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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE 14D-9
(RULE 14d-101)
SOLICITATION/RECOMMENDATION STATEMENT UNDER SECTION 14(d)(4)
OF THE SECURITIES EXCHANGE ACT OF 1934
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Comptek Research, Inc.
(Name of Subject Company)
Comptek Research, Inc.
(Name of Person(s) Filing Statement)
Common Stock, Par Value $.02 Per Share
(Title of Class of Securities)
204682108
(CUSIP Number of Class of Securities)
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Christopher A. Head, Esq.
Executive Vice President, General Counsel and Secretary
Comptek Research, Inc.
2732 Transit Road
Buffalo, New York 14224-2523
(716) 677-4070
(Name, Address and Telephone Number of Person Authorized to Receive Notices and
Communications on Behalf of the Person(s) Filing Statement)
with copies to:
<TABLE>
<C> <S>
James R. Tanenbaum, Esq. Richard S. Forman, Esq.
Stroock & Stroock & Lavan LLP Stroock & Stroock & Lavan LLP
180 Maiden Lane 2029 Century Park East
New York, New York 10038 Los Angeles, California 90067
(212) 806-5400 (310) 556-5800
</TABLE>
[_]Check the box if the filing relates solely to preliminary communications
made before the commencement of a tender offer.
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Item 1. Subject Company Information.
The name of the subject company to which this Solicitation/Recommendation
Statement on Schedule 14D-9 (this "Schedule 14D-9") relates is Comptek
Research, Inc., a New York corporation ("Comptek"). The address of the
principal executive offices of Comptek is 2732 Transit Road, Buffalo, New York
14224-2523. The telephone number of the principal executive offices of Comptek
is (716) 677-4070. The title of the class of equity securities to which this
Schedule 14D-9 relates is common stock, par value $.02 per share, including the
associated preferred stock purchase rights, of Comptek (the "Comptek Common
Stock" or the "Shares"). As of July 5, 2000, there were 6,273,328 Shares
outstanding.
Item 2. Identity And Background Of Filing Person.
The name, business address and business telephone number of Comptek, which
is the person filing this Schedule 14D-9, are set forth in Item 1 above.
This Schedule 14D-9 relates to the Offer (as defined below) by Northrop
Grumman Corporation, a Delaware corporation ("Northrop"), through its wholly
owned subsidiary, Yavapai Acquisition Corp., a Delaware corporation
("Acquisition Sub"), disclosed in a tender offer statement on Schedule TO dated
July 6, 2000 (together with any amendments or supplements thereto, the
"Schedule TO"), to exchange each outstanding Share for such number of shares of
the common stock, par value $1.00 per share, of Northrop (the "Northrop Common
Stock") equal to the quotient obtained by dividing $20.75 by the Final Average
Closing Price (as defined below) (the "Exchange Ratio"), subject to adjustment
as set forth below, upon the terms and subject to the conditions set forth in
the Prospectus (as defined below) and in the related letter of transmittal (the
"Letter of Transmittal" which, together with the Prospectus, constitute the
"Offer"). Northrop is making the Offer pursuant to the Agreement and Plan of
Merger, dated as of June 12, 2000, by and among Northrop, Acquisition Sub and
Comptek (the "Merger Agreement").
The Exchange Ratio will be adjusted as follows: if the Final Average Closing
Price of Northrop Common Stock is (i) equal to or less than $74.00, then the
Exchange Ratio shall be 0.2804 or (ii) equal to or greater than $84.00, then
the Exchange Ratio shall be 0.2470; provided, however, that if the Final
Average Closing Price is less than $74.00 on the day Northrop makes a request
to the United States Securities and Exchange Commission (the "SEC") that the
Registration Statement (as defined below) be declared effective, Comptek shall
have the right to terminate the Merger Agreement if Comptek gives written
notice to Northrop and Acquisition Sub within one business day of the date of
such request prior to the Registration Statement being declared effective;
provided, further, however, that such termination shall not be effective if
Northrop, in the exercise of its sole discretion, elects, by written notice to
Comptek within one business day to issue additional shares of Northrop Common
Stock sufficient to equal the value to be received if the Final Average Closing
Price had been $74.00. For purposes of the Offer and this Schedule 14D-9,
"Final Average Closing Price" means the average of the per share closing sales
price of Northrop Common Stock, rounded to four decimal places, as reported
under "NYSE Composite Reports" in The Wall Street Journal for each of the 20
New York Stock Exchange ("NYSE") trading days in the period ending two business
days prior to the effective date of the Registration Statement.
The Merger Agreement provides that, among other things, as soon as
practicable following the satisfaction or waiver of the conditions set forth in
the Merger Agreement, Acquisition Sub will be merged with and into Comptek (the
"Merger"), and Comptek will continue as the surviving corporation (the
"Surviving Corporation"). At the effective time of the Merger (the "Effective
Time"), each Share then outstanding (excluding (i) those held in Comptek's
treasury, (ii) those owned by any wholly owned subsidiary of Comptek and (iii)
those as to which appraisal rights, if any, have been exercised) will be
converted into the right to receive such number of fully paid and nonassessable
shares of Northrop Common Stock as is equal to the Exchange Ratio finally
established for the Offer. A copy of the Merger Agreement is filed herewith as
Exhibit (e)(1) and is incorporated herein by reference.
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The Merger Agreement requires Northrop to prepare and file with the SEC a
registration statement on Form S-4 to register the offer and sale of Northrop
Common Stock pursuant to the Offer (such registration statement, as amended
from time to time, is referred to herein as the "Registration Statement") under
the Securities Act of 1933, as amended (the "Securities Act"). The Registration
Statement, at the time of the initial filing thereof, will include a
preliminary prospectus (the "Preliminary Prospectus") containing the
information required under Rule 14d-4(b) promulgated under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"). The prospectus included
in the Registration Statement at the time it is declared effective by the SEC,
including all information deemed to be included therein, as supplemented from
time to time, is referred to herein as the "Prospectus." As soon as practicable
on the date of commencement of the Offer, Northrop and Acquisition Sub shall
(i) file with the SEC the Schedule TO which will contain or incorporate by
reference all or part of the Preliminary Prospectus and the Letter of
Transmittal (such Schedule TO, collectively with such Preliminary Prospectus
and Letter of Transmittal, the "Offer Documents"), and (ii) cause the Offer
Documents to be disseminated to holders of Shares.
Copies of the Preliminary Prospectus and the Letter of Transmittal are filed
herewith as Exhibits (a)(1) and (a)(2), respectively, and are incorporated
herein by reference.
The Schedule TO states that the principal executive offices of Northrop and
Acquisition Sub are located at 1840 Century Park East, Los Angeles, CA 90067.
Item 3. Past Contacts, Transactions, Negotiations And Agreements.
The information contained under the caption "Interests of Certain Persons"
in the Prospectus and in the Information Statement which is attached hereto as
Schedule I is incorporated herein by reference. Each material agreement,
arrangement or understanding and any actual or potential conflict of interest
between Comptek or its affiliates and (i) Comptek's executive officers,
directors or affiliates or (ii) Northrop or Acquisition Sub or their respective
executive officers, directors or affiliates, is either incorporated herein by
reference as a result of the previous sentence or set forth below.
Treatment Of Options
The Merger Agreement provides that each outstanding option to purchase
Shares which has been granted to certain employees (each, an "Option"),
including the executive officers and non-employee directors of Comptek (each, a
"Management Option"), shall become fully vested and exercisable commencing ten
business days prior to the consummation of the Offer and the Options shall be
converted into options to purchase shares of Northrop Common Stock upon
consummation of the Offer. The Management Options were issued pursuant to
Comptek's 1992 Equity Incentive Plan, as amended, 1994 Stock Option Plan for
Non-Employee Directors or 1998 Equity Incentive Stock Plan (collectively, the
"Comptek Equity Plans"). Under the terms of the Comptek Equity Plans, all of
the Management Options are subject to acceleration of vesting and
exercisability upon a "change in control", which would be triggered by the
consummation of the Offer or the Merger.
The following table sets forth, with respect to each of the executive
officers and the non-employee directors of Comptek:
. the number of Shares subject to Options held by such persons that will be
exercisable immediately prior to the consummation of the Offer (including
Options that are currently exercisable as well as Options which will
become exercisable in connection with the transactions contemplated by
the Merger Agreement);
. the weighted average exercise price of the Options held by such persons;
and
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. the aggregate net cash value of such Options, computed by subtracting the
total exercise price for such Options (based on the weighted average
exercise price) from the total value of the shares of Comptek Common
Stock issuable upon exercise of such Options (based on $20.75, which is
the value of the shares of Northrop Common Stock issuable for each Share
pursuant to the Offer).
<TABLE>
<CAPTION>
Weighted
Options Which Average Aggregate Net
Will Be Exercise Price Cash Value Of
Name(1) Exercisable Per Share Options
------- ------------- -------------- -------------
<S> <C> <C> <C>
Joseph A. Alutto..................... 36,000 $11.7465 $ 324,126.00
Laura L. Benedetti(2)................ 57,685 7.7646 749,062.80
Chris Boehm(3)....................... 25,000 16.00 118,750.00
Edward G. Eberl...................... 20,000 8.125 252,500.00
Bradley H. Feldmann.................. 35,000 9.5804 390,936.00
G. Wayne Hawk........................ 36,000 11.7465 324,126.00
Christopher A. Head.................. 88,568 6.2712 1,282,358.36
Patrick J. Martin.................... 31,000 12.2702 262,873.80
Wayne E. Meyer....................... 24,000 9.0313 281,248.80
James D. Morgan...................... 16,900 7.1043 230,612.33
Lawrence M. Schadegg................. 0 -- --
John J. Sciuto....................... 158,074 5.9808 2,334,626.52
Henry P. Semmelhack.................. 36,000 11.7465 324,126.00
</TABLE>
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(1) Includes, with respect to the following individuals, unvested Options in
the amounts set forth next to their names, the vesting of which will be
accelerated as a result of the transactions contemplated by the Merger
Agreement: Laura L. Benedetti (28,812); Chris Boehm (25,000); Edward G.
Eberl (20,000); Bradley H. Feldmann (35,000); Christopher A. Head (20,843);
James D. Morgan (6,667); and John J. Sciuto (46,667).
(2) Includes an Option to purchase 1,145 shares of Comptek Common Stock which
is contingent upon the approval by the shareholders of Comptek of certain
amendments to Comptek's 1998 Equity Incentive Stock Plan.
(3) Includes an Option to purchase 10,000 shares of Comptek Common Stock which
is contingent upon the approval by the shareholders of Comptek of certain
amendments to Comptek's 1998 Equity Incentive Stock Plan.
Change of Control Severance Agreements
Comptek has entered into change of control agreements dated December 31,
1999 with each of Messrs. Sciuto, Head, and Feldmann and Mrs. Benedetti (the
"Change of Control Agreements"). The terms of each Change of Control Agreement
are substantially the same. Each Change of Control Agreement provides that if
the employee's employment is terminated by Comptek without cause or the
employee terminates his employment for good reason, in either case upon or
within two years following the occurrence of a "change of control", the
employee shall be provided, among other things, a lump sum payment equal to
1.99 times the employee's annual base salary and target bonus. The employee
shall also be entitled to continue to participate for a period of two years in
each of Comptek's employee benefits plans which provide insurance and medical
benefits on the same basis as was provided to the employee prior to
termination.
In addition, each Change of Control Agreement provides for Comptek to pay on
behalf of the employee, any excise tax imposed by Section 4999 of the Internal
Revenue Code of 1986, as amended (the "Internal Revenue Code"), on any payment
or benefit provided by Comptek deemed to be in connection with a change of
control, together with a gross-up payment to satisfy any income taxes
(including interest and penalties) imposed related to the payment of the excise
tax. These additional excise tax related payments are not limited to severance
benefits, but apply to any other benefits or payments received by the employee
and deemed to be in connection with a change of control. Each Change of Control
Agreement provides for an acceleration of vesting and exercisability of all
Management Options upon a change of control.
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The consummation of the Offer and the Merger will constitute a "change of
control" within the meaning of the Change of Control Agreements.
The following table sets forth, with respect to each of the executives party
to a Change of Control Agreement, the total amount that would be payable to
such executive if such executive's employment by Comptek were terminated
without good cause or if such executive were to terminate his or her employment
with good reason, in either case within two years following the consummation of
the Offer or the Merger (based upon such executive's base salary and target
bonus in effect on the date of this Schedule 14d-9):
<TABLE>
<CAPTION>
Salary &
Bonus
Name Payout(1)
---- ---------
<S> <C>
Laura L. Benedetti................................................. $398,000
Bradley H. Feldmann................................................ $517,400
Christopher A. Head................................................ $507,450
John J. Sciuto..................................................... $935,300
</TABLE>
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(1) The salary and bonus payout does not reflect the value to the executives of
continuing to participate in each of Comptek's employee benefit plans which
provide insurance or medical benefits. The payout amounts also do not
reflect the fact that Comptek has agreed to pay on behalf of the executives
any excise tax imposed as well as any "gross-up" payment to satisfy any
income tax imposed related to the payment of the excise tax.
The payments to the four executive officers described herein arising
pursuant to the Change of Control Agreements would be in addition to any
payments due to such four executives pursuant to their respective employment
agreements following any voluntary or involuntary termination of employment.
See "Employment Agreements" in the Information Statement included as Schedule I
to this Schedule 14D-9.
Change of Control Option Exercise Agreements
Pursuant to letter agreements dated March 20, 2000 between Comptek and each
of Messrs. Sciuto, Head, and Feldmann and Mrs. Benedetti (the "Option Letter
Agreements"), Comptek has agreed to pay each such executive officer an amount
equal to 50% of the reportable taxable income as a result of the exercise of
Options and subsequent disposition of shares of Comptek Common Stock in
connection with a "change of control". The consummation of the Offer and the
Merger will constitute a "change of control" of Comptek within the meaning of
the Option Letter Agreements.
Employee Benefit Plans
Pursuant to the terms of the Merger Agreement, Northrop has agreed to
provide all employees of Comptek, who remain employed after the Effective Time,
with industry competitive benefits as compared with similarly situated
employees at comparable companies, excluding (i) the Comptek Equity Plans,
and (ii) Comptek's 1999 Employee Stock Purchase Plan. Furthermore, from and
after the Effective Time, until the first anniversary of the Effective Time
such benefits shall be at least comparable, in the aggregate for each employee,
to the benefits maintained for such employee by Comptek prior to the closing of
the Merger (the "Closing").
Payment in connection with Stock Loans
In July of 1996 and February and March of 1999, John J. Sciuto executed
promissory notes totaling $317,254 in favor of Comptek Federal Systems, Inc., a
subsidiary of Comptek. Comptek Federal Systems, Inc. provided the loans to Mr.
Sciuto to facilitate his purchase of 62,178 shares of Comptek Common Stock and
for the payment of estimated alternative minimum taxes. As of June 12, 2000,
the outstanding balance on Mr. Sciuto's loans was $129,325.00. On June 12,
2000, the Board of Directors of Comptek (the "Comptek
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Board") adopted a resolution providing that in connection with the consummation
of the Offer, Comptek shall pay to Mr. Sciuto $193,987.50, an amount equal to
the outstanding balance on the loans from Comptek Federal Systems, Inc. and a
tax gross-up of 50%. Mr. Sciuto has agreed to use said sums for the repayment
of these stock loans from Comptek Federal Systems, Inc.
Directors and Officers Insurance and Indemnification
The Merger Agreement provides that, for six years after the Effective Time,
Comptek, as the Surviving Corporation, will indemnify and hold harmless the
current and former directors and officers of Comptek (the "Indemnified
Parties") in respect of matters pertaining to their service as such officers or
directors existing or occurring at or prior to the Effective Time to the
fullest extent that Comptek would have been permitted under New York law and
its charter documents (each as in effect on the date hereof) to indemnify such
Indemnified Parties. Northrop has agreed that Comptek shall maintain in effect
insurance reasonably comparable to the directors' and officers' liability
insurance policies maintained by Comptek immediately prior to the Effective
Time; provided, however that Comptek will not be required to expend in any one
year in excess of 150% of the annual premium currently paid by Comptek for such
coverage immediately prior to the Effective Time. The provisions with respect
to indemnification set forth in the certificate of incorporation of Surviving
Corporation shall not be amended, repealed or otherwise modified for a period
of six years from the Effective Time in any manner that would affect adversely
the rights thereunder of individuals who at or at any time prior to the
Effective Time were directors, officers, employees or agents of Comptek.
Merger Agreement
The following is a summary of certain material provisions of the Merger
Agreement. This summary is qualified in its entirety by reference to the
complete text of the Merger Agreement, a copy of which is filed herewith as
Exhibit (e)(1) and is incorporated herein by reference.
Conditions of the Offer. The Offer is subject to a number of conditions
which are described below:
(1) There must be validly tendered in accordance with the terms of the
Offer prior to the expiration date of the Offer, and not withdrawn, a
number of Shares which, together with the Shares then owned by Northrop and
Acquisition Sub, represents at least 66.67% of the total number of
outstanding Shares on a fully diluted basis (as though all outstanding
options, rights and other securities convertible into or exercisable or
exchangeable for Shares had been converted, exercised or exchanged in
accordance with their terms) as of the date that Northrop accepts the
Shares pursuant to the Offer (the "Minimum Tender Condition"). On July 5,
2000, the number of Shares needed to satisfy the Minimum Tender Condition
would have been 5,132,378.
(2) The waiting period, and any extension thereof, under the Hart-Scott-
Rodino Antitrust Improvements Act of 1976 ("HSR Act") and any other
applicable antitrust law, must have expired or been terminated.
(3) The Registration Statement must have become effective under the
Securities Act and must not be the subject of any stop order or proceedings
seeking a stop order.
(4) The shares of Northrop Common Stock issuable to Comptek shareholders
in the Offer and the Merger must have been approved for listing on the
NYSE, subject to official notice of issuance.
(5) The Offer is also subject to the conditions that, at any time on or
after the date of the Merger Agreement and prior to the time of acceptance
for exchange of Shares pursuant to the Offer:
(a) there shall not have been instituted or pending any action or
proceeding by any governmental entity, (i) challenging or seeking
to make illegal, to delay materially or otherwise directly or
indirectly to restrain or prohibit the making of the Offer, the
acceptance for exchange of, or the exchange or delivery of shares
of Northrop Common Stock for, some of or all the Shares by
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Northrop or Acquisition Sub or the consummation by Northrop or
Acquisition Sub of the Merger, seeking to obtain material damages or
otherwise directly or indirectly relating to the transactions
contemplated by the executed agreement between Acquisition Sub and
certain shareholders of Comptek dated June 15, 2000 (the "Tender
Agreement"), the Merger Agreement, the Offer or the Merger, (ii)
seeking to restrain or prohibit the Northrop's or Acquisition Sub's
ownership or operation (or that of their respective subsidiaries or
affiliates) of all or any portion of the business or assets of
Comptek and its subsidiaries, taken as a whole, or of Northrop and
its subsidiaries, taken as a whole, or to compel Northrop or any of
its subsidiaries or affiliates to dispose of or hold separate all or
any portion of the business or assets of Comptek and its
subsidiaries, taken as a whole, or of Northrop and its subsidiaries,
taken as a whole, (iii) seeking to impose limitations on the ability
of Northrop or any of its subsidiaries or affiliates effectively to
exercise full rights of ownership of the Shares, including, without
limitation, the right to vote any Shares acquired or owned by
Northrop or any of its subsidiaries or affiliates on all matters
properly presented to Comptek's shareholders, or (iv) seeking to
require divestiture by Northrop or any of its subsidiaries or
affiliates of any Shares;
(b) there shall not be any action taken, or any statute, rule,
regulation, injunction, order or decree proposed, enacted,
enforced, promulgated, issued or deemed applicable to the Merger
Agreement, the Offer or the Merger, by any governmental entity
that, in the reasonable judgment of Northrop, is reasonably likely,
directly or indirectly, to result in any of the consequences
referred to in clauses (i) through (iv) of the immediately
preceding paragraph;
(c) (i) Comptek's representations and warranties in the Merger
Agreement that are qualified as to materiality shall be true and
correct (except to the extent expressly made as an earlier date, in
which case as of such date), or any of the representations and
warranties that are not qualified as to materiality shall be true
and correct in all material respects (except to the extent
expressly made as an earlier date, in which case as of such date);
and (ii) there shall not be a material breach of any of the
covenants of Comptek set forth in the Merger Agreement; provided,
however, that Comptek shall not be deemed in material breach of its
obligations thereunder if any such breach is cured within ten
business days after receipt by Comptek of written notice of such
breach from Northrop, if such cure can be accomplished before the
Offer expires without any extension thereof;
(d) there shall not have been any change in or effect on the business
of Comptek or its subsidiaries that, individually or in the
aggregate (taking into account all other such changes or effects),
is, or is reasonably likely to be, materially adverse to the
business, assets, liabilities, financial condition or results of
operations of Comptek and its subsidiaries, taken as a whole (a
"Comptek Material Adverse Effect"); provided, however, that
"Comptek Material Adverse Effect" shall not be deemed to include
the impact of (a) changes in generally accepted accounting
principles, (b) acts or omissions of Comptek taken with the prior
written consent of Northrop, (c) changes in general economic or
industry conditions, (d) the compliance by Comptek with the
provisions of the Merger Agreement and the effects of the Offer and
the Merger on the business, assets, liabilities, financial
condition or results of operations of Comptek and its subsidiaries,
(e) any change in the market price or trading volume of the Comptek
Common Stock, and (f) any changes or effects as a result of the
announcement of the Offer and the Merger;
(e)the Merger Agreement shall not have been terminated in accordance
with its terms;
(f) (i) the Comptek Board (or any committee thereof) shall have
approved and shall have made a recommendation of the Offer, the
Merger and the Merger Agreement and shall have not withdrawn or
materially modified or amended in a manner adverse to Northrop or
Acquisition Sub its approval or recommendation of the Offer, the
Merger or the Merger Agreement; and (ii) the Comptek Board (or any
committee thereof) shall have not recommended to the shareholders
of Comptek any Comptek Superior Proposal (as defined below) or
resolved to, or publicly announced an intention to, do so;
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(g) Comptek shall not have entered into, or publicly announced its
intention to enter into, an agreement or agreement in principle
(other than certain confidentiality agreements permitted by the
Merger Agreement) with respect to any Comptek Superior Proposal (as
defined below under "--Other Offers");
(h) no person or "group" (as defined in Section 13(d)(3) of the
Exchange Act), other than Northrop or any of its subsidiaries,
shall have become the "beneficial owner" (as defined in Rule 13d-3
promulgated under the Exchange Act) of at least 20% of the
outstanding Shares or shall have acquired, directly or indirectly,
at least 20% of the assets of Comptek and its subsidiaries, which,
in the good faith judgment of Northrop in any such case, and
regardless of the circumstances (including any action or omission
by Northrop or Acquisition Sub) giving rise to any such condition,
makes it inadvisable to proceed with such acceptance for exchange;
and
(i) (i) Northrop shall have been furnished with evidence satisfactory
to it of the consent or approval of those certain third parties
listed in the Merger Agreement whose consent or approval may be
required in connection with the Offer and the Merger; (ii) certain
key employees of Comptek or its subsidiaries listed in the Merger
Agreement shall have executed and delivered employment agreements
and non-competition agreements reasonably acceptable to Northrop
and at least three out of the six other key employees listed in the
Merger Agreement shall have executed and delivered employment
agreements and non-competition agreements reasonably acceptable to
Northrop; and (iii) Comptek shall have terminated all contracts
with foreign consultants of Comptek or its subsidiaries for which
Northrop has requested such termination at least 45 days prior to
Effective Time.
