<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE
SECURITIES EXCHANGE ACT OF 1934
FILED BY THE REGISTRANT /X/ FILED BY A PARTY OTHER THAN THE REGISTRANT / /
- --------------------------------------------------------------------------------
Check the appropriate box:
/ / Preliminary Proxy Statement
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
ECC International Corp.
(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/ $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / 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:
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<PAGE> 2
ECC INTERNATIONAL CORP.
-----------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To the Stockholders of
ECC INTERNATIONAL CORP.:
Notice is hereby given that the Annual Meeting of Stockholders of ECC
International Corp., a Delaware corporation (the "Company"), will be held at The
Drake Hotel, 440 Park Avenue at 56th Street, New York, New York, on Wednesday,
December 6, 1995 at 10:00 a.m., Eastern Standard Time (the "Meeting"), to
consider and act upon the following matters:
1. To elect a Board of Directors to serve until the next Annual
Meeting of Stockholders of the Company and until their successors are duly
elected and qualified.
2. To ratify the selection of Coopers & Lybrand L.L.P. as the
Company's independent public accountants for the current year.
3. To approve the Company's 1996 Employee Stock Purchase Plan.
4. To transact such other business as may properly come before the
Meeting and any adjournments thereof.
The Board of Directors has no knowledge of any other business to be
transacted at the Meeting.
Holders of record of the Company's Common Stock, $.10 par value, as of the
close of business on October 18, 1995 will be entitled to notice of and to vote
at the Meeting and any adjournments thereof. A list of stockholders is open for
examination to any stockholder at the offices of the Company, 175 Strafford
Avenue, Suite 116, Wayne, Pennsylvania 19087-3377 and will be available at the
Meeting.
By Order of the Board of Directors,
Richard F. Thompson
RICHARD F. THOMPSON, Secretary
Wayne, Pennsylvania
October 23, 1995
WHETHER OR NOT YOU EXPECT TO BE PRESENT AT THE MEETING, PLEASE PROMPTLY
COMPLETE, SIGN, DATE AND RETURN TO THE COMPANY THE ENCLOSED PROXY CARD. IF YOU
ARE PRESENT AT THE MEETING, YOU MAY WITHDRAW YOUR PROXY AND VOTE YOUR SHARES
PERSONALLY.
<PAGE> 3
ECC INTERNATIONAL CORP.
------------------------
PROXY STATEMENT
FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON DECEMBER 6, 1995
This Proxy Statement is furnished in connection with the solicitation by
the management of ECC International Corp., a Delaware corporation (the
"Company"), of proxies for use at the Annual Meeting of Stockholders of the
Company to be held at The Drake Hotel, 440 Park Avenue at 56th Street, New York,
New York, on Wednesday, December 6, 1995, at 10:00 a.m., Eastern Standard Time
(the "Meeting"), and all adjournments and postponements thereof. The matters to
be considered and acted upon at the Meeting are described below in this Proxy
Statement.
All shares represented by proxies will be voted in the manner specified on
the proxy card or, if not specified, in favor of the proposals listed on the
card. Stockholders giving proxies may revoke them at any time prior to their
being voted by either written or oral request to the Secretary.
The Company's principal executive offices are located at 175 Strafford
Avenue, Suite 116, Wayne, Pennsylvania 19087-3377. The Company also maintains
offices at 5882 South Tampa Avenue, Orlando, Florida 32839-3981 and Kingston
Wharf, Brighton Road, Shoreham-by-Sea, Sussex, England BN436RN. The Notice of
Meeting, this Proxy Statement, the enclosed proxy card and the Company's Annual
Report for the fiscal year ended June 30, 1995 were first mailed to the
Company's stockholders on or about October 23, 1995.
VOTING SECURITIES AND VOTES REQUIRED
Holders of record of the Company's Common Stock, $.10 par value (the
"Common Stock"), as of the close of business on October 18, 1995 (the "Record
Date"), will be entitled to notice of and to vote at the Meeting and any
adjournments thereof. As of the Record Date, there were outstanding and entitled
to vote 7,694,690 shares of Common Stock. With respect to each matter to come
properly before the Meeting, each holder of shares of Common Stock will be
entitled to one vote per share. Each outstanding share of Common Stock has
attached to it one Preferred Stock Purchase Right, which entitles the registered
holder to purchase from the Company one one-hundredth of a share of the
Company's Series A Junior Participating Preferred Stock at a price of $45 per
one one-hundredth of a share, subject to adjustment. The description and terms
of the Rights are set forth in a Rights Agreement between the Company and Mellon
Bank (East), N.A., as Rights Agent, which was entered into in connection with
the Warrant Dividend Plan adopted by the Board of Directors of the Company (the
"Board").
The holders of a majority of the shares of Common Stock issued and
outstanding and entitled to vote at the Meeting shall constitute a quorum for
the transaction of business at the Meeting. Shares of Common Stock present in
person or represented by proxy (including shares which abstain or do not vote
with respect to one or more of the matters presented for stockholder approval)
will be counted for purposes of determining whether a quorum exists at the
Meeting.
The affirmative vote of the holders of a plurality of the shares of Common
Stock present or represented at the Meeting is required for election of
directors. The affirmative vote of the holders of a majority of the shares of
Common Stock present or represented at the Meeting is required for the approval
of the 1996 Employee Stock Purchase Plan and the ratification of the selection
of Coopers & Lybrand L.L.P. ("Coopers &
1
<PAGE> 4
Lybrand") by the Board as the Company's independent auditors for the current
fiscal year. Shares of Common Stock represented in person or by proxy (including
shares which abstain or do not vote for any reason with respect to one or more
of the matters presented for stockholder approval) will be counted for purposes
of determining whether a quorum is present at the Meeting. Abstentions will be
treated as shares that are present and entitled to vote for purposes of
determining the number of shares present and entitled to vote with respect to
any particular matter, but will not be counted as a vote in favor of such
matter. Accordingly, an abstention from voting on a matter has the same legal
effect as a vote against the matter. If a broker or nominee holding stock in
"street name" indicates on the proxy that it does not have discretionary
authority to vote as to a particular matter, those shares will not be considered
as present and entitled to vote with respect to such matter.
STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information, as of August 31, 1995,
with respect to the beneficial ownership of the Company's Common Stock by (i)
the only persons known by the Company to beneficially own more than five percent
of the outstanding shares of Common Stock, (ii) each director and nominee for
director, (iii) each executive officer named in the Summary Compensation Table
under the heading "Executive Compensation" below and (iv) all directors and
executive officers of the Company as a group:
<TABLE>
<CAPTION>
SHARES OF PERCENTAGE OF
NAME AND ADDRESS COMMON STOCK OUTSTANDING
OF BENEFICIAL OWNER BENEFICIALLY OWNED(1) COMMON STOCK(2)
------------------- --------------------- ---------------
<S> <C> <C>
5% STOCKHOLDERS:
Heartland Advisors, Inc.
790 North Milwaukee Street
Milwaukee, WI 53202................................. 798,800(3) 10.4%
T. Rowe Price Associates, Inc.
100 E. Pratt Street
Baltimore, MD 21202................................. 569,600(4) 7.4%
Dimensional Fund Advisors, Inc.
