<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1996
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or
[ ] TRANSACTION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
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Commission File Number: 1-8988
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ECC International Corp.
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(Exact name of registrant as specified in its charter)
Delaware 23-1714658
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
175 Strafford Avenue, Suite 116, Wayne, PA 19087-3377
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(Address of principal executive offices) Zip Code)
(610) 687-2600
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(Registrant's telephone number, including area code)
Not Applicable
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(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding twelve months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for at least the past 90 days. [ X ] Yes [ ] No
As of March 31, 1996, there were 7,777,082 shares of the Registrant's
Common Stock, $.10 par value per share, issued and outstanding.
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<PAGE> 2
<TABLE>
ECC INTERNATIONAL CORP. AND SUBSIDIARIES
CONSOLIDATED INCOME STATEMENTS
NINE MONTHS ENDED MARCH 31, 1996 AND 1995
(In Thousands Except Share and Per Share Data)
(Unaudited)
<CAPTION>
Nine Months Nine Months
Ended Ended
3/31/96 3/31/95
----------- -----------
<S> <C> <C>
Net Sales $ 85,976 $ 72,164
Cost of Sales 69,724 54,995
---------- ----------
Gross Profit 16,252 17,169
---------- ----------
Expenses:
Selling, General & Administrative 10,588 9,193
Systems Development 251 880
---------- ----------
Total Expenses 10,839 10,073
---------- ----------
Operating Income 5,413 7,096
---------- ----------
Other Income (Expense):
Interest Income 190 745
Interest Expense (1,188) (1,045)
Other - Net (74) (18)
---------- ----------
Total Other Expense (1,072) (318)
---------- ----------
Income Before Income Taxes 4,341 6,778
Provision for Income Taxes 1,493 2,382
---------- ----------
Net Income $ 2,848 $ 4,396
========== ==========
Earnings Per Common Share and
Common Share Equivalents $ 0.36 $ 0.56
========== ==========
Weighted Average Number of Common and
Common Share Equivalents Outstanding 7,908,764 7,912,489
</TABLE>
See accompanying notes to the consolidated financial statements.
<PAGE> 3
<TABLE>
ECC INTERNATIONAL CORP. AND SUBSIDIARIES
CONSOLIDATED INCOME STATEMENTS
THREE MONTHS ENDED MARCH 31, 1996 AND 1995
(In Thousands Except Share and Per Share Data)
(Unaudited)
<CAPTION>
Three Months Three Months
Ended Ended
3/31/96 3/31/95
------------ ------------
<S> <C> <C>
Net Sales $ 27,305 $ 28,832
Cost of Sales 23,817 22,808
---------- ----------
Gross Profit 3,488 6,024
---------- ----------
Expenses:
Selling, General & Administrative 3,825 3,005
Systems Development 67 200
---------- ----------
Total Expenses 3,892 3,205
---------- ----------
Operating (Loss)/Income (404) 2,819
---------- ----------
Other Income (Expense):
Interest Income 77 669
Interest Expense (337) (372)
Other - Net 56 15
---------- ----------
Total Other Expense (204) 312
---------- ----------
(Loss)/Income Before Income Taxes (608) 3,131
(Benefit)/Provision for Income Taxes (210) 1,260
---------- ----------
Net (Loss)/Income $ (398) $ 1,871
========== ==========
(Loss)/Earnings Per Common Share and
Common Share Equivalents $ (0.05) $ 0.24
========== ==========
Weighted Average Number of Common and
Common Share Equivalents Outstanding 7,777,082 7,909,480
</TABLE>
See accompanying notes to the consolidated financial statements.
<PAGE> 4
<TABLE>
ECC INTERNATIONAL CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In Thousands)
<CAPTION>
(Unaudited) (Audited)
3/31/96 6/30/95
----------- ---------
<S> <C> <C>
ASSETS
Current Assets:
Cash $ 3,372 $ 3,535
Accounts Receivable, Net 10,491 8,778
Costs and Estimated Earnings in Excess
of Billings on Uncompleted Contracts 30,480 39,752
Inventories
Raw Material 8,896 6,897
Work in Process 5,040 1,998
Finished Goods 1,392 1,140
Prepaid Expenses and Other 1,594 1,764
------- -------
Total Current Assets 61,265 63,864
Property, Plant and Equipment - Net 25,212 24,007
Other Assets 2,053 1,868
------- -------
Total Assets $88,530 $89,739
======= =======
Continued...
