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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
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 (S) 240.14a-11(c) or (S) 240.14a-12
ALLIED RESEARCH CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the 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:
-------------------------------------------------------------------------
Notes:
Reg. (S) 240.14a-101.
SEC 1913 (3-99)
<PAGE>
Allied Research Corporation William Glenn Yarborough, Jr.
President
April 28, 2000
Dear Shareholder:
Your Board of Directors joins me in cordially extending an invitation to
attend the 2000 Annual Meeting of Shareholders that will be held on Wednesday,
June 7, 2000 at The Tower Club, 17th Floor, 8000 Towers Crescent Drive, Vienna,
Virginia 22182. The meeting will start at 10:30 a.m.
We sincerely hope you will be able to attend and participate in the meeting. I
will report on the Company's progress and respond to questions you may have
about the Company's business and strategic direction.
Your vote is most important. Whether or not you plan to attend the annual
meeting, we hope you will vote as soon as possible. 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.
We appreciate your continuing support and look forward to seeing you at the
annual meeting.
Warm regards and best wishes.
Very truly yours,
/s/ W. Glenn Yarborough, Jr.
------------------------------
W. Glenn Yarborough, Jr.
8000 Towers Crescent Drive, Suite 260, Vienna, Virginia 22182
Tel: (703) 847-5268 Fax: (703) 847-5334
Tollfree: (800) 847-5322
<PAGE>
ALLIED RESEARCH CORPORATION
---------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
JUNE 7, 2000
---------------
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of Allied
Research Corporation will be held on Wednesday, June 7, 2000, 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 seven (7) 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 2000.
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 12, 2000 are
entitled to notice of and to vote at the meeting.
A copy of the Annual Report of Allied Research Corporation for 1999 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,
William Glenn Yarborough, Jr.
President and
Chief Executive Officer
April 28, 2000
<PAGE>
ALLIED RESEARCH CORPORATION
8000 TOWERS CRESCENT DRIVE, SUITE 260
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 7, 2000,
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 12, 2000 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 $3,500 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 28, 2000.
Voting Securities and Principal Shareholders
On April 12, 2000, the record date for the determination of shareholders
entitled to notice of and to vote at the annual meeting, 4,862,984 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 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 based upon the
most recent filings made by the undersigned with the Securities and Exchange
Commission.
<TABLE>
<CAPTION>
Title Amount and nature
of Name and address of of beneficial Percent of
class beneficial owner ownership class/1/
----- ------------------- ----------------- ----------
<S> <C> <C> <C>
Common FMR Corp./2/ 473,000 9.7%
82 Devonshire Street Owned
Boston, MA 02109 directly
Common Dimensional Fund 339,600 7.0%
Advisor, Inc./3/ Owned
1299 Ocean Ave., 11th Floor directly
Santa Monica, CA 90401
Common Kahn Capital 334,500 6.8%
Management, LL/4/ Owned
8910 University Center directly
Lane, Suite 570
San Diego, CA 92122
</TABLE>
- -------------------
/1/ Based upon 4,856,722 shares of common stock outstanding plus 26,750 shares
which may be acquired within 60 days pursuant to outstanding stock options.
/2/ FMR Corp. and its wholly-owned subsidiary, Fidelity Management & Research
Company ("Fidelity"), Edward C. Johnson, 3rd and Abigail P. Johnson, jointly
filed an amended Schedule 13G with the SEC on February 11, 2000. This
Schedule 13G states that Fidelity Low-Priced Stock Fund owned 473,000 shares
of Common Stock as of December 31, 1999.
/3/ Dimensional Fund Advisors, Inc. ("Dimensional"), a registered investment
advisor, filed an amended Schedule 13G with the SEC on February 3, 2000.
This Schedule 13G states that Dimensional is deemed to have beneficial
ownership of 339,600 shares, all of which shares are owned by advisory
clients of Dimensional. Dimensional disclaims beneficial ownership of all
such shares.
/4/ Kahn Capital Management, LLC ("Kahn") filed a Schedule 13G with the SEC on
November 23, 1999. This Schedule 13G states that Kahn Capital Partners,
L.P., a limited partnership of which Kahn is the general partner, owned
334,500 shares of Common Stock as of December 31, 1999.
The following information is furnished as of March 3, 2000, with respect to the
beneficial ownership by management of Allied's Common Stock:
<TABLE>
<CAPTION>
Title Amount and nature
of Name of of beneficial Percent of
class beneficial owner ownership class/1/
----- ------------------- ----------------- ----------
<S> <C> <C> <C>
Common Harry H. Warner 12,000 *
Owned directly
Common Clifford C. Christ 27,000 *
Owned directly
Common Robert W. Hebel 9,625 *
Owned directly
Common J. R. Sculley 92,400 1.9%
Owned directly
Common W. Glenn Yarborough, Jr. 115,020 2.4%
Owned directly
Common All executive officers 256,045 5.2%
and directors as a Owned directly
group (5)/2/
</TABLE>
- -------------------
/1/ Based upon 4,856,722 shares of common stock outstanding plus 26,750 shares
which may be acquired within 60 days pursuant to outstanding stock options.