Notwithstanding the foregoing conditions to the Offer, the Comptek Board (or
any committee thereof) may (1) withdraw or materially modify or amend in a
manner adverse to Northrop or Acquisition Sub its approval or recommendation of
the Offer, the Merger or the Merger Agreement or (2) may recommend to the
shareholders of Comptek any Company Superior Proposal or may resolve to, or
publicly announce an intention to, do so, if:
(x) the representations and warranties of Northrop set forth in the
Merger Agreement that are qualified as to materiality shall become untrue
or incorrect (except to the extent expressly made as of an earlier date, in
which case as of such date), or any of the representations and warranties
set forth in the Merger Agreement that are not so qualified shall become
untrue or incorrect in any material respect (except to the extent expressly
made as of an earlier date, in which case as of such date);
(y) there shall be a material breach of any of the covenants of Northrop
set forth in the Merger Agreement; provided, however, that Northrop shall
not be deemed in material breach of its obligations under the Merger
Agreement or any representation or warranty if any such breach is cured
within ten business days after receipt by Northrop of written notice of
such breach from Comptek, if such cure can be accomplished before the Offer
expires without any extension thereof; or
(z) there shall have been any change in or effect on the business of
Northrop and its subsidiaries that, individually or in the aggregate
(taking into account all other such changes or effects), is, or is
reasonably likely to be, materially adverse to the business, assets,
liabilities, financial condition or results of operations of Northrop and
its subsidiaries, taken as a whole (a "Northrop Material Adverse Effect");
provided, however, that "Northrop Material Adverse Effect" shall not be
deemed to include the impact of (a) changes in generally accepted
accounting principles, (b) acts or omissions of Northrop taken with the
prior written consent of Comptek, (c) changes in general economic or
industry conditions, (d) the compliance by Northrop or Acquisition Sub with
the provisions of the Merger Agreement and the effects of the Offer and the
Merger on the business, assets, liabilities, financial condition or results
of operations of Northrop and its subsidiaries, taken as a whole, (e) any
change in the market price or trading volume of Northrop Common Stock, and
(f) any changes or effects as a result of the announcement of the Offer and
the Merger.
7
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Amending the Offer. Pursuant to the Merger Agreement, Northrop agreed that,
without the prior written consent of Comptek, no change may be made to the
Offer which:
. changes the form or amount of consideration to be paid;
. imposes conditions to the Offer in addition to those set forth in the
Merger Agreement;
. changes or waives the Minimum Tender Condition;
. extends the Offer (except as set forth below under "--Expiration or
Termination of the Offer"); or
. makes any other change to any condition to the Offer set forth in the
Merger Agreement which is adverse to the holders of Shares.
Consideration. The Merger Agreement provides for the consideration that
Northrop will pay in the Offer, including the Exchange Ratio and the
adjustments, if any, to the Exchange Ratio.
Expiration or Termination of the Offer. Pursuant to the Merger Agreement,
Northrop agreed that if, at the scheduled expiration date of the Offer, the
conditions to the Offer shall not have been satisfied or waived, other than
several specified conditions, unless there is no reasonable possibility of all
of the conditions to the Offer being satisfied on or before October 31, 2000,
Northrop will extend the expiration date of the Offer for an additional period
or periods of time, each of which being no longer than 15 business days, until
the date that such conditions are satisfied or waived and Northrop becomes
obligated to accept for payment and pay for Shares tendered pursuant to the
Offer. However, if at any scheduled expiration date of the Offer, all of the
conditions to the Offer have been satisfied or waived other than the Minimum
Tender Condition, Northrop will only be required to extend the Offer for an
additional 20 business days following such scheduled expiration date.
The Merger. If the conditions to the Merger are satisfied or waived in
accordance with the Merger Agreement and in accordance with the General
Corporation Law of the State of Delaware (the "DGCL") and the Business
Corporation Law of the State of New York (the "BCL"), then at the Effective
Time Acquisition Sub will merge with and into Comptek. Comptek will survive the
Merger as a wholly owned subsidiary of Northrop.
Effective Time of the Merger. The Merger will become effective upon the
filing of (i) a certificate of merger with the Secretary of State of the State
of Delaware in such form as is required by, and executed in accordance with,
the relevant provisions of the DGCL and (ii) a certificate of merger with the
Secretary of State of the State of New York in such form as required by, and
executed in accordance with, the relevant provisions of the BCL or at such
later date and time as agreed by Northrop and Comptek and set forth in such
certificates of merger.
Additional Effects of the Merger. Upon completion of the Merger:
. each outstanding share of Comptek Common Stock will be converted into and
become the right to receive the amount and type of consideration received
by Comptek shareholders who tendered their Shares in the Offer;
. each outstanding share of capital stock of Acquisition Sub will be
converted into and become one share of common stock of Comptek, as the
Surviving Corporation;
. the directors and officers of Acquisition Sub at the Effective Time will
become the directors and officers of Comptek, as the Surviving
Corporation;
. the certificate of incorporation of Comptek in effect immediately prior
to the Effective Time will be amended and restated as of the Effective
Time so as to read substantially the same as the certificate of
incorporation of Acquisition Sub, and, as so amended, such certificate of
incorporation shall be the certificate of incorporation of Comptek, as
the Surviving Corporation; and
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. the bylaws of Comptek in effect immediately prior to the Effective Time
will be amended and restated in their entirety to read substantially the
same as the bylaws of Acquisition Sub, and, as so amended, such bylaws
shall be the bylaws of Comptek, as the Surviving Corporation.
Exchange Agent. At or prior to the Effective Time, Northrop shall enter into
an agreement with a bank or trust company that is reasonably acceptable to
Comptek, to act as exchange agent for the Merger (the "Exchange Agent") with
which Northrop shall deposit any required cash and certificates representing
the number of whole shares of Northrop Common Stock issuable pursuant to the
Merger Agreement in exchange for outstanding shares of Comptek Common Stock.
Soon after the Effective Time, the Exchange Agent will send a letter to each
person who was a Comptek shareholder at the Effective Time containing
instructions on how to surrender Comptek stock certificates to the Exchange
Agent and receive shares of Northrop Common Stock and cash, if any cash is
payable.
Dividends. Holders of Shares will not be entitled to receive any dividends
or other distributions payable by Northrop until they exchange the stock
certificates representing their Shares for certificates representing shares of
Northrop Common Stock. Once holders deliver their Comptek stock certificates to
the Exchange Agent, they will receive, subject to applicable laws, accumulated
dividends and distributions, without interest.
Fractional Shares. No scrip or fractional shares of Northrop Common Stock
will be issued upon the surrender of certificates representing Shares. An
outstanding fractional share interest shall not entitle the owner thereof to
vote, to receive dividends or to any rights of a shareholder of Northrop or of
the Surviving Corporation with respect to such fractional share interest.
Holders of Shares otherwise entitled to fractional shares of Northrop Common
Stock will receive a cash payment instead of such fractional shares. No later
than the Closing, Northrop shall deposit with the Exchange Agent an amount in
cash sufficient for the Exchange Agent to pay each holder of Comptek Common
Stock an amount in cash, rounded to the nearest whole cent, equal to the
product obtained by multiplying (i) the fractional share interest to which such
holder would otherwise be entitled by (ii) the Final Average Closing Price.
As soon as practicable after the determination of the amount of cash to be
paid to holders of Shares with respect to any fractional share interests, if
any, the Exchange Agent will make available such amounts, net of any required
withholding taxes, to such holders of Comptek Common Stock, subject to and in
accordance with the terms of the Merger Agreement.
Comptek Board of Directors. Upon acceptance for exchange of Shares in the
Offer, Northrop will be entitled to designate a number of directors of Comptek,
rounded up to the next whole number, that bears the same proportion to the
total number of directors of Comptek as the proportion of the total number of
shares of Comptek Common Stock then held by Northrop bears to the total number
of outstanding shares of Comptek Common Stock, provided that until the Merger
has been consummated, the Comptek Board shall always have at least two members
(the "Continuing Directors") who were directors of Comptek prior to
consummation of the Offer. The Merger Agreement provides that, prior to the
Effective Time, if Northrop's designees are elected to the Comptek Board, the
affirmative vote of the Continuing Directors will be required to:
. amend or terminate the Merger Agreement;
. waive any of Comptek's rights, benefits or remedies under the Merger
Agreement;
. extend the time for performance of Northrop's or Acquisition Sub's
obligations under the Merger Agreement; or
. approve any other action by Comptek which is reasonably likely to
adversely affect the interests of Comptek's shareholders, other than
Northrop, Acquisition Sub or their affiliates, with respect to the
transactions contemplated by the Merger Agreement.
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Representations and Warranties. The Merger Agreement contains customary
representations of Comptek and Northrop (including its wholly owned merger
subsidiary, Acquisition Sub) relating to, among other things:
. corporate existence, corporate organization, and similar corporate
matters;
. with respect to Comptek only, ownership of subsidiaries;
. capital structure;
. corporate authority to enter into, and carry out the obligations under,
the Merger Agreement and the enforceability of the Merger Agreement;
. absence of a conflict with or violation of the certificate of
incorporation, bylaws, or laws, or, with respect to Comptek only, any
material agreement, as a result of the transactions contemplated by the
Merger Agreement;
. required filings and consents, approvals, authorizations and permits of
governmental authorities relating to the Merger Agreement and related
matters;
. possession of permits and compliance with applicable laws;
. documents filed with the SEC and stock exchanges and the accuracy of
information contained in those documents;
. financial statements and the absence of undisclosed liabilities;
. with respect to Northrop only, the accuracy of information supplied in
connection with its Prospectus and the Registration Statement and of
information supplied or to be supplied by Northrop or Acquisition Sub for
inclusion or incorporation by reference in this Schedule 14D-9 or
Comptek's proxy statement relating to the meeting of shareholders of
Comptek, if required, for the purpose of obtaining shareholder approval
of the Merger and the Merger Agreement (the "Comptek Proxy Statement");
. absence of material changes or events;
. with respect to Comptek only, matters relating to the Employee Retirement
Income Security Act of 1974, employee benefits, employment agreements,
and consultants;
. with respect to Comptek only, contracts, litigation, environmental
matters, intellectual property matters, insurance, title to properties,
and affiliates;
. filing of tax returns and payment of taxes;
. with respect to Comptek only, the opinion of its financial advisor;
. engagement and payment of fees to brokers, finders, or investment
bankers;
. with respect to Comptek only, absence of certain improper business
practices, pending claims or investigations, and business activity
restrictions;
. with respect to Comptek only, inapplicability of state takeover statutes
and absence of dissenters' rights in connection with the Offer;
. with respect to Comptek only, shareholder votes required for approval of
the Merger Agreement and the transactions contemplated thereby; and
. with respect to Northrop only, authority to issue the shares of Northrop
Common Stock in connection with the Offer and the Merger and lack of any
ownership by Northrop or Acquisition Sub of any capital stock of Comptek.
In addition, the parties have also represented to one another that they are
unaware of any circumstance or event that would prevent the Merger from being
treated as a tax-free reorganization pursuant to Section 368(a) of the Internal
Revenue Code.
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The representations and warranties contained in the Merger Agreement do not
survive the Effective Time of the Merger.
Conduct of Business Pending the Merger. Comptek has agreed that in order to
preserve substantially intact its business organization, unless Northrop
otherwise agrees in writing, Comptek and its subsidiaries will (1) conduct
their businesses only in, and not take any action except in, the ordinary
course of business consistent with past practice, (2) use all reasonable
efforts to keep available the services of current officers, significant
employees and consultants, and (3) preserve current, significant business
relationships with corporate partners, customers, suppliers and other persons.
Comptek has agreed that, except as otherwise provided by the Merger Agreement,
neither Comptek nor its subsidiaries will do any of the following without the
prior written consent of Northrop:
. amend its certificate of incorporation or bylaws;
. authorize, issue, sell, pledge, dispose of, grant, transfer, lease,
license, guarantee or encumber any shares of capital stock of Comptek or
any of its subsidiaries other than pursuant to (1) the exercise of
Options outstanding as of the date of the Merger Agreement, (2) the grant
after the date of the Merger Agreement of options to newly hired
employees in the ordinary course of business consistent with past
practice and in each case subject to the prior approval of Northrop
before grant, provided, that such additional amount of Comptek Common
Stock subject to such options shall not exceed 25,000 shares in the
aggregate or (3) Comptek's 1999 Employee Stock Purchase Plan in the
ordinary course of business consistent with past practice, provided that
Comptek shall take all necessary action to suspend offering of such
shares as of July 1, 2000;
. sell, pledge, dispose of, grant, transfer, lease, license, guarantee, or
encumber any material property or assets of Comptek or any of its
subsidiaries except transactions pursuant to existing contracts or in the
ordinary course of business consistent with past practice;
. (1) acquire any interest in another entity, other than the purchase of
assets in the ordinary course of business consistent with past practice;
(2) incur any indebtedness; (3) terminate, cancel, or request or agree to
any material change in any material contract or license agreement; (4)
make or authorize capital expenditures totaling, in the aggregate, in
excess of $500,000; or (5) enter into or amend any contract, agreement,
commitment, or arrangement that if fully performed would not be permitted
by the foregoing restrictions;
. declare, set aside, make or pay any dividends with respect to any of its
capital stock;
. reclassify, combine, split, subdivide or redeem, purchase or otherwise
acquire any of its capital stock;
. amend or change the period of exercisability of, or authorize cash
payments in exchange for, options granted under the Comptek Stock
Incentive Plans;
. amend the terms of, repurchase, redeem or otherwise acquire any
securities of Comptek or any of its subsidiaries;
. increase the compensation payable to its directors, officers,
consultants, or employees; grant any rights to severance or termination
pay or enter into any new employment or severance agreement that provides
benefits upon a change in control that would be triggered by the Merger;
establish, adopt, enter into or amend any collective bargaining, bonus,
profit sharing, thrift, compensation, stock option, restricted stock,
pension, retirement, deferred compensation, employment, termination,
severance or other plan, agreement, trust, fund, policy or arrangement
for the benefit of any director, officer, consultant or employee of
Comptek or any subsidiary of Comptek; or enter into or amend any
contract, agreement, commitment or arrangement between Comptek or any
subsidiary of Comptek and any of Comptek's directors, officers,
consultants or employees;
. pay, discharge, or satisfy any claims, liabilities or obligations other
than in the ordinary course of business and consistent with past practice
or as disclosed in Comptek's audited consolidated balance sheet as of
March 31, 1999 or on the disclosure schedule provided in connection with
the Merger Agreement;
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. except as required by any governmental entity, make any material change
with respect to its accounting practices;
. make any material tax election or settle or compromise any material tax
liability; or
. authorize or enter into any agreement or make any commitment to do any of
the foregoing or take any action which would make any of the
representations or warranties of Comptek untrue or incorrect or prevent
Comptek from performing its covenants.
Access to Information. Pursuant to the Merger Agreement, Comptek agreed,
except as required pursuant to any confidentiality agreement or similar
agreement or arrangement to which Northrop or Comptek or any of their
respective subsidiaries is a party or pursuant to applicable law, to provide
Northrop (and its representatives) access at reasonable times upon prior notice
to Comptek's and its subsidiaries' officers, employees, agents, properties,
offices and other facilities and to the books and records thereof, and (ii)
furnish promptly such information concerning Comptek's and its subsidiaries'
business, properties, contracts, assets, liabilities and personnel as Northrop
or its representatives may reasonably request.
Other Offers. The Merger Agreement provides that, from the date of the
Merger Agreement until the Effective Time or, if earlier, the termination of
the Merger Agreement, Comptek will not, whether directly or indirectly, and
shall cause its officers, directors, employees, accountants, consultants, legal
counsel, agents and other representatives not to, directly or indirectly:
. solicit, initiate or encourage (including by way of furnishing nonpublic
information), any inquiries or the making of any proposal or offer
(including, without limitation, any proposal or offer to its
shareholders) that constitutes, or may reasonably be expected to lead to,
any Company Competing Transaction (as defined below); or
. enter into or maintain or continue discussions or negotiate with any
Person in furtherance of such inquiries or to obtain a Company Competing
Transaction, or agree to endorse any Company Competing Transaction; or
. authorize or permit any of Comptek's representatives or any subsidiary of
Comptek, or any representative retained by any subsidiary of Comptek, to
take any such action;
provided, however, that if and only if:
. a person submits an unsolicited, bona fide written proposal regarding a
Company Competing Transaction; and
. the Comptek Board determines that such proposal is a Company Superior
Proposal;
then the Comptek Board may provide information under a confidentiality
agreement to the person making the Company Superior Proposal and participate in
negotiations and discussions regarding the Company Superior Proposal.
Additionally, in response to a Company Superior Proposal which was not
solicited by Comptek and which did not otherwise result from a breach of the
provisions of the Merger Agreement described above, Comptek may terminate the
Merger Agreement.
Comptek has agreed to notify Northrop promptly of any proposal or offer, or
any inquiry or contact with any person with respect thereto, regarding a
Company Competing Transaction, such notice to include the identity of the
person making such proposal, offer, inquiry or contact, and other terms of such
Company Competing Transaction. Comptek immediately shall cease and cause to be
terminated all existing discussions or negotiations with any parties conducted
heretofore with respect to any Comptek Competing Transaction. Comptek shall not
release any third party from, or waive any provision of, any confidentiality or
standstill agreement to which it is a party.
The right of Northrop and Comptek to terminate the Merger Agreement will
remain operative and in full force and effect regardless of any investigation
made by or on behalf of any party hereto, any person controlling any such party
or any of their respective officers, directors, representatives or agents,
whether prior to or after the execution of the Merger Agreement.
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No provision of the Merger Agreement prohibits the Comptek Board from
taking, and disclosing to Comptek's shareholders, a position with respect to a
third party tender offer made pursuant to Rules 14d-9 and 14e-2.
The Merger Agreement provides that:
. the term "Company Competing Transaction" means any (i) merger,
consolidation, share exchange, business combination or similar
transaction; (ii) any sale, lease, exchange, transfer or other
disposition of 20% or more of the assets of Comptek or Comptek's
Subsidiaries, taken as a whole, in a single transaction or series of
transactions; (iii) any tender offer or exchange offer for 20% or more of
the outstanding voting securities of Comptek or the filing of a
registration statement under the Securities Act in connection therewith;
(iv) any Person having acquired "beneficial ownership" (as such term is
defined under Section 13(d) of the Exchange Act) or the right to acquire
beneficial ownership of, or any "group" (as such term is defined under
Section 13(d) of the Exchange Act) having been formed which beneficially
owns or has the right to acquire beneficial ownership of, 33% or more of
the outstanding voting securities of Comptek; (v) any solicitation by
Comptek in opposition to the Offer; or (vi) any public announcement of a
proposal, plan or intention to do any of the foregoing or any agreement
to engage in any of the foregoing.