</TABLE>
<PAGE> 5
<TABLE>
ECC INTERNATIONAL CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (Continued)
(In Thousands)
<CAPTION>
(Unaudited) (Audited)
3/31/96 6/30/95
----------- ---------
<S> <C> <C>
LIABILITIES & STOCKHOLDERS' EQUITY
Current Liabilities:
Temporary Credit Facility $ -- $ 2,534
Current Portion of Long-Term Debt 3,000 3,600
Accounts Payable 9,042 7,197
Accrued Compensation 3,580 4,093
Advances on Long-Term Contracts 2,818 1,395
Accrued Profit Sharing 772 672
Other Accrued Expenses 1,275 3,390
------- -------
Total Current Liabilities 20,487 22,881
------- -------
Deferred Income Taxes 1,569 1,569
------- -------
Long-Term Debt 13,903 16,250
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Commitments and Contingencies
Stockholders' Equity:
Common stock, $.10 par; authorized
20,000,000 shares at 3/31/96 and
6/30/95; reserved for stock options
and other obligations to issue stock,
1,371,975 shares at 3/31/96 and
2,157,528 shares at 6/30/95; issued
and outstanding 7,777,082 shares
at 3/31/96 and 7,657,846 at 6/30/95 778 766
Preferred stock, $.10 par; authorized
1,000,000 shares at 3/31/96 and at
6/30/95; issued and none outstanding
at 3/31/96 and 6/30/95 -- --
Capital in Excess of Par 22,598 21,822
Cumulative Translation Adjustment (59) 45
Retained Earnings 29,254 26,406
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Total Stockholders' Equity 52,571 49,039
------- -------
Total Liabilities & Stockholders' Equity $88,530 $89,739
======= =======
</TABLE>
See accompanying notes to the consolidated financial statements.
<PAGE> 6
<TABLE>
ECC INTERNATIONAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED
MARCH 31, 1996 AND 1995
(In Thousands)
(Unaudited)
<CAPTION>
Nine Months Nine Months
Ended Ended
3/31/96 3/31/95
----------- ------------
<S> <C> <C>
Cash Flows From Operating Activities:
Net Income $ 2,848 $ 4,396
Items Not Requiring Cash:
Depreciation 2,795 2,583
Provision for Doubtful Accounts 63 --
Deferred Income Taxes -- (184)
Changes in Certain Assets and Liabilities:
Accounts Receivable (1,776) (6,747)
Cost and Estimated Earnings in Excess
of Billings on Uncompleted Contracts 9,272 (9,847)
Inventories (5,293) 533
Prepaid Expenses and Other 170 81
Accounts Payable 1,846 3,781
Advances on Long-Term Contracts 1,423 (7)
Accrued Expenses (2,528) 1,706
------- -------
Net Cash Provided By (Used In) Operating Activities 8,820 (3,705)
------- -------
Cash Flows From Investing Activities:
Additions to Property, Plant and Equipment (4,000) (3,445)
Other (290) 80
------- -------
Net Cash Used In Investing Activities (4,290) (3,365)
------- -------
Cash Flows From Financing Activities:
Proceeds From Issuance of Common Stock, Options
Exercised and Warrants, Including Related Tax Benefit 788 5,447
New Borrowings under Term Loan -- 9,000
Repayments under Term Loan (2,250) --
New Borrowings under Revolving Credit Facility, Net (3,231) 10,708
Repayment of Long-Term Debt under Revolving Credit
Agreement and Notes Payable -- (17,943)
------- -------
Net Cash (Used In) Provided By Financing Activities (4,693) 7,212
------- -------
Net (Decrease)/Increase in Cash (163) 142
Cash at Beginning of the Period 3,535 2,600
------- -------
Cash at End of the Period 3,372 2,742
======= =======
Continued...