/2/ None of the three (3) individuals added to the Board of Directors on April
1, 2000 owned any of Allied's Common Stock as of that date.
2
<PAGE>
ELECTION OF DIRECTORS
Seven (7) 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.
W. Glenn Yarborough, Jr. became a member of the Board of Directors in 1999. J.
R. Sculley joined the Board of Directors in 1991; Clifford C. Christ joined the
Board of Directors in April, 1993; Harry H. Warner joined the Board of Directors
in January, 1996; and Bruce W. Waddell, Ronald H. Griffith and J. H. Binford
Peay, III joined the Board of Directors on April 1, 2000. Robert W. Hebel's
tenure as a member of the Board of Directors will end in June, 2000.
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 Principal business occupation
first elected for past five years and
Name of nominee a director Age other directorships
--------------- ------------- --- -----------------------------
<S> <C> <C> <C>
Clifford C. Christ 1993 52 President and Chief Executive Officer of NavCom
Defense Electronics, Inc., a defense electronics
company, since 1988.
Ronald H. Griffith 2000 61 Executive Vice President and Chief Operating Officer
of MPRI Inc., a professional services company, since
1998; formerly, Vice Chief of Staff of the U.S. Army.
J.H. Binford Peay, III 2000 59 Consultant; formerly, Vice Chief of Staff of the
U.S. Army. Also a director of United Defense, L.P.
and MPRI, Inc.
J.R. Sculley 1991 59 Chairman of the Board and Chief Executive Officer of
the Company from December, 1992 - September, 1999.
Bruce W. Waddell 2000 53 President and Chief Executive Officer of The
Stonebridge Group, Inc., a management consulting
firm, since 1990.
Harry H. Warner 1996 64 Self-employed financial consultant, investor and
real estate developer. Also a director of Chesapeake
Corporation, Pulaski Furniture Corporation and
Virginia Management Investment Corporation.
W. Glenn Yarborough, Jr. 1999 59 President and Chief Executive Officer of the Company
since September, 1999; President and Chief Operating
Officer of the Company since July, 1998; Vice
President of the Company since January, 1995. Member
of the Board of Directors, Carleton Technologies,
since 1994.
</TABLE>
During calendar year 1999, there were ten (10) 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 1999 and the Compensation
Committee met three (3) times in calendar year 1999.
3
<PAGE>
The Audit Committee is currently comprised of Messrs. Christ, Warner and
Hebel. 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.
The Compensation Committee is currently comprised of Messrs. 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 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, 1999, 1998 and 1997 to the chief executive
officer of the Company and to other executive officers of the Company whose
total annual salary and bonus exceeds $100,000:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long Term Compensation
--------------------------------------------------
Annual Compensation Awards Payouts
-----------------------------------------------------------------------------------------------------
Name Other Restricted All
and Annual Stock Securities LTIP Other
Principal Compensation Award(s) Underlying Payouts Compensation
Position Year Salary($) Bonus($)/1/ ($) ($) Options/SARs(#) ($) ($)/2/
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
W. Glenn 1999 200,000
Yarborough, Jr., 1998 197,000 61,312
President; 1997 183,000 108,000
Chief Executive
Officer since
September, 1999
J. R. Sculley, 1999 290,000 400,000
Chief Executive 1998 275,000 68,125
Officer until 1997 245,000 120,000
September, 1999
</TABLE>
- -------------------
/1/ Messrs. Sculley and Yarborough were awarded bonuses of (i) $68,125 and
$61,312 respectively, for 1998 performance, payable in 1999 in stock and/or
cash, and (ii) $120,000 and $108,000, respectively, for 1997 performance,
payable in 1998 in stock and/or cash. These performance awards were paid as
follows - Mr. Sculley was awarded 5,548 shares of stock and cash bonuses of
$30,329 and $53,424, respectively, and Mr. Yarborough was awarded 9,000
shares of Company stock in each of February, 1999 and March, 1998. The
shares issued in February, 1999 had a market value of $6.8125 per share on
the date of grant; and the shares issued in March, 1998 had a market value
of $12.00 per share on the date of grant.
/2/ Mr. Sculley is entitled to post-employment payments of $80,000 per year for
a five (5) year period.
4
<PAGE>
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FY-End Option/SAR VALUE
<TABLE>
<CAPTION>
Number of
Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Options/SARs at Options/SARs at
FY-End (#) FY-End ($)/1/
Shares Acquired Exercisable/ Exercisable/
Name on Exercise (#) Value Realized ($) Unexercisable Unexercisable
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
W. Glenn Yarborough, Jr. 4,200 $10,238 14,000/0/2/ 0/0
</TABLE>
- -------------------
/1/ Based on the closing price of the Company's stock of $6.9375 on December 31,
1999.