. the term "Company Superior Proposal" means a Company Competing
Transaction as to which: (i) the Comptek Board determines in good faith
(after considering applicable law and consulting with independent outside
counsel) that its fiduciary duties to Comptek's shareholders under
applicable law require that the Comptek Board provide information to, or
otherwise negotiate with, the acquiring party making such Company
Competing Transaction; (ii) if any cash consideration is involved, shall
not be subject to any financing contingency, and with respect to which
Comptek Board shall have determined in the proper exercise of its
fiduciary duties to Comptek's shareholders that the acquiring party is
reasonably capable of consummating such Company Competing Transaction on
the terms proposed; and (iii) the Comptek Board shall have determined in
good faith (after consulting with Comptek's independent financial
advisors of nationally recognized reputation) that such Company Competing
Transaction provides greater value, in the aggregate, to the shareholders
of the Company than the Merger.
Employee Benefits. Pursuant to the terms of the Merger Agreement, Northrop
has agreed to provide all employees of Comptek, who remain employed after the
Effective Time, with industry competitive benefits as compared with similarly
situated employees at comparable companies, excluding (i) the Comptek Equity
Plans and (ii) Comptek's 1999 Employee Stock Purchase Plan. Furthermore, from
and after the Effective Time, until the first anniversary of the Effective Time
such benefits shall be at least comparable, in the aggregate for each employee,
to the benefits maintained for such employee by Comptek prior to the Closing.
Directors and Officers Insurance and Indemnification. The Merger Agreement
provides that, for six years after the Effective Time, Comptek, as the
Surviving Corporation, will indemnify and hold harmless the current and former
directors and officers of Comptek in respect of matters pertaining to their
service as such officers or directors existing or occurring at or prior to the
Effective Time to the fullest extent that Comptek would have been permitted
under New York law and its charter documents (each as in effect on the date
hereof) to indemnify such Indemnified Parties. Northrop has agreed that Comptek
shall maintain in effect insurance reasonably comparable to the directors' and
officers' liability insurance policies maintained by Comptek immediately prior
to the Effective Time; provided, however that Comptek will not be required to
expend in any one year in excess of 150% of the annual premium currently paid
by Comptek for such coverage immediately prior to the Effective Time. The
provisions with respect to indemnification set forth in the certificate of
incorporation of Surviving Corporation shall not be amended, repealed or
otherwise modified for a period of six years from the Effective Time in any
manner that would affect adversely the rights thereunder of individuals who at
or at any time prior to the Effective Time were directors, officers, employees
or agents of Comptek.
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Comptek Shareholders' Meeting. If required by applicable law to effectuate
the Merger, the Merger Agreement requires Comptek to call a meeting of its
shareholders as soon as reasonably practicable after acceptance for payment of
Shares tendered in the Offer. If the Minimum Tender Condition is satisfied
pursuant to the Offer, Acquisition Sub will hold at least a 66.67% of the
outstanding Shares and will be able to assure that the requisite number of
affirmative votes in favor of approval and adoption of the Merger Agreement
will be received, even if no other shareholder votes in favor thereof. If
Acquisition Sub obtains at least 90% of the outstanding Shares pursuant to the
Offer, it has agreed to effect the Merger without any notice to and without the
authorization of the shareholders of Comptek pursuant to Section 253 of the
DGCL and Section 905 of the BCL.
Antitrust Approvals. Pursuant to the Merger Agreement, each of the parties
to the Merger Agreement has agreed to take, or cause to be taken, all
appropriate action and make all necessary filings, and thereafter make any
other required or appropriate submissions, with respect to the Merger
Agreement, the Offer and the Merger required under the HSR Act, if any. The
parties shall cooperate and consult with each other in connection with the
making of all such filings, including by providing copies of all such documents
to the nonfiling parties and their advisors prior to filing, and none of the
parties shall file any such document if any of the other parties shall have
reasonably objected to the filing. No party shall consent to any voluntary
extension of any statutory deadline or waiting period or to any voluntary delay
of the consummation of the Offer or the Merger at the behest of any
governmental entity without the consent and agreement of the other parties,
which consent shall not be unreasonably withheld.
Further Assurances. Each of Northrop and Comptek has agreed, pursuant to the
Merger Agreement, to use all reasonable efforts to take, or cause to be taken,
all appropriate actions, and to do, or cause to be done, all things necessary,
proper or advisable under applicable law or otherwise to consummate and make
effective, the Offer and the Merger, including, without limitation:
. use all reasonable efforts to take such action as may be required to
obtain all other necessary actions or nonactions, waivers, consents and
approvals from governmental entities and the making of all other
necessary registrations and filings (including other filings with
governmental entities, if any);
. use all reasonable efforts to obtain all necessary consents, approvals or
waivers from third parties; and
. use all reasonable efforts in the preparation of the Registration
Statement, the Offer Documents, the Schedule 14D-9 and, if necessary, any
post-effective amendment to the Registration Statement filed by Northrop
for the purpose of filing the Comptek Proxy Statement (the "Post-
Effective Amendment").
Conditions to the Completion of the Merger. Each party's obligation to
effect the Merger is subject to the satisfaction or waiver of the following
conditions:
. if required by BCL or the DGCL, the holders of at least 66.67% of all
outstanding shares of Comptek Common Stock having approved and adopted
the Merger and the Merger Agreement;
. Acquisition Sub having accepted for exchange and exchanged all shares of
Comptek Common Stock tendered pursuant to the Offer unless the failure to
consummate the Offer is the result of a willful and material breach of
the Merger Agreement by the party asserting such condition;
. no judgment, order, decree, statute, law, ordinance, rule or regulation
entered, enacted, promulgated, enforced or issued by any court or other
governmental entity of competent jurisdiction or other legal restraint or
prohibition being in effect that prevents or prohibits consummation of
the Merger; and
. the Registration Statement or a Post-Effective Amendment, as the case may
be, shall have become effective under the Securities Act and shall not be
the subject of any stop order.
Termination Events. The Merger Agreement may be terminated at any time prior
to the Effective Time, notwithstanding any approval of the Merger Agreement by
the shareholders of Comptek:
(1) by mutual written consent of Comptek and Northrop;
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(2) by Northrop or Comptek if the Offer shall have expired or been
terminated in accordance with the terms of the Merger Agreement without
Northrop or Acquisition Sub having accepted for exchange any Shares
pursuant to the Offer; provided that Northrop and Acquisition Sub shall not
be permitted to terminate the Merger Agreement if the Offer is terminated
or expires without Shares being accepted for exchange in violation of the
Merger Agreement;
(3) by Northrop or Comptek if the Offer shall not have been consummated
on or before October 30, 2000, unless the failure to consummate the Offer
is the result of a willful and material breach of the Merger Agreement by
the party seeking to terminate;
(4) by Northrop or Comptek if the Merger shall not have been consummated
as a result of any condition described above under "--Conditions to the
Completion of the Merger" being incapable of being satisfied;
(5) by Northrop or Comptek if any statute, rule, regulation, injunction
or decree having the effects set forth below shall be in effect and shall
have become final and nonappealable:
(a) there shall be instituted or pending any action or proceeding by
any governmental entity, (i) challenging or seeking to make illegal, to
delay materially or otherwise directly or indirectly to restrain or
prohibit the making of the Offer, the acceptance for exchange of, or
the exchange or delivery of shares of Northrop Common Stock for, some
of or all the Shares by Northrop or Acquisition Sub or the consummation
by Northrop or Northrop of the Merger, seeking to obtain material
damages or otherwise directly or indirectly relating to the
transactions contemplated by the Tender Agreement, the Merger
Agreement, the Offer or the Merger, (ii) seeking to restrain or
prohibit Northrop's or Acquisition Sub's ownership or operation (or
that of their respective subsidiaries or affiliates) of all or any
portion of the business or assets of Comptek and its subsidiaries,
taken as a whole, or of Northrop and its subsidiaries, taken as a
whole, or to compel Northrop or any of its subsidiaries or affiliates
to dispose of or hold separate all or any portion of the business or
assets of Comptek and its subsidiaries, taken as a whole, or of
Northrop and its subsidiaries, taken as a whole, (iii) seeking to
impose limitations on the ability of Northrop or any of its
subsidiaries or affiliates effectively to exercise full rights of
ownership of the Shares, including, without limitation, the right to
vote any Shares acquired or owned by Northrop or any of its
subsidiaries or affiliates on all matters properly presented to
Comptek's shareholders or (iv) seeking to require divestiture by
Northrop or any of its subsidiaries or affiliates of any Shares; or
(b) there shall be any action taken, or any statute, rule,
regulation, injunction, order or decree proposed, enacted, enforced,
promulgated, issued or deemed applicable to the Merger Agreement, the
Offer or the Merger, by any governmental entity that, in the reasonable
judgment of Northrop, is reasonably likely, directly or indirectly, to
result in any of the consequences referred to in clauses (i) through
(iv) of paragraph (a) above, subject as aforesaid;
(6) by Northrop upon the occurrence of any Trigger Event (as defined
below under "--Termination Fee; Expenses"); or
(7) by Comptek if the Comptek Board shall have recommended to the
shareholders of Comptek a Company Competing Transaction provided that
Comptek complies with certain requirements of the Merger Agreement.
Termination Fee; Expenses. Comptek has agreed to pay Northrop a fee (the
"Termination Fee") in immediately available funds equal to $4 million promptly,
but in no event later than ten business days, after the termination of the
Merger Agreement (or such later date as may apply in the case of clause (1)
below) as a result of the occurrence of any of the events set forth below
(each, a "Trigger Event"):
(1) Comptek shall have received a Company Competing Transaction, and at
any time prior to, or within one year after the termination of the Merger
Agreement, unless the Merger Agreement is terminated pursuant to paragraphs
(1) or (5) under "--Termination Events" above, Comptek shall have entered
into,
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or shall have publicly announced its intention to enter into, an agreement
or an agreement in principle, other than a confidentiality agreement
permitted by the Merger Agreement, with respect to any Company Competing
Transaction;
(2) any person or "group" (as defined in Section 13(d)(3) of the
Exchange Act), other than Northrop or any of its subsidiaries, shall have
become the "beneficial owner" (as defined in rule 13d-3 promulgated under
the Exchange Act) of at least 20% of the outstanding Shares or shall have
acquired, directly or indirectly, at least 20% of the assets of Comptek and
its subsidiaries;
(3) Comptek shall have intentionally breached or willfully failed to
perform in any material respect any of its representations, warranties,
covenants or other agreements contained in the Merger Agreement, which
breach or failure to perform would give rise to the failure of a condition
set forth in subparagraphs (c), (d) or (e) of paragraph (5) under "--
Conditions of the Offer" above; or
(4) the Comptek Board, or any committee thereof, shall have recommended
to the shareholders of Comptek any Company Competing Transaction or shall
have resolved to, or publicly announced an intention to do so, except under
the circumstances described under "--Conditions of the Offer" above.
Notwithstanding the foregoing, no Termination Fee shall be paid pursuant to
the Trigger Events listed above if Northrop shall be in material breach of its
obligations under the Merger Agreement or if any of its representations and
warranties shall become untrue or incorrect in any material respect unless such
breach or untrue or incorrect representation or warranty is cured within ten
business days after receipt by Northrop of written notice of such breach or
untrue or incorrect representation or warranty from Comptek.
In the event that Northrop shall terminate the Merger Agreement because of
any breach or failure to perform by Comptek as set forth in clause (3) above
that is not an intentional breach or willful failure to perform on the part of
Comptek, then, without limiting any other remedies available to Northrop,
Comptek shall reimburse Northrop (not later than ten business days after
submission of statements therefor) for all actual, documented out-of-pocket
expenses not to exceed $750,000 reasonably incurred by Northrop on its behalf
in connection with the consummation of the transaction contemplated by the
Merger Agreement; provided, however, that no fee is payable if Northrop is in
material breach of its obligations under the Merger Agreement and has not cured
any such breach within five business days after receipt of written notice by
Comptek.
In the event that the Comptek Board rescinds its recommendation of the Offer
or recommends a Company Superior Proposal under the circumstances described
under "--Conditions of the Offer" above and as a result the Offer and the
Merger are not consummated, then, without limiting any other remedies available
to Comptek, Northrop shall reimburse Comptek (not later than ten business days
after submission of statements therefore) for all actual, documented out-of-
pocket expenses not to exceed $750,000 reasonably incurred by Comptek or on its
behalf in connection with the consummation of the transaction contemplated by
the Merger Agreement; provided, however, that no fee is payable if Comptek is
in material breach of its obligations under the Merger Agreement and has not
cured any such breach within five business days after receipt of written notice
by Northrop.
The Merger Agreement further provides that under certain circumstances if
Comptek or Northrop fails to pay any termination fee or any reimbursement due,
it must pay the other party's costs and expenses in connection with any action
taken to collect payment.
Except as otherwise set forth above, all expenses incurred in connection
with the Merger Agreement, the Offer and the Merger shall be paid by the party
incurring such expenses, whether or not the Offer or the Merger is consummated,
except that Northrop shall pay all expenses incurred solely for printing,
filing and mailing the Registration Statement, the Post-Effective Amendment, if
necessary, the Proxy Statement, if necessary, and all SEC and other regulatory
filing fees incurred in connection with the Registration Statement and the
Proxy Statement and any fees required to be paid under the HSR Act.
Assumption Of Certain Obligations. Pursuant to the Merger Agreement,
Northrop has agreed that it shall, or shall cause the Surviving Corporation to,
affirmatively assume the obligations of Comptek under certain indentures and
financing agreements to which Comptek is a party.
16
<PAGE>
In March 1999, Comptek issued $15 million principal amount of 8
1/2% Convertible Subordinated Debentures due 2004 (the "Convertible
Debentures") pursuant to the Indenture (the "Comptek Indenture") dated March
24, 1999 by and between Comptek and The Bank of New York, as trustee (the
"Trustee") for the benefit of the purchasers of the Convertible Debentures. As
of June 21, 2000, $5 million of Convertible Debentures remained outstanding.
The Convertible Debentures are convertible into Comptek Common Stock at the
conversion price of $9.50 per share. Pursuant to and in accordance with the
Comptek Indenture, in connection with the closing of the Merger, the Surviving
Corporation and the Trustee will execute a supplemental indenture to the
Comptek Indenture which will provide that thereafter all outstanding
Convertible Debentures be convertible into Northrop Common Stock as if such
Convertible Debentures had been converted to Comptek Common Stock immediately
prior to the Merger.
In addition to the Comptek Indenture, other financing agreements to which
Comptek is a party and which are subject to the foregoing requirement are: (i)
the Loan Agreement dated March 24, 1999 between Comptek, as borrower, and
Manufacturers and Traders Trust Company, as lender, pursuant to which Comptek
has a $30 million line of credit; (ii) the Canadian Economic Development
Corporation Performance Bond Guarantee Recourse Agreement dated November 5,
1997; and (iii) a $10 million Subordinated Note payable to Amherst Systems,
Inc. due March 26, 2001.
Tender Agreement
As required by Northrop as a condition to its entering into the Merger
Agreement, on June 15, 2000, Acquisition Sub entered into a Tender Agreement
with certain shareholders of Comptek (each, a "Shareholder," and collectively,
the "Shareholders") with respect to an aggregate of 1,419,601 shares including
Options owned by such Shareholders. The Shareholders who entered into the
Tender Agreement are: Laura L. Benedetti, John R. Cummings, Bradley H.
Feldmann, G. Wayne Hawk, Christopher A. Head, James D. Morgan, John J. Sciuto
and Henry P. Semmelhack. The following is a summary of certain provisions of
the Tender Agreement. The summary is qualified in its entirety by reference to
the full text of the Tender Agreement, a copy of which is filed herewith as
Exhibit (a)(5) and is incorporated herein by reference.
Pursuant to the Tender Agreement, each Shareholder has agreed to tender for
exchange in the Offer all Shares then owned or thereafter acquired by such
Shareholder.
Pursuant to the Tender Agreement, each Shareholder has revoked any and all
previous proxies granted with respect to such Shareholder's Shares, and
constitutes and appoints Acquisition Sub, or any nominee of Acquisition Sub
with full power of substitution, as its true and lawful attorney and proxy, to
vote each of such Shareholder's Shares at any meeting of Comptek's shareholders
(i) in favor of the adoption of the Merger Agreement, the Tender Agreement and
the approval of the Merger; (ii) against any action or agreement that would
result in a breach of any covenant, representation or warranty or the failure
to fulfill any other obligation or agreement of Comptek under the Merger
Agreement; and (iii) in favor of any other matter necessary for the
consummation of the transactions contemplated by the Merger Agreement and the
Tender Agreement. In addition, the proxy granted by each Shareholder is
irrevocable, and coupled with an interest and is granted in consideration for
Acquisition Sub entering into the Merger Agreement; provided, however, that
such proxy shall be revoked upon termination of the Merger Agreement in
accordance with its terms.
Under the terms of the Tender Agreement, each Shareholder has agreed that
such Shareholder will not directly or indirectly (i) grant any proxies (other
than proxies relating to the election of management's slate of directors at an
annual meeting of Comptek's shareholders, and other routine matters which would
not require the filing of a preliminary proxy statement under Rule 14a-6(a) of
the Exchange Act) or enter into any voting trust or other agreement or
arrangement with respect to the voting of any such Shareholder's Shares or (ii)
sell, assign, transfer, encumber or otherwise dispose of, or enter into any
contract, option or other arrangement or assignment or understanding and agrees
to notify Acquisition Sub promptly and to provide all details requested by
Acquisition Sub if such Shareholder shall be approached or solicited, directly
or indirectly, by any person with respect to any of the foregoing.
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<PAGE>
Additionally, each Shareholder, in the capacity as a Shareholder, shall not
directly or indirectly (i) subject to the fiduciary duty under applicable law
of such Shareholder as a director of Comptek (if such Shareholder is such a
director) as further provided in the Merger Agreement, solicit, initiate or
encourage (or authorize any person to solicit, initiate or encourage) any
inquiry, proposal or offer from any person to acquire the business, property or
capital stock of Comptek or any direct or indirect subsidiary thereof, or any
acquisition of a substantial equity interest in, or a substantial amount of the
assets of, Comptek or any direct or indirect subsidiary thereof, whether by
Merger, purchase of assets, tender offer or other transaction or (ii) subject
to the fiduciary duty under applicable law of such Shareholder as a director of
Comptek (if such Shareholder is such a director) as further provided in the
Merger Agreement, participate in any discussion or negotiations regarding, or
furnish to any other person any information with respect to, or otherwise
cooperate in any way with, or participate in, facilitate or encourage any
effort or attempt by any other person to do or seek any of the foregoing. Such
Shareholder shall promptly advise Acquisition Sub of the terms of any
communications it may receive in the capacity as a Shareholder relating to any
of the foregoing.
Item 4. The Solicitation/Recommendation.
(a) Recommendation Of Comptek Board.
At a meeting held on June 12, 2000, the Comptek Board approved the Merger
Agreement and the transactions contemplated thereby, including the Offer and
the Merger, are advisable, fair to and in the best interests of Comptek's
shareholders.
The Comptek Board recommends that Comptek's shareholders accept the Offer
and tender their Shares pursuant to the Offer.
A letter to Comptek's shareholders communicating the Comptek Board's
recommendation and a press release announcing the execution of the Merger
Agreement are filed herewith as Exhibits (a)(3) and (a)(4), respectively, and
are incorporated herein by reference.
(b) Background; Reasons For The Comptek Board's Recommendation; Opinion Of
Comptek's Financial Advisor.
Background
Beginning in November, 1999, senior management of Comptek began to explore
and analyze Comptek's strategic alternatives in order to maximize shareholder
value. Among other things, Comptek's senior management explored and analyzed
the following: (i) remaining as a stand-alone company and operating in
accordance with Comptek's current business model, including strategic small
acquisitions, (ii) pursuing a merger with a similar size company, and (iii)
pursuing a possible sale of Comptek.
Comptek subsequently engaged CIBC World Markets Corp. ("CIBC World Markets")
as its financial advisor to assist senior management in its review of strategic
alternatives and in any significant corporate transaction or series of
transactions that may be undertaken by Comptek. After an evaluation of, and
discussions with, Comptek's management and CIBC World Markets regarding
possible strategic alternatives, the Comptek Board determined that the best
course of action to maximize shareholder value was to explore a sale of
Comptek.
Comptek's management, with the assistance of CIBC World Markets, then
identified a number of third parties in the defense electronics and federal
information technology services industries, and certain financial buyers, who
might have an interest in engaging in a business combination transaction with
Comptek.
