SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant (X)
Filed by a Party other than the Registrant ( )
Check the appropriate box:
( ) Preliminary Proxy Statement ( ) Confidential, for Use of the
Commission Only (as permitted
by Rule 14a-6(e)(2))
(X) Definitive Proxy Statement
( ) Definitive Additional Materials
( ) Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
ALLIED RESEARCH CORPORATION
(Name of Registrant as Specified in its Charter)
(Name of Person(s) Filing Proxy Statement, if other than Registrant)
Payment of Filing Fee (Check the appropriate box):
(X) $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
( ) $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
( ) Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
( ) Fee paid previously with preliminary materials.
( ) Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule, or Registration Statement No.:
3) Filing Party:
4) Date Filed:
<PAGE>
Allied Research Corporation
Allied Research Corporation
8000 Towers Crescent Drive
Suite 750
Vienna, Virginia 22182
April 25, 1996
Dear Shareholder:
Your Board of Directors joins me in extending an invitation to attend the
1996 Annual Meeting of Shareholders which will be held on Wednesday, June 5,
1996 at The Tower Club, 17th Floor, 8000 Towers Crescent Drive, Vienna, Virginia
22182. The meeting will start promptly at 10:30 a.m.
We sincerely hope you will be able to attend and participate in the meeting.
We will report on the Company's progress and respond to questions you may have
about the Company's business.
Whether or not you plan to attend, it is important that your shares be
represented and voted at the meeting, and, therefore, we urge you to complete,
sign, date and return the enclosed proxy card in the envelope provided for this
purpose.
Sincerely yours,
/s/ J. R. Sculley
J. R. Sculley,
Chairman and
Chief Executive Officer
<PAGE>
ALLIED RESEARCH CORPORATION
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
June 5, 1996
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of Allied
Research Corporation will be held on Wednesday, June 5, 1996, at The Tower Club,
17th floor, 8000 Towers Crescent Drive, Vienna VA 22182, at 10:30 a.m., local
time, on Wednesday, June 5, 1996, for the following purposes:
1. To elect six (6) directors of the Company to serve for the ensuing year
and until their successors are elected and qualified.
2. To consider and act upon a proposal to ratify the selection of Grant
Thornton LLP as the Company's independent auditors for the year 1996.
3. To transact such other business as may properly come before the meeting or
any adjournment or adjournments thereof.
Only shareholders of record at the close of business on April 10, 1996
are entitled to notice of and to vote at the meeting.
A copy of the Annual Report of Allied Research Corporation for 1995 is
enclosed with this Notice, the attached Proxy Statement and the accompanying
proxy.
All Shareholders are urged to attend the meeting in person or by proxy.
Shareholders who do not expect to attend the meeting are requested to complete,
sign and date the enclosed proxy and return it promptly in the self-addressed
envelope provided.
By Order of the Board of Directors,
/s/ J. R. Sculley
J. R. Sculley,
Chairman and
Chief Executive Officer
April 25, 1996
<PAGE>
ALLIED RESEARCH CORPORATION
8000 TOWERS CRESCENT DRIVE, SUITE 750
VIENNA, VIRGINIA 22182
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
General
The accompanying proxy is solicited by and on behalf of the Board of
Directors of Allied Research Corporation, a Delaware corporation (the
"Company"), for use at the annual meeting of shareholders to be held at The
Tower Club, 17th Floor, 8000 Towers Crescent Drive, Vienna, Virginia 22182, on
Wednesday, June 5, 1996, at 10:30 a.m., local time, or any adjournment thereof
(the "annual meeting").
The record date for determination of the shareholders entitled to vote at the
annual meeting is April 10, 1996, at the close of business. Any shareholder
giving a proxy may revoke it at any time before it is exercised (including a
revocation at the annual meeting) by filing with the Secretary of the Company a
written revocation or duly executed proxy bearing a later date.
