<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)
[ ]
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
PAYMENT OF FILING FEE (CHECK THE APPROPRIATE BOX):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) 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.
October 27, 1997
Dear Fellow Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders of
ECC International Corp. to be held on Thursday, December 4, 1997, 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
approval of the Company's 1997 Director Equity Compensation Plan, and (iii) the
ratification of the selection of Coopers & Lybrand L.L.P. as the Company's
independent public accountants for the current fiscal year.
Your vote is important, regardless of the number of shares you own. We urge
you to sign, date and mail the enclosed proxy card 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 the 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 4, 1997 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 approve the Company's 1997 Director Equity Compensation Plan.
3. To ratify the selection of Coopers & Lybrand L.L.P. as the
Company's independent public accountants for the current year.
4. 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 24, 1997 will be entitled to notice of
and to vote at the Meeting and any adjournments thereof. A list of stockholders
is open for examination by 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
October 27, 1997
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 4, 1997
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 4, 1997, at 10:00 a.m., Eastern
Standard Time (the "Meeting"), and all adjournments 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 to approve the Company's 1997 Director Equity Compensation Plan (the
"Plan") and in favor of the proposal regarding the selection of accountants.
Stockholders giving proxies may revoke them by written request to the Secretary
of the Corporation at any time prior to their being voted.
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, 1997 ARE EXPECTED
TO BE FIRST MAILED TO THE COMPANY'S STOCKHOLDERS ON OR ABOUT NOVEMBER 5, 1997.
THE COMPANY WILL, UPON WRITTEN REQUEST OF ANY STOCKHOLDER, FURNISH WITHOUT
CHARGE A COPY OF ITS ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED JUNE 30,
1997, AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION, WITHOUT EXHIBITS.
PLEASE ADDRESS ALL SUCH REQUESTS TO THE COMPANY, 175 STRAFFORD AVENUE, SUITE
116, WAYNE, PENNSYLVANIA, 19087-3377, ATTENTION: SECRETARY. EXHIBITS WILL BE
PROVIDED UPON WRITTEN REQUEST AND PAYMENT OF AN APPROPRIATE PROCESSING FEE.
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 24, 1997 (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 8,151,790 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. Pursuant to the Company's stockholder rights
plan, each outstanding share of Common Stock has attached to it one Preferred
Stock Purchase Right (the "Rights"), 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. 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, as amended.
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
<PAGE> 5
Stock present in person or represented by proxy (including shares which abstain
or do not vote with respect to one or more of the matters presented for
stockholder approval) will be counted for purposes of determining whether a
quorum exists at the Meeting.
The affirmative vote of the holders of a plurality of the shares of Common
Stock present or represented at the Meeting is required for election of
directors. The affirmative vote of the holders of a majority of the shares of
Common Stock present or represented at the Meeting is required for approval of
the Plan and the ratification of the selection of Coopers & Lybrand L.L.P. as
the Company's independent auditors for the current fiscal year.
Shares which abstain from voting as to a particular matter and shares held
in "street name" by brokers or nominees who indicate on their proxies that they
do not have discretionary authority to vote such shares as to a particular
matter will not be counted as votes in favor of such matter and will also not be
counted as votes cast or shares voting on such matter. Accordingly, abstentions
and "broker non-votes" will have no effect on the voting on a matter that
requires the affirmative vote of a certain percentage of the votes cast or
shares voting on a 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
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information, as of July 31, 1997,
with respect to the beneficial ownership of Common Stock by (i) each person
known by the Company to beneficially own more than five percent of the
outstanding shares of Common Stock, (ii) each director and nominee for director,
(iii) each executive officer named in the Summary Compensation Table under the
heading "Executive Compensation" below and (iv) all directors and executive
officers of the Company as a group:
<TABLE>
<CAPTION>
SHARES OF PERCENTAGE OF
NAME OF COMMON STOCK OUTSTANDING SHARES
BENEFICIAL OWNER BENEFICIALLY OWNED(1) OF COMMON STOCK(2)
---------------- -------------------- -----------------
<S> <C> <C>
5% STOCKHOLDERS:
Heartland Advisors, Inc.
