<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1999
------------------------------------------------
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ________________ to ____________________
Commission File Number: 001-8988
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ECC International Corp.
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(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
Delaware 23-1714658
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(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)
2001 West Oak Ridge Road, Orlando, FL 32809-3803
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(Address of principal executive offices) (Zip Code)
</TABLE>
(407) 859-7410
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(Registrant's telephone number, including area code)
Not Applicable
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(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding twelve months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
[ X ] Yes [ ] No
As of September 30, 1999, there were 8,423,805 shares of the Registrant's
Common Stock, $.10 par value per share, issued and outstanding.
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<PAGE> 2
PART I. FINANCIAL STATEMENTS
ITEM 1. FINANCIAL STATEMENTS
ECC INTERNATIONAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
(In Thousands Except Per Share Data)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Three Months
Ended Ended
9/30/99 9/30/98
------------ ------------
<S> <C> <C>
Net Sales $ 10,188 $ 10,411
Cost of Sales 7,225 7,987
-------- ---------
Gross Profit 2,963 2,424
-------- ---------
Expenses:
Selling, General & Administrative 2,024 3,061
Independent Research and Development 41 520
Non-Recurring Expenses -- 1,166
-------- ---------
Total Expenses 2,065 4,747
-------- ---------
Operating Income/(Loss) 898 (2,323)
-------- ---------
Other Income/(Expense):
Interest Income 12 75
Interest Expense (209) (244)
Other - Net (128) 104
--------- ---------
Total Other Expense (325) (65)
-------- ---------
Income/(Loss) Before Income Taxes 573 (2,388)
Benefit for Income Taxes -- (604)
-------- ---------
Net Income/(Loss) $ 573 $ (1,784)
======== =========
Income/(Loss) Per Common Share - Basic and
Assuming Dilution:
Net Income/(Loss) Per Common Share-Basic $ 0.07 $ (0.21)
========= =========
Net Income/(Loss) Per Common Share-Dilutive $ 0.07 $ (0.21)
========= =========
</TABLE>
See accompanying notes to the consolidated financial statements.
2
<PAGE> 3
ECC INTERNATIONAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
THREE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
(In Thousands)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Three Months
Ended Ended
9/30/99 9/30/98
------------ ------------
<S> <C> <C>
Net Income/(Loss) $ 573 $ (1,784)
Other Comprehensive Expense:
Foreign Currency Translation Adjustments -- (125)
--------- ---------
Total Comprehensive Income/(Loss) $ 573 $ (1,909)
========= =========
</TABLE>
See accompanying notes to the consolidated financial statements
3
<PAGE> 4
ECC INTERNATIONAL CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In Thousands)
<TABLE>
<CAPTION>
(Unaudited) (Audited)
9/30/99 6/30/99
----------- ---------
<S> <C> <C>
ASSETS
Current Assets:
Cash $ -- $ 1,485
Accounts Receivable 5,271 4,738
Cost and Estimated Earnings in Excess
of Billings on Uncompleted Contracts 18,298 18,494
Inventories 4,588 4,311
Prepaid Expenses and Other 644 755
-------- --------
Total Current Assets 28,801 29,783
Property, Plant and Equipment - Net 17,998 18,273
Other Assets 791 657
-------- --------
Total Assets $ 47,590 $ 48,713
======== ========
</TABLE>
Continued...
4
<PAGE> 5
ECC INTERNATIONAL CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (Continued)
(In Thousands Except Share and Per Share Data)
<TABLE>
<CAPTION>
(Unaudited) (Audited)
9/30/99 6/30/99
----------- ---------
<S> <C> <C>
LIABILITIES & STOCKHOLDERS' EQUITY
Current Liabilities:
Current Portion of Long-Term Debt $ 6,791 $ 6,424
Accounts Payable 2,099 2,917
Accrued Expenses and Other 6,550 7,379
-------- --------
Total Current Liabilities 15,440 16,720
Deferred Income Taxes 507 507
Other Long-Term Liabilities 950 1,399
COMMITMENTS AND CONTINGENCIES
Stockholders' Equity:
Preferred Stock, $.10 par; 1,000,000
shares authorized; none issued and
outstanding at 9/30/99 and 6/30/99
Common Stock, $.10 par; 20,000,000 -- --
shares authorized; issued and outstanding,
8,423,805 shares at 9/30/99 and
8,412,165 at 6/30/99 842 841
Note Receivable from Stockholder (146) (146)
Capital in Excess of Par 25,037 25,005
Retained Earnings 4,960 4,387
-------- --------
Total Stockholders' Equity 30,693 30,087
-------- --------
Total Liabilities & Stockholders' Equity $ 47,590 $ 48,713
======== ========
</TABLE>
See accompanying notes to the consolidated financial statements.
5
<PAGE> 6
ECC INTERNATIONAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED
SEPTEMBER 30, 1999 AND 1998
(In Thousands)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Three Months
Ended Ended
9/30/99 9/30/98
------------ ------------
<S> <C> <C>
Cash Flows From Operating Activities:
Net Income/(Loss) $ 573 $(1,784)
Items Not Requiring Cash:
Depreciation 972 1,014
Amortization 66 --
Changes in Certain Assets and Liabilities:
Accounts Receivable (533) 1,407
Costs and Estimated Earnings in Excess
of Billings on Uncompleted Contracts 196 (78)
Inventories (277) (207)
Prepaid Expenses and Other (2) (570)
Accounts Payable (818) (866)
Advances on Long-Term Contracts -- (476)
Accrued Expenses and Other Long-Term Liabilities (1,534) 873
-------- -------
Net Cash Used In Operating Activities (1,357) (687)
-------- -------
Cash Flows From Investing Activities:
Additions to Property, Plant and Equipment (413) (749)
Other -- 348
-------- -------
Net Cash Used In Investing Activities (413) (401)
-------- -------
Cash Flows From Financing Activities:
Proceeds From Issuance of Common Stock and
Options Exercised 5 --
Financing Charges Incurred on Revolving Credit Facility (87)
Repayments Under Revolving Credit Facility (10,807) --
Borrowings Under Revolving Credit Facility 11,174 --
-------- -------
Net Cash Provided by Financing Activities 285 --
-------- -------
Net Decrease in Cash (1,485) (1,088)
Cash at Beginning of the Period 1,485 4,830
-------- -------
Cash at End of the Period $ -- $ 3,742
======== =======
</TABLE>
Continued ...
6
<PAGE> 7
ECC INTERNATIONAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED
SEPTEMBER 30, 1999 AND 1998 (Continued)
(In Thousands)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Three Months
Ended Ended
9/30/99 9/30/98
------------ ------------
<S> <C> <C>
Supplemental Disclosure of Cash Flow Information:
Cash Paid During the Year For:
Interest $143 $248
Supplemental Schedule of Non Cash Financing Activities:
Issuance of Director Equity Compensation $ 28 $ 23
Purchase of Fixed Assets Through Capital Leases $284 $ --
</TABLE>
See accompanying notes to the consolidated financial statements.
7
<PAGE> 8
ECC INTERNATIONAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
1. The accompanying financial statements are unaudited and have been prepared
by ECC International Corp. (the "Company") pursuant to the rules and
regulations of the Securities and Exchange Commission. The June 30, 1999
consolidated balance sheet was derived from audited financial statements
but does not include all disclosures required by generally accepted
accounting principles. In the opinion of management the accompanying
unaudited consolidated financial statements contain all adjustments,
consisting of only normal recurring adjustments, necessary to present
fairly the consolidated financial position, results of operations,
comprehensive income and cash flows for the interim period presented. These
unaudited consolidated financial statements should be read in conjunction
with the consolidated financial statements and footnotes thereto in the
Company's Annual Report on Form 10-K for the fiscal year ended June 30,
1999.
2. The new revolving credit facility requires all cash receipts to be applied
directly to the debt resulting in a zero cash balance at September 30,
1999.
3. Inventories
<TABLE>
<CAPTION>
(in Thousands)
9/30/99 6/30/99
------- -------
<S> <C> <C>
Work in Process $1,670 $1,180
Raw Materials 2,918 3,131
------ ------
Total $4,588 $4,311
====== ======
</TABLE>
Work in process inventory is valued using the specific identification cost
method, but not in excess of net realizable value. Raw materials are valued
at the lower of average cost or market.
4. Debt
On June 24, 1999, the Company entered into a revolving credit facility with
a bank totaling $12.5 million and expiring on June 24, 2003. Available
borrowings, which are based on a formula to receivables and property, as
defined in the revolving credit facility, were approximately $2.2 million
at September 30, 1999.
The revolving credit facility includes a subjective acceleration clause as
well as a lockbox requirement under the control of the lender, whereby all
collections of trade receivables are used to immediately reduce the balance
of the revolving credit facility. As such, the outstanding balance of
approximately $6.8 million at September 30, 1999 is included in the Current
Portion of Long-Term Debt on the Consolidated Balance Sheet.
5. Non-Recurring Expenses
During fiscal year 1999, the Company implemented various cost reduction
initiatives and changes in management including the relocation of the
corporate headquarters and
8
<PAGE> 9
Instructional System Development Group from Wayne, Pennsylvania to the
Company's principal System Design and Production Center in Orlando,
Florida. The relocation was completed in September 1998. In addition, as a
result of recurring net losses in the UK operations, the Board of Directors
announced, during the first quarter of fiscal year 1999, the approval of a
plan to wind-down and discontinue the UK operations, which was completed in
May 1999. These initiatives resulted in non-recurring charges of
approximately $1.2 million during the three-month period ended September
30, 1998. There were no additional charges during the first quarter of
fiscal year 2000.