In accordance with the laws of the State of Delaware and the Company's
Restated Certificate of Incorporation, as amended, and its Amended and Restated
Bylaws, a majority of the outstanding shares of common stock will constitute a
quorum at the meeting. Abstentions and broker non-votes are counted for purposes
of determining the presence or absence of a quorum for the transaction of
business.
In accordance with the laws of the State of Delaware and the Company's
Restated Certificate of Incorporation, as amended, and its Amended and Restated
Bylaws (i) for the election of directors, which requires a plurality of the
votes cast, only proxies and ballots indicating votes "FOR all nominees",
"WITHHELD from all nominees" or specifying that votes be withheld for one or
more designated nominees are counted to determine the total number of votes
cast, and broker non-votes are not counted, and (ii) for the adoption of all
other proposals, which are decided by a majority of the shares of the stock of
the Company present in person or by proxy and entitled to vote, only proxies and
ballots indicating votes "FOR", "AGAINST" or "ABSTAIN" on the proposal or
providing the designated proxies with the right to vote in their judgment and
discretion on the proposal are counted to determine the number of shares present
and entitled to vote, and broker non-votes are not counted.
The cost of solicitation of proxies will be borne by the Company. The Company
will reimburse brokers, banks and other custodians, nominees and fiduciaries for
reasonable expenses incurred by them in sending proxy materials to the
beneficial owners of the common stock. In addition to solicitations by mail,
directors, officers and regular employees of the Company may solicit proxies
personally or by telegraph or telephone without additional compensation. The
Company has also retained Chemical Mellon Shareholders Services to aid in the
solicitation at an estimated cost of $3,000 plus out-of-pocket expenses.
The approximate date on which this Proxy Statement and enclosed form of proxy
are to be mailed to shareholders is April 25, 1996.
Voting Securities and Principal Shareholders
On April 10, 1996, the record date for the determination of shareholders
entitled to notice of and to vote at the annual meeting, 4,430,698 shares of
common stock of the Company were outstanding. Common stock is the only class of
capital stock of the Company currently outstanding. Each shareholder of record
is entitled to one vote for each share of common stock owned on all matters to
come before the annual meeting.
1
<PAGE>
The following table sets forth information as of March 15, 1996, with respect
to the shares of the Company's common stock which are held by the only persons
known to the Company to be the beneficial owners of more than 5% of such common
stock:
Title Amount and nature
of Name and address of of beneficial Percent of
class beneficial owner ownership class(1)
- --------------------------------------------------------------------------------
Common Linder Growth Fund/ 424,620 9.45%
Ryback Management Owned
Corporation directly
7711 Carondelet Avenue
P.O. Box 16900
St. Louis, MO 63105
Common Fidelity Low-Priced Stock 248,110
Fund/Fidelity Management Owned 5.52%
& Research Company directly
82 Devonshire Street
Boston, MA 02109
The following table sets forth the information as of March 4, 1996, with
respect to the beneficial ownership by management of the Company's common stock:
Title Amount and nature
of Name of of beneficial Percent of
class beneficial owner ownership class(1)
- --------------------------------------------------------------------------------
Common Charles T. Scott 2,000 *
Owned directly
Common Earl P. Smith 1,110 *
Owned directly
Common Clifford C. Christ 8,000 *
Owned directly
Common Harry H. Warner 1,000 *
Owned directly
Common J.R. Sculley 76,336(2) 1.7%
Owned directly
Common W. Glenn Yarborough, Jr. 15,664(3) *
Owned directly
Common All executive officers and 104,110 2.3%
directors as a group (6) Owned directly
- --------------------------------------------------------------------------------
1 Based upon 4,442,056 shares of common stock outstanding plus 72,500 shares
which may be acquired within 60 days pursuant to outstanding stock options.
2 Includes 12,000 shares which may be acquired within 60 days pursuant
to outstanding stock options.
3 Includes 7,000 shares which may be acquired within 60 days pursuant to
outstanding stock options.