1299 Ocean Avenue, Suite 650
Santa Monica, CA 90401.............................. 414,814(5) 5.4%
DIRECTORS AND EXECUTIVE OFFICERS:
Julian Demora......................................... 325,000(6) 4.2%
Ajit W. Hirani........................................ 3,693 *
Max M. Kampelman(7)................................... 20,000(8) *
Martin S. Kaplan...................................... 57,570(9) *
Herbert Krasnow....................................... 129,045(10) 1.7%
Jesse Krasnow......................................... 59,999(10)(11) *
Thomas E. McGrath..................................... 50,000(9) *
Merrill A. McPeak..................................... 0 *
George W. Murphy...................................... 218,426(12) 2.8%
Patrick M. Donohue.................................... 22,440(13) *
James A. Ferguson..................................... 18,264(14) *
Jerry D. Robbins...................................... 4,006 *
Nicholas A. Siecko.................................... 13,711(15) *
Richard F. Thompson................................... 26,846(16) *
All directors and officers as a group (14 persons).... 949,000(17) 12.4%
</TABLE>
2
<PAGE> 5
- ---------------
*Percentage is less than 1% of the total number of outstanding shares of Common
Stock of the Company.
(1) The number of shares of Common Stock beneficially owned by each person or
entity is determined under rules promulgated by the Securities and Exchange
Commission (the "Commission"). Under such rules, beneficial ownership
includes any shares as to which the person or entity has sole or shared
voting power or investment power, and also includes any shares which the
person or entity has the right to acquire within 60 days after August 31,
1995. Unless otherwise indicated, each person or entity referred to above
has sole voting and investment power with respect to the shares listed. The
inclusion herein of any shares deemed beneficially owned does not
constitute an admission of beneficial ownership of such shares.
(2) For purposes of this table, the number of outstanding shares of Common
Stock of the Company is adjusted for each person to include the number of
shares of Common Stock into which any options held by such person are
exercisable within 60 days after August 31, 1995.
(3) Heartland Advisors, Inc. filed a Schedule 13G pursuant to Section 13 of the
Securities Exchange Act of 1934, as amended, and the rules promulgated
thereunder reporting its beneficial ownership of shares of Common Stock of
the Company as of May 31, 1995. The foregoing information is derived from
such Schedule 13G.
(4) T. Rowe Price Associates, Inc. filed a Schedule 13G pursuant to Section 13
of the Securities Exchange Act of 1934, as amended, and the rules
promulgated thereunder reporting its beneficial ownership of shares of
Common Stock of the Company as of February 14, 1995. The foregoing
information is derived from such Schedule 13G.
(5) Dimensional Fund Advisors, Inc. filed a Schedule 13G pursuant to Section 13
of the Securities Exchange Act of 1934, as amended, and the rules
promulgated thereunder reporting its beneficial ownership of shares of
Common Stock of the Company as of January 30, 1995. The foregoing
information is derived from such Schedule 13G.
(6) Includes 15,000 shares which are held in trust for the benefit of Mr.
Demora's spouse and 10,000 shares issuable upon exercise of outstanding
stock options exercisable within 60 days after August 31, 1995.
(7) Mr. Kampelman has declined to be nominated for reelection to the Board and
will retire from the Board following the Meeting pursuant to the Board's
mandatory retirement policy.
(8) Represents shares held by Majorie B. Kampelman (spouse) as trustee under
indenture dated 3/27/94.
(9) Includes 32,500 shares issuable upon exercise of outstanding stock options
exercisable within 60 days after August 31, 1995.
(10) Includes 16,250 shares issuable upon exercise of outstanding stock options
exercisable within 60 days after August 31, 1995.
(11) Includes 7,500 shares which are held in trust for the benefit of Mr.
Krasnow's three minor children.
(12) Includes 104,125 shares issuable upon exercise of outstanding stock options
exercisable within 60 days after August 31, 1995.
(13) Includes 17,281 shares issuable upon exercise of outstanding stock options
exercisable within 60 days after August 31, 1995.
(14) Includes 15,000 shares issuable upon exercise of outstanding stock options
exercisable within 60 days after August 31, 1995.
(15) Includes 10,125 shares issuable upon exercise of outstanding stock options
exercisable within 60 days after August 31, 1995.
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<PAGE> 6
(16) Includes 21,563 shares issuable upon exercise of outstanding stock options
exercisable within 60 days after August 31, 1995.
(17) Includes 275,594 shares issuable upon exercise of outstanding stock options
exercisable within 60 days after August 31, 1995.
ELECTION OF DIRECTORS
The persons named in the enclosed proxy card (Herbert Krasnow and George W.
Murphy) will vote to elect the eight nominees named below unless authority to
vote for the election of any or all of the nominees is withheld by marking the
proxy card to that effect. Each nominee has consented to being named in this
Proxy Statement and to serve if elected. Mr. Kampelman has declined to be
nominated for reelection to the Board and will retire from the Board following
the Meeting pursuant to the Board's mandatory retirement policy. The Board
wishes to express its appreciation to Mr. Kampelman for his past service as a
member of the Board.
Each director will be elected to hold office until the next Annual Meeting
of Stockholders or until his successor is elected and qualified. If for any
reason any nominee should become unavailable for election prior to the Meeting,
the person acting under the proxy may vote the proxy for the election of a
substitute. It is not presently expected that any of the nominees will be
unavailable. The affirmative vote of the holders of a plurality of the shares of
the Common Stock of the Company present or represented at the Meeting is
necessary for the election of the nominees named below.
Set forth below are the name and age of each nominee for the Board and the
positions and offices held by him, his principal occupation and business
experience during the past five years, the names of other publicly-held
companies of which he serves as a director and the year of the commencement of
his term as a director of the Company. Information with respect to the number of
shares of Common Stock beneficially owned by each director, directly or
indirectly, as of August 31, 1995, appears under "Stock Ownership of Certain
Beneficial Owners and Management."
JULIAN DEMORA, age 69, became a director in 1992. Mr. Demora is President
of the construction and development company, Key Realty and Development, Inc.
AJIT W. HIRANI, age 48, is Vice President, General Manager of Training
Systems Division for the Company. Mr. Hirani has been employed by the Company
since 1972.
MARTIN S. KAPLAN, age 56, became a director in 1969. Mr. Kaplan is a
partner in the law firm of Hale and Dorr.
HERBERT KRASNOW, age 73, became a director in 1973. Mr. Krasnow is a
partner in the private investment firm of Lefferts/Fore Associates.
JESSE KRASNOW, age 46, became a director in 1976. Mr. Krasnow is a partner
in the private investment firm of Lefferts/Fore Associates. Mr. Jesse Krasnow is
Mr. Herbert Krasnow's son.
THOMAS E. MCGRATH, age 51, became a director in 1983. Mr. McGrath is a
Managing Director of Citicorp Securities, Inc.
MERRILL A. MCPEAK, age 59, was elected as a director by the Board in
September, 1995. He served over twenty years in senior United States Air Force
positions, culminating in four years as Chief of Staff from 1990 through 1994.
As Chief of Staff, he led an organization of almost one million people with
annual budgets nearing $100 billion. He retired in 1994 with the rank of
General.
4
<PAGE> 7
GEORGE W. MURPHY, age 59, became a director in 1973. Mr. Murphy is
President and Chief Executive Officer of the Company.
BOARD AND COMMITTEE MEETINGS
During the fiscal year ended June 30, 1995, the Board held five meetings.