790 North Milwaukee Street
Milwaukee, WI 53202..................... 2,196,550(3) 27.3%
Dimensional Fund Advisors, Inc.
1299 Ocean Avenue, 11th Floor
Santa Monica, CA 90401.................. 520,214(4) 6.5%
T. Rowe Price Associates, Inc.
100 East Pratt Street
Baltimore, MD 21202..................... 501,500(5) 6.2%
Travelers Group Inc.
388 Greenwich Street
New York, NY 10013...................... 421,436(6) 5.2%
DIRECTORS AND EXECUTIVE OFFICERS:
Bruce A. Beda............................. 0 *
Julian Demora............................. 325,000(7) 4.0%
Ajit W. Hirani............................ 35,424(8) *
Martin S. Kaplan.......................... 57,570(9) *
Jesse Krasnow............................. 59,999(10) *
Thomas E. McGrath......................... 50,000(9) *
Merrill A. McPeak......................... 10,000(11) *
George W. Murphy.......................... 192,027(12) 2.4%
Patrick M. Donohue........................ 22,232(13) *
James A. Ferguson......................... 21,021(14) *
Jerry D. Robbins.......................... 17,481(15) *
All directors and executive officers
as a group (13 persons)................. 818,733(16) 9.9%
</TABLE>
- ---------------
* Percentage is less than 1% of the total number of outstanding shares of
Common Stock.
(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,
1997. 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.
3
<PAGE> 7
(2) For purposes of this table, the number of outstanding shares of Common
Stock 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, 1997.
(3) On September 10, 1997, Heartland Advisors, Inc. filed a Schedule 13G
pursuant to Section 13 of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), and the rules promulgated thereunder reporting its
beneficial ownership of shares of Common Stock as of September 5, 1997. The
foregoing information is derived from such Schedule 13G.
(4) 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 520,214 shares of Common Stock as of June 30, 1997, 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.
(5) 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 as of
July 31, 1997, 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.
(6) On February 14, 1997, Travelers Group Inc. filed a Schedule 13G pursuant to
Section 13 of the Exchange Act and the rules promulgated thereunder
reporting its beneficial ownership of shares of Common Stock as of February
13, 1997. Smith Barney Mutual Funds Management Inc., a wholly owned
subsidiary of Smith Barney Holdings Inc. reported beneficial ownership of
420,800 shares of Common Stock. Smith Barney Holdings Inc. disclaims
beneficial ownership of all such shares. Smith Barney Holdings Inc., a
wholly owned subsidiary of Travelers Group Inc. reported beneficial
ownership of 421,436 shares of Common Stock. Travelers Group Inc. disclaims
beneficial ownership of all shares held by Smith Barney Holdings Inc. and
Smith Barney Mutual Funds Management Inc.
(7) 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, 1997.
(8) Includes 26,000 shares issuable upon exercise of outstanding stock options
exercisable within 60 days after July 31, 1997.
(9) Includes 32,500 shares issuable upon exercise of outstanding stock options
exercisable within 60 days after July 31, 1997.
(10) Includes 7,500 shares which are held in trust for the benefit of Mr.
Krasnow's three children.
(11) Consists of 10,000 shares issuable upon exercise of outstanding stock
options exercisable within 60 days after July 31, 1997.
(12) Includes 75,000 shares issuable upon exercise of outstanding stock options
exercisable within 60 days after July 31, 1997.
(13) Includes 17,000 shares issuable upon exercise of outstanding stock options
exercisable within 60 days after July 31, 1997.
(14) Includes 15,000 shares issuable upon exercise of outstanding stock options
exercisable within 60 days after July 31, 1997.
(15) Includes 11,000 shares issuable upon exercise of outstanding stock options
exercisable within 60 days after July 31, 1997.
