SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC
FORM 10-Q
(Mark One)
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended October 1, 1999.
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ______ to ________
Commission file number 1-8502
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Comptek Research, Inc.
- ----------------------------------------------------------------
(Exact name of registrant as specified in its charter)
New York 16-0959023
- ---------------------------- -------------------------
(State or other jurisdiction (I.R.S. Employee
of incorporation or organization) Identification No.)
2732 Transit Road, Buffalo, New York 14224-2523
- ---------------------------------------- ---------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (716) 677-4070
---------------
Not Applicable
- -----------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since
last report.)
Indicate by check [ ] whether the registrant (1) has filed all reports
required to be filed by Section 13 of 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 X No
Class Outstanding at October 1, 1999
- ------------------------ --------------------------------------
Common $.02 Par Value 5,115,653
COMPTEK RESEARCH, INC.
INDEX
Page
PART I. Financial Information Number
Item 1. Financial Statements
Consolidated Condensed Balance Sheets
October 1, 1999, and March 31, 1999 3
Consolidated Condensed Statements of Income
Twenty-Six Weeks Ended October 1, 1999,
and September 25, 1998 4
Consolidated Condensed Statements of Cash Flows
Twenty-Six Weeks Ended October 1, 1999,
and September 25, 1998 5
Consolidated Statement of Changes in Shareholders'
Equity Twenty-Six Weeks Ended October 1, 1999 6
Notes to the Consolidated Condensed
Financial Statements 7
Independent Accountants' Review Report 10
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of Operations 11
PART II. Other Information
Item 4. Submission of Matters to a Vote of
Security Holders 15
Item 6. Exhibits and Reports on Form 8-K 16
COMPTEK RESEARCH, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(In thousands)
October 1, March 31,
1999 1999
---------- ---------
(Unaudited)
Assets
Current assets:
Cash and equivalents $2,358 $2,376
Receivables 39,355 36,099
Inventories 5,925 5,744
Other 1,511 1,018
---------- ---------
Total current assets 49,149 45,237
Equipment and leasehold improvements, net 7,198 7,034
of accumulated depreciation and
amortization of $10,366 at October 1,
1999 and $9,050 at March 31, 1999
Goodwill 41,649 41,645
Other assets 5,063 4,857
---------- ---------
Total assets $103,059 $98,773
Liabilities and Shareholders' Equity
Current liabilities:
Current installments on long-term debt $3,792 $4,030
Accounts payable 4,799 7,482
Accrued salaries and benefits 7,486 9,040
Other accrued expenses 4,812 3,804
Customer advances 9,122 7,646
Deferred income taxes 1,467 1,209
----------- ---------
Total current liabilities 31,478 33,211
Deferred income taxes 902 853
Long-term debt, excluding current 53,787 49,610
installments
Shareholders' equity:
Common stock 111 110
Additional paid-in capital 16,448 16,190
Stock related awards and loans (207) (296)
Retained earnings 4,328 2,466
----------- ---------
20,680 18,470
Less cost of treasury shares (3,788) (3,371)
----------- ---------
Total shareholders' equity 16,892 15,099
----------- ---------
Total liabilities and shareholders' equity $103,059 $98,773
========== =========
See accompanying notes to consolidated condensed financial statements.
COMPTEK RESEARCH, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(Unaudited)
(In thousands, except per share amounts)
Thirteen Weeks Ended Twenty-Six Weeks Ended
Oct. 1, Sept. 25, Oct. 1, Sept. 25,
1999 1998 1999 1998
------- --------- ------- ----------
Net sales $33,658 $23,452 $71,727 $43,703
Operating costs and expenses:
Cost of sales 25,870 17,675 55,679 33,008
Selling, general and 4,691 3,414 9,680 6,317
administrative
Research and 747 672 1,515 1,319
development ------- --------- ------- ---------
Operating profit 2,350 1,691 4,853 3,059
Interest expense, net 945 398 1,875 646
------- --------- ------- ---------
Income before income taxes 1,405 1,293 2,978 2,413
Income taxes 578 528 1,116 965
------- --------- ------- ---------
Net income $827 $765 $1,862 $1,448
======= ========= ======= =========
Net income per share:
Basic $0.16 $0.15 $0.36 $0.29
======= ========= ======= =========
Basic weighted average
shares outstanding 5,116 5,027 5,106 5,009
======= ========= ======= =========
Diluted $0.15 $0.15 $0.32 $0.28
======= ========= ======= =========
Diluted weighted average
shares outstanding 7,026 5,200 7,026 5,194
======= ========= ======= =========
See accompanying notes to consolidated condensed financial statements.
COMPTEK RESEARCH, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
Twenty-Six Weeks Ended
October 1, Sept. 25,
1999 1998
---------- ---------
Operating activities:
Net income $1,862 $1,448
Adjustments to reconcile net income
to net cash provided by (used in)
operating activities:
Depreciation and amortization 2,729 1,087
Deferred income taxes 302 692
Non-cash charges 170 204
Other assets - 130
Changes in assets and liabilities
providing (using) cash, excluding
the effects of acquisition:
Receivables (4,242) 865
Inventories (181) (447)
Other current assets (479) 156
Accounts payable and accrued expenses (3,229) (3,577)
Customer advances 1,476 337
---------- ---------
Net cash provided by (used in) operating $(1,592) $895
activities ---------- ---------
Investing activities:
Expenditures for equipment and
leasehold improvements $(1,479) $(437)
Software development costs (717) (263)
Payment from officer for stock purchase 50 50
Proceeds from sale of assets 46 -
Payments pursuant to business acquisitions, - (17,946)
net of cash acquired --------- ---------
Net cash used in investing activities $(2,100) $(18,596)
--------- ---------
Financing activities:
Net proceeds from revolving debt $5,678 $4,150
Proceeds from issuance of long-term debt
- 15,000
Repayment of long-term debt (1,739) (1,022)
Repurchase of common stock (417) (398)
Proceeds from sale of common stock held in
treasury - 364
Proceeds from issuance of common stock
152 79
--------- ---------
Net cash provided by financing $3,674 $18,173
activities --------- ---------
Net increase (decrease) in cash and $(18) $472
equivalents
Cash and equivalents at beginning of 2,376 550
year --------- ---------
Cash and equivalents at end of period $2,358 $1,022
========= =========
See accompanying notes to consolidated condensed financial statements.
COMPTEK RESEARCH, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
Twenty-Six Weeks Ended October 1, 1999
(Unaudited)
(In thousands)
Stock
Addi- Related
tional Awards
Common Paid-In and Retained Treasury
Stock Capital Loans Earnings Stock Total
----------------------------------------------------------
Balance at March
31, 1999 $ 110 $16,190 $ (296) $2,466 $(3,371) $15,099
Net income - - - 1,862 - 1,862
Exercise of stock
options 1 151 - - - 152
Stock award - 107 39 - - 146
Repurchase of
common stock - - - - (417) (417)
Payment from
officer for stock - - 50 - - 50
purchase ------ -------- -------- -------- -------- -------
Balance at October
1, 1999 $ 111 $16,448 $ (207) $4,328 $(3,788) $16,892
See accompanying notes to consolidated condensed financial statements.
Comptek Research, Inc. and Subsidiaries
Notes to Consolidated Condensed Financial Statements
(Unaudited)
1. In the opinion of Management, the accompanying unaudited
consolidated condensed financial statements contain all
adjustments, consisting of normal recurring items, necessary
to present fairly the financial position, results of
operations and cash flows for the periods shown. It is the
Company's policy to end its first three quarterly accounting
periods on the last Friday of each quarter, which includes
thirteen weeks of operations. The fourth quarter ends on
March 31. The financial data included herein was compiled in
accordance with the same accounting policies applied to the
Company's audited annual financial statements, which should be
read in conjunction with these statements.
The results of operations for the twenty-six weeks ended
October 1, 1999, are not necessarily indicative of the results
to be expected for the full year.
2. Net Income Per Share
The following table reconciles the effect that potentially
dilutive securities have on net income per share (amounts in
thousands, except per share data):
Thirteen Weeks Twenty-Six Weeks
Ended Ended
---------------- ----------------
Sept. Sept.