Commencing in late February 2000, 37 parties were contacted in an effort to
ascertain on a preliminary basis their level of interest in engaging in a
business combination transaction with Comptek. Of the parties contacted,
approximately 20 parties, including Northrop, executed confidentiality
agreements and received limited non-public information concerning Comptek.
Prospective bidders were requested to submit preliminary indications of
interests in a possible transaction with Comptek by March 1, 2000.
18
<PAGE>
In early March 2000, Comptek received preliminary indications of interest
from five parties, including a preliminary indication of interest from Northrop
of between $16.00 to $18.00 per Share. On March 20, 2000, the Board of
Directors of Comptek reviewed these five preliminary indications of interest
and instructed Comptek's financial advisor to further discuss the levels of
interest received. Depending on the outcome of those discussions, the Board of
Directors instructed Comptek's financial advisor to invite Northrop and other
prospective buyers with an opportunity to conduct limited due diligence on
Comptek at a data room established at the offices of Stroock & Stroock & Lavan
LLP, Comptek's legal counsel ("Stroock"). During these meetings,
representatives of Northrop and other potential buyers were to be provided with
an overview of Comptek's businesses and operations and were to be provided with
certain additional non-public financial information of Comptek, including
detailed financial forecasts.
From April 13 through April 14, 2000, Northrop's due diligence team reviewed
public documents, financial and technical information, financial forecasts as
well as other financial and operational information in the data room.
Northrop's due diligence team also met with and asked questions of Comptek's
management as part of its review of Comptek. On April 14, 2000, Comptek
provided to Northrop the proposed form of merger agreement prepared by Stroock.
Upon completion of this phase of due diligence, prospective bidders,
including Northrop, were requested to submit revised proposals and comments to
the proposed form of merger agreement. The Comptek Board, taking into account a
number of factors, including the proposed amount and form of the consideration
offered and the likelihood of completion of a transaction, authorized Comptek's
management and legal and financial advisors to continue negotiations with
Northrop.
On April 27, 2000, Northrop submitted a written proposal which was subject
to certain conditions, including the satisfactory completion of confirmatory
due diligence, and which valued Comptek at $20.00 per Share. Although not
binding, this written proposal served as the basis for the parties'
negotiations towards a definitive agreement.
During the week of May 22, 2000, Northrop conducted its confirmatory due
diligence.
On June 2, 2000, Northrop submitted a revised written proposal which was no
longer subject to completion of due diligence, but was subject to the
negotiation and execution of a definitive agreement. This revised proposal
contemplated an all stock transaction at a fixed exchange ratio of 0.265 of a
share of Northrop Common Stock for each outstanding Share.
On June 4, 2000, Mr. Sciuto held a meeting with other senior members of
management of Comptek, and a telephonic meeting with Comptek's legal and
financial advisors, to update them on his discussions with Northrop.
After discussions between Comptek and Northrop, Northrop amended its June 2,
2000 conditional offer by a letter dated June 7, 2000 that established a range
of exchange ratios depending on the average closing price per share of Northrop
Common Stock for the 20 trading days immediately preceding the consummation of
the transaction to preserve the indicated value of the transaction to both
Northrop and the Comptek shareholders.
Discussions among the parties and their respective legal and financial
advisors immediately ensued, and by a second letter dated June 7, 2000,
Northrop revised the final exchange ratios and provided the estimated value of
a share of Comptek Common Stock.
Between June 8, 2000 and June 11, 2000, there were a series of telephonic
negotiations between Albert Myers, Corporate Vice President and Treasurer of
Northrop, and John Sciuto, Chairman, President and Chief Executive Officer of
Comptek, regarding various valuation refinements. Negotiations also were
conducted in New York City on June 10 and 11 among the parties' legal and
financial advisors regarding the details, terms and conditions of a final
merger agreement.
19
<PAGE>
During the period from June 4, 2000 to June 11, 2000, Mr. Sciuto had
numerous telephone conversations with each member of the Comptek Board to keep
them informed of the substance of the negotiations with Northrop.
The Comptek Board held a special meeting on June 12, 2000, to discuss the
proposed transaction with Northrop and the terms of the Merger Agreement. Mr.
Sciuto updated the Comptek Board on the negotiations with Northrop. Mr. Sciuto
reviewed the strategic business rationale for the transaction. Representatives
of Stroock summarized the terms and conditions of the Merger Agreement, the
Tender Agreement and related legal documents, and discussed the directors'
fiduciary duties under New York law. In addition, CIBC World Markets reviewed
with the Comptek Board its financial analysis of the Exchange Ratio (which is
summarized under "--Opinion of Comptek's Financial Advisor" below) and rendered
to the Comptek Board an oral opinion, which opinion was subsequently confirmed
by delivery of a written opinion dated June 12, 2000, to the effect that, as of
that date and subject to the matters described therein, the Exchange Ratio was
fair, from a financial point of view, to the holders of Shares (other than
Northrop and its affiliates).
After discussion and consideration of the factors and reasons described
below under "--Reasons for the Comptek Board's Recommendation," the Comptek
Board determined that the Merger Agreement and the transactions contemplated
thereby, including the Offer and the Merger, are advisable, fair to and in the
best interests of, Comptek's shareholders, approved the Merger Agreement and
the transactions contemplated thereby, including the Offer and the Merger, and
recommended that Comptek's shareholders accept the Offer and tender their
shares of Comptek Common Stock pursuant to the Offer.
Following the meeting of the Comptek Board, as of June 12, 2000, Comptek,
Northrop and Acquisition Sub executed the Merger Agreement. On June 12, 2000,
each of Comptek and Northrop issued a press release announcing that the parties
had executed the Merger Agreement. On June 15, 2000 certain shareholders of
Comptek, including certain directors and certain members of senior management,
executed the Tender Agreement.
Reasons For The Comptek Board's Recommendation
In approving the Offer, the Merger, the Merger Agreement and the
transactions contemplated thereby and recommending that all holders of Shares
accept the Offer and tender their Shares pursuant to the Offer, the Comptek
Board considered a number of factors, including:
1. the financial condition, results of operations, cash flows, earnings,
assets and prospects of Comptek if it remains an independent company;
2. the belief of Comptek's management that the shares of Comptek Common
Stock have historically been undervalued due to Comptek's size and industry
focus.
3. the potential strategic alternatives available to Comptek and the
viability and risks associated with each alternative, including the prospects
for Comptek on a stand-alone basis and the risks associated with achieving and
executing upon Comptek's business plan, both short-term and long-term;
4. the belief of Comptek's management that, based on its review of Comptek's
strategic alternatives and on the feedback from recent preliminary contacts
with a number of third parties in the defense electronics and federal
information technology services industries to ascertain their level of interest
in engaging in a business combination transaction with Comptek, it is unlikely
that any party would propose an alternative transaction that would be more
favorable to Comptek and its shareholders than the Offer and the Merger;
5. the Comptek Board's expectation that the addition of Comptek's operations
to Northrop would likely increase the overall value and profitability of
Northrop, tending to produce greater shareholder value for Comptek's
shareholders;
6. the opportunity of the combined company to reduce costs through economies
of scale that would not have been readily achievable by Comptek independently,
and the elimination of redundant operations and duplicate administrative
functions;
20
<PAGE>
7. the opportunity of the combined company to further enhance research and
development efforts, including potentially more rapid development of products
as a result of shared knowledge between electronics development teams;
8. the strengths and weaknesses of Northrop's businesses and the key
attributes of the combined company in terms of, among other things, products,
sales, customers, management and competitive position;
9. the fact that the defense and federal information technology services
electronics industries are extremely competitive and are characterized by rapid
change and uncertainty due to new and emerging technologies;
10. the increasing competition in Comptek's markets from both existing and
potential competitors, some of which have greater assets and resources than
Comptek, which has occurred as a result of, among other reasons, the
consolidation taking place in the defense sector in general and in the defense
electronics and federal information technology segments in particular;
11. the potential effect of the public announcement of the Offer and the
Merger on Comptek's ability to attract and retain key management, sales,
marketing and technical personnel;
12. the recent and historical stock price performance of the shares of
Comptek Common Stock and Northrop Common Stock;
13. the fact that the market value of the shares of Northrop Common Stock,
based on the Exchange Ratio and the closing price of such shares on the NYSE on
June 9, 2000, to be exchanged for each Share pursuant to the Offer and the
Merger represents a premium of approximately 20.7% over the closing price of
the Shares on the American Stock Exchange on June 9, 2000;
14. the financial and other terms of the Offer, the Merger and the Merger
Agreement, including the benefits of the transaction being structured as a
first-step exchange offer and second-step merger, which may provide Comptek's
shareholders with an opportunity to receive shares of Northrop Common Stock on
an accelerated basis;
15. the fact that the provisions of the Merger Agreement are designed to
provide that the value of the shares of Northrop Common Stock to be received in
the Offer could exceed $20.75 per Share if the Final Average Closing Price
exceeds $84.00.
16. the fact that the Offer and the Merger will present the opportunity for
the holders of shares of Comptek Common Stock to participate in a significantly
larger and more diversified company and, as shareholders of the combined
company, to have greater liquidity in their shares and to benefit from any
future growth of the combined company;
17. the discussions of the terms of the Merger with Comptek's senior
management and legal and financial advisors;
18. the financial presentation of CIBC World Markets including its opinion
dated June 12, 2000 to the Comptek Board, as to the fairness, from a financial
point of view, and as of the date of the opinion, of the Exchange Ratio to the
holders of Comptek Common Stock, other than Northrop and its affiliates, as
described below under the caption "--Opinion of Comptek's Financial Advisor";
19. the terms and conditions of the Merger Agreement and the conditions of
the Offer;
20. the likelihood that the Offer and the Merger would be consummated,
including the limited nature of the conditions to the Offer and the experience,
reputation and financial condition of Northrop;
21. the consents and approvals required to consummate the Offer and the
Merger, including regulatory clearance under the HSR Act and foreign antitrust
laws, and the favorable prospects for receiving such consents and approvals;
21
<PAGE>
22. the fact that while the Merger Agreement prohibits Comptek from
soliciting proposals concerning an acquisition of Comptek, the Comptek Board,
in the exercise of its fiduciary duties, would be able to provide information
to, and engage in negotiations with, a third party that makes an unsolicited
superior acquisition proposal, and that the Comptek Board would be able to
terminate the Merger Agreement and accept a superior acquisition proposal if it
determines that its fiduciary duties so require, upon payment to Northrop of a
termination fee of $4 million; and
23. the fact that the Offer and the Merger are structured in a manner so
that in certain circumstances (the existence of which will not be known prior
to the consummation of the Offer and the Merger), they should qualify as a
reorganization for federal income tax purposes, in which case Comptek's
shareholders would generally not recognize gain or loss for fractional shares
of Northrop Common Stock.
The foregoing discussion of the information and factors considered by the
Comptek Board is not intended to be exhaustive but is believed to include all
material factors considered by the Comptek Board. In view of the wide variety
of factors, both positive and negative, considered by the Comptek Board, the
Comptek Board did not find it practical to, and did not, quantify or otherwise
assign relative weights to the specific factors considered. The Comptek Board
also did not determine that any factor was of particular importance. Rather,
the Comptek Board viewed its position and recommendations as being based on the
totality of the information presented to and considered by the Comptek Board.
In addition, individual members of the Comptek Board may have given different
weights to different factors.
Opinion Of Comptek's Financial Advisor
Comptek has engaged CIBC World Markets to act as its exclusive financial
advisor in connection with the Offer and the Merger. In connection with this
engagement, Comptek requested that CIBC World Markets evaluate the fairness,
from a financial point of view, to the holders of Comptek Common Stock of the
Exchange Ratio provided for in the Offer and the Merger. On June 12, 2000, at a
meeting of the Comptek Board held to evaluate the Offer and the Merger, CIBC
World Markets rendered an oral opinion, which opinion was confirmed by delivery
of a written opinion dated June 12, 2000, to the effect that, as of that date
and based on and subject to the matters described in its opinion, the Exchange
Ratio was fair, from a financial point of view, to the holders of Comptek
Common Stock, other than Northrop and its affiliates.
The full text of CIBC World Markets' written opinion dated June 12, 2000,
which describes the assumptions made, matters considered and limitations on the
review undertaken, is attached to the back of this Schedule 14D-9 as Schedule
III. CIBC World Markets' opinion is addressed to the Comptek Board and relates
only to the fairness of the Exchange Ratio from a financial point of view to
the holders of Comptek Common Stock, other than Northrop and its affiliates.
The opinion does not address any other aspect of the Offer, the Merger or any
related transaction, and does not constitute a recommendation to any
shareholder as to whether such shareholder should exchange shares in the Offer
or as to any other matter relating to the Offer or the Merger. The summary of
CIBC World Markets' opinion described below is qualified in its entirety by
reference to the full text of its opinion. Holders of Comptek Common Stock are
urged to read the opinion carefully in its entirely.
In arriving at its opinion, CIBC World Markets:
. reviewed the Merger Agreement;
. reviewed audited financial statements of Comptek for the fiscal years
ended March 31, 1998, March 31, 1999 and March 31, 2000 and audited
financial statements of Northrop for the fiscal years ended December 31,
1997, December 31, 1998 and December 31, 1999;
. reviewed unaudited financial statements of Northrop for the fiscal
quarter ended March 31, 2000;
. reviewed financial projections of Comptek prepared by Comptek's
management and publicly available financial projections relating to
Northrop;
22
<PAGE>
. reviewed historical market prices and trading volumes for Comptek Common
Stock and Northrop Common Stock;
. held discussions with Comptek's senior management with respect to
Comptek's business and prospects for future growth;
. reviewed and analyzed publicly available financial data for companies
that CIBC World Markets deemed comparable to Comptek and Northrop;
. reviewed and analyzed publicly available information for transactions
that CIBC World Markets deemed comparable to the Offer and the Merger;
. performed a discounted cash flow analysis of Comptek using assumptions of
future performance provided to CIBC World Markets by Comptek's management
and a discounted cash flow analysis of Northrop using publicly available
financial data;
. reviewed public information concerning Comptek and Northrop;
. at Comptek's request, approached and held discussions with third parties
to solicit indications of interest in the possible acquisition of
Comptek; and
. performed other analyses and reviewed other information as CIBC World
Markets deemed appropriate.
In rendering its opinion, CIBC World Markets relied on and assumed, without
independent verification or investigation, the accuracy and completeness of all
of the financial and other information that Comptek and its employees,
representatives and affiliates provided to CIBC World Markets. With respect to
forecasts of Comptek's future financial condition and operating results
provided to CIBC World Markets, CIBC World Markets assumed, at the direction of
Comptek's management, without independent verification or investigation, that
the forecasts were reasonably prepared on bases reflecting the best available
information, estimates and judgments of Comptek's management. With respect to
forecasts of Northrop's future financial condition and operating results, CIBC
World Markets reviewed and discussed with representatives of Northrop publicly
available forecasts relating to Northrop, and assumed, with Comptek's consent,
that the forecasts represented reasonable estimates and judgments as to the
future financial condition and operating results of Northrop. CIBC World
Markets also assumed, with Comptek's consent, that the Offer and the Merger
would be treated as a tax-free reorganization for federal income tax purposes.
CIBC World Markets did not make or obtain any independent evaluations or
appraisals of the assets or liabilities of Comptek, Northrop or affiliated
entities. CIBC World Markets expressed no opinion as to Comptek's and
Northrop's underlying valuation, future performance or long-term viability, or
the price at which Northrop Common Stock would trade upon or after announcement
or consummation of the Offer or the Merger. CIBC World Markets' opinion was
necessarily based on the information available to CIBC World Markets and
general economic, financial and stock market conditions and circumstances as
they existed and could be evaluated by CIBC World Markets as of the date of its
opinion. Although subsequent developments may affect its opinion, CIBC World
Markets does not have any obligation to update, revise or reaffirm its opinion.
Comptek imposed no other instructions or limitations on CIBC World Markets with
respect to the investigations made or the procedures followed by it in
rendering its opinion.
This summary is not a complete description of CIBC World Markets' opinion to
the Comptek Board or the financial analyses performed and factors considered by
CIBC World Markets in connection with its opinion. The preparation of a
fairness opinion is a complex analytical process involving various
determinations as to the most appropriate and relevant methods of financial
analysis and the application of those methods to the particular circumstances
and, therefore, a fairness opinion is not readily susceptible to summary
description. CIBC World Markets believes that its analyses and this summary
must be considered as a whole and that selecting portions of its analyses and
factors or focusing on information presented in tabular format, without
considering all analyses and factors or the narrative description of the
analyses, could create a misleading or incomplete view of the processes
underlying CIBC World Markets' analyses and opinion.
23
<PAGE>
In performing its analyses, CIBC World Markets considered industry
performance, general business, economic, market and financial conditions and
other matters existing as of the date of its opinion, many of which are beyond
Comptek's and Northrop's control. No company, transaction or business used in
the analyses as a comparison is identical to Comptek, Northrop or the Offer and
the Merger, and an evaluation of the results of those analyses is not entirely
mathematical. Rather, the analyses involve complex considerations and judgments
concerning financial and operating characteristics and other factors that could
affect the acquisition, public trading or other values of the companies,
business segments or transactions analyzed.
The estimates contained in CIBC World Markets' analysis and the ranges of
valuations resulting from any particular analysis are not necessarily
indicative of actual values or future results, which may be significantly more
or less favorable than those suggested by its analyses. In addition, analyses
relating to the value of businesses or securities do not purport to be
appraisals or to reflect the prices at which businesses or securities actually
may be sold. Accordingly, CIBC World Markets' analyses and estimates are
inherently subject to substantial uncertainty.
The type and amount of consideration payable in the Offer and the Merger was
determined through negotiation between Comptek and Northrop and the decision to
enter into the Offer and the Merger was solely that of the Comptek Board. CIBC
World Markets' opinion and financial analyses were only two of many factors
considered by the Comptek Board in its evaluation of the Offer and the Merger
and should not be viewed as determinative of the views of the Comptek Board or
management with respect to the Exchange Ratio or the Offer or the Merger.
The following is a summary of the material financial analyses underlying
CIBC World Markets' opinion to the Comptek Board in connection with the Offer
and the Merger. The financial analyses summarized below include information
presented in tabular format. In order to fully understand CIBC World Markets'
financial analyses, the tables must be read together with the text of each
summary. The tables alone do not constitute a complete description of the
financial analyses. Considering the data in the tables below without
considering the full narrative description of the financial analyses, including
the methodologies and assumptions underlying the analyses, could create a
misleading or incomplete view of CIBC World Markets' financial analyses.
Selected Companies Analyses
Comptek. CIBC World Markets compared financial and stock market information
for Comptek and the following seven selected publicly held companies in the
small capitalization defense and federal information technology services
industries:
<TABLE>
<S> <C>
Small Capitalization Federal
Small Capitalization Defense Companies Information Technology Services Companies
-------------------------------------- -----------------------------------------
. Applied Signal Technology, Inc. . BTG, Inc.
. EDO Corporation . CACI International Inc
. DRS Technologies, Inc.
. Elbit Systems Ltd.
. FLIR Systems, Inc.
</TABLE>
CIBC World Markets reviewed enterprise values, calculated as equity market
value, plus straight debt, minority interest, straight preferred stock and all
out-of-the-money convertibles, less investments in unconsolidated affiliates
and cash, as multiples of latest 12 months and estimated calendar year 2000
revenues, earnings before interest and taxes, commonly referred to as EBIT, and
earnings before interest, taxes, depreciation and amortization, commonly
referred to as EBITDA. CIBC World Markets also reviewed equity market values as
multiples of estimated calendar years 2000 and 2001 earnings per share,
commonly referred to as EPS. All multiples were based on closing stock prices
on June 8, 2000. Estimated financial data for the selected companies were based
on publicly available research analysts' estimates and estimated financial data
for Comptek were based on internal estimates of Comptek's management.
24
<PAGE>
CIBC World Markets then applied a range of selected multiples of latest 12
months and estimated calendar year 2000 revenues, EBIT and EBITDA and estimated
calendar years 2000 and 2001 EPS derived from the selected companies to
corresponding financial data of Comptek in order to derive an implied equity
reference range for Comptek. This analysis indicated the following implied per
Share equity reference range for Comptek, as compared to the per Share equity
value for Comptek implied by the Exchange Ratio based on the average closing
price of Northrop Common Stock for the 20 trading days ended June 8, 2000:
<TABLE>
<CAPTION>
Implied Equity Equity Value for Comptek
Reference Range for Comptek Implied by Exchange Ratio
--------------------------- -------------------------
<S> <C>
$8.64-$11.30 per Share $20.75 per Share
</TABLE>
Northrop. CIBC World Markets also compared financial and stock market
information for Northrop and the following five selected publicly held
companies in the defense industry:
. Alliant Techsystems Inc.
. General Dynamics Corporation
. Harris Corporation
. L-3 Communications Corporation
. Litton Industries, Inc.
CIBC World Markets reviewed enterprise values as multiples of latest 12
months and estimated calendar year 2000 revenues, EBIT and EBITDA. CIBC World
Markets also reviewed equity market values per share as multiples of estimated
calendar years 2000 and 2001 EPS excluding, in the case of Northrop, pension
income. All multiples were based on closing stock prices on June 8, 2000.
