<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
FILED BY THE REGISTRANT [X] FILED BY A PARTY OTHER THAN THE REGISTRANT [ ]
--------------------------------------------------------------------------------
Check the appropriate box:
[ ] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
ECC International Corp.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
PAYMENT OF FILING FEE (CHECK THE APPROPRIATE BOX):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee is
calculated and state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the form or schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
--------------------------------------------------------------------------------
<PAGE> 2
ECC INTERNATIONAL CORP.
October 11, 2000
Dear Fellow Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders of
ECC International Corp. to be held at 2001 West Oak Ridge Road in Orlando,
Florida, on November 8, 2000 at 10:00 a.m., Eastern Standard Time. The Board of
Directors and management look forward to personally greeting those stockholders
able to attend.
At this meeting, as set forth in the accompanying Notice of Annual Meeting
and Proxy Statement, stockholders will be asked to consider and act upon: (i)
the election of the Board of Directors to serve for a one-year term and (ii) the
ratification of the selection of PricewaterhouseCoopers LLP as the Company's
independent public accountants for the current fiscal year.
Your vote is important, regardless of the number of shares you own. We urge
you to sign, date and mail the enclosed proxy card as soon as possible, even if
you currently plan to attend the annual meeting. This will not prevent you from
voting in person, but will ensure that your vote is counted if you are unable to
attend the meeting.
On behalf of the Board of Directors, thank you for your continued support.
Sincerely,
/s/ JAMES C. GARRETT
JAMES C. GARRETT
President and
Chief Executive Officer
<PAGE> 3
ECC INTERNATIONAL CORP.
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To the Stockholders of
ECC INTERNATIONAL CORP.:
Notice is hereby given that the Annual Meeting of Stockholders of ECC
International Corp., a Delaware corporation (the "Company"), will be held at
2001 West Oak Ridge Road in Orlando, Florida, on November 8, 2000 at 10:00 a.m.,
Eastern Standard Time (the "Meeting"), to consider and act upon the following
matters:
1. To elect a Board of Directors to serve until the next Annual
Meeting of Stockholders of the Company or until their successors are duly
elected and qualified.
2. To ratify the selection of PricewaterhouseCoopers LLP as the
Company's independent public accountants for the current year.
3. To transact such other business, if any, as may properly come
before the Meeting and any adjournments thereof.
The Board of Directors has no knowledge of any other business to be
transacted at the Meeting.
Holders of record of the Company's Common Stock, $.10 par value per share,
as of the close of business on October 2, 2000 will be entitled to notice of and
to vote at the Meeting and any adjournments thereof. A list of stockholders is
open for examination to any stockholder at the principal executive offices of
the Company, 2001 West Oak Ridge Road, Orlando, Florida 32809-3803 and will be
available at the Meeting.
By Order of the Board of Directors,
/s/ Melissa Van Valkenburgh
Melissa A. Van Valkenburgh,
Secretary
Orlando, Florida
October 11, 2000
WHETHER OR NOT YOU EXPECT TO BE PRESENT AT THE MEETING, PLEASE PROMPTLY
SIGN, DATE AND MAIL THE ENCLOSED PROXY CARD. IF YOU ARE PRESENT AT THE MEETING,
YOU MAY WITHDRAW YOUR PROXY AND VOTE YOUR SHARES PERSONALLY.
<PAGE> 4
ECC INTERNATIONAL CORP.
2001 WEST OAK RIDGE ROAD
ORLANDO, FL 32809-3803
------------------------
PROXY STATEMENT
FOR THE ANNUAL MEETING OF STOCKHOLDERS TO BE
HELD ON NOVEMBER 8, 2000
This Proxy Statement is furnished in connection with the solicitation by
the Board of Directors of ECC International Corp., a Delaware corporation (the
"Company"), of proxies for use at the Annual Meeting of Stockholders of the
Company to be held at 2001 West Oak Ridge Road in Orlando, Florida, on November
8, 2000 at 10:00 a.m., Eastern Standard Time (the "Meeting"), and all
adjournments thereof. The matters to be considered and acted upon at the Meeting
are described below in this Proxy Statement.
All shares represented by proxies will be voted in the manner specified on
the proxy. Any proxy not specifying the contrary will be voted in the election
of directors for the Board of Directors' nominees and in favor of the proposal
regarding the selection of accountants. Stockholders giving proxies may revoke
them by written request to the Secretary of the Company at any time prior to
their being voted.