</TABLE>
<PAGE> 7
<TABLE>
ECC INTERNATIONAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED
MARCH 31, 1996 AND 1995 (Continued)
(In Thousands)
(Unaudited)
<CAPTION>
Nine Months Nine Months
Ended Ended
3/31/96 3/31/95
----------- ------------
<S> <C> <C>
Supplemental Disclosure of Cash Flow Information:
Cash Paid During the Year For:
Interest $1,287 $ 732
Income Taxes $2,766 $ 1,839
</TABLE>
See accompanying notes to the consolidated financial statements.
<PAGE> 8
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
----------------------------------------------------
1. The accompanying statements are unaudited and have been prepared by ECC
pursuant to the rules and regulations of the Securities and Exchange
Commission. The June 30, 1995 balance sheet was derived from audited
financial statements but does not include all disclosures required by
generally accepted accounting principles. In the opinion of management such
consolidated financial statements contain all adjustments, consisting of
only normal recurring adjustments, necessary to present fairly the
consolidated financial position, results of operations and cash flows for
the interim periods presented. The aforementioned consolidated financial
statements have been prepared substantially in conformity with the
accounting principles reflected in the consolidated financial statements
included in the Company's Annual Report on Form 10-K for the fiscal year
ended June 30, 1995.
2. Earnings per share for the three and nine month periods ended March 31,
1996 and 1995 are based on net income divided by the weighted average
number of common share and common share equivalents outstanding.
Common stock equivalents (stock options, warrants and Employee Stock
Purchase Plan) are excluded from the calculation of per share data when
their dilutive effect is not material.
3. During the second quarter of fiscal year 1996, the Company executed an
Amendment to its loan facility increasing the maximum available credit under
the revolving credit portion of the loan facility from $11.0 million to
$15.0 million. The amendment also increased the maximum available credit to
the Company's wholly owned subsidiary, ECC Simulation Limited from $2.0
million to $4.0 million. The original payment terms and covenants of the
loan facility remain in effect.
<PAGE> 9
ECC INTERNATIONAL CORP. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
a) Material Changes in Financial Condition
---------------------------------------
During the nine month period ended March 31, 1996, the Company's principal
sources of cash were receipts on accounts receivable and proceeds from the
exercise of stock options. The principal uses of these and existing funds were
to make payments on the term loan and revolving credit facility and to finance
the increase in inventories as well as acquisitions of property, plant and
equipment.
Costs and estimated earnings in excess of billings on uncompleted contracts
decreased due to significant billings on several of the Company's contracts
which were completed during the second quarter of fiscal year 1996 or were
substantially near completion. Payment on these billings were received during
the third quarter of fiscal year 1996.
Accounts receivable increased due to billings on the Company's large cost
plus incentive fee contract for which payment was received in April, 1996.
Raw material inventory increased primarily due to the continued production
of vending machines for stock in anticipation of future sales orders.
Work in progress inventory increased due to unabsorbed overhead. Overhead
is absorbed based on an annualized projected rate. Management expects that
volume during the remaining fiscal 1996 quarter will support the currently
budgeted overhead rate.
Finished goods inventory increased primarily due to the completion of
vending machines in late March which were not shipped until April, 1996.
The increase in accounts payable of approximately $1.8 million is primarily
the result of material purchases in the vending operation, as well as, raw
material purchase requirements under one of the Company's major contracts.
During the second quarter of fiscal year 1996, the Company executed an
Amendment to its loan facility increasing the maximum available credit under the
revolving credit portion of the loan facility from $11.0 million to $15.0
million. The amendment also increased the maximum available credit to the
Company's wholly owned subsidiary, ECC Simulation Limited from $2.0 million to
$4.0 million. The original payment terms and covenants of the loan facility
remain in effect. The Company is required to make quarterly payments of
principal on the term loan in the amount of $750,000 during fiscal year 1996.