Oct. 1, 25, Oct. 1, 25,
1999 1998 1999 1998
Basic Net Income Per Share:
Net income $827 $765 $1,862 $1,448
======= ====== ======= ======
Weighted average shares 5,116 5,027 5,106 5,009
======= ====== ======= ======
outstanding
Basic net income per share $0.16 $0.15 $0.36 $0.29
======= ====== ======= ======
Diluted Net Income Per Share:
Net income $827 $765 $1,862 $1,448
After-tax equivalent of
Interest expense on 8.5%
Convertible subordinated
debentures 193 - 391 -
------ ------ ------ ------
Income for purposes of
computing diluted net $1,020 $765 $2,253 $1,448
income per share ======= ====== ======= ======
Weighted average shares 5,116 5,027 5,106 5,009
outstanding
Incremental shares from
assumed conversions:
Stock options 145 173 155 185
Convertible
Subordinated 1,765 - 1,765 -
Debentures ------- ------ ------ ------
Weighted average shares
Outstanding for purposes
of computing diluted 7,026 5,200 7,026 5,194
net income per share ====== ====== ======= ======
Diluted net income per $0.15 $0.15 $0.32 $0.28
share ======= ====== ======= ======
3. On March 26, 1999, the Company completed the purchase of the
business operations and substantially all of the related
assets and liabilities of Amherst Systems, Inc. (Amherst), a
privately-held company. Accordingly, the acquired operations
are included in the Company's operating results for the twenty-
six weeks ended October 1, 1999. The Company is in the
process of gathering the information necessary to finalize the
allocation of the purchase price and, at this time, the
purchase price allocation continues to remain preliminary.
For the twenty-six weeks ended September 25, 1998, the
following unaudited pro forma results of operations assume the
Amherst acquisition had occurred at April 1, 1998. These pro
forma results are not necessarily indicative of the actual
results of operations that may have resulted if the
combination had occurred on that date.
Net Sales $66,681
Net Income $1,372
Earnings per share - Basic $ 0.27
Earnings per share - Diluted $ 0.25
4. Inventories consist of (in thousands):
Oct. 1, Mar. 31,
1999 1999
--------- ----------
Parts $3,487 $3,114
Work-in-process 2,087 2,300
Finished goods 351 330
--------- ----------
Total $5,925 $5,744
========= ==========
5. During the twenty-six weeks ended October 1, 1999, 51,046
shares of the Company's common stock were purchased and placed
into Treasury stock. These shares were acquired pursuant to a
stock repurchase plan approved by the Company's Board of
Directors. There were no common shares issued from the
Company's treasury shares. The total number of treasury
shares as of October 1, 1999 was 481,190.
6. During the twenty-six weeks ended October 1, 1999, the Company
granted 226,000 options at the closing market price on the
date of grant under its Equity Incentive Plans. Options for
682,811 shares were available for future grants under the
Equity Incentive Plans.
During the twenty-six weeks ended October 1, 1999, the Company
granted 24,000 options at the closing market price on the date
of grant under its Non-Employee Directors Stock Option Plan.
On August 17, 1998, the Board of Directors amended the Non-
Employee Director Stock Option Plan to increase the number of
shares available for grant to 300,000 from 100,000 shares.
Based on this increase, which was approved by shareholders at
the 1999 Annual Meeting of Shareholders, at October 1, 1999,
there were 177,000 shares available for future grants under
this Plan.
A total of 405,041 shares were exercisable under these plans.
7. Business Segment Information
Thirteen Weeks Twenty-Six Weeks
Ended Ended
Sept. Sept.
Oct. 1, 25, Oct. 1, 25,
1999 1998 1999 1998
Net Sales
Simulation and $14,068 $4,556 $32,338 $9,226
Training
Tactical Systems 10,259 8,358 20,840 14,867
Engineering and
Technical 9,331 10,538 18,549 19,610
Services -------- ------- ------- -------
Total Net Sales $33,658 $23,452 $71,727 $43,703
======== ======= ======= =======
Operating Profit
Simulation and $607 $471 $1,386 $757
Training
Tactical Systems 951 372 2,009 1,014
Engineering and
Technical
Services 792 848 1,458 1,288
------- ------- ------- -------
Total Operating Profit $2,350 $1,691 $4,853 $3,059
Interest expense, net (945) (398) (1,875) (646)
------- ------- ------- -------
Income before $1,405 $1,293 $2,978 $2,413
income taxes ======= ======= ======= =======
Independent Accountants' Review Report
The Board of Directors and Shareholders
Comptek Research, Inc.:
We have reviewed the consolidated condensed balance sheet of
Comptek Research, Inc. and subsidiaries as of October 1, 1999,
and the related consolidated condensed statements of income for
the thirteen and twenty-six week periods ended October 1, 1999
and September 25, 1998, and changes in shareholders' equity, and
cash flows for the twenty-six week periods ended October 1, 1999
and September 25, 1998. These consolidated condensed financial
statements are the responsibility of the Company's management.
We conducted our reviews in accordance with standards established
by the American Institute of Certified Public Accountants. A
review of interim financial information consists principally of
applying analytical procedures to financial data, and making
inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit in
accordance with generally accepted auditing standards, the
objective of which is the expression of an opinion regarding the
financial statements taken as a whole. Accordingly, we do not
express such an opinion.
Based on our reviews, we are not aware of any material
modifications that should be made to the consolidated condensed
financial statements referred to above for them to be in
conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted
auditing standards, the consolidated balance sheet of Comptek
Research, Inc. and subsidiaries as of March 31, 1999, and the
related consolidated statements of income, shareholders' equity,
and cash flows for each of the years in the three-year period
then ended (not presented herein); and in our report dated May
14, 1999, we expressed an unqualified opinion on those
consolidated financial statements. In our opinion, the
information set forth in the accompanying consolidated condensed
balance sheet as of March 31, 1999, is fairly presented, in all
material respects, in relation to the consolidated balance sheet
from which it has been derived.
/S/ KPMG LLP
KPMG LLP
Buffalo, New York
October 22, 1999
Management's Discussion and Analysis
Financial Condition and Results of Operations
General
Comptek designs and develops specialized systems, software and
proprietary products intended for the global military electronics
market. These defense-related systems provide management
information and implement offensive and defensive responses in
combat situations. Additionally, we are a supplier of EW
simulation/stimulation, training and software validation systems
related to electronic surveillance. We also develop systems and
provide engineering and technical services for the maintenance
and upgrade of EW and Command, Control, Communications, Computers
and Intelligence systems for several U.S. Air Force and U.S. Navy
platforms.
Comptek operates in three business segments: EW
Simulation/Stimulation and Training Systems (Simulation and
Training), Tactical Systems, and Engineering and Technical
Services (Services).
In March 1999, we completed the acquisition of the business
operations, assets and related liabilities of Amherst Systems,
Inc. ("Amherst"). Amherst's annualized net sales, prior to the
acquisition were approximately $45 million, with the majority of
such sales attributable to domestic activities under fixed-price
contracts. This acquired business operates under our Simulation
and Training business segment and has substantially affected the
Company's financial condition and operating activities, as
discussed in greater detail below. The pro forma financial
information pertaining to the Amherst acquisition is presented in
note 3 to the consolidated condensed financial statements.
The Company's contract backlog as of October 1, 1999 was $178.3
million, a slight increase from $173.4 million at July 2, 1999.
Since March 31, 1999, backlog decreased by 5.4% as a result of
work performed under these contracts.
Results of Operations
Net Sales. Net sales for the thirteen weeks ended October 1,
1999, were to $33.7 million, an increase of 43.5% from the prior
year's net sales of $23.5 million for the corresponding period.
For the twenty-six weeks ended October 1, 1999, net sales were to
$71.7 million, an increase of 64.1% from the prior year's net
sales of $43.7 million.
