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) No fee required
( ) 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>
April 24, 1998
Dear Shareholder:
Your Board of Directors joins me in extending an invitation to attend
the 1998 Annual Meeting of Shareholders which will be held on Wednesday, June 3,
1998 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.
Very truly yours,
/s/ J. R. Sculley
__________________________
J. R. Sculley,
CHAIRMAN AND
CHIEF EXECUTIVE OFFICER
<PAGE>
ALLIED RESEARCH CORPORATION
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
JUNE 3, 1998
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of
Allied Research Corporation will be held on Wednesday, June 3, 1998, at The
Tower Club, 17th Floor, 8000 Towers Crescent Drive, Vienna, Virginia 22182., at
10:30 a.m., local time, for the following purposes:
1. To elect five (5) 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 1998.
3. To transact such other business as may properly come before the
meeting or any adjournment of adjournments thereof.
Only shareholders of record at the close of business on April 8,
1998 are entitled to notice of and to vote at the meeting.
A copy of the Annual Report of Allied Research Corporation for 1997 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 24, 1998
<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 Tower Crescent Drive, Vienna, Virginia 22182, on
Wednesday, June 3, 1998, 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 8, 1998 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
charter and 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
charter and 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 Corporate Investor Communications, Inc. 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 24, 1998.
VOTING SECURITIES AND PRINCIPAL SHAREHOLDERS
On April 8, 1998, the record date for the determination of shareholders
entitled to notice of and to vote at the annual meeting, 4,727,774 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.
<PAGE>
The following table sets forth information as of March 1, 1998, 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:
Amount and nature
Title of Name and address of of beneficial Percent of
Class beneficial owner ownership class(1)
- -------- ------------------- ----------------- ----------
Common Fidelity Low-Priced Stock 454,000 9.5%
Fund/Fidelity Management & Owned directly
Research Company
82 Devonshire Street
Boston, MA 02109
Common Dimensional Fund 270,200 5.7%
Advisors, Inc.(2) Owned directly
1299 Ocean Avenue
11th Floor
Santa Monica, CA 90401
- --------------------
(1) Based upon 4,649,721 shares of common stock outstanding plus 140,670
shares which may be acquired within 60 days pursuant to outstanding
stock options.
(2) Dimensional Fund Advisors, Inc. ("Dimensional"), a registered
investment advisor, is deemed to have beneficial ownership of 270,200
shares, all of which shares are held in portfolios of DFA Investment
Dimensions Group, Inc., a registered open-end investment company, or in
series of the DFA Investment Trust Company, a Delaware business trust,
or the DFA Group Trust and DFA Participation Group Trust, investment
vehicles for qualified employee benefit plans, all of which Dimensional
Fund Advisors, Inc. serves as investment manager. Dimensional disclaims
beneficial ownership of all such shares.
The following table sets forth the information as of March 1, 1998,
with respect to the beneficial ownership by management of the Company's common
stock:
Amount and nature
Title of Name of of beneficial Percent of
Class beneficial owner ownership(1) class(2)
- -------- ---------------- ---------------- ----------
16,110 *
Common Earl P. Smith Owned directly
Common Clifford C. Christ 25,000 *
Owned directly
Common Robert W. Hebel 17,000 *
Owned directly
Common Harry H. Warner 10,000 *
Owned directly
Common J.R. Sculley 122,804 2.6%
Owned directly
Common W. Glenn Yarborough, Jr. 58,649 1.3%
Owned directly
Common All executive officers directors 249,563 5.2%
as a group (6) Owned directly
- --------------------
(1) Includes 14,000 shares which may be acquired by Mr. Smith, 18,200
shares which may be acquired by Mr. Yarborough and 43,720 shares which
may be acquired by Mr. Sculley within 60 days pursuant to outstanding
stock options.
(2) Based upon 4,649,721 shares of common stock outstanding plus 140,670
shares which may be acquired within 60 days pursuant to outstanding
stock options.
