<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 Rule 14a-11(c) or Rule 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 15, 1999
Dear Fellow Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders of
ECC International Corp. to be held on Wednesday, November 10, 1999, at 10:00
a.m. at 2001 West Oak Ridge Road in Orlando, Florida. The Board of Directors and
management look forward to personally greeting 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 and (ii) the
ratification of the selection of PricewaterhouseCoopers LLP 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/ JAMES C. GARRETT
JAMES C. GARRETT
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
2001 West Oak Ridge Road in Orlando, Florida, on November 10, 1999 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 PricewaterhouseCoopers LLP as the
Company's independent public accountants for the current year.
3. To transact such other business, if any, as may properly come
before the Meeting and any adjournments thereof.
The Board of Directors has no knowledge of any other business to be
transacted at the Meeting.
Holders of record of the Company's Common Stock, $.10 par value per share,
as of the close of business on October 8, 1999 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, 2001 West Oak Ridge Road, Orlando, Florida 32809-3803 and will be
available at the Meeting.
By Order of the Board of Directors,
/s/ Melissa Van Valkenburgh
Melissa Van Valkenburgh, Secretary
Orlando, Florida
October 15, 1999
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.
2001 WEST OAK RIDGE ROAD
ORLANDO, FL 32809-3803
------------------------
PROXY STATEMENT
FOR THE ANNUAL MEETING OF STOCKHOLDERS TO BE
HELD ON NOVEMBER 10, 1999
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 2001 West Oak Ridge Road in Orlando, Florida, on November
10, 1999 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. Any proxy not specifying the contrary will be voted in the election
of directors for the Board of Directors' nominees 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 Company at any time prior to
their being voted.
THE NOTICE OF MEETING, THIS PROXY STATEMENT, THE ENCLOSED PROXY AND THE
COMPANY'S ANNUAL REPORT FOR THE FISCAL YEAR ENDED JUNE 30, 1999 ARE FIRST BEING
SENT OR GIVEN TO THE COMPANY'S STOCKHOLDERS ON OR ABOUT OCTOBER 20, 1999. 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, 1999, AS
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION, WITHOUT EXHIBITS. PLEASE
ADDRESS ALL SUCH REQUESTS TO THE COMPANY, 2001 WEST OAK RIDGE ROAD, ORLANDO,
FLORIDA 32809-3803, 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 8, 1999 (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 8,414,765 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 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
<PAGE> 5
of Common Stock present or represented at the Meeting is required for the
ratification of the selection of PricewaterhouseCoopers LLP 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 each
matter that requires the affirmative vote of a certain percentage of the votes
cast or shares voting on such 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 August 31, 1999,
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:
Dimensional Fund Advisors, Inc.
1299 Ocean Avenue, 11th Floor
Santa Monica, CA 90401................................ 538,014(3) 6.4%
Franklin Advisors
77 Mariners Island Blvd
San Mateo, CA 94404................................... 772,000(4) 9.2%
Heartland Advisors, Inc.
790 North Milwaukee Street
Milwaukee, WI 53202................................... 935,500(5) 11.1%
Steel Partners II, L.P.
150 E. 52nd Street
21st Floor
New York, NY 10022.................................... 1,242,500(6) 14.8%
DIRECTORS:
Bruce A. Beda........................................... 30,248(7) *
Julian Demora........................................... 415,111(8) 4.9%
James C. Garrett........................................ 250,000(9) 2.9%
James R. Henderson...................................... 0 *
Martin S. Kaplan........................................ 77,997(10) *
Jesse Krasnow........................................... 99,259(11) 1.2%
Warren G. Lichtenstein.................................. 1,242,500(12) 14.8%
Thomas E. McGrath....................................... 74,497(13) *
Merrill A. McPeak....................................... 60,285(14) *
OTHER NAMED EXECUTIVE OFFICERS:
Glenn Andrew............................................ 47,586(15) *
James B. Conyers........................................ 22,592(16) *
Ajit W. Hirani.......................................... 0 *
Jerome Pogorzelski...................................... 32,633(17) *
Melissa Van Valkenburgh................................. 35,000(18) *
Relland M. Winand....................................... 4,120 *
All directors and executive officers as a group (16
persons).............................................. 2,392,003(19) 27.1%
</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
3
<PAGE> 7
such rules, beneficial ownership includes any shares as to which the person
or entity has sole or shared voting power or investment power, and also
includes any shares which the person or entity has the right to acquire
within 60 days after August 31, 1999. Any references in these footnotes to
stock options held by a person shall refer only to stock options currently
exercisable or exercisable within 60 days after August 31, 1999. Unless
otherwise indicated, each person or entity referred to above has sole
voting and investment power with respect to the shares listed. The
inclusion herein of any shares deemed beneficially owned does not
constitute an admission of beneficial ownership of such shares.