The Simulation and Training segment's net sales increased by
208.8% and 250.5% for the thirteen weeks and twenty-six weeks
ended October 1, 1999, respectively. Net sales for this segment
were $14.1 million and $32.3 million for the thirteen weeks and
twenty-six weeks ended October 1, 1999, respectively, compared
with $4.6 million and $9.2 million from the corresponding periods
in the prior year. These increases are primarily due to the
acquisition of Amherst completed in March 1999. The Simulation
and Training segment is currently comprised of the former Amherst
and Comptek's Advanced Systems Division. Net sales attributable
to the former Amherst were approximately $11.6 million and $26.2
million for the thirteen and twenty-six weeks ended October 1,
1999, respectively, offset by decreases in Advanced Systems
Division's portion of the segment sales. This offsetting
decrease was principally due to a drop in orders related to the
Advanced Systems Division.
The Tactical Systems segment's net sales were $20.8 million for
the twenty-six weeks ended October 1, 1999 compared to $14.9
million from the prior year. This increase is associated with an
increase in product sales this year as compared with prior year.
Additionally, Comptek purchased PRB Associates, Inc. ("PRB") last
year effective May 1, 1998, and as a result only five months of
PRB operations are reported for the first half of Fiscal 1999.
The Services segment reported net sales for the twenty-six weeks
ended October 1, 1999 of $18.6 million, a decrease of 5.4%, from
$19.6 million in the prior year. This decrease is associated
with fluctuations in the timing of contract performance and
delivery orders..
Gross Margin. Gross margin was $16.0 million in the twenty-six
weeks ended October 1, 1999 from $10.7 million in the prior year,
representing an increase of 50.1%. Gross margin as a percentage
of sales decreased to 22.4% for the twenty-six weeks ended
October 1, 1999, compared with 24.5% in the prior year. For the
thirteen weeks ended October 1, 1999 gross margin increased to
$7.8 million, or 23.1% of sales, compared with $5.8 million, or
24.6% of sales, in the prior year.
The increase in gross margin dollars, as well as the decrease in
the gross margin as a percent of sales for both the thirteen
weeks and twenty-six weeks ended October, is primarily the result
of activities in the Simulation and Training segment. The
acquired operations of Amherst contributed an additional $2.6
million and $5.7 million of gross margin, for the thirteen and
twenty-six weeks ended October 1, 1999, respectively. This
increase was offset, in part, by a loss of approximately $530,000
and $860,000 for the thirteen and twenty-six weeks ended October
1, 1999, in an existing simulation and training fixed-priced
contract. Both the former Amherst operations and the losses
recognized on an existing simulation and training fixed-priced
contract negatively impacted the gross margin as a percent of
sales. The acquired operations of Amherst reported gross
margins, as a percentage of sales, of 22.7% and 21.7% for the
thirteen and twenty-six weeks ended October 1, 1999.
Selling, General and Administrative (SG&A) Expenses. SG&A was
$9.7 million in the twenty-six weeks ended October 1, 1999, up
from $6.3 million in the prior year, representing an increase of
53.2%. SG&A as a percentage of sales, however, decreased to
13.5% for the twenty-six weeks ended October 1, 1999, compared
with 14.5% in the prior year. For the thirteen weeks ended
October 1, 1999, SG&A increased to $4.7 million, or 13.9% of
sales, compared with $3.4 million, or 14.6% of sales, in the
prior year. The increase in SG&A dollars in the current year is
associated with the acquisition of Amherst in March 1999. As a
percentage of sales, SG&A decreased primarily as a result of
timing associated with marketing and bidding activity for all
business segments.
Research and Development (R&D) Expense. R&D increased to $1.5
million in the twenty-six weeks ended October 1, 1999, from $1.3
million in the prior year, representing an increase of 14.9%.
For the thirteen weeks ended October 1, 1999, R&D was $747,000,
compared with $672,000 in the prior year, representing an
increase of 11.2%. R&D efforts are primarily concentrated in the
Simulation and Training and Tactical Systems segments to enhance
and maintain current products. This increase is primarily the
result of the acquired operations of Amherst, in addition to
ongoing development activity with the Company's products in the
above mentioned segments. Additionally, the Company capitalized
costs related to the software development of its AMES III and MKN
products for the Simulation and Training. Software
capitalization during the thirteen and twenty-six weeks ended
October 1, 1999, totaled $396,000 and $717,000, respectively.
Operating Profit. Operating profit for the thirteen weeks ended
October 1, 1999, was $2.4 million, an increase of 39.0% from the
prior year's operating profit of $1.7 million for the
corresponding period. For the twenty-six weeks ended October 1,
1999, operating profit was $4.9 million, an increase of 58.6%
from the prior year's operating profit of $3.1 million. As a
percentage of sales operating profits decreased to 7.0% and 6.8%
for the thirteen and twenty-six weeks ended October 1, 1999,
respectively. In the prior year the Company reported operating
profits as a percentage of sales of 7.2% and 7.0% for the
thirteen and twenty-six weeks ended September 25, 1998,
respectively.
In the current fiscal year, operating profit dollars were
positively affected by a sales volume increase due to the Amherst
acquisition, a higher level of product sales, and increased work
on higher-margin contracts. Overall operating profits as a
percentage of sales, however, decreased primarily in the
Simulation and Training segment as a result of a loss of
approximately $530,000 and $860,000 for the thirteen and twenty-
six weeks ended October 1, 1999, on an existing simulation and
training fixed-priced contract, as previously discussed.
Additionally, the acquisition of Amherst added sales at lower
operating margins than the existing Simulation and Training
business, due to its customer base. An increase in Tactical
Systems segment operating profit is the result of increases in
product sales this year as compared with prior year. These
product sales generate higher than average operating margins.
Increases in Engineering and Technical Services segment operating
profit is the result of the mix of services work.
Interest Expense. Interest expense was $1.9 million in the
twenty-six weeks ended October 1, 1999, up from $646,000 in the
prior year, representing an increase of 190.2%. For the thirteen
weeks ended October 1, 1999, interest expense was $945,000,
compared with $398,000 in the prior year, representing an
increase of 137.4%. This increase is associated primarily with
the financing costs relating to the Amherst acquisition.
Additionally, the financing of working capital throughout the
twenty-six weeks resulted in the Company incurring additional
interest expense.
Income Taxes. Income taxes were $1.1 million in the twenty-six
weeks ended October 1, 1999, up from $965,000 in the prior year,
representing an increase of 15.6%. For the thirteen weeks ended
October 1, 1999, income taxes increased to $578,000 compared with
$528,000 in the prior year. The Company recorded an effective
tax rate of 37.5%, compared with 40.0% in the prior year. In the
current year, the Company received a prior-year state tax refund.
The net refund, recorded as a part of the provision of income
taxes, was approximately $70,000. We expect the effective tax
rate for the balance of the current fiscal year to be
approximately 40.0%
Net Income. Net income was $1.9 million for the twenty-six weeks
ended October 1, 1999, up from $1.4 million in the prior year,
representing an increase of 28.6%. For the thirteen weeks ended
October 1, 1999, net income was $827,000 compared with $765,000
in the prior year, representing an increase of 8.1%. As a
percentage of sales, net income decreased from 3.3% to 2.6% for
the comparable quarters. Although sales increased significantly
as a result of the Amherst acquisition, the decrease in gross
margin percentage and increase in interest expense adversely
affected the corresponding increase in net income. These impacts
were partially offset by approximately $250,000 in non-recurring
income related to the state tax refund, which resulted in a
reduced year to date effective tax rate.
Liquidity and Capital Resources
Net cash provided by operating activities for the thirteen weeks
ended October 1, 1999 was $5.6 million compared with $685,000 in
the prior year. For the twenty-six weeks ended October 1, 1999,
operations required cash of $1.6 million compared with providing
cash of $895,000 in the prior year. Year to date cash was
required to fund working capital requirements, primarily the
reduction of accounts payable and accrued liabilities. During
the current quarter, cash from operations was aided by the
collection of receivables of $3.1 million and the increase in
customer advances of $2.5 million. Increases in depreciation and
amortization for the period when compared with the prior year are
primarily the result of the acquired operations of Amherst and
the associated intangible asset amortization.