2
<PAGE>
ELECTION OF DIRECTORS
Five (5) 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 became a member 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:
<TABLE>
<CAPTION>
Year in which first Principal business occupation for
elected past five years and
Name of nominee a director Age other directorships
- ----------------- ------------------- --- -----------------------------------------------------------
<S> <C>
J.R. Sculley 1991 57 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 MECAR S.A. ("MECAR"), Barnes & Reinecke,
Inc. ("Barnes & Reinecke") and Allied Research
Corporation Limited ("Limited") since April, 1992;
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).
Clifford C. Christ 1993 50 President and chief executive officer of NavCom Defense
Electronics, Inc., a defense electronics company, since
1988.
Earl P. Smith 1993 59 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 74 Private investor.
Harry H. Warner 1996 62 Self-employed financial consultant, investor and real
estate developer. Also a director of Chesapeake
Corporation, Pulaski Furniture Corporation and American
Filtrona Corporation.
</TABLE>
During calendar year 1997, there were seven (7) formal meetings of the
Board of Directors. The directors frequently communicate with one another on an
informal basis.
The Audit Committee had one (1) meeting during 1997 and the
Compensation Committee met three (3) times in calendar year 1997.
The Audit Committee is currently comprised of Messrs. Christ, Hebel 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 accountants'
certification, and (iv) reviews the adequacy of the Company's basic accounting
and internal control systems.
3
<PAGE>
The Compensation Committee is currently comprised of Messrs. Smith,
Hebel and Warner. 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.
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, 1997, 1996 and 1995, by the chief executive
officer of the Company and by other executive officers of the Company whose
total annual salary and bonus exceeds $100,000:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
ANNUAL COMPENSATION Awards Payouts
------------------------------ -----------------------
Other All
Name Annual Restricted Securities Other
and Compen- Stock Underlying LTIP Compen-
Principal sation Award(s) Options/ Payouts sation
Position Year Salary($) Bonus($)(1) ($) ($) SARs (#) ($) ($)
- --------- ---- --------- ----------- ------- ---------- ---------- ------- -------
<S> <C>
J. R. Sculley, 1997 $245,000 $120,000
Chief Executive Officer 1996 $245,000 $100,000
1995 $235,000 15,000
W. Glenn Yarborough, Jr. 1997 $180,500 $108,000
Vice President 1996 $168,000 $ 90,000 27,600
1995 $144,500
</TABLE>
- ---------------
(1) Messrs. Sculley and Yarborough were awarded bonuses of $120,000 and
$108,000, respectively, for 1997 performance payable in 1998 in stock
and/or cash and $100,000 and $90,000, respectively, for 1996 performance
payable in 1997 in stock and/or cash. In March 1998 and 1997, Mr. Sculley
was awarded 5,548 shares of stock and a cash bonuses of $53,424 and
$44,420. Mr. Yarborough was awarded 9,000 shares of Company stock in each
of March 1998 and 1997. The shares issued in March 1998 had a market value
of $12.00 per share on the date of grant; the shares issued in March, 1997
had a market value of $10.00 per share on the date of grant.
4
<PAGE>
AGGREGATED OPTIONS/SAR EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION/SAR VALUE
<TABLE>
<CAPTION>
Number of
Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Options/SARs Options/SARS
at FY-End (#) at FY-End ($)(1)
Shares Acquired Value Exercisable/ Exercisable/
Name on Exercise (#) Realized ($) Unexercisable Unexercisable
- ---- --------------- ------------ ------------- -------------
<S> <C>
J.R. Sculley 4,880 $25,010 22,520/43,600 $94,689/$213,847
W. Glenn Yarborough, Jr. 19,200 $92,625 14,000/8,400 $58,623/$72,979
</TABLE>
- ------------------------
(1) Based on the closing price of the Company's stock of $12.4375 on December
31, 1997.
DIRECTOR COMPENSATION
Directors who are employees of the Company receive no additional
compensation for serving as a director. Each non-employee director (an "Outside
Director") is currently compensated for services as a director, including as a
member of committees of the Board 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. 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 base 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. None of the options granted pursuant to the Directors
Option Plan are intended to qualify as incentive stock options under Section 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. Options for
15,000 shares each were granted under the Directors Option Plan in 1996 to
Messrs. Christ, Smith, Hebel and Warner; no such options were granted in 1997.