/2/ Mr. Yarborough exercised his option to acquire these shares in March, 2000.
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 compensated for service
as a director, including as a member of committees of the Board, at the rate of
$1,000 per month; an award of 1,000 shares of Common Stock on each July 1;
$1,000 for each Board meeting in excess of four (4) personally attended during
each calendar year; $500 for each committee meeting attended which is not held
in conjunction with a Board meeting; and $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 an
aggregate of 75,000 shares were granted under the Directors Option Plan in 1996
to Allied's Outside Directors; no such options were granted in 1997, 1998 or
1999.
5
<PAGE>
Employment Contracts and Change-In-Control Agreements
W. Glenn Yarborough, Jr. and the Company have entered into an Employment
Agreement (the "Yarborough Agreement") which extends through July, 2000, 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. Mr. Yarborough is entitled to receive base compensation of $200,000 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. For a
period of five (5) years following the expiration of Mr. Yarborough's
employment, he has agreed to provide consulting services to the Company for
annual compensation of $55,000.
J.R. Sculley's employment with Allied terminated in September, 1999. He is
entitled to be paid at the rate of his former salary ($290,000 per year) through
August, 2000. He is also entitled to post-employment payments of $80,000 per
year for a five (5) year period. Such amounts are subject to acceleration upon a
change of control of Allied.
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 on a dividend distribution 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 rights 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, 1999 consisted of Messrs. Earl P. Smith (until his resignation from
the Board of Directors in September, 1999), 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) periodic
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 1998, the Compensation Committee engaged in an
extensive study of compensation paid to chief executive officers of comparably
sized public companies.
The annual bonus component of the executive compensation program will largely
be implemented using Company stock awards. No stock awards have been issued to
the executive officers of the Company in view of the Company's 1999 results. 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 the
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. Yarborough's base salary as Chief Executive Officer of the Company is at a
level substantially below that of his predecessor.
This report is submitted by the Compensation Committee of the Board of
Directors.
Robert W. Hebel
Harry H. Warner
7
<PAGE>
Performance Graph
The following graph assumes $100 was invested on December 31, 1994 in Allied
Research Corporation Common Stock, the S&P 500 Index and a Peer Group. It
compares the cumulative total return on each, assuming reinvestment of
dividends, for the five-year period ended December 31, 1999.
Comparison of Cumulative Total Returns*
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
STARTING
BASIS
1994 1995 % 1996 % 1997 % 1998 % 1999 %
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Allied Research Corporation $100.00 $ 80.00 -20.00 $122.50 53.13 $248.74 103.05 $165.00 -33.67 $138.76 -15.90
S&P 500 $100.00 137.58 37.58 169.17 22.96 225.60 33.36 290.08 28.58 351.12 21.04
Peer Group $100.00 130.98 30.98 160.25 22.35 180.85 12.85 192.44 6.41 179.03 -6.97
</TABLE>
*Total return based on $100 initial investment and reinvestment of dividends
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.
Peer Group
- ----------
Represents the comparable peers' total return over the past five years
including reinvestment of dividends.
The peer group consists of the following companies:
Alliant Techsystems (ATK)
CACI International, Inc. (CACI)
Cubic Corporation (CUB)
ESCO Electronic (ESE)
VSE Corporation (VSE)
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 2000. 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 2000
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 260, Vienna, Virginia 22182, no
later than December 29, 2000, 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/ W. Glenn Yarborough, Jr.
---------------------------------------
W. Glenn Yarborough, Jr.,
President and Chief Executive Officer
Dated: April 28, 2000
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 W. Glenn Yarborough, Jr. 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 7, 2000, 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)
- --------------------------------------------------------------------------------
(carat) FOLD AND DETACH HERE (carat)
Dear Shareholder(s):
Enclosed you will find material relative to the company's 2000 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>
<TABLE>
<CAPTION>
<S> <C>
If no direction is made, this proxy will be voted FOR Items 1 and 2. Please mark [ X ]
your vote as
indicated in
this example
<CAPTION>
<S> <C> <C> <C> <C> <C>
FOR WITHHELD FOR WITHHELD FOR AGAINST ABSTAIN
Item 1. ELECTION OF DIRECTORS Item 2. APPOINTMENT OF
Nominees: Clifford C. Christ [ ] [ ] Bruce W. Waddell [ ] [ ] INDEPENDENT [ ] [ ] [ ]
AUDITORS
Ronald H. Griffith [ ] [ ] Harry H. Warner [ ] [ ]
Item 3. IN THEIR DISCRETION, PROXIES ARE
J. H. Binford Peay, III [ ] [ ] W. Glenn [ ] [ ] AUTHORIZED TO VOTE UPON SUCH OTHER
Yarborough, Jr. BUSINESS AS MAY PROPERLY COME
J. R. Sculley [ ] [ ] BEFORE THE ANNUAL MEETING.
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.
- -----------------------------------------------------------------------------------------------------------------------------------
(carat) FOLD AND DETACH HERE (carat)
</TABLE>