The following table sets forth the details and the cumulative activity in
the various accruals associated with the wind-down of the UK operations and
relocation of the Wayne Office in the Consolidated Balance Sheet at June
30, 1999 and September 30, 1999.
<TABLE>
<CAPTION>
(in Thousands)
Cash Reduction Non-Cash
6/30/99 Payments Activity 9/30/99
------- -------- -------- -------
<S> <C> <C> <C> <C>
Severance $ 36 $ (36) $ -- $ --
Facility Lease Obligations 567 (283) 25 309
Other 16 (16) -- --
----- ----- ----- ----
Total $ 619 $(335) $ 25 $ 309
===== ===== ===== =====
</TABLE>
The accrual for non-recurring expenses is included in/or classified as
follows on the Consolidated Balance Sheet.
Accrued Expenses and Other $206
Other Long-Term Liabilities $103
6. Business Segment Information
The Company operates in one segment-training. This segment includes the
design and manufacture of training simulators.
<TABLE>
<CAPTION>
Sales by Class of Customer
(In Thousands)
9/30/99 9/30/98
------- -------
<S> <C> <C>
U.S. Department of Defense
Direct $ 2,002 $ 521
Subcontract 8,186 7,504
------- -------
Total U.S. Department of Defense 10,188 8,025
------- -------
Foreign Governments -- 1,736
Foreign Commercial -- 650
------- -------
Total Foreign -- 2,386
------- -------
Total Sales $10,188 $10,411
======= =======
</TABLE>
9
<PAGE> 10
Export Sales from the U.S. were not material for the quarter ended
September 30, 1999 as compared to $2,386,000 for the quarter ended
September 30, 1998. Export sales do not include Foreign Military Sales
through U.S. Government agencies and prime contractors of $197,000 and
$453,000 in the quarters ended September 30, 1999 and 1998, respectively.
Since a substantial portion of the Company's revenues are attributable to
long-term contracts with various government agencies, any factor affecting
procurement of long-term government contracts such as changes in government
spending, cancellation of weapons programs and delays in contract awards
could have a material impact on the Company's financial condition and
results of operations.
Sales by Geographic Area
<TABLE>
<CAPTION>
(In Thousands)
United Europe and
States Middle East Consolidated
------ ----------- ------------
<S> <C> <C> <C>
Revenues
9/30/99 $10,188 $ -- $10,188
9/30/98 8,025 2,386 10,411
Operating (Loss)/Income
9/30/99 898 -- 898
9/30/98 (1,712) (611) (2,323)
Long-Lived Assets
9/30/99 17,998 -- 17,998
6/30/99 18,273 -- 18,273
</TABLE>
7. Earnings Per Share
Basic earnings/(loss) per common share is computed by dividing net
earnings/(loss) available to common shareholders by the weighted-average
number of common shares outstanding during the period. Diluted
earnings/(loss) per share is computed by dividing net earnings/(loss)
available to common shareholders by the weighted-average number of common
shares outstanding during the period adjusted for the number of shares that
would have been outstanding if the dilutive potential common shares had
been issued. The diluted earnings/(loss) per share does not assume the
exercise of options that would have an antidilutive effect on
earnings/(loss) per share.
The weighted-average number of common shares outstanding for each period
presented is as follows:
<TABLE>
<CAPTION>
Three-Month Ended
9/30/99 9/30/98
------- -------
<S> <C> <C>
Basic 8,412,602 8,329,589
Dilutive 8,465,197 8,329,589
</TABLE>
10
<PAGE> 11
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
This Quarterly Report on Form 10-Q contains forward-looking statements
within the meaning of Section 21E of the Securities Exchange Act of 1934,
as amended, and Section 27A of the Securities Act if 1933, as amended. For
this purpose, any statements contained herein that are not statements of
historical fact may be deemed to be forward-looking statements. Without
limiting the foregoing, the words "believes," "anticipates," "plans,"
"expects," and similar expressions are intended to identify forward-looking
statements. There are a number of factors that could cause the Company's
actual results to differ materially from those indicated by such
forward-looking statements. These factors include, without limitation,
those set forth below under the caption "Certain Factors That May Affect
Future Operating Results."
a) MATERIAL CHANGES IN FINANCIAL CONDITION
During the three-month period ended September 30, 1999, the Company's
principal sources of cash were borrowings under the revolving credit
facility and collections on accounts receivable, which are applied directly
toward the revolving credit facility balance. (See Note 2 to the
Consolidated Financial Statements.) The principal uses of these funds were
to make vendor and payroll payments, lease termination and contract
novation payments, as well as investments in capital assets.
The cash balance decreased due to the new revolving credit facility
arrangement where all cash receipts are applied directly to pay down the
outstanding loan balance. (See Note 2 to the Consolidated Financial
Statements.)
Accounts Receivable increased primarily due to billings on the Company's
domestic training contracts including the CCTT LRIP, Javelin multi-year and
EST programs.
Prepaid Expenses and Other decreased primarily due to the amortization of
annual group insurance premiums.
Other Assets increased primarily as a result of deferred charges recorded
for the revolving credit facility during the three-month period ended
September 30, 1999.
Accounts Payable decreased primarily due to improvement in payment cycles
supported by the revolving credit facility.
Accrued expenses decreased primarily as a result of lease termination
payments made associated with the wind down of the UK division. (See Note 5
to the Consolidated Financial Statements).
Other Long-Term Liabilities decreased due to payments on UK contract
novations and lease terminations associated with the wind down of the UK
operations.
11
<PAGE> 12
During the remainder of fiscal year 2000, the Company anticipates spending
approximately $800,000 for new machinery and equipment and to continue to
refurbish the Orlando facility.
Other than as stated above, the Company currently has no other material
commitments for capital expenditures. Management believes that with the
funds available under its new revolving credit facility and its projected
cash flow, the Company will have sufficient resources to meet planned
operating commitments for the foreseeable future.
b.) MATERIAL CHANGES IN RESULTS OF OPERATIONS
Net sales did not change significantly for the three-month period ended
September 30, 1999 as compared to the same period ended September 30, 1998,
however, the UK sales volume declined by $2.4 million as a result of the UK
operations wind-down while domestic volume increased by $2.2 million.
Overall gross profit as a percentage of net sales increased to 29 percent
for the three-month period ended September 30, 1999 as compared to 23
percent for the same period ended September 30, 1998. The increase is
primarily a result of improved levels of gross margin on ongoing programs
including Javelin, CCTT and AGTS. In addition, the Company's cost reduction
initiatives during fiscal year 1999 and the first quarter of fiscal year
2000 have reduced overhead costs, thus improving gross margins.
Selling, general and administrative expense decreased 34 percent during the
three-month period ended September 30, 1999 as compared to the same period
ended September 30, 1998. This decrease is primarily as a result of cost
cutting initiatives during fiscal year 1999, particularly in the areas of
executive salaries, legal fees and outside marketing representatives.
Independent Research and Development expense decreased 92 percent during
the three-month period ended September 30, 1999 as compared to the same
period ended September 30, 1998 due to the timing of planned developments
in fiscal year 2000.
Non-Recurring Expenses decreased 100 percent during the three-month period
ended September 30, 1999 as compared to the same period ended September 30,
1998. This decrease is primarily the result of the wind down of the UK
operations and the relocation of the corporate headquarters, both of which
were completed in fiscal year 1999. No additional charges are anticipated
in fiscal year 2000. (See note 5 to the Consolidated Financial statements.)
Other-Net decreased primarily as a result of translation losses on foreign
exchange transactions.
The Company did not record a tax provision during the first quarter of
fiscal year 2000 as Net Operating Loss Carryforwards will be utilized for
current income.
12
<PAGE> 13
c) CERTAIN FACTORS THAT MAY AFFECT FUTURE OPERATING RESULTS
The following important factors, among others, could cause actual results
to differ materially from those indicated by forward-looking statements
made in this Quarterly Report on Form 10-Q and presented elsewhere by
management from time to time. All forward-looking statements included in
this document are based on information available to the Company on the date
hereof, and the Company assumes no obligation to update any such
forward-looking statements.
A number of uncertainties exist that could affect the Company's future
operating results, including, without limitation, general economic
conditions, changes in government spending, cancellation of weapons
programs, delays in contract awards, delays in the acceptance process of
contract deliverables, the Company's continued ability to develop and
introduce products, the introduction of new products by competitors,
pricing practices of competitors, the cost and availability of parts and
the Company's ability to control costs.
To date, a substantial portion of the Company's revenues have been
attributable to long-term contracts with various government agencies. As a
result, any factor adversely affecting procurement of long-term government
contracts could have a material adverse effect on the Company's financial
condition and results of operations.
Because of these and other factors, past financial performance should not
be considered an indication of future performance. The Company's future
quarterly operating results may vary significantly. Investors should not
use historical trends to anticipate future results and should be aware that
the trading price of the Company's Common Stock may be subject to wide
fluctuations in response to quarterly variations in operating results and
other factors, including those discussed above.
YEAR 2000 ISSUE
The "Year 2000" problem relates to computer systems that have time and
date-sensitive programs that were designed to read years beginning with
"19", but may not properly recognize the year 2000. If a computer system or
software application used by the Company or a third party dealing with the
Company fails because of the inability of the system or application to
properly read the year "2000" the results could conceivably have a material
adverse effect on the Company if not adequately remedied by the Company,
its suppliers and customers on a timely basis.
The Company has formally addressed the Year 2000 Issue since November 1997
when a Year 2000 Compliance Program was initiated. A complete evaluation
was made on all internal systems, including voice mail, automated badge
entry, e-mail, payroll, accounting, facilities and products. In addition,
the Company is working with its prime contractors to identify year 2000
problems that may affect the integration of the Company's product with
those of the prime contractors. The Company will work with its prime
contractors to remediate any problems as they are identified.