2
<PAGE>
ELECTION OF DIRECTORS
Six (6) directors are to be elected to serve until the next annual meeting
and until their successors are elected and qualified. The accompanying proxy
will be voted for the election of all of the persons named below as nominees
unless the shareholder otherwise specifies in the proxy. If any of the nominees
should become unavailable, the persons named in the proxy or their substitutes
shall be entitled to vote for one or more substitutes to be designated by the
Board of Directors.
J.R. Sculley and Charles T. Scott became members of the Board of
Directors in 1991. Clifford C. Christ and Earl P. Smith joined the Board of
Directors in April, 1993. Robert W. Hebel and Harry H. Warner joined the
Board of Directors in January, 1996.
The following information is presented with respect to each nominee, each of
whom has indicated approval of his nomination and willingness to serve if
elected:
Year in which Principal business occupation
first elected for past five years and
Name of nominee a director Age other directorships
- --------------------------------------------------------------------------------
J.R. Sculley 1991 55 Chairman of the Board and chief
executive officer of the Company
since December, 1992; president and
chief operating officer of the
Company since April, 1992; director
of Barnes & Reinecke, Inc.
("Barnes & Reinecke") since
April, 1992; director of Allied
Research Corporation Limited
("Limited") since April, 1992;
director of ARC Services, Inc.
("Services") since January,
1993; director of Advanced
Studies and Technologies of
Grumman Corporation, a defense
company, from 1989 to April, 1992;
formerly Assistant Secretary of
the Army (Research, Development
and Acquisition).
Charles T. Scott 1991 74 Retired business executive; from
1978 to 1990, president of
Management Services Corporation,
a subsidiary of Lear Siegler
Corp., a defense company.
Clifford C. Christ 1993 48 President and chief executive
officer of NavCom Defense
Electronics, Inc., a defense
electronics company, since 1988.
Earl P. Smith 1993 57 Principal in Earl P. Smith and
Associates, a defense consulting
firm, since 1990; vice
president-commercial operations of
Management Services Corporation,
a subsidiary of Lear Siegler Corp.,
a defense company, during 1990;
vice president marketing and
contracts of Management Services
Corporation from 1986-1990.
Robert W. Hebel 1996 72 Private investor.
Harry H. Warner 1996 60 Self-employed financial consultant,
investor and real estate developer.
Also a director of Chesapeake
Corporation, Pulaski Furniture
Corporation and American Filtrona
Corporation.
During calendar year 1995, there were five (5) formal meetings of the Board
of Directors. The directors frequently communicate with one another on an
informal basis.
The Audit Committee had two (2) meetings during 1995 and the Compensation
Committee met once in calendar year 1995.
The Audit Committee is currently comprised of Messrs. Christ, Scott and
Warner. Among its functions, the Audit Committee (i) recommends the selection of
the Company's independent public accountants, (ii) reviews the scope of the
independent public accountants' audit activity, (iii) reviews the financial
statements which are the subject of the independent public accountant's
certification, and (iv) reviews the adequacy of the Company's basic accounting
and internal control systems.
The Compensation Committee is currently comprised of Messrs. Scott,
Smith and Hebel. The Compensation Committee establishes the Company's
executive compensation program. It also periodically reviews the
compensation of executives and other key officers and employees of the Company
and its subsidiaries.
3
<PAGE>
The Planning and Operations Committee is currently comprised of Messrs.
Sculley, Smith and Hebel. This committee will advise management concerning
certain planning and technical operations issues.
The Board of Directors of the Company has no standing nominating or similar
committee.