THE NOTICE OF MEETING, THIS PROXY STATEMENT, THE ENCLOSED PROXY AND THE
COMPANY'S ANNUAL REPORT FOR THE FISCAL YEAR ENDED JUNE 30, 2000 ARE FIRST BEING
SENT OR GIVEN TO THE COMPANY'S STOCKHOLDERS ON OR ABOUT OCTOBER 11, 2000. THE
COMPANY WILL, UPON WRITTEN REQUEST OF ANY STOCKHOLDER, FURNISH WITHOUT CHARGE A
COPY OF ITS ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED JUNE 30, 2000, AS
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION, WITHOUT EXHIBITS. PLEASE
ADDRESS ALL SUCH REQUESTS TO THE COMPANY, 2001 WEST OAK RIDGE ROAD, ORLANDO,
FLORIDA 32809-3803, ATTENTION: SECRETARY. EXHIBITS WILL BE PROVIDED UPON WRITTEN
REQUEST AND PAYMENT OF AN APPROPRIATE PROCESSING FEE.
VOTING SECURITIES AND VOTES REQUIRED
Holders of record of the Company's Common Stock, $.10 par value per share
(the "Common Stock"), as of the close of business on October 2, 2000 (the
"Record Date"), will be entitled to notice of and to vote at the Meeting and any
adjournments thereof. As of the Record Date, there were outstanding and entitled
to vote 8,140,139 shares of Common Stock. With respect to each matter to come
properly before the Meeting, each holder of shares of Common Stock will be
entitled to one vote per share.
In keeping in line with current corporate governance practices and the goal
to increase shareholder value, on August 9, 2000 the Board of Directors
terminated the Rights Agreement dated as of August 27, 1996 between the Company
and Mellon Bank, N.A., as amended (the "Rights Agreement") and to redeem all
outstanding rights ("the Rights"). Pursuant to the terms of the Rights
Agreement, on September 1, 2000 all stockholders of record at the close of
business on August 9, 2000 received $0.01 for each Right held.
The holders of a majority of the shares of Common Stock issued and
outstanding and entitled to vote at the Meeting shall constitute a quorum for
the transaction of business at the Meeting. Shares of Common Stock present in
person or represented by proxy (including shares which abstain or do not vote
with respect to one or more of the matters presented for stockholder approval)
will be counted for purposes of determining whether a quorum exists at the
Meeting.
<PAGE> 5
The affirmative vote of the holders of a plurality of the shares of Common
Stock present or represented at the Meeting is required for election of
directors. The affirmative vote of the holders of a majority of the shares of
Common Stock present or represented at the Meeting is required for the
ratification of the selection of PricewaterhouseCoopers LLP as the Company's
independent auditors for the current fiscal year.
Shares which abstain from voting as to a particular matter, and shares held
in "street name" by brokers or nominees, who indicate on their proxies that they
do not have discretionary authority to vote such shares as to a particular
matter, will not be counted as votes in favor of such matter, and will also not
be counted as votes cast or shares voting on such matter. Accordingly,
abstentions and "broker non-votes" will have no effect on the voting on each
matter that requires the affirmative vote of a certain percentage of the votes
cast or shares voting on such matter.
All shares represented by properly executed proxies will, unless such
proxies have previously been revoked, be voted at the Meeting in accordance with
the directions of the proxies. If no direction is indicated, the shares will be
voted as recommended by the Board of Directors. A stockholder executing and
returning a proxy has the power to revoke it at any time before it is voted by
providing written notice of such revocation to the Secretary of the Company, by
submitting a validly executed later-dated proxy, or by attending the Meeting and
voting in person. The mere presence of a stockholder at the Meeting, however,
will not constitute a revocation of a previously submitted proxy.
2
<PAGE> 6
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information, as of August 31, 2000,
with respect to the beneficial ownership of Common Stock by (i) each person
known by the Company to beneficially own more than five percent of the
outstanding shares of Common Stock, (ii) each director and nominee for director,
(iii) each executive officer named in the Summary Compensation Table under the
heading "Executive Compensation" below and (iv) all directors and executive
officers of the Company as a group:
<TABLE>
<CAPTION>
SHARES OF PERCENTAGE OF
NAME OF COMMON STOCK OUTSTANDING SHARES
BENEFICIAL OWNER BENEFICIALLY OWNED(1) OF COMMON STOCK(2)
---------------- --------------------- ------------------
<S> <C> <C>
5% STOCKHOLDERS:
Dimensional Fund Advisors, Inc.
