-based awards. In addition, our employees are eligible to be granted incentive stock options. Our non-employee directors are eligible to receive non-discretionary grants of nonqualified stock options subject to certain limitations. The aggregate number of shares of common stock which may be issued may not exceed 8,962,500. Grants of incentive and non-qualified stock awards may not have a term exceeding ten years or no more than five years in the case of an incentive stock award gra nted to a stockholder who owns stock representing more than 10% of the voting power.

On June 2, 2010, our Board of Directors approved an amendment to the 2000 Stock Incentive Plan increasing the annual automatic grant of options to non-employee directors from 12,500 to 15,000, and providing that the annual grant shall be made on the same date as the annual grant of options to our employees or June 2 of such year if there has been no such grant of options to employees.

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As of April 30, 2010, we had granted stock-based awards representing the right to purchase an aggregate of 6,330,459 shares (net of 775,741 canceled awards) at prices ranging between $3.13 - $51.65, of which 2,906,060 are outstanding at April 30, 2010. As of April 30, 2010, 3,424,399 stock-based awards have been exercised.

The following table summarizes certain stock option plan activity during the nine months ended April 30, 2010:

	Number of Shares Underlying Stock-Based Awards			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (Years)	Aggregate Intrinsic Value
Outstanding at July 31, 2009		3,065,245		$	33.26
Granted		3,000			34.15
Expired/canceled		(20,300	)		44.26
Exercised		(49,275	)		15.71
Outstanding at October 31, 2009		2,998,670			33.48
Granted		5,000			30.46
Expired/canceled		(4,650	)		43.65
Exercised		(17,650	)		16.92
Outstanding at January 31, 2010		2,981,370			33.55
Granted		-			-
Expired/canceled		(50,538	)		39.23
Exercised		(24,772	)		16.30
Outstanding at April 30, 2010		2,906,060		$	33.60	2.59	$	9,632,000
Exercisable at April 30, 2010		1,744,598		$	30.42	2.06	$	8,825,000
Expected to vest at April 30, 2010		1,067,610		$	38.14	3.41	$	767,000

Included in the number of shares underlying stock-based awards outstanding at April 30, 2010, in the above table, are 38,500 SARs with an aggregate intrinsic value of $11,000.

The total intrinsic value of stock-based awards exercised during the three months ended April 30, 2010 and 2009 was $345,000 and $93,000, respectively. The total intrinsic value of stock-based awards exercised during the nine months ended April 30, 2010 and 2009 was $1,578,000 and $9,285,000, respectively.

2001 Employee Stock Purchase Plan – The ESPP was approved by the shareholders on December 12, 2000, and 675,000 shares of our common stock were reserved for issuance. The ESPP is intended to provide our eligible employees the opportunity to acquire our common stock at 85% of fair market value at the date of issuance through participation in the payroll-deduction based ESPP. Through the third quarter of fiscal 2010, we issued 367,627 shares of our common stock to participating employees in connection with the ESPP.

(16)   Customer and Geographic Information

Sales by geography and customer type, as a percentage of consolidated net sales, are as follows:

	Three months ended April 30,						Nine months ended April 30,
	2010			2009			2010			2009
United States
U.S. government		72.5	%		54.5	%		68.2	%		56.4	%
Commercial customers		5.5	%		11.6	%		6.2	%		11.1	%
Total United States		78.0	%		66.1	%		74.4	%		67.5	%
International		22.0	%		33.9	%		25.6	%		32.5	%

International sales for the three months ended April 30, 2010 and 2009, which include sales to U.S. domestic companies for inclusion in products that will be sold to international customers, were $47,586,000 and $43,646,000, respectively. International sales for the nine months ended April 30, 2010 and 2009, which include sales to U.S. domestic companies for inclusion in products that will be sold to international customers, were $133,666,000 and $150,728,000, respectively.

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For the three and nine months ended April 30, 2010 and 2009, except for sales to the U.S. government which include sales to prime contractors of the U.S. government, no other customer or individual country, including sales to U.S. domestic companies for inclusion in products that will be sold to a foreign country, represented more than 10% of consolidated net sales.

(17)   Segment Information

Reportable operating segments are determined based on Comtech’s management approach. The management approach, as defined by accounting standards which have been codified into FASB ASC 280, “Segment Reporting,” is based on the way that the chief operating decision-maker organizes the segments within an enterprise for making decisions about resources to be allocated and assessing their performance. Our chief operating decision-maker is our President and Chief Executive Officer.

While our results of operations are primarily reviewed on a consolidated basis, the chief operating decision-maker also manages the enterprise in three operating segments: (i) telecommunications transmission, (ii) mobile data communications, and (iii) RF microwave amplifiers.

Telecommunications transmission products include satellite earth station products (such as analog and digital modems, frequency converters, power amplifiers, transceivers and voice gateways) and over-the-horizon microwave communications products and systems (such as digital troposcatter modems). Mobile data communications products include satellite-based mobile location tracking and messaging hardware (such as mobile satellite transceivers and third-party produced ruggedized computers) and related services and the design and production of microsatellites. RF microwave amplifier products include traveling wave tube amplifiers and solid-state, high-power broadband amplifier products that use the microwave and radio frequency spectrums.

Unallocated expenses result from such corporate expenses as legal, accounting and executive compensation. In addition, for the three and nine months ended April 30, 2010, unallocated expenses include $2,332,000 and $5,758,000, respectively, of stock-based compensation expense and for the three and nine months ended April 30, 2009, unallocated expenses include $2,339,000 and $7,049,000, respectively, of stock-based compensation expense. Interest expense (which includes amortization of deferred financing costs) associated with our convertible senior notes and our Credit Facility is not allocated to the operating segments. Depreciation and amortization includes amortization of stock-based compensation. Unallocated assets consist principally of cash, deferred financing costs and deferred tax assets. Substantially all of our long-lived ass ets are located in the U.S.

Depreciation and amortization for the nine months ended April 30, 2009 includes $6,200,000 of acquired in-process research and development, of which $3,300,000 was related to our RF microwave amplifiers segment, and $2,900,000 was related to our telecommunications transmission segment.

Corporate management defines and reviews segment profitability based on the same allocation methodology as presented in the segment data tables below:

	Three months ended April 30, 2010
(in thousands)	Telecommunications Transmission		Mobile Data Communications		RF Microwave Amplifiers		Unallocated			Total
Net sales	$	56,536		134,064		25,703		-		$	216,303
Operating income (loss)		12,757		27,529		2,480		(6,740	)		36,026
Interest income and other		37		12		31		235			315
Interest expense		42		-		-		1,938			1,980
Depreciation and amortization		2,716		786		1,159		2,385			7,046
Expenditure for long-lived assets, including intangibles		623		353		159		27			1,162
Total assets at April 30, 2010		256,218		78,314		105,395		573,983			1,013,910

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	Three months ended April 30, 2009
(in thousands)	Telecommunications Transmission		Mobile Data Communications		RF Microwave Amplifiers		Unallocated (as adjusted- See Note 2)			Total (as adjusted- See Note 2)
Net sales	$	54,138		32,183		42,224		-		$	128,545
Operating income (loss)		9,708		1,152		5,608		(5,240	)		11,228
Interest income and other		45		2		10		347			404
Interest expense		41		-		-		887			928
Depreciation and amortization		2,823		873		1,106		2,393			7,195
Expenditure for long-lived assets, including intangibles		643		1,143		238		19			2,043
Total assets at April 30, 2009		273,741		52,173		119,117		279,680			724,711

	Nine months ended April 30, 2010
(in thousands)	Telecommunications Transmission		Mobile Data Communications		RF Microwave Amplifiers		Unallocated			Total
Net sales	$	161,661		272,388		87,202		-		$	521,251
Operating income (loss)		34,868		52,509		7,904		(16,892	)		78,389
Interest income and other		43		36		13		636			728
Interest expense		130		-		-		5,783			5,913
Depreciation and amortization		8,133		2,354		3,422		5,912			19,821
Expenditure for long-lived assets, including intangibles		2,392		1,134		745		44			4,315
Total assets at April 30, 2010		256,218		78,314		105,395		573,983			1,013,910

	Nine months ended April 30, 2009
(in thousands)	Telecommunications Transmission		Mobile Data Communications			RF Microwave Amplifiers		Unallocated (as adjusted- See Note 2)			Total (as adjusted- See Note 2)
Net sales	$	198,222		152,960			113,164		-		$	464,346
Operating income (loss)		46,078		29,898			9,217		(18,892	)		66,301
Interest income and other (expense)		59		(5	)		105		2,148			2,307
Interest expense		95		-			-		4,552			4,647
Depreciation and amortization		12,124		2,464			7,383		7,208			29,179
Expenditure for long-lived assets, including intangibles		131,779		9,974			50,234		56			192,043
Total assets at April 30, 2009		273,741		52,173			119,117		279,680			724,711

Intersegment sales for the three months ended April 30, 2010 and 2009 by the telecommunications transmission segment to the mobile data communications segment were $44,575,000 and $7,399,000, respectively. For the nine months ended April 30, 2010 and 2009, intersegment sales by the telecommunications transmission segment to the mobile data communications segment were $75,170,000 and $52,269,000, respectively.

For the three months ended April 30, 2010 and 2009, intersegment sales by the telecommunications transmission segment to the RF microwave amplifiers segment were $1,023,000 and $4,563,000, respectively. Intersegment sales for the nine months ended April 30, 2010 and 2009 by the telecommunications transmission segment to the RF microwave amplifiers segment were $6,064,000 and $9,762,000, respectively.

For the three months ended April 30, 2010 and 2009, intersegment sales by the RF microwave amplifiers segment to the telecommunications transmission segment were $264,000 and $0, respectively. Intersegment sales for the nine months ended April 30, 2010 and 2009 by the RF microwave amplifiers segment to the telecommunications transmission segment were $264,000 and $145,000, respectively.

All intersegment sales have been eliminated from the tables above.

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(18)   Goodwill

The carrying amount of goodwill, by segment, at both April 30, 2010 and July 31, 2009 is as follows:

Telecommunications transmission	$	107,779,000
Mobile data communications		11,899,000
RF microwave amplifiers		29,575,000
Balance at April 30, 2010 and July 31, 2009	$	149,253,000

(19)   Intangibles With Finite Lives

Intangible assets with finite lives as of April 30, 2010 and July 31, 2009 are as follows:

	April 30, 2010
	Weighted Average Amortization Period		Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
Technologies		10.7	$	42,224,000		21,458,000	$	20,766,000
Customer relationships		10.0		29,931,000		5,429,000		24,502,000
Trademarks and other		17.5		6,044,000		1,210,000		4,834,000
Total			$	78,199,000		28,097,000	$	50,102,000

	July 31, 2009
	Weighted Average Amortization Period		Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
Technologies		10.5	$	42,311,000		18,944,000	$	23,367,000
Customer relationships		10.0		29,931,000		3,176,000		26,755,000
Trademarks and other		17.5		6,344,000		1,194,000		5,150,000
Total			$	78,586,000		23,314,000	$	55,272,000

Amortization expense for the three months ended April 30, 2010 and 2009 was $1,754,000 and $1,805,000, respectively. Amortization expense for the nine months ended April 30, 2010 and 2009 was $5,283,000 and $5,394,000, respectively. The estimated amortization expense related to intangible assets with finite lives for the fiscal years ending July 31, 2010, 2011, 2012, 2013 and 2014 is $7,014,000, $6,586,000, $5,649,000, $5,442,000 and $5,324,000, respectively.

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(20)   Legal Matters and Proceedings

Export Matters

In April 2010, the Enforcement Division of the Office of Defense Trade Controls Compliance (“DDTC”) of the U.S. Department of State confirmed to us that it was closing, without taking further administrative action, its review of previously reported violations with respect to our compliance with International Traffic in Arms Regulations (“ITAR”). The DDTC also informed us that it reserved the right to reopen the matter if circumstances such as the discovery of new information or the recurrence of similar violations warrant the initiation of administrative enforcement proceedings. In this regard, the DDTC requested that, by September 2010, we submit to DTTC a plan for an ITAR compliance audit to be performed by an independent auditor, that the audit be conducted in October 2010, and that we provide the results of this audit to the DDTC by December 2010.  The independent auditor and its related audit plan must be approved by the DDTC.

We have taken and continue to take numerous steps to significantly improve our export control processes and we expect to continue to remediate, improve and enhance our internal controls relating to exports. Should we or the independent auditor identify a material weakness relating to our compliance, the ongoing costs of remediation could be material. If the outside audit finds additional violations and/or the DDTC reopens its case for any circumstances, it could result in civil or criminal fines and/or penalties and/or result in an injunction against us, all of which could, in the aggregate, materially adversely impact our business, results of operations and cash flows.

Purported Class Action Lawsuits

We have been sued in two nearly identical purported class action lawsuits (Pompano Beach Police & Firefighters’ Retirement System, etc., v. Comtech Telecommunications Corp. et al.,  09 Civ. 3007 (SJF/AKT) and Lawing v. Comtech Telecommunications Corp., 09 Civ. 3182 (JFB)), both filed in the United States District Court for the Eastern District of New York (the “Complaints”). Our Chief Executive Officer and Chief Financial Officer are also named as defendants. The Complaints, filed in July 2009, allege that we violated Section 10(b) of the Securities Exchange Act of 1934 by making materially false and misleading statements with respect to revenue and earnings guidance for fiscal year 2009. Th e plaintiffs purport to sue on behalf of purchasers of our stock between September 17, 2008 and March 9, 2009. The essence of the Complaints is that we allegedly failed to disclose certain adverse facts that were allegedly known to exist at the time we issued the revenue and earnings guidance at issue in the Complaints. We have, to date, only been served with a complaint by the Pompano Beach Police and Firefighters’ Retirement System (“Pompano Beach”). On September 10, 2009, the District Court entered a scheduling order in the Pompano Beach lawsuit, and pursuant to that order, Pompano Beach filed a motion seeking consolidation of the two related actions and appointment as lead plaintiff under the procedure set out in the Private Securities Litigation Reform Act of 1995. That motion has not yet been decided. We believe the case has no merit and we intend to vigorously defend ourselves and our officers in this action. Although the ultimate outcome of litigation is difficult to accurately pred ict, we believe that the final outcome of this action will not have a material adverse effect on our consolidated financial condition.

Other Proceedings

There are certain other pending and threatened legal actions, which arise in the normal course of business. Although the ultimate outcome of litigation is difficult to accurately predict, we believe that the outcome of these pending and threatened actions will not have a material adverse effect on our consolidated financial condition or results of operations.

(21)   Subsequent Events

On May 8, 2010, we signed a definitive merger agreement to acquire CPI International, Inc. (“CPI”), a leading global supplier of vacuum electron devices (including klystron, traveling wave and power grid tubes). CPI’s tubes and amplifiers are incorporated into products that are used in hundreds of critical commercial and military applications. We estimate that the total amount of cash required to consummate the merger will be approximately $372,000,000, and that we will issue approximately 4,400,000 shares of our common stock. The transaction is subject to a number of customary regulatory and other closing conditions including a CPI shareholder vote. We expect to incur substantial merger and integration related expenses that, pursuant to newly adopted purchase accounting rules, may no longer be capitalized as part of the cost of the merger. These expenses are expected to include change-in-control related payments to be made to certain CPI executives, the acceleration of certain unvested stock-based awards held by CPI employees, and professional fees to our financial and legal advisors. We preliminarily estimate these expenses will range from $18,000,000 to $22,000,000, the majority of which are expected to be immediately expensed on the day the acquisition closes with the remainder expensed during the first year of the acquisition.

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ITEM 2.                   MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

Certain information in this Quarterly Report on Form 10-Q contains forward-looking statements, including but not limited to, information relating to our future performance and financial condition, plans and objectives of our management and our assumptions regarding such future performance, financial condition, and plans and objectives that involve certain significant known and unknown risks and uncertainties and other factors not under our control which may cause our actual results, future performance and financial condition, and achievement of our plans and objectives to be materially different from the results, performance or other expectations implied by these forward-looking statements. These factors include: the risk that the acquisition of CPI International, Inc. (“CPI”) may not be consummated for reasons including th at the conditions precedent to the completion of the acquisition may not be satisfied; the possibility that the expected synergies from the proposed merger will not be realized, or will not be realized within the anticipated time period; the risk that our and CPI’s businesses will not be integrated successfully; the possibility of disruption from the acquisition making it more difficult to maintain business and operational relationships; any actions taken by either of the companies, including but not limited to, restructuring or strategic initiatives (including capital investments or asset acquisitions or dispositions); the timing of receipt of, and our performance on, new or existing orders that can cause significant fluctuations in net sales and operating results; the timing and funding of government contracts; adjustments to gross profits on long-term contracts; risks associated with international sales, rapid technological change, evolving industry standards, frequent new product announcements and enhancements, changing customer demands, changes in prevailing economic and political conditions; risks associated with our legal proceedings and other matters; risks associated with our MTS and BFT contracts; risks associated with our obligations under our revolving credit facility; and other factors described in this quarterly report on Form 10-Q, our other filings with the Securities and Exchange Commission (“SEC”) and CPI’s filings with the SEC.

OVERVIEW

We design, develop, produce and market innovative products, systems and services for advanced communications solutions. We believe many of our solutions play a vital role in providing or enhancing communication capabilities when terrestrial communications infrastructure is unavailable, inefficient or too expensive. We conduct our business through three complementary operating segments: telecommunications transmission, mobile data communications and RF microwave amplifiers. We sell our products to a diverse customer base in the global commercial and government communications markets. We believe we are a leader in the market segments that we serve.

Our telecommunications transmission segment provides sophisticated equipment and systems that are used to enhance satellite transmission efficiency and that enable wireless communications in environments where terrestrial communications are unavailable, inefficient or too expensive. Our telecommunications transmission segment also operates our high-volume technology manufacturing center that is utilized, in part, by our mobile data communications and RF microwave amplifiers segments and to a much lesser extent by third-party commercial customers who outsource a portion of their manufacturing to us. Accordingly, our telecommunications transmission segment’s operating results are impacted positively or negatively by the level of utilization of our high-volume technology manufacturing center. Our mobile data communications segment p rovides customers with an integrated solution, including mobile satellite transceivers and satellite network support, to enable global satellite-based communications when mobile, real-time, secure transmission is required for applications including logistics, support and battlefield command and control. Our mobile data communications segment also designs and manufactures microsatellites and related components. Our RF microwave amplifiers segment designs, manufactures and markets satellite earth station traveling wave tube amplifiers and solid-state amplifiers, including high-power, broadband RF microwave amplifier products.

A substantial portion of our sales may be derived from a limited number of relatively large customer contracts, such as our Movement Tracking System (“MTS”) and our Blue Force Tracking (“BFT”) indefinite delivery/indefinite quantity (“IDIQ”) contracts with the U.S. Army. Timing of future orders and revenues associated with IDIQ and other large contracts are difficult to accurately predict. Quarterly and period-to-period sales and operating results may be significantly affected by our MTS or BFT contracts. In addition, our gross profit is affected by a variety of factors, including the mix of products, systems and services sold, production efficiencies, estimates of warranty expense, price competition and general economic conditions. Our gross profit may also be affected by the impact of any cumulativ e adjustments to contracts that are accounted for under the percentage-of-completion method.

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Our contracts with the U.S. government can be terminated at any time and orders are subject to unpredictable funding, deployment and technology decisions by the U.S. government. Some of these contracts, such as the MTS and BFT contracts, are IDIQ contracts, and as such, the U.S. government is not obligated to purchase any equipment or services under these contracts. We have in the past experienced and we continue to expect future significant fluctuations in sales and operating results from quarter-to-quarter and period-to-period. As such, comparisons between periods and our current results may not be indicative of a trend or future performance.

Revenue from the sale of our products is generally recognized when the earnings process is complete, upon shipment or customer acceptance. Revenue from contracts relating to the design, development or manufacture of complex electronic equipment to a buyer’s specification or to provide services relating to the performance of such contracts is generally recognized in accordance with accounting standards that have been codified into Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 605-35, “Revenue Recognition - Construction-Type and Production-Type Contracts” (“ASC 605-35”). Revenue from contracts that contain multiple elements that are not accounted for under FASB ASC 605-35 is generally accounted for in accordance with accounting standards that have been codified into FASB ASC 605-25, “Revenue Recognition - Multiple Element Arrangements.” Revenue from these contracts is allocated to each respective element based on each element’s relative fair value and is recognized when the respective revenue recognition criteria for each element is met.

DEFINITIVE MERGER AGREEMENT TO ACQUIRE CPI INTERNATIONAL, INC.

On May 8, 2010, we signed a definitive merger agreement to acquire CPI International, Inc. (“CPI”), a leading global supplier of vacuum electron devices (including klystron, traveling wave and power grid tubes). CPI’s tubes and amplifiers are incorporated into products that are used in hundreds of critical commercial and military applications. We estimate that the total amount of cash required to consummate the merger (including payments for existing CPI change of control agreements, the cancellation of existing CPI employee stock-based awards and repayment of currently outstanding CPI debt) will be approximately $372.0 million, and that we will issue approximately 4.4 million shares of our common stock. The merger includes customary termination provisions, is subject to regulatory approvals and to a CPI shareholder v ote. If the merger is successfully completed, we believe that the acquisition will result in the following significant strategic benefits:

·   Almost triples the size of our RF microwave amplifier segment and immediately establishes us as a leading global supplier of vacuum electron devices (including klystron, traveling wave and power grid tubes);

·   Drives further innovation by combining manufacturing, engineering and sales teams for our XICOM branded-product group with CPI’s Satcom product group to take advantage of united resources which are expected to deliver new and advanced amplifiers and other products to be used in satellite communications, radar applications and other electronic warfare systems;

·   Diversifies our product portfolio and customer base with CPI’s extensive portfolio of over 4,500 microwave and power grid tubes;

·   Brings strong cash flows from CPI’s annuity-like sales of replacements, spares and repairs, including upgraded replacements for existing sole-sourced products, that are expected to result in a more stable, predictable combined business that is partially insulated from dramatic shifts in market conditions; and

·   Strategically redeploys a significant portion of our existing cash to enhance earnings per share and shareholder value.

Over time, we expect to achieve significant operating synergies as a result of the acquisition of CPI.

We expect to incur substantial merger and integration related expenses that, pursuant to newly adopted purchase accounting rules, may no longer be capitalized as part of the cost of the merger. These expenses are expected to include change-in-control related payments to be made to certain CPI executives, the acceleration of certain unvested stock-based awards held by CPI employees, and professional fees to our financial and legal advisors. We preliminarily estimate these expenses will range from $18.0 million to $22.0 million, the majority of which are expected to be immediately expensed on the day the acquisition closes with the remainder expensed during the first year of the acquisition.

Upon the closing of the transaction, on a pro-forma basis and excluding the impact of any additional acquisitions, we anticipate having between $175.0 million and $200.0 million of cash and cash equivalents.

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STATUS OF OUR MTS AND BFT CONTRACTS

Our current MTS and BFT contracts expire in July 2010 and December 2011, respectively. We are currently in the process of actively competing for the next-generation BFT contract. In December 2009, the U.S. Army issued a draft competitive MTS RFP for future MTS requirements. A final competitive MTS RFP has yet to be issued.

In order to better position us to win and secure follow-on contracts for next-generation MTS and BFT programs, in the past several years, we have committed considerable research and development resources with a focus on designing and delivering backward compatible next-generation solutions. Because our MTS and BFT next-generation solutions are backward compatible, we believe our solutions provide the U.S. Army the unique ability to leverage its existing technology investment by continuing to use the existing deployed units and world-wide support infrastructure while ultimately and seamlessly transitioning to the next-generation MTS and BFT systems.

In order to maintain a competitive procurement process, the U.S. Army provides interested companies with information about its program plans; however, detailed program requirements and related strategic funding decisions are subject to daily, if not constant, change. The U.S. Army has stated that it intends to eventually converge onto a single mobile system configuration known as Joint Battle Command-Platform (“JBC-P”) with a goal of unifying tracking and battlefield situational awareness. JBC-P is intended for all U.S. military services (e.g., the U.S. Army and U.S. Marine Corps). In addition, there are other existing and emerging U.S. military programs that have goals similar to JBC-P. As such, it is possible, that both our MTS and BFT programs could be combined into one or more other programs, or be combined with each ot her.  We have shared our technology plans and product roadmaps with the U.S. Army and are incorporating suggestions and other improvements at their request into our products. Our next-generation MTS and BFT solutions have been designed with this overall goal in mind and we believe our solutions can enable the U.S. Army to gradually transition and migrate both programs to JBC-P or similar new programs, should it ultimately occur. We have responded and will continue to respond to the U.S. Army’s requests for proposals in a way that we believe best meets the U.S. Army’s requirements and we believe that we will continue to generate future revenues relating to the MTS and BFT programs.

Although we are not aware that the U.S. Army has made any definitive decision regarding the next-generation MTS and BFT contracts, we are encouraged by recent developments. In May 2010, our BFT contract ceiling was increased by $140.5 million from $243.5 million to $384.0 million. In addition, in May 2010, our MTS contract ceiling was increased by $67.3 million from $605.1 million to $672.4 million. Pursuant to the terms and conditions of our contracts and orders in backlog, we can continue to make MTS and BFT deliveries through July 2011 and December 2011, respectively. Although we cannot be certain that we will be awarded next-generation MTS and BFT contracts or receive additional ceiling increases to our existing MTS and BFT contracts, our business outlook for fiscal 2010 and beyond assumes that we will generate significant revenue from both the MTS and BFT programs in the future.

If our next-generation solutions do not meet the U.S. Army’s operational needs or strategic objectives, or if the U.S. Army makes strategic fielding plan changes that we are unable to address, it would have a material adverse impact on our business and results of operations.

