<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
FILED BY THE REGISTRANT [X] FILED BY A PARTY OTHER THAN THE REGISTRANT [ ]
- --------------------------------------------------------------------------------
Check the appropriate box:
[ ] Preliminary Proxy Statement
[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)
[Logo]
(Name of Person(s) Filing Proxy Statement)
PAYMENT OF FILING FEE (CHECK THE APPROPRIATE BOX):
[ ] $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:
- --------------------------------------------------------------------------------
<PAGE> 2
ECC INTERNATIONAL CORP.
November 13, 1996
Dear Fellow Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders of
ECC International Corp. to be held on Tuesday, December 3, 1996, at 10:00 a.m.
at the offices of the Company, 2001 West Oakridge Road, Orlando, Florida. The
Board of Directors and management look forward to greeting personally those
stockholders able to attend.
At this meeting, as set forth in the accompanying Notice of Annual Meeting
and Proxy Statement, stockholders will be asked to consider and act upon: (i)
the election of the Board of Directors to serve for a one-year term; (ii) the
ratification of the selection of Coopers & Lybrand L.L.P. as the Company's
independent public accountants for the current year; and (iii) the approval of
an amendment to the Company's By-laws. There are also two stockholder proposals
that we understand may be presented for consideration at the meeting. The
stockholder proposals are also discussed in the attached Proxy Statement.
As is set forth on pages 13-17 of the accompanying Proxy Statement, your
Board believes that these stockholder proposals are not in the best interests of
the Company and its stockholders as a whole and unanimously recommends a vote
"AGAINST" such stockholder proposals. During the annual meeting, we will report
on the operations of your Company. Directors and officers of ECC will be present
to respond to any questions you may have.
Your vote is important, regardless of the number of shares you own. We urge
you to sign, date and mail the enclosed proxy as soon as possible, even if you
currently plan to attend the annual meeting. This will not prevent you from
voting in person, but will ensure that your vote is counted if you are unable to
attend the meeting.
On behalf of your Board of Directors, thank you for your continued support.
Sincerely,
/s/ GEORGE W. MURPHY
GEORGE W. MURPHY
President and
Chief Executive Officer
<PAGE> 3
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
offices of the Company, 2001 West Oakridge Road, Orlando, Florida, 32839-3981,
on December 3, 1996 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 an amendment to the By-Laws of the Company, to take
effect July 1, 1997, providing that a special meeting of stockholders shall
be called by the President or Secretary of the Company upon written
application from the holders of not less than 30% of the Company's
outstanding capital stock entitled to vote at the special meeting.
4. To consider two potential stockholder proposals.
5. To transact such other business, if any, as may properly come
before the Meeting and any adjournments thereof.
Holders of record of the Company's Common Stock, $.10 par value per share,
as of the close of business on October 18, 1996 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 principal executive 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,
/s/ RELLAND M. WINAND
RELLAND M. WINAND, Secretary
Wayne, Pennsylvania
November 13, 1996
WHETHER OR NOT YOU EXPECT TO BE PRESENT AT THE MEETING, PLEASE PROMPTLY
SIGN, DATE AND MAIL THE ENCLOSED PROXY CARD. IF YOU ARE PRESENT AT THE MEETING,
YOU MAY WITHDRAW YOUR PROXY AND VOTE YOUR SHARES PERSONALLY.
<PAGE> 4
ECC INTERNATIONAL CORP.
---------------------
PROXY STATEMENT
FOR THE ANNUAL MEETING OF STOCKHOLDERS TO BE
HELD ON DECEMBER 3, 1996
This Proxy Statement is furnished in connection with the solicitation by
the Board of Directors 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 offices of the Company, 2001 West Oakridge Road,
Orlando, Florida, 32839-3981, on December 3, 1996, 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. Any proxy not specifying the contrary will be voted in the
election of directors for the Board of Directors' nominees, in favor of the
proposal regarding the selection of accountants and the proposed amendment to
the By-laws and against the two stockholder proposals. Stockholders giving
proxies may revoke them at any time prior to their being voted by written
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 2001 West Oakridge Road, Orlando, Florida 32839-3981; Unit 2, Home
Farm Business Centre, Home Farm Road, Brighton, East Sussex, England BN1 9H4;
and 2900 Titan Row, Suite 142, Orlando, Florida 32809-5691. The Notice of
Meeting, this Proxy Statement, the enclosed proxy card and the Company's Annual
Report for the fiscal year ended June 30, 1996 were first mailed to the
Company's stockholders on or about November 13, 1996.
VOTING SECURITIES AND VOTES REQUIRED
Holders of record of the Company's Common Stock, $.10 par value per share
(the "Common Stock"), as of the close of business on October 18, 1996 (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 7,857,512 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. On August 27, 1996, the Board of Directors of
the Company adopted a new stockholder rights plan containing substantially the
same terms as the previous stockholder rights plan, which expired by its terms
on September 17, 1996. Pursuant to the new stockholder rights plan, 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-thousandth of a share of the Company's Series B Junior
Participating Preferred Stock at a price of $40.00 per one one-thousandth of a
share, subject to adjustment. At the Meeting of the Board of Directors on August
27, 1996, the Board also resolved to retain an investment bank to review such
$40.00 purchase price of the Company's Series B Junior Participating Preferred
Stock. The description and terms of the Rights are set forth in a Rights
Agreement between the Company and Mellon Bank, N.A., as Rights Agent, dated as
of August 27, 1996.