For the twenty-six weeks ended October 1, 1999, the Company
purchased $1.5 million in capital equipment and invested $717,000
in software development. These activities were funded for the
period by the Company's existing credit facility. During the
quarter, the Company reduced the borrowings under its revolving
credit facility by $3.0 million.
As a result of a review of the Company's requirements for working
capital, capital expenditures demands, stock repurchases and
repayments of long-term debt, the Company's credit facility was
increased from $27 million to $30 million. We anticipate that
the current facility and available borrowing capacity will be
sufficient to cover the above requirements.
Year 2000 Update
Comptek's assessment of Year 2000 issues is presented in the
Report on Form 10-K for the fiscal year ended March 31, 1999.
As discussed in our Report on Form 10-K for the fiscal year ended
March 31, 1999, we have completed our assessment of our internal
systems for the potential impact of the "Year 2000 Problem" and
have initiated appropriate remedial actions which were
substantially completed in fiscal 1999. The upgrade and testing
of our payroll systems was completed by July 31, 1999.
In addition to the testing of our primary information management
systems, we have tested and corrected, as necessary, all of the
personal computers currently in use. For the fiscal year ended
March 31, 1999, we budgeted $100,000 for Year 2000 compliance
upgrades and spent less than $80,000. For contingency purposes,
we budgeted additional capital expenditures on such items in the
fiscal year beginning April 1, 1999. During the twenty-six weeks
ended October 1, 1999, we spent approximately $125,000 for
upgrades.
While we continue to evaluate the compliance activities of our
vendors and suppliers, we are satisfied with the responses
received to date and do not anticipate any material adverse
impact on our financial condition as it relates to vendors' and
suppliers' Year 2000 compliance. We will, to the extent
feasible, be testing such products for compliance, but can offer
no assurances that our vendors and suppliers will in fact by Year
2000 be compliant.
While we do not currently anticipate a material adverse impact on
our financial condition or results of operations, we can offer no
assurances that the Year 2000 Problem will not adversely impact
Comptek. Accordingly, we expect on an on-going basis to continue
to evaluate the Year 2000 Problem and its potential impact on
Comptek and our industry group.
Forward-Looking Statements
This Management's Discussion and Analysis contains forward-
looking statements about the Company's current expectations based
on current business conditions. Forward-looking statements are
subject to risks and uncertainties that could cause actual
results to differ materially. These risks and uncertainties
include the Company's dependence on continued funding of U.S.
Department of Defense programs. Some additional risks and
uncertainties, among others, that also need to be considered are
the likelihood that actual future revenues that are realized may
differ from those inferred from existing total backlog; the
ability to transition and integrate Amherst; the ability to
expand sales in international markets; and the ability to
complete future acquisitions without adversely affecting the
Company's financial condition. Other risks and uncertainties are
described in the Company's Form 10-K Annual Report for the fiscal
year ended March 31, 1999.
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
(a) The Registrant's Annual Meeting of Shareholders was held
August 13, 1999.
(b) At the Annual Meeting, shareholders elected the following
individuals as Class I directors whose terms expire in 2001:
For Withheld Abstain or broker
Authority non-votes
John J. Sciuto 4,669,647 358,323 None
James D. 4,669,247 344,023 None
Morgan
Henry P. 4,669,569 343,701 None
Semmelhack
Wayne E. Meyer 4,654,947 358,323 None
The following directors' respective terms of office continued
in effect after the meeting:
Continuing Class II Directors
Continuing in Office until 2000
Joseph A. Alutto
John R. Cummings
G. Wayne Hawk
Patrick J. Martin
(c) The Amendment of the Certificate of Incorporation to
increase the authorized shares of common stock of the
Company from 10 million shares to 20 million shares was
approved by the following vote:
For Against Abstain or broker
non-votes
4,269,230 737,042 6,998
(d) The adoption of the 1999 Employee Stock Purchase Plan was
approved by the following vote:
For Against Abstain or broker
non-votes
2,687,635 869,726 15,352
(e) The Amendment of the 1994 Stock Option Plan for Non-
Employee Directors the following vote:
For Against Abstain or broker
non-votes
2,467,939 1,074,939 30,235
(f) The selection of KPMG, LLP as independent auditors was also
ratified by the following vote:
For Against Abstain or broker
non-votes
4,826,795 183,100 3,375
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
10.1 Employment Agreement between Registrant and Bradley H. Feldmann
10.2 Employment Agreement between Registrant and Edward G. Eberl
15 Letter Regarding Unaudited Interim Financial Information.
27 Financial Data Schedule.
(b) Reports on Form 8-K:
None
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.
COMPTEK RESEARCH, INC.
Date: November 12, 1999 By: /s/ John J. Sciuto
John J. Sciuto
Chairman, President and
Chief Executive Officer
Date: November 12, 1999 By: /s/ Laura L. Benedetti
Laura L. Benedetti
Chief Financial Officer, Vice
President of Finance and
Treasurer
INDEX TO EXHIBITS
- - - - - - -
Exhibit Page
No. Description of Exhibit No.
10.1 Employment Agreement between Registrant and 19
Bradley H. Feldmann
10.2 Employment Agreement between Registrant and 28
Edward G. Eberl
15 Letter Regarding Unaudited Interim Financial 36
Information
27 Financial Data Sheet 37
Exhibit 10.1
EMPLOYMENT AGREEMENT
THIS AGREEMENT, made as of the 1st day of June, 1999, by and
between Bradley H. Feldmann, residing at 9724 San Remo Court,
Santee, CA 92071 (hereinafter called "Employee"), and COMPTEK
RESEARCH, INC., a New York corporation having its office and
principal place of business at 2732 Transit Road, Buffalo, New
York 14224 (hereinafter called the "Corporation").
W I T N E S S E T H :
WHEREAS, the Employee has accepted employment with the
Corporation, and he shall become its Senior Vice President and
Chief Operating Officer; and
WHEREAS, the Employee acknowledges that he has and will
continue to develop specialized knowledge of, and personal
relationships with, the Corporation's customers and their
products and operations; and
WHEREAS, this Agreement is one of several similar agreements
by and between the Corporation and certain key executives; and
WHEREAS, it is the intention of the parties to have this
Agreement and such similar Agreements construed in a consistent
manner in accordance with the laws of the State of New York; and
WHEREAS, the Corporation wishes to be reasonably assured
that Employee will continue as an employee and desires to retain
his services, realizing that if he were to enter into competition
with the Corporation it would suffer financial loss;
NOW, THEREFORE, in consideration of mutual covenants and
obligations contained herein, the parties hereto agree as
follows:
1. Term of Employment. The initial term of employment
under this Agreement shall be for one (1) year commencing on the
date set forth above. Employment under this Agreement shall
automatically be extended for an additional one (1) year period
on each anniversary of the commencement date of this Agreement
from year-to-year so long as the Agreement is in effect, subject
to termination upon any basis listed in paragraphs 4, 5, 11, and
12.
2. Duties and Responsibilities. Employee agrees that
during the term of this Agreement his principal area of
responsibility shall be that of executive management of the
Corporation. Employee shall devote his full business time and
best efforts, skills, and ability to promote the business of the
Corporation and perform for the Corporation such duties as are
customarily performed by a management or executive employee
having responsibility in such areas, and such other duties as may
be assigned to him by the President and CEO of the Corporation
and serve as an officer and/or a director of the Corporation if
duly elected. Employee shall have such power and authority as
shall reasonably be required to enable his to perform his duties
hereunder in an efficient manner; provided that in the exercising
of such power and authority and the performance of such duties,
he shall at all times be subject to the supervision and direction
of the President and CEO of the Corporation and the authority and
control of the Board of Directors of the Corporation.
3. Remuneration.
(a) So long as Employee is employed by the Corporation, he
will be paid a salary at such rate as may be fixed from time to
time by the President and CEO of the Corporation, but not less
than $175,000.00 per year (his "Base Salary"), payable in
approximately equal installments at such intervals as the
Corporation pays the salaries of its executive employees
generally. At least once annually, the Corporation shall
evaluate the Employee's performance and market data for similar
positions in industry. Based on such evaluation an increase in
the Base Salary shall be considered by the Corporation.