The by-laws provide that a shareholder of the Company entitled to vote for
the election of directors may nominate persons for election to the Board of
Directors by providing written notice to the Secretary of the Company not less
than 14 and not more than 50 days prior to the annual meeting. Such notice shall
include (i) the name and address of the shareholder and of each person to be
nominated, (ii) a representation that the shareholder is a holder of record of
stock of the Company entitled to vote at such meeting and intends to appear in
person or by proxy at the meeting to nominate each person specified, (iii) a
description of all understandings between the shareholder and each nominee and
other person (naming such person) pursuant to which the nomination is to be made
by the shareholder, (iv) such other information regarding each nominee as would
be required to be included in a proxy statement filed pursuant to the proxy
rules of the Securities and Exchange Commission had the nominee been nominated
by the Board of Directors and (v) the consent of each nominee to serve as a
director of the Company if so elected. The chairman of the meeting may refuse to
acknowledge the nomination of any person not made in compliance with the
foregoing procedures.
Compensation of Directors and Executive Officers
The following table sets forth information concerning all compensation paid
for services rendered in all capacities to the Company and its subsidiaries
during the years ended December 31, 1995, 1994 and 1993, by the chief executive
officer of the Company and by other executive officers of the Company whose
total annual salary and bonus exceeds $100,000:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long Term Compensation
- -------------------------------------------------------------------------------------------------------------------
Annual Compensation Awards Payouts
- -------------------------------------------------------------------------------------------------------------------
(a) (b) (c) (d) (e) (f) (g) (h) (i)
Other Securities All
Name and Annual Restricted Underlying Other
Principal Compen- Stock Options LTIP Compen-
Position Year Salary ($) Bonus($) sation ($) Award(s) SARs (#) Payouts ($) sation ($)
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
J.R. 1995 $235,000
Sculley, 1994 $235,000 $103,125(1) $82,763(2) 56,000(3)
Chief 1993 $225,000 $44,654(4)
Executive Officer
W. Glenn 1995 $144,500
Yarborough, Jr.,(5) 1994 $130,000 $ 26,250(6) 14,000(7)
Vice President
Michael W. 1995 $132,000
Owen,(8)
Vice President
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Mr. Sculley was granted 25,000 shares of Company stock which had a
market value of $4.125 per share on the date of grant.
(2) Mr. Sculley was paid $82,763 in payment of federal and state taxes paid as a
result of the 1994 stock award.
(3) Mr. Sculley was granted incentive stock options to acquire up to 56,000
shares of Company stock in March, 1994. The options first become
exercisable in March, 1996 at which point they become exercisable at the
rate of 20% of the underlying shares per year.
(4) Mr. Sculley was paid $44,654 in partial payment of federal and state taxes
paid as a result of 1992 stock award.
(5) Mr. Yarborough first became an executive officer of the Company in
January, 1995.
(6) Mr. Yarborough was granted 6,000 shares of Company stock which had a market
value of $4.375 per share on the date of grant.
(7) Mr. Yarborough was granted incentive stock options to acquire up to 14,000
shares of Company stock in March, 1994. The options first become
exercisable in March, 1996 at which point they become exercisable at the
rate of 20% of the underlying shares per year.
(8) Mr. Owen resigned all positions with the Company in early 1996.
4
<PAGE>
Aggregated Options/SAR Exercises in Last Fiscal Year
and FY-End Option/SAR Value
<TABLE>
<CAPTION>
(a) (b) (c) (d) (e)
Number of
Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Options/SARS Options/SARs at
FY-End (#) FY-End ($)
Shares Acquired Value Exercisable/ Exercisable/
Name on Exercise (#) Realized ($) Unexercisable Unexercisable
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
J.R. Sculley 0 0 0/56,000 0(1)
W. Glenn Yarborough, Jr. 0 0 0/14,000 0(1)
- --------------------------------------------------------------------------------------------
</TABLE>
1 At December 31, 1995, the Company's common stock traded at $3.125 per share;
the exercise price was $8.25 per share.