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.
<PAGE> 5
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
ratification of the selection of Coopers & Lybrand L.L.P. ("Coopers & Lybrand")
as the Company's independent auditors for the current fiscal year and for
approval of the amendment to the By-laws of the Company providing that a special
meeting of stockholders shall be called by the President or Secretary of the
Company upon written application from holders of not less than 30% of the
Company's outstanding capital stock entitled to vote at the special meeting. In
addition, the affirmative vote of a majority of the shares present or
represented at the Meeting will constitute approval of any other proposal.
Proxies solicited by the Board of Directors will be voted AGAINST each of the
stockholder proposals unless otherwise indicated. 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 by a stockholder present in person or
represented by proxy at the Meeting 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 as to certain shares to
vote on a particular matter, those shares will not be considered as voting on
such matter, nor as present and entitled to vote with respect to that matter.
Accordingly, a "broker non-vote" on a matter that requires the affirmative vote
of a certain percentage of shares present and entitled to vote on the matter,
such as the election of directors, has no effect on the voting of such matter,
while a "broker non-vote" on a matter that requires the affirmative vote of a
certain percentage of the outstanding shares has the same effect as a vote
against the matter.
All shares represented by properly executed proxies will, unless such
proxies have previously been revoked, be voted at the Meeting in accordance with
the directions of the proxies. If no direction is indicated, the shares will be
voted as recommended by the Board of Directors. A stockholder executing and
returning a proxy has the power to revoke it at any time before it is voted by
providing written notice of such revocation to the Secretary of the Company, by
submitting a validly executed later-dated proxy, or by attending the Meeting and
voting in person. The mere presence of a stockholder at the Meeting, however,
will not constitute a revocation of a previously submitted proxy.
2
<PAGE> 6
STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
<TABLE>
The following table sets forth certain information, as of July 31, 1996,
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:
<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.............................. 1,575,300(3) 20.1%
T. Rowe Price Associates, Inc.
100 E. Pratt Street
Baltimore, MD 21202.............................. 501,500(4) 6.4%
Dimensional Fund Advisors, Inc.
1299 Ocean Avenue, 11th Floor
Santa Monica, CA 90401........................... 453,014(5) 5.8%
DIRECTORS AND EXECUTIVE OFFICERS:
Julian Demora...................................... 325,000(6) 4.1%
Ajit W. Hirani..................................... 24,163(7) *
Martin S. Kaplan................................... 57,570(8) *
Herbert Krasnow.................................... 126,045(9) 1.6%
Jesse Krasnow...................................... 59,999(10) *
Thomas E. McGrath.................................. 50,000(8) *
Merrill A. McPeak.................................. 10,000(11) *
George W. Murphy................................... 215,209(12) 2.7%
Patrick M. Donohue................................. 22,232(13) *
James A. Ferguson.................................. 19,536(14) *
Jerry D. Robbins................................... 13,035(15) *
All directors and executive officers
as a group (13 persons).......................... 948,382(16) 11.7%
<FN>
- ---------------
* 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 July 31, 1996. 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.
</TABLE>
3
<PAGE> 7
(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 July 31, 1996.
(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 August 9, 1996. The foregoing information is derived from
such Schedule 13G.
(4) The foregoing information is derived from information provided by T. Rowe
Price Associates, Inc. to the Company. T. Rowe Price Associates, Inc. is
deemed to have beneficial ownership of 501,500 shares of Common Stock of
the Company as of July 31, 1996, all of which are owned by T. Rowe Price
New Horizons Fund, Inc., of which T. Rowe Price Associates, Inc. serves as
investment advisor. T. Rowe Price Associates, Inc. disclaims beneficial
ownership of all such shares.
(5) The foregoing information is derived from information provided by
Dimensional Fund Advisors Inc. to the Company. Dimensional Fund Advisors
Inc., a registered investment advisor, is deemed to have beneficial
ownership of 453,014 shares of Common Stock of the Company as of July 31,
1996, all of which shares are held in portfolios of DFA Investment
Dimensions Group, Inc., a registered open-end investment company, or in
series of The DFA Investment Trust Company, a Delaware business trust, or
the DFA Group Trust and the DFA Participating Group Trust, investment
vehicles for qualified employee benefit plans, all of which Dimensional
Fund Advisors Inc. serves as investment manager. Dimensional Fund Advisors
Inc. disclaims beneficial ownership of all such shares.
(6) Includes 15,000 shares which are held in trust for the benefit of Mr.
Demora's spouse and 10,000 shares issuable upon the exercise of outstanding
stock options exercisable within 60 days after July 31, 1996.
(7) Includes 18,000 shares issuable upon exercise of outstanding stock options
exercisable within 60 days after July 31, 1996.
(8) Includes 32,500 shares issuable upon exercise of outstanding stock options
exercisable within 60 days after July 31, 1996.
(9) Includes 16,250 shares issuable upon exercise of outstanding stock options
exercisable within 60 days after July 31, 1996.
(10) Includes 7,500 shares which are held in trust for the benefit of Mr.
