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ALLIED RESEARCH CORPORATION
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ALLIED RESEARCH CORPORATION
8000 TOWERS CRESENT DRIVE, SUITE 750
VIENNA, VIRGINIA 22182
CONTACT: GLENN YARBOROUGH
(800) 847-5322
HOME PAGE: CFONEWS.COM/ALR
TICKER: AMER STOCK EXCH/ALR
"FOR IMMEDIATE RELEASE"
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ALLIED RESEARCH CORPORATION LAUNCHES REBUTTAL TO ZILKHA CAPITAL PARTNERS
ALLEGATIONS
VIENNA, Virginia - May 27, 1999 - In response to the recent mailing of proxy
material by Zilkha Capital to unseat Allied Research's incumbent Board, Dr. J.
R. Sculley, Chairman & Chief Executive Officer of Allied, commented, ``Do not
let Zilkha's misstatements, contradictions, lack of understanding of Allied's
businesses or 'we can do it better' rhetoric divert you from their real
objective. We believe Zilkha's motives are clear - they are self-serving and
detrimental to other shareholders. This proxy fight is an attempt by Zilkha to
take control of your company without offering any benefit to all shareholders.''
In addition, Dr. Sculley urged shareholders to consider:
ZILKHA HAS ATTEMPTED TO DISTORT THE EXCELLENT OPERATING RESULTS ACHIEVED BY OUR
MANAGEMENT DURING THE PAST FIVE YEARS. ALLIED HAS AN IMPRESSIVE RECORD OF
OPERATING RESULTS.
. During the period from 1994 to 1998, revenue has increased at an annual
compounded rate of 20%, from $69.8 million to $143.5 million, and net earnings
have improved from a loss of $10.9 million to a profit of $9.1 million.
. In 1998, Allied's return on assets of 11% and return on equity of 21% exceeded
the median performance of the companies in the S&P Small Cap Aerospace/Defense
Index which achieved a 10% return on assets and 13% return on equity.
ALLIED IS IMPLEMENTING A DIVERSIFICATION STRATEGY THAT HAS POSITIONED THE
COMPANY FOR PROFITABLE FUTURE GROWTH.
. MECAR, our principal operating subsidiary, has teamed with major defense
contractors on new weapons systems that we expect will provide steady, long-term
revenues and profits. Furthermore, the company's BRI subsidiary has successfully
diversified it revenue base into foreign markets.
. Beginning in 1998, Allied engaged investment bankers to pursue acquisition
opportunities for its electronic security business in Europe and the United
States. The success of Allied's VSK Group, which accounted for 35% of the
company's 1998 pre-tax profit, supports management's decision to expand its
electronic security business. Allied will continue to be a patient and prudent
acquirer.
ZILKHA HAS POORLY MANAGED THEIR EXISTING COLT'S MANUFACTURING CO., BUSINESS AND
ADMITS THEY HAVE NO SPECIFIC PLAN TO MANAGE ALLIED.
. Under Zilkha management, Colt's Manufacturing Co., provoked a customer boycott
of Colt's products resulting in an apparent decline in revenues, as reported by
The Wall Street Journal.
. With their statement, ``--.until we replace the Board and are able to analyze
the company from the inside, it is impossible to develop-- specific plans,''
Zilkha continues to demonstrate little current understanding of Allied's
business, and has therefore, offered no clear, specific, or credible plan for
the management of Allied's business.
IF ZILKHA TAKES CONTROL OF THE BOARD, THEY WILL BE ABLE TO DISMANTLE ALLIED'S
ANTI-TAKEOVER DEFENSES AND DEPRIVE YOU OF A FAIR PRICE FOR YOUR COMPANY.
. A Zilkha-nominated Board of Directors could approve an acquisition of Allied
at an inadequate price and impose impediments to any other bidder interested in
acquiring the company at a higher price.
. Allied's Board of Directors has the power to reject any inadequate bids to
acquire Allied and to negotiate the highest and best bid for the company if and
when a sale/merger is appropriate.
ZILKHA HAS BEEN REJECTED BY A BELGIAN GOVERNMENT IN AN ATTEMPT TO ACQUIRE
ANOTHER BELGIAN DEFENSE CONTRACTOR.
. Under Zilkha's ownership, Colt's recent attempt to acquire one of the world's
main suppliers of small arms was rejected by a regional Belgian government.
Rather than let Zilkha take control, the government bought the company itself.
. In contrast, Allied currently enjoys a very favorable relationship with the
Belgian government that is essential to MECAR's continued success.
ANY DISTURBANCE OF ALLIED'S RELATIONSHIPS WITH ITS FOREIGN CUSTOMERS WOULD HAVE
A MATERIAL ADVERSE EFFECT ON ALLIED'S BUSINESS.
. Allied's management team has spent years developing and building personal
relationships with customers, many of which are foreign companies and
governmental organizations located principally in the Middle East, Europe and
Southeast Asia.
. Your management team is extremely concerned that these relationships would
suffer if the Board is replaced by the Zilkha nominees.
IF ZILKHA REDEPLOYS ALLIED'S CASH AS THEY SUGGEST IN THEIR PROXY MATERIALS, IT
COULD ADVERSELY IMPACT ALLIED'S CORE BUSINESS. ZILKHA SIMPLY DOES NOT UNDERSTAND
OUR BUSINESS.
. The large and profitable orders at MECAR and BRI in recent years have required
cash deposits to assure our customers, suppliers and banks that they could
perform as contractually required. Our cash serves as part of the collateral
necessary for our banks to assure our suppliers and customers of timely payment
and delivery.
. We are expecting orders to increase as a result of the recent increase in oil
prices. We believe our existing cash and credit facilities are at the
appropriate levels to finance the growth of our core business as well as support
our commercial acquisition program in the electronic security field.
TO SUMMARIZE ZILKHA'S TRACK RECORD:
. Zilkha's poor management of Colt's has resulted in an apparent decline in
revenues.
. Zilkha's lack of understanding of Allied has rendered them unable to offer a
clear, specific, or credible plan for the management of Allied's business.
. Zilkha's rejection by a Belgian government as an acquirer of a Belgian defense
company may make them unwelcome owners of Belgian-based MECAR.
. Zilkha's self-serving, unnecessary and highly dilutive convertible note
financing proposal was determined by your Board to be detrimental to the
interests of shareholders.
The management of Allied Research Corporation is concerned that shareholders
will be misled by the Zilkha group campaign and welcomes them to call Corporate
Investor Communications (877) 460-4348 if they have any questions or would like
to discuss the issues with us. The Board recommends that shareholders support
the current management team by returning only white proxy cards and discarding
any card sent to them by the Zilkha group.
Allied Research Corporation is a defense and electronic security firm. Its
operating units develop and produce ammunition, supply equipment performance
upgrades for defense departments worldwide, and design, produce and market
sophisticated electronic security and access control systems.
Certain statements contained herein are ``Forward Looking'' statements as such
term is defined in the Private Securities Litigation Reform Act of 1995. Because
such statements include risks and uncertainties, actual results may differ
materially from those expressed or implied. Factors that could cause results to
differ materially from those expressed or implied include, but are not limited
to, those discussed in filings by the company with the Securities and Exchange
Commission.