1299 Ocean Avenue, 11th Floor
Santa Monica, CA 90401................................ 602,264(3) 7.2%
Franklin Advisory Services, LLC
77 Mariners Island Blvd
San Mateo, CA 94404................................... 630,000(4) 7.5%
Steel Partners II, L.P.
150 E. 52nd Street
21st Floor
New York, NY 10022.................................... 2,290,200(5) 27.3%
DIRECTORS:
Bruce A. Beda........................................... 24,141(6) *
Julian J. Demora........................................ 479,776(7) 5.7%
James C. Garrett........................................ 340,000(8) 4.0%
James R. Henderson...................................... -- --
Jesse L. Krasnow........................................ 104,252(9) 1.2%
Warren G. Lichtenstein.................................. 2,295,200(10) 27.3%
Thomas E. McGrath....................................... 79,162(11) *
Merrill A. McPeak....................................... 95,704(12) 1.1%
Robert F. Mehmel........................................ -- --
OTHER NAMED EXECUTIVE OFFICERS:
Glenn C. Andrew......................................... 70,783(13) *
Melissa A. Van Valkenburgh.............................. 50,557(14) *
Charles B. Engle........................................ 35,075(15) *
All directors and executive officers as a group
(12 persons)........................................... 3,574,650(16) 42.6%
</TABLE>
---------------
* Percentage is less than 1% of the total number of outstanding shares of
Common Stock.
(1) The number of shares of Common Stock beneficially owned by each person or
entity is determined under rules promulgated by the Securities and Exchange
Commission (the "Commission"). Under such rules, beneficial ownership
includes any shares as to which the person or entity has sole or shared
voting power or investment power, and also includes any shares which the
person or entity has the right to acquire within 60 days after August 31,
2000. Any references in these footnotes to stock options held by a person
shall refer only to stock options currently exercisable or exercisable
within 60 days after August 31, 2000. Unless otherwise indicated, each
person or entity referred to above has sole voting and
3
<PAGE> 7
investment power with respect to the shares listed. The inclusion herein of
any shares deemed beneficially owned does not constitute an admission of
beneficial ownership of such shares.
(2) For purposes of this table, the number of outstanding shares of Common
Stock is adjusted for each person to include the number of shares of Common
Stock subject to stock options held by such person.
(3) On February 1, 2000, Dimensional Fund Advisors Inc., filed a Schedule 13G
pursuant to Section 13 of the Exchange Act and the rules promulgated
thereunder reporting its beneficial ownership of shares of Common Stock.
Dimensional Fund Advisors Inc. reported sole dispositive power over 602,264
and sole voting power over 602,264 of such beneficially owned shares of
Common Stock.
(4) The foregoing information is derived from information provided by Franklin
Advisory Services, LLC to the Company.
(5) The foregoing information is derived from information provided by Steel
Partners II, L.P. to the Company.
(6) Includes 10,000 shares subject to outstanding stock options.
(7) Includes 469,776 shares which are held in trust for the benefit of Mr.
Demora and 10,000 shares subject to outstanding stock options.
(8) Includes 290,000 shares subject to outstanding stock options.
(9) Includes 20,100 shares which are held in trust for the benefit of Mr.
Krasnow's three children and 84,152 shares held jointly by Mr. Krasnow and
his wife, Maris.
(10) Includes shares described in (5). Mr. Lichtenstein is the Chairman of the
Board for Steel Partners L.L.C., the general partner of Steel Partners II,
L.P., and as a result, may be considered the beneficial owner of the shares
held by Steel Partners II, L.P., although Mr. Lichtenstein disclaims such
beneficial ownership, except as to his pecuniary interest therein.
(11) Includes 20,000 shares subject to outstanding stock options.
(12) Includes 65,000 shares subject to outstanding stock options.
(13) Consists of 70,086 shares subject to outstanding stock options.
(14) Includes 50,000 shares subject to outstanding stock options.
(15) Consists of 35,000 shares subject to outstanding stock options.
(16) Includes the shares described in notes 6-15 above.
4
<PAGE> 8
ELECTION OF DIRECTORS
The persons named in the enclosed proxy (James C. Garrett and Jesse
Krasnow) will vote to elect as directors of the Company the seven nominees named
below unless authority to vote for the election of any or all of the nominees is
withheld by marking the proxy to that effect. Each nominee has consented to
being named in this Proxy Statement and to serve as a director if elected.