Krasnow's three children and 11,250 shares issuable upon exercise of
outstanding stock options exercisable within 60 days after July 31, 1996.
(11) Includes 10,000 shares issuable upon exercise of outstanding stock options
exercisable within 60 days after July 31, 1996.
(12) Includes 104,125 shares issuable upon exercise of outstanding stock options
exercisable within 60 days after July 31, 1996.
(13) Includes 17,000 shares issuable upon exercise of outstanding stock options
exercisable within 60 days after July 31, 1996.
(14) Includes 15,000 shares issuable upon exercise of outstanding stock options
exercisable within 60 days after July 31, 1996.
(15) Includes 8,000 shares issuable upon exercise of outstanding stock options
exercisable within 60 days after July 31, 1996.
(16) Includes 291,762 shares issuable upon exercise of outstanding stock options
exercisable within 60 days after July 31, 1996.
4
<PAGE> 8
PROPOSAL 1 -- 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.
Each director will be elected to hold office until the next Annual Meeting
of Stockholders or until his successor is duly 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 July 31, 1996, appears under "Stock Ownership of Certain
Beneficial Owners and Management."
JULIAN DEMORA, age 70, became a director in 1992. Mr. Demora is President
of the construction and development company, Key Realty and Development, Inc.
AJIT W. HIRANI, age 49, is Vice President, General Manager of Training
Systems Division for the Company. Mr. Hirani has been employed by the Company
since 1972 and became a director in 1995.
MARTIN S. KAPLAN, age 57, became a director in 1969. Mr. Kaplan is a Senior
Partner in the law firm of Hale and Dorr, counsel to the Company.
HERBERT KRASNOW, age 74, became a director in 1973. Mr. Krasnow is a
Partner in the private investment firm of Lefferts/Fore Associates.
JESSE KRASNOW, age 47, 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 52, became a director in 1983. Mr. McGrath is a
Managing Director of Citicorp Securities, Inc.
MERRILL A. MCPEAK, age 61, became a director in 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. He retired in 1994 with the rank of
General. General McPeak serves on the Boards of Directors of Tektronix, Inc. and
Thrustmaster, Inc.
GEORGE W. MURPHY, age 60, became a director in 1973. Mr. Murphy has been
President and Chief Executive Officer of the Company since 1970.
BOARD AND COMMITTEE MEETINGS
During the fiscal year ended June 30, 1996, the Board held six 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. The Company has an Audit Committee, a Compensation Committee and a Stock
Option Committee. The Company does not have a Nominating Committee.
5
<PAGE> 9
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 one meeting of that Committee held during the 1996 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 1996 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 the one meeting
of that Committee held during the 1996 fiscal year.
DIRECTORS' COMPENSATION
In the last fiscal year, aggregate directors' fees of $158,000 were paid
with respect to six outside directors. Pursuant to these arrangements, Messrs.
Demora, Kaplan, H. Krasnow, J. Krasnow, McGrath and McPeak each received an
annual fee of $20,000 and a fee of $1,000 for each Board and Committee meeting
attended. In the fiscal year ended June 30, 1996, Mr. Demora received $25,000;
Messrs. Kaplan and J. Krasnow each received $29,000; Mr. H. Krasnow received
$26,000; Mr. McGrath received $30,000 and General McPeak received $19,000 in
directors' fees. Mr. Kaplan is a Senior Partner at Hale and Dorr, which provides
legal services to the Company.
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
Based solely on its review of copies of reports filed by reporting persons
of the Company pursuant to Section 16(a) of the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), the Company believes that all filings required
to be made by reporting persons of the Company were timely made in accordance
with the requirements of the Exchange Act, except that General McPeak filed his
initial Form 3 late.
6
<PAGE> 10
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION
<TABLE>
The following table sets forth for each of the last three fiscal years
certain information concerning the compensation of the Company's President and
Chief Executive Officer and the Company's four other most highly compensated
executive officers during the fiscal year ended June 30, 1996 who were serving
as executive officers on June 30, 1996 (the "Named Executive Officers"):
SUMMARY COMPENSATION TABLE
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
ANNUAL ------------
COMPENSATION SECURITIES
NAME AND ------------------ UNDERLYING ALL OTHER
PRINCIPAL POSITION YEAR SALARY($) BONUS($) OPTIONS(#) COMPENSATION($)(1)
------------------ ---- --------- -------- ------------ ------------------
<S> <C> <C> <C> <C> <C>
George W. Murphy...................... 1996 $312,423 $ 45,000 0 $46,924
President and Chief 1995 297,873 60,000 75,000 49,858
Executive Officer 1994 276,000 100,000 14,375 53,725
Ajit W. Hirani(2)..................... 1996 232,308 35,000 10,000 30,321
Vice President, General 1995 195,059 45,000 40,000 29,651
Manager of Training Systems Division
Patrick M. Donohue.................... 1996 184,731 20,000 5,000 34,540
Vice President, 1995 178,151 25,000 12,000 31,721
Marketing 1994 169,519 24,000 4,281 28,017
James M. Ferguson(2).................. 1996 196,193 0 0 40,225
Vice President, New Business 1995 188,739 25,000 15,000 39,707
Development -- ECC Vending Corp.