13
<PAGE> 14
For its information technology, the Company currently utilizes a network of
Unix and Windows NT platforms, which provide company-wide access to all of
the Company's business application programs. Employees access the network
application software through individual PC's (approximately 400), all of
which are compliant. All Company network operating systems and
substantially all operating systems on individual workstations have been
updated to comply with Year 2000 requirements. Periodically, new
application programs and updated versions of existing programs are added to
the system. The Company has a policy to accept only Year 2000 compliant
software and has instituted an ongoing program to confirm that all new
software programs are compliant with Year 2000 requirements. The Company is
currently performing a final re-verification test of all systems as part of
that ongoing program. Further, the Company has recently replaced all
central core components of its network and all satellite switching cabinets
with Year 2000 compliant Lucent Technologies Cajun 550 series switch
routers. Although there can be no assurance that the Company will identify
and correct every Year 2000 problem found in its computer applications, the
Company believes that it has in place a comprehensive program to identify
and correct such problems.
The Company has reviewed its building and utility systems (heat, light,
phones, etc.) for the impact of Year 2000. All of the internal systems in
this area are Year 2000 ready. While the Company has no reason to believe
that its utility suppliers will not meet their required Year 2000
compliance targets, there can be no assurance that these suppliers will in
fact meet the Company's requirements. The failure of any such supplier to
fully remediate its systems for Year 2000 compliance could cause a partial
shutdown of the Company's plant, which could impact the Company's ability
to meet its obligations to supply products to its customers.
The Company is satisfied that its customer base is aware of the Year 2000
issue and is proactively working to ensure that there are no problems
associated with the Year 2000. The Company is aware of this because all
major customers have asked the Company for its Year 2000 status. In the
process, they have revealed their Year 2000 plans and stated that they are
actively engaged in solving any problems.
The Company also previously commenced a program to determine the Year 2000
compliance efforts of its equipment and material suppliers. The Company has
sent requests to all of its significant suppliers regarding their Year 2000
compliance, requesting that they warrant their ability to provide services
and supplies in the Year 2000. More than half of the suppliers have
warranted their ability to provide supplies in the Year 2000, and the
remainder have presented a plan to have their company compliant by the end
of calendar year 1999. This program will be ongoing and the Company's
efforts with respect to specific problems identified will depend in part
upon its assessment of the risk that any such problems may cause the
shutdown of a supplier's plant or its operations. Unfortunately, the
Company cannot fully control the conduct of its suppliers, and there can be
no guarantee that Year 2000 problems, originating with a supplier, will not
occur. The Company has developed contingency plans in the event of a Year
2000 failure caused by a supplier or third party. In some cases, especially
with respect to its utility vendors, alternative suppliers may not be
available. The Company has made arrangements to have key personnel
continuously on-site during the transition from 1999 to 2000 to react
immediately to any unforeseen failure.
14
<PAGE> 15
The Company believes the cost of Year 2000 compliance for its information
and productions systems has not and will not exceed $25,000 and, therefore,
is not material to its consolidated results of operations and financial
position.
If the Company does not become Year 2000 compliant in a timely manner, the
Year 2000 issue could have a material impact on the business, financial
condition and results of operations. Delays in Year 2000 compliance could
also adversely affect the Company's reputation and competitive position and
impair its ability to process customer transactions and orders and payments
of supplier merchandise. The most reasonably likely worst case scenarios
would include (1) corruption of data contained in the Company's internal
information systems, (2) hardware failure and (3) the failure of
infrastructure services provided by third parties (e.g. electricity, phone
service, etc.). The Company has completed its contingency plan for high,
medium, and low risk areas. The plans include, among other things, manual
"work-arounds" for software and hardware failures, as well as substitutions
of systems, if necessary.
The foregoing shall be considered a Year 2000 readiness disclosure to the
maximum extent allowed under the Year 2000 Information and Readiness
Disclosure Act.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not Applicable.
15
<PAGE> 16
PART II. OTHER INFORMATION
ECC INTERNATIONAL CORP.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
a. Exhibits
Exhibit 10.1 - Agreement dated September 16, 1999 by and between
the Company, Steel Partners II, L.P. and Warren G. Lichtenstein.
Exhibit 10.2 - Amendment No. 1 to Employment Agreement dated
August 9, 1999 by and between the Company and James C. Garrett.
Exhibit 10.3 - Amendment and Restated Non-Competition and
Non-Solicitation Agreement dated August 9, 1999 by and between
the Company and James C. Garrett.
Exhibit 10.4 - Employment Agreement dated August 9, 1999 by and
between the Company and Glenn Andrew.
Exhibit 10.5 - Non-Competition and Non-Solicitation Agreement
dated August 9, 1999 by and between the Company and Glenn Andrew.
Exhibit 10.6 - Employment Agreement dated August 9, 1999 by and
between the Company and Melissa Van Valkenburgh.
Exhibit 10.7 - Non-Competition and Non-Solicitation Agreement
dated August 9, 1999 by and between the Company and Melissa Van
Valkenburgh
Exhibit 27.1 - Financial Data Schedule for the three-month period
ended September 30, 1999.
b. REPORTS ON FORM 8-K
Not applicable
16
<PAGE> 17
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ECC INTERNATIONAL CORP.
Date November 10, 1999 /s/ Melissa Van Valkenburgh
----------------------------- -------------------------------------
Melissa Van Valkenburgh
Chief Financial Officer
17
<PAGE> 1
Exhibit 10.1
AGREEMENT
THIS AGREEMENT (the "Agreement"), made this 16th day of September,
1999, is entered into by ECC International Corp., a Delaware corporation (the
"Company"), Steel Partners II, L.P., a Delaware limited partnership (together
with its affiliates, "Steel") and Warren G. Lichtenstein ("Lichtenstein").
Steel and Lichtenstein currently own an aggregate of 1,947,501 shares
of Common Stock, $.10 par value per share, of the Company. For purposes of this
Agreement, "Voting Securities" shall mean all classes of capital stock of the
Company which are then entitled to vote generally in the election of directors
of the Company. In consideration of the mutual covenants and promises contained
herein, and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged by the parties hereto, and in order to provide
a constructive and mutually beneficially relationship among the Company, Steel
and Lichtenstein, the parties agree as follows:
1. TERM OF AGREEMENT AND TERMINATION
(a) The respective covenants and agreements of the
Company, Steel and Lichtenstein contained in this Agreement will continue in
full force and effect until the date immediately following the date of the
Company's Annual Meeting of Stockholders held in calendar year 2000 (the
"Termination Date"), unless earlier terminated in accordance with Section 1(b).
(b) Either party may terminate this Agreement, in its
sole discretion, if the other party fails to perform or observe in any material
respects any of its obligations pursuant to this Agreement, including any
decision by either Lichtenstein or James R. Henderson ("Henderson") not to be
elected to the Company's Board of Directors (the "Board") at the annual meeting
scheduled for November 10, 1999.
(c) From and after the Termination Date or earlier
termination of this Agreement, the covenants of the parties set forth herein
shall be of no further force or effect and the parties shall be under no further
obligation with respect thereto PROVIDED, HOWEVER, that Section 2(c) shall
survive the termination of this Agreement.
2. COVENANTS OF THE COMPANY
(a) The Company shall cause Lichtenstein and Henderson to
be nominated by the Board at the meeting of the Board to be held on September
16, 1999, for election to the Board at the annual meeting of stockholders to be
held on November 10, 1999. Until the Termination Date or earlier termination of
this Agreement, the Board shall include Lichtenstein and Henderson (for so long
<PAGE> 2
as each is willing to serve as a director) in the slate of nominees recommended
by the Board to stockholders for election as directors at each annual meeting of
stockholders of the Company commencing with the November 10, 1999 annual meeting
of stockholders.
(b) Until the Termination Date or earlier termination of
this Agreement, the number of members of the Board shall not exceed eight (8).
(c) The Company shall not hold the 2001 Annual Meeting of
Stockholders of the Company on a date prior to June 30, 2001.
(d) At the meeting of the Board of Directors to be held
on September 16, 1999, the Company's By-Laws shall be amended to provide that,
for the period commencing on the date immediately following the date of the
Company's Annual Meeting of Stockholders held in calendar year 2000 and ending
on the date of the Company's Annual Meeting of Stockholders held in calendar
year 2001, any director or the entire Board of Directors may be removed, with or
without cause, at any special meeting of stockholders called for such purpose by
the holders of a majority of the shares present at such meeting and entitled to
vote thereat. Such By-Law amendment shall not be amended prior to the election
of Lichtenstein and Henderson to the Board, and shall thereafter only be amended
with the consent of Messrs. Lichtenstein and Henderson.
3. COVENANTS OF STEEL AND LICHTENSTEIN
Prior to the Termination Date or earlier termination of this Agreement:
(a) Each of Steel and Lichtenstein shall take all such
action as may be required so that all Voting Securities beneficially owned by
either of them are voted for the slate of director nominees recommended by the
majority of the directors of the Company to be voted on at any annual or special
meeting of stockholders or by written consent of stockholders in lieu of a
meeting. Each of Steel and Lichtenstein, as holders of Voting Securities, shall
be present, in person or by proxy, at all meetings of stockholders of the
Company so that all Voting Securities beneficially owned by them may be counted
for the purpose of determining the presence of a quorum at such meetings.
(b) Neither Steel nor Lichtenstein shall deposit any
Voting Securities in a voting trust or subject any Voting Securities to any
arrangement or agreement with respect to the voting of such Voting Securities.