(2) For purposes of this table, the number of outstanding shares of Common
Stock is adjusted for each person to include the number of shares of Common
Stock subject to stock options held by such person.
(3) On February 11, 1999, Dimensional Fund Advisors 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.
Dimensional Fund Advisors Inc. reported sole dispositive power over 538,014
and sole voting power over 538,014 of such beneficially owned shares of
Common Stock.
(4) The foregoing information is derived from information provided by Franklin
Advisors to the Company.
(5) On March 10, 1999, Heartland Advisors, 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
28, 1999. Heartland Advisors, Inc. reported sole dispositive power over
935,500, and sole voting power over 219,500, of such beneficially owned
shares of Common Stock.
(6) The foregoing information is derived from information provided by Steel
Partners II, L.P. to the Company.
(7) Includes 10,000 shares subject to outstanding stock options.
(8) Includes 405,111 shares which are held in trust for the benefit of Mr.
Demora and 10,000 shares subject to outstanding stock options.
(9) Includes 200,000 shares subject to outstanding stock options.
(10) Includes 48,070 shares which are held in the Martin S. Kaplan P.C., Pension
Plan and Profit Sharing Trust and 20,000 shares subject to outstanding
stock options.
(11) Includes 20,000 shares which are held in trust for the benefit of Mr.
Krasnow's three children and 79,259 shares held jointly by Mr. Krasnow and
his wife, Maris.
(12) Consists of the shares described in (6). Mr. Lichtenstein is the Chairman
of the Board for Steel Partners L.L.C., the general partner of Steel
Partners II, L.P., and as a result, may be considered the beneficial owner
of the shares held by Steel Partners II, L.P., although Mr. Lichtenstein
disclaims such beneficial ownership, except as to his pecuniary interest
therein.
(13) Includes 20,000 shares subject to outstanding stock options.
(14) Includes 40,000 shares subject to outstanding stock options.
(15) Consists of 47,586 shares subject to outstanding stock options.
(16) Includes 10,675 shares subject to outstanding stock options.
(17) Includes 17,000 shares subject to outstanding stock options.
(18) Consists of 35,000 shares subject to outstanding stock options.
(19) Includes the shares described in notes 7-18 above.
4
<PAGE> 8
ELECTION OF DIRECTORS
The persons named in the enclosed proxy (James C. Garrett and Jesse
Krasnow) will vote to elect as directors of the Company 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 to that effect. Each nominee has consented to
being named in this Proxy Statement and to serve as a director if elected.
Martin S. Kaplan, who has served on the Board of Directors since 1969, will not
be standing for election to the Board this year. After 30 years of dedicated
service to the Company, Mr. Kaplan is stepping down in order to devote more time
to other interests.
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 for at least 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 as of August 31,
1999, appears under "Security Ownership of Certain Beneficial Owners and
Management." There are no family relationships among any of the nominees for
director and executive officers of the Company.
BRUCE A. BEDA, age 58, 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 Iwerks Entertainment.
JULIAN DEMORA, age 73, became a director in 1992. Mr. Demora is President
of the construction and development company, Key Realty and Development, Inc.
JAMES C. GARRETT, age 55, is President and Chief Executive Officer of the
Company. He became a director in June 1998. Previously, Dr. Garrett served as
Vice President and General Manager of the Raytheon E-Systems Communications
Division from 1991 to June 1998.
JAMES R. HENDERSON, age 40, is a nominee for the Board. He has been a
consultant to Steel Partners L.L.C since August 1999. Prior to that, Mr.
Henderson was employed by Aydin Corporation, from June 1996 to June 1999, most
recently as President and Chief Operating Officer. Prior to that, Mr. Henderson
was employed by the Unisys Corporation, from May 1980 until May 1996, most
recently as a Senior Financial Executive. He serves on the board of Tech-Sym
Corporation.