CRITICAL ACCOUNTING POLICIES

We consider certain accounting policies to be critical due to the estimation process involved in each.

Revenue Recognition on Long-Term Contracts.   Revenues and related costs from long-term contracts relating to the design, development or manufacture of complex electronic equipment to a buyer’s specification or to provide services relating to the performance of such contracts are recognized in accordance with FASB ASC 605-35. We primarily apply the percentage-of-completion method and generally recognize revenue based on the relationship of total costs incurred to total projected costs, or, alternatively, based on output measures, such as units delivered or produced. Profits expected to be realized on such contracts are based on total estimated sales for the contract compared to total estimated costs, including warranty costs, at completion of the contract.

Indirect costs relating to long-term contracts, which include expenses such as general and administrative, are charged to expense as incurred and are not included in our work in process (including our contracts-in-progress) inventory or cost of sales. Total estimated costs are reviewed and revised periodically throughout the lives of the contracts, and adjustments to profits resulting from such revisions are made cumulative to the date of the change. Estimated losses on long-term contracts are recorded in the period in which the losses become evident. Long-term U.S. government cost-reimbursable type contracts are also specifically covered by FASB ASC 605-35.

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We have been engaged in the production and delivery of goods and services on a continual basis under long-term contractual arrangements for many years. Historically, we have demonstrated an ability to accurately estimate total revenues and total expenses relating to our long-term contracts. However, there exist inherent risks and uncertainties in estimating revenues, expenses and progress toward completion, particularly on larger or longer-term contracts. If we do not accurately estimate the total sales, related costs and progress towards completion on such contracts, the estimated gross margins may be significantly impacted or losses may need to be recognized in future periods. Any such resulting changes in margins or contract losses could be material to our results of operations and financial condition.

In addition, most government contracts have termination for convenience clauses that provide the customer with the right to terminate the contract at any time. Such terminations could impact the assumptions regarding total contract revenues and expenses utilized in recognizing profit under the percentage-of-completion method of accounting. Changes to these assumptions could materially impact our results of operations and financial condition. Historically, we have not experienced material terminations of our long-term contracts. We also address customer acceptance provisions in assessing our ability to perform our contractual obligations under long-term contracts. Our inability to perform on our long-term contracts could materially impact our results of operations and financial condition. Historically, we have been able to perform on ou r long-term contracts.

Accounting for Stock-Based Compensation. As further discussed in “Notes to Condensed Consolidated Financial Statements – Note (4) Stock-Based Compensation,” we issue stock-based awards to certain of our employees and our Board of Directors and we recognize related stock-based compensation for both equity and liability-classified stock-based awards in our consolidated financials statements.

We have used and expect to continue to use the Black-Scholes option pricing model to compute the estimated fair value of stock-based awards. The Black-Scholes option pricing model includes assumptions regarding dividend yields, expected volatility, expected option term and risk-free interest rates. The assumptions used in computing the fair value of stock-based awards reflect our best estimates, but involve uncertainties relating to market and other conditions, many of which are outside of our control. We estimate expected volatility by considering the historical volatility of our stock, the implied volatility of publicly traded call options on our stock, the implied volatility from call options embedded in our 3.0% convertible senior notes and our expectations of volatility for the expected life of stock-based awards. The expected opt ion term is the number of years that we estimate that share-based awards will be outstanding prior to exercise based upon prior exercise patterns. The risk-free interest rate is based on the U.S. treasury yield curve in effect at the time of grant for an instrument which closely approximates the expected option term. As a result, if other assumptions or estimates had been used for options granted, stock-based compensation expense that was recorded could have been materially different. Furthermore, if different assumptions are used in future periods, stock-based compensation expense could be materially impacted in the future.

Impairment of Goodwill and Other Intangible Assets.  As of April 30, 2010, our goodwill and other intangible assets aggregated $199.4 million. For purposes of reviewing impairment and the recoverability of goodwill, each of our three operating segments constitutes a reporting unit and we must make various assumptions regarding estimated future cash flows and other factors in determining the fair values of each reporting unit. If these estimates or their related assumptions change in the future, or if we change our reporting structure, we may be required to record impairment charges in future periods. If global economic conditions deteriorate from current levels, or if the market value of our equi ty or assets significantly declines, or if we are not successful in achieving our expected sales levels (including sales associated with our Radyne acquisition and our MTS and BFT contracts), our goodwill may become impaired in future periods. We perform an annual impairment review in the first quarter of each fiscal year. Based on the impairment review performed at the start of our first quarter of fiscal 2010, there was no impairment of goodwill.

As further discussed in Item 2. “Management’s Discussion and Analysis of Financial Condition – Status of our MTS and BFT Contracts,” we are currently competing for next-generation MTS and BFT contracts. Although we cannot be certain that we will be awarded next-generation MTS and BFT contracts or receive additional ceiling increases to our existing MTS and BFT contracts, our business outlook for fiscal 2010 and beyond assumes that we will generate significant revenues from both the MTS and BFT programs in the future. If we do not secure additional contract ceiling increases or we are not awarded new contracts for both the MTS and BFT next-generation programs, we may need to perform an interim impairment test relating to the $11.9 million of goodwill that i s recorded in our mobile data communications segment. In addition, in the future, unless there are other indicators of impairment, such as a significant adverse change in our future financial performance, our next impairment review for goodwill will be performed and completed in the first quarter of fiscal 2011. Any impairment charges that we may take in the future could be material to our results of operations and financial condition.

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Provision for Warranty Obligations. We provide warranty coverage for most of our products, including products under long-term contracts, for a period of at least one year from the date of shipment. We record a liability for estimated warranty expense based on historical claims, product failure rates and other factors. Costs associated with some of our warranties that are provided under long-term contracts are incorporated into our estimates of total contract costs. There exist inherent risks and uncertainties in estimating warranty expenses, particularly on larger or longer-term contracts. As such, if we do not accurately estimate our warranty costs, any changes to our original estimates could be material to our results of operations and financial condition.

Accounting for Income Taxes. Our deferred tax assets and liabilities are determined based on temporary differences between financial reporting and tax bases of assets and liabilities, and applying enacted tax rates expected to be in effect for the year in which the differences are expected to reverse. The provision for income taxes is based on domestic (including federal and state) and international statutory income tax rates in the tax jurisdictions where we operate, permanent differences between financial reporting and tax reporting and available credits and incentives. We recognize interest and penalties related to uncertain tax positions in income tax expense. The U.S. federal government is our most significant income tax jurisdiction.

Significant judgment is required in determining income tax provisions and tax positions. We may be challenged upon review by the applicable taxing authority and positions taken by us may not be sustained. We recognize all or a portion of the benefit of income tax positions only when we have made a determination that it is more-likely-than-not that the tax position will be sustained upon examination, based upon the technical merits of the position and other factors. For tax positions that are determined as more-likely-than-not to be sustained upon examination, the tax benefit recognized is the largest amount of benefit that is greater than 50% likely of being realized upon ultimate settlement. The development of reserves for income tax positions requires consideration of timing and judgments about tax issues and potential outcomes, and is a subjective critical estimate. In certain circumstances, the ultimate outcome of exposures and risks involves significant uncertainties. If actual outcomes differ materially from these estimates, they could have a material impact on our results of operations and financial condition.

Provision for Excess and Obsolete Inventory.  We record a provision for excess and obsolete inventory based on historical and future usage trends. Other factors may also influence our provision, including decisions to exit a product line, technological change and new product development. These factors could result in a change in the amount of excess and obsolete inventory on hand. Additionally, our estimates of future product demand may prove to be inaccurate, in which case we may have understated or overstated the provision required for excess and obsolete inventory. In the future, if we determine that our inventory was overvalued, we would be required to recognize such costs in our financial statements at the time of such determination. Any such cha rges could be material to our results of operations and financial condition.

Although we have received recent contract ceiling increases for both our MTS and BFT contracts, if one or both of these contracts are not renewed or if we do not receive further contract ceiling increases, the level of our current and future MTS and BFT inventories or our outstanding purchase commitments could be excessive and we may be left with large inventories of unusable parts that we would have to write-off. Any such charges could be material to our consolidated results of operations in the period that we make such determination.

Allowance for Doubtful Accounts.  We perform credit evaluations of our customers and adjust credit limits based upon customer payment history and current creditworthiness, as determined by our review of our customers’ current credit information. Generally, we will require cash in advance or payment secured by irrevocable letters of credit before an order is accepted from an international customer that we do not do business with regularly. In addition, we seek to obtain credit insurance for certain domestic and international customers. We monitor collections and payments from our customers and maintain an allowance for doubtful accounts based upon our historical experience and any specific customer collection issues that we have identified. In li ght of ongoing tight credit market conditions, we continue to see requests from our customers for higher credit limits and longer payment terms. Because of our strong cash position and the nominal amount of interest we are earning on our cash and cash equivalents, we have, on a limited basis, approved certain customer requests. We continue to monitor our accounts receivable credit portfolio and have not had any significant negative customer credit experiences to date. While our credit losses have historically been within our expectations of the allowances established, we cannot guarantee that we will continue to experience the same credit loss rates that we have in the past, especially in light of current global economic conditions and the much tighter credit environment. Measurement of such losses requires consideration of historical loss experience, including the need to adjust for current conditions, and judgments about the probable effects of relevant observable data, including present economic condition s such as delinquency rates and the financial health of specific customers. Changes to the estimated allowance for doubtful accounts could be material to our results of operations and financial condition.

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Business Outlook for the Remainder of Fiscal 2010

We have recently experienced a marked increase in bookings across all three of our business segments which we believe relates to improved global business conditions in our commercial markets. In addition, we also benefited from increased government spending for our products and services despite ongoing U.S. government budget constraints. Based on our results for the nine months ended April 30, 2010 and our expectations for the fiscal quarter ending July 31, 2010, we continue to expect that fiscal 2010 will be another year of record consolidated net sales and that our operating income in fiscal 2010 will be significantly higher than it was in fiscal 2009.

As of April 30, 2010, we have approximately $411.1 million in backlog, the majority of which relates to future deliveries of third-party produced new ruggedized computers and certain related accessories pursuant to orders previously received via our MTS contract. We believe our third-party supplier of new MTS ruggedized computers and certain related accessories is on track to meet our estimated production and delivery schedule for the remainder of fiscal 2010. Assuming no changes in our estimated delivery schedules, the fourth quarter of our fiscal 2010 is expected to be the peak quarter of consolidated net sales.

Although we believe that business conditions have improved throughout our fiscal 2010, as evidenced by recent negative economic developments in Western Europe, the overall business environment remains challenging. If our current or prospective customers materially postpone, reduce or even forgo purchases of our products and services, our business outlook will be adversely affected.

As of April 30, 2010, we had $568.3 million of cash and cash equivalents and in May 2010, we announced, as further discussed in Item 2. “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Definitive Merger Agreement to Acquire CPI International, Inc.,” plans to supplement our organic growth and diversify our business by acquiring CPI. Although we are not currently able to predict the date of completion of the CPI transaction, our financial results have and will continue to include certain merger and integration related charges that are required to be expensed.

COMPARISON OF THE RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED APRIL 30, 2010 AND APRIL 30, 2009

Net Sales. Consolidated net sales were $216.3 million and $128.5 million for the three months ended April 30, 2010 and 2009, respectively, representing an increase of $87.8 million, or 68.3%. The period-over-period increase in net sales is attributable to higher sales in both our mobile data communications and telecommunications transmission segments that were offset, in part, by lower sales in our RF microwave amplifiers segment.

Telecommunications transmission

Net sales in our telecommunications transmission segment were $56.5 million and $54.1 million for the three months ended April 30, 2010 and 2009, respectively, an increase of $2.4 million, or 4.4%. Our telecommunications transmission segment represented 26.1% of consolidated net sales for the three months ended April 30, 2010 as compared to 42.1% for the three months ended April 30, 2009. The increase in net sales in this segment was driven by slightly higher sales of our satellite earth station products that were offset, in part, by lower sales of our over-the-horizon microwave systems. Although relatively nominal, sales in our telecommunications transmission segment for the three months ended April 30, 2009 include sales related to video encoder and decoder products and fiberglass antennas for commercial broadcast customers which we are no longer offering to our customers.

Sales of our satellite earth station products for the three months ended April 30, 2010 were slightly higher than the three months ended April 30, 2009. Bookings for our satellite earth station product line, during the three months ended April 30, 2010, were higher than bookings in either of the two prior quarters of fiscal 2010. Overall global economic conditions remain challenging; however, we believe that business conditions are slowly improving and that this improvement will ultimately result in our satellite earth station product line bookings increasing from current levels.

Sales of our over-the-horizon microwave systems for the three months ended April 30, 2010 were modest and lower than sales in the three months ended April 30, 2009. In March 2010, we received a $35.4 million contract to provide system design and telecommunications transmission equipment for use in a communications network for our North African country end-customer. We expect to generate significant revenue related to this contract during fiscal 2011 and 2012.

Bookings, sales and profitability in our telecommunications transmission segment can fluctuate from period-to-period due to many factors, including the book and ship nature associated with our satellite earth station products, the current adverse conditions in the global economy and credit markets, and the timing of, and our related performance on, contracts from the U.S. government and international customers for our over-the-horizon microwave systems.

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Mobile data communications

Net sales in our mobile data communications segment were $134.1 million for the three months ended April 30, 2010 and $32.2 million for the three months ended April 30, 2009, an increase of $101.9 million, or 316.5%. Our mobile data communications segment represented 62.0% of consolidated net sales for the three months ended April 30, 2010 as compared to 25.1% for the three months ended April 30, 2009.

The increase in sales in our mobile data communications segment was primarily attributable to significantly higher MTS sales to the U.S. Army. The increase in MTS sales during the three months ended April 30, 2010 was primarily driven by the shipment of orders that were in our backlog for new third-party produced MTS ruggedized computers and new MTS systems which incorporate such computers. Sales to the U.S. Army pursuant to our existing BFT contract during the three months ended April 30, 2010 were slightly lower as compared to the three months ended April 30, 2009 and primarily reflect sales of satellite transponder capacity and related network and engineering services. During the three months ended April 30, 2010, we did ship incremental MTS and BFT mobile satellite transceivers as compared to the three months ended April 30, 2009. Sales relating to the design and manufacture of microsatellites, although nominal in both periods, were higher during the three months ended April 30, 2010 as compared to the three months ended April 30, 2009.

As reported in our prior SEC filings, our third-party supplier for new MTS ruggedized computers experienced production and technical issues which previously resulted in significant shipping and related deployment delays to the U.S. Army. During the three months ended April 30, 2010, our third-party supplier slightly exceeded our delivery timetable and we currently expect that the supplier will meet our delivery timetable for the final three months of fiscal 2010. There is a possibility that we could experience further delays and, if such delays occur, revenues that we are currently expecting for the remainder of fiscal 2010 could shift to fiscal 2011. Assuming there are no further delays, we expect the fourth quarter of our fiscal 2010 to be the peak quarter of sales for our mobile data communications segment.

Through April 30, 2010, we received $597.4 million in total orders under our $672.4 million MTS contract, which expires in July 2010, and $234.9 million in total orders under our $384.0 million BFT contract, which expires in December 2011.

We have experienced and we expect to continue to experience significant fluctuations in sales and orders related to the MTS and BFT programs. Bookings, sales and profitability in our mobile data communications segment can fluctuate dramatically from period-to-period due to many factors, including unpredictable funding, deployment and technology decisions by the U.S. government. As such, period-to-period comparisons of our results may not be indicative of a trend or future performance. Our MTS and BFT contracts are both IDIQ contracts and, as such, the U.S. Army is not obligated to purchase any equipment or services under these contracts. In addition, a substantial majority of our mobile data communications segment backlog as of April 30, 2010 includes orders relating to MTS ruggedized computers and certain related accessories which are manufactured by a third-party supplier. If we do not receive these MTS ruggedized computers and certain related accessories in a timely manner or if field deployment schedules change, we could experience further delays in fulfilling funded and anticipated orders from our customers.

RF microwave amplifiers

Net sales in our RF microwave amplifiers segment were $25.7 million for the three months ended April 30, 2010, as compared to $42.2 million for the three months ended April 30, 2009, a decrease of $16.5 million, or 39.1%. Our RF microwave amplifiers segment represented 11.9% of consolidated net sales for the three months ended April 30, 2010 as compared to 32.8% for the three months ended April 30, 2009.

The decline in our RF microwave amplifiers segment sales during the three months ended April 30, 2010 as compared to the three months ended April 30, 2009, is primarily attributable to significantly lower sales to the U.S. government, primarily lower CREW 2.1 related sales. Bookings for our RF microwave amplifier products during the three months ended April 30, 2010 were higher than bookings in either of the two prior quarters of fiscal 2010 and were slightly higher than the three months ended April 30, 2009. Although it will be difficult to replicate this level of bookings for our quarter ending July 31, 2010, we believe this marked increase reflects potentially sustainable market demand.

Bookings, sales and profitability in our RF microwave amplifiers segment can fluctuate from period-to-period due to many factors including the current adverse conditions in the global economy and credit markets, and the timing of, and our related performance on, contracts from the U.S. government and international customers.

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Geography and Customer Type

Sales to the U.S. government (including sales to prime contractors of the U.S. government) represented 72.5% and 54.5% of consolidated net sales for the three months ended April 30, 2010 and 2009, respectively. International sales (which include sales to U.S. companies for inclusion in products that are sold to international customers) represented 22.0% and 33.9% of consolidated net sales for the three months ended April 30, 2010 and 2009, respectively. Domestic commercial sales represented 5.5% and 11.6% of consolidated net sales for the three months ended April 30, 2010 and 2009, respectively.

Gross Profit. Gross profit was $74.8 million and $47.5 million for the three months ended April 30, 2010 and 2009, respectively, representing an increase of $27.3 million. The increase in gross profit is attributable to the significant increase in net sales reported during the three months ended April 30, 2010. Gross profit as a percentage of net sales was 34.6% for the three months ended April 30, 2010 as compared to 37.0% for the three months ended April 30, 2009. The decrease in gross profit as a percentage of net sales during the three months ended April 30, 2010 is primarily attributable to an increase in mobile data communications segment sales as a percentage of total consolidated net sales. Our mobile data communications segment generally has lower gros s margins than our other two business segments. In addition, our gross profit as a percentage of sales was impacted by the overall change in product mix, as further discussed below.

Our telecommunications transmission segment’s gross profit percentage for the three months ended April 30, 2010 was higher than the gross profit percentage for the three months ended April 30, 2009. This increase was primarily attributable to a more favorable product mix primarily related to higher production of mobile satellite transceivers and certain accessories at our high-volume technology manufacturing center located in Tempe, Arizona. Our telecommunications transmission segment manufactures mobile satellite transceivers and certain accessories for our mobile data communications segment, which, in turn, sells them to its customers, primarily the U.S. Army.

Our mobile data communications segment experienced an increase in gross profit percentage during the three months ended April 30, 2010 as compared to the three months ended April 30, 2009. This increase was primarily driven by a significant increase in sales of mobile satellite transceivers and related systems primarily to our MTS customer offset, in part, by a write-down of approximately $2.6 million related to older generation MTS computers that we had in our inventories. During the three months ended April 30, 2010, we entered into an agreement with the U.S. Army to sell it almost all of our remaining older generation MTS computers. The amount of this write-down is included in our provision for excess and obsolete inventory which is further discussed below.  Significant period-to-period fluctuations in our gross margins ca n occur in our mobile data communications segment as a result of the nature, timing and mix of actual deliveries which are primarily driven by the U.S. Army’s requirements.

Our RF microwave amplifiers segment experienced a higher gross profit percentage during the three months ended April 30, 2010 as compared to the three months ended April 30, 2009. For the three months ended April 30, 2009, gross margins in this segment were negatively impacted by long production times relating to certain complex solid-state, high-power amplifiers and high-power switches that employed newer technology.

Included in cost of sales for the three months ended April 30, 2010 and 2009 are provisions for excess and obsolete inventory of $4.6 million and $1.0 million, respectively. As discussed in Item 2. “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Policies – Provisions for Excess and Obsolete Inventory,” we regularly review our inventory and record a provision for excess and obsolete inventory based on historical and projected usage assumptions.

Selling, General and Administrative Expenses.  Selling, general and administrative expenses were $25.6 million and $23.1 million for the three months ended April 30, 2010 and 2009, respectively, representing an increase of $2.5 million, or 10.8%.  As a percentage of consolidated net sales, selling, general and administrative expenses were 11.8% and 18.0% for the three months ended April 30, 2010 and 2009, respectively.

The increase in selling, general and administrative expenses is primarily attributable to increased cash-based incentive compensation associated with the overall increase in our net sales and profits. Included in the three months ended April 30, 2010 were professional fees of approximately $1.0 million associated with our pending acquisition of CPI. The decrease in selling, general and administrative expenses as a percentage of consolidated net sales is attributable to the higher consolidated net sales for the three months ended April 30, 2010.

Amortization of stock-based compensation expense recorded as selling, general and administrative expenses increased to $1.8 million in the three months ended April 30, 2010 from $1.7 million in the three months ended April 30, 2009.

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Research and Development Expenses.  Research and development expenses were $11.4 million for both the three months ended April 30, 2010 and 2009. As a percentage of consolidated net sales, research and development expenses were 5.3% and 8.9% for the three months ended April 30, 2010 and 2009, respectively. The decrease in research and development expenses as a percentage of consolidated net sales is attributable to the higher consolidated net sales for the three months ended April 30, 2010.

For the three months ended April 30, 2010 and 2009, research and development expenses of $7.2 million and $7.4 million, respectively, related to our telecommunications transmission segment, $1.4 million and $1.6 million, respectively, related to our mobile data communications segment, $2.5 million and $2.0 million, respectively, related to our RF microwave amplifiers segment, with the remaining expenses related to the amortization of stock-based compensation expense which is not allocated to our three operating segments. Amortization of stock-based compensation expense recorded as research and development expenses was $0.3 million and $0.4 million for the three months ended April 30, 2010 and 2009, respectively.

As an investment for the future, we are continually enhancing our existing products and developing new products and technologies. Whenever possible, we seek customer funding for research and development to adapt our products to specialized customer requirements. During the three months ended April 30, 2010 and 2009, customers reimbursed us $2.9 million and $6.0 million, respectively, which is not reflected in the reported research and development expenses, but is included in net sales with the related costs included in cost of sales. During the three months ended April 30, 2010, we completed our efforts associated with building, testing and delivering our next-generation BFT-HC transceivers pursuant to an $8.0 million order we received from the U.S. Army in fiscal 2009.

Amortization of Intangibles. Amortization relating to intangible assets with finite lives was $1.8 million, for both the three months ended April 30, 2010 and 2009.

Operating Income. Operating income for the three months ended April 30, 2010 and 2009 was $36.0 million and $11.2 million, respectively. As further discussed below, the significant increase is primarily attributable to higher operating income in both our mobile data communications and telecommunications transmission segments, partially offset by a decline in operating income in our RF microwave amplifiers segment and an increase in unallocated operating expenses.

Operating income in our telecommunications transmission segment was $12.8 million for the three months ended April 30, 2010 as compared to $9.7 million for the three months ended April 30, 2009. The increase in operating income is primarily due to this segment’s increase in gross profit percentage, as discussed above, and cost reduction activities.

Our mobile data communications segment generated operating income of $27.5 million for the three months ended April 30, 2010 as compared to $1.1 million for the three months ended April 30, 2009. The increase in operating income is primarily due to this segment’s significantly higher net sales and higher gross profit percentage, as discussed above.

Our RF microwave amplifiers segment generated operating income of $2.5 million for the three months ended April 30, 2010 as compared to $5.6 million for the three months ended April 30, 2009. The decrease in operating income is primarily due to this segment’s decline in net sales as discussed above.

Unallocated operating expenses increased to $6.8 million for the three months ended April 30, 2010 from $5.2 million for the three months ended April 30, 2009 primarily due to increased cash-based incentive compensation associated with the overall increase in our net sales and profits and increased professional fees associated with our agreement to purchase CPI. Amortization of stock-based compensation expense, which is included in unallocated operating expenses, was $2.3 million in both the three months ended April 30, 2010 and 2009.

Interest Expense.  Interest expense was $2.0 million and $0.9 million for the three months ended April 30, 2010 and 2009, respectively. Interest expense during the three months ended April 30, 2010 is primarily due to incremental interest expense associated with the issuance of $200.0 million of our 3.0% convertible senior notes. Our interest expense during the three months ended April 30, 2009 reflects a retroactive adjustment to record implied interest expense at 7.5% related to our 2.0% convertible senior notes. Our 2.0% convertible senior notes were fully converted into common shares during the third quarter of our fiscal 2009.

Interest Income and Other.  Interest income and other for the three months ended April 30, 2010 was $0.3 million, as compared to $0.4 million for the three months ended April 30, 2009. The decrease of $0.1 million is attributable to a significant decline in period-over-period interest rates offset, in part, by an increase in cash and cash equivalents which generated incremental interest income.

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All of our available cash and cash equivalents are currently invested in commercial and government money market mutual funds, certificates of deposit, short-term U.S. Treasury obligations and bank deposits, and currently yield a blended annual interest rate of approximately 0.29%.

Provision for Income Taxes.  The provision for income taxes was $12.6 million and $3.1 million for the three months ended April 30, 2010 and 2009, respectively. Our effective tax rate was 36.6% for the three months ended April 30, 2010 as compared to 28.9% for the three months ended April 30, 2009. Our effective tax rate for the three months ended April 30, 2009 has been retroactively adjusted and presented to reflect lower income taxes due to the increase in implied interest expense related to our 2.0% convertible senior notes that were fully converted into common shares during the third quarter of our fiscal 2009.