Every member of the Board attended at least 75% of the total number of meetings
of the Board and of all committees of the Board on which they respectively
served, with the exception of Mr. Demora, who attended three meetings of the
Board. The Company also has an Audit Committee, a Compensation Committee and a
Stock Option Committee. The Company does not have a Nominating Committee.
The principal functions of the Audit Committee are to make recommendations
to the Board regarding the appointment of the Company's independent public
accountants; review and approve any major changes in accounting policy; review
the arrangements for, and the scope and results of, the independent audit;
review and approve the independent accountants' proposed fees for audit and
non-audit services; and review the Company's policies and procedures for
compliance with disclosure requirements with respect to conflicts of interest
and for prevention of unethical, questionable or illegal payments. Messrs. J.
Krasnow and McGrath, who comprise the Audit Committee of the Board, each
attended the only meeting of that Committee held during the 1995 fiscal year.
The principal function of the Compensation Committee is to advise and guide
the Board in determining executive officer compensation. Messrs. Kaplan, J.
Krasnow and McGrath, who comprise the Compensation Committee, each attended both
meetings of that Committee held during the 1995 fiscal year.
The principal function of the Stock Option Committee is to assist the Board
in the administration of the Company's stock option plans. Messrs. Kaplan and
McGrath, who comprise the Stock Option Committee, each attended both meetings of
that Committee held during the 1995 fiscal year.
DIRECTORS' COMPENSATION
In the last fiscal year, aggregate directors' fees of $149,000 were paid
with respect to six outside directors. Pursuant to these arrangements, Messrs.
Demora, Kampelman, Kaplan, H. Krasnow, J. Krasnow and McGrath each received an
annual fee of $20,000 and a fee of $1,000 for each meeting attended. In the
fiscal year ended June 30, 1995, Mr. Demora received $23,000; Mr. Kampelman
received $24,000; Messrs. Kaplan and H. Krasnow each received $25,000 and
Messrs. J. Krasnow and McGrath each received $26,000 in directors' fees. Mr.
Kaplan is a partner at Hale and Dorr, which provides legal services to the
Company. Mr. Kampelman is of Counsel to Fried, Frank, Harris, Shriver &
Jacobson, which provides legal services to the Company.
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<PAGE> 8
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION
The following table sets forth certain information concerning the
compensation for each of the last three fiscal years of the Company's President
and Chief Executive Officer and the Company's four other most highly compensated
executive officers during the fiscal year ended June 30, 1995 who were serving
as executive officers on June 30, 1995 (the "Named Executive Officers"):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
------------
AWARDS
------------
ANNUAL COMPENSATION SECURITIES
NAME AND ---------------------- UNDERLYING ALL OTHER
PRINCIPAL POSITION YEAR SALARY($) BONUS($) OPTIONS(#) COMPENSATION($)(1)
------------------ ---- --------- -------- ------------ ------------------
<S> <C> <C> <C> <C> <C>
George W. Murphy................ 1995 $ 297,873 $ 60,000 75,000 $ 49,858
President and Chief 1994 276,000 100,000 14,375 53,725
Executive Officer 1993 270,000 -- -- 30,502
Ajit W. Hirani(2)............... 1995 195,059 45,000 40,000 29,651
Vice President,
General Manager of Training
Systems Division
James M. Ferguson(2)............ 1995 188,739 25,000 15,000 39,707
Vice President,
Vending Products
Patrick M. Donohue.............. 1995 178,151 25,000 12,000 31,721
Vice President, 1994 169,519 24,000 4,281 28,017
Marketing 1993 157,500 -- -- 9,537
Jerry D. Robbins(2)............. 1995 164,525 30,000 15,000 23,847
Vice President,
Vending Products
</TABLE>
- ---------------
(1) Includes the following: (a) profit sharing contributions by the Company in
1995 for Messrs. Murphy, Hirani, Ferguson, Donohue and Robbins of $20,095
each; (b) the Company's contributions under the Savings and Investment Plan
in 1995 for Messrs. Murphy, Hirani, Ferguson, Donohue and Robbins of $5,662,
$6,185, $5,980, $6,101 and $1,469, respectively; (c) the portion of the
premium paid by the Company with respect to split-dollar executive deferred
compensation insurance program in 1995 for Messrs. Murphy, Hirani, Ferguson,
Donohue and Robbins of $1,413, $456, $996, $840 and $271, respectively; (d)
the Company's contributions under the key executive universal life insurance
program in 1995 of $15,000 for Mr. Murphy and $7,500 for Mr. Ferguson; (e)
the taxable portion of long-term disability premiums paid by the Company in
1995 for Messrs. Murphy, Hirani, Ferguson, Donohue and Robbins of $7,238,
$2,741, $4,686, $4,235 and $1,910, respectively; and (f) the taxable portion
of group term life insurance paid by the Company in 1995 for Messrs. Murphy,
Hirani, Ferguson, Donohue and Robbins of $450, $174, $450, $450 and $102,
respectively.
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<PAGE> 9
(2) Messrs. Hirani, Ferguson and Robbins were each elected an executive officer
of the Company effective January 25, 1995. Salary reflected in the table
includes compensation paid in all capacities during fiscal year 1995.
OPTION GRANTS
The following table sets forth certain information concerning grants of
stock options made during the fiscal year ended June 30, 1995 to each of the
Named Executive Officers:
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
INDIVIDUAL GRANTS VALUE AT
------------------------------------------------------------- ASSUMED ANNUAL RATES
PERCENT OF OF STOCK PRICE
NUMBER OF TOTAL OPTIONS APPRECIATION FOR
SECURITIES GRANTED TO EXERCISE OPTION TERM(2)
UNDERLYING EMPLOYEES IN PRICE EXPIRATION -----------------------
NAME OPTIONS GRANTED FISCAL YEAR PER SHARE(1) DATE 5% 10%
---- --------------- ------------- ------------ ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
George W. Murphy............ 75,000(3) 9.4% $11.50 1/24/05 $574,250 $1,374,000
Ajit W. Hirani.............. 40,000(4) 5.0 11.50 1/24/05 289,200 732,800
James M. Ferguson........... 15,000(3) 1.9 11.50 1/24/05 108,450 274,800
Patrick M. Donohue.......... 12,000(3) 1.5 11.50 1/24/05 86,760 219,840
Jerry D. Robbins............ 15,000(4) 1.9 11.50 1/24/05 108,450 274,800
</TABLE>
- ---------------
(1) The exercise price is equal to the fair market value of the Company's Common
Stock on the date of grant.
(2) Amounts represent hypothetical gains that could be achieved for the
respective options if exercised at the end of the option term. These gains
are based on assumed rates of stock appreciation of 5% and 10% compounded
annually from the date the respective options were granted to their
expiration date. This table does not take into account any appreciation in
the price of the Common Stock to date. Actual gains, if any, on stock
option exercises will depend on the future performance of the Common Stock
and the date on which the options are exercised.
(3) Options are fully exercisable commencing on the date of grant.
(4) Options vest in five equal annual installments commencing on the first
anniversary of date of grant.
