EXHIBIT 99.4
July 23, 2001
Xxxxxxx X. Xxxxxx, CPA/MBA
00000 Xxxxxxx Xxxxxx
Xxxxxxx Xxxxx, Xxxxxxxx 00000
Dear Xxxxx:
On behalf of the Board of Directors (the "Board") of Allied Research
Corporation (the "Company"), I am very pleased to offer you the position of
Chief Financial Officer of the Company. This letter agreement clarifies and
confirms the terms of your employment with the Company.
1. POSITIONS; START DATE
As Chief Financial Officer of the Company, you shall have the duties and
responsibilities customarily associated with such position and such duties as
may be assigned to you by the Chief Executive Officer and/or the Executive Vice
President of the Company. Your office will be at the Company's headquarters,
located at 0000 Xxxxxx Xxxxxxxx Xxxxx, Xxxxx 000, Xxxxxx, Xxxxxxxx 00000. You
agree not to actively engage in any other employment, occupation or consulting
activity that conflicts with the interests of the Company. Unless we mutually
agree otherwise, you will commence employment on July 30, 2001 (the "Start
Date").
2. SALARY
Your salary will be $13,333.33 per month ($160,000 annualized), payable
monthly in accordance with the Company's standard payroll practice and subject
to applicable withholding taxes. Because your position is exempt from overtime
pay, your salary will compensate you for all hours worked. Your salary will be
reviewed and effective annually by the Board or its Compensation Committee, and
any adjustments will be effective as of the date determined by the Board or its
Compensation Committee.
3. STOCK AWARD
As a one-time "signing bonus", and subject to Board of Directors' approval,
you will be granted a stock award of 2,500 shares of Company common stock as of
the Start Date. These shares are registered pursuant to an S-8 Registration
Statement filed by the Company with the Securities and Exchange Commission.
4. BONUS
In addition to your salary, commencing with respect to calendar year 2002
you will be eligible to earn an annual bonus of up to 35% of your base salary if
you meet or exceed certain performance standards which will be mutually
determined by you and the Chief Executive
Officer and approved by the Compensation Committee. The performance standards
will be mutually determined and approved prior to the beginning of each calendar
year. You will be eligible for an annual bonus for any calendar year only if you
remain employed with the Company as of December 31 of such calendar year. The
bonus will be payable within ten (10) days of the public release by the Company
of its financial results for the relevant calendar year. The bonus will be
payable, at your election, in cash and/or shares of Company common stock. In the
event the shares are subject to any restrictions on transferability, we will
agree upon an appropriate discount from the market value of the shares on the
date of your receipt of the shares thereby resulting in an increase in the
number of shares awarded over the number which would have been awarded on an
unrestricted basis. For the August 1 - December 31, 2001 short period, you will
be considered for a discretionary bonus based on your performance during such
period and the financial results of the Company.
5. BENEFITS
You will also be entitled, during the term of your employment, to such
employee benefits as the Company may offer from time to time, subject to
applicable eligibility requirements.
6. STOCK OPTION
As we discussed, our compensation structure is weighted towards equity
ownership because we believe we will create the most value for the Company and
its shareholders over time by having employees think and act like, and therefore
be, owners. To this end, and subject to Board of Directors' approval, you will
be granted a five (5) year option to purchase 40,000 shares of Company common
stock, which will vest as to 16,000 shares on the first day of August, 2002 and
at the rate of 8,000 shares on the first day of August of each of 2003, 2004 and
2005, provided you remain in the employ of the Company on said dates. The
options will provide for accelerated vesting upon a Change of Control (as
defined below). The strike price will be the fair market value per share of such
stock on the last trading day immediately preceding the Start Date. The options
will be incentive stock options to the extent permissible under the Internal
Revenue Service code and regulations. Your option will be documented by delivery
to you of a stock option agreement. The Board (or the Committee) will consider
and may in its discretion issue future option grants to you based on your
performance, the Company's operating results and other appropriate factors.
For purposes hereof, the term "Change of Control" means:
(i) the acquisition (other than by the Company) by any person, entity
or "group" within the meaning of Section 13(d) or 14(d) of the
Securities Exchange Act of 1934 (the "Exchange Act") (excluding, for
this purpose, the Company or its subsidiaries or any employee benefit
plan of the Company or its subsidiaries which acquires beneficial
ownership of voting securities of the Company) of beneficial ownership
(within the meaning of Rule 13d-3 promulgated under the Exchange Act),
of 50% or more of either the then outstanding shares of common stock
or the combined voting power of the Company's then outstanding capital
stock entitled to vote generally in the election of directors; or
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(ii) individuals who, as of the date hereof, constitute the Board
(as of the date hereof the "Incumbent Board") cease for any reason to
constitute at least a majority of the Board, provided that any person
becoming a director subsequent to the date hereof whose election, or
nomination for election by the Company's shareholders, was approved by
a vote of at least a majority of the directors then comprising the
Incumbent Board shall be considered as though such person were a
member of the Incumbent Board; or
(iii) approval by the shareholders of the Company of (x) a
reorganization, merger, consolidation or share exchange, in each case,
with respect to which persons who were the shareholders of the Company
immediately prior to such reorganization, merger, consolidation or
share exchange do not, immediately thereafter, own more than 50% of
the combined voting power entitled to vote generally in the election
of directors of the reorganized, merged, consolidated or other
surviving company's then outstanding voting securities, (y) a
liquidation or dissolution of the Company or (iii) the sale of all or
substantially all of the assets of the Company.