-2-
<PAGE> 3
(c) Neither Steel nor Lichtenstein shall join a
partnership, limited partnership, syndicate or other group, or otherwise act in
concert with any other person, for the purpose of acquiring, holding, voting or
disposing of Voting Securities, or otherwise become a "person" within the
meaning of Section 13(d)(3) of the Securities and Exchange Act of 1934, as
amended (the "Exchange Act") (in each case other than solely with each other).
(d) Neither Steel nor Lichtenstein, as holders of Voting
Securities, shall call, or join in a call for, a special meeting of the
stockholders of the Company.
4. MISCELLANEOUS
(e) Each of the parties hereto acknowledge and agree that
irreparable damage would occur in the event any of the provisions of this
Agreement are not performed in accordance with their specific terms or were
otherwise breached. It is accordingly agreed that the parties shall be entitled
to an injunction or injunctions to prevent breaches of the provisions of this
Agreement and to enforce specifically the terms and provisions hereof in any
court of the United States or any state thereof having jurisdiction, in addition
to any other remedy to which they may be entitled at law or equity.
(f) If any provisions of this Agreement shall be found by
any court of competent jurisdiction to be invalid or unenforceable, the parties
hereby waive such provision to the extent that it is found to be invalid or
unenforceable. Such provision shall, to the maximum extent allowable by law, be
modified by such court so that it becomes enforceable, and, as modified, shall
be enforced as any other provision hereof, all the other provisions hereof
continuing in full force and effect.
(g) As used herein, the term "affiliate" shall have the
meaning set forth in Rule 12b-2 under the Exchange Act.
(h) This Agreement contains the entire understanding of
the parties with respect to the transactions contemplated hereby and this
Agreement may be amended only by an agreement in writing executed by the parties
hereto.
(i) All notices, consents, requests, instructions,
approvals and other communications provided for herein shall be validly given,
made or served, if in writing and delivered personally, by telecopy or sent by
registered mail, postage prepaid or overnight courier, if to:
The Company: ECC International Corp.
2001 West Oak Ridge Road
Orlando, FL 32839-3981
Attn: President
fax: (407) 888-3454
-3-
<PAGE> 4
Copies to: General Merrill A. McPeak
17360 SW Grandview
Lake Oswego, OR 97034
fax: (503) 699-2036
Hale and Dorr LLP
60 State Street
Boston, MA 02109
Attn: Martin S. Kaplan, P.C.
fax: (617) 526-5000
Steel: Steel Partners II, L.P.
150 East 52nd Street, 21st Floor
New York, NY 10022
Attn: Warren G. Lichtenstein
fax: (212) 813-2198
Copy to: Olshan Grundman Frome Rosenzweig & Wolosky LLP
505 Park Avenue
New York, NY 10022
Attn: Steven Wolosky, Esq.
fax: (212) 755-1467
Lichtenstein: c/o Steel Partners II, L.P.
150 East 52nd Street, 21st Floor
New York, NY 10022
fax: (212) 813-2198
Copy to: Olshan Grundman Frome Rosenzweig & Wolosky LLP
505 Park Avenue
New York, NY 10022
Attn: Steven Wolosky, Esq.
fax: (212) 755-1467
or to such other address or telecopy number as any party may, from time to time,
designate in a written notice given in a like manner. Notice given by telecopy
shall be deemed delivered on the day the sender receives telecopy confirmation
that such notice was received at the telecopier number of the addressee. Notice
given by mail as set out above shall be deemed delivered five days after the
date the same is postmarked.
-4-
<PAGE> 5
(j) This Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of Delaware applicable to
contracts made and to be performed therein.
* * * * *
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed under seal, all as of the day and year first above written.
ECC INTERNATIONAL CORP.
By: /s/ Merrill A. McPeak
--------------------------------
Name: Merrill A. McPeak
Title: Chairman of the Board
STEEL PARTNERS II, L.P..
By: /s/ Warren G. Lichtenstein
--------------------------------
Name: Warren G. Lichtenstein
Title: General Partner
/s/ Warren G. Lichtenstein
--------------------------------
Warren G. Lichtenstein
-5-
<PAGE> 1
Exhibit 10.2
AMENDMENT NO. 1 TO EMPLOYMENT AGREEMENT
THIS AMENDMENT NO. 1 TO EMPLOYMENT AGREEMENT (the "Agreement") is made
as of the 9th day of August, 1999, by and between ECC International Corp., a
Delaware corporation (the "Company"), and James C. Garrett (the "Executive").
WHEREAS, the Company and the Executive are parties to an Employment
Agreement, dated as of June 15, 1998 (the "Agreement"); and
WHEREAS, the Company and the Executive are desirous of continuing the
Executive's employment with Company for the period, and on the terms and
conditions, set forth in the Agreement, subject to the amendment set forth
herein;
NOW, THEREFORE, in consideration of the foregoing and intending to be
bound, the parties hereby agree that Section 7 of the Agreement is amended and
restated in its entirety to read as follows:
7. CHANGE IN CONTROL.
7.1 Notwithstanding any other provision of this
Agreement, if a Change in Control (as such term is defined below) shall have
occurred, upon the termination of employment of the Executive for any reason or
no reason after such Change in Control, the following severance payments and
arrangements (less applicable deductions for social security, payroll and other
applicable taxes) shall be made for the benefit of the Executive:
(a) cash payments in bi-weekly installments at
the Executive's current bi-weekly Base Salary at the time of termination (less
applicable deductions) for a period equal to 48 months, commencing with the
month immediately succeeding the month during which the termination occurred;
(b) normal employee medical benefits shall be
continued for the Executive for a period equal to 48 months, commencing with the
month immediately succeeding the month during which the termination occurred;
(c) a lump sum cash payment in an amount equal
to 48 times the current monthly value of the other benefits otherwise payable to
the Executive at the time of termination;
(d) payment of bonuses otherwise earned but not
yet paid to the Executive under Section 3 through the date of termination; and
<PAGE> 2
(e) all stock options granted to the Executive
which shall not have vested as of the time of termination shall thereupon
automatically vest and be immediately exercisable in full, provided that any
such acceleration of vesting shall in every event be subject to the terms of any
stock option plan under which such stock options are granted.
7.2 For purposes of this Agreement, a "Change in Control"
shall mean:
(a) any merger or consolidation which results in
the voting securities of the Company outstanding immediately prior thereto
representing immediately thereafter (either by remaining outstanding or by being
converted into voting securities of the surviving or acquiring entity) less than
50% of the combined voting power of the voting securities of the Company or such
surviving or acquiring entity outstanding immediately after such merger or
consolidation;
(b) individuals who, as of July 1, 1999,
constitute the Board (the "Incumbent Board") cease for any reason to constitute
at least a majority of the Board; provided, however, that any individual
becoming a director subsequently to such date whose election, or nomination for
election by the Company's stockholders, was approved by a vote of at least a
majority of the directors then comprising the Incumbent Board shall be
considered as though such individual were a member of the Incumbent Board
(except that this proviso shall not apply to any individual whose initial
assumption of office as a director occurs as a result of an actual or threatened
election contest with respect to the election or removal of directors or other
actual or threatened solicitation of proxies or consents other than by or on
behalf of the Board); or
(c) any sale of all or substantially all of the
assets of the Company."
Except as amended hereby, the Agreement shall remain unchanged and
shall remain in full force and effect. Capitalized terms used herein and not
otherwise defined shall have the respective meanings given to them in the
Agreement.
* * * * *
<PAGE> 3
IN WITNESS WHEREOF, this Amendment No. 1 to Employment Agreement is
executed as of the date first above written.
COMPANY:
ECC INTERNATIONAL CORP.
/s/ Merrill A. McPeak
--------------------------------------
Merrill A. McPeak
Chairman of the Board of Directors
EXECUTIVE:
/s/ James C. Garrett
--------------------------------------
James C. Garrett
<PAGE> 1
Exhibit 10.3
ECC INTERNATIONAL CORP.
AMENDED AND RESTATED NON-COMPETITION AND NON-SOLICITATION AGREEMENT
This Agreement is made between ECC International Corp., a Delaware
corporation (hereinafter referred to collectively with its subsidiaries as the
"Company"), and James C. Garrett (the "Employee").
WHEREAS, the Company and the Employee are parties to a Non-Competition
and Non-Solicitation Agreement, dated as of June 15, 1998 (the "Agreement");
WHEREAS, the Company and the Employee are parties to an Employment
Agreement, dated as of June 15, 1998 (the "Employment Agreement"); and
WHEREAS, the Company and the Employee have entered into Amendment No. 1
to Employment Agreement on the date hereof for the continued employment of the
Employee as President and Chief Executive Officer of the Company under the terms
of the Employment Agreement, as amended;
NOW, THEREFORE, in consideration of the foregoing, the continued
employment of the Employee by the Company and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged by
the parties hereto, the Employee and the Company agree that the Agreement is
amended and restated as follows:
1. NON-COMPETITION.
(a) While the Employee is employed by the Company, for a period of
two years after the termination or cessation of such employment for any reason,
and for any period during which the Employee shall receive severance payments
and arrangements pursuant to Section 7 of the Employment Agreement, the Employee
will not directly or indirectly:
(i) as an individual proprietor, partner,
stockholder, officer, employee, director, joint venturer,
investor, lender, consultant, or in any other capacity
whatsoever (other than as the holder of not more than one
percent of the combined voting power of the outstanding stock
of a publicly held company), develop, design, produce, market,
sell or render (or assist any other person in developing,
designing, producing, marketing, selling or rendering)
products or services competitive with those developed,
designed, produced, marketed, sold or rendered by the Training
and Simulation Business of the Company while the Employee was
employed by the Company; or
<PAGE> 2
(ii) solicit, divert or take away, or attempt to
divert or to take away, the business or patronage of any of
the clients, customers or accounts, or prospective clients,
customers or accounts, of the Company which were contacted,
solicited or served by the Employee while employed by the
Company.