Estimated financial data for the selected companies and Northrop were based on
publicly available research analysts' estimates.
CIBC World Markets then applied a range of selected multiples of latest 12
months and estimated calendar year 2000 revenues, EBIT, EBITDA and estimated
calendar years 2000 and 2001 EPS derived from the selected companies to
corresponding financial data of Northrop in order to derive an implied equity
reference range for Northrop. This analysis indicated the following implied per
share equity reference range for Northrop, as compared to the closing price of
Northrop Common Stock on June 8, 2000:
<TABLE>
<CAPTION>
Implied Equity Closing Price of Northrop
Reference Range for Northrop Common Stock on June 8, 2000
---------------------------- ----------------------------
<S> <C>
$66.43-$86.06 per share $77.63 per share
</TABLE>
25
<PAGE>
Precedent Transactions Analysis
CIBC World Markets reviewed the purchase prices and implied transaction
multiples in the following 43 selected transactions in the defense electronics
and federal information technology services industries:
Defense Electronics Transactions
<TABLE>
<CAPTION>
Acquiror Target
-------- ------
<S> <C>
. DRS Technologies NAI Technologies
. EDO Corporation AIL Technologies, Inc.
. Elbit Systems Ltd. Elop Electro-Optics Industries Ltd.
. GEC-Marconi Systems Corporation Hazeltine Corporation
. General Dynamics Corporation Computing Devices International
. General Dynamics Corporation GTE Government Systems Corporation
. General Dynamics Corporation Lucent Technologies Inc. (Advanced Technology Systems Division)
. ITT Industries, Inc. Kaman Sciences Corporation
. ITT Industries, Inc. Stanford Telecommunications, Inc. (Defense Division)
. L-3 Communications Corporation AlliedSignal, Inc. (Ocean Systems Division)
. L-3 Communications Corporation Aydin Corporation
. L-3 Communications Corporation ILEX Systems
. L-3 Communications Corporation Interstate Electronics Corporation
. L-3 Communications Corporation Microdyne Corporation
. L-3 Communications Corporation SPD Technologies, Inc.
. Litton Industries, Inc. Denro Inc.
. Marconi North America, Inc. Watkins-Johnson Company (Telecommunications Division)
. Mentmore Holdings Corporation Watkins-Johnson Company (Defense Division)
. Northrop California Microwave, Inc.
. Raytheon Company E-Systems, Inc.
. Tracor, Inc. AEL Industries, Inc.
</TABLE>
26
<PAGE>
Federal Information Technology Services Transactions
<TABLE>
<CAPTION>
Acquiror Target
-------- ------
<S> <C>
. Affiliated Computer
Services, Inc. Computer Data Systems, Inc.
. Anteon Corporation Analysis & Technology, Inc.
. Anteon Corporation Techmatics, Inc.
. AT&T Corporation GRC International, Inc.
. CACI International Inc Government Systems, Inc.
. CACI International Inc QuesTech, Inc.
. Computer Data Systems,
Inc. Analytical Systems Engineering Corporation
. Computer Sciences
Corporation Nichols Research Corporation
. General Electric plc Tracor, Inc.
. Getronics NV Wang Laboratories, Inc.
. Litton Industries, Inc. PRC Inc.
. Litton Industries, Inc. TASC, Inc.
. Northrop Logicon, Inc.
. Science Applications
International Corporation The Boeing Company (Information Systems Division)
. The Carlyle Group EG&G Technical Services, Inc.
. The Titan Corporation Advanced Communication Systems, Inc.
. The Titan Corporation AverStar, Inc.
. TRW Inc. BDM International, Inc.
. Veridian Corporation ERIM International, Inc.
. Veridian Corporation MRJ Group, Inc.
. Veridian Corporation Trident Data Systems, Inc.
. Wang Global I-NET Inc.
</TABLE>
CIBC World Markets reviewed enterprise values in the selected transactions
as multiples of latest 12 months revenues, EBIT and EBITDA, and equity purchase
prices as a multiple of latest 12 months net income. CIBC World Markets also
reviewed the premiums paid in the selected transactions. All multiples and
premiums were based on publicly available information at the time of
announcement of the relevant transaction. In order to derive an implied equity
reference range for Comptek, CIBC World Markets then applied a range of
selected multiples of latest 12 months revenue, EBIT, EBITDA and net income
derived from the selected transactions to corresponding financial data of
Comptek and a range of selected premiums derived from the selected transactions
to the closing price of Comptek Common Stock on November 17, 1999, which is the
date one day prior to Comptek's announcement of its engagement of CIBC World
Markets to assist Comptek in exploring strategic alternatives. This analysis
indicated the following implied per Share equity reference range for Comptek,
as compared to the per Share equity value for Comptek implied by the Exchange
Ratio based on the average closing price of Northrop Common Stock for the 20
trading days ended June 8, 2000:
<TABLE>
<CAPTION>
Implied Equity Equity Value for Comptek
Reference Range for Comptek Implied by Exchange Ratio
--------------------------- -------------------------
<S> <C>
$14.85-$18.56 per Share $20.75 per Share
</TABLE>
27
<PAGE>
Discounted Cash Flow Analyses
Comptek. CIBC World Markets performed a discounted cash flow analysis of
Comptek to estimate the present value of the unleveraged, after-tax free cash
flows that Comptek could generate for fiscal years 2001 through 2005, based on
internal estimates of Comptek's management. CIBC World Markets calculated a
range of estimated terminal values by applying multiples ranging from 6.0x to
7.0x to Comptek's projected fiscal year 2005 EBITDA. The present value of the
cash flows and terminal values were calculated using discount rates ranging
from 12.0% to 14.0%. This analysis indicated the following implied per Share
equity reference range for Comptek, as compared to the per Share equity value
for Comptek implied by the Exchange Ratio based on the average closing price of
Northrop Common Stock for the 20 trading days ended June 8, 2000:
<TABLE>
<CAPTION>
Implied Equity Equity Value for Comptek
Reference Range for Comptek Implied by Exchange Ratio
--------------------------- -------------------------
<S> <C>
$14.53-$18.57 per Share $20.75 per Share
</TABLE>
Northrop. CIBC World Markets also performed a discounted cash flow analysis
of Northrop to estimate the present value of the unleveraged, after-tax free
cash flows that Northrop could generate for fiscal years 2000 through 2004,
based on publicly available research analysts' estimates. CIBC World Markets
calculated a range of estimated terminal values by applying multiples ranging
from 7.5x to 8.5x to Northrop's projected fiscal year 2004 EBITDA. The present
value of the cash flows and terminal values were calculated using discount
rates ranging from 11.0% to 13.0%. This analysis indicated the following
implied per share equity reference range for Northrop, as compared to the
closing price of Northrop Common Stock on June 8, 2000:
<TABLE>
<CAPTION>
Implied Equity Closing Price of Northrop
Reference Range for Northrop Common Stock on June 8, 2000
---------------------------- ----------------------------
<S> <C>
$81.66-$103.47 per share $77.63 per share
</TABLE>
Leveraged Buyout Analysis
CIBC World Markets derived an implied equity reference range for Comptek by
performing a leveraged buyout analysis based on internal estimates of Comptek's
management and assuming a range of required rates of return to a financial
buyer of 25% to 30% and a range of EBITDA terminal multiples of 6.5x to 7.5x.
This analysis indicated the following implied equity reference range for
Comptek, as compared to the equity value for Comptek implied by the Exchange
Ratio based on the closing price of Northrop Common Stock on June 8, 2000:
<TABLE>
<CAPTION>
Implied Equity Equity Value for Comptek
Reference Range for Comptek Implied by Exchange Ratio
--------------------------- -------------------------
<S> <C>
$12.00-$14.00 per Share $20.75 per Share
</TABLE>
Exchange Ratio Analyses
Implied Exchange Ratio Analysis. CIBC World Markets calculated implied
exchange ratio reference ranges by dividing the results derived for Comptek
from the "Selected Companies Analyses," "Precedent Transaction Analysis,"
"Discounted Cash Flow Analyses" and "Leveraged Buyout Analysis" described above
by the average of the results derived for Northrop from the "Selected Companies
Analyses" and "Discounted Cash Flow Analyses" described above. CIBC World
Markets then compared these implied ranges to the Exchange Ratio. This analysis
indicated the following approximate implied exchange ratio reference ranges, as
compared to the Exchange Ratio in the Offer and the Merger of 0.2686x based on
the average closing price of Northrop Common Stock for the 20 trading days
ended June 8, 2000:
<TABLE>
<CAPTION>
Implied Exchange Ratio Range
----------------------------
<S> <C>
Selected Companies Analyses................. 0.0912x-0.1526x
Precedent Transaction Analysis.............. 0.1567x-0.2506x
Discounted Cash Flow Analyses............... 0.1533x-0.2508x
Leveraged Buyout Analysis................... 0.1266x-0.1891x
</TABLE>
28
<PAGE>
Historical Exchange Ratio Analysis. CIBC World Markets performed an
historical exchange ratio analysis comparing the closing prices for Comptek
Common Stock and Northrop Common Stock on June 8, 2000, and the average daily
closing prices of Comptek Common Stock and Northrop Common Stock for the one
month, two months, three months and six months preceding June 8, 2000. This
analysis yielded an implied exchange ratio range of 0.2113x to 0.2539x, as
compared to the Exchange Ratio in the Offer and the Merger of 0.2686x based on
the average closing price of Northrop Common Stock for the 20 trading days
ended June 8, 2000, as indicated below:
<TABLE>
<CAPTION>
Period Implied Exchange Ratio
------ ----------------------
<S> <C>
June 8, 2000...................................... 0.2222x
One month average................................. 0.2113x
Two months average................................ 0.2203x
Three months average.............................. 0.2464x
Six months average................................ 0.2539x
</TABLE>
Other Factors. In rendering its opinion, CIBC World Markets also reviewed
and considered other factors, including:
. selected research analysts' reports for Northrop, including stock price
estimates of those analysts;
. the 52-week historical trading ranges for Comptek Common Stock and
Northrop Common Stock;
. the relationship between movements in Comptek Common Stock, movements in
the common stock of selected defense companies and information technology
companies, and movements in the S&P 500 Index; and
. potential pro forma effect of the Offer and the Merger on Northrop's EPS
for estimated calendar years 2000 through 2003, based on, in the case of
Comptek, internal estimates of Comptek's management and, in the case of
Northrop, publicly available research analysts' estimates.
(c) Intent To Tender.
To Comptek's knowledge, after reasonable inquiry and in view of the
obligations under the Tender Agreement, all executive officers, directors,
affiliates and subsidiaries of Comptek will tender pursuant to the Offer all
Shares held of record or beneficially owned by them (other than options to
acquire Shares).
Item 5. Persons/Assets, Retained, Employed, Compensated Or Used.
Comptek has agreed to pay CIBC World Markets for its financial advisory
services in connection with the Offer and the Merger an aggregate fee equal to
a percentage of the total consideration, including liabilities assumed, payable
in the Offer and the Merger. It is currently estimated that the aggregate fee
payable to CIBC World Markets will be approximately $2.7 million. In addition,
Comptek has agreed to reimburse CIBC World Markets for its reasonable out-of-
pocket expenses, including reasonable fees and expenses of its legal counsel,
and to indemnify CIBC World Markets and related parties against liabilities,
including liabilities under the federal securities laws, relating to, or
arising out of, its engagement.
Comptek selected CIBC World Markets based on CIBC World Markets' reputation,
expertise and familiarity with Comptek and its business. CIBC World Markets is
an internationally recognized investment banking firm and, as a customary part
of its investment banking business, is regularly engaged in valuations of
businesses and securities in connection with acquisitions and mergers,
underwritings, secondary distributions of securities, private placements and
valuations for other purposes. CIBC World Markets has in the past provided
services to Comptek unrelated to the Offer and the Merger, for which services
has received compensation. In the ordinary course of business, CIBC World
Markets and its affiliates may actively trade the securities of Comptek and
Northrop for their own account and for the accounts of customers and,
accordingly, may at any time hold a long or short position in such securities.
29
<PAGE>
Neither Comptek nor any person acting on its behalf has employed, retained
or agreed to compensate any person or class of persons to make solicitations or
recommendations in connection with the Offer or the Merger.
Item 6. Interest In Securities Of The Subject Company.
Except as set forth on Schedule II attached hereto, no transactions in the
Shares have been effected during the past 60 days by Comptek or any of its
executive officers, directors, affiliates or subsidiaries.
Item 7. Purposes Of The Transaction And Plans Or Proposals.
(a) Except as indicated in Items 3 and 4 above, no negotiations are being
undertaken or are underway by Comptek in response to the Offer which relate to
a tender offer or other acquisition of Comptek's securities by Comptek, any
subsidiary of Comptek or any other person.
(b) Except as indicated in Items 3 and 4 above, no negotiations are being
undertaken or are underway by Comptek in response to the Offer which relate to,
or would result in, (i) any extraordinary transaction, such as a merger,
reorganization or liquidation, involving Comptek or any subsidiary of Comptek,
(ii) any purchase, sale or transfer of a material amount of assets of Comptek
or any subsidiary of Comptek, or (iii) any material change in the present
dividend rate or policy, indebtedness or capitalization of Comptek.
(c) Except as indicated in Items 3 and 4 above, there are no transactions,
Board of Directors resolutions, agreements in principle or signed contracts
entered into in response to the Offer that relate to one or more of the matters
referred to in Item 7(a) above.
Item 8. Additional Information.
(a) The Information Statement attached hereto as Schedule I is being
furnished to Comptek's shareholders in connection with the possible designation
by Northrop, pursuant to the Merger Agreement, of certain persons to be
appointed to the Comptek Board other than at a meeting of Comptek's
shareholders, and such information is incorporated herein by reference.
(b) On June 12, 2000, the Rights Agreement dated as of April 16, 1999
between Comptek and American Stock Transfer & Trust Company, as Rights Agent
(the "Rights Agreement"), was amended (the "Amendment") to provide that neither
Northrop nor Acquisition Sub, individually or collectively, shall be deemed to
be an Acquiring Person (as defined in the Rights Agreement) nor shall a
Distribution Date (as defined in the Rights Agreement) be deemed to have
occurred solely as a result of (i) the announcement, approval, execution or
delivery of the Merger Agreement, (ii) the consummation of the Offer and/or
Merger, or (iii) the consummation of the other transactions contemplated by the
Merger Agreement.
30
<PAGE>
(c) The information contained in all of the Exhibits referred to in Item 9
below is incorporated herein by reference.
Item 9. Exhibits.
<TABLE>
<C> <S>
(a)(1) Preliminary Prospectus, dated July 6, 2000. Incorporated herein by
reference to the prospectus included in the Registration Statement
on Form S-4 of Northrop filed with the SEC on July 6, 2000 (the
"Northrop S-4").
(a)(2) Form of Letter of Transmittal. Incorporated herein by reference to
Exhibit 99.1 to the Northrop S-4.
(a)(3) Chairman's Letter to Shareholders of Comptek, dated July 6, 2000.*
(a)(4) Press Release of Comptek, dated June 12, 2000. Incorporated herein
by reference to Exhibit 99 to Comptek's Current Report on Form 8-K
filed on June 12, 2000.
(a)(5) Tender Agreement between Acquisition Sub and Laura L. Benedetti,
John R. Cummings, Bradley H. Feldmann, G. Wayne Hawk, Christopher
A. Head, James D. Morgan, John J. Sciuto and Henry P. Semmelhack of
Comptek dated June 15, 2000.
(e)(1) Agreement and Plan of Merger, dated as of June 12, 2000, among
Northrop, Acquisition Sub and Comptek. Incorporated herein by
reference to Comptek's Current Report on Form 8-K filed on June 22,
2000.
(e)(2) Opinion of CIBC World Markets Corp. to the Board of Directors of
Comptek dated June 12, 2000. Included as Schedule III hereto.*
(e)(3) Form of Change of Control Agreement between Comptek and certain of
its officers. Incorporated herein by reference to Exhibit 10.2 to
Comptek's Quarterly Reports. Form 10-Q for the quarter ended
December 31, 1999 (the "December 1999 Form 10-Q"). Agreement with
John J. Sciuto, Chairman, President and Chief Executive Officer,
dated December 31, 1999. Agreement with Bradley H. Feldmann, Senior
Vice President and Chief Operating Officer, dated December 31,
1999. Agreement with Laura L. Benedetti, Vice President, Chief
Financial Officer and Treasurer, dated December 31, 1999. Agreement
with Christopher A. Head, Executive Vice President, General Counsel
and Secretary, dated December 31, 1999.
(e)(4)(i) Comptek Employee Change of Control Severance Plan. Incorporated
herein by reference to Exhibit 10.3 to the December 1999 10-Q.
(e)(4)(ii) Amendment to Employee Change of Control Plan between Comptek and
certain of its employees. Incorporated herein by reference to
Exhibit 10.3m to Comptek's Annual Report on Form 10-K for the
fiscal year ended March 31, 2000 (the "2000 Form 10-K").
(e)(5) Employment Agreement between Comptek and Bradley H. Feldmann dated
June 1, 1999. Incorporated herein by reference to Exhibit 10.1 to
Comptek's Quarterly Report on Form 10-Q for the quarter ended
October 1, 1999 (the "October 1999 Form 10-Q").
(e)(6) 1994 Stock Option Plan for Non-Employee Directors, as amended.
Incorporated herein by reference to Exhibit B to Comptek's 1999
definitive Proxy Statement dated July 12, 1999 (the "1999 Proxy
Statement").
(e)(7) 1999 Employee Stock Purchase Plan. Incorporated herein by reference
to Exhibit A to the 1999 Proxy Statement.
(e)(8) 1992 Equity Incentive Plan, as amended. Incorporated herein by
reference to Exhibit 10.1 to Comptek's Quarterly Report on Form 10-
Q for quarter ended June 30, 1995.
(e)(9) 1998 Equity Incentive Stock Plan. Incorporated herein by reference
to Appendix A of Comptek's 1998 definitive Proxy Statement dated
July 8, 1998 (the "1998 Proxy Statement").
</TABLE>
31
<PAGE>
<TABLE>
<C> <S>
(e)(10) Non-qualified Stock Option Agreement by and between Comptek and John
J. Sciuto dated June 20, 1996. Incorporated herein by reference to
Exhibit 10.1b to Comptek's Annual Report on Form 10-K for the fiscal
year ended March 31, 1997.
(e)(11) Employment Agreement dated November 1, 1997 by and between Comptek and
John J. Sciuto. Incorporated herein by reference to Exhibit 10.3c to
Comptek's Annual Report on Form 10-K for the fiscal year ended March
31, 1998 (the "1998 Form 10-K").
(e)(12) Employment Agreement dated November 1, 1997 by and between Comptek and
Christopher A. Head. Incorporated herein by reference to Exhibit 10.3d
to the 1998 Form 10-K.
(e)(13) Employment Agreement dated April 1, 1998 by and between Comptek and
Laura L. Benedetti. Incorporated herein by reference to Exhibit 10.3e
to the 1998 Form 10-K.
(e)(14) Employment Agreement dated April 1, 1997 by and between Comptek and
James D. Morgan. Incorporated herein by reference to Exhibit 10.3f to
the 1998 Form 10-K.
(e)(15) Employment Agreement dated May 14, 1998 by and between PRB Associates,
Inc. and Lawrence M. Schadegg. Incorporated herein by reference to
Exhibit 10.3h to the 1998 Form 10-K.
(e)(16) Restricted Stock Agreement dated May 14, 1998 by and between Comptek
and Lawrence M. Schadegg. Incorporated herein by reference to Exhibit
10.3i to the 1998 Form 10-K.
(e)(17) Letter Agreement Regarding Repayment of Stock Loans between Comptek
and John J. Sciuto. Incorporated herein by reference to Exhibit 10.3o
to the 2000 Form 10-K.
(e)(18) Form of Incentive Stock Option Agreement and Non-Qualified Stock
Agreement issued under Comptek's Equity Incentive Plan to plan
participants, including executive officers. Incorporated herein by
reference to Exhibit 10.1a to the 1998 Form 10-K.
(e)(19) Form of Gross-Up Letter dated March 20, 2000 issued to Laura L.
Benedetti, Bradley H. Feldmann, Christopher A. Head, and John J.
Sciuto. Incorporated herein by reference to Exhibit 10.3n to the 2000
Form 10-K.
(e)(20) The Rights Agreement dated as of April 16, 1999, between Comptek
Research, Inc. and American Stock Transfer & Trust Company, as Rights
Agent. Incorporated herein by reference to Exhibit 4 to Comptek's
Current Report on Form 8-K, dated April 19, 1999.
(e)(21) Amendment to the Rights Agreement dated June 12, 2000. Incorporated
herein by reference to Exhibit 99.1 to Comptek's Current Report on
Form 8-K filed on June 22, 2000.
</TABLE>
--------
* Included in copy mailed to stockholders.
32
<PAGE>
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
Dated: July 6, 2000
COMPTEK RESEARCH, INC.