(16) Includes the shares described in notes 7-15 above and an additional 19,368
shares issuable upon exercise of outstanding stock options exercisable
within 60 days after July 31, 1997.
4
<PAGE> 8
ELECTION OF DIRECTORS
The persons named in the enclosed proxy card (George W. Murphy and Martin
S. Kaplan) 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 at 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, 1997, appears under "Stock Ownership of Certain
Beneficial Owners and Management."
BRUCE A. BEDA, age 56, became a director in 1997. Mr. Beda has been Chief
Executive Officer of Orion Partners, LLC, a private investment and consulting
company, since February 1995. Previously, he was Chief Financial Officer at
VentureDynes Ltd., a multi-divisional manufacturing company. Mr. Beda serves on
the Boards of Directors of Stifel Financial Corp. and Rexworks Inc.
JULIAN DEMORA, age 71, became a director in 1992. Mr. Demora is President
of the construction and development company, Key Realty and Development, Inc.
AJIT W. HIRANI, age 50, 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 58, became a director in 1969. Mr. Kaplan is a Senior
Partner in the law firm of Hale and Dorr LLP, counsel to the Company.
JESSE KRASNOW, age 48, became a director in 1976. Mr. Krasnow is a Partner
in the private investment firm of Lefferts/Fore Associates.
THOMAS E. MCGRATH, age 53, became a director in 1983. Mr. McGrath is a
Managing Director of Citicorp Securities, Inc.
MERRILL A. MCPEAK, age 62, 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 Praegitzer
Industries, Inc., Tektronix, Inc., Thrustmaster, Inc. and Trans World Airlines,
Inc.
GEORGE W. MURPHY, age 61, has been President and Chief Executive Officer of
the Company since 1970. Mr. Murphy became a director in 1973. Mr. Murphy has
announced his intention to retire from his management positions no later than
the end of the current fiscal year to pursue personal interests. The Company has
announced that it will retain an executive search firm to help identify and
select a new Chief Executive Officer.
5
<PAGE> 9
BOARD AND COMMITTEE MEETINGS
During the fiscal year ended June 30, 1997, the Board held six meetings.
Each 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 he respectively served.
The Company has an Audit Committee, a Compensation Committee and a Stock Option
Committee. The Company does not have a Nominating Committee.
The principal functions of the Audit Committee are to make recommendations
to the Board regarding the appointment of the Company's independent public
accountants, review and approve any major changes in accounting policy, review
the arrangements for, and the scope and results of, the independent audit,
review and approve the independent accountants' proposed fees for audit and
non-audit services, and review the Company's policies and procedures for
compliance with disclosure requirements with respect to conflicts of interest
and for prevention of unethical, questionable or illegal payments. Messrs.
Krasnow and McGrath, who compose the Audit Committee, both attended the one
meeting of that Committee held during the 1997 fiscal year.
The principal function of the Compensation Committee is to advise and guide
the Board in determining executive officer compensation. Messrs. Kaplan, Krasnow
and McGrath, who compose the Compensation Committee, each attended the one
meeting of that Committee held during the 1997 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 both attended the one meeting of that Committee held during the 1997
fiscal year. On May 22, 1997, the Board appointed Messrs. Demora and Krasnow to
the Stock Option Committee, replacing Messrs. Kaplan and McGrath.
DIRECTORS' COMPENSATION
All of the directors are reimbursed for expenses incurred in connection
with their attendance at each Board and committee meeting. Each non-employee
director is paid annual fees of $20,000 plus $1,000 for each Board and committee
meeting attended. In addition, the Company has adopted, subject to stockholder
approval at the Meeting, the 1997 Director Equity Compensation Plan which
provides that one-half of the annual fees payable to each director shall be paid
in the form of unrestricted shares of Common Stock. See "Approval of the 1997
Director Equity Compensation Plan."
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Based solely on its review of copies of reports filed by reporting persons
of the Company pursuant to Section 16(a) of 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.