Each director will be elected to hold office until the next Annual Meeting
of Stockholders or until his successor is duly elected and qualified. If for any
reason any nominee should become unavailable for election prior to the Meeting,
the person acting under the proxy may vote the proxy for the election of a
substitute. It is not presently expected that any of the nominees will be
unavailable. The affirmative vote of the holders of a plurality of the shares of
the Common Stock of the Company present or represented at the Meeting is
necessary for the election of the nominees named below.
Set forth below are the name and age of each nominee for the Board and the
positions and offices held by him, his principal occupation and business
experience for at least the past five years, the names of other publicly held
companies of which he serves as a director and the year of the commencement of
his term as a director of the Company. Information with respect to the number of
shares of Common Stock beneficially owned by each director as of August 31,
2000, appears under "Security Ownership of Certain Beneficial Owners and
Management." There are no family relationships among any of the nominees for
director and executive officers of the Company.
JULIAN J. DEMORA, age 74, became a director in 1992. Mr. Demora is
President of the construction and development company, Key Realty and
Development, Inc.
JAMES C. GARRETT, age 56, is President and Chief Executive Officer of the
Company. He became a director in June 1998. Previously, Dr. Garrett served as
Vice President and General Manager of the Raytheon E-Systems Communications
Division from 1991 to June 1998.
JAMES R. HENDERSON, age 42, became a director in 1999. He has been Vice
President of Operations of Steel Partners L.L.C since August 1999. Prior to
that, Mr. Henderson was employed by Aydin Corporation from June 1996 to June
1999, most recently as President and Chief Operating Officer. Prior to that, Mr.
Henderson was employed by the Unisys Corporation, from May 1980 until May 1996,
most recently as a Senior Financial Executive. He serves on the board of
Tech-Sym Corporation.
JESSE L. KRASNOW, age 51, became a director in 1976. Mr. Krasnow is a
Partner in the private investment firm of Lefferts/Fore Associates.
WARREN G. LICHTENSTEIN, age 35, became a director in 1999. He has been the
Chairman of the Board, Secretary and the Managing Member of Steel Partners
L.L.C., the general partner of Steel Partners II, L.P., since January 1996.
Prior to that Mr. Lichtenstein was Chairman and a director of Steel Partners
Ltd. from 1993 until January 1996. Mr. Lichtenstein serves on the Boards of
Gateway Industries, Inc., Web Financial Corporation, PLM International, Inc.,
CPX Corp., Tech-Sym Corporation and Puroflow Incorporated.
MERRILL A. MCPEAK, age 65, became a director in 1995. He served over
twenty years in senior United States Air Force positions, culminating in four
years as Chief of Staff from 1990 through 1994, retiring with the rank of
General. General McPeak has served as President of McPeak & Associates, a
consulting company, since 1994. General McPeak serves on the Boards of Directors
of Tektronix, Inc., Trans World Airlines, Inc., and Centerspan Communications,
Inc.
ROBERT F. MEHMEL, age 38, is a nominee for the Board. He has been the
Director of Corporate Development for Jabil Circuit, an electronic and
manufacturing company, since July 2000. Previously, he was Vice President of
Planning for L3 Communications, an aerospace and defense company from April 1997
to July 2000.
5
<PAGE> 9
On September 16, 1999, the Company entered into an agreement with Steel
Partners II, L.P., and Warren G. Lichtenstein. Under the agreement, the Company
agreed to cause, and has since caused, Mr. Lichtenstein and Mr. Henderson to be
nominated by the Company's board of directors for election to its board at the
annual meeting of its stockholders that was held on November 10, 1999. The
Company agreed that until the termination of the agreement, the Board will
recommend Messrs. Lichtenstein and Henderson as nominees to stockholders for
election as directors at each annual meeting and the number of members of the
board shall not exceed eight.
In addition, under this agreement, the Company agreed that it shall not
hold the 2001 annual meeting of its stockholders prior to June 30, 2001. The
Company agreed to amend, and has since amended, its by-laws to allow any
director or the entire board to be removed with or without cause at any special
meeting of its stockholders held for such purpose, by the holders of a majority
of the shares present at the meeting and entitled to vote thereat, with such
provision to be in effect from the date immediately following its annual meeting
held in the calendar year 2000 up to and including the date of its annual
meeting held in calendar year 2001. Furthermore, the Company agreed that the
amendment to its by-laws shall not be amended prior to the election of Mr.