Our effective tax rate for the three months ended April 30, 2010 and 2009 was impacted by net discrete tax expenses of $0.2 million and a discrete tax benefit of $0.5 million, respectively. Excluding discrete items in both periods, our estimated effective tax rate for the three months ended April 30, 2010 was 36.0% as compared to 33.7% for the three months ended April 30, 2009.  This increase in our effective tax rate is primarily attributable to the expiration of the federal research and experimentation credit on December 31, 2009.

Excluding the impact of discrete tax items, our fiscal 2010 effective tax rate is expected to approximate 36.0%.

The IRS continues to audit our federal income tax return for the fiscal year ended July 31, 2007 and recently informed us that it intends to audit our federal income tax return for the year ended July 31, 2008.  For both years under audit, we believe the IRS is focusing on the allowable amount of federal research and experimentation credits utilized as well as the amount of our domestic production activities deduction. The IRS is not currently examining any of the federal income tax returns filed by Radyne Corporation for the tax years prior to our August 1, 2008 acquisition of Radyne. Although adjustments relating to the audits and related settlements of our fiscal 2004, 2005 and 2006 tax returns were immaterial, a resulting tax assessment or settlement for fiscal 2007, fiscal 2008, or other later periods could have a materi al adverse impact on our consolidated results of operations and financial condition.

COMPARISON OF THE RESULTS OF OPERATIONS FOR THE NINE MONTHS ENDED APRIL 30, 2010 AND APRIL 30, 2009

Net Sales. Consolidated net sales were $521.3 million and $464.3 million for the nine months ended April 30, 2010 and 2009, respectively, representing an increase of $57.0 million, or 12.3%. The period-over-period increase in net sales is attributable to significantly higher sales in our mobile data communications segment that were offset, in part, by a decrease in sales in both our telecommunications transmission and RF microwave amplifiers segments.

Telecommunications transmission

Net sales in our telecommunications transmission segment were $161.7 million and $198.2 million for the nine months ended April 30, 2010 and 2009, respectively, a decrease of $36.5 million, or 18.4%. Our telecommunications transmission segment represented 31.0% of consolidated net sales for the nine months ended April 30, 2010 as compared to 42.7% for the nine months ended April 30, 2009. The decline in net sales in this segment was due to substantially lower sales of our satellite earth station products offset, in part, by a slight increase in sales of our over-the-horizon microwave systems. Although relatively nominal, sales in our telecommunications transmission segment for the nine months ended April 30, 2009 include sales related to video encoder and decoder products and fiberglass antennas for commercial broadcast customers which we are no longer offering to our customers.

Sales of our satellite earth station products for the nine months ended April 30, 2010 were substantially lower than they were in the nine months ended April 30, 2009 due to difficult economic conditions. Although bookings of our satellite earth station products during the nine months ended April 30, 2010 were significantly lower than bookings in the nine months ended April 30, 2009, bookings for the most recent quarter were higher than they were in either of the prior two fiscal quarters. Overall global economic conditions remain challenging; however, we believe that business conditions are slowly improving and that this improvement will ultimately result in our satellite earth station product line bookings increasing from current levels.

Sales of our over-the-horizon microwave systems for the nine months ended April 30, 2010 were modest; however, they were slightly higher than they were in the nine months ended April 30, 2009. In March 2010, we received a $35.4 million contract award to provide system design and telecommunications transmission equipment for use in a communications network for our North African country end-customer. We expect to generate significant revenue related to this contract during fiscal 2011 and 2012.

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Bookings, sales and profitability in our telecommunications transmission segment can fluctuate from period-to-period due to many factors, including the book and ship nature associated with our satellite earth station products, the current adverse conditions in the global economy and credit markets, and the timing of, and our related performance on, contracts from the U.S. government and international customers for our over-the-horizon microwave systems.

Mobile data communications

Net sales in our mobile data communications segment were a record $272.4 million for the nine months ended April 30, 2010 and $153.0 million for the nine months ended April 30, 2009, an increase of $119.4 million, or 78.0%. Our mobile data communications segment represented 52.3% of consolidated net sales for the nine months ended April 30, 2010 as compared to 32.9% for the nine months ended April 30, 2009.

The increase in sales in our mobile data communications segment was primarily attributable to significantly higher MTS sales to the U.S. Army. The increase in MTS sales during the nine months ended April 30, 2010 was primarily driven by the shipment of orders that were in our backlog for new third-party produced MTS ruggedized computers and new MTS systems which incorporate such computers. Sales to the U.S. Army pursuant to our existing BFT contract during the nine months ended April 30, 2010 were substantially lower compared to the nine months ended April 30, 2009 and primarily reflect sales of satellite transponder capacity and related network and engineering services. During the nine months ended April 30, 2010, sales of both MTS and BFT mobile satellite transceivers were significantly lower as compared to the nine months ended Apri l 30, 2009. Sales relating to the design and manufacture of microsatellites, although nominal in both periods, were lower during the nine months ended April 30, 2010 as compared to the nine months ended April 30, 2009.

As reported in prior SEC filings, our third-party supplier for new MTS ruggedized computers experienced production and technical issues which previously resulted in significant shipping and related deployment delays to the U.S. Army during the nine months ended April 30, 2010. There is a possibility that we could experience further delays and, if such delays occur, revenues that we are currently expecting for the remainder of fiscal 2010 could shift to fiscal 2011.

Through April 30, 2010, we received $597.4 million in total orders under our $672.4 million MTS contract, which expires in July 2010, and $234.9 million in total orders under our $384.0 million BFT contract, which expires in December 2011.

We have experienced and we expect to continue to experience significant fluctuations in sales and orders related to the MTS and BFT programs. Bookings, sales and profitability in our mobile data communications segment can fluctuate dramatically from period-to-period due to many factors, including unpredictable funding, deployment and technology decisions by the U.S. government. As such, period-to-period comparisons of our results may not be indicative of a trend or future performance. Our MTS and BFT contracts are both IDIQ contracts and, as such, the U.S. Army is not obligated to purchase any equipment or services under these contracts. In addition, a substantial majority of our mobile data communications segment backlog as of April 30, 2010 includes orders relating to MTS ruggedized computers and certain related accessories which are manufactured by a third-party supplier. If we do not receive these MTS ruggedized computers and certain related accessories in a timely manner or if field deployment schedules change, we could experience further delays in fulfilling funded and anticipated orders from our customers.

RF microwave amplifiers

Net sales in our RF microwave amplifiers segment were $87.2 million for the nine months ended April 30, 2010, as compared to $113.1 million for the nine months ended April 30, 2009, a decrease of $25.9 million, or 22.9%. Our RF microwave amplifiers segment represented 16.7% of consolidated net sales for the nine months ended April 30, 2010 as compared to 24.4% for the nine months ended April 30, 2009.

The decline in our RF microwave amplifiers segment sales during the nine months ended April 30, 2010 as compared to the nine months ended April 30, 2009, is primarily attributable to significantly lower sales to the U.S. government, primarily lower CREW 2.1 related sales. Although we recently experienced a marked increase in bookings during the most recent quarter, our RF microwave amplifiers segment bookings during the nine months ended April 30, 2010 were significantly lower as compared to the nine months ended April 30, 2009 primarily due to difficult economic conditions.

Bookings, sales and profitability in our RF microwave amplifiers segment can fluctuate from period-to-period due to many factors including the current adverse conditions in the global economy and credit markets, and the timing of, and our related performance on, contracts from the U.S. government and international customers.

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Geography and Customer Type

Sales to the U.S. government (including sales to prime contractors of the U.S. government) represented 68.2% and 56.4% of consolidated net sales for the nine months ended April 30, 2010 and 2009, respectively. International sales (which include sales to U.S. companies for inclusion in products that are sold to international customers) represented 25.6% and 32.5% of consolidated net sales for the nine months ended April 30, 2010 and 2009, respectively. Domestic commercial sales represented 6.2% and 11.1% of consolidated net sales for the nine months ended April 30, 2010 and 2009, respectively.

Gross Profit. Gross profit was $188.1 million and $194.0 million for the nine months ended April 30, 2010 and 2009, respectively, representing a decrease of $5.9 million. Gross profit as a percentage of net sales was 36.1% for the nine months ended April 30, 2010 as compared to 41.8% for the nine months ended April 30, 2009. The decrease in gross profit and gross profit as a percentage of net sales during the nine months ended April 30, 2010 was primarily attributable to an increase in mobile data communications segment sales as a percentage of total consolidated net sales. Our mobile data communications segment generally has lower gross margins than our other two business segments. In addition, our gross profit as a percentage of sales was impacted by the over all change in product mix, as further discussed below.

Our telecommunications transmission segment’s gross profit percentage for the nine months ended April 30, 2010 was slightly lower than the gross profit percentage for the nine months ended April 30, 2009. The decline in gross profit percentage was primarily the result of a less favorable product mix and lower overall usage of our high-volume technology manufacturing center, located in Tempe, Arizona, that was driven by a decline in satellite earth station product sales and lower production of mobile satellite transceivers and certain related accessories. Our telecommunications transmission segment manufactures mobile satellite transceivers and certain accessories for our mobile data communications segment, which, in turn, sells them to its customers, primarily the U.S. Army. This decline was partially offset by the benefit of cos t-reduction actions that were completed in prior periods.

Our mobile data communications segment experienced an anticipated significant decline in gross profit percentage during the nine months ended April 30, 2010 as compared to the nine months ended April 30, 2009 primarily due to a change in product mix. During the nine months ended April 30, 2010, a substantial portion of our mobile data communications segment’s sales related to the shipment of orders that were in our backlog for new MTS third-party produced ruggedized computers and related accessories or new MTS systems which include these computers. These new MTS computers have significantly lower gross margins than our MTS and BFT equipment and services sold during the nine months ended April 30, 2009. During the nine months ended April 30, 2010, we also recorded a write-down of approximately $2.6 million of older generation MTS computers that we had in our inventories. During the three months ended April 30, 2010, we entered into an agreement with the U.S. Army to sell it almost all of our remaining older generation MTS computers. The amount of this write-down is included in our provision for excess and obsolete inventory which is further discussed below.  Significant period-to-period fluctuations in our gross margins can occur in our mobile data communications segment as a result of the nature, timing and mix of actual deliveries which are primarily driven by the U.S. Army’s requirements.

Our RF microwave amplifiers segment experienced a slightly higher gross profit percentage during the nine months ended April 30, 2010 as compared to the nine months ended April 30, 2009. For the nine months ended April 30, 2009, gross margins in this segment were negatively impacted by long production times relating to certain complex solid-state, high-power amplifiers and high-power switches that employed newer technology.

Included in cost of sales for the nine months ended April 30, 2010 and 2009 are provisions for excess and obsolete inventory of $6.2 million and $3.0 million, respectively. Included in cost of sales for the nine months ended April 30, 2009 is amortization of $1.5 million related to the estimated fair value step-up of Radyne inventory acquired. As discussed in our Item 2. “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Policies – Provisions for Excess and Obsolete Inventory,” we regularly review our inventory and record a provision for excess and obsolete inventory based on historical and projected usage assumptions.

Selling, General and Administrative Expenses.  Selling, general and administrative expenses were $70.3 million and $78.0 million for the nine months ended April 30, 2010 and 2009, respectively, representing a decrease of $7.7 million, or 9.9%. As a percentage of consolidated net sales, selling, general and administrative expenses were 13.5% and 16.8% for the nine months ended April 30, 2010 and 2009, respectively.

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The decrease in selling, general and administrative expenses is primarily attributable to the benefit from cost reduction activities including our fiscal 2009 decision to no longer offer video encoder and decoder products or market fiberglass antennas to our broadcast customers and overall lower cash-based incentive compensation. Included in selling, general and administrative expenses for the nine months ended April 30, 2010 are professional fees of approximately $1.0 million associated with our pending acquisition of CPI. The decrease in selling, general and administrative expenses as a percentage of consolidated net sales is attributable to the higher consolidated net sales for the nine months ended April 30, 2010.

Amortization of stock-based compensation expense recorded as selling, general and administrative expenses was $4.3 million in the nine months ended April 30, 2010 as compared to $5.3 million in the nine months ended April 30, 2009.

Research and Development Expenses.  Research and development expenses were $34.1 million and $38.1 million for the nine months ended April 30, 2010 and 2009, respectively, representing a decrease of $4.0 million, or 10.5%. As a percentage of consolidated net sales, research and development expenses were 6.6% and 8.2% for the nine months ended April 30, 2010 and 2009, respectively.  The decrease in research and development expenses is attributable to reductions in spending, including reductions in internal funding incurred on research and development efforts associated with our next-generation MTS and BFT products which were introduced during fiscal 2009. As noted below, we received a contract in fiscal 2009 from the U.S. Army to fund some of our next-generation BFT efforts. The decrease in research and development expenses as a percentage of consolidated net sales is attributable to the higher consolidated net sales for the nine months ended April 30, 2010.

For the nine months ended April 30, 2010 and 2009, research and development expenses of $21.2 million and $23.3 million, respectively, related to our telecommunications transmission segment, $3.9 million and $7.4 million, respectively, related to our mobile data communications segment, $8.1 million and $6.2 million, respectively, related to our RF microwave amplifiers segment, with the remaining expenses related to the amortization of stock-based compensation expense which is not allocated to our three operating segments. Amortization of stock-based compensation expense recorded as research and development expenses was $0.9 million and $1.2 million for the nine months ended April 30, 2010 and 2009, respectively.

As an investment for the future, we are continually enhancing our existing products and developing new products and technologies. Whenever possible, we seek customer funding for research and development to adapt our products to specialized customer requirements. During the nine months ended April 30, 2010 and 2009, customers reimbursed us $9.2 million and $10.0 million, respectively, which is not reflected in the reported research and development expenses, but is included in net sales with the related costs included in cost of sales. During the nine months ended April 30, 2010, we completed our efforts associated with building, testing and delivering our next-generation BFT-HC transceivers pursuant to an $8.0 million order we received from the U.S. Army in fiscal 2009.

Amortization of Acquired In-Process Research and Development. There was no amortization of acquired in-process research and development projects for the nine months ended April 30, 2010.

During the nine months ended April 30, 2009, in connection with our August 1, 2008 acquisition of Radyne, we immediately amortized $6.2 million for the estimated fair value of acquired in-process research and development projects. The acquired in-process research and development projects were expensed upon acquisition because technological feasibility had not been established and no future alternative use existed.  Of the $6.2 million of amortization of acquired in-process research and development for the nine months ended April 30, 2009, $3.3 million related to our RF microwave amplifiers segment and $2.9 million related to our telecommunications transmission segment. Such amounts are included in each respective segment’s operating income results.

Amortization of Intangibles. Amortization relating to intangible assets with finite lives was $5.3 million and $5.4 million for the nine months ended April 30, 2010 and 2009, respectively.

Operating Income. Operating income for the nine months ended April 30, 2010 and 2009 was $78.4 million and $66.3 million, respectively. As further discussed below, the increase is primarily attributable to a significant increase in operating income in our mobile data communications segment, partially offset by a decrease in operating income in both our telecommunications transmission and RF microwave amplifiers segments as well as lower unallocated operating expenses. Operating income during the nine months ended April 30, 2009 reflects a $6.2 million charge for acquired in-process research and development projects associated with our Radyne acquisition.

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Operating income in our telecommunications transmission segment was $34.8 million for the nine months ended April 30, 2010 as compared to $46.1 million for the nine months ended April 30, 2009. The decrease in operating income is primarily due to this segment’s decline in net sales and gross margins which were partially offset by cost reduction activities, as discussed above. Operating income for the nine months ended April 30, 2009 includes the impact of $2.9 million of immediate amortization of acquired in-process research and development projects associated with our Radyne acquisition.

Our mobile data communications segment generated operating income of $52.5 million for the nine months ended April 30, 2010 as compared to $29.9 million for the nine months ended April 30, 2009. This increase is primarily due to this segment’s significantly higher net sales and lower research and development expenses, as discussed above.

Our RF microwave amplifiers segment generated operating income of $7.9 million for the nine months ended April 30, 2010 as compared to $9.2 million for the nine months ended April 30, 2009. The decrease in operating income is primarily due to this segment’s decline in net sales and an increase in research and development expenditures, as discussed above. Operating income for the nine months ended April 30, 2009 includes amortization of $3.3 million of acquired in-process research and development projects associated with our Radyne acquisition.

Unallocated operating expenses decreased to $16.8 million for the nine months ended April 30, 2010 as compared to $18.9 million for the nine months ended April 30, 2009 primarily due to lower amortization of stock-based compensation. Unallocated operating expenses for the nine months ended April 30, 2010 include professional fees associated with our agreement to purchase CPI.

Amortization of stock-based compensation expense, which is included in unallocated operating expenses, amounted to $5.8 million in the nine months ended April 30, 2010 as compared to $7.0 million in the nine months ended April 30, 2009.

Interest Expense.  Interest expense was $5.9 million and $4.6 million for the nine months ended April 30, 2010 and 2009, respectively. The increase in interest expense during the nine months ended April 30, 2010 as compared to the nine months ended April 30, 2009 is primarily due to incremental interest expense associated with the issuance of $200.0 million of our 3.0% convertible senior notes. Our interest expense during the nine months ended April 30, 2009 reflects a retroactive adjustment to record implied interest expense at 7.5% related to our 2.0% convertible senior notes. Our 2.0% convertible senior notes were fully converted into common shares during the third quarter of our fiscal 2009.

Interest Income and Other.  Interest income and other for the nine months ended April 30, 2010 was $0.7 million, as compared to $2.3 million for the nine months ended April 30, 2009. The decrease of $1.6 million is primarily attributable to a significant decline in period-over-period interest rates offset, in part, by an increase in cash and cash equivalents which generated incremental interest income.

All of our available cash and cash equivalents are currently invested in commercial and government money market mutual funds, certificates of deposit, short-term U.S. Treasury obligations and bank deposits, and currently yield a blended annual interest rate of approximately 0.29%.

Provision for Income Taxes.  The provision for income taxes was $26.0 million and $22.6 million for the nine months ended April 30, 2010 and 2009, respectively. Our effective tax rate was 35.6% for the nine months ended April 30, 2010 compared to 35.4% for the nine months ended April 30, 2009. Our effective tax rate for the nine months ended April 30, 2009 has been retroactively adjusted and presented to reflect lower income taxes due to the increase in implied interest expense related to our 2.0% convertible senior notes.

Our effective tax rate for the nine months ended April 30, 2010 reflects net discrete tax benefits of approximately $0.3 million and our effective tax rate for the nine months ended April 30, 2009 reflects discrete tax benefits of $1.1 million which primarily relate to the passage of legislation that included the retroactive extension of the expiration of the federal research and experimentation credit from December 31, 2007 to December 31, 2009. Also, our effective tax rate for the nine months ended April 30, 2009 was significantly impacted by the fact that we recorded an amortization charge of $6.2 million for acquired in-process research and development, which was non-deductible for income tax purposes.

Excluding the aforementioned non-deductible acquired in-process research and development and discrete tax items in both periods, our effective tax rate for the nine months ended April 30, 2010 was approximately 36.0% as compared to 33.9% for the nine months ended April 30, 2009. The increase in our effective tax rate is primarily attributable to the expiration of the federal research and experimentation credit on December 31, 2009.

Excluding the impact of discrete tax items, our fiscal 2010 effective tax rate is expected to approximate 36.0%.

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During the nine months ended April 30, 2010, similar to the agreements we reached with the IRS for our federal income tax returns for fiscal 2004 and 2005, we reached an agreement with the IRS relating to the allowable amount of federal research and experimentation credits utilized and interest expense relating to our 2.0% convertible senior notes for fiscal 2006. This agreement did not result in any material change to our income tax provision for the nine months ended April 30, 2010.

The IRS continues to audit our federal income tax return for the fiscal year ended July 31, 2007 and recently informed us that it intends to audit our federal income tax return for the year ended July 31, 2008.  For both years under audit, we believe the IRS is focusing on the allowable amount of federal research and experimentation credits utilized as well as the amount of our domestic production activities deduction. The IRS is not currently examining any of the federal income tax returns filed by Radyne Corporation for the tax years prior to our August 1, 2008 acquisition of Radyne. Although adjustments relating to the audits and related settlements of our fiscal 2004, 2005 and 2006 tax returns were immaterial, a resulting tax assessment or settlement for fiscal 2007, fiscal 2008, or other potential future periods could ha ve a material adverse impact on our consolidated results of operations and financial condition.

LIQUIDITY AND CAPITAL RESOURCES

Our unrestricted cash and cash equivalents increased to $568.3 million at April 30, 2010 from $485.5 million at July 31, 2009, representing an increase of $82.8 million. The increase in cash and cash equivalents during the nine months ended April 30, 2010 was primarily driven by the following:

·   Net cash provided by operating activities of $82.5 million for the nine months ended April 30, 2010 as compared to $49.6 million for the nine months ended April 30, 2009. The net increase in cash provided by operating activities was primarily attributable to a significant decrease in net working capital requirements during the nine months ended April 30, 2010 as compared to the nine months ended April 30, 2009. Net cash expected to be provided by operating activities for the remainder of the fiscal year is currently difficult to predict and will be significantly impacted by the timing of actual deliveries, collections and vendor payments relating to our overall performance on our MTS contract with the U.S. Army.

·   Net cash used in investing activities for the nine months ended April 30, 2010 and April 30, 2009 was $2.3 million and $215.9 million, respectively.  During the nine months ended April 30, 2010, we spent $4.2 million to purchase property, plant and equipment, including expenditures relating to ongoing equipment upgrades, as well as enhancements to our high-volume technology manufacturing center in Tempe, Arizona and we received proceeds of $2.0 million from the sale of certain assets and liabilities relating to our video encoder and decoder product line. For the nine months ended April 30, 2009, $205.3 million of cash and cash equivalents (net of cash acquired) was used to purchase Radyne.

·   Net cash provided by financing activities was $2.6 million for the nine months ended April 30, 2010 as compared to $11.4 million for the nine months ended April 30, 2009, primarily due to substantially lower proceeds related to stock option exercises.

Our investment policy relating to our unrestricted cash and cash equivalents is intended to minimize principal loss while at the same time maximize the income we receive without significantly increasing risk. To minimize risk, we generally invest our cash and cash equivalents in money market mutual funds (both government and commercial), certificates of deposit, bank deposits, and U.S. Treasury securities. Many of our money market mutual funds invest in direct obligations of the U.S. government, bank securities guaranteed by the Federal Deposit Insurance Corporation, certificates of deposits and commercial paper and other securities issued by other companies. While we cannot predict future market conditions or market liquidity, we believe our investment policies are appropriate in the current environment. Ultimately, the availability o f our cash and cash equivalents is dependent on a well-functioning liquid market.

As of April 30, 2010, we have approximately $568.3 million of cash and cash equivalents. As of April 30, 2010, our material short-term cash requirements primarily consist of cash necessary to purchase CPI and to fund our ongoing working capital needs. We expect to redeploy approximately $372.0 million of our existing cash and cash equivalents to purchase CPI (including the payments for existing CPI change of control agreements, the cancellation and payment of existing CPI employee stock-based awards and the repayment of currently outstanding CPI debt). Upon closing of the CPI acquisition, we anticipate that we will have, on a pro-forma basis, and excluding the impact of any additional acquisitions we may make, between $175.0 million and $200.0 million of cash and cash equivalents.

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Our material long-term cash requirements primarily consist of the possible use of cash to repay our 3.0% convertible senior notes and operating leases, including the present value of the net contractual non-cancelable lease obligations and related costs (through October 31, 2018) of $2.0 million related to Radyne’s former Phoenix, Arizona manufacturing and engineering facility, which we have subleased to a third party through October 31, 2015.

We have historically met both our short-term and long-term cash requirements with funds provided by a combination of cash and cash equivalent balances, cash generated from operating activities and cash generated from financing transactions. In light of ongoing tight credit market conditions, we continue to receive requests from our customers for higher credit limits and longer payment terms. Because of our strong cash position and the nominal amount of interest we are earning on our cash and cash equivalents, we have, on a limited basis, approved certain customer requests. We continue to monitor our accounts receivable credit portfolio and have not had any material negative customer credit experiences to date. Based on our anticipated level of future sales and operating income, we believe that our existing cash and cash equivalent bala nces and our cash generated from operating activities will be sufficient to meet both our currently anticipated short-term and long-term operating cash requirements.

Although it is difficult in the current economic and credit environment to predict the terms and conditions of financing that may be available in the future, should our short-term or long-term cash requirements increase beyond our current expectations, we believe that we would have sufficient access to credit from financial institutions and/or financing from public and private debt and equity markets.

As discussed in “Notes to Condensed Consolidated Financial Statements – Note (20) Legal Matters and Proceedings,” we are incurring expenses associated with certain legal proceedings and other matters. The outcome of these legal proceedings and other matters is inherently difficult to predict and an adverse outcome in one or more matters could have a material adverse effect on our consolidated financial condition and results of operations in the period of such determination.

FINANCING ARRANGEMENTS

In May 2009, we issued $200.0 million of our 3.0% convertible senior notes in a private offering pursuant to Rule 144A under the Securities Act of 1933, as amended. The net proceeds from this transaction were approximately $194.5 million after deducting the initial purchasers’ discount and transaction costs. For further information, see “Notes to Condensed Consolidated Financial Statements – Note (13) Convertible Senior Notes.”

In June 2009, we entered into a committed $100.0 million three-year, unsecured revolving credit facility (“Credit Facility”) with a syndicate of bank lenders (see “Notes to Condensed Consolidated Financial Statements – Note (12) Credit Facility”). At April 30, 2010, we have approximately $8.3 million of standby letters of credit outstanding under this Credit Facility relating to the guarantee of future performance on certain customer contracts and no commercial letters of credit outstanding.