6
<PAGE> 10
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION
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, 1997 who were serving
as executive officers on June 30, 1997 (the "Named Executive Officers"):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
------------
AWARDS
ANNUAL ------------
COMPENSATION SECURITIES
NAME AND ----------------- UNDERLYING ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS OPTIONS COMPENSATION(1)
------------------ ---- -------- ------- ------------ ---------------
<S> <C> <C> <C> <C> <C>
George W. Murphy........................ 1997 $324,567 -- -- $40,649
President and Chief 1996 312,423 $45,000 -- 46,924
Executive Officer 1995 297,873 60,000 75,000 49,858
Ajit W. Hirani(2)....................... 1997 242,615 -- -- 29,943
Vice President, General 1996 232,308 35,000 10,000 30,321
Manager of Training Systems Division 1995 195,059 45,000 40,000 29,651
James M. Ferguson(2).................... 1997 200,346 -- -- 24,657
Vice President, New Business 1996 196,193 -- -- 40,225
Development -- ECC Vending Corp. 1995 188,739 25,000 15,000 39,707
Patrick M. Donohue...................... 1997 189,808 -- -- 29,636
Vice President, 1996 184,731 20,000 5,000 34,540
Marketing 1995 178,151 25,000 12,000 31,721
Jerry D. Robbins(2)..................... 1997 178,770 -- -- 10,822
Vice President, Manufacturing 1996 172,689 -- 5,000 26,175
-- ECC Vending Corp. 1995 164,525 30,000 15,000 23,847
</TABLE>
- ---------------
(1) Includes the following: (a) profit sharing contributions by the Company in
1997 for Messrs. Murphy, Hirani and Donohue of $7,990 each; (b) the
Company's contributions under the Executive Savings and Investment Plan in
1997 for Messrs. Murphy, Hirani, Ferguson, Donohue and Robbins of $16,631,
$12,493, $9,016, $9,441 and $8,045, respectively; (c) the portion of the
premium paid by the Company with respect to split-dollar executive deferred
compensation insurance program in 1997 for Messrs. Murphy, Hirani, Ferguson,
Donohue and Robbins of $1,712, $472, $1,058, $860 and $296, respectively;
(d) the taxable portion of long-term disability premiums paid by the Company
in 1997 for Messrs. Murphy, Hirani, Ferguson, Donohue, and Robbins of
$7,541, $2,880, $4,884, $4,416 and $2,220, respectively; (e) the taxable
portion of group term life insurance paid by the Company in 1997 for Messrs.
Murphy, Hirani, Ferguson, Donohue and Robbins of $1,053, $261, $1,053, $675
and $261, respectively; and (f) the Company's contribution related to
executive automobiles in 1997 for Messrs. Murphy, Hirani, Ferguson and
Donohue of $5,722, $5,847, $8,646 and $6,254, respectively.
(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.
7
<PAGE> 11
OPTION GRANTS
The Company granted no stock options and no stock appreciation rights to
the Named Executive Officers during the fiscal year ended June 30, 1997.
OPTION EXERCISES AND YEAR-END VALUES
The following table sets forth certain information concerning the exercise
of stock options during the fiscal year ended June 30, 1997 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, 1997:
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING
SHARES UNEXERCISED OPTIONS
ACQUIRED VALUE AT FISCAL YEAR-END(2)
NAME ON EXERCISE REALIZED(1) EXERCISABLE/UNEXERCISABLE
---- ----------- ----------- -------------------------
<S> <C> <C> <C>
George W. Murphy............. 29,125 $ 167,500 75,000 / 0
Ajit W. Hirani............... -- -- 26,000 / 24,000
James M. Ferguson............ -- -- 15,000 / 0
Patrick M. Donohue........... -- -- 17,000 / 0
Jerry D. Robbins............. -- -- 11,000 / 9,000
</TABLE>
- ---------------
(1) Represents the difference between the exercise price and the fair market
value of the Common Stock on the date of exercise.
(2) As of June 30, 1997, the Named Executive Officers held no unexercised
in-the-money options.
