The offices of Comtech Telecommunications Corp. in Melville, N.Y., in a...

The offices of Comtech Telecommunications Corp. in Melville, N.Y., in a 2016 image.   Credit: Newsday/David Trotman-Wilkins

Comtech Telecommunications Corp. and an activist investor have reached an 11th-hour settlement in a proxy war, clearing the way for a "unified" board of directors and the appointment of a company veteran as CEO.

The deal with Manhattan-based Outerbridge Capital Management LLC was announced on Thursday, the day before Comtech's scheduled annual meeting.

Comtech and Outerbridge agreed to support "a unified slate of directors," under the agreement.

Outerbridge, owner of about 4.9% of Comtech's outstanding common stock, had nominated two candidates to the Comtech board of directors and questioned the choice of president and chief operating officer Michael Porcelain to succeed longtime CEO Fred Kornberg.

In a report, proxy advisory firm Institutional Shareholder Services recommended that shareholders vote for one of the Outerbridge nominees, called a board reshuffle by Comtech "unconvincing" and pointed to a recent $790 million buyout offer for Comtech by "credible potential buyer" Acacia Research Corp.

Another proxy advisory firm, Glass, Lewis & Co., also endorsed an Outerbridge nominee in a report that cited "a shortage of industry and end-market experience among Comtech's independent directors."

Comtech, based in Melville, builds satellite earth stations and 911 emergency systems and provides cybersecurity training to customers including the Department of Defense.

Under the settlement, Outerbridge, which had called for Comtech to consider selling the company, endorsed the appointment of Porcelain.

"We appreciate Michael Porcelain’s deep industry experience and understanding of Comtech, and believe he is the right leader for the company," Rory Wallace, chief investment officer of Outerbridge, said in a statement.

"Comtech and Outerbridge have recently engaged in constructive discussions and this agreement puts us squarely on a path forward that is consistent with our shared desire to accelerate value creation," Porcelain said. "It has become clear that Outerbridge is a knowledgeable and engaged shareholder seeking to enhance value for all stakeholders."

Friday's annual meeting was adjourned until Dec. 28 and Outerbridge withdrew its slate of two director nominees with the understanding that one would be appointed by the Comtech board.

The agreement calls for Comtech's board to expand from seven directors to nine with seats going to former Outerbridge nominee Wendi Carpenter, Comtech nominees Judy Chambers and Larry Waldman and an independent director acceptable to both Outerbridge and Comtech.

Seats also will go to Porcelain and Mark Quinlan, a principal of White Hat Capital Partners LP, whose firm in October joined in a $100 million convertible preferred investment in Comtech.

As of July 31, 2020, the company had 2,034 employees, including contractors and temporary workers. About 180 employees are based in Melville.

Shares of Comtech shed 0.7% to close at $23.49 on Monday when major U.S. averages fell more than 1%.

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