/s/ Christopher A. Head
By: _________________________________
Christopher A. Head, Esq.
Executive Vice President,
General Counsel and Secretary
33
<PAGE>
SCHEDULE I
COMPTEK RESEARCH, INC.
2732 Transit Road,
Buffalo, New York 14224
Information Statement Pursuant to Section 14(f) of the Securities
Exchange Act of 1934 and Rule 14f-1 Thereunder
I-1
<PAGE>
NO VOTE OR OTHER ACTION OF THE SECURITY HOLDERS IS REQUIRED IN
CONNECTION WITH THIS INFORMATION STATEMENT. NO PROXIES ARE BEING
SOLICITED AND YOU ARE REQUESTED NOT TO SEND COMPTEK A PROXY
We are sending this information statement ("Information Statement") to you
as a record holder, at the close of business on June 29, 2000, of the common
stock, par value $.02 per share (including the associated preferred stock
purchase rights, the "Common Stock" or "Shares"), of Comptek Research, Inc., a
New York corporation ("Comptek"), in accordance with Rule 14f-1 under the
United States Securities Exchange Act of 1934, as amended (the "Exchange Act").
There will be no vote or other action by our shareholders in connection with
this Information Statement. Voting proxies regarding shares of our Common Stock
are not being solicited from any shareholder. You are urged to read this
Information Statement carefully. You are not, however, required to take any
action in connection with this Information Statement.
BACKGROUND INFORMATION
On June 12, 2000, Comptek entered into an Agreement and Plan of Merger (the
"Merger Agreement") with Northrop Grumman Corporation, a Delaware corporation
("Northrop"), and Yavapai Acquisition Corp., a Delaware corporation and a
direct wholly owned subsidiary of Northrop ("Acquisition Sub"). The terms of
the Merger Agreement call for (i) Northrop to cause Acquisition Sub to make an
exchange offer to exchange shares of common stock, par value $1.00 per share,
of Northrop (the "Northrop Common Stock") for all of the issued and outstanding
Shares (the "Offer"), and (ii) subsequent to the consummation of the Offer, for
Acquisition Sub to be merged with and into Comptek (the "Merger"). As a result
of the Offer and Merger, Comptek will become a wholly owned subsidiary of
Northrop.
Acquisition Sub is expected to commence the Offer on July 6, 2000. The Offer
is scheduled to expire at 12:00 midnight, New York City time, on August 2,
2000, unless it is extended by Acquisition Sub in accordance with the terms and
conditions of the Merger Agreement.
The Merger Agreement provides that, upon the consummation of the Offer,
Comptek shall cause certain designees of Northrop (the "Northrop Designees") to
be elected to the Board of Directors of Comptek (the "Comptek Board"). If,
however, the Merger Agreement is terminated or if Acquisition Sub does not
accept the Common Stock tendered for exchange, then Northrop will not have any
rights to designate directors for election to the Comptek Board.
THE NORTHROP DESIGNEES
Effective upon the acceptance for exchange by Acquisition Sub of a number of
Shares that satisfies the condition that there shall be validly tendered in
accordance with the terms of the Offer prior to the expiration date of the
Offer and not withdrawn a number of Shares which, together with the Shares then
owned by Northrop and Acquisition Sub, represents at least 66.67% of the total
number of outstanding Shares, assuming the exercise or conversion of all
outstanding options, rights and convertible securities and the issuance of all
Shares that Comptek is obligated to issue (the "Minimum Tender Condition"),
Northrop will be entitled to designate the number of directors, rounded up the
next whole number, on the Comptek Board that equals the product of (i) the
total number of directors on the Comptek Board (giving effect to the to the
election of any additional directors pursuant to this provision) and (ii) the
percentage that the number of Shares owned by Northrop or Acquisition Sub
(including shares accepted for exchange) bears to the total number of Shares
outstanding, and Comptek shall take all necessary action to cause Northrop's
Designees to be elected or appointed to the Comptek Board, including, without
limitation, increasing the number of directors, or seeking and accepting
resignations of incumbent directors, or both; provided that, prior to the
effective time of the Merger (the "Effective Time"), the Comptek Board shall
always have at least two members who were directors of Comptek prior to
consummation of the Offer (each, a "Continuing Director"). If the number of
Continuing Directors is reduced to less than two for any reason prior to the
Effective Time, the remaining and departing Continuing Directors shall be
entitled to designate a person to fill the vacancy.
I-2
<PAGE>
As a result of the Merger, the separate corporate existence of Acquisition
Sub shall cease and Comptek shall continue as the surviving corporation of the
Merger as a wholly owned subsidiary of Northrop (the "Surviving Corporation").
The directors of Acquisition Sub at the Effective Time shall be the directors
of the Surviving Corporation, until the earlier of their resignation or
removal or until their successors are duly elected and qualified.
Northrop has informed Comptek that it will choose the Northrop Designees to
the Comptek Board from the directors and executive officers of Northrop and/or
Acquisition Sub listed in Annex A to the preliminary prospectus dated July 6,
2000 (the "Preliminary Prospectus") included in Northrop's registration
statement on Form S-4 (the "Registration Statement"), a copy of which
Preliminary Prospectus is being mailed to Comptek's shareholders together with
Comptek's Schedule 14D-9 to which this Information Statement is attached.
Northrop has informed Comptek that each of the directors and executive
officers listed in Annex A has consented to act as a director of Comptek, if
so designated. The name, address, principal occupation or employment and five
year employment for each such person is set forth in Annex A.
It is expected that the Northrop Designees will assume office following the
acceptance for exchange by Acquisition Sub of the Minimum Tender Condition of
Shares pursuant to the Merger Agreement, which cannot be earlier than August
2, 2000.
CERTAIN INFORMATION REGARDING COMPTEK
As of July 5, 2000, Comptek had 6,273,328 shares of Common Stock issued and
outstanding, Comptek's only class of voting securities that would be entitled
to vote for directors at a shareholder meeting if one were to be held, each
share being entitled to one vote.
INFORMATION CONCERNING DIRECTORS AND EXECUTIVE OFFICERS OF COMPTEK
The Comptek Board is divided into two classes serving staggered two-year
terms. Four directorships are designated Class I and four directorships are
designated Class II. The current Class I directors were elected at the 1999
Annual Meeting for a two-year term expiring at the 2001 Annual Meeting. The
current Class II directors were elected at the 1998 Annual Meeting for a two-
year term expiring at the 2000 Annual Meeting.
The following list sets forth the name and present principal occupation or
employment, and material occupations, positions, offices or employments for
the past five years, of each director and executive officer of Comptek. Unless
otherwise indicated, each such person is a citizen of the United States and
the business address of such person is c/o Comptek Research, Inc., 2732
Transit Road, Buffalo, New York 14224.
Dr. Joseph A. Alutto, age 58. Dr. Alutto has been a Director since 1987.
Dr. Alutto was appointed Dean of the Fisher College of Business at The Ohio
State University in March 1991. Dr. Alutto served as Dean of the School of
Management at the State University of New York at Buffalo from 1977 to 1990.
He also serves on the Board of Directors of United Retail Group, Inc.
(specialty retailer of women's apparel).
Laura L. Benedetti, age 34. Ms. Benedetti was appointed Senior Vice
President in May of 2000 and Chief Financial Officer in February of 1999. Ms.
Benedetti has been Vice President of Finance since April 1, 1997, Treasurer
since 1992, and Principal Financial and Accounting Officer since 1995.
Chris Boehm, age 43. Mr. Boehm was named President of Comptek Federal
Systems, Inc. on May 16, 2000. Prior to his appointment as President, Mr.
Boehm was employed by Litton/PRC, Inc. ("Litton") for over 15 years in several
positions, including President and General Manager of the Migration Solutions
Business Unit and as Executive Manager for Litton's National Intelligence
Systems division.
Dr. John R. Cummings, age 67. Dr. Cummings, who is retired, has been a
Director since 1968. He was
I-3
<PAGE>
Chairman of the Board from September 1990 until March 31, 1997. He served as
President and Chief Executive Officer from October 1991 until March 31, 1996.
He previously was a Vice President and Chief Scientist of Comptek since its
formation, and is a founder of Comptek.
Edward G. Eberl, age 48. Mr. Eberl was named President of Comptek Amherst
Systems, Inc. in June 1999. Prior to being named President, Mr. Eberl was Vice
President--Technical Operations and product manager for the combat
electromagnetic environment simulator (CEESIM) for Amherst Systems, Inc.
("Amherst"), now a subsidiary of Comptek. He has more than 20 years experience
in the design and development of real-time simulation systems and had been with
Amherst since its inception.
Bradley F. Feldmann, age 39. Mr. Feldmann joined Comptek on June 7, 1999, as
Senior Vice President and Chief Operating Officer. He was employed by Cubic
Defense Systems, Inc., a subsidiary of Cubic Corporation, in several program
and general management positions of increasing responsibility from 1989 until
joining Comptek. Immediately prior to joining Comptek, he was Senior Vice
President and Chief Operating Officer of Cubic Defense Systems.
G. Wayne Hawk, age 72. Mr. Hawk, who is retired, has been a Director since
1977. He was Chairman and Chief Executive Officer of Acme Electric Corporation
from August 1992 until his retirement in October 1993. He was President and
Chief Executive Officer from August 1991 to August 1992 until his retirement in
October 1993. He was President and Chief Executive Officer from August 1991 to
August 1992. Prior thereto, he served as President and Chief Operating Officer
since April 1991, and President and Chief Executive Officer from January 1987
to April 1991.
Christopher A. Head, age 48. Mr. Head has been Comptek's Vice President and
General Counsel since 1985. In 1991, he was designated Executive Vice
President. Mr. Head also served as Chief Financial Officer from April of 1992
to June of 1993. He has also served as Secretary of Comptek since 1985.
Dr. Patrick J. Martin, age 59. Dr. Martin has been a Director since 1993.
Dr. Martin is Corporate Senior Vice President and President, North American
Solutions Group for Xerox Corporation. Prior thereto, Dr. Martin held the
following positions for Xerox Corporation; 1998 to 2000 he was President,
Developing Markets Operations; from 1996 to 1998 he was President, Americas
Customer Operations; he was President of the Office Products Division from 1993
to 1996; and from 1991 to 1993, Dr. Martin was President and General Manager of
Xerox Corporation's Americas Customer Operations. In 1992, Dr. Martin was
elected to the additional post of Corporate Vice President. Dr. Martin is a
director of Central Vermont Public Service Corporation (electric utility).
Wayne E. Meyer, age 74. Rear Admiral Wayne E. Meyer has been a Director
since 1998. Mr. Meyer entered the private sector in 1985 as a consultant,
speaker and writer and presently provides technical expertise and strategic
advice to a variety of commercial and government clients. Retired from the Navy
in 1985 after 42 years of active naval service, he is currently President of
the Wayne E. Meyer Corporation. Mr. Meyer is the Chairman of Mikros Systems
Corporation (developer of digital radio technology), and serves on the Board of
Advisors to Bath Marine Works, a business unit of General Dynamics Corporation.
James D. Morgan, age 63. Mr. Morgan has been a Director since 1968, and is a
founder of Comptek. Mr. Morgan is currently Vice President and Chief Scientist
of Comptek. He was a Vice President for Barrister Information Systems
Corporation (law office automation products and services) from April 1982 to
April 1990 and is currently serving on Barrister's Board of Directors.
Lawrence M. Schadegg, age 55. Mr. Schadegg became an executive officer of
Comptek as a result of Comptek's acquisition of PRB Associates, Inc. in May
1998. He has been President of PRB, now a subsidiary of Comptek, since 1978.
Previously, Mr. Schadegg served as a Naval Flight Officer in the U.S. Navy.
John J. Sciuto, age 57. Mr. Sciuto has served as a Director since 1996. Mr.
Sciuto was appointed
I-4
<PAGE>
President and Chief Executive Officer of Comptek Research, Inc. on April 1,
1996. Effective April 1, 1997, he was elected to the additional position of
Chairman of the Board. Mr. Sciuto has been President and Chief Executive
Officer of Comptek Federal Systems, Inc., Comptek's principal operating
subsidiary, since its incorporation in 1992. Prior to that, Mr. Sciuto was
President of the Federal Systems Division of Comptek Research, Inc.
Henry P. Semmelhack, age 63. Mr. Semmelhack has served as a Director since
1968. Mr. Semmelhack has been President, Chief Executive Officer and Chairman
of the Board of Barrister Global Services Network, Inc. (law office automation
products and services) since 1982. A founder of Comptek, he served as its Chief
Executive Officer until May 1983. Mr. Semmelhack is a director of Merchants
Group, Inc. (insurance company).
BOARD MEETINGS AND COMMITTEES
The Comptek Board held five meetings (including both regular and special
meetings) during the year ended March 31, 2000. During fiscal year ended March
31, 2000, Comptek had two committees: the Audit Committee and the Compensation
Committee (collectively, the "Committees").
The Audit Committee currently consists of Directors Alutto, Cummings, Hawk
and Semmelhack. The Audit Committee held four meetings during the fiscal year
ended March 31, 2000. The Audit Committee's functions include recommending to
the Comptek Board the engagement of Comptek's independent certified public
accountants and reviewing with such accountants the plan for, and results of,
their auditing engagement. The Comptek Board has adopted a written charter for
the Audit Committee, consistent with the requirements of Section 121(B) of the
American Stock Exchange Rules.
The Compensation Committee currently consists of Directors Alutto, Martin,
Hawk, and Meyer. The Compensation Committee met once and took other actions by
unanimous written consent during the fiscal year ended March 31, 2000. The
Compensation Committee approves compensation arrangements for executive
officers and directors and administers Comptek's equity incentive plans.
Comptek does not currently have a Nominating Committee. Nominees for
directors of Comptek are selected by the full Comptek Board. The Comptek Board
will consider nominees recommended by shareholders of Comptek. The names and
information supporting any such nominee should be sent to Christopher A. Head,
Esq., Secretary, Comptek Research, Inc., 2732 Transit Road, Buffalo, NY 14224,
who will submit them to the Comptek Board.
During the year ended March 31, 2000, each of the directors attended at
least 75% of the meetings of the Comptek Board and Committees on which he
served.
I-5
<PAGE>
COMPENSATION OF DIRECTORS
Employee-directors receive no additional compensation for service on the
Comptek Board or its Committees. For the fiscal year ended March 31, 2000,
directors who are not employees received an annual retainer of $16,000, payable
in quarterly installments of $4,000. In addition, each non-employee director
receives a fee of: (i) $1,000 per Comptek Board meeting attended up to an
annual maximum of $6,000; and (ii) $1,000 per Committee meeting attended if
held on different day than a Comptek Board meeting, or $500 per committee
meeting attended if held on the same day as a Comptek Board meeting, up to an
annual maximum of $5,000.
Each non-employee director is automatically granted a non-qualified option
to purchase 1,000 shares of Common Stock at 100% of fair market value as of the
date of the director's election, appointment, or designation as a non-employee
director. In addition, each non-employee director, effective five business days
after each Annual Meeting, is automatically granted a non-qualified option to
purchase 1,000 shares of Common Stock at 100% of fair market value as of the
date of grant. Options granted on an automatic basis shall be exercisable in
full as of the date of grant. Further, the Comptek Board is authorized to make
discretionary grants of options in addition to the automatic grants provided
for in the Plan. The discretionary grants shall be exercisable as determined by
the Comptek Board at the time of grant.
During the fiscal year ended March 31, 2000, the following discretionary
grants were made to each non-employee director and to all non-employee
directors as a group:
<TABLE>
<CAPTION>
Number
Individual or Group of Options Price
------------------- ---------- ------
<S> <C> <C>
Each Non-Employee Director................................ 3,000 $7.875
12,000 $10.25
All Non-Employee Directors, as a group (6 persons)........ 18,000 $7.875
72,000 $10.25
</TABLE>
In addition, in order to encourage ownership of Comptek Shares by non-
employee directors, each non-employee director is automatically granted a non-
qualified option to purchase 5,000 shares of Common Stock at 100% of fair
market value as of the first day of the calendar quarter following such
director's first attaining ownership of at least 5,000 shares of Common Stock.
I-6
<PAGE>
PRINCIPAL SHAREHOLDERS
The following table sets forth certain information, as of May 31, 2000, with
respect to the beneficial ownership of Common Stock by all persons or groups
(as such terms are used in Section 13(d)(3) of the Exchange Act) known by
Comptek to be the beneficial owners of more than 5% of its outstanding Common
Stock (the only class of stock outstanding).
<TABLE>
<CAPTION>
Amount and Nature
of Beneficial
Name and Address of Beneficial Owner Ownership(1) Percent
------------------------------------ ----------------- -------
<S> <C> <C>
J. Carlo Cannell.................................. 347,100(2) 5.6%
D/B/A Cannell Capital Management
600 California Street
Floor 14
San Francisco, CA 94108
James D. Morgan .................................. 331,171(3) 5.3%
2732 Transit Road
Buffalo, NY 14224
</TABLE>
--------
(1) The beneficial ownership information presented is based upon information
furnished by each person or contained in filings with the Securities and
Exchange Commission. Pursuant to Rule 13d-3 under the Exchange Act,
beneficial ownership of a security consists of sole or shared voting power
(including the power to vote or direct the vote) and/or sole or shared
investment power (including the power to dispose or to direct the
disposition) with respect to a security whether through any contract,
arrangement, understanding, relationship or otherwise. Except as otherwise
indicated, the named person has sole voting and investment power with
respect to the shares of Common Stock set forth opposite his name.
Percentages have been calculated on the basis of 6,234,044 shares
outstanding, plus, as appropriate, shares subject to options or subject to
debenture conversion and deemed outstanding pursuant to Rule 13d-3(d)(1)
under the Exchange Act.
(2) Shared voting and dispositive power for all shares listed.
(3) Amount indicated includes options to purchase 10,233 shares which are
exercisable within 60 days of May 31, 2000.
I-7
<PAGE>
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth the beneficial ownership of shares of Common
Stock as of May 31, 2000, by each director and each executive officer who is
named in the Summary Compensation Table below, and by all directors and
executive officers as a group:
<TABLE>
<CAPTION>
Amount and Nature
of Beneficial
Name of Beneficial Owner Ownership(1) Percent
------------------------ ----------------- -------
<S> <C> <C>
Joseph A. Alutto.................................... 41,100(2) *
Laura L. Benedetti.................................. 31,274(3) *
John R. Cummings.................................... 221,000(4) 3.5%
Bradley H. Feldmann................................. 5,177(5) *
G. Wayne Hawk....................................... 233,138(6) 3.7%
Christopher A. Head................................. 79,199(7) 1.3%
Patrick J. Martin................................... 31,000(8) *
Wayne E. Meyer...................................... 26,000(9) *
James D. Morgan..................................... 331,171(10) 5.3%
Lawrence M. Schadegg................................ 21,889 *
John J. Sciuto...................................... 179,871(11) 2.8%
Henry P. Semmelhack................................. 215,786(2) 3.4%
All executive officers and directors as a group (14
persons)........................................... 1,416,605(12) 21.3%
</TABLE>
--------
* less than 1%
(1) The beneficial ownership information presented is based upon information
furnished by each person or contained in filings with the Securities and
Exchange Commission. Pursuant to Rule 13d-3 under the Exchange Act,
beneficial ownership of a security consists of sole or shared voting power
(including the power to vote or direct the vote) and/or sole or shared
investment power (including the power to dispose or to direct the
disposition) with respect to a security whether through any contract,
arrangement, understanding, relationship or otherwise. Except as otherwise
indicated, the named person has sole voting and investment power with
respect to the Shares set forth opposite his name. Percentages have been
calculated on the basis of 6,234,044 Shares outstanding, plus, as
appropriate, Shares subject to options and deemed outstanding pursuant to
Rule 13d-3(d)(1) under the Exchange Act.
(2) Amount indicated includes options to purchase 36,000 Shares which are
exercisable within 60 days of May 31, 2000.
(3) Amount indicated includes options to purchase 28,873 Shares which are
exercisable within 60 days of May 31, 2000.
(4) Amount indicated includes 40,000 Shares held by Dr. Cumming's wife,
Barbara Cummings. Also included are options to purchase 34,000 Shares
which are exercisable within 60 days of May 31, 2000.
(5) Amount indicated includes options to purchase 5,000 Shares which are
exercisable within 60 days of May 31, 2000.
(6) Amount indicated includes options to purchase 36,000 Shares which are
exercisable within 60 days of May 31, 2000. Also included are 500 Shares
owned by Mr. Hawk's wife, Charline Hawk. Mr. Hawk disclaims any beneficial
ownership of the Shares held by his wife.
(7) Amount indicated includes options to purchase 67,725 Shares which are
exercisable within 60 days of May 31, 2000.
(8) Amount indicated includes options to purchase 31,000 Shares which are
exercisable within 60 days of May 31, 2000.
(9) Amount indicated includes options to purchase 24,000 Shares which are
exercisable within 60 days of May 31, 2000.
I-8
<PAGE>
(10) Amount indicated includes options to purchase 10,233 Shares which are
exercisable within 60 days of May 31, 2000.