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 the Company's financial performance, business strategies,
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.
8
<PAGE> 12
Executive Compensation Program
The Board, with guidance and input from the Compensation Committee,
approves the executive compensation program on an annual basis, including
specified levels of compensation for all executive officers. The Company's
executive compensation program has been designed to implement the objectives
described above and composes the following fundamental elements:
- a base salary that is determined by individual contributions and
sustained performance.
- 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.
- 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 at the
beginning of each fiscal year. In determining salary adjustments, the Board
considers individual performance and contributions to the Company as well as the
recommendations of management. In fiscal 1997, 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. The Board
did not award any bonuses to the Company's executive officers, including the
Chief Executive Officer, for fiscal 1997. The Board believed that bonuses were
inappropriate given the Company's performance in 1997. 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.
9
<PAGE> 13
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. The Company
granted no stock options to executive officers, including the Chief Executive
Officer, in fiscal 1997. See "Executive Compensation -- Option Grants."
Chief Executive Officer Compensation. The Board evaluates the performance
of the Chief Executive Officer on an annual basis. The assessment of the Chief
Executive Officer is based on a number of factors, including the following:
achievement of short- and long-term financial and strategic targets and
objectives, 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 1997 fiscal year was increased by $12,144 over his base salary for the 1996
fiscal year, based upon a consideration of the factors discussed above.
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
10
<PAGE> 14
STOCK PERFORMANCE GRAPH
The following graph compares cumulative stockholder return on the Company's
Common Stock with the cumulative total return for (i) the Russell 2000 and (ii)
a peer group index determined by the Company for the period from June 30, 1992
through June 30, 1997. The peer group index consists of EDO Corporation, Gencorp
Inc., Hexcel Corporation, Sparton Corporation, TransTechnology Corporation,
United Industrial Corporation and Wyman Gordon Co.
COMPARATIVE FIVE-YEAR TOTAL RETURNS(1)
ECC INTERNATIONAL CORP., RUSSELL 2000, PEER GROUP
(PERFORMANCE THROUGH JUNE 30, 1997)
<TABLE>
<CAPTION>
MEASUREMENT PERIOD
(FISCAL YEAR COVERED) ECC RUSSELL 2000 PEER GROUP
<S> <C> <C> <C>
1992 100.00 100.00 100.00
1993 95.00 125.96 102.10
1994 520.00 131.51 87.37
1995 445.00 157.90 105.98
1996 365.00 195.62 164.67
1997 210.00 227.56 234.52
</TABLE>
- ---------------
(1) Assumes $100 invested at the close of trading on the last trading day
preceding the first day of the fifth preceding fiscal year in the Company's
Common Stock, Russell 2000 and Peer Group. Cumulative total return assumes
reinvestment of dividends.
11
<PAGE> 15
APPROVAL OF THE 1997 DIRECTOR EQUITY COMPENSATION PLAN
SUMMARY OF THE PLAN
The following summary of the Company's 1997 Director Equity Compensation
Plan (the "Plan") is qualified in its entirety by reference to the Plan, a copy
of which may be obtained by making a written request to the Secretary of the
Company.
The Plan is designed to provide the members of the Company's Board of
Directors (the "Directors") with unrestricted shares ("Unrestricted Shares") of
the Company's Common Stock in lieu of 50% of the otherwise payable directors'
fees. The Plan covers an aggregate of 75,000 shares of Common Stock, subject to
adjustment as provided in the Plan, which shares shall be issued in accordance
with the provisions of the Plan. On each date that directors' fees are otherwise
payable by the Company to the Directors, each Director shall receive, in lieu of
50% of his directors' fees payable on such date, a number of Unrestricted Shares
that is equal in value to such foregone directors' fees. Such Unrestricted
Shares shall be paid to the Directors at the same time the directors' fees would
otherwise have been paid. Currently, each non-employee director is paid annual
fees of $20,000 plus $1,000 for each Board and committee meeting attended. See
"Election of Directors -- Directors' Compensation."