(b) It is understood that temporary disability (of less
than six (6) months in duration) will not result in termination
of Employee's employment, during which period of time Employee's
then Base Salary shall continue in effect.
(c) Employee will be entitled to reimbursement for all
reasonable travel and other business expenses incurred by him.
Employee will be included in any group life insurance, medical
insurance, pension, profit-sharing plans or other benefits which
the Corporation may have in force from time to time for its
executive personnel. Such benefits and any resulting payments
thereunder shall be in addition to his Base Salary and shall
continue in effect during any period of payments provided for
under paragraphs 5, 11, or 12 of this Agreement.
(d) The Corporation will negotiate annually with the
Employee the amount of a bonus ("Target Bonus") which shall
become payable to the Employee based upon established financial
performance objectives of the Corporation in the ensuing fiscal
year. The amount of any such Target Bonus so agreed upon shall
become effective when the same shall be set forth in writing and
signed by the President and CEO of the Corporation; provided,
however, the previously established Target Bonus shall continue
in effect until a new Target Bonus is agreed to by the Employee
and the Corporation. Of the amount of the bonus agreed upon, 65%
will be paid to the Employee within thirty (30) days after the
end of the fiscal year (based upon the financial performance for
such year shown on the unaudited internal report). The remaining
balance will be paid to the Employee within thirty (30) days of
the release of the Corporation's audited financial statements by
the Corporation's independent certified public accountants and
shall be final and conclusive and binding on all parties.
4. Death Benefits.
(a) If Employee should die while still in the employ of
the Corporation, the Corporation will pay to his designated
beneficiary
(i) his Base Salary in effect at the time of death for
the balance of the month in which his death occurs,
plus
(ii) in each of the first twelve (12) months following
the month in which his death occurs, an amount equal
to one twelfth (1/12) of his Base Salary in effect
at the time of death.
(b) If the designated beneficiary is not alive at the time
of the making of any of such payments, the payments shall be made
in equal shares to such of the children of the Employee as shall
be surviving at the time of each of such payments; or, if the
Employee has no surviving designated beneficiary or children at
the time of the making of any such payments, then a lump sum
payment shall be made to the Employee's estate in accordance with
paragraph 13 of this Agreement.
5. Termination of Employment Due to Illness or
Disability.
(a) In the event of the disability or illness of Employee
rendering his substantially unable to render service to the
Corporation of the character contemplated by this Agreement for a
period in excess of six (6) months, the Corporation shall have
the right to terminate this Agreement upon giving not less than
thirty (30) days' advance written notice given after such six (6)
month period of its intention to terminate Employee. If Employee
shall have resumed his duties hereunder within such thirty-day
period and shall have continuously performed his duties for at
least two (2) consecutive months thereafter, such notice of
termination shall be deemed of no force or effect and this
Agreement shall thereupon continue in full force, as though such
notice of termination had not been given. In the event a
question arises hereunder as to Employee's incapacity to perform
his regular duties, the Employee shall be examined by a physician
selected by the Corporation and the Employee, and such
physician's determination shall be final and conclusive and
binding on all parties for the purposes hereof.
(b) Upon termination of his employment because of such
illness or disability, the Corporation shall pay to the Employee
in each of the first twelve (12) months following the effective
date of such termination, a monthly termination payment equal to
one twelfth (1/12) of his Base Salary in effect at the time of
such termination.
(c) In the event of Employee's death after such
termination on account of such illness or disability, but before
the completion of the making of the payments to which he became
entitled as provided for above, the Corporation shall make such
payments to the Employee's designated beneficiary; or, if the
designated beneficiary is not alive at the time of the making of
any of such payments, the payments shall be made in equal shares
to such of the children of the Employee as shall be surviving at
the time of each of such payments; or, if the Employee has no
surviving designated beneficiary or children at the time of the
making of any such payments, then a lump sum payment shall be
made to the Employee's estate in accordance with paragraph 13 of
this Agreement.
6. Non-Competition. It is understood and agreed that
during the term of his employment by the Corporation, and, in the
event that he resigns or is discharged, for a period of one (1)
year following the effective date of termination of his
employment by the Corporation, for whatever reason, the Employee
shall not engage directly or indirectly in any business in the
continental United States which is substantially similar to the
business of the Corporation, either as a proprietor, stockholder
(other than as a holder of less than 5% of any class of the
securities of a corporation registered under the Securities
Exchange Act of 1934, as amended), partner, officer, employee or
otherwise, unless the Corporation has first consented in writing
thereto. In addition to the foregoing covenants, it is also
understood and agreed that after the termination of the
Employee's employment with the Corporation, for whatever reason,
the Employee shall not solicit any of the Corporation's customers
with which he dealt while he was employed by the Corporation,
either on behalf of himself or any other person or entity engaged
in any business substantially similar to the business of the
Corporation, unless the Corporation has first consented in
writing thereto.
7. Trade Secrets. In the course of performing his
duties, the Employee will be engaged in the development,
manufacture and sale of a variety of computer hardware and
software products based upon experimental and inventive work, and
the Employee will receive, and acknowledges that he has received,
confidential information of the Corporation including, without
limitation, information not available to competitors relating to
the Corporation's existing and contemplated products,
manufacturing procedures, methods, machines, computations,
technology, formulae, trade secrets, know-how, research and
development programs, discoveries, improvements and ideas
(regardless of whether or not patentable), customer information,
all of which is hereinafter referred to as "Trade Secrets." The
Employee agrees that he will not, either during his employment or
subsequent to the termination of his employment by the
Corporation, directly or indirectly disclose, publish or
otherwise divulge any Trade Secrets to anyone outside the
Corporation or use such information in any manner which would
adversely affect the business or business prospects of the
Corporation, without prior written authorization from the
Corporation to do so. Without limiting the generality of the
foregoing, the Employee agrees that while employed by the
Corporation he will not, except with the prior written consent of
a duly authorized superior officer of the Corporation, take out
of the Corporation's offices or facilities, or disclose or
otherwise divulge to any unauthorized person, any Trade Secrets
and that if, at the time of the termination of his employment by
the Corporation he is in possession of any documents or other
written materials constituting, containing or reflecting Trade
Secrets, he will return and surrender all such documents and
written materials to the Corporation upon leaving its employ.
The restrictions and protection provided for in this paragraph
shall be in addition to any protection afforded to Trade Secrets
by law or equity.
8. Inventions. The Employee agrees that all inventions,
discoveries and improvements, and all new ideas for manufacturing
and marketing products of the Corporation, which the Employee has
conceived or may conceive while employed by the Corporation,
whether during or outside business hours, on the premises of the
Corporation or elsewhere, alone or in collaboration with others,
or which he has acquired or may acquire from others, and whether
or not the same can be patented or registered under patent,
copyright, or trademark laws, shall be and become the sole and
exclusive property of the Corporation. The Employee agrees to
promptly disclose and fully acquaint the President and CEO of the
Corporation with any such inventions, discoveries, improvements
and ideas which he has conceived, made or acquired, and shall, at
the request of the Corporation, make a written disclosure of the
same and execute such applications, assignments, and other
written instruments as may reasonably be required to grant to the
Corporation sole and exclusive right, title and interest thereto
and therein and to enable the Corporation to obtain and maintain
patent, copyright, and trademark protection therefor.
9. Non-Solicitation and Non-Interference. For a period of
one (1) year following Employee's termination of employment,
Employee shall not, directly or indirectly, on his own behalf of
another person or entity (i) contact, solicit, offer to hire or
hire any person who was, within a period of six months prior to
such termination, employed by the Corporation; (ii) communicate
nor have contact with the Corporation's employees, customers,
suppliers, other persons with whom the Corporation may then have
business relations which communication or contact may interfere
with or otherwise interrupt the Corporation's operations,
employment or business relationships with such persons, or (iii)
by any means issue or communicate any private or public statement
which may be critical or disparaging of the Corporation, it
products, services, officers, directors or employees.