Jerry D. Robbins(2)................... 1996 172,689 0 5,000 26,175
Vice President, Manufacturing 1995 164,525 30,000 15,000 23,847
-- ECC Vending Corp.
<FN>
- ---------------
(1) Includes the following: (a) profit sharing contributions by the Company in 1996 for Messrs. Murphy,
Hirani, Donohue, Ferguson and Robbins of $15,046 each; (b) the Company's contributions under the
Savings and Investment Plan in 1996 for Messrs. Murphy, Hirani, Donohue, Ferguson and Robbins of
$10,654, $8,200, $6,937, $6,491 and $7,178, respectively; (c) the portion of the premium paid by
the Company with respect to split-dollar executive deferred compensation insurance program in 1996
for Messrs. Murphy, Hirani, Donohue, Ferguson and Robbins of $1,574, $452, $794, $977 and $277,
respectively; (d) the Company's contributions under the key executive universal life insurance
program in 1996 of $3,750 for Mr. Murphy and $1,875 for Mr. Ferguson; (e) the taxable portion of
long-term disability premiums paid by the Company in 1996 for Messrs. Murphy, Hirani, Donohue,
Ferguson and Robbins of $7,541, $2,880, $4,421, $4,886 and $2,009, respectively; (f) the taxable
portion of group term life insurance paid by the Company in 1996 for Messrs. Murphy, Hirani,
Donohue, Ferguson and Robbins of $450, $174, $450, $450 and $174, respectively; (g) the Company's
contribution to the employee stock purchase plan for Messrs. Murphy, Hirani, Donohue, Ferguson and
Robbins of $2,452, $3,569, $1,435, $1,854 and $1,491, respectively; and (h) the Company's
contribution related to executive automobiles for Messrs. Murphy, Donohue and Ferguson of $5,457,
$5,457 and $8,646, respectfully.
</TABLE>
7
<PAGE> 11
(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
<TABLE>
The following table sets forth certain information concerning grants of
stock options made during the fiscal year ended June 30, 1996 to each of the
Named Executive Officers:
OPTION GRANTS IN LAST FISCAL YEAR
<CAPTION>
POTENTIAL
REALIZABLE
INDIVIDUAL GRANTS VALUE AT ASSUMED
-------------------------------------------------------- ANNUAL RATES OF
NUMBER OF PERCENT OF STOCK PRICE
SECURITIES TOTAL OPTIONS APPRECIATION FOR
UNDERLYING GRANTED TO OPTION TERM (3)
OPTIONS EMPLOYEES IN EXERCISE PRICE EXPIRATION ------------------
NAME GRANTED(1) FISCAL YEAR PER SHARE (2) DATE 5% 10%
- ---- ---------- ------------- -------------- ---------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
George W. Murphy....... 0 -- -- -- --
Ajit W. Hirani......... 10,000 7.4% $10.00 2/22/06 $63,000 $159,400
Patrick M. Donohue..... 5,000 3.7 10.00 2/22/06 31,500 79,700
James M. Ferguson...... 0 -- -- -- --
Jerry D. Robbins....... 5,000 3.7 10.00 2/22/06 31,500 79,700
<FN>
- ---------------
(1) Options vest in five equal annual installments beginning one year after the date of grant.
(2) The exercise price is equal to the fair market value of the Company's Common Stock on the date of
grant.
(3) Amounts represent hypothetical gains that could be achieved for the respective options if exercised
at the end of the option term. These gains are based on assumed rates of stock appreciation of 5% and
10% compounded annually from the date the respective options were granted to their expiration date.
This table does not take into account any appreciation in the price of the Common Stock to date.
Actual gains, if any, on stock option exercises will depend on the future performance of the Common
Stock and the date on which the options are exercised.
</TABLE>
8
<PAGE> 12
OPTION EXERCISES AND YEAR-END VALUES
<TABLE>
The following table sets forth certain information concerning the exercise
of stock options during the fiscal year ended June 30, 1996 by each of the Named
Executive Officers and the number and value of unexercised options held by each
of the Named Executive Officers on June 30, 1996:
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<CAPTION>
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS OPTIONS
AT FISCAL AT FISCAL
YEAR-END YEAR-END
SHARES (#) ($)(2)
ACQUIRED VALUE ---------------- --------------
ON EXERCISE REALIZED EXERCISABLE/ EXERCISABLE/
NAME (#) ($)(1) UNEXERCISABLE UNEXERCISABLE
- ---- ----------- -------- ---------------- --------------
<S> <C> <C> <C> <C>
George W. Murphy....................... 11,500 120,750 104,125 / 0 $196,688 / $0
Ajit W. Hirani......................... -- -- 18,000 / 32,000 0 / 0
Patrick M. Donohue..................... 10,281 86,077 17,000 / 0 0 / 0
James M. Ferguson...................... -- -- 15,000 / 0 0 / 0
Jerry D. Robbins....................... -- -- 8,000 / 12,000 0 / 0
<FN>
- ---------------
(1) Represents the difference between the exercise price and the fair market value of the Common Stock
on the date of exercise.
(2) Value of unexercised "in-the money" options represents the difference between the closing price of
the Company's Common Stock on June 28, 1996 ($9.125 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.
</TABLE>
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 to 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.