5
<PAGE>
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 July 31, 1998. 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 $245,000 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,
1998, and is automatically renewable from year to year thereafter unless either
the Company or Mr. Yarborough gives the other timely notice of his intent not to
renew. Mr. Yarborough is entitled to receive base compensation of $183,000 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 Agreement
provides each stockholder of record 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, 1997 consisted of Messrs. Earl P. Smith, Robert W. Hebel and Harry
H. Warner. 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.
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.
6
<PAGE>
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
based on both contractual obligations and performance evaluations; (b) annual
bonuses have been based on operating results and performance criteria; and (c)
stock options grants have been based in part on 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. Stock awards aggregating
14,548 shares have been issued to the executive officers of the Company in view
of 1997 performance. It is the intent of the Compensation Committee to continue
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
periodic grant of stock options. These grants are intended to provide a direct
linkage between increased compensation for the Company's executives and 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 generally to be exercisable
only after an employee has satisfied a minimum tenure requirement.
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.
Stock awards constituting 5,548 shares were awarded to Mr. Sculley in early 1998
together with a cash bonus of $53,424.
This report is submitted by the Compensation Committee of the Board of
Directors.
Earl P. Smith
Robert W. Hebel
Harry H. Warner
7
<PAGE>
PERFORMANCE GRAPH
The following graph assumes $100 was invested on December 31, 1992 in
Allied Research Corporation common stock, the S&P 500 Index and the S&P
Aerospace/Defense Industry Index. In compares the cumulative total return on
each, assuming reinvestment of dividends, for the five-year period ended
December 31, 1997.
[Graph appears below with plot points]
Comparison of Cumulative Total Return
Assumes initial investment of $100 and reinvestment of dividends
<TABLE>
<CAPTION
1992 1993 1994 1995 1996 1997
---- ---- ---- ---- ---- ----
<S><C>
Allied Research Corporation (ARC) $100 $ 61.47 $ 36.70 $ 29.36 $ 44.95 $ 91.28
S&P Index (S&P) 100 110.08 111.53 153.45 188.68 250.99
S&P Aerospace Defense Industry Index (IG) 100 130.07 140.69 232.82 311.42 320.39
</TABLE>
8
<PAGE>
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
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 1998. 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 a 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.
9
<PAGE>
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR"
RATIFICATION OF GRANT THORNTON AS THE COMPANY'S
INDEPENDENT AUDITORS FOR THE YEAR 1998
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 23, 1998, 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 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 24, 1998
YOUR VOTE IS IMPORTANT. PLEASE PROMPTLY COMPLETE AND SIGN THE ENCLOSED
FORM OF PROXY AND RETURN IT IN THE ACCOMPANYING POSTPAID ENVELOPE.
10
<PAGE>
PROXY
THIS IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
OF
ALLIED RESEARCH CORPORATION
The undersigned hereby appoints J.R. Sculley and Harry H. Warner 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 3, 1998, 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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Dear Shareholder(s):
Enclosed you will find material relative to the company's 1998 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
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If no direction is made, this proxy will be voted FOR Items 1 and 2.
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FOR WITHHELD FOR AGAINST ABSTAIN
Item 1. ELECTION OF DIRECTORS [ ] [ ] FOR WITHHELD Item 2. APPOINTMENT OF [ ] [ ] [ ]
Nominees: J.R. Sculley Harry H. Warner [ ] [ ] INDEPENDENT
AUDITORS
Clifford C. Christ [ ] [ ] Earl P. Smith [ ] [ ] Item 3. IN THEIR DISCRETION, PROXIES ARE
AUTHORIZED TO VOTE UPON SUCH OTHER
BUSINESS AS MAY PROPERLY COME
Robert W. Hebel [ ] [ ] BEFORE THE ANNUAL MEETING.
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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.
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