JESSE KRASNOW, age 50, became a director in 1976. Mr. Krasnow is a Partner
in the private investment firm of Lefferts/Fore Associates.
WARREN G. LICHTENSTEIN, age 33, is a nominee for the Board. He has been the
Chairman of the Board for Steel Partners L.L.C., the general partner of Steel
Partners II, L.P., since January 1996. Prior to that Mr. Lichtenstein was
Chairman and a director of Steel Partners Ltd. from 1993 until January 1996. Mr.
Lichtenstein serves on the Boards of Gateway Industries, Inc., Web Financial
Corporation, PLM International, Inc., CPX Corp., Tech-Sym Corporation and
Saratosa Beverage Group, Inc.
5
<PAGE> 9
THOMAS E. MCGRATH, age 55, became a director in 1983. Mr. McGrath is a
Managing Director of Citicorp Securities, Inc.
MERRILL A. MCPEAK, age 64, 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, retiring with the rank of General.
General McPeak has served as President of McPeak & Associates, a consulting
company, since 1994. General McPeak serves on the Boards of Directors of
Praegitzer Industries, Inc., Tektronix, Inc., Thrustmaster, Inc., Trans World
Airlines, Inc., Western Power & Equipment Corp. and E.Com, Inc.
BOARD AND COMMITTEE MEETINGS
During the fiscal year ended June 30, 1999, the Board held five meetings.
Every member of the Board attended at least 75% of the total number of meetings
of the Board and of all committees of the Board on which they respectively
served. The Company has an Audit Committee and a Compensation 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. Beda,
Krasnow and McGrath compose the Audit Committee of the Board. Messrs. Krasnow
and McGrath attended the three meetings of that Committee held during the 1999
fiscal year and Mr. Beda attended two meetings of that committee.
The principal functions of the Compensation Committee are to advise and
guide the Board in determining executive officer compensation and to assist the
Board in the administration of the Company's stock option plans. Messrs. Demora,
Kaplan and McPeak, who compose the Compensation Committee of the Board, each
attended the three meetings of that Committee held during the 1999 fiscal year.
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. The Chairman of the Board, currently General McPeak, is paid
annual fees of $24,000 plus $1,000 for each Board and committee meeting
attended. Pursuant to the Company's 1997 Director Equity Compensation Plan,
one-half of the annual fees payable to each director are paid in the form of
unrestricted shares of Common Stock.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Except as described below, and 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 during fiscal 1999 all filings required to be made by
reporting persons of the Company were timely made in accordance with the
requirements of the Exchange Act.
Mr. Julian Demora, a director of the Company, reported the purchase of
10,000 shares of Common Stock, which occurred on February 22, 1999 and 35,000
shares of Common Stock, which occurred on February 24, 1999, on a Form 4 filed
March 24, 1999 and the purchase of 5,000 shares of Common Stock, which occurred
on May 21, 1999, on a Form 4 filed June 30, 1999.
6
<PAGE> 10
EXECUTIVE COMPENSATION
EMPLOYMENT AGREEMENTS
In June 1998, the Company and Dr. Garrett entered into an employment
agreement providing for the employment of Dr. Garrett as the President and Chief
Executive Officer of the Company for a three-year term ending on June 28, 2001.
The agreement provides for an annual base salary of $250,000 as well as annual
cash bonuses and stock option grants upon the satisfaction of certain
agreed-upon goals and objectives. In addition, Dr. Garrett received a cash bonus
of $50,000 upon the execution of the agreement, as well as reimbursement for
certain relocation expenses. In connection with the agreement, Dr. Garrett was
granted stock options to purchase an aggregate of 50,000 shares of Common Stock
from the Company for an aggregate purchase price of $156,250 consisting of (i)
$10,000 in cash and (ii) a promissory note in the principal amount of $146,250.
The promissory note shall accrue interest at the rate of 5.58% per year and
shall be paid in full on June 15, 2001. Upon the expiration of the agreement
without renewal, Dr. Garrett shall be entitled to receive continuing base salary
and benefits for a period of 12 months. In the event that his employment with
the Company is terminated without cause, for good reason, or after a Change in
Control (each as defined therein), Dr. Garrett shall be entitled to receive
continuing base salary and benefits for the remainder of the term of the
agreement or for a period of 24 months, whichever is greater. Dr. Garrett has
also entered into a non-competition and non-solicitation agreement with the
Company during the term of his employment by the Company and for a period of two
years thereafter.