Lichtenstein and Mr. Henderson to the board and thereafter may not be amended
without the consent of Mr. Lichtenstein and Mr. Henderson.
Under the agreement, Steel Partners and Mr. Lichtenstein agree that they
shall take all action such that the shares beneficially owned by them are voted,
at any annual meeting or special meeting or by written consent in lieu of a
meeting, for the slate of director nominees recommended by the majority of the
directors of the Company. They agreed to be present, in person or by proxy, at
all meetings of the Company's stockholders so that all of the shares
beneficially owned by them may be counted for the purpose of determining the
presence of a quorum at such meetings. They agreed that neither of them shall
deposit any of the shares beneficially owned by them in a voting trust or make
those shares subject to any arrangement or agreement with regard to the voting
of such shares. They agreed that neither of them shall join a partnership,
limited partnership, syndicate or other group, or act in concert with any other
to acquire, hold, vote or dispose of any of the shares beneficially owned by
them, or otherwise become a "person" within the meaning of Section 13(d)(3) of
the Securities Exchange Act of 1934, as amended. They agreed that neither of
them shall call or join in a call for a special meeting of the Company's
stockholders.
The agreement is governed by the laws of the State of Delaware and shall
terminate on its terms immediately following the date of the Company's annual
meeting for the calendar year 2000, unless sooner terminated by either party due
to the failure of the other party to perform or observe any material terms of
the agreement.
BOARD AND COMMITTEE MEETINGS
During the fiscal year ended June 30, 2000, the Board held four regular
meetings and eight special teleconference meetings. Every member of the Board
attended at least 80% of the total number of meetings of the Board and of all
committees of the Board on which they respectively served. The Company has an
Audit Committee and an Organization and Compensation Committee. The Company does
not have a Nominating Committee.
The principal functions of the Audit Committee are to make recommendations
to the Board regarding the appointment of the Company's independent public
accountants, review and approve any major changes in accounting policy, review
the arrangements for, and the scope and results of, the independent audit,
review and approve the independent accountants' proposed fees for audit and
non-audit services, and review the
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<PAGE> 10
Company's policies and procedures for compliance with disclosure requirements
with respect to conflicts of interest and for prevention of unethical,
questionable or illegal payments. Messrs. Krasnow, Beda and Henderson compose
the Audit Committee of the Board. All of the members of the Audit Committee are
independent. Messrs. Krasnow and Beda attended all four meetings of that
Committee held during fiscal year 2000 and Mr. Henderson attended the two
meetings of that Committee held since Mr. Henderson joined the Committee in
November 1999.
The principal functions of the Organization and Compensation Committee are
to advise and guide the Board in determining executive officer compensation and
to assist the Board in the administration of the Company's stock option plans.
Messrs. McGrath, Demora and McPeak compose the Organization and Compensation
Committee of the Board. Mr. McPeak attended all five meetings held during fiscal
year 2000. Mr. Demora attended four of the meetings and Mr. McGrath attended the
two meetings of that Committee held since Mr. McGrath joined the Committee in
November 1999.
DIRECTORS' COMPENSATION
All of the directors are reimbursed for expenses incurred in connection
with their attendance at each Board and Committee meeting. Each non-employee
director is paid annual fees of $20,000 plus $1,000 for each regular Board and
Committee meeting attended and $500 for each special teleconference meeting that
exceeds one-half hour. The Chairman of the Board, currently General McPeak, is
paid annual fees of $24,000 plus $1,000 for each Board and Committee meeting
attended and $500 for each special teleconference meeting that exceeds one-half
hour. Pursuant to the Company's 1997 Director Equity Compensation Plan, one-half
of the annual fees payable to each director were paid in the form of
unrestricted shares of Common Stock except Messrs. Lichtenstein and Henderson
who received all their compensation in cash.
In accordance with the 1997 Director Equity Compensation Plan, upon
election the Chairman of the Board receives 25,000 shares of stock options and
5,000 shares of stock options for each annual election thereafter to the
Chairman's position. Other directors elected to the Board receive 10,000 shares
of stock options upon election with exception of Messrs. Lichtenstein and
Henderson.
Beginning in fiscal year 2001, each Board member has the option to make an
annual election to receive their compensation in either cash only or half-cash
and half-stock with exception of Messrs. Lichtenstein and Henderson.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Based solely on its review of copies of reports filed by reporting persons
of the Company pursuant to Section 16(a) of the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), the Company believes that during fiscal year
2000 all filings required to be made by reporting persons of the Company were
timely made in accordance with the requirements of the Exchange Act.