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<PAGE> 10
OPTION EXERCISES AND YEAR-END VALUES
The following table sets forth certain information concerning each exercise
of stock options during the fiscal year ended June 30, 1995 by each of the Named
Executive Officers and the number and value of unexercised options held by each
of the Named Executive Officers on June 30, 1995:
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES
UNDERLYING VALUE OF
UNEXERCISED UNEXERCISED
OPTIONS AT IN-THE-MONEY
FISCAL OPTIONS AT
YEAR-END FISCAL YEAR-END
SHARES (#) ($)(1)
ACQUIRED VALUE ------------- -----------------
ON EXERCISE REALIZED EXERCISABLE/ EXERCISABLE/
NAME (#) ($) UNEXERCISABLE UNEXERCISABLE
---- ----------- -------- ------------- -----------------
<S> <C> <C> <C> <C>
George W. Murphy................. 21,874 $289,449 115,265/0 $ 358,438/0
Ajit W. Hirani................... -- 0 0/40,000 0/0
James M. Ferguson................ 1,000 8,750 15,000/0 0/0
Patrick M. Donohue............... 9,844 123,050 22,281/0 90,388/0
Jerry D. Robbins................. -- 0 0/15,000 0/0
</TABLE>
- ---------------
(1) Value of unexercised "in-the money" options represents the difference
between the closing price of the Company's Common Stock on June 30, 1995
($11.125 per share) and the exercise price of the option, multiplied by the
number of shares subject to the option. The lowest exercise price on any of
the outstanding options is $2.125 per share.
REPORT OF THE COMPENSATION COMMITTEE
EXECUTIVE COMPENSATION PHILOSOPHY
The Company's Compensation Committee of the Board is responsible for
determining the compensation for the key executives of the Company. The
Company's executive compensation program is designed to align executive
compensation with financial performance, business strategies and Company values
and objectives. This program seeks to enhance the profitability of the Company,
and thereby enhance stockholder value, by linking the financial interests of the
Company's executives with those of the stockholders.
In applying this philosophy, the Board, guided by input and recommendations
from the Compensation Committee members, has established a program to attract
and retain executives of outstanding abilities who are critical to the long-term
success of the Company, and reward executives for achievement of internal
Company goals as well as long-term strategic management. Through these
objectives, the Company integrates its compensation program with its annual and
long-term strategic planning.
EXECUTIVE COMPENSATION PROGRAM
The Board, with guidance and input from the Compensation Committee,
approves the executive compensation program on an annual basis, including
specified levels of compensation for all executive officers. The Company's
executive compensation program has been designed to implement the objectives
described above and is comprised of the following fundamental three elements:
- a base salary that is determined by individual contributions and
sustained performance.
8
<PAGE> 11
- an annual cash bonus that is tied to corporate financial performance as
well as the achievement of individual business-related objectives.
- a long-term incentive program that rewards executives when stockholder
value is created through an increase in the market value of the Company's
Common stock or through significant performance achievements that enhance
the long-term success of the Company.
SALARY. Salaries for executive officers are reviewed by the Board on an
annual basis. In determining salary adjustments, the Board considers individual
performance and contributions to the Company as well as the recommendations of
management. In 1995, the Board awarded salary increases to all executive
officers. The amount of each increase was determined separately for each
executive officer and was based on individual performance as well as factors
reflecting a team approach to various aspects of the Company's business.
In 1990, the Company engaged a consulting firm in the employee compensation
and benefits field. The study conducted by this firm confirmed that the
compensation levels for the Company's key executive officers are in the
appropriate range when compared to companies of comparable size within the
defense and electronics industry.
ANNUAL INCENTIVE COMPENSATION. Annual incentives for the Company's
executive officers are intended to reflect the Company's belief that management
can make significant contributions to enhance stockholder value by achieving
Company objectives and maximizing earnings. Accordingly, the Company has
developed a management bonus plan that awards cash bonuses based on the
achievement of certain objectives, including earnings, actual performance versus
budget, order backlog, acquisition of new business and overall Company
profitability.
Bonuses for executive officers are discretionary and are determined
annually by the Board after a review of the recommendations of the Compensation
Committee and management. The bonuses, if any, for Messrs. Murphy and Hirani are
determined by the Board without any recommendations from management. Due to the
Company's strong performance in 1995, cash bonuses were awarded to all executive
officers.
LONG-TERM INCENTIVE COMPENSATION. The Company's long-term incentive
compensation program is implemented through the grant of stock options. This
program is intended to align executive interests with the long-term interests of
stockholders by linking executive compensation with stockholder enhancement. In
addition, the program motivates executives to improve long-term stock market
performance by allowing them to develop and maintain a significant, long-term
equity ownership position in the Company's Common Stock. Stock options are
granted at prevailing market rates and will only have value if the Company's
stock price increases in the future. Stock option grants either vest immediately
on the date of grant, or vest in five equal annual installments commencing on
the first anniversary of the date of grant. Further, executives must be employed
by the Company at the time of vesting in order to exercise the options.
Stock option awards are reviewed and considered by the Board and Stock
Option Committee members every other year. Stock option awards are determined
based upon consideration of management recommendations for each participant and
financial results for the Company as well as the participant's present equity
holdings in the Company. With respect to Messrs. Murphy and Hirani, the Board
reviews each of their performances and determines an appropriate award, if any.
Based on the Company's performance in 1995, all executive officers received
stock option grants. Each of the Named Executive Officers received fully vested
stock option grants ranging from 12,000 to 75,000 shares. See "Executive
Compensation -- Option Grants."
CHIEF EXECUTIVE OFFICER COMPENSATION. The Board evaluates the performance
of the Chief Executive Officer on an annual basis. The assessment of the Chief
Executive Officer is based on a number of factors, including the following:
achievement of short and long-term financial and strategic targets and
objectives,
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<PAGE> 12
considering factors such as sales and earnings per share; Company position
within the industries in which it competes, including market share; overall
economic climate; individual contribution to the Company; and such other factors
as the Board may deem appropriate. Mr. Murphy's annual base salary for the 1995
fiscal year was increased by $21,873 over his base salary for the 1994 fiscal
year, based upon a consideration of the factors discussed above. In addition, in
1995, Mr. Murphy received a cash bonus in the amount of $60,000 and was granted
an option to purchase 75,000 shares of Common Stock of the Company.
COMPENSATION COMMITTEE,
Martin S. Kaplan
Jesse Krasnow
Thomas E. McGrath
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<PAGE> 13
STOCK PERFORMANCE GRAPH
The following graph compares cumulative stockholder return on the Company's
Common Stock since June 30, 1990, the last trading day preceding the first day
of the fifth preceding fiscal year of the Company, with the cumulative total
return for (i) the Russell 2000 and (ii) a peer group index determined by the
Company. The peer group index consists of EDO Corporation, Gencorp Inc., Hexcel
Corporation, Logicon, Inc., M/A-COM, Inc., Sparton Corporation, TransTechnology
Corporation, United Industrial Corporation, UNC, Inc. and Wyman Gordon Co.
<TABLE>
COMPARATIVE FIVE-YEAR TOTAL RETURNS*
ECC INTERNATIONAL CORP., RUSSELL 2000, PEER GROUP
(Performance results through 6/30/95)
<CAPTION>
Measurement Period
(Fiscal Year Covered) ECC Russell 2000 Peer Group
<S> <C> <C> <C>
1990 100.00 100.00 100.00
1991 140.69 101.23 94.76
1992 59.53 115.95 108.57
1993 56.55 146.05 123.88
1994 309.55 152.48 112.92
1995 264.91 183.08 147.58
<FN>
Assumes $100 invested at the close of trading on the last trading day preceding the
first day of the fifth preceding fiscal year in ECC common stock, Russell 2000, and
Peer Group.