In August 1999, the employment agreement with Dr. Garrett was amended. In
the event that his employment with the Company is terminated as a result of a
Change in Control, he shall be entitled to receive continuing base salary and
benefits for a period of 48 months. The non-competition and non-solicitation
agreement was also extended to include the 48 months during which he receives
these payments.
Mr. Andrew and Ms. Van Valkenburgh also entered into employment agreements
in August 1999, whereby they shall be entitled to receive continuing base salary
and benefits for up to 24 months in the event of termination of employment due
to a Change in Control (as defined therein). Mr. Andrew and Ms. Van Valkenburgh
also entered into a non-competition and non-solicitation agreement pursuant to
which they are prohibited from competing with the Company or soliciting the
Company's employees during the term of employment and for a period of two years
thereafter.
7
<PAGE> 11
SUMMARY COMPENSATION
The following table sets forth for each of the last three fiscal years
certain information concerning the compensation of the Company's Chief Executive
Officer during the fiscal year ended June 30, 1999 and six other executive
officers of the Company, four of whom were serving as executive officers on June
30, 1999 (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>
James C. Garrett................... 1999 $221,154 $100,000(2) 50,000 $20,580
President and Chief 1998 -- 50,000 250,000 --
Executive Officer 1997 -- -- -- --
Glenn C. Andrew(3)................. 1999 138,462(4) 100,000(2) 47,586 21,467
Executive Vice 1998 -- -- -- --
President 1997 -- -- -- --
Ajit W. Hirani(5).................. 1999 264,193 -- -- 15,345
Former Vice President, 1998 242,740 -- -- 22,507
General Manager of 1997 242,615 -- -- 29,943
Training Systems Division
Melissa A. Van Valkenburgh(6)...... 1999 43,077(7) 25,000(2) 35,000 739
Vice President, Finance 1998 -- -- -- --
Chief Financial Officer 1997 -- -- -- --
Relland M. Winand(8)............... 1999 139,394 50,000(9) -- --
Former Vice President, 1998 133,325 -- -- 5,573
Finance and Treasurer 1997 120,000 18,000 10,000 12,776
James B. Conyers(10)............... 1999 154,731 -- -- 9,268
Former Vice President, 1998 143,845 -- -- 6,447
Business Development Support 1997 142,799 18,000 -- 7,515
Jerome Pogorzelski(11)............. 1999 154,154 20,000(2) -- 8,950
Former Vice President, 1998 142,246 -- -- 6,361
Engineering/Manufacturing 1997 146,799 20,000 -- 7,515
</TABLE>
- ---------------
(1) Includes the following: (a) the Company's contributions under the Executive
Savings and Investment Plan in 1999 for Messrs. Garrett, Andrew, Conyers,
Hirani and Pogorzelski of $10,385, $4,985, $6,963, $4,626 and $6,869,
respectively; (b) car allowance for Messrs. Garrett and Hirani of $3,821
and $7,563, respectively; (c) taxes paid by the Company for Messrs.
Garrett, Andrew and Hirani of $4,066, $4,174 and $3,156, respectively; (d)
the Company's match to the 401K Plan in 1999 for Messrs. Garrett, Andrew,
Conyers, Pogorzelski of $2,308, $2,308, $2,305 and $2,081, respectively,
and for Ms. Van Valkenburgh of $739; and (e) reallocation allowance for Mr.
Andrew of $10,000.
(2) Consists of bonuses earned during fiscal 1999, but paid during fiscal 2000.
(3) Mr. Andrew became Executive Vice President in October 1998.
8
<PAGE> 12
(4) Mr. Andrew's annualized salary is $200,000.
(5) Mr. Hirani served as Vice President and General Manager of the Training
Systems Division until November 1998.
(6) Ms. Van Valkenburgh became Vice President, Finance in March 1999.
(7) Ms. Van Valkenburgh's annualized salary is $160,000.
(8) Mr. Winand served as Vice President, Finance until October 1998.
(9) Consists of a bonus paid to Mr. Winand during fiscal 1999 in connection
with services rendered in the shut-down of the Wayne, Pennsylvania
facility.
(10) Mr. Conyers served as Vice President, Business Development Support until
July 1999.