COMMITMENTS

Except as disclosed in the below table, in the normal course of business, we routinely enter into binding and non-binding purchase obligations primarily covering anticipated purchases of inventory and equipment. We do not expect that these commitments, as of April 30, 2010, will materially adversely affect our liquidity.

At April 30, 2010, we had contractual cash obligations relating to: (i) our $281.5 million and $97.2 million MTS orders which we announced in January 2009 and April 2009, respectively, (ii) our operating lease commitments (including satellite lease expenditures relating to our mobile data communications segment’s MTS and BFT contracts) and (iii) the potential cash repayment of our 3.0% convertible senior notes.

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Payments due under these long-term obligations, excluding interest on the 3.0% convertible senior notes, are as follows:

	Obligations Due by Fiscal Years (in thousands)
	Total			Remainder of 2010			2011 and 2012			2013 and 2014			After 2014
MTS purchase orders	$	155,011			155,011			-			-			-
Operating lease commitments		43,032			12,306			15,840			4,876			10,010
3.0% convertible senior notes		200,000			-			-			-			200,000
Total contractual cash obligations		398,043			167,317			15,840			4,876			210,010
Less contractual sublease payments		(6,818	)		(299	)		(2,416	)		(2,488	)		(1,615	)
Net contractual cash obligations	$	391,225			167,018			13,424			2,388			208,395

In connection with our $281.5 million and $97.2 million of MTS orders from the U.S. Army, we were required to place multiple purchase orders for ruggedized computers and related accessories with a third party. As is typical with U.S. government contract awards, we believe that if the U.S. Army were to terminate its contract with us for convenience, we should be able to cancel our purchase orders with our vendor and/or recover any unreimbursed costs from the U.S. Army.

In addition to the commitments noted in the above table, and as further discussed in Item 2. “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Definitive Merger Agreement to Acquire CPI International, Inc.,” pursuant to the terms of the merger agreement, upon closing, we would be obligated to pay cash in respect of the merger consideration and other items including the cancellation of CPI employee stock-based awards. In addition, upon closing, we intend to repay CPI’s indebtedness to its lenders. We currently estimate that the aggregate amount of these commitments is approximately $372.0 million.

In the ordinary course of business, we include indemnification provisions in certain of our customer contracts. Pursuant to these agreements, we have agreed to indemnify, hold harmless and reimburse the indemnified party for losses suffered or incurred by the indemnified party, including but not limited to losses related to third-party intellectual property claims. To date, there have not been any material costs or expenses incurred in connection with such indemnification claims. Our insurance policies may not cover the cost of defending indemnification claims or providing indemnification. As a result, if a claim were asserted against us by any party that we have agreed to indemnify, we could incur future legal costs and damages.

As further discussed in “Notes to Condensed Consolidated Financial Statements – Note (13) Convertible Senior Notes,” on May 8, 2009, we issued $200.0 million of our 3.0% convertible senior notes. Holders of the notes will have the right to require us to repurchase some or all of the outstanding notes, solely for cash, on May 1, 2014, May 1, 2019 and May 1, 2024 and upon certain events, including a change in control. If not earlier redeemed by us or repaid pursuant to the holders’ right to require repurchase, the notes mature on May 1, 2029.

We have approximately $8.3 million of standby letters of credit outstanding under our Credit Facility related to the guarantee of future performance on certain contracts and no commercial letters of credit outstanding under our Credit Facility for the payment of goods and supplies.

In connection with our August 2006 acquisition of certain assets and assumed liabilities of Insite Consulting, Inc. (“Insite”), a logistics application software company, we may be required to make certain earn-out payments based on the achievement of future sales targets. The first part of the earn-out cannot exceed $1.4 million and is limited to a five-year period ending August 2011. The second part of the earn-out, which is for a ten-year period ending August 2016, is unlimited and based on a per unit future sales target primarily related to new commercial satellite-based mobile data communications markets. Through April 30, 2010 we made aggregate payments of approximately $17,000 associated with the second part of the earn-out, none of which were paid during the nine months ended April 30, 2010. In May 2010, we received a substantial order from the U.S. Army for our MTS software 5.16 which incorporates an application developed by Insite. Deliveries against this order require payments associated with the first part of the earn-out. We expect that a substantial portion of the first part of the earn-out will be paid upon delivery of such order which is expected to occur in the last quarter of our fiscal 2010. In accordance with accounting standards that were grandfathered by the FASB ASC (see additional discussion below), these earn-out payments will be recorded as additional purchase price which will result in an increase in goodwill. Such amounts are not included in the above table.

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We have change of control agreements and indemnification agreements with certain of our executive officers and certain key employees. All of these agreements may require payments, in certain circumstances, including, but not limited to, an event of a change in control of our Company. Such amounts are not included in the above table.

RECENT ACCOUNTING PRONOUNCEMENTS

As further discussed in “Notes to Condensed Consolidated Financial Statements – Note (2) Impact of Adoption of New Accounting Standards Codification and Adoption of New Accounting Standards,” during the nine months ended April 30, 2010, we adopted:

·   An accounting standard now known as FASB ASC 820-10, “Fair Value Measurements and Disclosures – Overall,”  which clarifies (i) how to measure the fair value of liabilities when a quoted price in an active market for the identical liability is not available; (ii) that when estimating the fair value of a liability, a reporting entity is not required to include a separate input or adjustment to other inputs relating to the existence of a restriction that prevents the transfer of the liability; (iii) that both a quoted price in an active market for the identical liability at the measurement date and the quoted price for the identical liability when traded as an asset in an active market when no adjustments to the quoted price of the asset are required are Level 1 fair value measurements; (iv) that the amounts of significant tra nsfers in and out of Level 1 and Level 2 fair value measurements be disclosed separately along with the reasons for the transfer; (v) a reporting entity should provide fair value measurement disclosures for each class of assets and liabilities; and (vi) a reporting entity should provide disclosures about the valuation techniques and inputs used to measure fair value for both recurring and nonrecurring Level 2 and Level 3 fair value measurements.

·   The FASB ASC which was issued in June 2009 and required that, except for grandfathered accounting standards, historical references to original accounting standards that were adopted or utilized by us in prior periods must now reflect references that are contained in the FASB ASC.

·   An accounting standard now known as FASB ASC 470-20, “Debt - Debt With Conversion and Other Options” relating to our 2.0% convertible senior notes, which resulted in a retroactive adjustment to our historical financial statements to separate the imputed liability and equity components of our 2.0% convertible senior notes in our consolidated balance sheet, on a fair value basis, and an adjustment to our interest expense in our consolidated statement of operations to reflect our non-convertible debt borrowing rate of 7.5%.

·   An accounting standard now known as FASB ASC 805, “Business Combinations” relating to acquisitions of businesses, which will impact business combinations that we enter into in the future and will impact certain tax contingencies relating to our historical acquisitions.

·   An accounting standard now known as FASB ASC 825, “Financial Instruments” which requires disclosures of the fair value of financial instruments and the method(s) and assumptions used to determine fair value for annual and interim reporting periods of publicly traded companies.

The adoption of these accounting standards did not have any material impact on our consolidated statement of operations or financial position.

The FASB ASC is subject to updates by FASB, which are known as Accounting Standards Updates (“ASU”). The following are FASB ASUs which have been issued, incorporated into the FASB ASC and not yet adopted by us:

·   FASB ASU No. 2010-17, issued April 2010, is an update of FASB ASC 605 “Revenue Recognition—Milestone Method: Milestone Method of Revenue Recognition,” and unless adopted early by us as permitted, is effective prospectively for our annual reporting period beginning August 1, 2010 (our fiscal 2011).  ASU 2010-17 provides guidance on applying the milestone method to milestone payments for achieving specified performance measures when those payments are related to uncertain future events. The scope of ASU 2010-17 is limited to transactions involving research or development. This update further states that the milestone method is not the only acceptable method of revenue recognition for milestone payments. Accordingly, entities can make an accounting policy election to recognize arrangement consideration received for achieving s pecified performance measures during the period in which the milestones are achieved, provided certain criteria are met. An entity’s policy for recognizing deliverable consideration or unit of accounting consideration contingent upon achievement of a milestone shall be applied consistently to similar deliverables or units of accounting. We are currently evaluating the potential impact that this update may have on our consolidated financial statements; however, we do not expect this to have a material effect.

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·   FASB ASU No. 2010-06, issued in January 2010, amends the disclosure requirements of FASB ASC 820-10, “Fair Value Measurements and Disclosures – Overall.” This FASB ASU requires, effective in our first quarter of fiscal 2012, that in Level 3 fair value measurements reconciliations, information about purchases, sales, issuances and settlements should be presented separately on a gross basis. We value our money market mutual funds and certificates of deposit using Level 1 inputs. Because we currently do not have any liabilities outstanding which must be remeasured at fair value, we do not believe this FASB ASU will have any impact on our consolidated financial statements.

·   FASB ASU No. 2009-14, issued in October 2009, amends FASB ASC 985 “Software” and, unless adopted early by us as permitted, is effective prospectively for our annual reporting period beginning August 1, 2010 (our fiscal 2011).  As a result of this FASB ASU, tangible products containing both software and non-software components that function together to deliver the tangible product’s essential functionality are no longer within the scope of the software revenue guidance in FASB ASC 985-605.  This FASB ASU also requires that hardware components of a tangible product containing software components always be excluded from the software revenue guidance.  We are currently evaluating the impact that this FASB ASU will have on our consolidated financial statements.

·   FASB ASU No. 2009-13, issued in October 2009, is an update of FASB ASC 605-25 “Revenue Recognition - Multiple-Element Arrangements” and, unless adopted early by us as permitted, is effective prospectively for our annual reporting period beginning August 1, 2010 (our fiscal 2011). In addition to establishing a hierarchy for determining the selling price of a deliverable, this FASB ASU eliminates the residual method of allocation of arrangement consideration and instead requires use of the relative selling price method. We are currently evaluating the impact that this FASB ASU will have on our consolidated financial statements.

Item 3.     Quantitative and Qualitative Disclosures about Market Risk

Our earnings and cash flows are subject to fluctuations due to changes in interest rates, primarily from our investment of available cash balances. Under our current policies, we do not use interest rate derivative instruments to manage exposure to interest rate changes. As of April 30, 2010, we had cash and cash equivalents of $568.3 million, which consisted of cash and highly-liquid money market mutual funds, bank deposits and U.S. Treasury securities. Many of these investments are subject to fluctuations in interest rates, which could impact our results. Based on our investment portfolio balance as of April 30, 2010, a hypothetical change in interest rates of 10% would have a nominal impact on interest income over a one-year period. Ultimately, the availability of our cash and cash equivalents is dependent on a well-functioning liqu id market.

Our 3.0% convertible senior notes bear a fixed rate of interest. As such, our earnings and cash flows are not sensitive to changes in interest rates on our long-term debt. As of April 30, 2010, we estimate the fair market value on our 3.0% convertible senior notes to be $213.5 million based on recent trading activity.

Item 4.     Controls and Procedures

Evaluation of Disclosure Controls and Procedures

As of the end of the period covered by this Quarterly Report on Form 10-Q, an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures was carried out under our supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of the end of the period covered by the report to provide reasonable assurance that the information required to be disclosed by us in reports filed under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. A system of controls, no matter how well designed and operated, cannot provide absolute assurance that the objectives of the system of controls are met, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected.

There have been no changes in our internal controls over financial reporting during the most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

The certifications of our Chief Executive Officer and Chief Financial Officer, that are Exhibits 31.1 and 31.2, respectively, should be read in conjunction with the foregoing information for a more complete understanding of the references in those Exhibits to disclosure controls and procedures and internal control over financial reporting.

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PART II

OTHER INFORMATION

Item 1.             Legal Proceedings

See “Notes to Condensed Consolidated Financial Statements – Note (20) Legal Matters and Proceedings,” in Part I, Item 1. of this Form 10-Q for information regarding legal proceedings.

Item 1A.          Risk Factors

There have been no material changes from the risk factors previously disclosed in our Form 10-K for the fiscal year ended July 31, 2009, except as follows:

Our pending acquisition of CPI may not be successful and we may not realize the anticipated benefits from this acquisition.

On May 8, 2010, we signed a definitive merger agreement (“Merger Agreement”) to acquire CPI International, Inc. (“CPI”), a leading global supplier of vacuum electron devices (including klystron, traveling wave and power grid tubes). CPI’s tubes and amplifiers are incorporated into products that are used in hundreds of critical commercial and military applications. We estimate that the total amount of cash required to consummate the merger (including payments for existing CPI change of control agreements, the cancellation of existing CPI employee stock-based awards and repayment of currently outstanding CPI debt) will be approximately $372.0 million, and that we will issue approximately 4.4 million shares of our common stock.

The merger is subject to customary terms and conditions, including, among others, (i) the adoption of the Merger Agreement by CPI’s stockholders, (ii) the absence of certain legal impediments to the consummation of the Merger, (iii) the expiration or termination of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and certain approvals under foreign anti-competition laws, (iv) subject to certain materiality exceptions, the accuracy of the representations and warranties made by us and CPI, respectively, and (v) compliance by us and CPI with their respective obligations under the Merger Agreement.

Even if the conditions to the consummation of the merger are satisfied and the merger is consummated, our acquisition of CPI may pose certain risks to our business.  If, in the future, CPI experiences substantially lower results than we expect, it could have a material adverse impact on our business, results of operations and financial condition. We can give no assurance that our acquisition of CPI will perform in accordance with our expectations. Despite our due diligence efforts, our assessment of the prospects for CPI’s businesses are subject to the risks associated with those businesses as described in CPI’s filings with the SEC, many of which risks are similar to the risks we face in our businesses and which are described in our filings with the SEC.

Although we expect to realize strategic, operational and financial benefits as a result of the CPI acquisition, we cannot ensure that such benefits will be achieved at all or, if achieved, to what extent. In particular, the success of the CPI acquisition will depend, in part, on our ability to realize anticipated efficiencies and cost savings, primarily through the elimination of redundant functions and the integration of certain operations. No assurances can be given that we will be able to achieve these efficiencies and cost savings.

In addition, we will face operational and administrative challenges as we work to integrate CPI's operations into our business. In particular, the CPI acquisition will significantly expand the types of businesses in which we are engaged, the number of our employees and the number of facilities we operate, thereby presenting us with significant challenges as we work to manage the substantial increases in scale resulting from the acquisition. We must integrate a large number of systems, both operational and administrative. Delays in this process could have a material adverse impact on our business, results of operations and financial condition. The diversion of our management’s attention to these matters and away from our other business concerns could have an adverse effect on our other businesses.

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There are number of unique risks associated with our Movement Tracking System orders from the U.S. Army.

We currently have approximately $271.1 million of backlog related to our mobile data communications segment of which the substantial majority relates to MTS orders for the sale of new ruggedized computers and certain related accessories to be supplied to the U.S. Army which are manufactured by a third-party supplier. These ruggedized computers are intended to replace older ruggedized computers which are currently deployed as part of our MTS system. As part of our ongoing mobile data communications business, we maintain substantial inventory in order to provide products to the U.S. Army on a timely basis.

During the first nine months of our fiscal 2010, we recorded significant revenue relating to the shipment of new MTS ruggedized computers and certain related accessories; however, our third-party supplier experienced production and technical issues which caused significant delays in shipments to the U.S. Army. Although we believe that our third-party supplier has taken appropriate steps to meet our expected delivery timetable for the remainder of fiscal 2010, there is a possibility that we could experience further shipping delays or that deployment schedules could change. If one or more of these events occur, revenue and operating income that we are currently expecting in our fiscal 2010 could shift to fiscal 2011.

Our MTS backlog (including the MTS ruggedized computers) is subject to the terms and conditions of our MTS contract which contains termination for convenience clauses and termination for default clauses that provide the U.S. Army with the right to terminate the order at any time. Historically, we have not experienced material terminations of our government orders; however, we understand that a third party that produces a different ruggedized computer has initiated actions which have resulted in a government review. This review could ultimately lead to a decision by the U.S. Army to delay or cancel MTS orders which are currently in our backlog. If orders are delayed or canceled, it would have a material adverse impact on our business outlook.

Item 6.             Exhibits

(a)    Exhibits

Exhibit 10.1 - Amendment to Credit Facility, dated as of June 24, 2009, by and among Comtech Telecommunications Corp. and Citibank, N.A., as Administrative Agent and The Lenders Party Hereto…

Exhibit 10.2 - 2000 Stock Incentive Plan, Amended and Restated, Effective June 2, 2010

Exhibit 31.1 - Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

Exhibit 31.2 - Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

Exhibit 32.1 - Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

Exhibit 32.2 - Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

… Certain portions of this agreement have been omitted and filed separately with the Securities and Exchange Commission pursuant to a request for confidential treatment.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

COMTECH TELECOMMUNICATIONS CORP.

(Registrant)

Date:  June 3, 2010                                                                           By: /s/ Fred Kornberg                                                   

Fred Kornberg

Chairman of the Board

Chief Executive Officer and President

(Principal Executive Officer)

Date:  June 3, 2010                                                                           By: /s/ Michael D. Porcelain                                               ;    

Michael D. Porcelain

Senior Vice President and

Chief Financial Officer

(Principal Financial and Accounting Officer)

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EX-10.1

Exhibit 10.1

AMENDMENT TO CREDIT AGREEMENT

THISAMENDMENT dated as of March 31, 2010 (this “Amendment”) to the Credit Agreement dated as of June 24, 2009 (the “Credit Agreement”) by and among COMTECH TELECOMMUNICATIONS CORP., a Delaware corporation (the “Company”), the Lenders party thereto and CITIBANK, N.A., a national banking association, as Administrative Agent for the Lenders.

WHEREAS, the Company has requested that the Lenders amend certain provisions of the Credit Agreement and the Lenders have agreed to amend such provisions of the Credit Agreement and grant such consent, subject to the terms and conditions set forth herein;

NOW, THEREFORE, in consideration of the premises and of the mutual agreements herein contained, the parties hereto agree as follows:

1.           Amendments.

              The definition of the term “Eligible Investments” in Section 1.01 of the Credit Agreement is hereby amended and restated in its entirety to provide as follows:

“Eligible Investments” shall mean (a) direct obligations of the United States of America or any government agency thereof, including bank issued securities guaranteed by the Federal Deposit Insurance Corporation under the terms of the Temporary Liquidity Guarantee Facility, provided that such obligations mature within two years of the date of acquisition thereof, and that the weighted average maturity of such securities does not exceed one year from the date of acquisition thereof; or (b) U.S. Dollar denominated certificates of deposit issued by any bank organized and existing under the laws of the United States or any state thereof and having aggregate capital and surplus in excess of $1 billion, provided that such obligations mature within two years of the date of acquisition thereof, and that the weighted average maturity of such securities does not exceed one year from the date of acquisition thereof; or (c) money market mutual funds having assets in excess of $2.5 billion; or (d) money market deposit accounts issued by any bank organized and existing under the laws of the United States of America or any state thereof and having aggregate capital and surplus in excess of $1 billion and having short term ratings no lower than P-1 from Moody’s Investors Service Inc., A-1 from Standard and Poor’s Ratings Group or F-1 from Fitch, Inc. or (e) commercial paper, bonds or debentures issued by any Lender or any corporation organized and existing under the laws of the United States or any state thereof and having short term ratings no lower than either P-1 from Moody’s Investors Service, Inc. or A-1 from Standard & Poor’s Ratings Group, or long term ratings no low er than either Aa3 from Moody’s Investors Service, Inc. or AA- from Standard & Poor’s Ratings Group, provided that such obligations mature within two years of the date of acquisition thereof, and that the weighted average maturity of such securities does not exceed one year from the date of acquisition thereof; or (f) securities issued by any State or political subdivision of the United States, having long term ratings no lower than either Aa3 from Moody’s Investors Service, Inc. or AA- from Standard & Poor’s Ratings Group, provided that such obligations mature within two years of the date of acquisition thereof, and that the weighted average maturity of such securities does not exceed one year from the date of acquisition thereof.

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2.           Conditions to Effectiveness.

This Amendment shall become effective upon receipt by the Administrative Agent of: (a) this Amendment, duly executed by the Company and (b) executed consents from the Lenders authorizing the Administrative Agent to execute this Amendment on behalf of the Lenders (the “Consent”).

3.           Miscellaneous.

Capitalized terms used herein and not otherwise defined herein shall have the same meanings as defined in the Credit Agreement.

Except as expressly amended hereby, the Credit Agreement shall remain in full force and effect in accordance with the original terms thereof.

The amendments set forth above are limited specifically to the matters set forth above and for the specific instances and purposes given and do not constitute directly or by implication a waiver or amendment of any other provision of the Credit Agreement or a waiver of any Default or Event of Default, whether now existing or hereafter arising, which may occur or may have occurred.

The Company hereby (i) represents and warrants that (a) after giving effect to this Amendment, the representations and warranties made by the Company and each of its Subsidiaries pursuant to the Credit Agreement and the other Loan Documents to which each is a party are true and correct in all material respects as of the date hereof with the same effect as though such representations and warranties had been made on and as of such date, unless any such representation or warranty is as of a specific date, in which case, as of such date and (b) after giving effect to this Amendment, no Default or Event of Default has occurred and is continuing and (ii) confirms that the liens, heretofore granted, pledged and/or assigned to the Administrative Agent for the Lenders shall not be impaired, limited or affected in any manner whatsoever by reaso n of this Amendment.

The Company hereby further represents and warrants that the execution, delivery and performance by the Company of this Amendment and the Credit Agreement (as amended by this Amendment), (a) have been duly authorized by all requisite corporate action, (b) will not violate or require any consent (other than consents as have been made or obtained and which are in full force and effect) under (i) any provision of law applicable to the Company, any applicable rule or regulation of any Governmental Authority, or the Certificate of Incorporation or By-laws of the Company, (ii) any order of any court or other Governmental Authority binding on the Company or (iii) any agreement or instrument binding on the Company.  Each of this Amendment and the Credit Agreement (as amended hereby), constitutes a legal, valid and binding obligation of the Company.

This Amendment may be executed in one or more counterparts, each of which shall constitute an original, but all of which when taken together shall constitute but one Amendment. This Amendment shall become effective when duly executed counterparts hereof which, when taken together, bear the signatures of each of the parties hereto shall have been delivered to the Administrative Agent.

This Amendment shall constitute a Loan Document.

This Amendment shall be governed by, and construed in accordance with, the laws of the State of New York.

[next page is signature page]

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IN WITNESS WHEREOF, the Company and the Administrative Agent, as authorized on behalf of the Required Lenders, have caused this Amendment to be duly executed by their duly authorized officers, all as of the day and year first above written.

CITIBANK, N.A., as Administrative Agent

By: /s/ Stuart N. Berman

Name:   Stuart N. Berman

Title:     Vice President

COMTECH TELECOMMUNICATIONS

CORP.

By: /s/ Michael D. Porcelain                

Name:   Michael D. Porcelain

Title:     Senior Vice President and

              Chief Financial Officer

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EX-10.2

Exhibit 10.2

THE COMTECH TELECOMMUNICATIONS CORP.