During fiscal year 1996, the Company anticipates spending approximately
$4.5 million to purchase new machinery and equipment, continue refurbishment of
the older areas of the Orlando facility and to make leasehold improvements to
the leased vending and UK facilities.
Due to the continued growth of the UK operation, the Company signed a new
lease in December 1995 for approximately 50,000 square feet near the existing UK
leased facility. Currently, the Company intends to use both facilities. The move
to this new location will be completed by the fourth quarter of fiscal year
1996.
<PAGE> 10
b) Material Changes in Results of Operations
-----------------------------------------
Sales increased for the nine month period ended March 31, 1996 as compared
to the same period ended March 31, 1995. The increase in sales is the result of
increased volume, particularly in the domestic training operation and marginally
in the U.K. operation. The sales volume increase for the training operation is
primarily the result of continued progress on a large cost plus incentive fee
contract and one large fixed price contract. The increase in domestic training
and U.K. sales volume was offset by a decrease in volume in the vending division
during the third quarter of fiscal year 1996 and the substantial completion of
two fixed price type contracts during the first half of fiscal year 1996. This
decrease in sales volume in the vending division resulted in an overall decrease
in sales volume for the three month period ended March 31, 1996 as compared to
the same period ended March 31, 1995.
Gross margin as a percentage of sales decreased for the nine and three
month periods ended March 31, 1996 versus the same periods ended March 31, 1995.
The decrease is largely the result of the Company's change in contract mix in
the domestic training operation. While the Company has experienced an increase
in volume on its' large cost plus type contracts, these contacts generally yield
lower gross margins than the fixed price type. A downward adjustment in gross
margin on the Company 's large cost plus type contract in the third quarter
further reduced gross margin versus the three month period ended March 31, 1995.
Also, adjustments were taken to the gross margin of two fixed price domestic
contracts, which were substantially completed during the first two quarters of
fiscal year 1996. These gross margin adjustments were primarily the result of
protracted acceptance schedules which resulted in higher than previously
anticipated costs.
In addition, the gross margin in the vending division decreased
substantially during the nine and three month periods ended March 31, 1996
versus the same periods ended March 31, 1995. As previously discussed in the
December 31, 1995 Form 10-Q, the vending division continued to experience a
decrease in sales volume during the third quarter of fiscal year 1996 due to a
seasonal slowdown in the vending industry. As a result of the seasonal slowdown
and refinements made to the beverage vending machine to permit dispensing of 20
ounce bottles, contract labor was reduced during the second quarter of fiscal
year 1996. Management expects to increase personnel levels to accommodate
anticipated sales orders of the new bottle vendor during the fourth quarter of
fiscal year 1996. Management also expects the vending division's financial
performance to improve during the fourth quarter of fiscal year 1996.
Selling, general and administrative expenses increased for the nine and
three month periods ended March 31, 1996 compared to the nine and three month
periods ended March 31, 1995. The increase is the result of higher salaries and
advertising costs in the vending division as marketing efforts are expanded, as
well as higher bid and proposal costs of the simulation division in order to
meet increased business opportunities.
Systems development expense decreased for the quarter and nine month period
ended March 31, 1996 versus the quarter and nine month period ended March 31,
1995. The decrease is the result of the reduction of development costs
associated with the new model frozen / refrigerated vending machine which is now
in production.
Interest expense increased for the quarter and nine month period ended
March 31, 1996 versus the quarter and nine month period in the previous fiscal
year. The increase in interest expense is the result of higher borrowings under
the Company's revolving credit agreement during the quarter and nine month
period ended March 31, 1996.
<PAGE> 11
c) Certain Factors That May Affect Future Operating Results
--------------------------------------------------------
The following important factors, among others, could cause actual results
to differ materially from those indicated by forward-looking statements made in
this Quarterly Report on Form 10-Q and presented elsewhere by management from
time to time.