9
<PAGE> 13
The Company's executive compensation program has been designed to implement the
objectives described above and is comprised of the three following fundamental
elements:
o a base salary that is determined by individual contributions and
sustained performance.
o an annual cash bonus that is tied to corporate financial performance
as well as the achievement of individual business-related
objectives, including ability to address the corporate need to
increase profitability.
o 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 1996, 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.
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 ability to address issues relating
to improvement in long-term corporate 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. See
"Executive Compensation -- Summary Compensation."
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.
Management and all other employees participating in stock option and stock
purchase programs of the Company are aware of the need to attain significant
earnings in order to realize incentive compensation based on stock appreciation.
Stock option awards are reviewed and considered by the Board and Stock
Option Committee members. 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. 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,
10
<PAGE> 14
including the following: achievement of short- and long-term financial and
strategic targets and objectives, 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 1996 fiscal year was increased by $14,550 over his
base salary for the 1995 fiscal year, based upon a consideration of the factors
discussed above. In addition, in 1996, Mr. Murphy received a cash bonus in the
amount of $45,000 in recognition of his strong leadership in addressing issues
related to enhancing future corporate profitability.
Compliance with Internal Revenue Code Section 162(m). Section 162(m) of
the Internal Revenue Code of 1986, as amended (the "Code"), generally disallows
a tax deduction to public companies for compensation over $1,000,000 paid to its
chief executive officer and its four other most highly compensated executive
officers. Qualifying performance-based compensation will not be subject to the
deduction limit if certain requirements are met. The Company currently intends
to structure its stock options granted to executive officers in a manner that
complies with the performance-based requirements of Section 162(m).
Compensation Committee,
Martin S. Kaplan
Jesse Krasnow
Thomas E. McGrath
11
<PAGE> 15
STOCK PERFORMANCE GRAPH
<TABLE>
The following graph compares cumulative stockholder return on the Company's
Common Stock since June 28, 1991, 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., Sparton Corporation, TransTechnology Corporation,
United Industrial Corporation, UNC, Inc. and Wyman Gordon Co.
COMPARATIVE FIVE-YEAR TOTAL RETURNS*
ECC INTERNATIONAL CORP., RUSSELL 2000, PEER GROUP
(PERFORMANCE THROUGH 6/30/96)
[CHART]
<CAPTION>
MEASUREMENT PERIOD
(FISCAL YEAR COVERED) ECC RUSSELL 2000 PEER GROUP
<S> <C> <C> <C>
1991 $100.00 $100.00 $100.00
1992 $ 42.31 $114.54 $117.64
1993 $ 40.20 $144.27 $127.80
1994 $220.03 $150.62 $115.10
1995 $188.30 $180.85 $146.48
1996 $154.45 $224.05 $221.56
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.
<FN>
- ---------------
* Cumulative total return assumes reinvestment of dividends.
</TABLE>
PROPOSAL 2 - 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, 1997. 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
12
<PAGE> 16
Coopers & Lybrand. It is not expected that any representative of Coopers &
Lybrand will be present at the Meeting.
PROPOSAL 3 - APPROVAL OF THE AMENDMENT OF THE
BY-LAWS OF THE COMPANY
On November 6, 1996, the Board of Directors determined to present a
proposal to the stockholders at the Meeting to amend the By-laws of the Company,
effective as of July 1, 1997, to provide that a special meeting of stockholders
shall be called by the President or Secretary of the Company upon the written
application of the holders of not less than 30% of the Company's outstanding
capital stock entitled to vote at the special meeting. The Board of Directors
believes that it is appropriate to allow stockholders the opportunity to approve
or disapprove this amendment at the Meeting. If this proposal is not approved at
the Meeting, the amendment to the By-laws will not be effected. The Board of
Directors recommends a vote "For" Proposal 3. Your Proxy will be voted for
Proposal 3 unless you specify otherwise.
The proposed amendment to the By-laws of the Company will add the following
provision to the end of Article II, Section 7:
"In addition, a special meeting of stockholders shall be called by the
President or Secretary upon the written application, dated on or after July
1, 1997, of one or more stockholders who hold in the aggregate not less
than 30% of the outstanding capital stock entitled to vote at the special
meeting."
In addition, Article II, Section 14, subsection (d) will be amended and restated
in its entirety to provide as follows:
"(d) At any special meeting of stockholders, only such business shall be
conducted, and only such proposals shall be acted on, as is properly
brought before the special meeting. In order for business to be properly
brought before the special meeting, business must be either (i) specified
in the notice of special meeting (or any supplement thereto) given by or at
the direction of the Board of Directors, (ii) otherwise properly brought
before the special meeting by or at the direction of the Board, or (iii)
otherwise properly brought before the special meeting by a stockholder. In
addition to any other applicable requirements, for business to be properly
brought before a special meeting by a stockholder, the stockholder must
have given notice thereof in writing to the Secretary of the corporation. A
stockholder's notice to the Secretary shall set forth as to each matter the
stockholder proposes to bring before the special meeting (i) a brief
description of the business desired to be brought before the special
meeting and the reasons for conducting such business at the special
meeting, (ii) the name and record address of the stockholder proposing such
business, (iii) the class and number of shares of the corporation which are
beneficially owned by the stockholder, and (iv) any material interest of
the stockholder in such business. Notwithstanding anything in the By-laws
to the contrary, no business shall be conducted at the special meeting
except in accordance with the procedures set forth in this Section 14 of
Article II. The chairman of the special meeting shall, if the facts
warrant, determine and declare to the special meeting that business was not
properly brought before the special meeting in accordance with the
provisions of this Section 14 of Article II and, if he should so determine,
he shall so declare to the special meeting and any such business not
properly brought before the special meeting shall not be transacted."