The Plan was adopted by the Board on July 31, 1997 and the issuance of
Unrestricted Shares thereunder is subject to approval of the Plan by the
stockholders of the Company. The Plan will be administered by the Board of
Directors of the Company, which shall have authority to adopt, amend and repeal
such provisions of the Plan as it shall deem advisable. All decisions by the
Board shall be made in its sole discretion and shall be final and binding on all
persons having or claiming any interest in the Plan. No Director shall be liable
for any action or determination relating to or under the Plan made in good
faith.
FEDERAL INCOME TAX CONSEQUENCES
Directors will recognize ordinary income, for the year in which the
Unrestricted Shares are granted, in an amount equal to the fair market value at
the time the Unrestricted Shares are granted. The recipient will have a basis in
the Unrestricted Shares equal to the amount of ordinary income recognized. Upon
the disposition of the Unrestricted Shares, the recipient will recognize a
capital gain or loss equal to the difference between the sale price of the
Unrestricted Shares and the basis in the Unrestricted Shares. The gain or loss
will be a long-term gain or loss if the shares are held for more than one year.
Each Director shall pay to the Company, or make provision satisfactory to
the Board for payment of, any taxes required by law to be withheld in connection
with the issuance of Unrestricted Shares to such recipient no later than the
date of the event creating the tax liability. The Board may allow recipients to
satisfy such tax obligations in whole or in part in shares of Common Stock,
including shares retained from the issuance of Unrestricted Shares creating the
tax obligation. The Company may, to the extent permitted by law, deduct any such
tax obligations from any payment of any kind otherwise due to a recipient of
Unrestricted Shares.
BOARD OF DIRECTORS RECOMMENDATION
The Board of Directors recommends approval of the Plan. The affirmative
vote of the holders of a majority of the shares of Common Stock present or
represented at the Meeting is required to approve the Plan.
12
<PAGE> 16
RATIFICATION OF THE APPOINTMENT OF
INDEPENDENT PUBLIC ACCOUNTANTS
The Board has selected Coopers & Lybrand L.L.P. as the Company's
independent public accountants for the fiscal year ending June 30, 1998.
Although stockholder approval of the Board's selection of Coopers & Lybrand
L.L.P. is not required by law, the Board believes that it is advisable to give
stockholders an opportunity to ratify this selection. If this proposal is not
approved at the Meeting, the Board will reconsider its selection of Coopers &
Lybrand L.L.P. It is not expected that any representative of Coopers & Lybrand
L.L.P. will be present at the Meeting.
OTHER MATTERS
The Board knows of no business that will be presented for consideration at
the Meeting other than as stated in the Notice of Meeting. If any other business
properly comes before the Meeting, it is the intention of the persons named in
the enclosed proxy card to vote or otherwise act in accordance with their
judgment on such matters.
The Company will bear the entire cost of preparing, assembling, printing
and mailing this Proxy Statement, the proxy card and any additional materials
that may be furnished 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. The Company reserves the right to retain
outside agencies for the purpose of soliciting proxies. Brokers, custodians and
fiduciaries in whose names stock is held will be requested to forward proxy
soliciting material to the owners of stock held in their names and the Company
will reimburse them for their out-of-pocket expenses in connection with this
service.
DEADLINE FOR SUBMISSION OF STOCKHOLDER PROPOSALS
Proposals of stockholders intended to be presented at next year's Annual
Meeting of Stockholders must be received by the Secretary of the Company at 175
Strafford Avenue, Suite 116, Wayne, Pennsylvania 19087-3377 not later than July
8, 1998, 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: October 27, 1997
13
<PAGE> 17
APPENDIX A
ECC INTERNATIONAL CORP.
1997 DIRECTOR EQUITY COMPENSATION PLAN
1. PURPOSE
The purpose of this 1997 Director Equity Compensation Plan (the
"Plan") of ECC International Corp., a Delaware corporation (the "Company"), is
to encourage ownership in the Company by members of the Company's Board of
Directors (the "Directors") whose continued services are considered essential to
the Company's future progress.