A number of uncertainties exist that could affect the Company's future
operating results, including, without limitation, general economic conditions,
changes in government spending, cancellation of weapons programs, delays in
contract awards, the Company's continued ability to develop and introduce
products in both its training and vending divisions, the introduction of new
products by competitors, pricing practices of competitors, the cost and
availablity of parts and the Company's ability to control costs.
To date, a substantial portion of the Company's revenues are attributable
to long-term contracts with various government agencies. As a result, any factor
adversly affecting procurement of long-term government contracts could have a
material adverse affect on the Company's financial condition and results of
operations.
In addition, any factor adversly affecting the Company's ability to obtain
sales orders for it's vending products may have a material adverse affect on the
Company's financial condition and results of operations.
Because of these and other factors, past financial performance should not
be considered an indication of future performance. The Company's quarterly
operating results may vary significantly, depending on factors such as the
timing of contract awards or seasonality in the vending division. Investors
should not use historical trends to anticipate future results and should be
aware that the trading price of the Company's Common Stock may be subject to
wide fluctuations in response to quarterly variations in operating results and
other factors, including those discussed above.
<PAGE> 12
. PART II. OTHER INFORMATION
ECC INTERNATIONAL CORP.
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
a. Exhibits
--------
Exhibit 10.24 - Form of Director's and Officer's Agreement To
Defend and Indemnify
Exhibit 11 - Schedule of Computation of Earnings Per Share
b. Reports on Form 8-K
-------------------
None.
<PAGE> 13
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ECC INTERNATIONAL CORP.
Date May 10, 1996 /s/ George W. Murphy
------------------------ ---------------------------
George W. Murphy, President
Date May 10 , 1996 /s/ Relland Winand
------------------------ ----------------------------
Relland Winand
Vice President, Finance
<PAGE> 1
Exhibit 10.24
FORM OF AGREEMENT TO DEFEND AND INDEMNIFY
-----------------------------------------
THIS AGREEMENT is made as of _______________, 199__ between
_________________ (the "Indemnified Party") and ECC International Corp. (the
"Corporation").
WHEREAS, the Indemnified Party is currently an officer and/or member of the
Board of Directors of the Corporation; and
WHEREAS, the Indemnified Party may resign as an officer and/ or member of
the Board of Directors if contractual indemnification is not provided; and
WHEREAS, the Corporation desires to retain the valuable services of the
Indemnified Party as an officer and/or member of the Board of Directors; and
WHEREAS, the parties hereto wish to provide for contractual
indemnification;
NOW, THEREFORE, the following is mutually agreed upon and understood:
1. The date of any involuntary removal or voluntary resignation of the
Indemnified Party as an officer and/or member of the Board of Directors of the
Corporation is referred to herein as the "Service Termination Date."
2. To the extent legally permissible, the Corporation shall indemnify the
Indemnified Party if he was or is a party or is threatened to be made a party to
any threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (other than an action by or in the
right of the Corporation) by reason of the fact that he was prior to the Service
Termination Date or is a director, officer, employee or agent of the
Corporation, or was prior to the Service Termination Date or is serving at the
request of the Corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, against
expenses (including attorneys' fees), judgments, fines, and amounts paid in
settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding, whether or not he continues to hold such position at
the time the loss or expense is incurred, and whether or not such action, suit
or proceeding is brought after the Service Termination Date; provided that no
indemnification shall be provided with respect to any claim, issue or matter as
to which the Indemnified Party shall not have acted in good faith and in a
manner he reasonably believed to be in or not opposed to the best interests of
the Corporation, and, with respect to any criminal action or proceeding, as to
which the
<PAGE> 2
Indemnified Party had reasonable cause to believe his conduct was unlawful.