* Cumulative total return assumes reinvestment of dividends.
</TABLE>
11
<PAGE> 14
APPROVAL OF THE 1996 EMPLOYEE STOCK PURCHASE PLAN
The Company's 1996 Employee Stock Purchase Plan (the "1996 Plan") continues
the program originally put in place by the 1984 Employee Stock Purchase Plan and
continued by the 1987 Employee Stock Purchase Plan, 1990 Employee Stock Purchase
Plan and 1993 Employee Stock Purchase Plan.
The 1996 Plan covers a total of 360,000 shares of the Company's Common
Stock and consists of six semi-annual offerings of 60,000 shares each. The
number of shares available for an offering may be increased, at the election of
the committee administering the 1996 Plan, by the shares, if any, which were
made available but not purchased during earlier offerings. The first offering
under the 1996 Plan will commence on July 1, 1996 and will terminate on December
31, 1996. Subsequent offerings will commence on July 1 and January 1 of each
year and will terminate, respectively, on each subsequent December 31 and June
30. The final offering under the 1996 Plan will commence on January 1, 1999 and
will terminate on June 30, 1999. With certain exceptions, all full-time
employees who were and continue to be employed by the Company or its
subsidiaries for at least three months are eligible to participate. All
employees of the Company or its subsidiaries are eligible to participate in the
1996 Plan on the same basis as other employees.
During each semi-annual offering, the maximum number of shares which may be
purchased by a participating employee under the 1996 Plan will be determined on
the first day of the offering under a formula whereby 85% of the market value of
a share of the Common Stock on the first day of the offering is divided into an
amount equal to that percentage of the employee's regular semiannual salary
which he or she elected to have withheld. The purchase price for shares
purchased by a participating employee is paid in cash through payroll deductions
and an employee may elect to have from 1% to 10% deducted from his or her
regular semiannual salary for this purpose. For each offering period, the price
at which the employee's option is exercised is the lower of (a) 85% of the
closing sales price of the Common Stock on the New York Stock Exchange (the
"Closing Price") on the day that the offering commences or (b) 85% of the
Closing Price on the day that the offering terminates.
The Board may at any time amend the 1996 Plan. No amendment can be made,
however, without prior approval of the stockholders of the Company if such
amendment would (a) materially increase the benefits accruing the participants
under the 1996 Plan, (b) materially increase the number of shares which may be
issued under the 1996 Plan or (c) materially modify the requirements as to
eligibility for participation under the 1996 Plan.
The 1996 Plan is administered by the Board (excluding those board members
who are members of management), which is authorized to designate subsidiaries
whose employees will be entitled to participate in the 1996 Plan, to decide
questions of eligibility and to make rules and regulations for the
administration and interpretation of the 1996 Plan.
FEDERAL INCOME TAX CONSEQUENCES. The 1996 Plan is intended to qualify as
an "employee stock purchase plan" within the meaning of Section 423 of the
Internal Revenue Code of 1986, as amended (the "Code"), which provides that the
participant does not have to pay any federal income tax upon joining the 1996
Plan or when an Offering ends and he or she receives shares of Common Stock. The
participant is, however, required to pay federal income tax on the difference,
if any, between the price at which he or she sells the shares and the price
which he or she paid for them.
If the participant has owned the shares for more than one year and disposes
of them at least two years after the day the Offering commenced, he or she will
be taxed as follows. If the market price of the shares on the date they are sold
is equal to or less than the price paid for the shares under the 1996 Plan, the
participant will incur a long-term capital loss in the amount equal to the price
paid over the sale price. If the sale price is
12
<PAGE> 15
higher than the price paid under the 1996 Plan, the participant will recognize
ordinary income in an amount equal to the lesser of (a) the excess of the market
price of the shares on the day the Offering commenced over the price paid or (b)
the excess of the sale price over the price paid. Any gain exceeding the amount
treated as ordinary income is treated as a long-term capital gain.
If the participant sells the shares before he or she has owned them for
more than one year or before the expiration of a two-year period commencing on
the day the Offering commenced, the participant will recognize ordinary income
on the amount of the difference between the actual purchase price and the market
price of the shares on the date of purchase and the Company will receive an
expense deduction for the same amount, subject to the limitations imposed by
Section 162(m) of the Code. The participant will recognize a capital gain or
loss (long-term or short-term depending on the period he has owned the shares)
for the difference between the sale price and the market price on the date of
purchase.
The amount which a participant elects to have deducted from his or her base
pay for the purchase of Common Stock under the 1996 Plan constitutes
compensation and is included in such participant's gross income and is
deductible by the Company for federal income tax purposes.
Except as provided in the preceding paragraph, the Company will not be
entitled to a tax deduction upon the purchase or sale of shares under the 1996
Plan. The 1996 Plan is not qualified under Section 401(a) of the Code.
BOARD OF DIRECTORS RECOMMENDATION
The Board recommends approval of the 1996 Plan. The affirmative vote of the
holders of a majority of the shares of Common Stock of the Company present or
represented at the Meeting is required to approve the 1996 Plan.
RATIFICATION OF THE APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board has selected Coopers & Lybrand as the Company's independent
public accountants for the fiscal year ending June 30, 1996. Although
stockholder approval of the Board's selection of Coopers & Lybrand is not
required by law, the Board believes that it is advisable to give stockholders an
opportunity to ratify this selection. If this proposal is not approved at the
Meeting, the Board will reconsider its selection of Coopers & Lybrand. It is not
expected that any representative of Coopers & Lybrand will be present at the
Meeting.
OTHER MATTERS
The Board knows of no business that will be presented for consideration at
the Meeting other than as stated in the Notice of Meeting. If any other business
properly comes before the Meeting, it is the intention of the persons named in
the enclosed proxy card to vote or otherwise act in accordance with their
judgment on such matters.
The Company will bear the entire cost of preparing, assembling, printing
and mailing this Proxy Statement, the proxy card and any additional materials
that may be furnished to stockholders. It may be that further solicitations will
be made by regular employees of the Company who will not be additionally
compensated therefor. The Company reserves the right to retain outside agencies
for the purpose of soliciting proxies. Brokers, custodians and fiduciaries in
whose names stock is held will be requested to forward proxy
13
<PAGE> 16
soliciting material to the owners of stock held in their names and the Company
will reimburse them for their out-of-pocket expenses in connection with this
service.
DEADLINE FOR SUBMISSION OF STOCKHOLDER PROPOSALS
Proposals of stockholders intended to be presented at next year's Annual
Meeting of Stockholders must be received by the Secretary of the Company at 175
Strafford Avenue, Suite 116, Wayne, Pennsylvania 19087-3377 not later than June
25, 1996, for inclusion in the proxy materials for that Meeting.
WHETHER OR NOT YOU EXPECT TO BE PRESENT AT THE MEETING, PLEASE COMPLETE,
SIGN, DATE AND RETURN TO THE COMPANY THE ENCLOSED PROXY CARD. IF YOU ARE PRESENT
AT THE MEETING, YOU MAY WITHDRAW YOUR PROXY AND VOTE YOUR SHARES PERSONALLY.
By Order of the Board of Directors,
Richard F. Thompson
RICHARD F. THOMPSON, Secretary
Dated: October 23, 1995
14
<PAGE> 17
ECC INTERNATIONAL CORP.