Director Compensation
Each director of the Company is currently compensated for services as a
director, including as a member of committees of the Board, as follows: (i) each
director who is also an employee of the Company is compensated in the amount of
$1,000 per month; and (ii) each director who is not also an employee of the
Company ("Outside Director") is compensated in accordance with the Allied
Research Corporation Outside Directors Compensation Plan (the "Directors
Compensation Plan") by which the Company pays each one of its Outside Directors
$1,000 per month during such Outside Director's tenure and awards 1,000 shares
of the Company's stock to each individual who serves as an Outside Director on
each July 1. As initially adopted by the Board of Directors, the Directors
Compensation Plan authorized the issuance of up to 50,000 shares of common stock
of the Company; as a result of the 5% stock dividend paid on November 6, 1992,
the 48,000 shares remaining to be issued automatically increased to 50,400
shares. In addition, Outside Directors are compensated (a) $1,000 for each Board
meeting in excess of four (4) personally attended during each calendar year, (b)
$500 for each committee meeting attended which is not held in conjunction with a
Board meeting, and (c) $250 for each teleconference Board meeting in excess of
two (2) in which a director participates during each calendar year.
In 1992, the Board of Directors of the Company adopted the Allied Research
Corporation Outside Directors Retirement Plan (the "Directors Retirement Plan")
to provide retirement benefits for long-standing Outside Directors. Under the
Directors Retirement Plan, Outside Directors are eligible for a retirement
benefit if they retire from the Board and have served as a member of the Board
for a minimum of (5) years. An eligible Outside Director who retires from the
Board is entitled to receive, commencing on the last day of the first month
following the month in which the director attains age seventy (70), monthly
payments equal to the monthly cash compensation received from the Company at the
time the director terminated service in such capacity. Such payments will cease
upon the earlier of the expiration of a period of time equivalent to the period
of time the director served as a member of the Board or the death of the
director. In the event that a director has breached any fiduciary or legal duty
to the Company, the director will forfeit the right to payment of benefits under
the Directors Retirement Plan. The Directors Retirement Plan is administered by
the Board of Directors.
In 1991, the Board of Directors of the Company adopted the Allied Research
Corporation Outside Directors Stock Option Plan (the "Directors Option Plan") by
which the Company may grant options for up to 208,000 shares of stock to its
Outside Directors (which amount includes the 5% stock dividend paid on November
6, 1992). None of the options granted pursuant to the Directors Option Plan are
intended to qualify as incentive stock
5
<PAGE>
options under Sections 422 through 424 of the Internal Revenue Code. The
purpose of the Directors Option Plan is to advance the interests of the
Company by providing its Outside Directors with financial incentives in the
form of non-statutory stock options in order to attract, retain and motivate
such Outside Directors. No options were granted under the Directors Option
Plan in 1995 and no options are outstanding under the Directors Option Plan.
Employment Contracts and Change-In-Control Agreements
J.R. Sculley and the Company have entered into an Employment Agreement (the
"Sculley Agreement"), which extends through March 31, 1998, and is automatically
renewable from year to year thereafter unless either the Company or Mr. Sculley
gives the other timely notice of its or his intent not to renew. In
consideration for his services as an officer of the Company and as a director of
the Company and its subsidiaries, Mr. Sculley is entitled to receive an
aggregate sum of not less than $235,000 per calendar year. The Sculley Agreement
further provides that upon the death or disability of Mr. Sculley, the Company
will make installment payments to or for the benefit of Mr. Sculley in an amount
not to exceed $250,000.
W. Glenn Yarborough, Jr. and the Company have entered into an Employment
Agreement (the "Yarborough Agreement") which extends through July, 1996, and is
automatically renewable from year to year thereafter unless either the Company
or Mr. Yarborough gives the other timely notice of its or his intent not to
renew. In consideration for his services as an officer of the Company and as a
director of the entities comprising The VSK Group, Mr. Yarborough is entitled to
receive an aggregate sum of not less than $168,000 per calendar year. The
Yarborough Agreement further provides that in the event Mr. Yarborough ceases to
serve in any capacity as an officer of the Company as a result of a voluntary or
involuntary termination within a period of twelve (12) months following a change
in control, Mr. Yarborough shall be entitled to a lump sum payment equal to the
aggregate amount of compensation payable to Mr. Yarborough throughout the
remaining term of the Yarborough Agreement.