3. To the extent legally permissible, the Corporation shall indemnify the
Indemnified Party if he was or is a party or is threatened to be made a party to
any threatened, pending, or completed derivative action, suit or proceeding,
whether civil, criminal, administrative or investigative, brought by or in the
right of the Corporation to procure a judgment in its favor by reason of the
fact that he is or was prior to the Service Termination Date a director,
officer, employee or agent of the Corporation, or is or was prior to the Service
Termination Date serving at the request of the Corporation as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise, against expenses (including attorneys' fees) actually
and reasonably incurred by him in connection with the defense or settlement of
such action, suit or proceeding whether or not he continues to hold such
position at the time the expense is incurred, and whether or not such action,
suit, or proceeding is brought after the Service Termination Date; provided that
no indemnification shall be provided with respect to (1) any claim, issue or
matter as to which the Indemnified Party shall not have acted in good faith and
in a manner he reasonably believed to be in or not opposed to the best interests
of the Corporation, or (2) any claim, issue or matter as to which the
Indemnified Party shall have been adjudged to be liable for negligence or
misconduct in the performance of his duty to the Corporation, unless and only to
the extent that, the Delaware Court of Chancery or the court in which such
action, suit or proceeding was brought shall determine, upon application, that
in view of all the circumstances the Indemnified Party is fairly and reasonably
entitled to indemnity for such expenses as the court deems proper.
4. For purposes of this Agreement, references to "other enterprises" shall
include employee benefit plans; references to "fines" shall include any excise
taxes assessed on a person with respect to an employee benefit plan; references
to "serving at the request of the Corporation" shall include any service as a
director, officer, employee or agent of the Corporation which imposes duties on,
or involves services by, such director, officer, employee, or agent with respect
to an employee benefit plan, its participants, or beneficiaries; and a person
who acted in good faith and in a manner he reasonably believed to be in the
interest of the participants and beneficiaries of an employee benefit plan shall
be deemed to have acted in a manner "not opposed to the best interests of the
Corporation" as referred to herein.
5. If any claim, action, suit or proceeding in which the Indemnified Party
becomes involved as aforesaid is disposed of, on
-2-
<PAGE> 3
the merits or otherwise, without the disposition being adverse to the
Indemnified Party; without an adjudication that the Indemnified Party was
negligent or guilty of misconduct in the performance of his duty to the
Corporation; without a plea of guilty or of NOLO CONTENDERE by the Indemnified
Party; and without an adjudication that the Indemnified Party did not act in
good faith and in a manner he reasonably believed to be in or not opposed to the
best interests of the Corporation (and, with respect to any criminal action or
proceeding, without an adjudication that the Indemnified Party had reasonable
cause to believe his conduct was unlawful); the Indemnified Party shall be
considered for the purposes hereof to have been wholly successful with respect
thereto and shall be entitled to indemnification hereunder as of right.
6. In all cases other than those with respect to which the Indemnified
Party is entitled to indemnification as of right under paragraph 5 hereof, any
indemnification hereunder shall be made as of right unless after investigation
(a) by the Board of Directors by a majority vote of a quorum consisting of
directors who are not parties to such action, suit or proceeding, or (b) if such
a quorum is not obtainable or, even if obtainable, a quorum of disinterested
directors so directs, by written opinion of independent legal counsel, it shall
be determined by clear and convincing evidence that the Indemnified Party did
not act in good faith and in a manner reasonably believed to be in or not
opposed to the best interests of the Corporation (and with respect to any
criminal action or proceeding, that the Indemnified Party had reasonable cause
to believe his conduct was unlawful), except that in any case, no
indemnification shall be provided if the Indemnified Party shall have been
adjudged to be liable for negligence or misconduct in the performance of his
duty to the Corporation unless, as specified in paragraph 3 hereof, the Delaware
Court of Chancery or the court in which such action, suit, or proceeding was
brought shall have determined that the Indemnified Party is fairly and
reasonably entitled to indemnity.
7. The termination of any action, suit or proceeding by judgement, order,
settlement, conviction, consent decree or upon a plea of NOLO CONTENDERE or its
equivalent, shall not, of itself, create a presumption that the Indemnified
Party did not act in good faith and in a manner which he reasonably believed to
be in or not opposed to the best interests of the Corporation, or with respect
to any criminal action or proceeding, that the Indemnified Party had reasonable
cause to believe that his conduct was unlawful.