(11) Amount indicated includes options to purchase 121,407 Shares which are
exercisable within 60 days of May 31, 2000.
(12) Amount indicated includes options to purchase 430,238 Shares which are
exercisable within 60 days of May 31, 2000.
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table contains information for the fiscal years ended March
31, 2000, 1999, and 1998, concerning the compensation received by Comptek's
Chief Executive Officer (the "CEO") and the other four most highly compensated
executive officers of Comptek whose salary and bonus exceeded $100,000 for the
fiscal year ended March 31, 2000.
<TABLE>
<CAPTION>
Annual Compensation Long-term Compensation
---------------------------------- ---------------------------------------------
Restricted Securities
Other Annual Stock Underlying LTIP All Other
Name and Principal Fiscal Salary Bonus Compensation Award(s) Options Payouts Compensation
Position Year ($) ($) ($) ($) (#) ($) ($)(1)
------------------ ------ ------- ------- ------------ ---------- ---------- ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
John J. Sciuto.......... 2000 280,009 114,125 16,700(2)(3) -- 25,000 -- 5,894
Chairman, President, 1999 247,249 100,000 56,129(2)(3) -- -- -- 5,495
and CEO 1998 227,133 100,000 51,438(2)(3) -- -- -- 26,367(5)
Lawrence M. Schadegg.... 2000 184,080 23,294 361(6) -- -- -- 14,040
President, Comptek PRB 1999 153,391(7) 27,266 611(6) 187,500(10) -- -- 14,028
Associates, Inc. 1998 N/A N/A N/A -- N/A N/A N/A
Bradley H. Feldmann..... 2000 175,011 57,063 72,468(12) -- 35,000 -- 1,656
Senior Vice President
and 1999 N/A N/A N/A N/A N/A N/A N/A
Chief Operating Officer 1998 N/A N/A N/A N/A N/A N/A N/A
Christopher A. Head..... 2000 160,014 72,625 684(11) -- 25,000 -- 4,156
Executive Vice
President, 1999 148,822 38,000(4) 423(11) -- 2,528 -- 3,879
General Counsel, and 1998 136,551 30,000(4) -- -- 10,000 -- 3,485
Secretary
Laura L. Benedetti...... 2000 125,008 51,875 -- -- 36,145 -- 3,123
Senior Vice President, 1999 95,398 30,000(4) -- -- 3,000 -- 2,479
CFO, and Treasurer 1998 79,555 20,000(4) -- -- 10,000 -- 1,940
</TABLE>
--------
(1) Amounts contributed by Comptek or its subsidiaries under retirement
savings plans as matching and annual contributions based upon the
individual's level of participation in the Plan as described below under
"--Retirement Savings Plans."
(2) In connection with the purchase of 62,178 shares of Common Stock, Comptek
Federal Systems, Inc., a subsidiary of Comptek ("CFS"), provided John J.
Sciuto low interest loans in the amount of $218,415 in fiscal 1997, and
$76,704 in fiscal 1999. The listed amount includes a gross-up of $25,000
in fiscal years 1999 and 1998, representing anticipated federal and state
tax liability associated with the portion of Mr. Sciuto's incentive
compensation applied to the repayment of the loans. Such gross-up is
provided by Comptek in consideration of Mr. Sciuto's commitment to apply
at least 50% of any bonus earned to the repayment of the loan. Also
included is $8,359 for fiscal 1998, $5,649 for fiscal 1999, and $8,313 for
fiscal 2000, representing the difference between the interest paid and the
amount which would have been paid had the loan carried a market interest
rate. Also included is a payout of unused vacation in the amount of
$17,539 in fiscal 1998 and $25,368 in fiscal 1999.
(3) In connection with the 1996 exercise of an incentive stock option, Comptek
provided to John J. Sciuto an interest-free loan in the amount of $21,278
to reimburse him for alternative minimum tax incurred in the
I-9
<PAGE>
transaction in exchange for his agreement to hold the Shares acquired for
at least two years. This loan was canceled in 1998 (see note 5). In
connection with the 1999 exercise of an incentive stock option, a loan in
the amount of $21,278 was provided on similar terms. Both loans were
provided pursuant to the terms of Comptek's 1992 Equity Incentive Plan.
The listed amount represents imputed interest of $1,109 for fiscal 2000,
$112 for fiscal 1999, and $540 for fiscal 1998.
(4) Twenty-five percent of such annual bonus was paid in Common Stock of
Comptek at fair market value in lieu of cash.
(5) This listed amount includes $21,278, representing cancellation of the one
of the loans described in note (3) above.
(6) Payout of unused vacation.
(7) Salary information for Mr. Schadegg is for the 11-month period May 1,
1998, through March 31, 1999, rather than the full fiscal year. Mr.
Schadegg first became an executive officer in May 1998, as a result of
Comptek's acquisition of PRB Associates, Inc.
(8) Salary information for Mr. Feldmann is for the ten-month period beginning
with his date of hire, June 7, 1999 through March 31, 2000.
(9) Includes options to purchase 1,145 Shares granted to Mrs. Benedetti on
November 1, 1999, which are contingent upon approval of an amendment to
the 1998 Equity Incentive Stock Plan.
(10) May 14, 1998, grant of 20,000 restricted Shares vesting at the rate of
2,500 shares per three-month period beginning August 1, 1998 and ending
May 1, 2000. The value of these Shares as of March 31, 1999, was
$277,500.
(11) In connection with the exercise of an incentive stock option, Comptek
provided Mr. Head an interest-free loan in the amount of $13,650 to
reimburse him for alternative minimum tax incurred in the transaction in
exchange for his agreement to hold the Shares acquired for at least two
years. The loan was provided pursuant to the terms of Comptek's 1992
Equity Incentive Plan. The listed amount represents imputed interest of
$684 for fiscal 2000 and $423 for fiscal 1999.
(12) Amount indicates Company reimbursement to Mr. Feldmann for costs incurred
in relation to his relocation from San Diego, California to Buffalo, New
York.
Incentive Compensation Plan
Company officers and certain other key people participate in an incentive
compensation arrangement (the "Incentive Plan") based on predetermined
corporate and subsidiary goals, including revenue, profit, project completion
and contract award levels established at the beginning of each fiscal year.
The base amount of an individual's incentive compensation potential is
established annually. Officers' incentive compensation levels are established
by the Compensation Committee and are approved by the Comptek Board.
Directors, as such, are not eligible to participate in the Incentive Plan.
Amounts paid to the named Executive Officers are set forth in the Summary
Compensation Table above.
I-10
<PAGE>
Stock-Based Compensation
The following table contains information relating to stock options granted
to the named executive officers in the fiscal year ended March 31, 2000.
<TABLE>
<CAPTION>
Option/SAR Grants in the Fiscal Year Ended March 31, 2000
----------------------------------------------------------------
Potential
Realizable Value
Individual Grants of Assumed Annual
---------------------------------------------- Rates of Stock
Percent of Price
Total Options/ Exercise Appreciation for
Options SAR Granted to or Base Option Term
Granted(1) Employees in Price Expiration -----------------
Name (#) Fiscal Year ($/Share) Date 5%(2) 10%(2)
---- ---------- -------------- --------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
John J. Sciuto.......... 25,000 6.2% $ 8.125 04/01/2009 $127,744 $323,729
Lawrence M. Schadegg.... None -- -- -- -- --
Bradley H. Feldmann..... 15,000 3.7% $8.6875 06/09/2009 $ 81,953 $207,685
20,000 5.0% $ 10.25 11/01/2009 $128,923 $326,717
Christopher A. Head..... 15,000 3.7% $ 8.125 04/01/2009 $ 76,647 $194,237
10,000 2.5% $ 10.25 11/01/2009 $ 64,462 $163,359
Laura L. Benedetti...... 25,000 6.2% $ 8.125 04/01/2009 $127,744 $323,729
11,145 2.8% $ 10.25 11/01/2009 $ 71,843 $182,063
</TABLE>
--------
(1) Options to purchase shares of Common Stock were granted under Comptek's
1992 Equity Incentive Plan and the 1998 Equity Incentive Stock Plan. No
stock appreciation rights ("SARs") were granted during the fiscal year.
Options are exercisable starting one year after grant date, with 1/3 of the
options becoming exercisable on each successive anniversary date, with full
exercisability occurring on the third anniversary date. Such options were
granted for a term of 10 years, subject to earlier termination in certain
events related to termination of employment.
(2) The dollar amounts in these columns were calculated using an assumed annual
compounded growth over the term of the option of 5% and 10%, respectively.
Use of this model should not be viewed in any way as a forecast of the
future performance of the Common Stock, which will be determined by future
events and unknown factors. The closing price of the Common Stock on the
American Stock Exchange on March 31, 2000, was $13.875.
The following table reflects the number of stock options and SARs exercised
by the named executive officers in the fiscal year ended March 31, 2000, the
total gain realized upon exercise, the number of stock options held at the end
of the year, and the realizable gain of the stock options that are "in-the-
money." In-the-money stock options and SARs are stock options or SARs with
exercise prices that are below the year-end stock price because the stock value
increased since the date of the grant.
<TABLE>
<CAPTION>
Aggregated Option/SAR Exercises in the Fiscal Year Ended March 31, 2000 and
Fiscal Year-End Option Values
---------------------------------------------------------------------------
# of Securities
Underlying Unexercised Value of Unexercised,
Options/SARs at Fiscal In-the-Money Options at
Shares Year-End Fiscal Year End(2)
Acquired Value ------------------------- -------------------------
on Exercise Realized(1) Exercisable Unexercisable Exercisable Unexercisable
Name (#) ($) (#) (#) ($) ($)
---- ----------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
John J. Sciuto.......... -- -- 93,074 65,000 771,611 476,250
Lawrence M. Schadegg.... -- -- -- -- -- --
Bradley H. Feldmann..... -- -- -- 35,000 -- 150,313
Christopher A. Head..... 8,250 51,109 58,548 30,020 515,864 157,593
Laura L. Benedetti...... 2,060 9,013 16,206 41,479 130,575 221,906
</TABLE>
--------
(1) Based upon the difference between the closing price of the Common Stock on
the American Stock Exchange on the date or dates of exercise and the
exercise price or prices for the stock options.
(2) Based upon the closing price of the Common Stock on the American Stock
Exchange on March 31, 2000, of $13.875 per share.
I-11
<PAGE>
COMPENSATION COMMITTEE REPORT ON COMPENSATION
Role Of The Compensation Committee
Each year the Compensation Committee, which is comprised entirely of outside
directors, evaluates and establishes the compensation arrangements for
executive officers, including a review and approval of annual salaries, annual
and long-term incentive plan awards, standards of performance for new awards,
payouts from past awards, and program participation and design. The
Compensation Committee also administers Comptek's 1992 Equity Incentive Plan
and Comptek's 1998 Equity Incentive Stock Plan for all participants. In
evaluating compensation for executive officers, the Committee has from time to
time retained the services of independent compensation experts, reviewed
industry available data and surveys, and received recommendations from
management and Comptek's Human Resources Department regarding overall
compensation plans and structures.
Executive Compensation Philosophy
The fundamental objective of Comptek's Executive Compensation Program (the
"Executive Compensation Program") is two-fold: to attract and retain highly
competent and motivated individuals by providing a compensation package which
is industry competitive, and to emphasize a reward system which is based upon
the individual's contribution to the overall success and performance of
Comptek. The Committee applies the following guiding principles in establishing
compensation levels for executives: (1) incentives should represent a strong
portion of the Executive Compensation Program; (2) salary should be reasonable
in reference to position responsibilities and industry norms; (3) fixed costs
should be controlled while encouraging performance-based variable costs which
link to the financial results of Comptek; and (4) the executive officers should
have significant equity ownership opportunities. It is the Compensation
Committee's belief that this approach will allow for a linking of compensation
with shareholder value and serve to attract and retain qualified individuals
capable of producing superior results. With reference to these principles, the
Compensation Committee for fiscal year ended March 31, 2000 (April 1, 1999
through March 31, 2000), evaluated the compensation paid to the executive
officers named in the Summary Compensation Table.
Base Compensation. The Compensation Committee's approach to base
compensation is to offer competitive salaries in comparison with market
averages. The Compensation Committee makes base compensation decisions in an
annual review with input from the CEO, market pay statistics, and nationwide
trends of executives in similar positions in companies with similar sales
volumes. This information is used as a frame of reference for annual salary
adjustments and starting salaries. The Compensation Committee considers both
Comptek's performance (e.g., stock price, return on assets, and earnings growth
v. budget), as well as individual decision-making responsibilities and work
performance of each position incumbent. With respect to the CEO, as discussed
below, the primary factor is profitability.
Annual Incentive Compensation Plan. Comptek uses the Incentive Plan to serve
as an incentive for executive officers and other key employees to accomplish
annual Company performance objectives. The performance objectives for the
Incentive Plan are established at the beginning of the fiscal year, subject to
modification in the event of a significant operating change. The Incentive Plan
performance objectives include overall corporate profitability and performance
results of the specific business unit of Comptek under a participant's direct
control. Individual target amount for incentive compensation are based upon
compensation survey averages and range between 20% and 50% of the individual's
base salary.
Long-Term Incentive Compensation. Comptek traditionally has used stock
options under its equity incentive plans (the "Equity Incentive Plans") to
serve as an incentive to executive officers and other key employees based on
Comptek's stock market value. The grant of stock options under the Equity
Incentive Plans is subjective, based on perception of the individual's
performance, functional responsibility, and position within Comptek. Awards are
typically considered at the time of the individual's annual performance review
or change in responsibilities or position.
I-12
<PAGE>
Fiscal 2000 Chief Executive's Pay
The Compensation Committee reviews the compensation of the CEO within the
context of published survey data issued by the American Electronics
Association, Watson Wyatt, William Mercer Company, and Western Management Group
providing compensation information for a group of companies similar to Comptek
in size and business focus. Based upon its own analysis, the Compensation
Committee established a base salary, incentive award targets, and equity
compensation for John J. Sciuto, as Chief Executive Officer.
For the fiscal year ended March 31, 2000, the Compensation Committee fixed
Mr. Sciuto's base salary at $280,000. The Compensation Committee believed that
such amount was an appropriate base salary given Mr. Sciuto's experience in the
defense industry and Comptek's position in that industry. Consistent with the
Compensation Committee's philosophy of emphasizing incentive compensation, the
Committee for fiscal year ended March 31, 2000 established a target amount of
incentive compensation which would be paid to the chief executive officer and
other officers if pre-determined earnings were achieved. Based upon diluted
earnings per share of $0.83, a 28% increase from the prior year, Mr. Sciuto
received incentive compensation of $114,125, representing 104% of his targeted
amount for fiscal 2000. Such earnings are the highest in Comptek's history.
For fiscal year 2001 (April 1, 2000 through March 31, 2001), the
Compensation Committee increased Mr. Sciuto's base salary to $320,000, and his
target bonus to $150,000, and it increased his earnings target. The specific
amount of the target bonus and annual increase in earnings target is a
subjective determination by the Compensation Committee predicated on industry
growth rates and bonus levels.
In connection with Mr. Sciuto's appointment as President and CEO, effective
April 1, 1996, the Compensation Committee granted Mr. Sciuto options on 100,000
shares of Common Stock, vesting ratably over a period of five years, 50,000 of
which are also subject to the attainment of certain performance objectives. In
addition, the Compensation Committee required Mr. Sciuto to acquire and retain
a minimum of 50,400 shares of Common Stock of Comptek. As of March 31, 2000,
Mr. Sciuto owned 58,464 Shares.
In order to facilitate Mr. Sciuto's purchase in July 1996 of 43,683 shares
of Common Stock from Comptek, CFS loaned to Mr. Sciuto $218,415. This loan,
which bears interest at the annual rate of 3.7%, is due and payable on the
earlier of July 8, 2001 or 90 days after Mr. Sciuto ceases to be employed by
Comptek. The loan agreement further provides that a minimum of 25% of the gross
amount of any incentive compensation paid to Mr. Sciuto will be used to pay
down the outstanding balance of the loan. If Mr. Sciuto elects to apply at
least 50% of such incentive compensation to loan repayment, then the amount
applied will be grossed-up to satisfy Mr. Sciuto's anticipated tax liability
related to the portion of his incentive compensation applied to repayment. For
the fiscal year ended March 31, 2000, Mr. Sciuto applied $57,063 of his
incentive compensation award to loan repayment and, as a result, received an
additional $28,531 payment to satisfy anticipated tax liability. Through June
2000, a total of $187,929 has been repaid on this loan. During the fourth
quarter of fiscal 1999, CFS loaned to Mr. Sciuto an additional $76,704, on
substantially similar terms but due January 31, 2004, to facilitate his
purchase of 18,495 shares. During the fiscal year, the Compensation Committee
also agreed Comptek would repay the subsidiary loan on Mr. Sciuto's behalf in
the event of a change of control of Comptek.
Company Position On Limitation Of Deductibility Of Executive Pay
Effective as of January 1, 1994, Section 162(m) of the Internal Revenue Code
of 1986, as amended (the "Internal Revenue Code"), generally denies a deduction
to any publicly-held corporation for compensation paid to its chief executive
officer and its four highest-paid executive officers to the extent that any
such individual's compensation exceeds $1 million, subject to certain
exceptions, including one for "performance-based compensation." Compensation
paid to such executive officers of Comptek for fiscal year 1999 is expected to
be tax-deductible since no such amount exceeds the $1 million limit. Under
Section 162(m) of the Internal Revenue Code and the regulations and transition
rules issued by the Internal Revenue Service, it is highly unlikely that any
one of Comptek's executive officers will receive compensation in the current
fiscal
I-13
<PAGE>
year that is nondeductible under Section 162(m). With respect to future years,
Comptek intends to study the application of Section 162(m) of the Internal
Revenue Code to its compensation plans and practices, and will consider
possible changes thereto that may be necessary to qualify future compensation
paid to its executive officers for deductibility under Section 162(m) of the
Internal Revenue Code.
The Compensation Committee of the Board of Directors
Joseph A. Alutto
G. Wayne Hawk
Patrick J. Martin
Wayne E. Meyer
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Henry P. Semmelhack was President and Chief Executive Officer of Comptek
from 1968 to 1983. From 1983 to 1992 he served as a consultant to Comptek. Mr.
Semmelhack's wife, Tricia T. Semmelhack, is a partner in the Buffalo, New York
law firm Hodgson, Russ, Andrews, Woods & Goodyear, LLP which firm has in the
past, and is anticipated may in the future, provided legal services to Comptek.
During the fiscal year ended March 31, 2000, James D. Morgan, an executive
officer and director of Comptek, served as a director and member of the
compensation committee of Barrister Global Services Network, Inc. ("Barrister")
and as such reviews and approves the compensation paid by Barrister to Henry P.
Semmelhack as an executive officer of Barrister.
EMPLOYMENT CONTRACTS
Comptek currently has employment contracts with certain of its key
employees, including each of the executive officers named in the Summary
Compensation Table. Effective November 1, 1997, Messrs. Sciuto and Head entered
into one-year employment agreements with Comptek, which provide for an
automatic annual renewal unless terminated by Comptek or the employee.
Effective April 1, 1998, and June 1, 2000, Mrs. Benedetti and Mr. Feldmann,
respectively, entered into a similar employment agreements with Comptek. Annual
salaries payable under such agreements as of May 31, 2000, are as follows: John
J. Sciuto, $320,000; Bradley H. Feldmann, $195,000; Christopher A. Head,
$180,000 and Laura L. Benedetti, $150,000. Under each agreement, in the event
of either voluntary or involuntary termination of employment, Comptek is
obligated to make a termination payment in twelve monthly installments equal to
one year's salary as of the termination date, plus a one-time payment at the
time of termination equal to 50 percent of the employee's target bonus in
effect at the time of termination, in consideration of, among other things, the
officer's agreement not to compete with Comptek during the one-year period.
In connection with the acquisition of PRB Associates, Inc. in May 1998,
Comptek's subsidiary, Comptek PRB Associates, Inc., entered into an employment
agreement with Mr. Schadegg, expiring April 30, 2001. The annual salary payable
under such contract as of May 31, 2000, is $202,488. In the event of an
involuntary termination without cause, Comptek is obligated to make a
termination payment, in twelve monthly installments, equal to one year's salary
as of the termination date. Mr. Schadegg is obligated not to compete with
Comptek for a period of one year following his termination of employment.
I-14
<PAGE>
CHANGE OF CONTROL AGREEMENTS
Comptek has change of control agreements with Messrs. Sciuto, Head, and
Feldmann and Mrs. Benedetti. The terms of each agreement are substantially the
same and each agreement was entered into in December 1999. The agreements
require Comptek to pay certain severance benefits and additional payments
related to a change in control of Comptek. The agreements provide that if the
employee's employment is terminated by Comptek without cause or the employee
terminates his or her employment for good reason upon or within two years
following the occurrence of a change of control, the employee shall be
provided, among other things, a lump sum payment equal to 1.99 times the
employee's annual base salary and target bonus. The employee shall also be
entitled to continue to participate in each of the Employer's employee
benefits, providing insurance and medical benefits on the same basis as was
provided to the employee prior to termination for a period of two years.
