EXHIBIT 99.1
November 27, 2000
X. X. Xxxxxxx Xxxx, III
0000 Xxxxxx Xxxxx
Xxxxxxx, Xxxxxxxx 00000
Dear Binnie:
On behalf of the Board of Directors (the "Board") of Allied Research
Corporation (the "Company"), I am very pleased to offer you the positions of
Chairman of the Board, President and Chief Executive Officer of the Company.
This letter agreement clarifies and confirms the terms of your employment with
the Company.
1. POSITIONS; START DATE
As Chairman of the Board, President and Chief Executive Officer of the
Company, you shall have the duties and responsibilities customarily associated
with such positions, including direct responsibility for the overall profit and
loss of the Company, and such duties as may be assigned to you by the Board.
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 January 1, 2001 (the "Start Date").
2. SALARY
Your salary will be $25,000 per month ($300,000 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 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 10,000 shares of Company common
stock as of the Start Date.
4. BONUS
In addition to your salary, you will be eligible to earn an annual bonus
of up to 50% of base salary if you meet or exceed certain performance standards
which will be mutually determined by you and the Compensation Committee and
approved by the Board. The performance standards for 2001 will be mutually
determined and approved within ninety (90)
days of commencement of employment and prior to the beginning of each subsequent
calendar year. You will be eligible for an annual bonus for any calendar year
only if you remain employed as Chief Executive Officer of the Company as of
December 31 of such calendar year. The bonus will be payable within thirty (30)
days of the filing by the Company of its Form 10-K 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.
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. In addition, the Company shall pay the
premium on a $1 million insurance policy insuring your life as long as you are
insurable at standard or better rates. You shall be entitled to designate the
beneficiary of the policy.
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 ten (10) year option to purchase 100,000 shares of Company common
stock, which will vest as to 40,000 shares on the first day of January, 2002 and
at the rate of 20,000 shares on the first day of January 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 in Section 8(c) hereof). 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 under the Company's 1997 plan
to the maximum extent permitted under law; the balance of the options will be
non-qualified stock options. To the extent the underlying shares are not
registered, the Company will use its best efforts to file a Form S-8
registration statement to register such shares. 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.
The above-described 100,000 share option grant assumes that the strike
price will not be greater than $8.875 per share. If the strike price exceeds
$8.875 per share, the number of shares subject to the option shall be an amount
computed by multiplying 100,000 by a fraction, the numerator of which is the
strike price and the denominator of which is $8.875.
7. TERMINATION OF EMPLOYMENT
Your employment may be terminated at any time by you, or by the Company
with or without Cause, with ninety (90) days' prior written notice. Subject to
this notice requirement,
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this at-will employment relationship cannot be changed except in writing signed
by the Chairman of the Compensation Committee. The following matters will
provide the Company with justification for termination of your employment with
"Cause":
(a) 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) 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's Board of Directors describing
such failure in reasonable detail.
8. PAYMENTS UPON TERMINATION OF EMPLOYMENT
The payments you will be entitled to receive from the Company upon
termination of your employment will be as follows:
(a) 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.
(b) If the Company terminates your employment without Cause within six (6)
months following a Change of Control which occurs during the first year of your
employment hereunder, in addition to the amounts described in Section 8(a)
above, the Company will pay you an amount equal to $500,000 less the Option
Profit (as herein defined). Said amount shall be paid in a lump sum within ten
(10) days following termination of your employment. Prior to the end of 2001,
the Company and you will reconsider the need for and the terms of any substitute
Section 8(b) provision.
(c) 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
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stock or the combined voting power of the Company's then outstanding
capital stock entitled to vote generally in the election of directors;
or
(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.
(d) For purposes hereof, the term "Option Profit" means the amount of
pre-tax profit which you could earn by exercising the stock options described in
Section 6 and selling the underlying shares of Company common stock in
connection with the Change of Control transaction or event (whether or not you
exercise any or all such options and/or sell the underlying shares).
9. NON-COMPETITION
For a one (1) year period from and after termination of your employment
for any reason, 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 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 December 7, 2000.
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/ Xxxxx X. Xxxxxx
Xxxxx X. Xxxxxx,
Chairman of Compensation Committee of
Allied Research Corporation
ACCEPTANCE
I accept employment with Allied Research Corporation under the terms set forth
in this letter agreement:
/s/ X. X. Xxxxxxx Xxxx, III
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X. X. Xxxxxxx Xxxx, III
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