8. Expenses incurred by the Indemnified Party in defending a civil or
criminal action, suit or proceeding for which he may be or is entitled to be
indemnified pursuant to paragraphs 2, 3, 4, 5
-3-
<PAGE> 4
and 6 hereof shall be paid by the Corporation in advance of the final
disposition of such action, suit or proceeding upon receipt of an undertaking by
or on behalf of the Indemnified Party to repay such amount if it shall
ultimately be determined that he is not entitled to indemnification by the
Corporation. Such undertaking may be accepted without reference to the financial
ability of the Indemnified Party to make repayment.
9. The rights of indemnification provided in this Agreement shall be in
addition to any rights to which the Indemnified Party may otherwise be entitled
by other agreements or as a matter of law including, without limitation, under
the Certificate of Incorporation or by By-Laws of the Corporation, and shall
inure to the benefit of the heirs, executors and administrators of the
Indemnified Party.
10. The rights of indemnification provided hereby shall be in addition to
and shall not be affected by the existence of any directors' and officers'
liability insurance policy which exists as of the date of this Agreement or as
of the date a claim is made under this Agreement; provided, however, that to the
extent that any claim made under this Agreement is covered by a directors' and
officers' liability insurance policy, the Corporation will only provide coverage
for such a claim under this Agreement after the full coverage under any
applicable directors' and officers' insurance policies is exhausted or coverage
thereunder otherwise becomes unavailable.
11. The Indemnified Party, upon learning of any claim, action, suit or
proceeding for which a claim will be made by the Indemnified Party under this
Agreement, shall notify the Corporation in writing within a reasonable time
after he first obtains knowledge of such claim, action, suit or proceeding. Upon
receiving such notice, the Corporation may at its election, take control of the
defense of such claim, action, suit or proceeding.
12. All notices required to be given to the Corporation under this
Agreement shall be delivered to it in care of:
Executive Vice President
ECC International Corp.
175 Strafford Avenue, Suite 116
Strafford, PA 19087-3377
with a copy to:
Martin S. Kaplan, Esq.
Hale and Dorr
60 State Street
Boston, MA 02109
-4-
<PAGE> 5
13. All notices required to be given to the Indemnified Party under this
Agreement shall be delivered to the Indemnified Party at the following address:
14. This Agreement shall not be construed against the party preparing it,
but shall be construed as if both parties jointly prepare this Agreement and any
uncertainty and ambiguity shall not, on that ground, be interpreted against any
one party.
15. The Corporation and the Indemnified Party each represent and warrant
that the terms of this Agreement are fully understood and voluntarily accepted.
16. Both parties hereto expressly retain the right from time to time to
seek to amend the terms of this Agreement, provided that any such amendment is
accomplished in writing and executed by both parties hereto.
17. In consideration of obtaining this Agreement the Indemnified Party
hereby agrees not to exercise his right under the Corporation's By-Laws to
voluntarily resign as a director of the Corporation unless such resignation is
accepted by a majority vote of the remaining members of the Corporation's Board
of Directors.
18. This Agreement will expire six years from and after the Service
Termination Date, except that it will continue in effect with respect to any
claim, action, suit or proceeding pending on such expiration date until the
final resolution or disposition thereof.
19. This Agreement (i) constitutes the entire agreement, and supersedes all
other prior agreements and understandings, both written and oral, among the
parties, or any of them, with respect to the subject matter hereof, and (ii)
shall be binding upon the successors and assigns of the Corporation.
20. If any term, provisions, covenant or restriction of this Agreement is
held by a court of competent jurisdiction to be invalid, void or unenforceable,
the remainder of the terms, provisions, covenants and restrictions of this
Agreement shall remain in full force and effect and shall in no way be affected,
impaired or invalidated.
21. This Agreement may be executed in counterparts, each of which shall be
deemed to be an original, but all of which together shall constitute one and the
same agreement.
-5-
<PAGE> 6
22. This Agreement shall be governed by and construed in accordance with
the laws of the State of Delaware.
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the
date first above written.
-----------------------------------------
ECC International Corp.