10. Enforcement of Covenants. The Corporation's
obligation to make any or all of the payments provided for under
this Agreement is conditioned upon and shall cease and terminate
in the event of the breach by the Employee of any of the
covenants contained herein. The Employee acknowledges that such
payments are full and adequate compensation for his
non-competition with the Corporation.
The Corporation, however, shall not cease to perform any of
its covenants made under this Agreement, including without
limitation the payment of money, until any alleged breach of this
Agreement by Employee has been adjudicated by a court of
competent jurisdiction.
The Employee understands and agrees that because of the
personal relationships with the Corporation's customers which he
has and will continue to form during his employment, and because
of the specialized knowledge which he will develop of the
Corporation's and of its customers' products, services, or
operations, potential irreparable damage would result to the
Corporation from his competing with it or divulging its Trade
Secrets as restricted by this Agreement. Accordingly, Employee
expressly agrees that in addition to any and all remedies
available to it, the Corporation shall have the remedies of money
damages and a restraining order, or an injunction, and of any
other appropriate equitable relief, without the necessity of
posting any bond or surety, in the event that there is a breach
of any covenants contained in this Agreement.
11. Termination of Employment by the Corporation. The
Corporation may, of its own volition, terminate Employee's
employment at any time, other than on account of illness or
disability, upon giving at least thirty (30) days' advance
written notice to the Employee of the date when such termination
shall become effective. In the event of such termination, the
Employee during his life shall be entitled to receive, so long as
he shall not breach (and shall not have breached) any of the
provisions of this Agreement, monthly payments for a period of
twelve (12) months next succeeding the effective date of
termination, each payment equal to one twelfth (1/12) of his Base
Salary in effect at the time of such termination, plus a one time
payment at the time of termination equal to 50% of the Employee's
Target Bonus in effect at the time of termination.
12. Termination of Employment by the Employee. Employee
may, of his own volition, terminate his employment at any time
upon giving at least thirty (30) days' advance written notice to
the President or the Chairman of the Board of Directors of the
Corporation of the date when such termination shall become
effective. In the event Employee's employment with the
Corporation terminates pursuant to this paragraph 12 of the
Agreement within twelve (12) months of its effective date,
Employee shall repay to the Corporation any costs incurred by the
Corporation in relocating Employee's residence to the Buffalo,
New York, area. Employee expressly consents to having the
Corporation offset such sums against any amount of money which
the Corporation may owe Employee.
13. Designation of Beneficiary; Lump Sum Payments. A
designated beneficiary entitled to receive the benefits payable
following the death of Employee under paragraph 4, or payable
following the death of the Employee after termination of
employment under paragraph 5, shall be named in a written
designation filed with the Secretary of the Corporation. Such
written designation may be revoked or amended by Employee at any
time. If no such written designation of beneficiary shall be
filed with the Secretary of the Corporation, or if the designated
beneficiary is not alive at the time of any payment to be made,
the same shall be paid in equal shares to such of the children of
the Employee as shall be surviving at the time of such payment.
If the Employee has no surviving designated beneficiary or
children at the time of any payment to be made under paragraph 4
or paragraph 5, the same shall be paid to Employee's estate in
cash. In determining the eligibility and status of persons
entitled to receive payments under paragraphs 4 and 5 of this
Agreement, the Corporation may rely on its records and the good
faith determinations of its officers. In no event shall the
Corporation be liable to any person for any sums paid to any
other persons pursuant to such records and determinations.
14. Assignments, etc. Neither Employee nor any
beneficiary designated to receive payments under this Agreement
shall have any power to transfer, assign, anticipate, mortgage or
otherwise encumber in advance any of the benefits payable
hereunder, nor shall such benefits be subject to seizure for the
payment of any debts or judgments or any of them or be
transferable by operation in law in the event of bankruptcy,
insolvency or otherwise.
15. Participation in Other Plans. Nothing in this
Agreement shall affect any right which Employee may otherwise
have to participate in, or under any other retirement plan or
agreement which the Corporation may now or hereafter provide.
16. Binding Agreement. This Agreement shall be binding
upon the parties hereto, their heirs, executors, administrators
or successors.
17. Revocation. This Agreement may be amended or revoked
at any time only by mutual written agreement of the parties.
18. Cumulative Remedies. Any of the remedies provided for
herein shall be in addition to any remedy available to either of
the parties at law or equity.
19. Savings Clause. If any part of this Agreement shall
be determined to be unreasonable in duration or in area, then
this Agreement is intended to and shall extend only for such
period of time and in such area as is determined to be
reasonable.
20. New York Law. This Agreement shall be construed in
accordance with and governed by the laws of the State of New
York.
IN WITNESS WHEREOF, Employee has hereunto set his hand and
seal, and the Corporation has caused these presents to be
executed by its President and Chairman of the Board and its
corporate seal to be affixed hereto, the day and year first above
written.
/s/Bradley H. Feldmann
Bradley H. Feldmann
COMPTEK RESEARCH, INC.
By /s/John J. Sciuto
John J. Sciuto
Chairman, President and CEO
(Corporate Seal)
STATE OF NEW YORK )
: SS.:
COUNTY OF ERIE )
On this 27th day of May 1999, before me personally came John J.
Sciuto to me known, who, being by me duly sworn, did depose and
say that he resides at Clarence, NY; that he is the Chairman,
President and CEO of COMPTEK RESEARCH, INC., the corporation
described in and which executed the above instrument; that he
knows the seal of said corporation; that the seal affixed to said
instrument is such corporate seal; that it was so affixed by the
order of the board of directors of said corporation, and that he
signed his name thereto by like order.
/s/Randy C. Fahs
Randy C. Fahs
Notary Public, State of New York
Qualified in Niagara County
My Commission Expires
October 2, 1999
STATE OF CALIFORNIA )
: SS.:
COUNTY OF SAN DIEGO )
On this 1st day of June 1999, before me personally came Bradley
H. Feldmann, residing at 9724 San Remo Court, Santee CA 92071, to
me personally known and known to me to be the same person
described in and who executed the foregoing instrument and
acknowledged that he executed the same.
/s/Deborah L. Walsh
Deborah L. Walsh
Comm. #1169582
Notary Public - California
San Diego County
My Comm. Expires Jan. 15, 2002
\AGR\EMPAGR.BHF
Exhibit 10.2
EMPLOYMENT AGREEMENT
FOR
EDWARD G. EBERL
THIS AGREEMENT, made as of the 26th day of March, 1999, by
and between EDWARD G. EBERL, residing at 13626 Strykersville
Road, South Wales NY 14139 (hereinafter "Employee"), and COMPTEK-
AMHERST, INC., a New York corporation which is a wholly-owned
subsidiary of Comptek Research, Inc., having its office and
principal place of business at 30 Wilson Road, Williamsville, New
York (hereinafter called the "Corporation").
W I T N E S S E T H :
WHEREAS, immediately prior to the execution of this
Agreement, Employee was employed as Vice President of Amherst
Systems, Inc., and it is the intention of the parties that he be
employed by the Corporation in such position; and
WHEREAS, Employee acknowledges that he has and will continue
to develop specialized knowledge of, and personal relationships
with, the Corporation's customers and their products and
operations; and
WHEREAS, this Agreement is one of several similar agreements
by and between the Corporation and certain key executives; and
WHEREAS, it is the intention of the parties to have this
Agreement and such similar Agreements construed in a consistent
manner in accordance with the laws of the State of New York; and
WHEREAS, the Corporation wishes to be reasonably assured
that Employee will continue as an employee and desires to retain
his services, realizing that if he were to enter into competition
with the Corporation it would suffer financial loss; and
WHEREAS, concurrently with the execution and delivery of
this Agreement, Comptek Research, Inc. ("Buyer") is purchasing
certain assets from Amherst Systems, Inc., ("Amherst"), the
Corporation and Employee wish to provide for continued employment
of Employee with the Corporation upon the terms and conditions
set forth in this Agreement;
NOW, THEREFORE, in consideration of mutual covenants and
obligations contained herein, the parties hereto agree as
follows:
1. Term of Employment. The Corporation hereby employs
Employee and Employee agrees to work for the Corporation for a
period of three (3) years beginning March 18 1999, and ending
March 31, 2002, subject, however, to earlier termination as
provided in paragraphs 4, 5, 11, and 12.