2. ELIGIBILITY
All of the Directors are eligible to receive unrestricted shares
("Unrestricted Shares") of the Company's Common Stock, $.10 par value per share
(the "Common Stock"), under the Plan.
3. ADMINISTRATION
The Plan will be administered by the Board of Directors of the
Company (the "Board"). The Board shall have authority to adopt, amend and repeal
such administrative rules, guidelines and practices relating to the Plan as it
shall deem advisable. The Board may correct any defect, supply any omission or
reconcile any inconsistency in the Plan in the manner and to the extent it shall
deem expedient to carry the Plan into effect and it shall be the sole and final
judge of such expediency. All decisions by the Board shall be made in its sole
discretion and shall be final and binding on all persons having or claiming any
interest in the Plan. No Director shall be liable for any action or
determination relating to or under the Plan made in good faith.
4. STOCK SUBJECT TO THE PLAN
(a) The maximum number of shares which may be issued under
the Plan shall be 75,000 shares of Common Stock, subject to adjustment as
provided in Section 9 of the Plan.
(b) Unrestricted Shares issued under the Plan may consist in
whole or in part of authorized but unissued shares or treasury shares.
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<PAGE> 18
5. UNRESTRICTED SHARES IN LIEU OF DIRECTORS' FEES
On each date that directors' fees are otherwise payable (each, a
"Payment Date") by the Company to the Directors, each Director shall receive, in
lieu of 50% of his directors' fees payable on such date, a number of
Unrestricted Shares that is equal to the quotient of (A) one-half of the dollar
amount of directors' fees then payable by the Company to the Director divided by
(B) the Price Per Share (as defined below), rounded to the nearest whole number.
The "Price Per Share" for a Payment Date shall equal the closing sale price per
share of the Common Stock on the New York Stock Exchange on such Payment Date
(or if no such price is reported on such date such price as reported on the
nearest preceding day) as reported in The Wall Street Journal (Eastern Edition).
If the Common Stock is instead listed on another nationally recognized
securities exchange on such date, the price per share shall equal the reported
closing sale price per share of the Common Stock by such exchange on the such
date or if the Common Stock is traded on the Nasdaq National Market or another
automated quotation system, the last reported sale price per share of the
Company's Common Stock on such system on such date (or if no such price is
reported on such date, such price as reported on the nearest preceding day) as
reported in The Wall Street Journal (Eastern Edition). If the Common Stock is
not listed on an exchange or reported in an automated quotation system, the
value per share on such date shall be determined by the Board of Directors. Such
Unrestricted Shares shall be paid to the Directors at the same time the
directors' fees would otherwise have been paid.
6. EFFECTIVE DATE AND TERMINATION
(a) The Plan was adopted by the Board of Directors on July
31, 1997 and shall become effective immediately upon its approval by the
stockholders of the Company.
(b) Unless sooner terminated in accordance with its terms,
the Plan shall terminate on the day following the date of the Company's annual
meeting of stockholders for the year 2000.
7. WITHHOLDING
Each Director receiving Unrestricted Shares shall pay to the
Company, or make provision satisfactory to the Board for payment of, any taxes
required by law to be withheld in connection therewith no later than the date of
the event creating the tax liability. Such tax obligations may be satisfied in
whole or in part in shares of Common Stock, including shares retained from the
issuance of Unrestricted Shares creating the tax obligation. The value of any
such retained shares shall equal the Price Per Share. The Company may, to the
extent permitted by law, deduct any such tax obligations from any payment of any
kind otherwise due to a Director receiving Unrestricted Shares.
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<PAGE> 19
8. LIMITATION OF RIGHTS
(a) NO RIGHT TO CONTINUE AS A DIRECTOR. Neither the Plan,
nor the issuance of Unrestricted Shares nor any other action taken pursuant to
the Plan shall constitute or be evidence of any agreement or understanding,
express or implied, that the Company will retain the Director in any capacity
for any period of time.