By: -------------------------------------
-6-
<PAGE> 1
Exhibit 11
<TABLE>
SCHEDULE OF COMPUTATION OF EARNINGS PER SHARE
(In Thousands, Except Per Share Data)
(Unaudited)
<CAPTION>
Nine Months Nine Months
Ended Ended
March 31 March 31
1996 1995
<S> <C> <C>
Primary
- -------
Net Income $ 2,848 $ 4,396
========== ==========
Weighted Average Shares Outstanding 7,756,869 7,584,694
Incremental Shares from Assumed
Exercise of Stock Options 151,895 327,795
---------- ----------
Total Shares 7,908,764 7,912,489
========== ==========
Primary Per Share Amounts
- -------------------------
Net Income $ 0.36 $ 0.56
========== ==========
Fully Diluted *
- -------------
Net Income $ 2,848 $ 4,396
========== ==========
Weighted Average Shares Outstanding 7,756,869 7,584,694
Incremental Shares from Assumed
Exercise of Stock Options 151,895 298,399
---------- ----------
Total Shares 7,908,764 7,883,093
========== ==========
Fully Diluted Per Share Amounts
- -------------------------------
Net Income $ 0.36 $ 0.56
========== ==========
<FN>
* Fully diluted earnings per share calculation is presented in accordance with
Regulation S-K item 601(b)(11) although not required by footnote 2 to
paragraph 14 of Accounting Principles Board Opinion No. 15 because it results
in dilution of less than 3%.
</TABLE>
<PAGE> 2
Exhibit 11
<TABLE>
SCHEDULE OF COMPUTATION OF EARNINGS PER SHARE
(In Thousands, Except Per Share Data)
(Unaudited)
<CAPTION>
Three Months Three Months
Ended Ended
March 31 March 31
1996 1995
<S> <C> <C>
Primary
- -------
Net (Loss)/Income $ (398) $ 1,871
========== ==========
Weighted Average Shares Outstanding 7,777,082 7,630,770
Incremental Shares from Assumed
Exercise of Stock Options - 278,710
---------- ----------
Total Shares 7,777,082 7,909,480
========== ==========
Primary Per Share Amounts
- -------------------------
Net (Loss)/Income $ (0.05) $ 0.24
========== ==========
Fully Diluted *
- -------------
Net (Loss)/Income $ (398) $ 1,871
========== ==========
Weighted Average Shares Outstanding 7,777,082 7,630,770
Incremental Shares from Assumed
Exercise of Stock Options - 253,850
---------- ----------
Total Shares 7,777,082 7,884,620
========== ==========
Fully Diluted Per Share Amounts
- -------------------------------
Net (Loss)/Income $ (0.05) $ 0.24
========== ==========
<FN>
* Fully diluted earnings per share calculation is presented in accordance with
Regulation S-K item 601(b)(11) although not required by footnote 2 to
paragraph 14 of Accounting Principles Board Opinion No. 15 because it results
in dilution of less than 3%.
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-START> JUL-01-1995
<PERIOD-END> MAR-31-1996
<CASH> 3,372
<SECURITIES> 0
<RECEIVABLES> 10,604
<ALLOWANCES> 113
<INVENTORY> 15,328
<CURRENT-ASSETS> 61,265
<PP&E> 55,467
<DEPRECIATION> 30,255
<TOTAL-ASSETS> 88,530
<CURRENT-LIABILITIES> 20,487
<BONDS> 13,903
<COMMON> 778
0
0
<OTHER-SE> 51,793
<TOTAL-LIABILITY-AND-EQUITY> 88,530
<SALES> 85,976
<TOTAL-REVENUES> 85,976
<CGS> 69,724
<TOTAL-COSTS> 69,724
<OTHER-EXPENSES> 325
<LOSS-PROVISION> 63
<INTEREST-EXPENSE> 1,188
<INCOME-PRETAX> 4,341
<INCOME-TAX> 1,493
<INCOME-CONTINUING> 2,848
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,848
<EPS-PRIMARY> .36
<EPS-DILUTED> .36
</TABLE>