2000 STOCK INCENTIVE PLAN

AMENDED AND RESTATED

EFFECTIVE JUNE 2, 2010

TABLE OF CONTENTS

	Page
ARTICLE I PURPOSE	1
ARTICLE II DEFINITIONS	1
2.1            "Acquisition Event"	1
2.2            "Affiliate"	1
2.3            "Award"	1
2.4            "Board"	2
2.5            "Cause"	2
2.6            "Change in Control"	2
2.7            "Code"	2
2.8            "Committee"	2
2.9            "Common Stock"	3
2.10          "Company"	3
2.11          "Consultant"	3
2.12          "Detrimental Activity"	3
2.13          "Disparagement"	4
2.14          "Disability"	4
2.15          "Effective Date"	4
2.16          "Eligible Employee"	4
2.17          "Exchange Act"	4
2.18          "Family Member"	4
2.19          "Fair Market Value"	4
2.20          "Foreign Jurisdiction"	5
2.21          "Incentive Stock Option"	5
2.22          "Limited Stock Appreciation Right"	5
2.23          "Non-Employee Director"	5
2.24          "Non-Qualified Stock Option"	5
2.25          "Non-Tandem Stock Appreciation Right"	5
2.26          "Other Stock-Based Award"	5
2.27          "Parent"	5
2.28          "Participant"	5
2.29          "Performance Criteria"	6
2.30          "Performance Cycle"	6
2.31          "Performance Goal"	6
2.32          "Performance Period"	6
2.33          "Performance Share"	6
2.34          "Performance Unit"	6
2.35          "Performance Unit Cycle"	6
2.36          "Plan"	6
2.37          "Reference Stock Option"	6
2.38          "Restricted Stock"	6
2.39          "Restriction Period"	6
2.40          "Retirement"	6

2.41          “Rule 16b-3”	6
2.42          “Section 162(m) of the Code”	7
2.43          “Section 409A of the Code”	7
2.44          “Securities Act”	7
2.45          “Stock Appreciation Right”	7
2.46          “Stock Option”	7
2.47          “Subsidiary”	7

2.48          “Tandem Stock Appreciation Right”  7

2.49          “Ten Percent Stockholder”	7
2.50          “Termination of Consultancy”	7
2.51          “Termination of Directorship”	7
2.52          “Termination of Employment”	7
2.53          “Transfer”	8
ARTICLE III ADMINISTRATION	8
3.1            The Committee	8
3.2            Grants of Awards	8
3.3            Guidelines	9
3.4            Decisions Final	10
3.5            Reliance on Counsel	10
3.6            Procedures	10
3.7            Designation of Consultants/Liability	10
ARTICLE IV SHARE AND OTHER LIMITATIONS	11
4.1            Shares	11
4.2            Changes	13
4.3            Minimum Purchase Price	14
4.4            Assumption of Awards	14
ARTICLE V ELIGIBILITY	15
5.1            General Eligibility	15
5.2            Incentive Stock Options	15
5.3            Non-Employee Directors	15
ARTICLE VI STOCK OPTIONS	15
6.1            Stock Options	15
6.2            Grants	15
6.3            Terms of Stock Options	16
ARTICLE VII STOCK APPRECIATION RIGHTS	18
7.1            Tandem Stock Appreciation Rights	18
7.2            Terms and Conditions of Tandem Stock Appreciation Rights	18
7.3            Non-Tandem Stock Appreciation Rights	20
7.4            Terms and Conditions of Non-Tandem Stock Appreciation Rights	20
7.5            Limited Stock Appreciation Rights	21
ARTICLE VIII RESTRICTED STOCK	21
8.1            Awards of Restricted Stock	21
8.2            Awards and Certificates	22
8.3            Restrictions and Conditions on Restricted Stock Awards	22
ARTICLE IX PERFORMANCE SHARES	24
9.1            Award of Performance Shares	24

9.2            Terms and Conditions	24
ARTICLE X CASH INCENTIVE AWARDS AND PERFORMANCE UNITS	26
10.1          Cash Incentive Awards	26
10.2          Awards of Performance Units	26
10.3          Terms and Conditions	26
ARTICLE XI OTHER STOCK-BASED AWARDS	28
11.1          Other Awards	28
11.2          Terms and Conditions	29
ARTICLE XII NON-TRANSFERABILITY AND TERMINATION  OF EMPLOYMENT/CONSULTANCY	30
12.1          Non-Transferability	30
12.2          Termination of Employment or Termination of Consultancy	30
ARTICLE XIII NON-EMPLOYEE DIRECTOR STOCK OPTION GRANTS	32
13.1          Stock Options	32

13.2          Grants  32

13.3          Non-Qualified Stock Options	33
13.4          Terms of Stock Options	33
13.5          Termination of Directorship	34
13.6          Acceleration of Exercisability	34
13.7          Changes	34
ARTICLE XIV CHANGE IN CONTROL PROVISIONS	35
14.1          Benefits	35
14.2          Change in Control	36
ARTICLE XV TERMINATION OR AMENDMENT OF PLAN	37
ARTICLE XVI UNFUNDED PLAN	38
16.1          Unfunded Status of Plan	38
ARTICLE XVII GENERAL PROVISIONS	38
17.1          Legend	38
17.2          Other Plans	39
17.3          Right to Employment/Consultancy	39
17.4          Withholding of Taxes	39
17.5          Listing and Other Conditions	39
17.6          Governing Law	40
17.7          Construction	40
17.8          Other Benefits	40
17.9          Costs	40
17.10             No Right to Same Benefits	40
17.11             Death/Disability	40
17.12             Section 16(b) of the Exchange Act	40
17.13             Section 409A of the Code	41
17.14             Severability of Provisions	41
17.15             Headings and Captions	41
ARTICLE XVIII EFFECTIVE DATE OF PLAN	41
ARTICLE XIX TERM OF PLAN	42

THE COMTECH TELECOMMUNICATIONS CORP.

2000 STOCK INCENTIVE PLAN

AMENDED AND RESTATED

EFFECTIVE JUNE 2, 2010

ARTICLE I

PURPOSE

The purpose of The Comtech Telecommunications Corp. 2000 Stock Incentive Plan is to enhance the profitability and value of the Company for the benefit of its stockholders by enabling the Company: (i) to offer employees of, and Consultants to, the Company and its Affiliates stock-based incentives and other equity interests in the Company and cash-based incentive Awards, thereby creating a means to attract, retain, motivate and reward such individuals and, through awards with a value based on the value of Company stock, to strengthen the mutuality of interests between such individuals and the Company's stockholders; and (ii) to make equity based awards to Non-Employee Directors, thereby creating a means to attract, retain and reward such Non-Employee Directors and strengthen the mutuality of interests between Non-Employee Dire ctors and the Company's stockholders.

ARTICLE II

DEFINITIONS

For purposes of this Plan, the following terms shall have the following meanings:

2.1"Acquisition Event" has the meaning set forth in Section 4.2(d).

2.2"Affiliate" means each of the following: (i) any Subsidiary; (ii) any Parent; (iii) any corporation, trade or business (including, without limitation, a partnership or limited liability company) which is directly or indirectly controlled 50% or more (whether by ownership of stock, assets or an equivalent ownership interest or voting interest) by the Company or one of its Affiliates; and (iv) any other entity in which the

Company or any of its Affiliates has a material equity interest and which is designated as an "Affiliate" by resolution of the Committee.

2.3"Award" means any award under this Plan of any:   (i) Stock Option; (ii) Stock Appreciation Right; (iii) Restricted Stock; (iv) Performance Share; (v) Performance Unit; (vi) Other Stock-Based Award; (vii) other award providing benefits similar to (i) through (vi) designed to meet the requirements of a Foreign Jurisdiction; or (viii) cash incentive Award awarded under Section 10.1.  An Award other than a cash incentive Award is referred to as an “Equity Award.”

2.4"Board" means the Board of Directors of the Company.

2.5"Cause" means, with respect to a Participant's Termination of Employment or Termination of Consultancy:  (i) in the case where there is no employment agreement, consulting agreement, change in control agreement or similar agreement in effect between the Company or an Affiliate and the Participant at the time of the grant of the Award (or where there is such an agreement but it does not define "cause" (or words of like import)), termination due to a Participant's commission of a fraud or a felony in connection with his or her duties as an employee of the Company or an Affiliate, willful misconduct or any act of disloyalty, dishones ty, fraud, breach of trust or confidentiality as to the Company or an Affiliate or any other act which is intended to cause or may reasonably be expected to cause economic or reputational injury to the Company or an Affiliate; or (ii) in the case where there is an employment agreement, consulting agreement, change in control agreement or similar agreement in effect between the Company or an Affiliate and the Participant at the time of the grant of the Award that defines "cause" (or words of like import), as defined under such agreement; provided, however, that with regard to any agreement that conditions "cause" on occurrence of a change in control, such definition of "cause" shall not apply until a change in control actually takes place and then only with regard to a termination thereafter.  With respect to a Participant's Termination of Directorship, "cause" shall mean an act or failure to act that constitutes cause for removal of a director under applicable Delaware law.

2.6"Change in Control" has the meaning set forth in Article XIII or Article XIV, as applicable.

2.7"Code" means the Internal Revenue Code of 1986, as amended.  Any reference to any section of the Code shall also be a reference to any successor provision.

2.8"Committee" means:  (a) with respect to the application of this Plan to Eligible Employees and Consultants, a committee or subcommittee of the Board appointed from time to time by the Board, which committee or subcommittee shall consist of two or more Non-Employee Directors, each of whom is intended to be, to the extent required by Rule 16b-3, a "non-employee director" as defined in Rule 16b-3 and, to the extent required by Section 162(m) of the Code and any regulations thereunder, an "outside director" as defined under Section 162(m) of the Code; provided, however, that

2

if and to the extent that no Committee exists which has the authority to administer this Plan, the functions of the Committee shall be exercised by the Board and all references herein to the Committee shall  be deemed to be references to the Board; and (b) with respect to the application of this Plan to Non-Employee Directors, the Board.

2.9"Common Stock" means the common stock, $.10 par value per share, of the Company.

2.10"Company" means Comtech Telecommunications Corp., a Delaware corporation, and its successors by operation of law.

2.11"Consultant" means any advisor or consultant to the Company or its Affiliates.

2.12"Detrimental Activity" means  (a) the disclosure to anyone outside the Company or its Affiliates, or the use in any manner other than in the furtherance of the Company's or its Affiliate's business, without written authorization from the Company, of any confidential information or proprietary information, relating to the business of the Company or its Affiliates, acquired by a Participant prior to the Participant's Termination;  (b) activity while employed that results, or if known could result, in the Participant's Termination that is classified by the Company as a Termination for Cause;  (c) any at tempt, directly or indirectly, to solicit, induce or hire (or the identification for solicitation, inducement or hire) any non-clerical employee of the Company or its Affiliates to be employed by, or to perform services for, the Participant or any person or entity with which the Participant is associated (including, but not limited to, due to the Participant's employment by, consultancy for, equity interest in, or creditor relationship with such person or entity) or any person or entity from which the Participant receives direct or indirect compensation or fees as a result of such solicitation, inducement or hire (or the identification for solicitation, inducement or hire) without, in all cases, written authorization from the Company;  (d) any attempt, directly or indirectly, to solicit in a competitive manner any current or prospective customer of the Company or its Affiliates without, in all cases, written authorization from the Company;  (e) the Participant's Disparagement, o r inducement of others to do so, of the Company or its Affiliates or their past and present officers, directors, employees or products;  (f) without written authorization from the Company, the rendering of services for any organization, or engaging, directly or indirectly, in any business, which is competitive with the Company or its Affiliates, or which organization or business, or the rendering of services to such organization or business, is otherwise prejudicial to or in conflict with the interests of the Company or its Affiliates, or (g) breach of any agreement between the Participant and the Company or an Affiliate (including, without limitation, any employment agreement or non-competition or non-solicitation agreement).  Unless otherwise determined by the Committee at grant, Detrimental Activity shall not be deemed to occur after the end of the one-year period following the Participant's Termination.   For purposes of subsections (a), (c), (d) and (f) above, the Chief Executive Officer and the General Counsel of the Company shall each have authority to provide the Participant with written authorization to engage in the activities contemplated thereby

3

and no other person shall have authority to provide the Participant with such authorization.

2.13"Disparagement" means making comments or statements to the press, the Company's or its Affiliates' employees, consultants or any individual or entity with whom the Company or its Affiliates has a business relationship which would adversely affect in any manner:  the conduct of the business of the Company or its Affiliates (including, without limitation, any products or business plans or prospects), or the business reputation of the Company or its Affiliates, or any of their products, or their past or present officers, directors or employees.

2.14"Disability" means, with respect to an Eligible Employee, Consultant or Non-Employee Director, a permanent and total disability, as determined by the Committee in its sole discretion, provided that in no event shall any disability that is not a permanent and total disability, as defined in Section 22(e)(3) of the Code, shall be treated as a Disability.  A Disability shall only be deemed to occur at the time of the determination by the Committee of the Disability.  Notwithstanding the foregoing, for Awards that are subject to Section 409A of the Code, Disability shall mean that a Participant is disabled under Section 409A(a)( 2)(C)(i) of the Code.

2.15"Effective Date" means the effective date of this Plan as defined in Article XVIII.

2.16"Eligible Employee" means each employee of the Company or an Affiliate.

2.17"Exchange Act" means the Securities Exchange Act of 1934, as amended.  Any references to any section of the Exchange Act shall also be a reference to any successor provision.

2.18"Family Member" shall mean "family member" as defined in Section A1(a)(5) of the general instructions of Form S-8.

2.19"Fair Market Value" means, unless otherwise required by any applicable provision of the Code or any regulations issued thereunder, as of any date, the last sales price for the Common Stock or the average of trading prices for Common Stock on the applicable date, as specified by the Committee:  (i) as reported on the principal national securities exchange on which it is then traded or The Nasdaq Stock Market LLC or (ii) if not traded on any such national securities exchange or The Nasdaq Stock Market LLC as quoted on an automated quotation system sponsored by the National Association of Securities Dealers, Inc.  If the Common Stock is not readily tradable on a national securities exchange, The Nasdaq Stock Market LLC or any automated quotation system sponsored by the National Association of Securities Dealers, Inc., its Fair Market Value shall be set in good faith by the Committee.  Notwithstanding anything herein to the contrary, "Fair Market Value" means the price for Common Stock set by the Committee in good faith based on reasonable methods set forth under Section 422 of the Code and the regulations thereunder including, without limitation, a method utilizing the average of

4

prices of the Common Stock reported on the principal national securities exchange on which it is then traded during a reasonable period designated by the Committee.  For purposes of the grant of any Stock Option or Stock Appreciation Right, the applicable date shall be the date of grant of the Stock Option or Stock Appreciation Right (which must be at or after the date on which such grant is duly authorized) or, if so specified by the Committee, the latest trading date for which the last sales price or average trading price is available at the time of grant, provided that for purposes of the exercise of any Stock Option or Stock Appreciation Right, the applicable date shall be the date a notice of exercise is received by the Secretary of the Company or, if not a day on which the applicable market is open, the next day that it is open.  For purposes of the conversion of a Performance Unit to shares of Common Stock for reference purposes, the applicable date shall be the date determined by the Committee in accordance with Section 10.2

2.20"Foreign Jurisdiction" means any jurisdiction outside of the United States including, without limitation, countries, states, provinces and localities.

2.21"Incentive Stock Option" means any Stock Option awarded to an Eligible Employee under this Plan intended to be and designated as an "Incentive Stock Option" within the meaning of Section 422 of the Code.

2.22"Limited Stock Appreciation Right" means an Award of a limited Tandem Stock Appreciation Right or a Non-Tandem Stock Appreciation Right made pursuant to Section 7.5 of this Plan.

2.23"Non-Employee Director" means a director of the Company who is not an active employee of the Company or an Affiliate and who is not an officer, director or employee of the Company or any Affiliate.

2.24"Non-Qualified Stock Option" means any Stock Option awarded under this Plan that is not an Incentive Stock Option.

2.25"Non-Tandem Stock Appreciation Right" means a Stock Appreciation Right entitling a Participant to receive an amount in cash or Common Stock (as determined by the Committee in its sole discretion) equal to the excess of:  (i) the Fair Market Value of a share of Common Stock as of the date such right is exercised, over (ii) the aggregate exercise price of such right.

2.26"Other Stock-Based Award" means an Award of Common Stock and other Awards made pursuant to Article XI that are valued in whole or in part by reference to, or are payable in or otherwise based on, Common Stock, including, without limitation, an Award valued by reference to performance of an Affiliate.

2.27"Parent" means any parent corporation of the Company within the meaning of Section 424(e) of the Code.

2.28"Participant" means any Eligible Employee or Consultant to whom an Award has been made under this Plan and each Non-Employee Director of the Company; provided, however, that a Non-Employee Director shall be a Participant for

5

purposes of the Plan solely with respect to awards of Stock Options pursuant to Article XIII.

2.29"Performance Criteria" has the meaning set forth in Exhibit A.

2.30"Performance Cycle" has the meaning set forth in Section 10.1.

2.31"Performance Goal" means the objective performance goals established by the Committee in accordance with Section 162(m) of the Code and based on one or more Performance Criteria.

2.32"Performance Period" has the meaning set forth in Section 9.1.

2.33"Performance Share" means an Award made pursuant to Article IX of this Plan of the right to receive Common Stock or, as determined by the Committee in its sole discretion, cash of an equivalent value at the end of the Performance Period or thereafter.

2.34"Performance Unit" means an Award made pursuant to Article X of this Plan of the right to receive a fixed dollar amount, payable in cash or Common Stock (or a combination of both) as determined by the Committee in its sole discretion, at the end of a specified Performance Unit Cycle or thereafter.

2.35"Performance Unit Cycle" has the meaning set forth in Section 10.2

2.36"Plan" means The Comtech Telecommunications Corp. 2000 Stock Incentive Plan.

2.37"Reference Stock Option" has the meaning set forth in Section 7.1.

2.38"Restricted Stock" means an Award of shares of Common Stock under this Plan that is subject to restrictions under Article VIII.

2.39"Restriction Period" has the meaning set forth in Section 8.3(a) with respect to Restricted Stock.

2.40"Retirement" means a Termination of Employment or Termination of Consultancy other than a termination for Cause or due to death or Disability by a Participant at or after age 65 or such earlier date after age 50 as may be approved by the Committee with regard to such Participant.  With respect to a Participant's Termination of Directorship, Retirement shall mean the failure to stand for reelection or the failure to be reelected at or after a Participant has attained age 65 or, with the consent of the Board, before age 65 but after age 50.

2.41"Rule 16b-3" means Rule 16b-3 under Section 16(b) of the Exchange Act as then in effect or any successor provisions.

6

2.42"Section 162(m) of the Code" means Section 162(m) of the Code and any Treasury regulations thereunder.

2.43"Section 409A of the Code" means Section 409A of the Code and any Treasury regulations thereunder.

2.44"Securities Act" means the Securities Act of 1933, as amended.  Any reference to any section of the Securities Act shall also be a reference to any successor provision.

2.45"Stock Appreciation Right" or "SAR" means the right pursuant to an Award granted under Article VII.

2.46"Stock Option" or "Option" means any option to purchase shares of Common Stock granted to Eligible Employees or Consultants under Article VI or to Non-Employee Directors under Article XIII.

2.47"Subsidiary" means any subsidiary corporation of the Company within the meaning of Section 424(f) of the Code.

2.48"Tandem Stock Appreciation Right" means a Stock Appreciation Right entitling the holder to surrender to the Company all (or a portion) of a Stock Option in exchange for an amount in cash or Common Stock (as determined by the Committee in its sole discretion) equal to the excess of:  (i) the Fair Market Value, on the date such Stock Option (or such portion thereof) is surrendered, of the Common Stock covered by such Stock Option (or such portion thereof), over (ii) the aggregate exercise price of such Stock Option (or such portion thereof).

2.49"Ten Percent Stockholder" means a person owning stock possessing more than 10% of the total combined voting power of all classes of stock of the Company, its Subsidiaries or its Parent.

2.50"Termination of Consultancy" means, with respect to a Consultant, that the Consultant is no longer acting as a consultant to the Company or an Affiliate.  In the event an entity shall cease to be an Affiliate, there shall be deemed a Termination of Consultancy of any individual who is not otherwise a Consultant to the Company or another Affiliate at the time the entity ceases to be an Affiliate.  In the event that a Consultant becomes an Eligible Employee upon the termination of his consultancy, the Committee, in its sole and absolute discretion, may determine that no Termination of Consultancy shall be deemed to occur until such time as such Consultant is no longer a Consultant or an Eligible Employee.

2.51"Termination of Directorship" means, with respect to a Non-Employee Director, that the Non-Employee Director has ceased to be a director of the Company.

2.52"Termination of Employment" means:  (i) a termination of employment (for reasons other than a military or personal leave of absence granted by the

7

Company) of a Participant from the Company and its Affiliates; or (ii) when an entity which is employing a Participant ceases to be an Affiliate, unless the Participant otherwise is, or thereupon becomes, employed by the Company or another Affiliate.  In the event that an Eligible Employee becomes a Consultant upon the termination of his employment, the Committee, in its sole and absolute discretion, may determine that no Termination of Employment shall be deemed to occur until such time as such Eligible Employee is no longer an Eligible Employee or a Consultant.

2.53"Transfer" means anticipate, alienate, attach, sell, assign, pledge, encumber, charge, hypothecate or otherwise transfer and “Transferred” has a correlative meaning.

ARTICLE III

ADMINISTRATION

3.1The Committee.  The Plan shall be administered and interpreted by the Committee.  If for any reason the appointed Committee does not meet the requirements of Rule 16b-3 or Section 162(m) of the Code, such noncompliance with the requirements of Rule 16b-3 and Section 162(m) of the Code shall not affect the validity of Awards, grants, interpretations or other actions of the Committee.

3.2Grants of Awards.  The Committee shall have full authority to grant to Eligible Employees and Consultants, pursuant to the terms of this Plan:  (i) Stock Options; (ii) Tandem Stock Appreciation Rights and Non-Tandem Stock Appreciation Rights; (iii) Restricted Stock; (iv) Performance Shares; (v) Performance Units; (vi) Other Stock-Based Awards; (vii) other awards providing benefits similar to (i) through (vi) designed to meet the requirements of Foreign Jurisdictions; and (viii) cash incentive Awards under Section 10.1. 
60;All Equity Awards shall be granted by, confirmed by, and subject to the terms of, a written agreement executed by the Company and the Participant.  In particular, the Committee shall have the authority:

(a)to select the Eligible Employees and Consultants to whom Awards may from time to time be granted hereunder;

(b)to determine whether and to what extent Awards, including any combination of two or more Awards, are to be granted hereunder to one or more Eligible Employees or Consultants;

(c)to determine, in accordance with the terms of this Plan, the number of shares of Common Stock to be covered by each Equity Award granted hereunder;

(d)to determine the terms and conditions, not inconsistent with the terms of this Plan, of any Award granted hereunder (including, but not limited to, the exercise or purchase price (if any), any restriction or limitation, any vesting schedule or acceleration thereof and any forfeiture restrictions or waiver thereof,

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regarding any Award and the shares of Common Stock relating thereto, based on such factors, if any, as the Committee shall determine, in its sole discretion);

(e)to determine whether and under what circumstances a Stock Option may be settled in cash, Common Stock and/or Restricted Stock under Section 6.3(d) or, with respect to Stock Options granted to Non-Employee Directors, Section 13.4(d);

(f)to the extent permitted by law, to determine whether, to what extent and under what circumstances to provide loans (which shall bear interest at the rate the Committee shall provide) to Eligible Employees and Consultants in order to exercise Stock Options under this Plan or to purchase Awards under this Plan (including shares of Common Stock);

(g)to determine whether a Stock Option is an Incentive Stock Option or Non-Qualified Stock Option, whether a Stock Appreciation Right is a Tandem Stock Appreciation Right or Non-Tandem Stock Appreciation Right or whether an Award is intended to satisfy Section 162(m) of the Code;

(h)to determine whether to require an Eligible Employee or Consultant, as a condition of the granting of any Award, not to sell or otherwise dispose of shares of Common Stock acquired pursuant to the exercise of an Option or an Award for a period of time as determined by the Committee, in its sole discretion, following the date of the acquisition of such Option or Award;

(i)to modify, extend or renew an Award, subject to Article XV herein,  provided, however, that if an Award is modified, extended or renewed and thereby deemed to be the issuance of a new Award under the Code or the applicable accounting rules, the exercise price of an Award may continue to be the original exercise price even if less than the Fair Market Value of the Common Stock at the time of such modification, extension or renewal; provided further, however, that such Award may be restructured to comply with Section 409A of the Code to avoid any adverse tax consequences, to the extent applicable.

3.3Guidelines.  Subject to Article XV hereof, the Committee shall have the authority to adopt, alter and repeal such administrative rules, guidelines and practices governing this Plan and perform all acts, including the delegation of its administrative responsibilities, as it shall, from time to time, deem advisable; to construe and interpret the terms and provisions of this Plan and any Award issued under this Plan (and any agreements relating thereto); and to otherwise supervise the administration of this Plan.  The Committee may correct any defect, supply any om ission or reconcile any inconsistency in this Plan or in any agreement relating thereto in the manner and to the extent it shall deem necessary to effectuate the purpose and intent of this Plan.  The Committee may adopt special guidelines and provisions for persons who are residing in, or subject to, the taxes of, Foreign Jurisdictions to comply with applicable tax and securities laws and may impose any limitations and restrictions that it deems necessary to comply with the applicable tax and securities laws of such Foreign Jurisdictions.  To the

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extent applicable, this Plan is intended to comply with Section 162(m) of the Code and the applicable requirements of Rule 16b-3 and shall be limited, construed and interpreted in a manner so as to comply therewith.

3.4Decisions Final.  Any decision, interpretation or other action made or taken in good faith by or at the direction of the Company, the Board or the Committee (or any of its members) arising out of or in connection with this Plan shall be within the absolute discretion of all and each of them, as the case may be, and shall be final, binding and conclusive on the Company and all employees and Participants and their respective heirs, executors, administrators, successors and assigns.

3.5Reliance on Counsel.  The Company, the Board or the Committee may consult with legal counsel, who may be counsel for the Company or other counsel, with respect to its obligations or duties hereunder, or with respect to any action or proceeding or any question of law, and shall not be liable with respect to any action taken or omitted by it in good faith pursuant to the advice of such counsel.

3.6Procedures.  If the Committee is appointed, the Board shall designate one of the members of the Committee as chairman and the Committee shall hold meetings, subject to the By-Laws of the Company, at such times and places as it shall deem advisable.  A majority of the Committee members shall constitute a quorum.  All determinations of the Committee shall be made by a majority of its members.  Any decision or determination reduced to writing and signed by all the Committee members in accordance with the By-Laws of the Company, shall be fully as effective as if it had been made by a vote at a meeting duly called and held.  The Committee shall keep minutes of its meetings and shall make such rules and regulations for the conduct of its business as it shall deem advisable.

3.7Designation of Consultants/Liability.

(a)The Committee may designate employees of the Company and professional advisors to assist the Committee in the administration of this Plan and may grant authority to officers to execute agreements or other documents on behalf of the Committee.

(b)The Committee may employ such legal counsel, consultants and agents as it may deem desirable for the administration of this Plan and may rely upon any opinion received from any such counsel or consultant and any computation received from any such consultant or agent.  Expenses incurred by the Committee in the engagement of any such counsel, consultant or agent shall be paid by the Company.  The Committee, its members and any employee of the Company designated pursuant to paragraph (a) above shall not be liable for any action or determination made in good faith with respect to this Plan.  To the maximum extent permitted by applicable law, no officer of the Company or member or former member of the C ommittee shall be liable for any action or determination made in good faith with respect to this Plan or any Award granted under it.  To the maximum extent permitted by applicable law or the Certificate of

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Incorporation or By-Laws of the Company and to the extent not covered by insurance, each officer and member or former member of the Committee shall be indemnified and held harmless by the Company against any cost or expense (including reasonable fees of counsel reasonably acceptable to the Company) or liability (including any sum paid in settlement of a claim with the approval of the Company), and advanced amounts necessary to pay the foregoing at the earliest time and to the fullest extent permitted, arising out of any act or omission to act in connection with this Plan, except to the extent arising out of such officer's, member's or former member's own fraud or bad faith.  Such indemnification shall be in addition to any rights of indemnification the officers, directors or members or former officers, directors or members may have under applicable law or under the Certificate of Incorporatio n or By-Laws of the Company or any Affiliate.  Notwithstanding anything else herein, this indemnification will not apply to the actions or determinations made by an individual with regard to Awards granted to him or her under this Plan.