7
<PAGE> 11
EXECUTIVE COMPENSATION
EMPLOYMENT AND SEVERANCE AGREEMENTS
In June 1998, the Company and Dr. Garrett entered into an employment
agreement providing for the employment of Dr. Garrett as the President and Chief
Executive Officer of the Company for a three-year term ending on June 28, 2001.
The agreement provides for an annual base salary of $250,000 as well as annual
cash bonuses and stock option grants upon the satisfaction of certain
agreed-upon goals and objectives. In addition, Dr. Garrett received a cash bonus
of $50,000 upon the execution of the agreement, as well as reimbursement for
certain relocation expenses. In connection with the agreement, Dr. Garrett was
granted stock options to purchase an aggregate of 250,000 shares of common stock
from the Company at an exercise price of $3.125 per share, vesting over three
years, and purchased an additional 50,000 shares for an aggregate purchase price
of $156,250 consisting of (i) $10,000 in cash and (ii) a promissory note in the
principal amount of $146,250. The promissory note accrues interest at the rate
of 5.58% per year and matures on June 15, 2001. Upon the expiration of the
agreement without renewal, Dr. Garrett shall be entitled to receive continuing
base salary and benefits for a period of 12 months. In the event that his
employment with the Company is terminated without cause, for good reason, or
after a Change in Control (each as defined therein), Dr. Garrett shall be
entitled to receive continuing base salary and benefits for the remainder of the
term of the agreement or for a period of 24 months, whichever is greater.
Pursuant to a non-competition and non-solicitation agreement with the Company,
Dr. Garrett has agreed not to compete with the Company during the term of his
employment with the Company and for a period of two years thereafter.
In August 1999, the employment agreement with Dr. Garrett was amended.
Pursuant to this agreement, in the event that Dr. Garrett's employment with the
Company is terminated as a result of a Change in Control, he shall be entitled
to receive continuing base salary and benefits for a period of 48 months. The
non-competition and non-solicitation agreement between Dr. Garrett and the
Company was also extended to include the 48 months during which he receives
these payments made under his employment agreement as amended.
In August 1999, Mr. Andrew and Ms. Van Valkenburgh also entered into
employment agreements with the Company. Pursuant to these agreements, each of
them are entitled to receive continuing base salary and benefits for up to 24
months in the event of a termination of employment due to a Change in Control
(as defined in such agreement). Mr. Andrew and Ms. Van Valkenburgh also entered
into a non-competition and non-solicitation agreement pursuant to which they are
prohibited from competing with the Company or soliciting the Company's employees
during the term of employment and for a period of two years thereafter.
The Company has entered into a severance agreement with James B. Conyers,
the Company's former Vice President of Business Development Support, in
connection with the termination of Mr. Conyers' employment as of July 23, 1999.
Mr. Conyers received a lump-sum payment of approximately $63,039 for accrued
vacation benefits and for continuing salary and health and dental coverage for
26 weeks following his termination date.
8
<PAGE> 12
SUMMARY COMPENSATION
The following table sets forth for each of the last three fiscal years
certain information concerning the compensation of the Company's Chief Executive
Officer during the fiscal year ended June 30, 2000 and five other executive
officers of the Company, three of whom were serving as executive officers on
June 30, 2000 (the "Named Executive Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
------------
AWARDS
------------
ANNUAL COMPENSATION SECURITIES
NAME AND --------------------- UNDERLYING ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS OPTIONS COMPENSATION(1)
------------------ ---- --------- -------- ------------ ---------------
<S> <C> <C> <C> <C> <C>
James C. Garrett.................. 2000 $ 250,000 $ 62,500(2) 50,000 $ 54,856
President and Chief 1999 250,000 100,000 -- 20,580
Executive Officer 1998 -- 50,000 250,000 --
Glenn C. Andrew................... 2000 200,000 50,000(2) 20,000 44,595
Executive Vice 1999 145,335 100,000 27,586 21,467
President 1998 -- -- -- --
Melissa A. Van Valkenburgh........ 2000 160,000 48,000(2) 10,000 64,832
Vice President, Finance 1999 43,077 25,000 25,000 739
Chief Financial Officer 1998 -- -- -- --
Charles B. Engle(3)............... 2000 132,000(4) 12,000(2) 20,000 67,937
Vice President of 1999 -- -- -- --
Technical Operations 1998 -- -- -- --
James B. Conyers(5)............... 2000 29,485 -- -- 66,936
Former Vice President, 1999 154,731 -- -- 9,268
Business Development Support 1998 143,845 -- -- 6,447
Jerome Pogorzelski(6)............. 2000 45,154 -- -- 8,767
Former Vice President, 1999 154,154 20,000 -- 8,950
Engineering/Manufacturing 1998 142,246 -- -- 6,361
</TABLE>
---------------
(1) Includes the following: (a) the Company's contributions under the Executive
Savings Plan in 2000 for Messrs. Garrett, Andrew, Engle, Conyers and
Pogorzelski of $11,250, $9,900, $5,815, $516 and $1,874, respectively, and
for Ms. Van Valkenburgh of $4,985; (b) car allowance for Messrs. Garrett and
Andrew of $6,525 and $2,728, respectively; (c) taxes paid by the Company for
Messrs. Garrett, Andrew, Engle, Conyers and Pogorzelski of $11,179, $8,601,
$11,701, $715 and $1,375, respectively, and for Ms. Van Valkenburgh of
$16,150; (d) the Company's match to the 401K Plan in 2000 for Messrs.