(b) If the Employee violates the provisions of Section 1(a), the
Employee shall continue to be bound by the restrictions set forth in Section
1(a) until a period of two years has expired without any violation of such
provisions.
2. NON-SOLICITATION.
(a) While the Employee is employed by the Company, for a period of
two years after the termination or cessation of such employment for any reason,
and for any period during which the Employee shall receive severance payments
and arrangements pursuant to Section 7 of the Employment Agreement, the Employee
will not directly or knowingly indirectly recruit, solicit or hire any employee
of the Company, or induce or attempt to induce any employee of the Company to
terminate his/her employment with, or otherwise cease his/her relationship with,
the Company.
(b) If the Employee violates the provisions of Section 2(a), the
Employee shall continue to be bound by the restrictions set forth in Section
2(a) until a period of two years has expired without any violation of such
provisions.
3. MISCELLANEOUS.
(a) NO CONFLICT. The Employee represents that the execution and
performance by him of this Agreement does not and will not conflict with or
breach the terms of any other agreement by which the Employee is bound.
(b) NOT EMPLOYMENT CONTRACT. The Employee acknowledges that this
Agreement does not constitute a contract of employment and does not imply that
the Company will continue his employment for any period of time.
(c) INTERPRETATION. If any restriction set forth in Sections 1 or
2 is found by any court of competent jurisdiction to be unenforceable because it
extends for too long a period of time or over too great a range of activities or
in too broad a geographic area, it shall be interpreted to extend only over the
maximum period of time, range of activities or geographic area as to which it
may be enforceable.
-2-
<PAGE> 3
(d) SEVERABILITY. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement.
(e) WAIVER OF RIGHTS. No delay or omission by the Company in
exercising any right under this Agreement will operate as a waiver of that or
any other right. A waiver or consent given by the Company on any one occasion is
effective only in that instance and will not be construed as a bar to or waiver
of any right on any other occasion.
(f) EQUITABLE REMEDIES. The restrictions contained in this
Agreement are necessary for the protection of the business and goodwill of the
Company and are considered by the Employee to be reasonable for such purpose.
The Employee agrees that any breach of this Agreement is likely to cause the
Company substantial and irrevocable damage and therefore, in the event of any
such breach, the Employee agrees that the Company, in addition to such other
remedies which may be available, shall be entitled to specific performance and
other injunctive relief.
(g) ASSIGNABILITY. The Company may assign this Agreement to any
other corporation or entity which acquires (whether by purchase, merger,
consolidation or otherwise) all or substantially all of the business and/or
assets of the Company.
(h) GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware. Any action,
suit, or other legal proceeding which is commenced to resolve any matter arising
under or relating to any provision of this Agreement shall be commenced only in
a court of the State of Delaware (or, if appropriate, a federal court located
within Delaware), and the Company and the Employee each consents to the
jurisdiction of such a court.
(i) LEGAL FEES. In the event that legal proceedings are commenced
by the Employee against the Company, or by the Company against the Employee, in
connection with this Agreement or the transactions contemplated hereby, the
party or parties which do not prevail in such proceedings shall pay the
reasonable attorneys' fees and other costs and expenses, including investigation
costs, incurred by the prevailing party in such proceedings.
THE EMPLOYEE ACKNOWLEDGES THAT HE HAS CAREFULLY READ THIS AGREEMENT AND
UNDERSTANDS AND AGREES TO ALL OF THE PROVISIONS IN THIS AGREEMENT.
* * * * *
-3-
<PAGE> 4
WITNESS our hands and seals:
ECC INTERNATIONAL CORP.
Date: August 9, 1999 By: /s/ Merrill A. McPeak
-----------------------------------------
Name: Merrill A. McPeak
Title: Chairman of the Board of Directors
Date: August 9, 1999 /s/ James C. Garrett
-----------------------------------------
James C. Garrett
-4-
<PAGE> 1
Exhibit 10.4
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement"), made this 9th day of
August, 1999, is entered into by ECC International Corp., a Delaware corporation
(the "Company"), and Glenn Andrew (the "Executive").
The Company desires to employ the Executive, and the Executive desires
to be employed by the Company. In consideration of the mutual covenants and
promises contained herein, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged by the parties hereto,
the parties agree as follows:
1. EMPLOYMENT. The Company hereby employs the Executive in such
position and capacity as the Executive and the Company shall from time to time
determine, and the Executive accepts such employment. The Executive shall have
the duties, responsibilities and authority as are delegated to him by the
Company.
2. PERFORMANCE. The Executive agrees to devote his entire
business time, attention and energies to the business and interests of the
Company during the term of this Agreement (the "Employment Term"). The Executive
agrees to abide by the rules, regulations, instructions, personnel practices and
policies of the Company and any changes therein which may be adopted from time
to time by the Company. The Executive acknowledges receipt of copies of all such
rules and policies committed to writing as of the date of this Agreement.
3. EMPLOYMENT TERM. The Executive shall be deemed to be an
at-will employee of the Company and the Executive's employment with the Company
may be terminated by the Company at any time for any reason or no reason, with
or without cause.
4. COMPENSATION AND BENEFITS.
4.1 SALARY. During the Employment Term, the Company shall
pay the Executive an annual base salary, payable in accordance with the
Company's normal payroll practice, subject to withholding and other applicable
taxes, at the annualized rate determined from time to time by the Board of
Directors.
4.2 ADDITIONAL BENEFITS. The Executive shall be entitled
to participate in all bonus and benefit programs that the Company establishes
and makes available to its executive officers, to the extent that Executive's
position, tenure, salary, age, health and other qualifications make him eligible
to participate.
<PAGE> 2
4.3 REIMBURSEMENT OF EXPENSES. The Company shall
reimburse the Executive for all reasonable expenses incurred or paid by the
Executive in connection with the performance of his duties, responsibilities or
services under this Agreement, upon presentation by the Executive of
documentation, expense statements, vouchers and/or such other supporting
information as the Company may require.
5. NON-COMPETITION AND NON-SOLICITATION AGREEMENT. On the date
hereof, the Company and the Executive shall enter into a Non-Competition and
Non-Solicitation Agreement substantially in the form attached hereto as EXHIBIT
A, and such agreement shall be incorporated herein by this reference and made a
part hereof as if set forth herein in its entirety.
6. CHANGE IN CONTROL.
6.1 Notwithstanding any other provision of this
Agreement, if a Change in Control (as such term is defined below) shall have
occurred, upon the termination of employment of the Executive after such Change
in Control (i) by the Company other than for cause or (ii) by the Executive for
good reason, the following severance payments and arrangements (less applicable
deductions for social security, payroll and other applicable taxes) shall be
made for the benefit of the Executive:
(a) cash payments in bi-weekly installments at
the Executive's current bi-weekly base salary at the time of termination (less
applicable deductions) for a period equal to 24 months, commencing with the
month immediately succeeding the month during which the termination occurred;
(b) normal employee medical benefits shall be
continued for the Executive for a period equal to 24 months, commencing with the
month immediately succeeding the month during which the termination occurred;
(c) a lump sum cash payment in an amount equal
to 24 times the current monthly value of the other benefits otherwise payable to
the Executive at the time of termination;
(d) payment of bonuses otherwise earned but not
yet paid to the Executive under Section 4 through the date of termination; and
(e) all stock options granted to the Executive
which shall not have vested as of the time of termination shall thereupon
automatically vest and be immediately exercisable in full, provided that any
such acceleration of vesting shall in every event be subject to the terms of any
stock option plan under which such stock options are granted.
-2-
<PAGE> 3
Notwithstanding the foregoing, the severance payments and
arrangements set forth in paragraphs (a) and (b) above shall cease in the event
the Executive commences alternate employment with (i) base salary equal to or
greater than the Executive's base salary at the time of termination and (ii)
comparable employee medical benefits.
For the purposes of this Section 6, cause shall mean any
willful misconduct by the Executive which affects the business reputation of the
Company or willful failure by the Executive to perform his material
responsibilities to the Company (including, without limitation, breach by the
Executive of any provision of any employment, consulting, advisory,
nondisclosure, non-competition or other similar agreement between the Executive
and the Company). For the purposes of this Section 6, good reason shall mean any
significant diminution in the Executive's title, authority or responsibilities
or any reduction in the Executive's base salary.
6.2 For purposes of this Agreement, a "Change in Control"
shall mean:
(a) any merger or consolidation which results in
the voting securities of the Company outstanding immediately prior thereto
representing immediately thereafter (either by remaining outstanding or by being
converted into voting securities of the surviving or acquiring entity) less than
50% of the combined voting power of the voting securities of the Company or such
surviving or acquiring entity outstanding immediately after such merger or
consolidation;
(b) individuals who, as of July 1, 1999,
constitute the Board (the "Incumbent Board") cease for any reason to constitute
at least a majority of the Board; provided, however, that any individual
becoming a director subsequently to the date hereof whose election, or
nomination for election by the Company's stockholders, was approved by a vote of
at least a majority of the directors then comprising the Incumbent Board shall
be considered as though such individual were a member of the Incumbent Board
(except that this proviso shall not apply to any individual whose initial
assumption of office as a director occurs as a result of an actual or threatened
election contest with respect to the election or removal of directors or other
actual or threatened solicitation of proxies or consents other than by or on
behalf of the Board); or
(c) any sale of all or substantially all of the
assets of the Company.