1996 EMPLOYEE STOCK PURCHASE PLAN
1. Purposes.
The 1996 Employee Stock Purchase Plan of ECC International Corp. (the
"Plan") is intended to provide a method whereby employees of ECC International
Corp. and its Subsidiary Corporations (as defined below) (hereinafter
collectively referred to, unless the context otherwise requires, as the
"Company") will have an opportunity to acquire a proprietary interest in the
Company through the purchase of shares of the common stock of the Company (the
"Common Stock"). It is the intention of the Company to have the Plan qualify
as an "employee stock purchase plan" under Section 423 of the Internal Revenue
Code of 1986, as amended (the "Code"). Accordingly, the Plan shall be
construed so as to extend and limit participation in a manner consistent with
the requirements of such Section 423.
2. Definitions.
(a) "base pay" means regular straight-time earnings (as the same may
be adjusted from time to time) but excluding payments for overtime, shift
differentials, incentive compensation, sales commissions, bonuses and other
special payments.
(b) "Employee" means any person who is customarily employed by the
Company for 20 or more hours per week and at least five months in a calendar
year.
(c) "Offering" or "Offerings" means the offering(s) of shares of
Common Stock to Employees of the Company pursuant to this Plan.
(d) "Offering Commencement Date" means the date on which an Offering
under the Plan commences pursuant to Paragraph 4.
(e) "Offering Termination Date" means the date on which an Offering
under the Plan terminates pursuant to Paragraph 4.
(f) "Offering Period" means, with respect to each Offering under the
Plan, the period of time beginning on the applicable Offering Commencement Date
and ending on the applicable Offering Termination Date.
(g) "Subsidiary Corporation" means any present or future corporation
which (i) is a "subsidiary corporation" as that term is defined in Section 424
of the Code and (ii) is designated as a
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<PAGE> 18
participant in the Plan by the Board of Directors or by the Committee described
in Paragraph 13.
3. Eligibility.
(a) Any Employee who shall have completed three months of employment
and who shall be employed by the Company on an Offering Commencement Date shall
be eligible to participate in the applicable Offering under the Plan.
(b) Any provision of the Plan to the contrary notwithstanding, no
Employee shall be granted an option to participate in the Plan:
(i) if, immediately after the grant, such Employee would own
stock, and/or hold outstanding options to purchase stock, possessing 5%
or more of the total combined voting power or value of all classes of
stock of the Company or of any Subsidiary Corporation (for purposes of
this Paragraph the rules of Section 424(d) of the Code shall apply in
determining stock ownership of any Employee); or
(ii) which permits his or her rights to purchase stock of the
Company or of any Subsidiary Corporation, pursuant to this Plan or any
other employee stock purchase plan of the Company or of any Subsidiary
Corporation, to accrue at a rate which exceeds $25,000 of the fair
market value of such stock (determined at the time such option is
granted) for any one calendar year.
4. Offering Dates.
The Plan will be implemented by six (6) semi-annual Offerings of an
aggregate of 360,000 shares (subject to adjustment as provided in Paragraphs
12(a) and 17) each of the Common Stock, as follows:
(i) the first Offering shall commence on July 1, 1996 and shall
terminate on December 31, 1996;
(ii) the second Offering shall commence on January 1, 1997 and shall
terminate on June 30, 1997;
(iii) the third Offering shall commence on July 1, 1997 and shall
terminate on December 31, 1997;
(iv) the fourth Offering shall commence on January 1, 1998 and
terminate on June 30, 1998;
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<PAGE> 19
(v) the fifth Offering shall commence on July 1, 1998 and terminate
on December 31, 1998; and
(vi) the sixth Offering shall commence on January 1, 1999 and
terminate on June 30, 1999.
5. Participation.
All eligible Employees will become participants in an Offering on the
applicable Offering Commencement Date. Payroll deductions for a participant
shall commence on the Offering Commencement Date applicable to the Offering (or
as soon thereafter as may be determined by the Company in its discretion) and
shall end on the Offering Termination Date applicable to such Offering, unless
sooner terminated pursuant to Paragraph 10.
6. Payroll Deductions.
(a) A participant may elect to have amounts withheld from his or her
base pay on each payday by completing an authorization for a payroll deduction
(an "Authorization") on the form provided by the Company and delivering it to
the Company prior to the commencement of the applicable Offering. At the time
a participant files his or her Authorization for a payroll deduction, the
participant shall elect to have deductions made from his or her pay on each
payday during the time he or she is a participant in an Offering at the rate of
0, 1, 2, 3, 4, 5, 6, 7, 8, 9 or 10% of his or her base pay. The aggregate
amount of a participant's payroll deductions for any Offering Period is
referred to herein as the "Authorized Deduction." An Authorization filed with
respect to an Offering shall also be deemed to be an Authorization with respect
to any subsequent Offering; provided, that (i) the participant may amend his or
her Authorization with respect to a subsequent Offering by filing a new
Authorization at least seven days and not more than 60 days prior to the
Offering Commencement Date of the second Offering, and (ii) the participant may
withdraw his or her payroll deductions from the Plan at any time pursuant to
Section 8(b). If a participant has not filed an Authorization with respect to
an Offering (including an Authorization deemed to apply to a subsequent
Offering pursuant to the preceding sentence) on or before the date(s) specified
by the Company, he or she shall be deemed to have filed an Authorization
election to withhold 0% of any base pay.
(b) All payroll deductions made for a participant shall be credited to
his or her account under the Plan. A participant may not make any separate
cash payment into such account.
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<PAGE> 20
(c) Except as provided in Paragraph 8(b) or Paragraph 10, a
participant may not make changes to the rate of deductions from his or her base
pay during an Offering Period.
7. Granting of Options.
(a) With respect to each Offering, a participating Employee shall be
deemed to have been granted, on the applicable Offering Commencement Date, an
option (the "Option") to purchase a maximum number of shares of Common Stock
determined as follows: 85% of the market value of a share of Common Stock on
such Offering Commencement Date shall be divided into an amount equal to (x)
that percentage of the Employee's base pay which he or she has elected to have
withheld (not to exceed 10%) multiplied by (y) the Employee's base pay for the
period of such Offering. The market value of the Common Stock shall be
determined as provided in paragraph (b) below.
An Employee's base pay for the period of any such Offering shall be
determined as follows: (i) in the case of a full-time employee normally paid on
an hourly rate, by multiplying his or her current hourly rate by 1040; (ii) in
the case of a part-time employee normally paid on an hourly rate, by
multiplying his or her normal hourly rate by the product of 26 times the number
of hours in his or her normal work week; (iii) in the case of an employee
normally paid at a bi-weekly rate, by multiplying his or her normal bi-weekly
rate by 13; (iv) in the case of a part-time employee normally paid at a weekly
rate, by multiplying his or her normal weekly rate by 26; and (v) in the case
of an employee normally paid at a monthly rate, by multiplying his or her
normal monthly rate by six.
(b) With respect to each Offering, the purchase price of a share of
Common Stock purchased with the Authorized Deduction (the "Option Exercise
Price") shall be the lower of:
(i) 85% of the closing sale price of the Common Stock on the New
York Stock Exchange on the Offering Commencement Date applicable to
such Offering (or on the next regular business day on which shares of
the Common Stock shall be traded in the event that no such shares shall
have been traded on the Offering Commencement Date); or
(ii) 85% of the closing sale price of the Common Stock on the New
York Stock Exchange on the Offering Termination Date applicable to such
Offering (or on the next regular business day on which shares of the
Common Stock shall be traded in the event that no such shares shall
have been traded on the Offering Termination Date).