Garrett, Andrew, Engle, Conyers and Pogorzelski of $5,125, $5,125, $3,323,
$885 and $1,355, respectively, and for Ms. Van Valkenburgh of $4,800; (e)
relocation allowance for Messrs. Garrett, Andrew and Engle of $14,691,
$13,882, $26,959, respectively, and for Ms. Van Valkenburgh of $36,580; (f)
severance payment to Mr. Conyers of $63,039; (g) stock option payment for
Mr. Pogorzelski of $531; (h) life insurance premiums paid for Messrs.
Garrett, Andrew, Engle, Conyers and Pogorzelski of $6,085, $4,359, $138,
$1,782 and $3,631, respectively, and for Ms. Van Valkenburgh of $2,317; (i)
signing bonus paid to Mr. Engle of $20,000.
9
<PAGE> 13
(2) Consists of bonuses earned during fiscal year 2000, but paid during fiscal
year 2001.
(3) Mr. Engle became Vice President, Engineering and Chief Technical Officer in
August 1999.
(4) Mr. Engle's annualized salary is $160,000.
(5) Mr. Conyers served as Vice President, Business Development Support until
July 1999.
(6) Mr. Pogorzelski served as Vice President, Engineering/Manufacturing until
September 1999.
OPTION GRANTS
The following table sets forth certain information concerning grants of
stock options made during the fiscal year ended June 30, 2000 to each of the
Named Executive Officers. The Company granted no stock appreciation rights
during the fiscal year ended June 30, 2000.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
INDIVIDUAL GRANTS VALUE AT ASSUMED
--------------------------------------------------- ANNUAL RATES OF
NUMBER OF PERCENT OF STOCK PRICE
SECURITIES TOTAL OPTIONS APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OPTION TERM(1)
OPTIONS EMPLOYEES IN PRICE PER EXPIRATION -------------------------
NAME GRANTED FISCAL YEAR SHARE(2) DATE 5% 10%
---- ---------- ------------- --------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
James C. Garrett................ 50,000 27% 3.9375 7/01/09 $123,813.63 $313,768.05
Glenn C. Andrew................. 20,000 11% 3.9375 7/01/09 49,525.45 125,507.22
Melissa A. Van Valkenburgh...... 10,000 5% 3.9375 7/01/09 24,762.73 62,753.61
Charles B. Engle................ 20,000 11% 3.3125 8/30/09 41,664.27 105,585.44
</TABLE>
---------------
(1) Amounts reported in these columns represent amounts that may be realized
upon exercise of the options immediately prior to the expiration of their
term assuming the specified compound rates of appreciation (5% and 10%) on
the market value of the Common Stock on the date of option grant over the
term of the options. These numbers are calculated based on rules promulgated
by the Securities and Exchange Commission and do not reflect the Company's
estimate of future stock price growth. Actual gains, if any, on stock option
exercises and Common Stock holdings are dependent on the timing of such
exercise and the future performance of the Common Stock. There can be no
assurance that the rates of appreciation assumed in this table can be
achieved or that the amounts reflected will be received by the option
holder.
(2) All options were granted at fair market value as determined by the Board of
Directors of the Company on the date of the grant.