Your Board of Directors believes that stockholders of the Company should
have adequate means by which to ensure timely consideration of matters deemed to
be important to their interest. Under Article II, Section 7 of the Company's
current By-laws, only the President, Chairman of the Board or a majority of the
Board of Directors can call a special meeting of stockholders. The Board
believes that it is in the best interests of the Company and its stockholders to
amend the By-laws of the Company, effective at the beginning of the
13
<PAGE> 17
next fiscal year (July 1, 1997), to provide that special meetings of
stockholders shall be called upon the application of stockholders owning in the
aggregate not less than 30% of the outstanding voting stock of the Company. The
Board believes that a threshold of 30% would ensure that stockholders
collectively holding a material interest in the Company will be given an
opportunity to bring concerns or proposals that they may have before the
stockholders as a whole at a special meeting. Such a threshold, however, will
serve to discourage stockholders who hold a small percentage of the Company's
Common Stock, and who may not share the interests and concerns of the Company's
stockholders in general, from calling special meetings of stockholders that may
be costly and disruptive to the business and affairs of the Company and,
therefore, not in the best interests of the Company and its stockholders.
STOCKHOLDER PROPOSALS AND OTHER MATTERS
The only matters to come before the Meeting of which the Board of Directors
are aware are set forth in this Proxy Statement, except that the Board has been
informed that a holder of 1,000 shares of Common Stock intends to submit the
following two resolutions for consideration at the Meeting:
PROPOSAL 4 - REQUEST ENGAGEMENT OF
INVESTMENT BANKING FIRM
"RESOLVED, that it is the sense of the stockholders of ECC International
Corp., expressed at its annual meeting held on December 3, 1996, that the
Corporation and/or its businesses be sold so as to maximize the return to
stockholders and that the same be done as expeditiously as is consistent
therewith, and to that end, the Board of Directors is requested to cause
the Corporation to engage an independent nationally recognized investment
banking firm to assist the Board in seeking to obtain a purchaser or
purchasers on terms and conditions that the Board deems expedient and in
the best interests of the Corporation and to submit the same to the
stockholders for their authorization."
The Board of Directors does not believe that the foregoing stockholder
resolution is in the best interests of the Company or its stockholders.
Therefore, the Board recommends that stockholders vote AGAINST Proposal 4. Your
proxy will be voted against Proposal 4 unless you specify otherwise.
The Board of Directors, which collectively beneficially owns 867,986
shares, or approximately 11.1%, of the Company's Common Stock, is firmly
committed to increasing stockholder value and regularly considers what actions
can be taken to maximize value for all of the Company's stockholders. At this
time and for the reasons explained below, the Board believes that stockholder
value can be best maximized by continuing to pursue your Company's long-term
strategic business plan.
Your Company is at a very important stage in its development, in its
training and simulation business, as well as in its relatively new vending
business. The Board of Directors believes that the uncertainty in the future
control and direction of the Company that would be created by passage of this
proposal would be seriously detrimental to the Company's business and prospects
as well as to its future growth and profitability. Your Board believes that
major defense prime contractors would be much less likely to award contracts to
the Company if this stockholder proposal were passed and the future ownership of
the Company was uncertain.
At present, a number of potentially significant contracts are being pursued
by the Company. For example, the Company has disclosed that discussions are
currently ongoing between the Company, Lockheed Martin and the United States
Army regarding the exercise of a contract option for a significant number of
Close Combat Tactical Trainer ("CCTT") units upon the completion of the current
contract in fiscal 1997. In addition, the training and simulation business
recently received a $9.2 million Third Low Rate Initial Production contract for
classroom and field tactical trainers for the Army's new Javelin Anti-Tank
Missile.
14
<PAGE> 18
The Army will make a multi-year production purchase of the Javelin Missile in
fiscal 1997 and the Company has submitted pricing for trainers to support this
purchase. The Company's training and simulation business is also currently
involved in aggressive competition for several other major government simulator
procurements that are scheduled for award in fiscal 1997. The potential value of
these other contracts is estimated by the Company to be approximately $100
million.
If the production option for a five-year production of CCTT modules is
exercised, and the Company is awarded the multi-year procurement for the Javelin
Missile trainers and any of the other simulator procurements, the Company
expects to have a solid and profitable base of training and simulation
manufacturing business through the year 2000.
Your Board of Directors believes that it is in the best interests of the
Company and the stockholders to continue to focus on its efforts to secure these
potential contracts in the upcoming fiscal year, and that seeking a purchaser or
purchasers of the Company at this time, together with the related uncertainty as
to the future ownership and control of the Company, could jeopardize the
awarding of any such contracts to the Company.