In June, 1991, the Board of Directors of the Company adopted the Preferred
Share Purchase Rights Agreement (the "Agreement"). The Board amended the
Agreement in April, 1993, to reduce the acquisition threshold described below
from 25% to 10%. The Agreement provides each stockholder of record on June 20,
1991, a dividend distribution of one "right" for each outstanding share of the
Company's common stock. Rights become exercisable at the earlier of ten days
following: (1) a public announcement that an acquirer has purchased or has the
right to acquire 10% or more of the Company's common stock, or (2) the
commencement of a tender offer which would result in an offeror beneficially
owning 30% or more of the outstanding common stock of the Company. All rights
held by an acquirer or offeror expire on the announced acquisition date, and all
rights expire at the close of business on June 20, 2001. Each right entitles a
stockholder to acquire at a stated purchase price, 1/100 of a share of the
Company's preferred stock which carries voting and dividend rights similar to
one share of its common stock. Alternatively, a rights holder may elect to
purchase for the stated price an equivalent number of shares of the Company's
common stock (or in certain circumstances, cash, property or other securities of
the Company) at a price per share equal to one-half of the average market price
for a specified period. In lieu of the purchase price, a right holder may elect
to acquire one-half of the common stock available under the second option. The
purchase price of the preferred stock fractional amount is subject to adjustment
for certain events as described in the Agreement. At the discretion of a
majority of the Board and within a specified time period, the Company may redeem
all of the rights at a price of $.01 per right. The Board may also amend any
provision of the Agreement prior to exercise.
Compensation Committee Interlocks and Insider Participation
The Compensation Committee of the Company during the fiscal year ended
December 31, 1995 consisted of Messrs. Charles T. Scott, Clifford C. Christ
and Earl P. Smith. None of such individuals has served as an officer or
employee of the Company nor is there any other relationship between any member
of the Compensation Committee and the Company which is required to be
disclosed under applicable proxy regulations.
6
<PAGE>
Compensation Committee Report on Executive Compensation
The Compensation Committee of the Board of Directors establishes the
compensation arrangements for executive officers of the Company. The
Compensation Committee's executive compensation program is structured to
attract, motivate and retain qualified executives, to reward individual
initiative and to link executive compensation with the interests of the
Company's shareholders. This program is implemented by establishing competitive
base salaries for its executive officers, coupled with bonuses with an emphasis
on stock awards for exceptional performance and achievements and stock option
grants to both retain executive officers and better assure that executive
compensation is tied directly to the performance of the Company's stock.
There are three components of the executive compensation program: (i) base
salary, (ii) annual bonuses with an emphasis on stock awards and (iii) annual
stock option grants. To date: (a) the base salary component has been principally
based upon contractual obligations and not performance evaluations; (b) annual
bonuses have been based on operating results and subjective performance
criteria; and (c) stock options grants have been based in part on subjective
performance evaluations and in part to facilitate increased ownership of Company
stock by key employees.
Salaries of the Company's executive officers are determined on the basis of
comparisons with salaries of executives holding similar positions at comparably
sized public companies. During 1992, the Chairman of the Compensation Committee
engaged in an extensive study of compensation paid to chief executive officers
of comparably sized public companies. This study was utilized to establish the
compensation payable to the individual then serving as chief executive officer
of the Company, the predecessor to the current chief executive officer, J.R.
Sculley.
The annual bonus component of the executive compensation program will largely
be implemented using Company stock awards. No stock awards were granted in 1995
in view of substantial losses incurred in 1994. Going forward, it is the intent
of the Compensation Committee to provide specific objectives for all executive
officers and the key members of management of the Company's subsidiaries.