-3-
<PAGE> 4
7. PROPRIETARY INFORMATION AND DEVELOPMENTS.
7.1 PROPRIETARY INFORMATION.
(a) The Executive agrees that all information,
whether or not in writing, of a private, secret or confidential nature
concerning the Company's business, business relationships or financial affairs
(collectively, "Proprietary Information") is and shall be the exclusive property
of the Company. By way of illustration, but not limitation, Proprietary
Information may include inventions, products, processes, methods, techniques,
formulas, compositions, compounds, projects, developments, plans, research data,
clinical data, financial data, personnel data, computer programs, customer and
supplier lists, and contacts at or knowledge of customers or prospective
customers of the Company. The Executive will not disclose any Proprietary
Information to any person or entity other than employees of the Company or use
the same for any purposes (other than in the performance of his duties as an
employee of the Company) without written approval by an officer of the Company,
either during or after his employment with the Company, unless and until such
Proprietary Information has become public knowledge without fault by the
Executive.
(b) The Executive agrees that all files,
letters, memoranda, reports, records, data, sketches, drawings, laboratory
notebooks, program listings, or other written, photographic, or other tangible
material containing Proprietary Information, whether created by the Executive or
others, which shall come into his custody or possession, shall be and are the
exclusive property of the Company to be used by the Executive only in the
performance of his duties for the Company. All such materials or copies thereof
and all tangible property of the Company in the custody or possession of the
Executive shall be delivered to the Company, upon the earlier of (i) a request
by the Company or (ii) termination of his employment. After such delivery, the
Executive shall not retain any such materials or copies thereof or any such
tangible property.
(c) The Executive agrees that his obligation not
to disclose or to use information and materials of the types set forth in
paragraphs (a) and (b) above, and his obligation to return materials and
tangible property, set forth in paragraph (b) above, also extends to such types
of information, materials and tangible property of customers of the Company or
suppliers to the Company or other third parties who may have disclosed or
entrusted the same to the Company or to the Executive.
7.2 DEVELOPMENTS.
(a) The Executive will make full and prompt
disclosure to the Company of all inventions, improvements, discoveries, methods,
developments, software, and works of authorship, whether patentable or not,
which are created, made, conceived or reduced to practice by him or under his
direction or jointly with others during his employment by the Company, whether
or not during normal working hours or on the premises of the Company (all of
which are collectively referred to in this Agreement as "Developments").
-4-
<PAGE> 5
(b) The Executive agrees to assign and does
hereby assign to the Company (or any person or entity designated by the Company)
all his right, title and interest in and to all Developments and all related
patents, patent applications, copyrights and copyright applications. However,
this Section 7.2(b) shall not apply to Developments which do not relate to the
present or planned business or research and development of the Company and which
are made and conceived by the Executive not during normal working hours, not on
the Company's premises and not using the Company's tools, devices, equipment or
Proprietary Information. The Executive understands that, to the extent this
Agreement shall be construed in accordance with the laws of any state which
precludes a requirement in an employee agreement to assign certain classes of
inventions made by an employee, this Section 7.2(b) shall be interpreted not to
apply to any invention which a court rules and/or the Company agrees falls
within such classes. The Executive also hereby waives all claims to moral rights
in any Developments.
(c) The Executive agrees to cooperate fully with
the Company, both during and after his employment with the Company, with respect
to the procurement, maintenance and enforcement of copyrights, patents and other
intellectual property rights (both in the United States and foreign countries)
relating to Developments. The Executive shall sign all papers, including,
without limitation, copyright applications, patent applications, declarations,
oaths, formal assignments, assignments of priority rights, and powers of
attorney, which the Company may deem necessary or desirable in order to protect
its rights and interests in any Development. The Executive further agrees that
if the Company is unable, after reasonable effort, to secure the signature of
the Executive on any such papers, any executive officer of the Company shall be
entitled to execute any such papers as the agent and the attorney-in-fact of the
Executive, and the Executive hereby irrevocably designates and appoints each
executive officer of the Company as his agent and attorney-in-fact to execute
any such papers on his behalf, and to take any and all actions as the Company
may deem necessary or desirable in order to protect its rights and interests in
any Development, under the conditions described in this sentence.
7.3 OTHER AGREEMENTS. The Executive hereby represents
that, except as the Executive has disclosed in writing to the Company, the
Executive is not bound by the terms of any agreement with any previous employer
or other party to refrain from using or disclosing any trade secret or
confidential or proprietary information in the course of his employment with the
Company or to refrain from competing, directly or indirectly, with the business
of such previous employer or any other party. The Executive further represents
that his performance of all the terms of this Agreement and as an employee of
the Company does not and will not breach any agreement to keep in confidence
proprietary information, knowledge or data acquired by the Executive in
confidence or in trust prior to his employment with the Company, and the
Executive will not disclose to the Company or induce the Company to use any
confidential or proprietary information or material belonging to any previous
employer or others.
-5-
<PAGE> 6
8. ENTIRE AGREEMENT. This Agreement constitutes the entire
agreement between the parties and supersedes all prior agreements and
understandings, whether written or oral, relating to the subject matter of this
Agreement.
9. AMENDMENT. This Agreement may be amended or modified only by a
written instrument executed by both the Company and the Executive.
10. GOVERNING LAW. This Agreement shall be construed, interpreted
and enforced in accordance with the laws of the State of Delaware.
11. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon
and inure to the benefit of both parties and their respective successors and
assigns, including any corporation with which or into which the Company may be
merged or which may succeed to its assets or business, provided, however, that
the obligations of the Executive are personal and shall not be assigned by him.
12. MISCELLANEOUS.
(a) No delay or omission by the Company or the Executive
in exercising any right under this Agreement shall operate as a waiver of that
or any other right. A waiver or consent given by the Company or the Executive on
any one occasion shall be effective only in that instance and shall not be
construed as a bar or waiver of any right on any other occasion.
(b) The captions of the sections of this Agreement are
for convenience of reference only and in no way define, limit or affect the
scope or substance of any section of this Agreement.
(c) In case any provision of this Agreement shall be
invalid, illegal or otherwise unenforceable, the validity, legality and
enforceability of the remaining provisions shall in no way be affected or
impaired thereby.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year set forth above.
-6-
<PAGE> 7
ECC INTERNATIONAL CORP.
By: /s/ James C. Garrett
---------------------------------
Name: James C. Garrett
Title: President
EXECUTIVE
/s/ Glenn Andrew
---------------------------------
Glenn Andrew
-7-
<PAGE> 1
EXHIBIT 10.5
ECC INTERNATIONAL CORP.
NON-COMPETITION AND NON-SOLICITATION AGREEMENT
This Agreement is made between ECC International Corp., a Delaware
corporation (hereinafter referred to collectively with its subsidiaries as the
"Company"), and Glenn Andrew (the "Employee").
WHEREAS, the Company and the Employee have entered into an Employment
Agreement on the date hereof (the "Employment Agreement");
NOW, THEREFORE, in consideration of the foregoing, the employment of
the Employee by the Company and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged by the parties hereto,
the Employee and the Company agree as follows:
1. NON-COMPETITION.
(a) While the Employee is employed by the Company, for a period of
two years after the termination or cessation of such employment for any reason,
and for any period during which the Employee shall receive severance payments
and arrangements pursuant to Section 6 of the Employment Agreement, the Employee
will not directly or indirectly:
(i) as an individual proprietor, partner,
stockholder, officer, employee, director, joint venturer,
investor, lender, consultant, or in any other capacity
whatsoever (other than as the holder of not more than one
percent of the combined voting power of the outstanding stock
of a publicly held company), develop, design, produce, market,
sell or render (or assist any other person in developing,
designing, producing, marketing, selling or rendering)
products or services competitive with those developed,
designed, produced, marketed, sold or rendered by the Training
and Simulation Business of the Company while the Employee was
employed by the Company; or
(ii) solicit, divert or take away, or attempt to
divert or to take away, the business or patronage of any of
the clients, customers or accounts, or prospective clients,
customers or accounts, of the Company which were contacted,
solicited or served by the Employee while employed by the
Company.
<PAGE> 2
(b) If the Employee violates the provisions of Section 1(a), the
Employee shall continue to be bound by the restrictions set forth in Section
1(a) until a period of two years has expired without any violation of such
provisions.
2. NON-SOLICITATION.
(a) While the Employee is employed by the Company, for a period of
two years after the termination or cessation of such employment for any reason,
and for any period during which the Employee shall receive severance payments
and arrangements pursuant to Section 6 of the Employment Agreement, the Employee
will not directly or knowingly indirectly recruit, solicit or hire any employee
of the Company, or induce or attempt to induce any employee of the Company to
terminate his/her employment with, or otherwise cease his/her relationship with,
the Company.
(b) If the Employee violates the provisions of Section 2(a), the
Employee shall continue to be bound by the restrictions set forth in Section
2(a) until a period of two years has expired without any violation of such
provisions.
3. MISCELLANEOUS.
(a) NO CONFLICT. The Employee represents that the execution and
performance by him of this Agreement does not and will not conflict with or
breach the terms of any other agreement by which the Employee is bound.
(b) NOT EMPLOYMENT CONTRACT. The Employee acknowledges that this
Agreement does not constitute a contract of employment and does not imply that
the Company will continue his employment for any period of time.
(c) INTERPRETATION. If any restriction set forth in Sections 1 or
2 is found by any court of competent jurisdiction to be unenforceable because it
extends for too long a period of time or over too great a range of activities or
in too broad a geographic area, it shall be interpreted to extend only over the
maximum period of time, range of activities or geographic area as to which it
may be enforceable.
(d) SEVERABILITY. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement.
(e) WAIVER OF RIGHTS. No delay or omission by the Company in
exercising any right under this Agreement will operate as a waiver of that or
any other right. A waiver or consent given by the Company on any one occasion is
effective only in that instance and will not be construed as a bar to or waiver
of any right on any other occasion.