ARTICLE IV

SHARE AND OTHER LIMITATIONS

4.1Shares.

(a)General Limitation.  The aggregate number of shares of Common Stock which may be issued or used for reference purposes under this Plan or with respect to which Equity Awards may be granted shall not exceed 8,962,500 shares of Common Stock (subject to any increase or decrease pursuant to Section 4.2) with respect to all types of Equity Awards (such aggregate number of shares includes shares already issued pursuant to Equity Awards granted under the Plan since its original inception).  The shares of Common Stock available under this Plan may be either authorized and un issued Common Stock or Common Stock held in or acquired for the treasury of the Company.  If any Stock Option or Stock Appreciation Right granted under this Plan expires, terminates or is canceled for any reason without having been exercised in full or, with respect to Stock Options, the Company repurchases any Stock Option, the number of shares of Common Stock underlying such unexercised or repurchased Stock Option or any unexercised Stock Appreciation Right shall again be available for the purposes of Equity Awards under this Plan.  If any shares of Restricted Stock, Performance Shares or Performance Units awarded under this Plan to a Participant are forfeited or repurchased by the Company for any reason, the number of forfeited or repurchased shares of Restricted Stock, Performance Shares or Performance Units shall again be available for the purposes of Equity Awards under this Plan.  If a Tandem Stock Appreciation Right is granted or a Limited Stock Appreciation Right is gra nted in tandem with a Stock Option, such grant shall only apply once against the maximum number of shares of Common Stock which may be issued under this Plan. In determining the number of shares of Common Stock available for Equity Awards, if Common Stock has been exchanged by a Participant as full

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or partial payment of exercise price or withholding taxes, or if the number shares of Common Stock otherwise deliverable has been reduced for the payment of exercise price or withholding taxes, the number of shares of Common Stock exchanged as payment for the payment of exercise price or withholding taxes, or reduced, shall again be available for purposes of Equity Awards under this Plan.

(b)Individual Participant Limitations.  (i)  The maximum number of shares of Common Stock subject to any Award of Stock Options, Stock Appreciation Rights, Performance Shares or shares of Restricted Stock for which the grant of such Award or the lapse of the relevant Restriction Period is subject to the attainment of Performance Goals in accordance with Section 8.3(a)(ii) herein which may be granted under this Plan during any fiscal year of the Company to each Eligible Employee or Consultant shall be 225,000 shares per type of Award (which shall be subject to any increase or decrease pursu ant to Section 4.2), provided that the maximum number of shares of Common Stock for all types of Equity Awards does not exceed 225,000 (which shall be subject to any increase or decrease pursuant to Section 4.2) during any fiscal year of the Company.  If a Tandem Stock Appreciation Right is granted or a Limited Stock Appreciation Right is granted in tandem with a Stock Option, it shall apply against the Eligible Employee's or Consultant's individual share limitations for both Stock Appreciation Rights and Stock Options.

(ii)There are no annual individual Eligible Employee or Consultant share limitations on Restricted Stock for which the grant of such Award or the lapse of the relevant Restriction Period is not subject to attainment of Performance Goals in accordance with Section 8.3(a)(ii) hereof.

(iii)Performance Units payable solely in cash shall be deemed to be cash incentive awards subject to the limitation in Section 4.1(b)(v), and Performance Units payable in cash or in shares of Common Stock shall be subject to the limitation in Section 4.1(b)(i) unless the Committee has, no later than the time performance goals are specified for the Performance Units, designated such Performance Units as cash incentive awards potentially settleable in shares, in which case the Performance Units shall be subject to the limitation in Section 4.1(b)(v).

(iv)The individual Participant limitations set forth in this Section 4.1(b)(i) – (iv) shall be cumulative; that is, to the extent that shares of Common Stock for which Equity Awards are permitted to be granted to an Eligible Employee or a Consultant during a fiscal year are not covered by an Award to such Eligible Employee or Consultant in a fiscal year, the number of shares of Common Stock available for Equity Awards to such Eligible Employee or Consultant shall automatically increase in the subsequent fiscal years during the term of the Plan until used.

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(v)The maximum potential amount earnable under all cash incentive Awards granted under this Plan for any fiscal year of the Company to each Eligible Employee shall be such Eligible Employee’s “Annual Limit,” which in each fiscal year shall be $4 million plus the amount of the Eligible Person's unused Annual Limit as of the close of the previous fiscal year.  This limitation is separate and not affected by the number of Awards granted during such fiscal year subject to the limitations under Section 4.1(b)(i) – (iv).  For this purpose, (i) the potential amount earnable means the maximum amount potentially payable, without regard to whether it is to be paid currently or on a deferred basis or continues to be subject to any service requirement or other non-performance condition, (ii) a Participant's Annual Limit is used to the extent an amount may be potentially earned or paid under a cash incentive Award, regardless of whether such amount is in fact earned or paid, and (iii) a cash incentive Award is “granted” for the earliest fiscal year included in the Performance Cycle for that Award, regardless of whether the terms of the Award do or do not create a legal right on the part of the Participant ultimately to receive a payment with respect to such Award.

4.2Changes.

(a)The existence of this Plan and the Awards granted hereunder shall not affect in any way the right or power of the Board or the stockholders of the Company to make or authorize any adjustment, recapitalization, reorganization or other change in the Company's capital structure or its business, any merger or consolidation of the Company or any Affiliate, any issue of bonds, debentures, preferred or prior preference stock ahead of or affecting Common Stock, the dissolution or liquidation of the Company or any Affiliate, any sale or transfer of all or part of the assets or business of the Company or any Affiliate or any other corporate act or proceeding.

(b)Subject to the provisions of Section 4.2(d), in the event of any such change in the capital structure or business of the Company by reason of any stock split, reverse stock split, stock dividend, combination or reclassification of shares, recapitalization, or other change in the capital structure of the Company, merger, consolidation, spin-off, reorganization, partial or complete liquidation, issuance of rights or warrants to purchase any Common Stock or securities convertible into Common Stock, or any other corporate transaction or event having an effect similar to any of the foregoing and effected without receipt of consideration by the Company, then the aggregate number and kind of shares which thereafter may be issued under this Plan, the number and kind of shares or other property (including cash) to be issued upon exercise of an outstanding Stock Option or other Awards granted under this Plan and the purchase price thereof shall be appropriately adjusted consistent with such change in such manner as the Committee may deem equitable to prevent substantial dilution or enlargement of the rights granted to, or available for, Participants under this Plan, and any such

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adjustment determined by the Committee in good faith shall be final, binding and conclusive on the Company and all Participants and employees and their respective heirs, executors, administrators, successors and assigns.

(c)Fractional shares of Common Stock resulting from any adjustment in Options or Awards pursuant to Section 4.2(a) or (b) shall be aggregated until, and eliminated at, the time of exercise by rounding-down for fractions less than one-half and rounding-up for fractions equal to or greater than one-half.  No cash settlements shall be made with respect to fractional shares eliminated by rounding.  Notice of any adjustment shall be given by the Committee to each Participant whose Award has been adjusted and such adjustment (whether or not such notice is given) shall be effective and binding for all purposes of this Plan.

(d)In the event of a merger or consolidation in which the Company is not the surviving entity or in the event of any transaction that results in the acquisition of substantially all of the Company's outstanding Common Stock by a single person or entity or by a group of persons and/or entities acting in concert, or in the event of the sale or transfer of all or substantially all of the Company's assets (all of the foregoing being referred to as "Acquisition Events"), then the Committee may, in its sole discretion, terminate all outstanding Stock Options and Stock Appreciation Rights, effective as of the date of the Acquisition Event, by delivering notice of termination to each Participant at least 30 days prior to the date of consu mmation of the Acquisition Event, in which case during the period from the date on which such notice of termination is delivered to the consummation of the Acquisition Event, each such Participant shall have the right to exercise in full all of his or her Stock Options and Stock Appreciation Rights that are then outstanding (without regard to any limitations on exercisability otherwise contained in the Stock Option or Award Agreements), but any such exercise shall be contingent upon and subject to the occurrence of the Acquisition Event, and, provided that, if the Acquisition Event does not take place within a specified period after giving such notice for any reason whatsoever, the notice and exercise pursuant thereto shall be null and void.

If an Acquisition Event occurs but the Committee does not terminate the outstanding Stock Options and Stock Appreciation Rights pursuant to this Section 4.2(d), then the provisions of Section 4.2(b) shall apply.

4.3Minimum Purchase Price.  Notwithstanding any provision of this Plan to the contrary, if authorized but previously unissued shares of Common Stock are issued under this Plan, such shares shall not be issued for a consideration which is less than as permitted under applicable law.

4.4Assumption of Awards.  Awards that were granted prior to the Effective Date under the (i) Comtech Telecommunications Corp. 1982 Incentive Stock Option Plan (the "1982 Plan"), and (ii) the Comtech Telecommunications Corp. 1993 Incentive Stock Option Plan, as amended, shall be transferred and assumed by this Plan

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as of the Effective Date.  Notwithstanding the foregoing, such Awards shall continue to be governed by the terms of the applicable agreement in effect prior to the Effective Date.

ARTICLE V

ELIGIBILITY

5.1General Eligibility.  All Eligible Employees and Consultants and prospective employees of and Consultants to the Company and its Affiliates are eligible to be granted Non-Qualified Stock Options, Stock Appreciation Rights, Restricted Stock, Performance Shares, Performance Units, Other Stock-Based Awards, awards providing benefits similar to each of the foregoing designed to meet the requirements of Foreign Jurisdictions under this Plan, and cash incentive Awards.  Eligibility for the grant of an Award and actual participation in this Plan shall be determined by the Committee in its sole discretion.  The vesting and exercise of Awards granted to a prospective employee or Consultant are conditioned upon such individual actually becoming an Eligible Employee or Consultant.

5.2Incentive Stock Options.  All Eligible Employees of the Company, its Subsidiaries and its Parent (if any) are eligible to be granted Incentive Stock Options under this Plan.  Eligibility for the grant of an Award and actual participation in this Plan shall be determined by the Committee in its sole discretion.

5.3Non-Employee Directors.  Non-Employee Directors are only eligible to receive an Award of Stock Options in accordance with Article XIII of the Plan.

ARTICLE VI

STOCK OPTIONS

6.1Stock Options.  Each Stock Option granted hereunder shall be one of two types: (i) an Incentive Stock Option intended to satisfy the requirements of Section 422 of the Code; or (ii) a Non-Qualified Stock Option.

6.2Grants.  The Committee shall have the authority to grant to any Eligible Employee one or more Incentive Stock Options, Non-Qualified Stock Options or both types of Stock Options (in each case with or without Stock Appreciation Rights).  To the extent that any Stock Option does not qualify as an Incentive Stock Option (whether because of its provisions or the time or manner of its exercise or otherwise), such Stock Option or the portion thereof which does not qualify, shall constitute a separate Non-Qualified Stock Option.  The Committee shall have the authority to grant any Consultant one or more Non-Qualified Stock Options (with or without Stock Appreciation Rights).  Notwithstanding any other provision of this Plan to the contrary or any provision in an agreement evidencing the grant of a Stock Option to the contrary, any Stock Option granted to an Eligible Employee of an Affiliate (other than an Affiliate which is a Parent or a Subsidiary) shall be a Non-Qualified Stock Option.

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6.3Terms of Stock Options.  Stock Options granted under this Plan shall be subject to the following terms and conditions, and shall be in such form and contain such additional terms and conditions, not inconsistent with the terms of this Plan, as the Committee shall deem desirable:

(a)Exercise Price.  The exercise price per share of Common Stock purchasable under an Incentive Stock Option or a Stock Option intended to be "performance-based" for purposes of Section 162(m) of the Code shall be determined by the Committee at the time of grant, but shall not be less than 100% of the Fair Market Value of the share of Common Stock at the time of grant; provided, however, that if an Incentive Stock Option is granted to a Ten Percent Stockholder, the exercise price shall be no less than 110% of the Fair Market Value of the Common Stock.  The exercise price per share of Commo n Stock purchasable under a Non-Qualified Stock Option shall be determined by the Committee; provided, that if the exercise price is less than 100% of the Fair Market Value of the Common Stock at the time of grant it is intended that such Award will be structured to comply with Section 409A of the Code, to the extent applicable.

(b)Stock Option Term.  The term of each Stock Option shall be fixed by the Committee; provided, however, that no Stock Option shall be exercisable more than 10 years after the date such Stock Option is granted; and further provided that the term of an Incentive Stock Option granted to a Ten Percent Stockholder shall not exceed 5 years.

(c)Exercisability.  Stock Options shall be exercisable at such time or times and subject to such terms and conditions as shall be determined by the Committee at grant.  If the Committee provides, in its discretion, that any Stock Option is exercisable subject to certain limitations (including, without limitation, that such Stock Option is exercisable only in installments or within certain time periods), the Committee may waive such limitations on the exercisability at any time at or after grant in whole or in part (including, without limitation, waiver of the installment exercise provision s or acceleration of the time at which such Stock Option may be exercised), based on such factors, if any, as the Committee shall determine, in its sole discretion.

(d)Method of Exercise.  Subject to whatever installment exercise and waiting period provisions apply under subsection (c) above, Stock Options may be exercised in whole or in part at any time and from time to time during the Stock Option term by giving written notice of exercise to the Secretary of the Company specifying the number of shares to be purchased.  Such notice shall be accompanied by payment in full of the purchase price as follows:  (i) in cash or by check, bank draft or money order payable to the order of the Company; (ii) to the extent permitted by law, if the Common Stock is traded on a national securities exchange, The Nasdaq Stock Market LLC or quoted on a national quotation system sponsored by the National Association of Securities Dealers, through a "cashless exercise" procedure whereby the Participant delivers irrevocable

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instructions to a broker satisfactory to the Company to deliver promptly to the Company an amount equal to the purchase price; or (iii) on such other terms and conditions as may be acceptable to the Committee (including, without limitation, the relinquishment of Stock Options or by payment in full or in part in the form of Common Stock owned by the Participant (and for which the Participant has good title free and clear of any liens and encumbrances) based on the Fair Market Value of the Common Stock on the payment date as determined by the Committee).  No shares of Common Stock shall be issued until payment therefore, as provided herein, has been made or provided for.

(e)Incentive Stock Option Limitations.  To the extent that the aggregate Fair Market Value (determined as of the time of grant) of the Common Stock with respect to which Incentive Stock Options are exercisable for the first time by an Eligible Employee during any calendar year under this Plan and/or any other stock option plan of the Company, any Subsidiary or any Parent exceeds $100,000, such Options shall be treated as Non-Qualified Stock Options.  In addition, if an Eligible Employee does not remain employed by the Company, any Subsidiary or any Parent at all times from the time an Ince ntive Stock Option is granted until 3 months prior to the date of exercise thereof (or such other period as required by applicable law), such Stock Option shall be treated as a Non-Qualified Stock Option.  Should any provision of this Plan not be necessary in order for the Stock Options to qualify as Incentive Stock Options, or should any additional provisions be required, the Committee may amend this Plan accordingly, without the necessity of obtaining the approval of the stockholders of the Company.

(f)Form, Modification, Extension and Renewal of Stock Options.  Subject to the terms and conditions and within the limitations of this Plan, Stock Options shall be evidenced by such form of agreement or grant as is approved by the Committee, and the Committee may (i) modify, extend or renew outstanding Stock Options granted under this Plan; provided that the rights of a Participant are not reduced without his consent; provided further, that any such modification, extension or renewal is intended to be structured to comply with Section 409A of the Code, to the extent applicable, and (ii) accept the surrender of outstanding Stock Options (up to the extent not theretofore exercised) and authorize the granting of new Stock Options in substitution therefor (to the extent not theretofore exercised).  Notwithstanding the foregoing, unless approved by stockholders of the Company, (i) an outstanding Option or SAR may not be modified to reduce the exercise price thereof, (ii) no new Option or SAR at a lower exercise price or base price may be substituted for a surrendered Option or SAR, and (iii) no other Award may be issued or cash may be paid in exchange for the surrender of an Option or SAR at a time that the exercise or base price of such Option or SAR exceeds the current Fair Market Value of a share of Common Stock or if such new Award or cash has a value in excess of the then in-the-money value of the surrendered Option or SAR, provided that adjustments or substitutions in accordance with Section 4.2 are not subject to this stockholder approval requirement.

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(g)Other Terms and Conditions.  Stock Options may contain such other provisions, which shall not be inconsistent with any of the terms of this Plan, as the Committee shall deem appropriate including, without limitation, permitting "reloads" such that the same number of Stock Options are granted as the number of Stock Options exercised, shares used to pay for the exercise price of Stock Options or shares used to pay withholding taxes ("Reloads").  With respect to Reloads, the exercise price of the new Stock Option shall be the Fair Market Value on the date of the "reload" and the term of th e Stock Option shall be the same as the remaining term of the Stock Options that are exercised, if applicable, or such other exercise price and term as determined by the Committee.

(h)Detrimental Activity.  Unless otherwise determined by the Committee at grant, (i) in the event the Participant engages in Detrimental Activity prior to any exercise of the Stock Option, all Stock Options (whether vested or unvested) held by the Participant shall thereupon terminate and expire, (ii) as a condition of the exercise of a Stock Option, the Participant shall be required to certify (or shall be deemed to have certified) at the time of exercise in a manner acceptable to the Company that the Participant is in compliance with the terms and conditions of the Plan and that the Participant has not engaged in, and does not intend to engage in, any Detrimental Activity, and (iii) in the event the Participant engages in Detrimental Activity during the one year period following the later of (x) Participant's Termination of Employment or (y) the date the Stock Option is exercised, that any Stock Options shall be immediately forfeited (whether or not then vested) and the Company shall be entitled to recover from the Participant at any time within one year after the later of (x) or (y), and the Participant shall pay over to the Company, an amount equal to any gain realized as a result of the exercise of any Stock Options (whether at the time of exercise or thereafter).

ARTICLE VII

STOCK APPRECIATION RIGHTS

7.1Tandem Stock Appreciation Rights.  Stock Appreciation Rights may be granted in conjunction with all or part of any Stock Option (a "Reference Stock Option") granted under this Plan ("Tandem Stock Appreciation Rights").  In the case of a Non-Qualified Stock Option, such rights may be granted either at or after the time of the grant of such Reference Stock Option.  In the case of an Incentive Stock Option, such rights may be granted only at the time of the grant of such Reference Stock Option.  Consultants shall not be eligible for a grant of T andem Stock Appreciation Rights granted in conjunction with all or part of an Incentive Stock Option.

7.2Terms and Conditions of Tandem Stock Appreciation Rights.  Tandem Stock Appreciation Rights shall be subject to such terms and conditions, not inconsistent with the provisions of this Plan, as shall be determined from time to time by the Committee, including Article XII and the following:

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(a)Term.  A Tandem Stock Appreciation Right or applicable portion thereof granted with respect to a Reference Stock Option shall terminate and no longer be exercisable upon the termination or exercise of the Reference Stock Option, except that, unless otherwise determined by the Committee, in its sole discretion, at the time of grant, a Tandem Stock Appreciation Right granted with respect to less than the full number of shares covered by the Reference Stock Option shall not be reduced until and then only to the extent the exercise or termination of the Reference Stock Option causes the number of sha res covered by the Tandem Stock Appreciation Right to exceed the number of shares remaining available and unexercised under the Reference Stock Option.

(b)Exercisability.  Tandem Stock Appreciation Rights shall be exercisable only at such time or times and to the extent that the Reference Stock Options to which they relate shall be exercisable in accordance with the provisions of Article VI and this Article VII.

(c)Method of Exercise.  A Tandem Stock Appreciation Right may be exercised by a Participant by surrendering the applicable portion of the Reference Stock Option.  Upon such exercise and surrender, the Participant shall be entitled to receive an amount determined in the manner prescribed in this Section 7.2.  Stock Options which have been so surrendered, in whole or in part, shall no longer be exercisable to the extent the related Tandem Stock Appreciation Rights have been exercised.

(d)Payment.  Upon the exercise of a Tandem Stock Appreciation Right, a Participant shall be entitled to receive up to, but no more than, an amount in Common Stock equal in value to the excess of the Fair Market Value of one share of Common Stock over the option price per share specified in the Reference Stock Option, multiplied by the number of shares in respect of which the Tandem Stock Appreciation Right shall have been exercised.

(e)Deemed Exercise of Reference Stock Option.  Upon the exercise of a Tandem Stock Appreciation Right, the Reference Stock Option or part thereof to which such Stock Appreciation Right is related shall be deemed to have been exercised for the purpose of the limitation set forth in Article IV of this Plan on the number of shares of Common Stock to be issued under this Plan.

(f)Detrimental Activity.  Unless otherwise determined by the Committee at grant, (i) in the event the Participant engages in Detrimental Activity prior to any exercise of Tandem Stock Appreciation Rights, all Tandem Stock Appreciation Rights (whether vested or unvested) held by the Participant shall thereupon terminate and expire, (ii) as a condition of the exercise of a Tandem Stock Appreciation Right, the Participant shall be required to certify (or shall be deemed to have certified) at the time of exercise in a manner acceptable to the Company that the Participant is in compliance with the terms and conditions of the Plan and that the Participant has not engaged in, and does not intend to engage in, any Detrimental Activity, and (iii) in the event the Participant

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engages in Detrimental Activity during the one year period following the later of (x) Participant's Termination of Employment or (y) the date the Tandem Stock Appreciation Right is exercised, that any Tandem Stock Appreciation Rights shall be immediately forfeited (whether or not then vested) and the Company shall be entitled to recover from the Participant at any time within one year after the later of (x) or (y), and the Participant shall pay over to the Company, an amount equal to any gain realized as a result of the exercise (whether at the time of exercise or thereafter).

7.3Non-Tandem Stock Appreciation Rights.  Non-Tandem Stock Appreciation Rights may also be granted without reference to any Stock Option granted under this Plan.

7.4Terms and Conditions of Non-Tandem Stock Appreciation Rights.  Non-Tandem Stock Appreciation Rights shall be subject to such terms and conditions, not inconsistent with the provisions of this Plan, as shall be determined from time to time by the Committee, including Article XII and the following:

(a)Term.  The term of each Non-Tandem Stock Appreciation Right shall be fixed by the Committee, but shall not be greater than ten (10) years after the date the right is granted.

(b)Exercisability.  Non-Tandem Stock Appreciation Rights shall be exercisable at such time or times and subject to such terms and conditions as shall be determined by the Committee at grant.  If the Committee provides, in its discretion, that any such right is exercisable subject to certain limitations (including, without limitation, that it is exercisable only in installments or within certain time periods), the Committee may waive such limitation on the exercisability at any time at or after grant in whole or in part (including, without limitation, waiver of  the installment ex ercise provisions or acceleration of the time at which rights may be exercised), based on such factors, if any, as the Committee shall determine, in its sole discretion.

(c)Method of Exercise.  Subject to whatever installment exercise and waiting period provisions apply under subsection (b) above, Non-Tandem Stock Appreciation Rights may be exercised in whole or in part at any time and from time to time during the term, by giving written notice of exercise to the Company specifying the number of Non-Tandem Stock Appreciation Rights to be exercised.

(d)Payment.  Upon the exercise of a Non-Tandem Stock Appreciation Right a Participant shall be entitled to receive, for each right exercised, up to, but no more than, an amount in cash and/or Common Stock (as chosen by the Committee in its sole discretion at grant, or thereafter if no rights of a Participant are reduced) equal in value to the excess of the Fair Market Value of one share of Common Stock on the date the right is exercised over the Fair Market Value of one share of Common Stock on the date the right was awarded to the Participant;

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provided, that if payment is made in cash such payment shall be structured to comply with Section 409A of the Code, to the extent applicable.

(e)Detrimental Activity.  Unless otherwise determined by the Committee at grant, (i) in the event the Participant engages in Detrimental Activity prior to any exercise of Non-Tandem Stock Appreciation Rights, all Non-Tandem Stock Appreciation Rights (whether vested or unvested) held by the Participant shall thereupon terminate and expire, (ii) as a condition of the exercise of a Tandem Stock Appreciation Right, the Participant shall be required to certify (or shall be deemed to have certified) at the time of exercise in a manner acceptable to the Company that the Participant is in complian ce with the terms and conditions of the Plan and that the Participant has not engaged in, and does not intend to engage in, any Detrimental Activity, and (iii) in the event the Participant engages in Detrimental Activity during the one year period following the later of (x) Participant's Termination of Employment or (y) the date the Non-Tandem Stock Appreciation Right is exercised, that any Non-Tandem Stock Appreciation Rights shall be immediately forfeited (whether or not then vested) and the Company shall be entitled to recover from the Participant at any time within one year after the later of (x) or (y), and the Participant shall pay over to the Company, an amount equal to any gain realized as a result of the exercise (whether at the time of exercise or thereafter).

7.5Limited Stock Appreciation Rights.  The Committee may, in its sole discretion, grant a Tandem Stock Appreciation Right or a Non-Tandem Stock Appreciation Right as a Limited Stock Appreciation Right.  Limited Stock Appreciation Rights may be exercised only upon the occurrence of a Change in Control or such other event as the Committee may, in its sole discretion, designate at the time of grant or thereafter.  Upon the exercise of limited Stock Appreciation Rights, except as otherwise provided in an Award agreement, the Participant shall receive in cash or Common Stock, as determined by the Committee, an amount equal to the amount (i) set forth in Section 7.2(d) with respect to Tandem Stock Appreciation Rights, or (ii) set forth in Section 7.4(d) with respect to Non-Tandem Stock Appreciation Rights, as applicable.