2. Duties and Responsibilities. Employee agrees that
during the term of this Agreement his principal area of
responsibility shall be that of executive level management of the
Corporation. Employee shall devote his full business time and
best efforts, skills, and ability to promote the business of the
Corporation and perform for the Corporation such duties as are
customarily performed by a management or executive employee
having responsibility in such areas, and such other duties as may
be assigned to him by the Chairman of the Board of Directors of
the Corporation and serve as an officer and/or a director of the
Corporation if duly elected. Employee shall have such power and
authority as shall reasonably be required to enable him to
perform his duties hereunder in an efficient manner; provided
that in the exercising of such power and authority and the
performance of such duties, he shall at all times be subject to
the supervision and direction of the Chairman of the Board, and
the authority and control of the Board of Directors, of the
Corporation.
3. Remuneration.
(a) So long as Employee is employed by the Corporation, he
will be paid a salary at such rate as may be fixed from time to
time by the Board of Directors of the Corporation, but not less
than One Hundred Fifty-nine Thousand Six Hundred Eighty-one and
59/100 Dollars ($159,681.59) per year (his current "Base
Salary"), payable in approximately equal installments at such
intervals as the Corporation pays the salaries of its executive
employees generally.
(b) It is understood that temporary disability (of less
than six (6) months in duration) will not result in termination
of Employee's employment, during which period of time Employee's
then Base Salary shall continue in effect.
(c) Employee will be entitled to reimbursement for all
reasonable travel and other business expenses incurred by him.
Employee will be included in any group life insurance, medical
insurance, pension, profit-sharing plans or other benefits which
the Corporation may have in force from time to time for its
executive personnel, provided, however, group medical insurance
will not be materially less favorable to Employee than is the
case as of the date of this Agreement. Such benefits and any
resulting payments thereunder shall be in addition to his Base
Salary and shall continue in force during any period of Base
Salary continuation.
4. Death Benefits.
(a) If Employee should die while still in the employ of
the Corporation, the Corporation will pay to his designated
beneficiary
(i) his Base Salary in effect at the time of death for
the balance of the month in which his death
occurs, plus
(ii)in each of the first twelve months following the
month in which his death occurs, an amount equal
to one twelfth (1/12) of his Base Salary in effect
at the time of death.
(b) If the designated beneficiary is not alive at the time
of the making of any of such payments, the payments shall be made
in equal shares to such of the children of Employee as shall be
surviving at the time of each of such payments; or, if Employee
has no surviving designated beneficiary or children at the time
of the making of any such payments, then a lump sum payment shall
be made to Employee's estate in accordance with paragraph 13 of
this Agreement.
5. Termination of Employment Due to Illness or
Disability.
(a) In the event of the disability or illness of Employee
rendering him substantially unable to render service to the
Corporation of the character contemplated by this Agreement for a
period in excess of six (6) months, the Corporation shall have
the right to terminate this Agreement upon giving not less than
thirty (30) days' advance written notice given after such six (6)
month period of its intention to terminate Employee. If Employee
shall have resumed his duties hereunder within such thirty-day
period and shall have continuously performed his duties for at
least two (2) consecutive months thereafter, such notice of
termination shall be deemed of no force or effect and this
Agreement shall thereupon continue in full force, as though such
notice of termination had not been given. In the event a
question arises hereunder as to Employee's incapacity to perform
his regular duties, Employee shall be examined by a physician
selected by the Corporation and Employee, and such physician's
determination shall be final and conclusive and binding on all
parties for the purposes hereof.
(b) Upon termination of his employment because of such
illness or disability, the Corporation shall pay to Employee in
each of the first twelve months following the effective date of
such termination, a monthly termination payment equal to one
twelfth (1/12) of his Base Salary in effect at the time of such
termination.
(c) In the event of Employee's death after such
termination on account of such illness or disability, but before
the completion of the making of the payments to which he became
entitled as provided for above, the Corporation shall make such
payments to Employee's designated beneficiary; or, if the
designated beneficiary is not alive at the time of the making of
any of such payments, the payments shall be made in equal shares
to such of the children of Employee as shall be surviving at the
time of each of such payments; or, if Employee has no surviving
designated beneficiary or children at the time of the making of
any such payments, then a lump sum payment shall be made to the
Employee's estate in accordance with paragraph 13 of this
Agreement.
6. Non-Competition. It is understood and agreed that
during the term of his employment by the Corporation, and, in the
event that he resigns or is discharged, for a period of one (1)
year following the effective date of termination of his
employment by the Corporation, for whatever reason, or the period
of time remaining on the Non-Competition Agreement between
Employee and Buyer, whichever is longer in duration, Employee
shall not engage directly or indirectly in any business in the
continental United States which is substantially similar to the
business of the Corporation, either as a proprietor, stockholder
(other than as a holder of less than 5% of any class of the
securities of a corporation registered under the Securities
Exchange Act of 1934, as amended), partner, officer, employee or
otherwise, unless the Corporation has first consented in writing
thereto. In addition to the foregoing covenants, it is also
understood and agreed that during the greater of (i) one (1) year
following Employee's termination of employment with the
Corporation, for whatever reason, or (ii) the length of time
remaining pursuant to any noncompetition agreement by and between
the Corporation (or any affiliate of the Corporation) and
Employee in effect, or to be put into effect, as of the date of
this Agreement, Employee shall not solicit any of the
Corporation's customers with which he dealt while he was employed
by the Corporation, either on behalf of himself or any other
person or entity engaged in any business substantially similar to
the business of the Corporation, unless the Corporation has first
consented in writing thereto.
7. Trade Secrets. In the course of performing his
duties, Employee will be engaged in the development, manufacture
and sale of a variety of computer hardware and software products
based upon experimental and inventive work, and Employee will
receive, and acknowledges that he has received, confidential
information of the Corporation including, without limitation,
information not available to competitors relating to the
Corporation's existing and contemplated products, manufacturing
procedures, methods, machines, computations, technology,
formulae, trade secrets, know-how, research and development
programs, discoveries, improvements and ideas (regardless of
whether or not patentable), customer information, all of which is
hereinafter referred to as "Trade Secrets." Employee agrees that
he will not, either during his employment or subsequent to the
termination of his employment by the Corporation, directly or
indirectly disclose, publish or otherwise divulge any Trade
Secrets to anyone outside the Corporation or use such information
in any manner which would adversely affect the business or
business prospects of the Corporation, without prior written
authorization from the Corporation to do so. Without limiting
the generality of the foregoing, Employee agrees that while
employed by the Corporation he will not, except with the prior
written consent of a duly authorized superior officer of the
Corporation, disclose or otherwise divulge to any unauthorized
person, any Trade Secrets and that if, at the time of the
termination of his employment by the Corporation he is in
possession of any documents or other written materials
constituting, containing or reflecting Trade Secrets, he will
return and surrender all such documents and written materials to
the Corporation upon leaving its employ. The restrictions and
protection provided for in this paragraph shall be in addition to
any protection afforded to Trade Secrets by law or equity.
8. Inventions. Employee agrees that all inventions,
discoveries and improvements, and all new ideas for manufacturing
and marketing products of the Corporation, which Employee has
conceived or may conceive while employed by the Corporation,
whether during or outside business hours, on the premises of the
Corporation or elsewhere, alone or in collaboration with others,
or which he has acquired or may acquire from others, and whether
or not the same can be patented or registered under patent,
copyright, or trademark laws, shall be and become the sole and
exclusive property of the Corporation. Employee agrees to
promptly disclose and fully acquaint the President or the
Chairman of the Board of the Corporation with any such
inventions, discoveries, improvements and ideas which he has
conceived, made or acquired, and shall, at the request of the
Corporation, make a written disclosure of the same and execute
such applications, assignments, and other written instruments as
may reasonably be required to grant to the Corporation sole and
exclusive right, title and interest thereto and therein and to
enable the Corporation to obtain and maintain patent, copyright,
and trademark protection therefor.