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<PAGE> 21
8. Exercise of Options.
With respect to each Offering during the term of the Plan:
(a) Unless a participant gives written notice of withdrawal to the
Company as provided in Paragraph 10, his or her Option will be deemed to have
been exercised automatically on the Offering Termination Date applicable to
such Offering for the purchase of the number of whole shares of Common Stock
which the Authorized Deduction in his or her account on such date will purchase
at the applicable Option Exercise Price (but not in excess of the number of
shares for which an Option has been granted the employee pursuant to Paragraph
7 (a)). No fractional shares will be issued. Any excess in such participant's
account on such date will either, (i) with the consent of such participant (and
with the consent of the Company, which may be withheld in its sole discretion),
remain in such participant's account under the Plan or under a successor plan,
if any, or (ii) be returned to him or her; provided that any excess returned
will not be credited with any interest.
(b) By written notice to the Treasurer of the Company at any time
prior to the applicable Offering Termination Date, a participant may elect to
withdraw all (but not less than all) of the accumulated payroll deductions in
his or her account at such time.
9. Delivery of Share Certificates.
As promptly as practicable after the Offering Termination Date with
respect to each Offering, the Company will deliver to each participant, as
appropriate, a certificate or certificates representing the shares of Common
Stock purchased upon the exercise of such participant's Option.
10. Withdrawal.
(a) As indicated in Paragraph 8(b), a participant may withdraw payroll
deductions credited to his or her account at any time prior to the applicable
Offering Termination Date by giving written notice of withdrawal to the
Treasurer of the Company. All of the participant's payroll deductions credited
to his or her account will be paid to the participant promptly after receipt of
such notice of withdrawal, and no further payroll deductions will be made with
respect to such participant during such Offering. The Company may, at its
option, treat any attempt by an employee to borrow on the security of
accumulated payroll deductions as an election to withdraw such deductions.
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<PAGE> 22
(b) A participant's withdrawal from any Offering will not have any
effect upon his or her eligibility to participate in any succeeding Offering or
in any similar plan which may hereafter be adopted by the Company; provided,
however, that an Employee who is subject to Section 16 of the Securities
Exchange Act of 1934, as amended, who withdraws his or her payroll deductions
prior to the end of an Offering Period may not participate in the Plan or in
any similar successor plan for a period of at least six months from the date of
such withdrawal.
(c) Upon termination of the participant's employment for any reason,
including retirement but excluding death or disability while in the employ of
the Company, the payroll deductions credited to his or her account will be
returned to the participant or, in the case of his or her death subsequent to
the termination of employment, to the person or persons entitled thereto under
Paragraph 14.
(d) Upon termination of the participant's employment because of death
or disability, the participant or his or her beneficiary (as defined in
Paragraph 14) shall have the right to elect, by written notice given to the
Treasurer of the Company prior to the expiration of the period of 30 days
commencing with the date of the death or disability of the participant, either:
(i) to withdraw all of the payroll deductions credited to the
participant's account under the Plan; or
(ii) to exercise the participant's option for the purchase of
Common Stock on the Offering Termination Date next following the date
of the participant's death or disability for the purchase of the number
of full shares of Common Stock which the accumulated payroll deductions
in the participant's account at the date of the participant's death or
disability will purchase at the applicable Option Exercise Price, and
any excess in such account will be returned to the participant or said
beneficiary.
In the event that no such written notice of election shall be duly
received by the Treasurer of the Company, the participant or beneficiary shall
automatically be deemed to have elected to withdraw the payroll deductions
credited to the participant's account at the date of the participant's death or
disability, and the same will be paid promptly to the participant or said
beneficiary.
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<PAGE> 23
11. Interest.
No interest will be paid or allowed on any money paid into the Plan or
credited to the account of any participant employee except as specifically set
forth in this Plan.
12. Stock.
(a) The maximum number of shares of Common Stock which shall be made
available for sale under the Plan during any Offering under the Plan shall be
60,000 shares (subject to increase pursuant to the last sentence of this
Paragraph 12(a)), subject in each case to adjustment upon changes in
capitalization of the Company as provided in Paragraph 17. If the total number
of shares for which Options are exercised on any Offering Termination Date in
accordance with Paragraph 8 exceeds 60,000, the Company shall make a pro rata
allocation of the shares available for delivery and distribution in as nearly a
uniform manner as shall be practicable and as it shall determine to be
equitable, and the balance of payroll deductions credited to the account of
each participant under the Plan shall be returned to him or her as promptly as
possible. If fewer than 60,000 shares are purchased during any given Offering
under the Plan, the amount not purchased shall be carried over to and made
available during the next and other subsequent Offerings under the Plan.
(b) No participant will have any interest in Common Stock covered by
his or her Option until such Option has been exercised.
(c) The Common Stock to be delivered to a participant under the Plan
will be registered in the name of the participant, or, if the participant so
directs, by written notice to the Treasurer of the Company prior to the
Offering Termination Date applicable thereto, in the names of the participant
and one such other person as may be designated by the participant, as joint
tenants with rights of survivorship, to the extent permitted by applicable law.
(d) The Board of Directors of the Company may, in its discretion,
require as conditions to the Exercise of any Option that the shares of Common
Stock reserved for issuance upon the exercise of the Option shall have been
duly listed, upon official notice of issuance, on the New York Stock Exchange,
and that either:
(i) a registration statement under the Securities Act of 1933, as
amended (the "Securities Act"), with respect to said shares shall be
effective; or
(ii) the Company shall have received the opinion of counsel
acceptable to the Company to the effect that the
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<PAGE> 24
issuance of such shares is exempt from all registration requirements
under the Securities Act.
13. Administration.
The Plan shall be administered by the Compensation Committee (the
"Committee") appointed by the Board of Directors of the Company. The officer
of the Company charged by the Committee with day-to-day administration of the
Plan shall, for matters involving the Plan, be an ex officio member of the
Committee. The interpretation and construction of any provision of the Plan
and the adoption of all rules and regulations for administering the Plan shall
be made by the Committee; provided, however, that any such interpretation, rule
or regulation adopted by the Committee may be subsequently altered, amended or
repealed by the Committee or the Board of Directors. All such interpretations,
rules and regulations made by the Committee and approved by the Board of
Directors with respect to any matter or provision contained in the Plan shall
be final, conclusive and binding upon the Company and upon all participants,
their heirs or legal representatives. The Company shall indemnify Committee
members, to the fullest extent permitted by applicable statute, for any
expenses incurred in defending a civil or criminal action or proceeding arising
out of such member's actions with respect to the administration of the Plan, in
advance of the final disposition of such action or proceeding, upon receipt of
an undertaking by the member indemnified to repay such payment if such member
shall be adjudicated not to have acted in good faith in the reasonable belief
that such member's actions were in the best interests of the Company.
14. Designation of Beneficiary.
A participant may file a written designation of a beneficiary who is to
receive any shares of Common Stock and/or cash in the event of the death of the
participant prior to the delivery of such shares or cash to the participant.