The Company's vending business is also seeking several new contracts in
fiscal 1997. Having successfully completed the Snapple Beverage contract in
fiscal 1996, the Company is continuing the development of its vending business
by seeking contracts with other major beverage vendors. Both Pepsi and Coca-Cola
are currently testing the Company's glass-front beverage vending machines with
their products in selected locations. The results of these tests to date have
shown a substantial increase in revenue per site when a Company vending machine
replaces a traditional can machine. The Company believes that Pepsi will make a
decision this calendar year as to whether Pepsi will commit to a corporate
program with the Company's beverage vending machines.
The vending business is still a relatively new venture for the Company that
is continuing in its development. The Board of Directors and management remain
excited about its future prospects. Management believes that potential
contracting partners with the Company's vending subsidiary, such as Pepsi and
Coca-Cola, understand and expect the Company's continued commitment to a
successful vending business. The Board of Directors believes that the Company's
ability to market to such companies would be affected negatively if the Company
were to seek a purchaser or purchasers of the Company or any of its businesses
at this time because of the related uncertainty as to the future ownership and
direction of the Company. Your Board of Directors believes that its interests
are aligned with those of all of the stockholders of the Company. In fulfilling
its obligations to act in the best interests of stockholders, the Board believes
that it may be appropriate to further examine alternatives for maximizing
stockholder value in the future. Your Board is always prepared to review and
consider any proposals, offers or other opportunities that it may receive or
that may arise relating to a sale, disposition or other strategic opportunity
involving the Company. The Board does not believe that now is an appropriate
time to conduct a sale or engage in some other extraordinary transaction. It is
the Board's view that, at present, stockholder value will be best maximized by
continuing to pursue the Company's strategic business plan. Therefore, your
Board of Directors believes that it is not in the best interests of the Company
or the stockholders to adopt Proposal 4.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "AGAINST" PROPOSAL 4. YOUR PROXY
WILL BE VOTED AGAINST PROPOSAL 4 UNLESS YOU SPECIFY OTHERWISE.
PROPOSAL 5 - AMENDMENT OF THE BY-LAWS
"RESOLVED, that Article II, Section 7 of the By-laws of the Corporation be
amended by adding the following provisions to the end thereof: 'A special
meeting of the stockholders, for any purpose or purposes, unless otherwise
prescribed by statute or by the Certificate of Incorporation, shall be
called by
15
<PAGE> 19
the Corporation upon written notice from stockholders owning not less than
ten (10%) percent of the Corporation's outstanding shares of voting stock,
which notice shall set forth the purpose or purposes of such special
meeting and the Corporation shall hold the special meeting of stockholders
no later than thirty (30) days after the date such notice is received by
the Corporation. Notwithstanding anything to the contrary contained in
Article X, Section 1 of the By-laws of the Corporation, this By-law may not
be amended without the affirmative vote of a majority of shares of voting
stock present in person or represented by proxy at a meeting of the
Corporation's stockholders and entitled to vote on the matter.' "
The Board of Directors does not believe that the foregoing stockholder
resolution is in the best interests of the Company or its stockholders.
Therefore, the Board recommends that stockholders vote AGAINST Proposal 5. Your
proxy will be voted against Proposal 5 unless you specify otherwise.
Article II, Section 7 of the By-laws of the Company currently provides that
special meetings of the stockholders, for any purpose or purposes, unless
otherwise prescribed by statute or the Certificate of Incorporation, may be
called by the President or Chairman of the Board and shall be called by the
President or Secretary at the request in writing of a majority of the Board of
Directors. On November 6, 1996, the Board of Directors determined to present a
proposal to the stockholders at the Meeting to amend the By-laws of the Company,
effective as of July 1, 1997, to provide that a special meeting of stockholders
shall be called by the President or Secretary of the Company upon the written
application of the holders of not less than 30% of the Company's outstanding
capital stock entitled to vote at the special meeting. As discussed in this
Proxy Statement, the Board of Directors believes that it is appropriate to allow
stockholders the opportunity to approve or disapprove such proposal at the
Meeting.
The Board of Directors believes that it is not in the best interests of the
Company and its stockholders to allow a special meeting of stockholders to be
called upon written notice from stockholders owning not less than ten (10%)
percent of the Company's outstanding capital stock. A provision in the By-laws
of the Company with such a low threshold would have the effect of allowing a
small group of stockholders, who may or may not share the best interests of the
Company and its stockholders as a whole, to use special meetings of stockholders
to interfere with and disrupt the Board's proper and lawful management of the
business and conduct of the affairs of the Company. Article Eighth of the
Company's Certificate of Incorporation provides that management of the business
and the conduct of the affairs of the Company shall be vested in the Board of
Directors. The Company's Board has the fiduciary duty under Delaware law to act
in the best interests of the stockholders as a whole and is proven and
experienced in managing the operations of the Company.
In addition, the Board does not believe the proposed amendment described in
the stockholder resolution, which requires a meeting to be held 30 days after
receipt of stockholder notice, would provide the Company with adequate time to
prepare appropriate proxy materials relating to any proposals set forth in the
stockholder's notice, file such materials with the Securities and Exchange
Commission, and then conduct a mailing to all stockholders of the Company.