-2-
<PAGE> 3
(f) EQUITABLE REMEDIES. The restrictions contained in this
Agreement are necessary for the protection of the business and goodwill of the
Company and are considered by the Employee to be reasonable for such purpose.
The Employee agrees that any breach of this Agreement is likely to cause the
Company substantial and irrevocable damage and therefore, in the event of any
such breach, the Employee agrees that the Company, in addition to such other
remedies which may be available, shall be entitled to specific performance and
other injunctive relief.
(g) ASSIGNABILITY. The Company may assign this Agreement to any
other corporation or entity which acquires (whether by purchase, merger,
consolidation or otherwise) all or substantially all of the business and/or
assets of the Company.
(h) GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware. Any action,
suit, or other legal proceeding which is commenced to resolve any matter arising
under or relating to any provision of this Agreement shall be commenced only in
a court of the State of Delaware (or, if appropriate, a federal court located
within Delaware), and the Company and the Employee each consents to the
jurisdiction of such a court.
(i) LEGAL FEES. In the event that legal proceedings are commenced
by the Employee against the Company, or by the Company against the Employee, in
connection with this Agreement or the transactions contemplated hereby, the
party or parties which do not prevail in such proceedings shall pay the
reasonable attorneys' fees and other costs and expenses, including investigation
costs, incurred by the prevailing party in such proceedings.
THE EMPLOYEE ACKNOWLEDGES THAT HE HAS CAREFULLY READ THIS AGREEMENT AND
UNDERSTANDS AND AGREES TO ALL OF THE PROVISIONS IN THIS AGREEMENT.
WITNESS our hands and seals:
ECC INTERNATIONAL CORP.
Date: August 9, 1999 By: /s/ James C. Garrett
--------------------------------
Name: James C. Garrett
Title: President
Date: August 9, 1999 /s/ Glenn Andrew
--------------------------------
Glenn Andrew
-3-
<PAGE> 1
Exhibit 10.6
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement"), made this 9th day of
August, 1999, is entered into by ECC International Corp., a Delaware corporation
(the "Company"), and Melissa Van Valkenburgh (the "Executive").
The Company desires to employ the Executive, and the Executive desires
to be employed by the Company. In consideration of the mutual covenants and
promises contained herein, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged by the parties hereto,
the parties agree as follows:
1. EMPLOYMENT. The Company hereby employs the Executive in such
position and capacity as the Executive and the Company shall from time to time
determine, and the Executive accepts such employment. The Executive shall have
the duties, responsibilities and authority as are delegated to her by the
Company.
2. PERFORMANCE. The Executive agrees to devote her entire
business time, attention and energies to the business and interests of the
Company during the term of this Agreement (the "Employment Term"). The Executive
agrees to abide by the rules, regulations, instructions, personnel practices and
policies of the Company and any changes therein which may be adopted from time
to time by the Company. The Executive acknowledges receipt of copies of all such
rules and policies committed to writing as of the date of this Agreement.
3. EMPLOYMENT TERM. The Executive shall be deemed to be an
at-will employee of the Company and the Executive's employment with the Company
may be terminated by the Company at any time for any reason or no reason, with
or without cause.
4. COMPENSATION AND BENEFITS.
4.1 SALARY. During the Employment Term, the Company shall
pay the Executive an annual base salary, payable in accordance with the
Company's normal payroll practice, subject to withholding and other applicable
taxes, at the annualized rate determined from time to time by the Board of
Directors.
4.2 ADDITIONAL BENEFITS. The Executive shall be entitled
to participate in all bonus and benefit programs that the Company establishes
and makes available to its executive officers, to the extent that Executive's
position, tenure, salary, age, health and other qualifications make her eligible
to participate.
<PAGE> 2
4.3 REIMBURSEMENT OF EXPENSES. The Company shall
reimburse the Executive for all reasonable expenses incurred or paid by the
Executive in connection with the performance of her duties, responsibilities or
services under this Agreement, upon presentation by the Executive of
documentation, expense statements, vouchers and/or such other supporting
information as the Company may require.
5. NON-COMPETITION AND NON-SOLICITATION AGREEMENT. On the date
hereof, the Company and the Executive shall enter into a Non-Competition and
Non-Solicitation Agreement substantially in the form attached hereto as EXHIBIT
A, and such agreement shall be incorporated herein by this reference and made a
part hereof as if set forth herein in its entirety.
6. CHANGE IN CONTROL.
6.1 Notwithstanding any other provision of this
Agreement, if a Change in Control (as such term is defined below) shall have
occurred, upon the termination of employment of the Executive after such Change
in Control (i) by the Company other than for cause or (ii) by the Executive for
good reason, the following severance payments and arrangements (less applicable
deductions for social security, payroll and other applicable taxes) shall be
made for the benefit of the Executive:
(a) cash payments in bi-weekly installments at
the Executive's current bi-weekly base salary at the time of termination (less
applicable deductions) for a period equal to 24 months, commencing with the
month immediately succeeding the month during which the termination occurred;
(b) normal employee medical benefits shall be
continued for the Executive for a period equal to 24 months, commencing with the
month immediately succeeding the month during which the termination occurred;
(c) a lump sum cash payment in an amount equal
to 24 times the current monthly value of the other benefits otherwise payable to
the Executive at the time of termination;
(d) payment of bonuses otherwise earned but not
yet paid to the Executive under Section 4 through the date of termination; and
(e) all stock options granted to the Executive
which shall not have vested as of the time of termination shall thereupon
automatically vest and be immediately exercisable in full, provided that any
such acceleration of vesting shall in every event be subject to the terms of any
stock option plan under which such stock options are granted.
-2-
<PAGE> 3
Notwithstanding the foregoing, the severance payments and
arrangements set forth in paragraphs (a) and (b) above shall cease in the event
the Executive commences alternate employment with (i) base salary equal to or
greater than the Executive's base salary at the time of termination and (ii)
comparable employee medical benefits.
For the purposes of this Section 6, cause shall mean any
willful misconduct by the Executive which affects the business reputation of the
Company or willful failure by the Executive to perform her material
responsibilities to the Company (including, without limitation, breach by the
Executive of any provision of any employment, consulting, advisory,
nondisclosure, non-competition or other similar agreement between the Executive
and the Company). For the purposes of this Section 6, good reason shall mean any
significant diminution in the Executive's title, authority or responsibilities
or any reduction in the Executive's base salary.
6.2 For purposes of this Agreement, a "Change in Control"
shall mean:
(a) any merger or consolidation which results in
the voting securities of the Company outstanding immediately prior thereto
representing immediately thereafter (either by remaining outstanding or by being
converted into voting securities of the surviving or acquiring entity) less than
50% of the combined voting power of the voting securities of the Company or such
surviving or acquiring entity outstanding immediately after such merger or
consolidation;
(b) individuals who, as of July 1, 1999,
constitute the Board (the "Incumbent Board") cease for any reason to constitute
at least a majority of the Board; provided, however, that any individual
becoming a director subsequently to the date hereof whose election, or
nomination for election by the Company's stockholders, was approved by a vote of
at least a majority of the directors then comprising the Incumbent Board shall
be considered as though such individual were a member of the Incumbent Board
(except that this proviso shall not apply to any individual whose initial
assumption of office as a director occurs as a result of an actual or threatened
election contest with respect to the election or removal of directors or other
actual or threatened solicitation of proxies or consents other than by or on
behalf of the Board); or
(c) any sale of all or substantially all of the
assets of the Company.
-3-
<PAGE> 4
7. PROPRIETARY INFORMATION AND DEVELOPMENTS.
7.1 PROPRIETARY INFORMATION.
(a) The Executive agrees that all information,
whether or not in writing, of a private, secret or confidential nature
concerning the Company's business, business relationships or financial affairs
(collectively, "Proprietary Information") is and shall be the exclusive property
of the Company. By way of illustration, but not limitation, Proprietary
Information may include inventions, products, processes, methods, techniques,
formulas, compositions, compounds, projects, developments, plans, research data,
clinical data, financial data, personnel data, computer programs, customer and
supplier lists, and contacts at or knowledge of customers or prospective
customers of the Company. The Executive will not disclose any Proprietary
Information to any person or entity other than employees of the Company or use
the same for any purposes (other than in the performance of her duties as an
employee of the Company) without written approval by an officer of the Company,
either during or after her employment with the Company, unless and until such
Proprietary Information has become public knowledge without fault by the
Executive.
(b) The Executive agrees that all files,
letters, memoranda, reports, records, data, sketches, drawings, laboratory
notebooks, program listings, or other written, photographic, or other tangible
material containing Proprietary Information, whether created by the Executive or
others, which shall come into her custody or possession, shall be and are the
exclusive property of the Company to be used by the Executive only in the
performance of her duties for the Company. All such materials or copies thereof
and all tangible property of the Company in the custody or possession of the
Executive shall be delivered to the Company, upon the earlier of (i) a request
by the Company or (ii) termination of her employment. After such delivery, the
Executive shall not retain any such materials or copies thereof or any such
tangible property.
(c) The Executive agrees that her obligation not
to disclose or to use information and materials of the types set forth in
paragraphs (a) and (b) above, and her obligation to return materials and
tangible property, set forth in paragraph (b) above, also extends to such types
of information, materials and tangible property of customers of the Company or
suppliers to the Company or other third parties who may have disclosed or
entrusted the same to the Company or to the Executive.
7.2 DEVELOPMENTS.
(a) The Executive will make full and prompt
disclosure to the Company of all inventions, improvements, discoveries, methods,
developments, software, and works of authorship, whether patentable or not,
which are created, made, conceived or reduced to practice by her or under her
direction or jointly with others during her employment by the Company, whether
or not during normal working hours or on the premises of the Company (all of
which are collectively referred to in this Agreement as "Developments").