7. TERMINATION OF EMPLOYMENT
Your employment may be terminated at any time by you or by the Company with
or without Cause, without prior written notice. This at-will employment
relationship cannot be changed except in writing signed by the Chief Executive
Officer of the Company or the Chairman of the Compensation Committee. The
following matters will provide the Company with justification for termination of
your employment with "Cause":
(a) your conviction of any act by you of fraud or embezzlement;
(b) your conviction of any felony involving an act of dishonesty, moral
turpitude, deceit or fraud;
(c) your conviction of any act of dishonesty or misconduct (whether in
connection with your responsibilities as an employee of the Company or
otherwise) that either materially impairs the Company's business, goodwill or
reputation or materially compromises your ability to represent the Company with
the public; or
(d) your material failure to perform your lawful duties to the Company
after receiving written notice from the Company describing such failure in
reasonable detail.
8. PAYMENTS UPON TERMINATION OF EMPLOYMENT
If you terminate your employment or if the Company terminates your
employment with or without Cause, the Company will pay you any accrued and
unpaid compensation (subject to normal withholding and other deductions) to the
effective date of termination of your employment. In addition, if your
employment with the Company is terminated by the Company
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without Cause or if you terminate your employment with the Company following (i)
a material adverse alteration or diminution in the nature or status of your
authority, duties or responsibilities from those in effect immediately prior to
such change, (ii) a reduction in your title of Chief Financial Officer, or (iii)
a reduction in your base salary: (a) you will be entitled to receive Severance
Pay (as herein defined); (b) you will be entitled to receive Continuing Benefits
(as herein defined); and (c) any non-vested stock option which is scheduled to
vest as of the next July 1 will vest as of the date of the termination of your
employment in an amount equal to the amount scheduled to vest as of said July 1
multiplied by a fraction, the numerator of which shall be the number of days of
the then current July 1 - June 30 fiscal year up to and including the date of
termination and the denominator of which will be 365. For purposes hereof:
"Severance Pay" means (i) payments equal to your base salary at the time of the
termination payable in monthly installments throughout the period ending twelve
(12) months from the date of employment termination; and (ii) an amount equal to
the average annual bonus earned by you (whether paid or deferred) for the three
most recent annual periods or such shorter period if the termination occurs
before you have served for three annual periods (such amount shall be payable
within forty-five (45) days after the end of the applicable calendar year); and
"Continuing Benefits" means medical, dental, vision, long-term care, life and
disability insurance coverage and any SEP entitlement for one (1) year following
the termination at levels comparable to that provided immediately prior to your
termination (all at the cost of the Company except for any contributions paid by
you prior to the termination). Notwithstanding the foregoing, if such
termination occurs within twelve (12) months following a Change of Control, the
Severance Pay shall be payable, at your election, either in a lump sum within
thirty (30) days of the date of employment termination or in periodic payments
over a period not to exceed three (3) years.
9. NON-COMPETITION
For a one (1) year period from and after termination of your employment for
any reason (except if such termination occurs within twelve (12) months
following a Change of Control), you shall not engage, directly or indirectly,
either on your own behalf or on behalf of any other person, firm, corporation or
other entity, in any business competitive with any business of the Company (or
any of its subsidiaries), in the geographic area or areas in which Company (or
any of its subsidiaries) is conducting business at the time of termination of
your employment, or own more than 5% of any such firm, corporation or other
entity. Upon any violation of the foregoing sentence, you will forfeit any
remaining amounts payable to you hereunder in addition to any other remedies
available to the Company as a result of the violation.
10. CONFIDENTIALITY
With your employment comes the responsibility that you will honor any
confidentiality agreements you have signed with other entities. If you have any
confidential information or trade secrets, written, or otherwise known by you,
you agree not to bring them to the Company, and you agree not to use them in any
way. You attest that you have not signed a "non-competition" agreement or any
other agreement that would prohibit you from working here.
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11. ADDITIONAL PROVISIONS
If you would like to defer receipt of any portion of your compensation, we
will establish an appropriate plan to effect the deferral.
The terms described in this letter agreement will be the terms of your
employment, and this letter supersedes any previous discussions or offers. Any
additions or modifications of these terms would have to be in writing and signed
by you and the Chief Executive Officer of the Company or the Chairman of the
Compensation Commission.
The validity, interpretation, construction and performance of this letter
agreement shall be governed by the laws of the State of Delaware (except their
provisions governing the choice of law).
If you agree that this letter agreement evidences our agreement concerning
your employment with the Company, please indicate so by signing both copies of
this letter retaining one for your files. This offer and all terms of
employment stated in this letter agreement will expire if you have not returned
a signed copy to me on or prior to July 27, 2001.
We are very excited about you joining us. I look forward to a productive
and mutually beneficial working relationship. Please let me know if I can
answer any questions for you about any of the matters outlined in this letter
agreement.
Sincerely,
/s/ X. X. Xxxxxxx Xxxx, III
---------------------------
X.X. Xxxxxxx Xxxx, III, Chairman of the Board,
President and Chief Executive Officer
ACCEPTANCE
I accept employment with Allied Research Corporation under the terms set forth
in this letter agreement:
/s/ Xxxxxxx X. Xxxxxx
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Xxxxxxx X. Xxxxxx, CPA/MBA
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