The Board of Directors believes that its proposal (see Proposal 3 above) to
allow special meetings of stockholders to be called upon the written application
from the holders of not less than 30% of the Company's outstanding capital stock
entitled to vote at the special meeting will provide both an effective threshold
and adequate means for stockholders who share the best interests of the Company
and the stockholders as a whole to ensure proper and timely consideration of
matters deemed to be important to their interests. In addition, under Article
II, Section 14 of the Company's current By-laws and the Federal securities laws,
every stockholder that meets certain eligibility and notice requirements has the
ability and right to present proposals for action at the annual meeting of
stockholders, and to have such proposals included in the proxy materials
distributed by the Company. As evidenced by the two stockholder proposals
discussed in this Proxy Statement, all stockholders of the Company have the
ability to present matters for consideration at the annual
16
<PAGE> 20
meeting of stockholders. The Board of Directors believes that individual and
small groups of stockholders presently possess adequate ability to ensure
consideration of matters deemed important to their interests and that the
stockholder proposal to amend the By-laws is neither necessary nor in the best
interests of the Company or its stockholders.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "AGAINST" PROPOSAL 5. YOUR PROXY
WILL BE VOTED AGAINST PROPOSAL 5 UNLESS YOU SPECIFY OTHERWISE.
Proxies solicited by the Board of Directors will be voted AGAINST each of
the foregoing stockholder proposals unless otherwise indicated. As of the date
of this Proxy Statement, the Board of Directors does not intend to present any
matter for action at the Meeting other than as set forth in the Notice of Annual
Meeting. If any other business properly comes before the Meeting, it is the
intention of the proxy holders 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 by the Company to its stockholders. It may be that further
solicitations will be made by regular employees of the Company who will not be
additionally compensated therefor. Brokers, custodians and fiduciaries in whose
names stock is held will be requested to forward proxy 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. In addition, D.F.
King & Co., Inc., New York, New York, has been retained to aid in the
solicitation of proxies at an estimated fee of approximately $75,000, plus
out-of-pocket expenses.
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 July
16, 1997, for inclusion in the proxy materials for that meeting.
WHETHER OR NOT YOU EXPECT TO BE PRESENT AT THE MEETING, PLEASE SIGN, DATE
AND MAIL 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,
/s/ RELLAND M. WINAND
RELLAND M. WINAND, Secretary
Dated: November 13, 1996
17
<PAGE> 21
ECC INTERNATIONAL CORP.
PROXY FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD DECEMBER 3, 1996
THIS PROXY IS SOLICITED ON BEHALF OF
THE BOARD OF DIRECTORS OF THE COMPANY
AND SHOULD BE RETURNED AS SOON AS POSSIBLE
IN THE ACCOMPANYING ENVELOPE
The undersigned, having received notice of the Annual Meeting and the
Board of Directors' 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 offices of the Company, 2001 West Oakridge Road, Orlando, Florida,
32839-3981, on December 3, 1996 at 10:00 a.m., Eastern Standard Time, and any
adjournments thereof, and there to vote and act upon the following matters in
respect of all shares of stock of the Company which the undersigned may be
entitled to vote or act upon, with all the powers the undersigned would possess
if personally present.
In their discretion, the proxy holders are authorized to vote upon such
other matters as may properly come before the meeting or any adjournments
thereof. 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 as recommended by the Board of Directors.
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.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" PROPOSALS 1, 2 AND 3, AND
"AGAINST" PROPOSALS 4 AND 5. TO VOTE IN ACCORDANCE WITH THE BOARD OF DIRECTORS'
RECOMMENDATIONS JUST SIGN THIS PROXY; NO BOXES NEED TO BE CHECKED. UNLESS
MARKED OTHERWISE, THIS PROXY WILL BE VOTED IN ACCORDANCE WITH THE BOARD OF
DIRECTORS' RECOMMENDATIONS.
WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING, YOU ARE URGED TO SIGN,
DATE AND MAIL THIS PROXY IN THE ACCOMPANYING ENVELOPE.
<PAGE> 22
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" PROPOSALS 1, 2 AND 3.
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 ratify the appointment of Coopers & Lybrand L.L.P. as the Company's
independent public accountants.
/ / FOR / / AGAINST / / ABSTAIN
3. To approve an amendment to the By-laws of the Company, to take effect July
1, 1997, providing that a special meeting of stockholders shall be called
by the President or Secretary of the Company upon written application from
holders of not less than 30% of the Company's outstanding capital stock
entitled to vote at the special meeting.
/ / FOR / / AGAINST / / ABSTAIN
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "AGAINST" PROPOSALS 4 AND 5.
4. Stockholder proposal to request the engagement of an investment banking
firm.
/ / FOR / / AGAINST / / ABSTAIN
5. Stockholder proposal to amend the By-laws of the Company to provide that a
special meeting of stockholders shall be called upon written notice from
holders of not less than ten (10%) percent of the Company's outstanding
voting stock.
/ / FOR / / AGAINST / / ABSTAIN
6. To transact such other business, if any, as may properly come before the
meeting or any adjournment thereof.
<PAGE> 23
MARK HERE MARK HERE
FOR ADDRESS / / IF YOU PLAN / /
CHANGE AND TO ATTEND
NOTE AT LEFT THE MEETING
Dated: ______________________, 1996
-----------------------------------
Signature
-----------------------------------
Signature
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.