(11) Mr. Pogorzelski served as Vice President, Engineering/Manufacturing until
September 1999.
OPTION GRANTS
The following table sets forth certain information concerning grants of
stock options made during the fiscal year ended June 30, 1999 to each of the
Named Executive Officers. The Company granted no stock appreciation rights
during the fiscal year ended June 30, 1999.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<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 EXERCISE OPTION TERM(1)
OPTIONS EMPLOYEES IN PRICE PER EXPIRATION --------------------
NAME GRANTED FISCAL YEAR SHARE(2) DATE 5% 10%
---- ---------- ------------- --------- ---------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
Glenn C. Andrew............... 27,586 42% 1.181 10/07/08 $51,854 $124,201
Melissa A. Van Valkenburgh.... 25,000 38% 2.688 03/22/09 $46,994 $112,558
</TABLE>
- ---------------
(1) Amounts reported in these columns represent amounts that may be realized
upon exercise of the options immediately prior to the expiration of their
term assuming the specified compound rates of appreciation (5% and 10%) on
the market value of the Common Stock on the date of option grant over the
term of the options. These numbers are calculated based on rules promulgated
by the Securities and Exchange Commission and do not reflect the Company's
estimate of future stock price growth. Actual gains, if any, on stock option
exercises and Common Stock holdings are dependent on the timing of such
exercise and the future performance of the Common Stock. There can be no
assurance that the rates of appreciation assumed in this table can be
achieved or that the amounts reflected will be received by the option
holder.
(2) All options were granted at fair market value as determined by the Board of
Directors of the Company on the date of the grant.
9
<PAGE> 13
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, 1999 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, 1999. No stock appreciation rights
were exercised during fiscal 1999 by the Named Executive Officers or were
outstanding at year-end.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
SHARES AT FISCAL YEAR-END AT FISCAL YEAR-END(2)
ACQUIRED VALUE ------------------------- -------------------------
NAME ON EXERCISE REALIZED(1) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
---- ----------- ----------- ------------------------- -------------------------
<S> <C> <C> <C> <C>
James C. Garrett................. -- -- 140,000/110,000 $113,750/$89,375
Glenn C. Andrew.................. -- -- 27,586/0 $ 58,620/$0
Ajit W. Hirani................... -- -- 0/0 $ 0/$0
Melissa A. Van Valkenburgh....... -- -- 25,000/0 $ 31,250/$0
Relland M. Winand................ -- -- 0/0 $ 0/$0
James B. Conyers................. -- -- 10,675/0 $ 4,541/$0
Jerome Pogorzelski............... -- -- 17,500/1,500 $ 906/$0
</TABLE>
- ---------------
(1) Represents the difference between the exercise price and the fair market
value of the Common Stock on the date of exercise.
(2) Value based on the last sales price per share ($3.9375) of the Company's
Common Stock on June 30, 1999, as reported on the New York Stock Exchange,
less the exercise price.
REPORT OF THE COMPENSATION COMMITTEE
The Company's Compensation Committee of the Board is responsible for
determining the compensation of, and compensation policies with respect to, the
executive officers of the Company, including the Chief Executive Officer. The
Compensation Committee currently consists of Messrs. Demora, Kaplan and McPeak.
The objectives of the Company's executive compensation program are to:
- Attract and retain key executives of outstanding abilities who are
critical to the long-term success of the Company;
- Align executive compensation with the Company's financial
performance, business strategies, values and objectives;
- 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; and
- Recognize and reward individual performance and responsibility.
10
<PAGE> 14
Executive Compensation Program
The Board, with guidance and input from the Compensation Committee,
approves the executive compensation program on an annual basis, including
specified levels of compensation for all executive officers. The Company's
executive compensation program has been designed to implement the objectives
described above and is composed of 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.
In general, the Compensation Committee intends that the overall total
compensation opportunities provided to the executive officers should reflect
competitive compensation for executives with corresponding responsibilities in
selected comparable companies. To the extent determined to be appropriate, the
Compensation Committee also considers general economic conditions, the Company's
financial performance and the individual's performance in establishing the
compensation opportunities of the executive officers. Total compensation
opportunities for the executive officers are adjusted over time as necessary to
meet this objective. Actual compensation earned by the executive officers
reflects both their contributions to the Company's actual stockholder value
creation and the Company's actual financial performance. While the targeted
total compensation levels for the executive officers are intended to be
competitive, compensation paid in any particular year may be more or less than
the average, depending upon the Company's actual performance.