-4-
<PAGE> 5
(b) The Executive agrees to assign and does
hereby assign to the Company (or any person or entity designated by the Company)
all her right, title and interest in and to all Developments and all related
patents, patent applications, copyrights and copyright applications. However,
this Section 7.2(b) shall not apply to Developments which do not relate to the
present or planned business or research and development of the Company and which
are made and conceived by the Executive not during normal working hours, not on
the Company's premises and not using the Company's tools, devices, equipment or
Proprietary Information. The Executive understands that, to the extent this
Agreement shall be construed in accordance with the laws of any state which
precludes a requirement in an employee agreement to assign certain classes of
inventions made by an employee, this Section 7.2(b) shall be interpreted not to
apply to any invention which a court rules and/or the Company agrees falls
within such classes. The Executive also hereby waives all claims to moral rights
in any Developments.
(c) The Executive agrees to cooperate fully with
the Company, both during and after her employment with the Company, with respect
to the procurement, maintenance and enforcement of copyrights, patents and other
intellectual property rights (both in the United States and foreign countries)
relating to Developments. The Executive shall sign all papers, including,
without limitation, copyright applications, patent applications, declarations,
oaths, formal assignments, assignments of priority rights, and powers of
attorney, which the Company may deem necessary or desirable in order to protect
its rights and interests in any Development. The Executive further agrees that
if the Company is unable, after reasonable effort, to secure the signature of
the Executive on any such papers, any executive officer of the Company shall be
entitled to execute any such papers as the agent and the attorney-in-fact of the
Executive, and the Executive hereby irrevocably designates and appoints each
executive officer of the Company as her agent and attorney-in-fact to execute
any such papers on her behalf, and to take any and all actions as the Company
may deem necessary or desirable in order to protect its rights and interests in
any Development, under the conditions described in this sentence.
7.3 OTHER AGREEMENTS. The Executive hereby
represents that, except as the Executive has disclosed in writing to the
Company, the Executive is not bound by the terms of any agreement with any
previous employer or other party to refrain from using or disclosing any trade
secret or confidential or proprietary information in the course of her
employment with the Company or to refrain from competing, directly or
indirectly, with the business of such previous employer or any other party. The
Executive further represents that her performance of all the terms of this
Agreement and as an employee of the Company does not and will not breach any
agreement to keep in confidence proprietary information, knowledge or data
acquired by the Executive in confidence or in trust prior to her employment with
the Company, and the Executive will not disclose to the Company or induce the
Company to use any confidential or proprietary information or material belonging
to any previous employer or others.
-5-
<PAGE> 6
8. ENTIRE AGREEMENT. This Agreement constitutes the entire
agreement between the parties and supersedes all prior agreements and
understandings, whether written or oral, relating to the subject matter of this
Agreement.
9. AMENDMENT. This Agreement may be amended or modified only by a
written instrument executed by both the Company and the Executive.
10. GOVERNING LAW. This Agreement shall be construed, interpreted
and enforced in accordance with the laws of the State of Delaware.
11. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon
and inure to the benefit of both parties and their respective successors and
assigns, including any corporation with which or into which the Company may be
merged or which may succeed to its assets or business, provided, however, that
the obligations of the Executive are personal and shall not be assigned by him.
12. MISCELLANEOUS.
(a) No delay or omission by the Company or the Executive
in exercising any right under this Agreement shall operate as a waiver of that
or any other right. A waiver or consent given by the Company or the Executive on
any one occasion shall be effective only in that instance and shall not be
construed as a bar or waiver of any right on any other occasion.
(b) The captions of the sections of this Agreement are
for convenience of reference only and in no way define, limit or affect the
scope or substance of any section of this Agreement.
(c) In case any provision of this Agreement shall be
invalid, illegal or otherwise unenforceable, the validity, legality and
enforceability of the remaining provisions shall in no way be affected or
impaired thereby.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year set forth above.
-6-
<PAGE> 7
ECC INTERNATIONAL CORP.
By: /s/ James C. Garrett
------------------------------------
Name: James C. Garrett
Title: President
EXECUTIVE
/s/ Melissa Van Valkenburgh
------------------------------------
Melissa Van Valkenburgh
-7-
<PAGE> 1
EXHIBIT 10.7
ECC INTERNATIONAL CORP.
NON-COMPETITION AND NON-SOLICITATION AGREEMENT
This Agreement is made between ECC International Corp., a Delaware
corporation (hereinafter referred to collectively with its subsidiaries as the
"Company"), and Melissa Van Valkenburgh (the "Employee").
WHEREAS, the Company and the Employee have entered into an Employment
Agreement on the date hereof (the "Employment Agreement");
NOW, THEREFORE, in consideration of the foregoing, the employment of
the Employee by the Company and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged by the parties hereto,
the Employee and the Company agree as follows:
1. NON-COMPETITION.
(a) While the Employee is employed by the Company, for a period of
two years after the termination or cessation of such employment for any reason,
and for any period during which the Employee shall receive severance payments
and arrangements pursuant to Section 6 of the Employment Agreement, the Employee
will not directly or indirectly:
(i) as an individual proprietor, partner,
stockholder, officer, employee, director, joint venturer,
investor, lender, consultant, or in any other capacity
whatsoever (other than as the holder of not more than one
percent of the combined voting power of the outstanding stock
of a publicly held company), develop, design, produce, market,
sell or render (or assist any other person in developing,
designing, producing, marketing, selling or rendering)
products or services competitive with those developed,
designed, produced, marketed, sold or rendered by the Training
and Simulation Business of the Company while the Employee was
employed by the Company; or
(ii) solicit, divert or take away, or attempt to
divert or to take away, the business or patronage of any of
the clients, customers or accounts, or prospective clients,
customers or accounts, of the Company which were contacted,
solicited or served by the Employee while employed by the
Company.
<PAGE> 2
(b) If the Employee violates the provisions of Section 1(a), the
Employee shall continue to be bound by the restrictions set forth in Section
1(a) until a period of two years has expired without any violation of such
provisions.
2. NON-SOLICITATION.
(a) While the Employee is employed by the Company, for a period of
two years after the termination or cessation of such employment for any reason,
and for any period during which the Employee shall receive severance payments
and arrangements pursuant to Section 6 of the Employment Agreement, the Employee
will not directly or knowingly indirectly recruit, solicit or hire any employee
of the Company, or induce or attempt to induce any employee of the Company to
terminate his/her employment with, or otherwise cease his/her relationship with,
the Company.
(b) If the Employee violates the provisions of Section 2(a), the
Employee shall continue to be bound by the restrictions set forth in Section
2(a) until a period of two years has expired without any violation of such
provisions.
3. MISCELLANEOUS.
(a) NO CONFLICT. The Employee represents that the execution and
performance by her of this Agreement does not and will not conflict with or
breach the terms of any other agreement by which the Employee is bound.
(b) NOT EMPLOYMENT CONTRACT. The Employee acknowledges that this
Agreement does not constitute a contract of employment and does not imply that
the Company will continue her employment for any period of time.
(c) INTERPRETATION. If any restriction set forth in Sections 1 or
2 is found by any court of competent jurisdiction to be unenforceable because it
extends for too long a period of time or over too great a range of activities or
in too broad a geographic area, it shall be interpreted to extend only over the
maximum period of time, range of activities or geographic area as to which it
may be enforceable.
(d) SEVERABILITY. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement.
(e) WAIVER OF RIGHTS. No delay or omission by the Company in
exercising any right under this Agreement will operate as a waiver of that or
any other right. A waiver or consent given by the Company on any one occasion is
effective only in that instance and will not be construed as a bar to or waiver
of any right on any other occasion.
-2-
<PAGE> 3
(f) EQUITABLE REMEDIES. The restrictions contained in this
Agreement are necessary for the protection of the business and goodwill of the
Company and are considered by the Employee to be reasonable for such purpose.
The Employee agrees that any breach of this Agreement is likely to cause the
Company substantial and irrevocable damage and therefore, in the event of any
such breach, the Employee agrees that the Company, in addition to such other
remedies which may be available, shall be entitled to specific performance and
other injunctive relief.
(g) ASSIGNABILITY. The Company may assign this Agreement to any
other corporation or entity which acquires (whether by purchase, merger,
consolidation or otherwise) all or substantially all of the business and/or
assets of the Company.
(h) GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware. Any action,
suit, or other legal proceeding which is commenced to resolve any matter arising
under or relating to any provision of this Agreement shall be commenced only in
a court of the State of Delaware (or, if appropriate, a federal court located
within Delaware), and the Company and the Employee each consents to the
jurisdiction of such a court.
(i) LEGAL FEES. In the event that legal proceedings are commenced
by the Employee against the Company, or by the Company against the Employee, in
connection with this Agreement or the transactions contemplated hereby, the
party or parties which do not prevail in such proceedings shall pay the
reasonable attorneys' fees and other costs and expenses, including investigation
costs, incurred by the prevailing party in such proceedings.
THE EMPLOYEE ACKNOWLEDGES THAT SHE HAS CAREFULLY READ THIS AGREEMENT
AND UNDERSTANDS AND AGREES TO ALL OF THE PROVISIONS IN THIS AGREEMENT.
WITNESS our hands and seals:
ECC INTERNATIONAL CORP.
Date: August 9, 1999 By: /S/ JAMES C. GARRETT
--------------------------------
Name: James C. Garrett
Title: President
Date: August 9, 1999 /s/ Melissa Van Valkenburgh
--------------------------------
Melissa Van Valkenburgh
-3-
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