ARTICLE VIII

RESTRICTED STOCK

8.1Awards of Restricted Stock.  Shares of Restricted Stock may be issued to Eligible Employees or Consultants either alone or in addition to other Awards granted under this Plan.  The Committee shall determine the eligible persons to whom, and the time or times at which, grants of Restricted Stock will be made, the number of shares to be awarded, the price (if any) to be paid by the recipient (subject to Section 8.2), the time or times within which such Awards may be subject to forfeiture, the vesting schedule and rights to acceleration thereof, and all other terms and conditions of the Awards.  The Committee may condition the grant or vesting of Restricted Stock upon the attainment of specified performance goals, including established Performance Goals in

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accordance with Section 162(m) of the Code, or such other factors as the Committee may determine, in its sole discretion.

8.2Awards and Certificates.  An Eligible Employee or Consultant selected to receive Restricted Stock shall not have any rights with respect to such Award, unless and until such Participant has delivered to the Company a fully executed copy of the applicable Award agreement relating thereto and has otherwise complied with the applicable terms and conditions of such Award.  Further, such Award shall be subject to the following conditions:

(a)Purchase Price.  The purchase price of Restricted Stock shall be fixed by the Committee.  Subject to Section 4.3, the purchase price for shares of Restricted Stock may be zero to the extent permitted by applicable law, and, to the extent not so permitted, such purchase price may not be less than par value.

(b)Acceptance.  Awards of Restricted Stock must be accepted within a period of 90 days (or such shorter period as the Committee may specify at grant) after the Award date by executing a Restricted Stock Award agreement and by paying whatever price (if any) the Committee has designated thereunder.

(c)Legend.  Each Participant receiving shares of Restricted Stock shall be issued a stock certificate in respect of such shares of Restricted Stock, unless the Committee elects to use another system, such as book entries by the transfer agent, as evidencing ownership of shares of Restricted Stock.  Such certificate shall be registered in the name of such Participant, and shall bear an appropriate legend referring to the terms, conditions, and restrictions applicable to such Award, substantially in the following form:

"The anticipation, alienation, attachment, sale, transfer, assignment, pledge, encumbrance or charge of the shares of stock represented hereby are subject to the terms and conditions (including forfeiture) of The Comtech Telecommunications Corp. 2000 Stock Incentive Plan (the "Plan") and an Agreement entered into between the registered owner and the Company dated _______.  Copies of such Plan and Agreement are on file at the principal office of the Company."

(d)Custody.  The Committee may require that any stock certificates evidencing such shares be held in custody by the Company until the restrictions thereon shall have lapsed and that, as a condition to the grant of such Award of Restricted Stock, the Participant shall have delivered a duly signed stock power, endorsed in blank, relating to the Common Stock covered by such Award.

8.3Restrictions and Conditions on Restricted Stock Awards.  Shares of Restricted Stock awarded pursuant to this Plan shall be subject to Article XII and the following restrictions and conditions:

(a)Restriction Period; Vesting and Acceleration of Vesting.  (i) The Participant shall not be permitted to Transfer shares of Restricted Stock awarded

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under this Plan during the period or periods set by the Committee (the "Restriction Period") commencing on the date of such Award, as set forth in the Restricted Stock Award agreement and such agreement shall set forth a vesting schedule and any events which would accelerate vesting of the shares of Restricted Stock.  Within these limits, based on service, attainment of Performance Goals pursuant to Section 8.3(a)(ii) below and/or such other factors or criteria as the Committee may determine in its sole discretion, the Committee may provide for the lapse of such restrictions in installments in whole or in part, or may accelerate the vesting of all or any part of any Restricted Stock Award and/or waive the deferral limitations for all or any part of any Restricted Stock Award.

(ii)Objective Performance Goals, Formulae or Standards.  If the grant of shares of Restricted Stock or the lapse of restrictions is based on the attainment of Performance Goals, the Committee shall establish the Performance Goals and the applicable vesting percentage of the Restricted Stock Award applicable to each Participant or class of Participants in writing prior to the beginning of the applicable fiscal year or at such later date as otherwise determined by the Committee and while the outcome of the Performance Goals are substantially uncertain.  Such Performance Goals may incorporat e provisions for disregarding (or adjusting for) changes in accounting methods, corporate transactions (including, without limitation, dispositions and acquisitions) and other similar type events or circumstances.  With regard to a Restricted Stock Award that is intended to comply with Section 162(m) of the Code, to the extent any such provision would create impermissible discretion under Section 162(m) of the Code or otherwise violate Section 162(m) of the Code, such provision shall be of no force or effect.  The applicable Performance Goals shall be based on one or more of the Performance Criteria set forth in Exhibit A hereto.

(b)Rights as Stockholder.  Except as provided in this subsection (b) and subsection (a) above and as otherwise determined by the Committee, the Participant shall have, with respect to the shares of Restricted Stock, all of the rights of a holder of shares of Common Stock of the Company including, without limitation, the right to receive any dividends, the right to vote such shares and, subject to and conditioned upon the full vesting of shares of Restricted Stock, the right to tender such shares.  The Committee may, in its sole discretion, determine at the time of grant that the payment of dividends shall be deferred until, and conditioned upon, the expiration of the applicable Restriction Period.

(c)Lapse of Restrictions.  If and when the Restriction Period expires without a prior forfeiture of the Restricted Stock subject to such Restriction Period, the certificates for such shares shall be delivered to the Participant.  All legends shall be removed from said certificates at the time of delivery to the Participant except as otherwise required by applicable law.

(d)Detrimental Activity.  Unless otherwise determined by the Committee at grant, each Award of Restricted Stock shall provide that in the

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event the Participant engages in Detrimental Activity prior to, or during the one year period following the later of Termination of Employment or any vesting of Restricted Stock, the Committee may direct (at any time within one year thereafter) that all unvested Restricted Stock shall be immediately forfeited to the Company and that the Participant shall pay over to the Company an amount equal to the gain realized at the time of vesting of any Restricted Stock.

ARTICLE IX

PERFORMANCE SHARES

9.1Award of Performance Shares.  Performance Shares may be awarded either alone or in addition to other Awards granted under this Plan.  The Committee shall, in its sole discretion, determine the Eligible Employees and Consultants to whom and the time or times at which such Performance Shares shall be awarded, the duration of the period (the "Performance Period") during which, and the conditions under which, a Participant's right to Performance Shares will be vested and the other terms and conditions of the Award in addition to those set forth in Section 9.2.

Each Performance Share awarded shall be referenced to one share of Common Stock.  Except as otherwise provided herein, the Committee shall condition the right to payment of any Performance Share Award upon the attainment of objective Performance Goals established pursuant to Section 9.2(c) below and such other non-performance based factors or criteria as the Committee may determine in its sole discretion.

9.2Terms and Conditions.  A Participant selected to receive Performance Shares shall not have any rights with respect to such Awards, unless and until such Participant has delivered a fully executed copy of a Performance Share Award agreement evidencing the Award to the Company and has otherwise complied with the following terms and conditions:

(a)Earning of Performance Share Award.  At the expiration of the applicable Performance Period, the Committee shall determine the extent to which the Performance Goals established pursuant to Section 9.2(c) are achieved and the percentage of each Performance Share Award that has been earned.

(b)Payment.  Following the Committee's determination in accordance with subsection (a) above, shares of Common Stock or, as determined by the Committee in its sole discretion, the cash equivalent of such shares shall be delivered to the Participant, in an amount equal to such Participant's earned Performance Share Award.  Notwithstanding the foregoing, except as may be set forth in the agreement covering the Award, the Committee may, in its sole discretion and in accordance with Section 162(m) of the Code, award an amount less than the earned Performance Share Award and/or subject the paym ent of all or part of any Performance Share Award to additional vesting and forfeiture conditions as it deems appropriate.

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(c)Objective Performance Goals, Formulae or Standards.  The Committee shall establish the objective Performance Goals for the earning of Performance Shares based on a Performance Period applicable to each Participant or class of Participants in writing prior to the beginning of the applicable Performance Period or at such later date as permitted under Section 162(m) of the Code and while the outcome of the Performance Goals are substantially uncertain.  Such Performance Goals may incorporate, if and only to the extent permitted under Section 162(m) of the Code, provisions for disregarding (or adjusting for) changes in accounting methods, corporate transactions (including, without limitation, dispositions and acquisitions) and other similar type events or circumstances.  To the extent any such provision would create impermissible discretion under Section 162(m) of the Code or otherwise violate Section 162(m) of the Code, such provision shall be of no force or effect.  The applicable Performance Goals shall be based on one or more of the Performance Criteria set forth in Exhibit A hereto.

(d)Dividends and Other Distributions.  At the time of any Award of Performance Shares, the Committee may, in its sole discretion, award an Eligible Employee or Consultant the right to receive the cash value of any dividends and other distributions that would have been received as though the Eligible Employee or Consultant had held each share of Common Stock referenced by the earned Performance Share Award from the last day of the first year of the Performance Period until the actual distribution to such Participant of the related share of Common Stock or cash value thereof.  Such amounts, if awarded, shall be paid to the Participant as and when the shares of Common Stock or cash value thereof are distributed to such Participant and, at the discretion of the Committee, may be paid with interest from the first day of the second year of the Performance Period until such amounts and any earnings thereon are distributed.  The applicable rate of interest shall be determined by the Committee in its sole discretion; provided, however, that for each fiscal year or part thereof, the applicable interest rate shall not be greater than a rate equal to the four-year U.S. Government Treasury rate on the first day of each applicable fiscal year.

(e)Detrimental Activity.  Unless otherwise determined by the Committee at grant, each Award of Performance Shares shall provide that in the event the Participant engages in Detrimental Activity prior to, or during the one year period following the later of Termination of Employment or any vesting of Performance Shares, the Committee may direct (at any time within one year thereafter) that all unvested Performance Shares shall be immediately forfeited to the Company and that the Participant shall pay over to the Company an amount equal to the gain realized at the time of vesting of any Performance Sh ares.

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ARTICLE X

CASH INCENTIVE AWARDS AND PERFORMANCE UNITS

10.1Cash Incentive Awards.  Cash incentive Awards may be awarded either alone or in addition to other Awards granted under this Plan.  The Committee shall, in its sole discretion, determine the Eligible Employees and Consultants to whom and the time or times at which such cash incentive Awards shall be awarded, the duration of the period (the "Performance Cycle") during which, and the conditions under which, a Participant shall earn the cash incentive Award and the oth er terms and conditions of the Award in addition to those set forth in Section 10.3.  Cash incentive Awards granted with a Performance Cycle of one year shall be designated as “Annual Incentive Awards.”

Cash incentive Awards shall be awarded in a dollar amount or a formula that will ultimately yield a dollar amount, as determined by the Committee.  Except as otherwise provided herein, the Committee shall condition the right to payment of any cash incentive Award upon the attainment of at least one objective Performance Goal established pursuant to Section 10.3(a) and such other factors or criteria as the Committee may determine in its sole discretion.

Cash incentive Awards under this Section 10.1 may be settled and paid only if stockholders of the Company previously have approved the amendment and restatement of the Plan containing the authorization of cash incentive Awards in this Section 10.1.

10.2Awards of Performance Units.  Performance Units may be awarded either alone or in addition to other Awards granted under this Plan.  The Committee shall, in its sole discretion, determine the Eligible Employees and Consultants to whom and the time or times at which such Performance Units shall be awarded, the duration of the period (the "Performance Unit Cycle") during which, and the conditions under which, a Participant's right to Performance Units will be vested and the other terms and conditions of the Award in addition to those set forth in Section 10.3.

Performance Units shall be awarded in a dollar amount determined by the Committee and shall be converted to a referenced number of shares of Common Stock based on the Fair Market Value of shares of Common Stock at the conversion date designated by the Committee (such designation may occur at any time, but no conversion may reference a market price from a date preceding the designation date).

Upon conversion, each Performance Unit shall be referenced to one share of Common Stock.  Except as otherwise provided herein, the Committee shall condition the right to payment of any Performance Unit Award upon the attainment of objective Performance Goals established pursuant to Section 10.3(a) and such other non-performance based factors or criteria as the Committee may determine in its sole discretion.  The cash value of any fractional Performance Unit Award subsequent to conversion to shares of Common Stock shall be treated as a dividend or other distribution under Section 10.3(e) to the extent any portion of the Performance Unit Award is earned.

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10.3Terms and Conditions.  The cash incentive Awards or Performance Units awarded pursuant to this Article 10 shall be subject to the following terms and conditions:

(a)Performance Goals.  The Committee shall establish the objective Performance Goal or Goals for the earning of cash incentive Awards or Performance Units based on a Performance Cycle or Performance Unit Cycle applicable to each Participant or class of Participants in writing prior to the beginning of the applicable Performance Cycle or Performance Unit Cycle or at such later date as permitted under Section 162(m) of the Code and while the outcome of the Performance Goal or Goals is substantially uncertain.  Such Performance Goals may incorporate, if and only to the extent permitted under Section 162(m) of the Code, provisions for disregarding (or adjusting for) changes in accounting methods, corporate transactions (including, without limitation, dispositions and acquisitions) and other similar type events or circumstances.  To the extent any such provision would create impermissible discretion under Section 162(m) of the Code or otherwise violate Section 162(m) of the Code, such provision shall be of no force or effect.  The applicable Performance Goals shall be based on one or more of the Performance Criteria set forth in Exhibit A hereto.

(b)Vesting.  At the expiration of the Performance Cycle or Performance Unit Cycle, the Committee shall determine and certify in writing the extent to which the Performance Goals have been achieved, and the corresponding extent to which a cash incentive Award or a Performance Unit has been earned in respect of each Participant.

(c)Payment.  Subject to the applicable provisions of the Award agreement and this Plan, at the expiration of the Performance Cycle or Performance Unit Cycle or any vesting period extending beyond the Performance Cycle or Performance Unit Cycle, cash or, with respect to Performance Units, shares of Common Stock (as the Committee may determine in its sole discretion at grant, or thereafter if no rights of a Participant are reduced), shall be delivered to the Participant in payment of any earned and vested cash incentive Award or any earned and vested Performance Units covered by the Performance Unit A ward.  Notwithstanding the foregoing, except as may be set forth in the agreement covering the Award, the Committee may, in its sole discretion, and to the extent applicable and permitted under Section 162(m) of the Code, award an amount less than the earned cash incentive Award or earned Performance Unit Award and/or subject the payment of all or part of any such Award to additional vesting and forfeiture conditions or conditions mandating the deferral of settlement of the Award as it deems appropriate.  If an Award is deferred such Award shall not increase (between the date on which the Award is credited to any deferred compensation program applicable to such Participant and the payment date) by an amount that would result in such deferral being deemed as an “increase in the amount of compensation” under Section 162(m) of the Code.

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(d)Accelerated Vesting.  Based on service, performance and/or such other factors or criteria, if any, as the Committee may determine, the Committee may, at or after grant, accelerate the date of earning or vesting of all or any part of any cash incentive Award or Performance Unit Award and/or waive the deferral limitations for all or any part of such Award, except that no acceleration or waiver may affect the time of settlement of an Award that constitutes a deferral of compensation under Section 409A of the Code except as permitted under applicable regulations and guidance under Section 409A.

(e)Dividends and Other Distributions.  At the time of any Award of Performance Units, the Committee may, in its sole discretion, award an Eligible Employee or Consultant the right to receive the cash value of any dividends and other distributions that would have been received as though the Eligible Employee or Consultant had held each share of Common Stock referenced by the earned Performance Unit Award from the last day of the first year of the Performance Cycle or Performance Unit Cycle until the actual distribution to such Participant of the related share of Common Stock or cash value thereof.
60; Such amounts, if awarded, shall be paid to the Participant as and when the shares of Common Stock or cash value thereof are distributed to such Participant and, at the discretion of the Committee, may be paid with interest from the first day of the second year of the Performance Cycle or Performance Unit Cycle until such amounts and any earnings thereon are distributed.  The applicable rate of interest shall be determined by the Committee in its sole discretion; provided, however, that for each fiscal year or part thereof, the applicable interest rate shall not be greater than a rate equal to the four-year U.S. Government Treasury rate on the first day of each applicable fiscal year.

(f)Detrimental Activity. Unless otherwise determined by the Committee at grant, each Award of Performance Units shall provide that in the event the Participant engages in Detrimental Activity prior to, or during the one year period following the later of Termination of Employment or any vesting of Performance Units, the Committee may direct (at any time within one year thereafter) that all unvested Performance Units shall be immediately forfeited to the Company and that the Participant shall pay over to the Company an amount equal to the gain realized at the time of vesting of any Performance Units which had vested in the period referred to above.

ARTICLE XI

OTHER STOCK-BASED AWARDS

11.1Other Awards.  Other Stock-Based Awards may be granted either alone or in addition to or in tandem with Stock Options, Stock Appreciation Rights, Restricted Stock, Performance Shares or Performance Units.

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Subject to the provisions of this Plan, the Committee shall have authority to determine the persons to whom and the time or times at which such Awards shall be made, the number of shares of Common Stock to be awarded pursuant to such Awards, and all other conditions of the Awards.  The Committee may also provide for the grant of Common Stock under such Awards upon the completion of a specified performance period.

11.2Terms and Conditions.  Other Stock-Based Awards made pursuant to this Article XI shall be subject to the following terms and conditions:

(a)Non-Transferability.  Subject to the applicable provisions of the Award agreement and this Plan, shares of Common Stock subject to Awards made under this Article XI may not be Transferred prior to the date on which the shares are issued, or, if later, the date on which any applicable restriction, performance or deferral period lapses.

(b)Dividends.  Unless otherwise determined by the Committee at the time of Award, subject to the provisions of the Award agreement and this Plan, the recipient of an Award under this Article XI shall be entitled to receive, currently or on a deferred basis, dividends or dividend equivalents with respect to the number of shares of Common Stock covered by the Award, as determined at the time of the Award by the Committee, in its sole discretion.

(c)Vesting.  Any Award under this Article XI and any Common Stock covered by any such Award shall vest or be forfeited to the extent so provided in the Award agreement, as determined by the Committee, in its sole discretion.

(d)Waiver of Limitation.  The Committee may, in its sole discretion, waive in whole or in part any or all of the limitations imposed hereunder (if any) with respect to any or all of an Award under this Article XI.

(e)Price.  Common Stock or Other Stock-Based Awards issued on a bonus basis under this Article XI may be issued for no cash consideration; Common Stock or Other Stock-Based Awards purchased pursuant to a purchase right awarded under this Article XI shall be priced as determined by the Committee.  Subject to Section 4.3, the purchase price of shares of Common Stock or Other Stock-Based Awards may be zero to the extent permitted by applicable law, and, to the extent not so permitted, such purchase price may not be less than par value.  The purchase of shares of Common Stock or Othe r Stock-Based Awards may be made on either an after-tax or pre-tax basis, as determined by the Committee; provided, however, that if the purchase is made on a pre-tax basis, such purchase shall be made pursuant to a deferred compensation program established by the Committee, which will be deemed a part of this Plan.

(f)Detrimental Activity.  Other Stock-Based Awards under this Article XI and any Common Stock covered by any such Award shall be forfeited

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in the event the Participant engages in Detrimental Activity under such conditions set forth by the Committee in the Award agreement.

ARTICLE XII

NON-TRANSFERABILITY AND TERMINATION

OF EMPLOYMENT/CONSULTANCY

12.1Non-Transferability.  No Stock Option, Stock Appreciation Right, Performance Unit, Performance Share or Other Stock-Based Award shall be Transferable by the Participant otherwise than by will or by the laws of descent and distribution.  All Stock Options and all Stock Appreciation Rights shall be exercisable, during the Participant's lifetime, only by the Participant.  Tandem Stock Appreciation Rights shall be Transferable, to the extent permitted above, only with the underlying Stock Option.  Shares of Restricted Stock under Article VIII ma y not be Transferred prior to the date on which shares are issued, or, if later, the date on which any applicable restriction, performance or deferral period lapses.  No Award shall, except as otherwise specifically provided by law or herein, be Transferable in any manner, and any attempt to Transfer any such Award shall be void, and no such Award shall in any manner be liable for or subject to the debts, contracts, liabilities, engagements or torts of any person who shall be entitled to such Award, nor shall it be subject to attachment or legal process for or against such person.  Notwithstanding the foregoing, the Committee may determine at the time of grant or thereafter, that a Non-Qualified Stock Option that is otherwise not transferable pursuant to this Section 12.1 is transferable to a Family Member in whole or in part and in such circumstances, and under such conditions, as specified by the Committee, except no transfer or other disposition for value shall be permitted.   ;A Non-Qualified Stock Option that is transferred to a Family Member pursuant to the preceding sentence may not be subsequently transferred otherwise than by will or by the laws of descent and distribution.

12.2Termination of Employment or Termination of Consultancy.  The following rules apply with regard to the Termination of Employment or Termination of Consultancy of a Participant:

(a)Rules Applicable to Stock Options and Stock Appreciation Rights.  Unless otherwise determined by the Committee at grant or, if no rights of the Participant are reduced, thereafter:

(i)Termination by Reason of Death, Disability or Retirement.  If a Participant's Termination of Employment or Termination of Consultancy is by reason of death, Disability or Retirement, all Stock Options and Stock Appreciation Rights held by such Participant may be exercised, to the extent exercisable at the Participant's Termination of Employment or Termination of Consultancy, by the Participant (or, in the case of death, by the legal representative of the Participant's estate) at any time within a period of one year from the date of such Termination of Employment or Termination of

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Consultancy, but in no event beyond the expiration of the stated terms of such Stock Options and Stock Appreciation Rights; provided, however, that, in the case of Retirement, if the Participant dies within such exercise period, all unexercised Stock Options and Non-Tandem Stock Appreciation Rights held by such Participant shall thereafter be exercisable, to the extent to which they were exercisable at the time of death, for a period of one year from the date of such death, but in no event beyond the expiration of the stated term of such Stock Options and Non-Tandem Stock Appreciation Rights.

(ii)Involuntary Termination Without Cause.  If a Participant's Termination of Employment or Termination of Consultancy is by involuntary termination without Cause, all Stock Options and Stock Appreciation Rights held by such Participant may be exercised, to the extent exercisable at Termination of Employment or Termination of Consultancy, by the Participant at any time within a period of 90 days from the date of such Termination of Employment or Termination of Consultancy, but in no event beyond the expiration of the stated term of such Stock Options and Stock Appreciation Rights.

(iii)Voluntary Termination.  If a Participant's Termination of Employment or Termination of Consultancy is voluntary (other than a voluntary termination described in Section 12.2(a)(iv)(B) below), all Stock Options and Stock Appreciation Rights held by such Participant may be exercised, to the extent exercisable at Termination of Employment or Termination of Consultancy, by the Participant at any time within a period of 30 days from the date of such Termination of Employment or Termination of Consultancy, but in no event beyond the expiration of the stated terms of such Stock Options and Stock Appr eciation Rights.  Notwithstanding the foregoing, effective for Stock Options and Stock Appreciation Rights granted on or after October 19, 2000, if a Participant's Termination of Employment or Termination of Consultancy is voluntary, all Stock Options and Stock Appreciation Rights held by such Participant shall thereupon terminate and expire as of the date of such Termination of Employment or Termination of Consultancy.

(iv)Termination for Cause.  If a Participant's Termination of Employment or Termination of Consultancy (A) is for Cause or (B) is a voluntary termination (as provided in subsection (iii) above) within 90 days after an event which would be grounds for a Termination of Employment or Termination of Consultancy for Cause, all Stock Options and Stock Appreciation Rights held by such Participant shall thereupon terminate and expire as of the date of such Termination of Employment or Termination of Consultancy.

(b)Rules Applicable to Restricted Stock.  Subject to the applicable provisions of the Restricted Stock Award agreement and this Plan, upon a Participant's Termination of Employment or Termination of Consultancy for any reason during the relevant Restriction Period, all Restricted Stock still subject to restriction will vest or be forfeited in accordance with the terms and conditions established by the Committee at grant or thereafter.

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(c)Rules Applicable to Performance Shares and Performance Units.  Subject to the applicable provisions of the Award agreement and this Plan, upon a Participant's Termination of Employment or Termination of Consultancy for any reason during the Performance Period, the Performance Unit Cycle or other period or restriction as may be applicable for a given Award, the Performance Shares or Performance Units in question will vest (to the extent applicable and to the extent permissible under Section 162(m) of the Code) or be forfeited in accordance with the terms and conditions established by the Committee at grant or thereafter.

(d)Rules Applicable to Other Stock-Based Awards.  Subject to the applicable provisions of the Award agreement and this Plan, upon a Participant's Termination of Employment or Termination of Consultancy for any reason during any period or restriction as may be applicable for a given Award, the Other Stock-Based Awards in question will vest or be forfeited in accordance with the terms and conditions established by the Committee at grant or thereafter.

ARTICLE XIII

NON-EMPLOYEE DIRECTOR STOCK OPTION GRANTS

13.1Stock Options.  The terms of this Article XIII shall apply only to Stock Options granted to Non-Employee Directors.

13.2Grants.  Without further action by the Board or the stockholders of the Company, each Non-Employee Director shall, subject to the terms of the Plan, be granted:

(a)Stock Options to purchase 4,500 shares of Common Stock as of the date the Non-Employee Director begins service as a Non-Employee Director on the Board (subject to increase or decrease pursuant to Section 4.2), provided that the Non-Employee Director began service on or after the Effective Date; and

(b)In addition to Stock Options granted pursuant to (a) above, Stock Options to purchase 15,000 shares of Common Stock (subject to increase or decrease pursuant to Section 4.2) as of June 2 of each calendar year (or, if a different date, the date the Company grants annual equity awards under the Plan to the employees of the Company) commencing June 2, 2010 (or such other date in 2010 in which the Company grants annual equity awards under the Plan to the employees of the Company), provided he or she has not, as of such day, experienced a Termination of Directorship and provided further that he or she has been a Non-Employee Director for at least six months as of such date.  Commencing June 2, 2010 (or such other date in 2010 in which the Company grants annual equity awards under the Plan to the employees of the Company), in the case of a Non-Employee Director who has not been such for at least six month as of such date, he or she shall be entitled to a prorated grant of Stock Options to

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purchase shares of Common Stock in an amount equal to the product of 15,000 and a fraction, the numerator of which is the number of months such Non-Employee Director served as such (counting, for this purpose, any partial month of service as one month) and the denominator of which is six.