Base Salary
Base salaries for executive officers are reviewed by the Compensation
Committee and are set by the Board at the beginning of each fiscal year. In
determining salary adjustments, the Board considers individual performance and
contributions to the Company, external competitiveness and the recommendations
of the Compensation Committee and management. The Board did not award
across-the-board salary increases to the Company's executive officers for fiscal
1999. The Board believed that across-the-board salary increases were
inappropriate given the Company's recent performance. In addition, the Company
hired a number of executive officers in fiscal 1999 whose annualized
compensation is reflected in the "Summary Compensation Table."
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
addressing 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. Bonuses were paid in fiscal 2000 based upon
performance in fiscal 1999. See "-- Summary Compensation."
11
<PAGE> 15
Long-Term Incentive Compensation
The Company's long-term incentive compensation program is implemented
through the grant of stock options under the Company's 1991 Option Plan and 1998
Stock Incentive Plan. 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 generally
will have value only if the Company's stock price increases in the future.
Stock option awards are reviewed and considered by the Board, guided by
input and recommendations from management for each participant, the financial
results for the Company and the participant's present equity holdings in the
Company. All executive officers, including the Chief Executive Officer, are
eligible to receive awards under the Company's 1991 Option Plan and 1998 Stock
Incentive Plan.
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 Named Executive Officers. Qualifying
performance-based compensation will not be subject to the deduction limit if
certain requirements are met. No Named Executive Officer received compensation
exceeding this limit in fiscal year 1999. Although the Company does not
currently intend to qualify its annual incentive awards as performance-based, it
will continue to monitor the impact of Section 162(m) on the Company.
Chief Executive Officer Compensation
In June 1998, Dr. Garrett became the Company's Chief Executive Officer. Dr.
Garrett has a multi-year employment agreement with the Company that fixes his
annual base salary at $250,000 per year. Dr. Garrett also is entitled to receive
annual cash bonuses and stock options upon the satisfaction of agreed-upon
performance goals and objectives. For fiscal 1999, Dr. Garrett earned a cash
bonus of $100,000. See "-- Employment Agreements." The Compensation Committee
believes that this compensation package is comparable to those of chief
executive officers of selected comparable companies and reflects the Company's
qualitative judgment of Dr. Garrett's expected contributions to the Company
during the term of the agreement.
Julian Demora
Martin S. Kaplan
Merrill A. McPeak
12
<PAGE> 16
STOCK PERFORMANCE GRAPH
The following graph compares cumulative stockholder return on the Company's
Common Stock for the period from June 30, 1994 through June 30, 1999 with the
cumulative total return for (i) the Russell 2000 Index (ii) a peer group index,
determined by the Company consisting of Cascade Corporation, Cubic Corporation,
EDO Corporation, Evans & Sutherland Corp., Firearms Training Systems, Nichols
Research Corp and United Industrial Corporation (the "Peer Group Index") and
(iii) the Russell 3000 Aerospace Industry Index (the "Aerospace Industry
Index").
In prior years the Company's stock performance graph has compared the
Company's stock performance with the performance of (i) the Russell 2000 Index
and (ii) the Russell 3000 Index. For subsequent years the Company will
substitute the Peer Group Index for the Russell 2000 Index. This change is being
made because the Company's Board of Directors has determined that the Peer Group
Index more accurately reflects the industry sector in which the Company competes
as well as companies of similar size to the Company and, therefore, presents a
better comparison of the performance of the Company's Common Stock against the
capital stock of its peers than does the Russell 2000 Index.
COMPARATIVE FIVE-YEAR TOTAL RETURNS*
ECC INTERNATIONAL CORP., RUSSELL 3000 AEROSPACE, PEER GROUP, RUSSELL 2000
(PERFORMANCE RESULTS THROUGH 6/30/1999)
[STOCK PERFORMANCE GRAPH]
<TABLE>
<CAPTION>
ECC R3000 AEROSPACE PEER GROUP RUSSELL 2000
--- --------------- ---------- ------------
<S> <C> <C> <C> <C>
'1994' 100.00 100.00 100.00 100.00
'1995' 85.58 137.96 143.30 120.07
'1996' 70.19 189.51 184.22 148.75
'1997' 40.39 248.62 197.46 173.04
'1998' 25.00 247.07 191.32 201.59
'1999' 30.29 264.68 142.86 204.62
</TABLE>
- ---------------
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
3000 Aerospace, Peer Group and Russell 2000.
* Cumulative total return assumes reinvestment of dividends.