In addition, the change of control severance agreements provide for
Comptek's payment on behalf of the employee any excise tax imposed by Section
4999 of the Internal Revenue Code on any payment or benefit provided by Comptek
deemed to be in connection with a change of control, together with a gross-up
payment to satisfy any income taxes (including interest and penalties) imposed
related to the payment of the excise tax. These additional excise tax payments
are not limited to severance benefits, but apply to any other benefits or
payments received by the employee and deemed to be in connection with a change
of control.
Comptek's Incentive Plans provide for immediate vesting and exercisability
of all outstanding unvested options upon a change of control. Comptek has also
agreed to pay to Messrs. Sciuto, Head, and Feldmann and Mrs. Benedetti, an
amount equal to 50% of the gain realized on the exercise and disposition of
options in connection with a change of control.
RETIREMENT SAVINGS PLANS
Comptek Research Plan. Comptek established a defined contribution plan known
as the Comptek Research Retirement Savings Plan, effective June 1, 1985 (the
"Research Retirement Savings Plan"). The Research Retirement Savings Plan is
intended to meet the requirements of Section 401(k) of the Code.
Full-time regular employees of Comptek Research and its Comptek Federal
Systems subsidiary participate in the Research Retirement Savings Plan. At
April 1, 2000, there were 480 participants.
Currently under the Research Retirement Savings Plan, Comptek will make an
automatic contribution equal to 1% of gross pay at the end of each fiscal year
to the individual account of each eligible employee. To be eligible for the
automatic contribution, an employee must have been continuously employed on a
full-time basis for the entire fiscal year. In addition, the Research
Retirement Savings Plan for the fiscal year ended March, 31, 2000, provided for
a Company match of $.30 per $1.00 contributed on the first 4% of pay
contributed to the Research Retirement Savings Plan by a participant.
A participant at all times is 100% vested in his contributions and
contributions made by Comptek. Distributions are made under the Research
Retirement Savings Plan only upon retirement, death, disability, separation
from service or in the case of certain hardships. There is also a loan
provision in the Research Retirement Savings Plan.
All contributions under the Research Retirement Savings Plan are placed into
individual accounts for each participant. For the year ended March 31, 2000,
Comptek contributed a total of $481,465 for all eligible employees, including
Executive Officers. Comptek's contributions for the last fiscal year for each
of Executive Officers Sciuto, Feldmann, Head, and Benedetti are included in the
Summary Compensation Table.
I-15
<PAGE>
Comptek PRB Associates Plan. During the fiscal year ended March 31, 2000,
Comptek's subsidiary, Comptek PRB Associates, Inc., maintained a separate
defined contribution plan for the employees of Comptek PRB, also under Section
401(k) of the Code (the "PRB Associates Plan"). At April 1, 2000, there were
297 participants.
Under the provisions of the PRB Associates Plan, Comptek PRB may make a
discretionary annual contribution to the individual account of each eligible
employee at the end of each plan year. To be eligible, an employee must be
credited with 1,000 hours of service during the plan year for which the
contribution is made and must be an active employee on the last day of the plan
year. Additionally, the employee must have attained age 21 and have been
credited with 1,000 hours of service within 12 consecutive months subsequent to
date of hire to be eligible to participate as of the following January 1 or
July 1. In addition, the PRB Associates Plan provides for a matching
contribution of $0.25 per $1.00 contributed on the first 4% of pay contributed
to the PRB Associates Plan by a participant.
Participants may make voluntary contribution to the PRB Associates Plan in
the form of 1% to 14% salary deductions or in the form of rollovers.
Participant contributions and the related earnings are always 100% vested.
Participants vest over a period of seven years in employer discretionary and
matching contributions.
Distributions are made under the PRB Associates Plan upon retirement, death,
disability, separation from service, or in the case of certain hardships. The
PRB Associates Plan contains a loan provision that allows each participant to
have two loans maximum outstanding at any time. For the year ended March 31,
2000, Comptek contributed a total of $179,346 for all eligible employees.
Comptek's contribution for the last fiscal year for executive officer
Lawrence Schadegg is included in the Summary Compensation Table.
DIRECTORS' AND OFFICERS' LIABILITY INSURANCE
Comptek, pursuant to its bylaws, indemnifies its directors, officers,
benefit plan trustees, other fiduciaries, and employees as permitted by law in
connection with proceedings which might be instituted against them by reason of
their service for or on behalf of Comptek. Comptek has purchased directors' and
officers' liability insurance which provides indemnification for Comptek and
its directors and officers. The current policy, issued by the Chubb Group of
Insurance Companies, is effective for the period of April 1, 1999, through
March 31, 2002, at an annual premium of $65,000.
CERTAIN TRANSACTIONS
The lease for Comptek's Hollywood, Maryland facility was entered into in
connection with Comptek's acquisition of PRB Associates, Inc. in May 1998. The
lease is with a partnership of the former principal shareholders of PRB, which
includes Lawrence Schadegg, an executive officer of Comptek. The lease expires
on April 30, 2001, and provides for an annual net rent of $1,200,000. Comptek
believes that the terms of this lease reflect current market conditions in that
location.
CFS currently has outstanding loans totaling $129,325 to John J. Sciuto,
Comptek's Chairman, President and CEO. These loans, one granted in 1997 and
another in 1999, were provided to Mr. Sciuto to facilitate his purchase of
62,178 shares of Common Stock. The loans carry an annual interest rate of 3.7%
and provide for repayment by the earlier of 90 days after Mr. Sciuto leaves
Comptek's employ or July 8, 2001, for the 1997 loan and January 31, 2004, for
the 1999 loan. The loan agreements provide that Mr. Sciuto will apply at least
25% of any incentive compensation to the repayment of the loans. The loan
agreements further provide that if Mr. Sciuto applies at least 50% of such
incentive compensation to loan repayment, then the amount applied will be
grossed-up to satisfy Mr. Sciuto's anticipated tax liability related to the
portion of his incentive compensation applied to repayment.
I-16
<PAGE>
During the fiscal year ended March 31, 2000, Comptek retained, and in the
future anticipates retaining, the Buffalo, New York, law firm of Hodgson, Russ,
Andrews, Woods & Goodyear, LLP to perform certain legal services. Director
Henry P. Semmelhack's wife, Tricia T. Semmelhack, is a partner in such law
firm.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Based solely on its review of the copies of such forms received by it, or
written representations from certain reporting persons, Comptek believes that,
during April 1, 1999, through March 31, 2000, all filing requirements
applicable to its officers, directors, and greater-than-ten-percent beneficial
owners were met, except for one Form 4 filing by Lawrence M. Schadegg which was
due in December 1999, but not filed until February 2000, due to a
misunderstanding by Mr. Schadegg as to his filing obligations and the
availability of a deferred filing.
I-17
<PAGE>
SCHEDULE II
INFORMATION REGARDING TRANSACTIONS
IN COMPTEK COMMON STOCK
The following table sets forth transactions in Comptek's equity securities
by Comptek and by certain of its executive officers and directors as listed
below during the 60 days prior to the date of the Schedule 14D-9.
<TABLE>
<CAPTION>
Name 5/00 6/00 7/00
---- ---- ---- ----
<C> <C> <C> <S>
Chris Boehm 5/15/00--Received an
option grant of 15,000
shares at $16.0000 per
share
Chris Boehm 5/15/00--Received an
option grant of 10,000
shares at $16.0000 per
share*
Comptek 5/3/00--Repurchased 200
shares at $14.9375 per
share
Comptek 5/4/00--Repurchased 200
shares at $15.1875 per
share
Comptek 5/15/00--Repurchased 200
shares at $15.9375 per
share
Comptek 5/16/00--Repurchased 200
shares at $16.1875 per
share
Comptek 5/22/00--Repurchased 400
shares at $15.6875 per
share
Comptek 6/2/00--Repurchased 200
shares at $16.875 per
share
Comptek 6/2/00--Repurchased 200
shares at $17.125 per
share
</TABLE>
--------
* The option is subject to the approval of an increase in the shares available
for stock option grants by the shareholders of Comptek at the 2000 Annual
Meeting.
<PAGE>
SCHEDULE III
[LETTERHEAD OF CIBC WORLD MARKETS CORP.]
June 12, 2000
The Board of Directors
Comptek Research, Inc.
2732 Transit Road
Buffalo, New York 14224
Members of the Board:
You have asked CIBC World Markets Corp. ("CIBC World Markets") to render a
written opinion ("Opinion") to the Board of Directors as to the fairness, from
a financial point of view, to the holders of the common stock of Comptek
Research, Inc. ("Comptek"), other than Northrop Grumman Corporation
("Northrop") and its affiliates, of the Exchange Ratio (defined below)
provided for pursuant to the Agreement and Plan of Merger, dated as of June
12, 2000 (the "Merger Agreement"), by and among Northrop, Yavapai Acquisition
Corp., a wholly owned subsidiary of Northrop ("Yavapai"), and Comptek. The
Merger Agreement provides for, among other things, (i) the commencement by
Yavapai of an offer pursuant to which each outstanding share of the common
stock, par value $0.02 per share, of Comptek ("Comptek Common Stock") will be
exchanged (the "Exchange Offer") for the right to receive that number of
shares of the common stock, par value $1.00 per share, of Northrop ("Northrop
Common Stock") equal to the quotient obtained by dividing $20.75 by the
average per share closing sales prices of Northrop Common Stock for each of
the 20 New York Stock Exchange trading days in the period ending two business
days prior to the effective date of the registration statement of Northrop
relating to the Exchange Offer (the "Final Average Closing Price" and, the
number of shares of Northrop Common Stock into which each share of Comptek
Common Stock will be so exchanged in the Exchange Offer, the "Exchange
Ratio"); provided, that if the Final Average Closing Price is (x) equal to or
less than $74.00, then the Exchange Ratio will be 0.2804 or (y) equal to or
greater than $84.00, then the Exchange Ratio will be 0.2470, and (ii)
subsequent to such Exchange Offer, the Merger of Yavapai with and into Comptek
(the "Merger" and, together with the Exchange Offer, the "Transaction")
pursuant to which each outstanding share of Comptek Common Stock not acquired
in the Exchange Offer will be converted into the right to receive that number
of shares of Northrop Common Stock equal to the Exchange Ratio.
In arriving at our Opinion, we:
(a) reviewed the Merger Agreement;
(b) reviewed audited financial statements of Comptek for the fiscal years
ended March 31, 1998, March 31, 1999 and March 31, 2000 and audited
financial statements of Northrop for the fiscal years ended December
31, 1997, December 31, 1998 and December 31, 1999;
(c) reviewed unaudited financial statements of Northrop for the fiscal
quarter ended March 31, 2000;
(d) reviewed financial projections of Comptek prepared by the management of
Comptek and publicly available financial projections relating to
Northrop;
(e) reviewed historical market prices and trading volumes for Comptek
Common Stock and Northrop Common Stock;
(f) held discussions with the senior management of Comptek with respect to
the business and prospects for future growth of Comptek;
(g) reviewed and analyzed certain publicly available financial data for
certain companies we deemed comparable to Comptek and Northrop;
(h) reviewed and analyzed certain publicly available information for
transactions that we deemed comparable to the Transaction;
<PAGE>
The Board of Directors
Comptek Research, Inc.
June 12, 2000
Page 2
(i) performed a discounted cash flow analysis of Comptek using certain
assumptions of future performance provided to us by the management of
Comptek and a discounted cash flow analysis of Northrop using publicly
available financial data;
(j) reviewed public information concerning Comptek and Northrop;
(k) at the request of Comptek, approached and held discussions with certain
third parties to solicit indications of interest in the possible
acquisition of Comptek; and
(l) performed such other analyses, reviewed such other information and
considered such other factors as we deemed appropriate.
In rendering our Opinion, we relied upon and assumed, without independent
verification or investigation, the accuracy and completeness of all of the
financial and other information provided to or discussed with us by Comptek
and its respective employees, representatives and affiliates. With respect to
forecasts of the future financial condition and operating results of Comptek
provided to us, we assumed, at the direction of the management of Comptek,
without independent verification or investigation, that such forecasts were
reasonably prepared on bases reflecting the best available information,
estimates and judgments of the management of Comptek. As you are aware,
Northrop has not provided us with internal forecasts, but we have reviewed and
discussed with representatives of Northrop publicly available forecasts
relating to Northrop and have assumed, with your consent, that such forecasts
represent reasonable estimates and judgments as to the future financial
condition and operating results of Northrop. We also have assumed, with your
consent, that the Transaction will be treated as a tax-free reorganization for
United States federal income tax purposes. We have neither made nor obtained
any independent evaluations or appraisals of the assets or liabilities
(contingent or otherwise) of Comptek, Northrop or affiliated entities. We are
not expressing any opinion as to the underlying valuation, future performance
or long-term viability of Comptek or Northrop, or the price at which Northrop
Common Stock will trade upon or subsequent to announcement or consummation of
the Transaction. Our Opinion is necessarily based on the information available
to us and general economic, financial and stock market conditions and
circumstances as they exist and can be evaluated by us on the date hereof. It
should be understood that, although subsequent developments may affect this
Opinion, we do not have any obligation to update, revise or reaffirm the
Opinion.
As part of our investment banking business, we are regularly engaged in
valuations of businesses and securities in connection with acquisitions and
mergers, underwritings, secondary distributions of securities, private
placements and valuations for other purposes.
We have acted as financial advisor to Comptek in connection with the
Transaction and to the Board of Directors of Comptek in rendering this Opinion
and will receive a fee for our services, a significant portion of which is
contingent upon consummation of the Transaction. We also will receive a fee
upon the delivery of this Opinion. CIBC World Markets and its affiliates have
in the past provided financial services to Comptek unrelated to the proposed
Transaction, for which services CIBC World Markets and such affiliates have
received compensation. In the ordinary course of business, CIBC World Markets
and its affiliates may actively trade securities of Comptek and Northrop for
their own account and for the accounts of customers and, accordingly, may at
any time hold a long or short position in such securities.
Based upon and subject to the foregoing, it is our opinion that, as of the
date hereof, the Exchange Ratio is fair, from a financial point of view, to
the holders of Comptek Common Stock (other than Northrop and its affiliates).
This Opinion is for the use of the Board of Directors of Comptek in its
evaluation of the Transaction, and does not constitute a recommendation to any
Shareholder as to whether such Shareholder should exchange
III-2
<PAGE>
The Board of Directors
Comptek Research, Inc.
June 12, 2000
Page 3
shares of Comptek Common Stock in the Exchange Offer or how such Shareholder
should vote on any matters relating to the Merger.
Very truly yours,
/s/ CIBC World Markets Corp.
CIBC WORLD MARKETS CORP.
III-3
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No.
-----------
<C> <S>
(a)(1) Preliminary Prospectus, dated July 6, 2000. Incorporated herein by
reference to the prospectus included in the Registration Statement
on Form S-4 of Northrop filed with the SEC on July 6, 2000 (the
"Northrop S-4").
(a)(2) Form of Letter of Transmittal. Incorporated herein by reference to
Exhibit 99.1 to the Northrop S-4.
(a)(3) Chairman's Letter to Shareholders of Comptek, dated July 6, 2000.*
(a)(4) Press Release of Comptek, dated June 12, 2000. Incorporated herein
by reference to Exhibit 99 to Comptek's Current Report on Form 8-K
filed on June 12, 2000.
(a)(5) Tender Agreement between Acquisition Sub and Laura L. Benedetti,
John R. Cummings, Bradley H. Feldmann, G. Wayne Hawk, Christopher
A. Head, James D. Morgan, John J. Sciuto and Henry P. Semmelhack
of Comptek dated June 15, 2000.
(e)(1) Agreement and Plan of Merger, dated as of June 12, 2000, among
Northrop, Acquisition Sub and Comptek herein by reference to
Comptek's Current Report on Form 8-K filed on June 22, 2000.
(e)(2) Opinion of CIBC World Markets Corp. to the Board of Directors of
Comptek dated June 12, 2000. Included as Schedule III hereto.*
(e)(3) Form of Change of Control Agreement between Comptek and certain of
its officers. Incorporated herein by reference to Exhibit 10.2 to
Comptek's Quarterly Reports. Form 10-Q for the quarter ended
December 31, 1999 (the "December 1999 Form 10-Q"). Agreement with
John J. Sciuto, Chairman, President and Chief Executive Officer,
dated December 31, 1999. Agreement with Bradley H. Feldmann,
Senior Vice President and Chief Operating Officer, dated December
31, 1999. Agreement with Laura L. Benedetti, Vice President, Chief
Financial Officer and Treasurer, dated December 31, 1999.
Agreement with Christopher A. Head, Executive Vice President,
General Counsel and Secretary, dated December 31, 1999.
(e)(4)(i) Comptek Employee Change of Control Severance Plan. Incorporated
herein by reference to Exhibit 10.3 to the December 1999 10-Q.
(e)(4)(ii) Amendment to Employee Change of Control Plan between Comptek and
certain of its employees. Incorporated herein by reference to
Exhibit 10.3m to Comptek's Annual Report on Form 10-K for the
fiscal year ended March 31, 2000 (the "2000 Form 10-K").
(e)(5) Employment Agreement between Comptek and Bradley H. Feldmann dated
June 1, 1999. Incorporated herein by reference to Exhibit 10.1 to
Comptek's Quarterly Report on Form 10-Q for the quarter ended
October 1, 1999 (the "October 1999 Form 10-Q").
(e)(6) 1994 Stock Option Plan for Non-Employee Directors, as amended.
Incorporated herein by reference to Exhibit B to Comptek's 1999
definitive Proxy Statement dated July 12, 1999 (the "1999 Proxy
Statement").
(e)(7) 1999 Employee Stock Purchase Plan. Incorporated herein by
reference to Exhibit A to the 1999 Proxy Statement.
(e)(8) 1992 Equity Incentive Plan, as amended. Incorporated herein by
reference to Exhibit 10.1 to Comptek's Quarterly Report on Form
10-Q for quarter ended June 30, 1995.
(e)(9) 1998 Equity Incentive Stock Plan. Incorporated herein by reference
to Appendix A of Comptek's 1998 definitive Proxy Statement dated
July 8, 1998 (the "1998 Proxy Statement").
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Exhibit No.
-----------
<C> <S>
(e)(10) Non-qualified Stock Option Agreement by and between Comptek and
John J. Sciuto dated June 20, 1996. Incorporated herein by
reference to Exhibit 10.1b to Comptek's Annual Report on
Form 10-K for the fiscal year ended March 31, 1997.
(e)(11) Employment Agreement dated November 1, 1997 by and between Comptek
and John J. Sciuto. Incorporated herein by reference to Exhibit
10.3c to Comptek's Annual Report on Form 10-K for the fiscal year
ended March 31, 1998 (the "1998 Form 10-K").
(e)(12) Employment Agreement dated November 1, 1997 by and between Comptek
and Christopher A. Head. Incorporated herein by reference to
Exhibit 10.3d to the 1998 Form 10-K.
(e)(13) Employment Agreement dated April 1, 1998 by and between Comptek
and Laura L. Benedetti. Incorporated herein by reference to
Exhibit 10.3e to the 1998 Form 10-K.
(e)(14) Employment Agreement dated April 1, 1997 by and between Comptek
and James D. Morgan. Incorporated herein by reference to Exhibit
10.3f to the 1998 Form 10-K.
(e)(15) Employment Agreement dated May 14, 1998 by and between PRB
Associates, Inc. and Lawrence M. Schadegg. Incorporated herein by
reference to Exhibit 10.3h to the 1998 Form 10-K.
(e)(16) Restricted Stock Agreement dated May 14, 1998 by and between
Comptek and Lawrence M. Schadegg. Incorporated herein by reference
to Exhibit 10.3i to the 1998 Form 10-K.
(e)(17) Letter Agreement Regarding Repayment of Stock Loans between
Comptek and John J. Sciuto. Incorporated herein by reference to
Exhibit 10.3o to the 2000 Form 10-K.
(e)(18) Form of Incentive Stock Option Agreement and Non-Qualified Stock
Agreement issued under Comptek's Equity Incentive Plan to plan
participants, including executive officers. Incorporated herein by
reference to Exhibit 10.1a to the 1998 Form 10-K.
(e)(19) Form of Gross-Up Letter dated March 20, 2000 issued to Laura L.
Benedetti, Bradley H. Feldmann, Christopher A. Head, and John J.
Sciuto. Incorporated herein by reference to Exhibit 10.3n to the
2000 Form 10-K.
(e)(20) The Rights Agreement dated as of April 16, 1999, between Comptek
Research, Inc. and American Stock Transfer & Trust Company, as
Rights Agent. Incorporated herein by reference to Exhibit 4 to
Comptek's Current Report on Form 8-K, dated April 19, 1999.
(e)(21) Amendment to the Rights Agreement dated June 12, 2000.
Incorporated herein by reference to Exhibit 99.1 to Comptek's
Current Report on Form 8-K filed on June 22, 2000.
</TABLE>
--------
* Included in copy mailed to stockholders.