9. Non-Solicitation and Non-Interference. For a period of
one (1) year following Employee's termination of employment,
Employee shall not, directly or indirectly, on his own behalf of
another person or entity (i) contact, solicit, offer to hire or
hire any person who was, within a period of six months prior to
such termination, employed by the Corporation; (ii) communicate
nor have contact with the Corporation's employees, customers,
suppliers, other persons with whom the Corporation may then have
business relations which communication or contact may interfere
with or otherwise interrupt the Corporation's operations,
employment or business relationships with such persons, or (iii)
by any means issue or communicate any private or public statement
which may be critical or disparaging of the Corporation, its
products, services, officers, directors or employees.
10. Enforcement of Covenants. The Corporation's
obligation to make any or all of the payments provided for under
this Agreement is conditioned upon and shall cease and terminate
in the event of a material breach by Employee of any of the
covenants contained herein. Employee acknowledges that such
payments are full and adequate compensation for his
non-competition with the Corporation.
The Corporation, however, shall not cease to perform any of
its covenants made under this Agreement, including without
limitation the payment of money, until any alleged material
breach of this Agreement by Employee has been adjudicated by a
court of competent jurisdiction.
Employee understands and agrees that because of the personal
relationships with the Corporation's customers which he has and
will continue to form during his employment, and because of the
specialized knowledge which he will develop of the Corporation's
and of its customers' products, services, or operations,
potential irreparable damage would result to the Corporation from
his competing with it or divulging its Trade Secrets as
restricted by this Agreement. Accordingly, Employee expressly
agrees that in addition to any and all remedies available to it,
the Corporation shall have the remedies of money damages and a
restraining order, or an injunction, and of any other appropriate
equitable relief, without the necessity of posting any bond or
surety, in the event that there is a breach of any covenants
contained in this Agreement.
11. Termination of Employment by the Corporation. The
Corporation may, of its own volition, terminate Employee's
employment at any time, other than on account of illness or
disability, upon giving at least thirty (30) days' advance
written notice to Employee of the date when such termination
shall become effective. In the event of such termination,
Employee during his life shall be entitled to receive, so long as
he shall not breach (and shall not have breached) any of the
provisions of this Agreement, or have been terminated for cause,
monthly payments for a period of twelve months next succeeding
the effective date of termination, each payment equal to one
twelfth (1/12) of his Base Salary in effect at the time of such
termination. Employee's employment shall be deemed to be
terminated for cause where the Corporation determines, in good
faith, that there has been continuing neglect by Employee of his
duties hereunder, continuing after written notice and a thirty
(30) day period in which to cure, or willful and material
misconduct on his part in connection with the performance of such
duties, where Employee suffers a loss of his/her security
clearance at the level which is in effect at the date of this
Agreement, or where Employee has been convicted of a felony or a
misdemeanor involving moral turpitude. If the Corporation
terminates Employee's employment for cause, Employee will be
entitled to receive his Base Salary only through the date such
termination of employment is effective.
12. Termination of Employment by Employee. Employee may,
of his own volition, terminate his employment at any time upon
giving at least thirty (30) days' advance written notice to the
President or the Chairman of the Board of Directors of the
Corporation of the date when such termination shall become
effective. If Employee terminates his employment, Employee will
be entitled to receive his Base Salary only through the date such
termination of employment is effective.
13. Designation of Beneficiary; Lump Sum Payments. A
designated beneficiary entitled to receive the benefits payable
following the death of Employee under paragraph 4, or payable
following the death of Employee after termination of employment
under paragraph 5, shall be named in a written designation filed
with the Secretary of the Corporation. Such written designation
may be revoked or amended by Employee at any time. If no such
written designation of beneficiary shall be filed with the
Secretary of the Corporation, or if the designated beneficiary is
not alive at the time of any payment to be made, the same shall
be paid in equal shares to such of the children of Employee as
shall be surviving at the time of such payment. If Employee has
no surviving designated beneficiary or children at the time of
any payment to be made under paragraph 4 or paragraph 5, the same
shall be paid to Employee's estate in cash. In determining the
eligibility and status of persons entitled to receive payments
under paragraphs 4 and 5 of this Agreement, the Corporation may
rely on its records and the good faith determinations of its
officers. In no event shall the Corporation be liable to any
person for any sums paid to any other persons pursuant to such
records and determinations.
14. Assignments, etc. Neither Employee nor any
beneficiary designated to receive payments under this Agreement
shall have any power to transfer, assign, anticipate, mortgage or
otherwise encumber in advance any of the benefits payable
hereunder, nor shall such benefits be subject to seizure for the
payment of any debts or judgments or any of them or be
transferable by operation in law in the event of bankruptcy,
insolvency or otherwise. The Corporation may assign this
Agreement, at its sole discretion, to its parent, subsidiary or
any affiliated entity.
15. Participation in Other Plans. Nothing in this
Agreement shall affect any right which Employee may otherwise
have to participate in, or under any other retirement plan or
agreement which the Corporation may now or hereafter provide.
16. Binding Agreement. This Agreement shall be binding
upon the parties hereto, their heirs, executors, administrators
or successors.
17. Revocation. This Agreement may be amended or revoked
at any time only by mutual written agreement of the parties.
18. Cumulative Remedies. Any of the remedies provided for
herein shall be in addition to any remedy available to either of
the parties at law or equity.
19. Savings Clause. If any part of this Agreement shall
be determined to be unreasonable in duration or in area, then
this Agreement is intended to and shall extend only for such
period of time and in such area as is determined to be
reasonable.
20. New York Law. This Agreement shall be construed in
accordance with and governed by the laws of the State of New
York.
IN WITNESS WHEREOF, Employee has hereunto set his hand and
seal, and the Corporation has caused these presents to be
executed by its Chairman of the Board and its corporate seal to
be affixed hereto, the day and year first above written.
/s/Edward G. Eberl
Edward. G. Eberl
COMPTEK-AMHERST, INC.
By: /s/John J. Sciuto
John J. Sciuto
Chairman
(Corporate Seal)
STATE OF NEW YORK )
: SS.:
COUNTY OF ERIE )
On this 25th day of March, 1999, before me personally came John
J. Sciuto to me known, who, being by me duly sworn, did depose
and say that he resides at E. Amherst, NY; that he is Chairman of
the Board of COMPTEK-AMHERST, INC., the corporation described in
and which executed the above instrument; that he knows the seal
of said corporation; that the seal affixed to said instrument is
such corporate seal; that it was so affixed by the order of the
board of directors of said corporation, and that he signed his
name thereto by like order.
/s/Randy C. Fahs
Notary Public
Randy C. Fahs
Notary Public, State of New York
Qualified in Niagara County
My Commission Expires
October 2, 1999
STATE OF NEW YORK )
: SS.:
COUNTY OF ERIE )
On this 12th day of March, 1999, before me personally
came Edward G. Eberl, to me personally known and known
to me to be the same person described in and who
executed the foregoing instrument and acknowledged that
he executed the same.
/s/Judith A. Pawlicki
Notary Public
Judith A. Pawlicki
Notary Public, State of
New York
Qualified in Erie County
My Comm. Expires 2/28/2002
Exhibit 15
The Board of Directors
Comptek Research, Inc.
Buffalo, New York
Gentlemen:
Registration Statement Nos. 33-54170, 33-82536, and 333-11437
With respect to the subject registration statements, we
acknowledge our awareness of the use therein of our report dated
October 22, 1999, related to our review of interim financial
information.
Pursuant to Rule 436(c) under the Securities Act of 1933, such
report is not considered part of a registration statement
prepared or certified by an accountant or a report prepared or
certified by an accountant within the meaning of sections 7 and
11 of the Act.
Very truly yours,
/s/KPMG LLP
KPMG LLP
Buffalo, New York
November 12, 1999
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