13.3Non-Qualified Stock Options.  Stock Options granted under this Article XIII shall be Non-Qualified Stock Options.

13.4Terms of Stock Options.  Stock Options granted under this Article XIII shall be subject to the following terms and conditions, and shall be in such form and contain such additional terms and conditions, not inconsistent with the terms of this Plan, as the Board shall deem desirable:

(a)Stock Option Price.  The Stock Option price per share of Common Stock purchasable under a Stock Option shall equal 100% of the Fair Market Value of the share of Common Stock at the time of grant.

(b)Stock Option Term.  The term of each Stock Option granted (i) prior to August 1, 2005 shall be ten (10) years and (ii) on or after August 1, 2005 shall be five (5) years.

(c)Exercisability.  Stock Options granted to Non-Employee Directors pursuant to Section 13.2 shall vest and become exercisable (i) on the first anniversary of date of grant for Stock Options granted prior to August 1, 2005 and (ii) in installments over a three (3) year period, commencing on the date of grant for Stock Options granted on or after August 1, 2005, at the rate of 25% effective on the first and second anniversaries of the date of grant and 50% on the third anniversary of the date of grant; provided that in any event the Stock Option may become vested only during the continuance of his or her service as a director of the Company.

(d)Method of Exercise.  Subject to whatever waiting period provisions apply under subsection (c) above, Stock Options may be exercised in whole or in part at any time and from time to time during the Stock Option term, by giving written notice of exercise to the Company specifying the number of shares to be purchased.  Such notice shall be accompanied by payment in full of the purchase price as follows:  (i) in cash or by check, bank draft or money order payable to the Company; (ii) to the extent permitted by law, if the Common Stock is traded on a national securities e xchange, through a "cashless exercise" procedure whereby the Participant delivers irrevocable instructions to a broker satisfactory to the Company to deliver promptly to the Company an amount equal to the purchase price; or (iii) such other arrangement for the satisfaction of the purchase price, as the Board may accept.  If and to the extent determined by the Board in its sole discretion at or after grant, payment in full or in part may also be made in the form of Common Stock owned by the Participant (and for which the Participant has good title free and clear of any liens and encumbrances) based on the Fair Market Value of the Common Stock on the payment date.  No shares of Common

33

Stock shall be issued until payment, as provided herein, therefore has been made or provided for.

(e)Form, Modification, Extension and Renewal of Stock Options.  Subject to the terms and conditions and within the limitations of the Plan, a Stock Option shall be evidenced by such form of agreement or grant as is approved by the Board, and the Board may modify, extend or renew outstanding Stock Options granted under the Plan (provided that the rights of a Participant are not reduced without his consent).

13.5Termination of Directorship.  The following rules apply with regard to Stock Options upon the Termination of Directorship:

(a)Termination of Directorship by Reason of Death, Disability or Otherwise Ceasing to be a Director.  Except as otherwise provided herein, upon the Termination of Directorship by reason of death, Disability, resignation, failure to stand for reelection or failure to be reelected or otherwise, all outstanding Stock Options exercisable and not exercised shall remain exercisable to the extent exercisable on such date of Termination of Directorship by the Participant or, in the case of death, by the Participant's estate or by the person given authority to exercise such Stock Options by his or her will o r by operation of law, at any time prior to the expiration of the stated term of such Stock Option.

(b)Cancellation of Options.  Except as provided in Section 13.6, no Stock Options that were not exercisable as of the date of Termination of Directorship shall thereafter become exercisable upon a Termination of Directorship for any reason or no reason whatsoever, and such Stock Options shall terminate and become null and void upon a Termination of Directorship.  If a Non-Employee Director's Termination of Directorship is for Cause, all Stock Options held by the Non-Employee Director shall thereupon terminate and expire as of the date of termination.

13.6Acceleration of Exercisability.  All Stock Options granted to a Non-Employee Director and not previously exercisable shall become fully exercisable upon such Director's death, and all Stock Options granted to Non-Employee Directors and not previously exercisable shall become fully exercisable immediately upon a Change in Control (as defined in Section 14.2).

13.7Changes.

(a)The Awards to a Non-Employee Director shall be subject to Sections 4.2(a), (b) and (c) of the Plan and this Section 13.7, but shall not be subject to Section 4.2(d).

(b)If the Company shall not be the surviving corporation in any merger or consolidation, or if the Company is to be dissolved or liquidated, then, unless the surviving corporation assumes the Stock Options or substitutes new Stock Options which are determined by the Board in its sole discretion to be

34

substantially similar in nature and equivalent in terms and value for Stock Options then outstanding, upon the effective date of such merger, consolidation, liquidation or dissolution, any unexercised Stock Options shall expire without additional compensation to the holder thereof; provided, that, the Board shall deliver notice to each Non-Employee Director at least 30 days prior to the date of consummation of such merger, consolidation, dissolution or liquidation which would result in the expiration of the Stock Options and during the period from the date on which such notice of termination is delivered to the consummation of the merger, consolidation, dissolution or liquidation, such Participant shall have the right to exercise in full, effective as of such consummation, all Stock Options that are then outstanding (without regard to limitations on exercise otherwise contained in the Stock Options) bu t contingent on occurrence of the merger, consolidation, dissolution or liquidation, and, provided that, if the contemplated transaction does not take place within a 90 day period after giving such notice for any reason whatsoever, the notice, accelerated vesting and exercise shall be null and void and, if and when appropriate, new notice shall be given as aforesaid.

ARTICLE XIV

CHANGE IN CONTROL PROVISIONS

14.1Benefits.  In the event of a Change in Control of the Company, except as otherwise provided by the Committee upon the grant of an Award, the Participant shall be entitled to the following benefits:

(a)Except to the extent provided in the applicable Award agreement, the Participant's employment agreement with the Company or an Affiliate, as approved by the Committee, or other written agreement approved by the Committee (as such agreement may be amended from time to time), (i) Equity Awards granted and not previously exercisable shall become exercisable upon a Change in Control, (ii) restrictions to which any shares of Restricted Stock granted prior to the Change in Control are subject shall lapse upon a Change in Control, and (iii) the conditions required for vesting of any unvested Performance Units and/or Performance Shares shall be deemed to be satisfied upon a Change in Control.

(b)The Committee, in its sole discretion, may provide for the purchase of any Stock Option by the Company or an Affiliate for an amount of cash equal to the excess of the Change in Control Price (as defined below) of the shares of Common Stock covered by such Stock Options, over the aggregate exercise price of such Stock Options.  For purposes of this Section 14.1, Change in Control Price shall mean the higher of (i) the highest price per share of Common Stock paid in any transaction related to a Change in Control of the Company, or (ii) the highest Fair Market Value per share of Common Stock at any time during the sixty (60) day period preceding a Change in Control.

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(c)Notwithstanding anything to the contrary herein, unless the Committee provides otherwise at the time a Stock Option is granted hereunder or thereafter, no acceleration of exercisability shall occur with respect to such Stock Options if the Committee reasonably determines in good faith, prior to the occurrence of the Change in Control, that the Stock Options shall be honored or assumed, or new rights substituted therefore (each such honored, assumed or substituted stock option hereinafter called an "Alternative Option"), by a Participant's employer (or the parent or a subsidiary of such employer) immediately following the Change in Control, provided that any such Alternative Option must meet the following criteria:

(i)the Alternative Option must be based on stock which is traded on an established securities market, or which will be so traded within 30 days of the Change in Control;

(ii)the Alternative Option must provide such Participant with rights and entitlements substantially equivalent to or better than the rights, terms and conditions applicable under such Stock Option, including, but not limited to, an identical or better exercise schedule; and

(iii)the Alternative Option must have economic value substantially equivalent to the value of such Stock Option (determined at the time of the Change in Control).

For purposes of Incentive Stock Options, any assumed or substituted Stock Option shall comply with the requirements of Treasury Regulation § 1.424-1 (and any amendments thereto).

(d)Notwithstanding anything else herein, the Committee may, in its sole discretion, provide for accelerated vesting of an Award or accelerated lapsing of restrictions on shares of Restricted Stock at any time.

14.2Change in Control.  A "Change in Control" shall be deemed to have occurred:

(a)upon any "person" as such term is used in Sections 13(d) and 14(d) of the Exchange Act (other than the Company, any trustee or other fiduciary holding securities under any employee benefit plan of the Company, or any company owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their ownership of Common Stock of the Company), becoming the owner (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing 30% or more of the combined voting power of the Company's then outstanding securities;

(b)during any period of two (2) consecutive years, individuals who at the beginning of such period constitute the Board of Directors, and any new director (other than a director designated by a person who has entered into an agreement with the Company to effect a transaction described in paragraph (a),

36

(c), or (d) of this section) or a director whose initial assumption of office occurs as a result of either an actual or threatened election contest (as such term is used in Rule 14a-11 of Regulation 14A promulgated under the Exchange Act) or other actual or threatened solicitation of proxies or consents by or on behalf of a person other than the Board of Directors of the Company whose election by the Board of Directors or nomination for election by the Company's stockholders was approved by a vote of at least two-thirds of the directors then still in office who either were directors at the beginning of the two-year period or whose election or nomination for election was previously so approved, cease for any reason to constitute at least a majority of the Board of Directors;

(c)upon a merger or consolidation of the Company with any other corporation, other than a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) more than 50% of the combined voting power of the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation; provided, however, that a merger or consolidation effected to implement a recapitalization of the Company (or similar transaction) in which no person (other than those covered by the exceptions in (a) above) acquires more than 50% of the combined voting power of the Company's then outstanding securities shall not constitute a Change in Control of the Company; or

(d)upon approval by the stockholders of the Company of a plan of complete liquidation of the Company or an agreement for the sale or disposition by the Company of all or substantially all of the Company's assets other than the sale or disposition of all or substantially all of the assets of the Company to a person or persons who beneficially own, directly or indirectly, at least 50% or more of the combined voting power of the outstanding voting securities of the Company at the time of the sale.

ARTICLE XV

TERMINATION OR AMENDMENT OF PLAN

Notwithstanding any other provision of this Plan, the Board or the Committee may at any time, and from time to time, amend, in whole or in part, any or all of the provisions of this Plan (including any amendment deemed necessary to ensure that the Company may comply with any regulatory requirement referred to in Article XVII), or suspend or terminate it entirely, retroactively or otherwise; provided, however, that, unless otherwise required by law or specifically provided herein, the rights of a Participant with respect to Awards granted prior to such amendment, suspension or termination, may not be impaired without the consent of such Participant and, provided further, without the approval of the shareholders of the Company in accordance with the laws of the State of Delaware, to the extent required by the applicable provisions of Ru le 16b-3 or Section 162(m) of the Code, or, to the extent applicable to Incentive

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Stock Options, Section 422 of the Code, no amendment may be made which would (i) increase the aggregate number of shares of Common Stock that may be issued under this Plan; (ii) increase the maximum individual Participant limitations for a fiscal year under Section 4.1(b); (iii) change the classification of employees or Consultants eligible to receive Awards under this Plan; (iv) decrease the minimum option price of any Stock Option or Stock Appreciation Right; (v) extend the maximum option period under Section 6.3; (vi) materially alter the Performance Criteria for the Award of Restricted Stock, Performance Units, Performance Shares or cash incentive Awards as set forth in Exhibit A; or (vii) require stockholder approval in order for this Plan to continue to comply with the applicable provisions of Section 162(m) of the Code or, to the extent applicable to Incentive Stock Options, Section 422 of the Code.  In no event may this Plan be amended without the approval of the stockholders of the Company in accordance with the applicable laws of the State of Delaware to increase the aggregate number of shares of Common Stock that may be issued under this Plan, decrease the minimum exercise price of any Stock Option or Stock Appreciation Right, or to make any other amendment that would require stockholder approval under the rules of any exchange or system on which the Company's securities are listed or traded at the request of the Company.

The Committee may amend the terms of any Award theretofore granted, prospectively or retroactively, but, subject to Article IV above or as otherwise specifically provided herein, no such amendment or other action by the Committee shall impair the rights of any holder without the holder's consent.

ARTICLE XVI

UNFUNDED PLAN

16.1Unfunded Status of Plan.  This Plan is intended to constitute an "unfunded" plan for incentive and deferred compensation.  With respect to any payments as to which a Participant has a fixed and vested interest but which are not yet made to a Participant by the Company, nothing contained herein shall give any such Participant any rights that are greater than those of a general creditor of the Company.

ARTICLE XVII

GENERAL PROVISIONS

17.1Legend.  The Committee may require each person receiving shares pursuant to an Award under this Plan to represent to and agree with the Company in writing that the Participant is acquiring the shares without a view to distribution thereof.  In addition to any legend required by this Plan, the certificates for such shares may include any legend which the Committee deems appropriate to reflect any restrictions on Transfer.

All certificates for shares of Common Stock delivered under this Plan shall be subject to such stock transfer orders and other restrictions as the Committee may deem advisable under the rules, regulations and other requirements of the Securities and

38

Exchange Commission, any stock exchange upon which the Common Stock is then listed or any national securities association system upon whose system the Common Stock is then quoted, any applicable Federal or state securities law, and any applicable corporate law, and the Committee may cause a legend or legends to be put on any such certificates to make appropriate reference to such restrictions.

17.2Other Plans.  Nothing contained in this Plan shall prevent the Board from adopting other or additional compensation arrangements, subject to stockholder approval if such approval is required; and such arrangements may be either generally applicable or applicable only in specific cases.

17.3Right to Employment/Consultancy.  Neither this Plan nor the grant of any Award hereunder shall give any Participant or other employee or Consultant any right with respect to continuance of employment or Consultancy by the Company or any Affiliate, nor shall they be a limitation in any way on the right of the Company or any Affiliate by which an employee is employed or a Consultant is retained to terminate his employment or Consultancy at any time.

17.4Withholding of Taxes.  The Company shall have the right to deduct from any payment to be made to a Participant, or to otherwise require, prior to the issuance or delivery of any shares of Common Stock or the payment of any cash hereunder, payment by the Participant of, any Federal, state or local taxes required by law to be withheld.  Upon the vesting of Restricted Stock, or upon making an election under Code Section 83(b), a Participant shall pay all required withholding to the Company.

Any such withholding obligation with regard to any Participant may be satisfied, subject to the consent of the Committee, by reducing the number of shares of Common Stock otherwise deliverable or by delivering shares of Common Stock already owned.   Any fraction of a share of Common Stock required to satisfy such tax obligations shall be disregarded and the amount due shall be paid instead in cash by the Participant.

17.5Listing and Other Conditions.

(a)As long as the Common Stock is listed on a national securities exchange or system sponsored by a national securities association, the issue of any shares of Common Stock pursuant to an Award shall be conditioned upon such shares being listed on such exchange or system.  The Company shall have no obligation to issue such shares unless and until such shares are so listed, and the right to exercise any Stock Option with respect to such shares shall be suspended until such listing has been effected.

(b)If at any time counsel to the Company shall be of the opinion that any sale or delivery of shares of Common Stock pursuant to an Award is or may in the circumstances be unlawful or result in the imposition of excise taxes on the Company under the statutes, rules or regulations of any applicable jurisdiction, the Company shall have no obligation to make such sale or delivery, or to make any application or to effect or to maintain any qualification or registration under

39

the Securities Act or otherwise with respect to shares of Common Stock or Awards, and the right to exercise any Stock Option shall be suspended until, in the opinion of said counsel, such sale or delivery shall be lawful or will not result in the imposition of excise taxes on the Company.

(c)Upon termination of any period of suspension under this Section 17.5, any Award affected by such suspension which shall not then have expired or terminated shall be reinstated as to all shares available before such suspension and as to shares which would otherwise have become available during the period of such suspension, but no such suspension shall extend the term of any Stock Option.

17.6Governing Law.  This Plan shall be governed and construed in accordance with the laws of the State of Delaware (regardless of the law that might otherwise govern under applicable Delaware principles of conflict of laws).

17.7Construction.  Wherever any words are used in this Plan in the masculine gender they shall be construed as though they were also used in the feminine gender in all cases where they would so apply, and wherever any words are used herein in the singular form they shall be construed as though they were also used in the plural form in all cases where they would so apply.

17.8Other Benefits.  No Award payment under this Plan shall be deemed compensation for purposes of computing benefits under any retirement plan of the Company or its subsidiaries nor affect any benefits under any other benefit plan now or subsequently in effect under which the availability or amount of benefits is related to the level of compensation, unless otherwise specifically stated in such other benefit plan.

17.9Costs.  The Company shall bear all expenses included in administering this Plan, including expenses of issuing Common Stock pursuant to any Awards hereunder.

17.10No Right to Same Benefits.  The provisions of Awards need not be the same with respect to each Participant, and such Awards to individual Participants need not be the same in subsequent years.

17.11Death/Disability.  The Committee may in its discretion require the transferee of a Participant to supply it with written notice of the Participant's death or Disability and to supply it with a copy of the will (in the case of the Participant's death) or such other evidence as the Committee deems necessary to establish the validity of the transfer of an Award.  The Committee may also require that the agreement of the transferee to be bound by all of the terms and conditions of this Plan.

17.12Section 16(b) of the Exchange Act.  All elections and transactions under this Plan by persons subject to Section 16 of the Exchange Act involving shares of Common Stock are intended to comply with any applicable exemptive condition under Rule 16b-3.  The Committee may establish and adopt written administrative guidelines, designed to facilitate compliance with Section 16(b) of the Exchange Act, as it may deem

40

necessary or proper for the administration and operation of this Plan and the transaction of business thereunder.

17.13Section 409A of the Code.  This Plan is intended to comply with the applicable requirements of Section 409A of the Code and shall be limited, construed and interpreted in a manner so as to comply therewith.  Notwithstanding anything herein to the contrary, any provision in this Plan that is inconsistent with Section 409A of the Code shall be deemed to be amended to comply with Section 409A of the Code and to the extent such provision cannot be amended to comply therewith, such provision shall be null and void.

17.14Severability of Provisions.  If any provision of this Plan shall be held invalid or unenforceable, such invalidity or unenforceability shall not affect any other provisions hereof, and this Plan shall be construed and enforced as if such provisions had not been included.

17.15Headings and Captions.  The headings and captions herein are provided for reference and convenience only, shall not be considered part of this Plan, and shall not be employed in the construction of this Plan.

ARTICLE XVIII

EFFECTIVE DATE OF PLAN

The Plan was originally adopted by the Board and effective on October 19, 1999, subject to approval by the stockholders of the Company (which was obtained at the stockholders meeting held on December 14, 1999).  The Plan was thereafter amended and restated in accordance with the requirements of the laws of the State of Delaware.  The Board approved the amendment and restatement of the Plan on October 9, 2006 and such amended and restated plan became effective on October 9, 2006, subject to approval of the provisions of this Plan adding a cash incentive Award and re-approval of the Performance Criteria for performance-based Equity Awards by the stockholders of the Company in accordance with the requirements of the laws of the State of Delaware or such later date as provided in the adopting resolution.  The stockholders of the Company approved the amendments that were subject to stockholder approval at the stockholder meeting held on December 5, 2006.  A further restatement of the Plan was approved by the Board on December 6, 2007 which incorporated amendments effective on November 9, 2007 (deleting the Plan provision authorizing the Committee with the authority to buy out previously granted stock options based on terms and conditions established by the Committee) and on December 6, 2007 (increasing the number of shares available for grant of Awards under the Plan by 850,000).  A further restatement of the Plan was approved by the Board on June 2, 2009 which incorporated amendments effective on June 2, 2009 (changing the date of grant of the annual grants of Stock Options to Non-Employee Directors).  A further restatement of the Plan was approved by the Board on September 22, 2009 and incorporates amendments effective on October 18, 2009 (increasing the number of shares available for grant of Awards under the Plan by 2,375,000, adjusting the maximum annual grant of Performance Units and the maximum annual potential amount earnable under Performance Units, limiting the Committee's authority to

41

amend or substitute a SAR or to issue Awards or cash in exchange for an Option or SAR in certain circumstances without stockholder approval, changing the conversion method for Performance Units, clarifying Plan provisions in compliance with Section 409A of the Code, and prohibiting any transfers or dispositions of Non-Qualified Stock Options to Family Members for value), certain of which were subject to the approval by the stockholders of the Company.  The stockholders of the Company approved the amendments that were subject to stockholder approval at the stockholder meeting held on December 9, 2009.  This restatement was approved by the Board on June 2, 2010 and incorporates amendments effective on June 2, 2010 (changing the date of grant and the amount of the annual grants of Stock Options to Non-Employee Directors).

ARTICLE XIX

TERM OF PLAN

No Award shall be granted pursuant to this Plan on or after October 18, 2019, but Awards granted prior to such date may extend beyond that date.  The foregoing notwithstanding, any Awards (the vesting or payment of which is conditioned on the satisfaction of Performance Criteria) intended to qualify as "performance-based compensation" under Section 162(m) of the Code may be granted until the date of the first Annual Meeting of Stockholders that occurs in the fifth year following the year in which the Company's stockholders last previously re-approved the Performance Criteria (even if this deadline extends past the date at which other Awards may be granted under the Plan).

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EXHIBIT A

PERFORMANCE CRITERIA

Performance Goals established for purposes of conditioning the grant of an Award of Restricted Stock based on performance or the vesting of performance-based Awards of Restricted Stock, Performance Units, Performance Shares and/or cash incentive Awards shall be based on one or more of the following performance criteria ("Performance Criteria"): (i) the attainment of certain target levels of, or a specified percentage increase in, revenues, income before income taxes and extraordinary items, net income, income before income tax and stock based compensation expense, earnings before income tax, earnings before interest, taxes, depreciation and amortization or a combination of any or all of the foregoing; (ii) the attainment of certain target levels of, or a percentage increase in, after-tax or pre-tax profits including, without limitation, that attributable to continuing and/or other operations; (iii) the attainment of certain target levels of, or a specified increase in, operational cash flow; (iv) the achievement of a certain level of, reduction of, or other specified objectives with regard to limiting the level of increase in, all or a portion of, the Company's bank debt or other long-term or short-term public or private debt or other similar financial obligations of the Company, which may be calculated net of such cash balances and/or other offsets and adjustments as may be established by the Committee; (v) the attainment of target levels of or a specified percentage increase in earnings per share or earnings per share from continuing operations; (vi) the attainment of certain target levels of, or a specified increase in return on capital employed or return on invested capital; (vii) the attainment of certain target levels of, or a percentage increase in, after-tax or pre-tax return on stockholders' eq uity; (viii) the attainment of certain target levels of, or a specified increase in, economic value added targets based on a cash flow return on investment formula; (ix) the attainment of certain target levels of or specified increases in the fair market value of the shares of the Company's common stock; and (x) the growth in the value of an investment in the Company's common stock assuming the reinvestment of dividends.  For purposes of item (i) above, "extraordinary items" shall mean all items of gain, loss or expense for the fiscal year determined to be extraordinary or unusual in nature or infrequent in occurrence or related to a corporate transaction (including, without limitation, a disposition or acquisition) or related to a change in accounting principle, all as determined in accordance with standards established by Opinion No. 30 of the Accounting Principles Board.  The Committee may specify that specific items of income or expense may be included or excluded from the calculation of achievement of any of the foregoing Performance Criteria.

In addition, such Performance Criteria may be based upon the attainment of specified levels of Company (or subsidiary, division or other operational unit of the Company) performance under one or more of the measures described above relative to the performance of other corporations.  To the extent permitted under Code Section 162(m), but only to the extent permitted under Code Section 162(m) (including, without limitation, compliance with any requirements for stockholder approval), the Committee may:  (i) designate additional business criteria on which the Performance Criteria may be based or (ii) adjust, modify or amend the aforementioned business criteria.

EX-31.1

EXHIBIT 31.1

CERTIFICATION PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Fred Kornberg, certify that:

1.   I have reviewed this quarterly report on Form 10-Q of Comtech Telecommunications Corp.;

2.   Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.   Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.   The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)   designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)   designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)   evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)   disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.   The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)   all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)   any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: June 3, 2010

/s/ Fred Kornberg

Fred Kornberg

Chairman of the Board

Chief Executive Officer and President

EX-31.2

EXHIBIT 31.2

CERTIFICATION PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Michael D. Porcelain, certify that:

1.   I have reviewed this quarterly report on Form 10-Q of Comtech Telecommunications Corp.;

2.   Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.   Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.   The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)   designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)   designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)   evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)   disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.   The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)   all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)   any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: June 3, 2010

/s/ Michael D. Porcelain

Michael D. Porcelain

Senior Vice President and Chief Financial Officer

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Comtech Telecommunications Corp. (the “Company”) on Form 10-Q for the period ended April 30, 2010 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Fred Kornberg, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

1.  The Report fully complies with requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2.  The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: June 3, 2010

/s/ Fred Kornberg

Fred Kornberg

Chairman of the Board

Chief Executive Officer and President

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Comtech Telecommunications Corp. (the “Company”) on Form 10-Q for the period ended April 30, 2010 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Michael D. Porcelain, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

1.  The Report fully complies with requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2.  The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: June 3, 2010

/s/ Michael D. Porcelain

Michael D. Porcelain

Senior Vice President and Chief Financial Officer