(b) NO RIGHTS AS STOCKHOLDER. No Participant shall have any
rights as a stockholder with respect to any Unrestricted Shares until becoming
the record holder of such shares.
9. CHANGES IN COMMON STOCK
If the outstanding shares of Common Stock are increased,
decreased or exchanged for a different number or kind of shares or other
securities, or if additional shares or new or different shares or other
securities are distributed with respect to such shares of Common Stock or other
securities, through merger, consolidation, sale of all or substantially all of
the assets of the Company, reorganization, recapitalization, reclassification,
stock dividend, stock split, reverse stock split or other distribution with
respect to such shares of Common Stock, or other securities, an appropriate and
proportionate adjustment will be made in the maximum number and kind of shares
reserved for issuance under the Plan.
10. AMENDMENT OF THE PLAN
The Board of Directors may suspend or discontinue the Plan or
revise or amend it in any respect whatsoever.
11. GOVERNING LAW
The Plan and all determinations made and actions taken pursuant
hereto shall be governed by the laws of the State of Delaware.
-16-
<PAGE> 20
ECC INTERNATIONAL CORP.
PROXY FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD DECEMBER 4, 1997
THIS PROXY IS SOLICITED ON BEHALF OF
THE BOARD OF DIRECTORS OF THE COMPANY
AND SHOULD BE RETURNED AS SOON AS POSSIBLE
The undersigned, having received notice of the Annual Meeting of
Stockholders and the Board of Directors' proxy statement therefor, and revoking
all prior proxies, hereby appoint(s) George W. Murphy and Martin S. Kaplan, 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 on Thursday, December 4, 1997 at 10:00 a.m. at the offices
of the Company, 2001 West Oakridge Road, Orlando, Florida, 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.
1. To elect the following nominees for director (except as marked to the
right):
Bruce A. Beda, Julian Demora, Ajit W. Hirani, Martin S. Kaplan, Jesse
Krasnow, Thomas E. McGrath, Merrill A. McPeak and George W. Murphy
[ ] FOR [ ] WITHHOLD AUTHORITY
all nominees listed to the right to vote for all nominees
(except as marked to the contrary) listed to the right
(Instruction: To withhold a vote for an individual nominee, write the
name of such nominee in the space provided below. Your shares will be
voted for the remaining nominees.)
----------
-17-
<PAGE> 21
2. To approve the Company's 1997 Director Equity Compensation Plan.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. To ratify the appointment of Coopers & Lybrand L.L.P. as the Company's
independent public accountants for the current year.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED
BY THE UNDERSIGNED STOCKHOLDER(S). IF NO OTHER INDICATION IS MADE, THE PROXIES
SHALL VOTE "FOR" ALL DIRECTOR NOMINEES AND "FOR" EACH OF PROPOSAL NUMBERS 2 AND
3.
WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING, YOU ARE URGED TO
SIGN, DATE AND MAIL THIS PROXY IN THE ACCOMPANYING ENVELOPE.
A VOTE "FOR" ALL DIRECTOR NOMINEES AND A VOTE "FOR" EACH OF PROPOSAL
NUMBERS 2 AND 3 IS RECOMMENDED BY THE BOARD OF DIRECTORS.
IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER
BUSINESS AS MAY PROPERLY COME BEFORE THE ANNUAL MEETING AND ANY ADJOURNMENT
THEREOF.
MARK HERE MARK HERE IF
FOR ADDRESS [ ] YOU PLAN TO [ ]
CHANGE AND ATTEND THE
NOTE AT LEFT MEETING
-18-
<PAGE> 22
Dated: ______________________, 1997
----------------------------------------------
Signature
----------------------------------------------
Signature if held jointly
NOTE: 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 AUTHORIZED OFFICER, GIVING FULL TITLE. IF A
PARTNERSHIP, PLEASE SIGN IN PARTNERSHIP NAME BY
AUTHORIZED PERSON, GIVING FULL TITLE.
-19-