The final component of the Company's executive compensation program is an
annual grant of stock options. These grants are intended to provide a direct
linkage between increased compensation for the Company's executives and an
increase in the price of the Company's stock which constitutes enhanced value
for all of the Company's shareholders. The number of options granted will be
based on the executives' level of responsibility, Company performance and
individual performance. As is the case with annual stock awards, the
Compensation Committee intends to use stock options to incent and motivate the
key managers of the Company's subsidiaries as well as Company executive
officers. As an additional objective, stock option grants to executive officers
are intended to induce the executive to remain in the employment of the Company.
Accordingly, the Compensation Committee intends for stock options to be
exercisable only after an employee has satisfied a minimum tenure requirement.
The Compensation Committee expects to issue stock options in accordance with the
foregoing plan within the next few weeks.
Mr. Sculley's base salary as chief executive officer of the Company is at a
level below that of his predecessor as chief executive officer. Mr. Sculley's
employment agreement was negotiated at the time he became chief operating
officer of the Company. It provided that his salary would be reviewed in the
event he was elected chief executive officer. Mr. Sculley was not afforded an
increase in salary at the time he assumed the duties of chief executive officer.
The only compensatory change following his assumption of the title and
responsibilities of chief executive officer was an amendment which provides for
the Company to make installment payments to or for the benefit of Mr. Sculley,
in an amount not to exceed $250,000, upon his death or disability. In 1994, the
term of Mr. Sculley's agreement was extended through March, 1998. The 1994
amendment does not entitle Mr. Sculley to any increase in base salary over 1995
levels. No stock awards or stock options were awarded to Mr. Sculley in 1995 or
1996 to date. While the Compensation Committee does not currently contemplate
the award of any stock awards to Mr. Sculley in 1996, it does contemplate that
Mr. Sculley will be included in the award of stock options expected to be made
in the next few weeks.
This report is submitted by the Compensation Committee of the Board of
Directors.
Charles T. Scott
Earl P. Smith
Robert W. Hebel
7
<PAGE>
Performance Graph
The following graph assumes $100 was invested on December 31, 1990 in Allied
Research Corporation common stock, the S&P 500 Index and the S&P
Aerospace/Defense Industry Index. It compares the cumulative total return on
each, assuming reinvestment of dividends, for the five-year period ended
December 31, 1995.
COMPARISON OF CUMULATIVE TOTAL RETURN
ASSUMES INITIAL INVESTMENT OF $100 AND REINVESTMENT OF DIVIDENDS
[GRAPH APPEARS HERE]
S&P Aerospace
Allied Research S&P Index Defense Industry
Corporation (ARC) (S&P) Index (IG)
90 100 100 100
91 373.119995 130.470001 119.540001
92 440.230011 140.410004 125.760002
93 270.600006 154.559998 163.580002
94 161.550003 156.600006 176.940002
95 129.240005 214.860001 292.799988
Allied Research Corporation (ARC)
S & P Index (S+P)
S & P Aerospace Defense Industry Index (IG)
ALLIED RESEARCH:
Represents Allied Research Corporation common stock's total return over the
past five years including reinvestment of dividends.
S&P 500:
Represents the S&P 500 Index's total return over the past five years
including reinvestment of dividends.
S&P Aerospace/Defense:
Represents the S&P Aerospace/Defense Industry Index's total return over the
past five years including reinvestment of dividends.
This index consists of the following companies:
AAR Corporation Precision Casting
Banner Aerospace Talley Industries
Fairchild Corporation Trans Technology
Hexcel Corporation UNC, Inc.
Orbital Science Whittaker Corporation
8
<PAGE>
PROPOSAL CONCERNING INDEPENDENT AUDITORS
The firm Grant Thornton LLP has been reappointed by the Board of Directors as
the Company's independent auditors for the year 1996. A resolution will be
presented at the annual meeting to ratify this appointment. The Company has been
advised that representatives of Grant Thornton LLP are expected to be present at
the annual meeting, with the opportunity to make a statement if they desire to
do so, and are expected to be available to respond to appropriate questions.