Such designation of beneficiary may be changed by the participant at any time
by written notice to the Treasurer of the Company. Within 30 days after the
participant's death, the beneficiary may, as provided in Paragraph 10(d), elect
to exercise the participant's Option when it becomes exercisable on the
Offering Termination Date of the then current Offering. Upon the death of a
participant and upon receipt by the Company of proof of the identity and
existence at the participant's death of a beneficiary validly designated by the
participant under the Plan, and notice of election of the beneficiary to
exercise the Option, the Company shall deliver such stock and/or cash to such
beneficiary. In the event of the death of a participant and in the absence of
a beneficiary validly designated under the Plan who is living at the time of
such
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<PAGE> 25
participant's death, the Company shall deliver such stock and/or cash to the
executor or administrator of the estate of the participant, or if no such
executor or administrator has been appointed (to the knowledge of the Company),
the Company, in its discretion, may deliver such stock and/or cash to the
spouse or to any one or more dependents of the participant as the Company may
designate. No beneficiary shall, prior to the death of the participant by whom
he has been designated, acquire any interest in the stock or cash credited to
the participant under the Plan.
15. Transferability.
Neither payroll deductions credited to a participant's account nor any
rights with regard to the exercise of an Option or to receive stock under the
Plan may be assigned, transferred, pledged or otherwise disposed of in any way
by the participant otherwise than by will or the laws of descent and
distribution. Any such attempted assignment, transfer, pledge or other
disposition shall be without effect, except that the Company may treat such act
as an election to withdraw funds in accordance with Paragraph 8(b).
16. Use of Funds.
All payroll deductions received or held by the Company under this Plan
may be used by the Company for any corporate purpose, and the Company shall not
be obligated to segregate such payroll deductions.
17. Effect of Changes of Common Stock.
In the event of any changes of outstanding shares of the Common Stock
by reason of stock dividends, subdivisions, combinations and the like, the
aggregate number and class of shares available under this Plan and the Option
Exercise Price per share shall be appropriately adjusted by the Board of
Directors of the Company, whose determination shall be conclusive. Any such
adjustments may provide for the elimination of any fractional shares which
would otherwise become subject to any Option.
18. Amendment or Termination.
The Board of Directors of the Company may at any time terminate or
amend the Plan. Except as hereinafter provided, however, no such termination
may affect Options previously granted, and no such amendment may make any
change in any Option previously granted which would adversely affect the rights
of any participant. In addition, no amendment may be made without prior
approval of the stockholders of the Company if such amendment would (a)
materially increase the benefits accruing to
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<PAGE> 26
participants under the Plan or (b) materially modify the requirements as to
eligibility for participation under the Plan.
19. Notices.
All notices or other communications by a participant to the Company
under or in connection with the Plan shall be deemed to have been duly given
when received by the Treasurer of the Company.
20. Merger or Consolidation.
If the Company shall at any time merge into or consolidate with another
corporation and the Company is the surviving entity, the holder of each Option
then outstanding will thereafter be entitled to receive at the next Offering
Termination Date upon the exercise of such Option for each share as to which
such Option shall be exercised the securities or property to which a holder of
one share of the Common Stock was entitled upon and at the time of such merger
or consolidation, and the Board of Directors of the Company shall take such
steps in connection with such merger or consolidation as the Board of Directors
shall deem necessary to assure that the provisions of Paragraph 17 shall
thereafter be applicable, as nearly as reasonably may be, in relation to the
said securities or property as to which such holder of such Option might
thereafter be entitled to receive thereunder. In the event of a merger or
consolidation in which the Company is not the surviving entity, or of a sale of
all or substantially all of the assets of the Company, the Plan shall
terminate, and all payroll deductions credited to participants' accounts shall
be returned to them.
21. Approval of Stockholders.
The Plan has been adopted by the Board of Directors of the Company, but
shall be void and of no effect unless it is approved by the stockholders of the
Company at their next annual meeting.
22. Registration and Qualification of the Plan Under Applicable
Securities Laws.
No Option shall be granted under the Plan until such time as the
Company has qualified or registered the shares which are subject to the Options
under the applicable state and federal securities laws to the extent required
by such laws.
APPROVED BY THE BOARD OF DIRECTORS ON JULY 28, 1995.
A-10
<PAGE> 27
ECC INTERNATIONAL CORP.
PROXY FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD DECEMBER 6, 1995
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF
DIRECTORS OF THE COMPANY AND SHOULD BE RETURNED
AS SOON AS POSSIBLE TO MELLON BANK (EAST), N.A.
The undersigned, having received notice of the meeting and management's
proxy statement therefor, and revoking all prior proxies, hereby appoint(s)
Herbert Krasnow and George W. Murphy, and each of them, attorneys or attorney of
the undersigned (with full power of substitution in them and each of them) for
and in the name(s) of the undersigned to attend the Annual Meeting of
Stockholders of ECC INTERNATIONAL CORP. (the "Company") to be held at The Drake
Hotel, 440 Park Avenue at 56th Street, New York, New York, on Wednesday,
December 6, 1995 at 10:00 a.m., Eastern Standard Time, and any adjourned
sessions thereof, and there to vote and act upon the following matters in
respect of all shares of stock of the Company which the undersigned will be
entitled to vote or act upon, with all the powers the undersigned would possess
if personally present.
In their discretion, the proxies are authorized to vote upon such other
matters as may properly come before the meeting or any adjournment thereof.
The proxy when properly executed will be voted in the manner directed
herein by the undersigned stockholder. The Shares represented by this Proxy will
be voted as directed by the undersigned. If no direction is given with respect
to any election to office or proposal, this proxy will be voted for such
election to office or proposal. Attendance of the undersigned at the meeting or
at any adjournment thereof will not be deemed to revoke this proxy unless the
undersigned shall revoke this proxy in writing.
WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING, YOU ARE URGED TO
COMPLETE, DATE, SIGN AND RETURN THIS PROXY IN THE ACCOMPANYING ENVELOPE.
1. TO ELECT THE FOLLOWING DIRECTORS (EXCEPT AS MARKED BELOW):
Julian Demora Jesse Krasnow Ajit W. Hirani Thomas E. McGrath Martin S.
Kaplan Merrill A. McPeak Herbert Krasnow George W. Murphy
FOR all nominees AGAINST (except as marked below) all
nominees
(Instruction: To vote against an individual nominee, write the name of such
nominee(s) in the space provided below)
2. TO APPROVE THE COMPANY'S 1996 EMPLOYEE STOCK PURCHASE PLAN.
FOR AGAINST ABSTAIN
3. To ratify the appointment of Coopers & Lybrand L.L.P. as the Company's
independent public accountants.
FOR AGAINST ABSTAIN
4. To transact such other business as may properly come before the meeting or
any adjournment thereof.
<PAGE> 28
MARK HERE MARK HERE
FOR ADDRESS CHANGE IF YOU PLAN TO ATTEND
AND NOTE AT LEFT THE MEETING
DATED: , 1995
Signature Signature if held jointly
PLEASE SIGN EXACTLY AS NAME APPEARS HEREON. WHEN SHARES ARE HELD BY JOINT
OWNERS, BOTH SHOULD SIGN. WHEN SIGNING AS ATTORNEY, EXECUTOR, ADMINISTRATOR,
TRUSTEE OR GUARDIAN, PLEASE GIVE FULL TITLE AS SUCH. IF A CORPORATION, PLEASE
SIGN IN FULL CORPORATE NAME BY PRESIDENT OR OTHER AUTHORIZED OFFICER. IF A
PARTNERSHIP, PLEASE SIGN IN PARTNERSHIP NAME BY AUTHORIZED PERSON.