SOURCE: Russell/Mellon Analytical Services
13
<PAGE> 17
RATIFICATION OF THE APPOINTMENT OF
INDEPENDENT PUBLIC ACCOUNTANTS
The Board has selected PricewaterhouseCoopers LLP as the Company's
independent public accountants for the fiscal year ending June 30, 2000, subject
to ratification by stockholders at the Meeting. Although stockholder approval of
the Board's selection of PricewaterhouseCoopers LLP 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 the matter. It is not expected that any representative of
PricewaterhouseCoopers LLP will be present at the Meeting.
PricewaterhouseCoopers LLP served as the Company's independent public
accountants during fiscal 1999.
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 to vote or otherwise act in accordance with their judgment on
such matters.
The Company will bear the entire cost of soliciting proxies. In addition to
solicitations by mail, the Company's directors, officers and regular employees
may, without additional remuneration, solicit proxies by telephone, facsimile
and personal interviews. 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 reasonable out-of-pocket expenses in connection
with this service.
DEADLINE FOR SUBMISSION OF STOCKHOLDER PROPOSALS FOR THE 2000 ANNUAL MEETING
Any proposal that a stockholder of the Company wishes to be considered for
inclusion in the Company's proxy statement and proxy for the Company's 2000
Annual Meeting of Stockholders (the "2000 Annual Meeting") pursuant to Rule
14a-8 under the Exchange Act must be submitted to the Secretary of the Company
at its offices, 2001 West Oak Ridge Road, Orlando, Florida 32809-3803, no later
than June 17, 2000.
If a stockholder of the Company wishes to present a proposal before the
2000 Annual Meeting, but does not wish to have the proposal considered for
inclusion in the Company's proxy statement and proxy, such stockholder must also
give written notice to the Secretary of the Company at the address noted above.
The Secretary must receive such notice not less than 50 days nor more than 75
days prior to the 2000 Annual Meeting; provided that, in the event that less
than 65 days' notice or prior public disclosure of the date of the 2000 Annual
Meeting is given or made, notice by the stockholder must be received not later
than the close of business on the 15th day following the date on which such
notice of the date of the meeting was mailed or such public disclosure was made,
whichever occurs first. If a stockholder fails to provide timely notice of a
proposal to be presented at the 2000 Annual Meeting, the proxies designated by
the Board of Directors of the Company will have discretionary authority to vote
on any such proposal.
14
<PAGE> 18
WHETHER OR NOT YOU EXPECT TO BE PRESENT AT THE MEETING, PLEASE SIGN, DATE
AND MAIL THE ENCLOSED PROXY. 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/ MELISSA VAN VALKENBURGH
Melissa Van Valkenburgh, Secretary
Dated: October 15, 1999
15
<PAGE> 19
APPENDIX A
ECC INTERNATIONAL CORP.
PROXY FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD NOVEMBER 10, 1999
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) James C. Garrett and Jesse Krasnow, 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 Wednesday, November 10, 1999 at 10:00 a.m. at 2001 West Oak Ridge Road
in Orlando, Florida, and any adjournments thereof, and there to vote and act
upon the following matters proposed by the Company 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. None of
the following proposals are conditioned upon the approval of any of the other
proposals.
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 below):
Bruce A. Beda, Julian Demora, James C. Garrett, James Henderson, Jesse Krasnow,
Warren Lichtenstein, Thomas E. McGrath, Merrill A. McPeak.
[ ] FOR [ ] WITHHOLD
all nominees all nominees
(except as marked below)
(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.)
<PAGE> 20
2. To ratify the appointment of PricewaterhouseCoopers LLP 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" PROPOSAL NUMBER 2.
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" PROPOSAL NUMBER 2 ARE
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
FOR ADDRESS
CHANGE AND MARK HERE IF YOU PLAN TO
NOTE AT LEFT [ ] ATTEND THE MEETING [ ]
<PAGE> 21
Dated: ______________________, 1999
___________________________________
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.