If the shareholders, by the affirmative vote of majority of the shares of
common stock represented at the meeting, do not ratify the selection of Grant
Thornton LLP, the selection of independent accountants will be reconsidered by
the Board of Directors.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" RATIFICATION OF GRANT THORNTON
AS THE COMPANY'S INDEPENDENT AUDITORS
FOR THE YEAR 1996
SHAREHOLDER PROPOSALS FOR NEXT ANNUAL MEETING
Shareholders are entitled to submit proposals on matters appropriate for
shareholder action consistent with regulations of the Securities and Exchange
Commission. Should a shareholder intend to present a proposal at next year's
annual meeting, it must be in writing and must be received by the Secretary of
the Company at 8000 Towers Crescent Drive, Suite 750, Vienna, Virginia 22182, no
later than December 26, 1996, in order to be included in the Company's proxy
statement and proxy relating to that meeting.
OTHER BUSINESS
The Board of Directors is not aware of any business requiring a vote of the
shareholders to come before the annual meeting other than those matters
described above in this Proxy Statement. However, if any other matter or matters
are properly brought before the annual meeting, or any adjournment thereof, it
is the intention of the persons named in the accompanying form of proxy to vote
the proxy on such matters in accordance with their judgment.
By Order of the Board of Directors,
/s/ J.R. Sculley
J.R. Sculley,
President
Dated: April 25, 1996
YOUR VOTE IS IMPORTANT. PLEASE PROMPTLY COMPLETE AND SIGN THE ENCLOSED FORM
OF PROXY AND RETURN IT IN THE ACCOMPANYING POSTPAID ENVELOPE.
9
<PAGE>
PROXY
THIS IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
OF
ALLIED RESEARCH CORPORATION
The undersigned hereby appoints J.R. Sculley and Charles T. Scott and each
of them proxies, each with full power of substitution, to vote all shares of
Common Stock of Allied Research Corporation (the "Company") which the
undersigned may be entitled to vote at the Annual Meeting of Shareholders of the
Company to be held on June 5, 1996, and any adjournment thereof, upon the
matters set forth below and described in the accompanying Proxy Statement and
upon such other business as may properly come before the meeting or any
adjournment thereof.
(Continued, and to be marked, dated and signed, on the other side)
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(triangle) FOLD AND DETACH HERE (triangle)
Dear Shareholder(s):
Enclosed you will find material relative to the company's 1996 Annual meeting of
shareholders. The notice of the annual meeting and proxy statement describe the
formal business to be transacted at the meeting, as summarized on the attached
proxy card.
Whether or not you expect to attend the Annual Meeting, please complete and
return promptly the attached proxy card in the accompanying envelope, which
requires no postage if mailed in the United States. As a shareholder, please
remember that your vote is very important to us. We look forward to hearing from
you.
Allied Research Corporation
<PAGE>
Please make [ X ]
your votes as
indicated in
the sample
The Board of Directors recommends
a vote FOR Items 1 and 2
Item 1. ELECTION OF DIRECTORS Item 2. APPOINTMENT OF INDEPENDENT AUDITORS
WITHHELD from
FOR all nominees all nominees
listed below listed below FOR AGAINST ABSTAIN
[ ] [ ] [ ] [ ] [ ]
Nominees: Item 3. IN THEIR DISCRETION, PROXIES ARE
J.R. Sculley Charles T. Scott AUTHORIZED TO VOTE UPON SUCH OTHER
Clifford C. Christ Earl P. Smith BUSINESS AS MAY PROPERLY COME
Robert W. Habel Harry H. Warner BEFORE THE ANNUAL MEETING.
WITHHELD FOR: (Write that nominee's
name in the space provided below).
___________________________________
Signature______________________Signature______________________Date______________
Note: Please sign as name appears hereon. Joint owners should each sign. When
signing as attorney, executor, administrator, trustee or guardian, please
give full title as such.
- -------------------------------------------------------------------------------
(triangle) FOLD AND DETACH HERE (triangle)