10
<PAGE> 14
OPTION EXERCISES AND YEAR-END VALUES
The following table sets forth certain information concerning the exercise
of stock options during the fiscal year ended June 30, 2000 by each of the Named
Executive Officers and the number and value of unexercised options held by each
of the Named Executive Officers on June 30, 2000. No stock appreciation rights
were exercised during fiscal 2000 by the Named Executive Officers or were
outstanding at year-end.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
SHARES AT FISCAL YEAR-END AT FISCAL YEAR-END(2)
ACQUIRED VALUE ------------------------- -------------------------
NAME ON EXERCISE REALIZED(1) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
---- ----------- ----------- ------------------------- -------------------------
<S> <C> <C> <C> <C>
James C. Garrett............... -- -- 245,100/55,000 $48,750/$13,750
Glenn C. Andrew................ -- -- 47,586/0 $43,103/$0
Melissa A. Van Valkenburgh..... -- -- 35,000/0 $17,188/$0
Charles B. Engle............... -- -- 0/20,000 $0/$1,250
</TABLE>
---------------
(1) Represents the difference between the exercise price and the fair market
value of the Common Stock on the date of exercise.
(2) Value based on the last sales price per share ($3.375) of the Company's
Common Stock on June 30, 2000, as reported on the New York Stock Exchange,
less the exercise price.
REPORT OF THE ORGANIZATION AND COMPENSATION COMMITTEE
The Company's Organization and Compensation Committee of the Board is
responsible for determining the compensation of, and compensation policies with
respect to, the executive officers of the Company, including the Chief Executive
Officer. The Organization and Compensation Committee currently consists of
Messrs. McGrath, Demora and McPeak.
The objectives of the Company's executive compensation program are to:
- Attract and retain key executives of outstanding abilities who are
critical to the long-term success of the Company;
- Align executive compensation with the Company's financial performance,
business strategies, values and objectives;
- Enhance the profitability of the Company, and thereby enhance
stockholder value, by linking the financial interests of the Company's
executives with those of the stockholders; and
- Recognize and reward individual performance and responsibility.
11
<PAGE> 15
Executive Compensation Program
The Board, with guidance and input from the Organization and Compensation
Committee, approves the executive compensation program on an annual basis,
including specified levels of compensation for all executive officers. The
Company's executive compensation program has been designed to implement the
objectives described above and is composed of the following fundamental
elements:
- A base salary that is determined by individual contributions and
sustained performance.
- An annual cash bonus that is tied to corporate financial performance
as well as the achievement of individual business-related objectives,
including ability to address the corporate need to increase
profitability.
- A long-term incentive program that rewards executives when stockholder
value is created through an increase in the market value of the
Company's Common Stock.
In general, the Organization and Compensation Committee intends that the
overall total compensation opportunities provided to the executive officers
should reflect competitive compensation for executives with corresponding
responsibilities in selected comparable companies. To the extent determined to
be appropriate, the Organization and Compensation Committee also considers
general economic conditions, the Company's financial performance and the
individual's performance in establishing the compensation opportunities of the
executive officers. Total compensation opportunities for the executive officers
are adjusted over time as necessary to meet this objective. Actual compensation
earned by the executive officers reflects both their contributions to the
Company's actual stockholder value creation and the Company's actual financial
performance. While the targeted total compensation levels for the executive
officers are intended to be competitive, compensation paid in any particular
year may be more or less than the average, depending upon the Company's actual
performance.
Base Salary
Base salaries for executive officers are reviewed by the Organization and
Compensation Committee and are set by the Board at the beginning of each fiscal
year. In determining salary adjustments, the Board considers individual
performance and contributions to the Company, external competitiveness and the
recommendations of the Organization and Compensation Committee and management.
The Board did not award across-the-board salary increases to the Company's
executive officers for fiscal 2000.
Annual Incentive Compensation
Annual incentives for the Company's executive officers are intended to
reflect the Company's belief that management can make significant contributions
to enhance stockholder value by achieving Company objectives and maximizing
earnings. Accordingly, the Company has developed a management bonus plan that
awards cash bonuses based on the achievement of certain objectives, including
addressing issues relating to improvement in long-term corporate earnings,
actual performance versus budget, order backlog, acquisition of new business and
overall Company profitability.
Bonuses for executive officers are discretionary and are determined
annually by the Board after a review of the recommendations of the Organization
and Compensation Committee and management. Bonuses were paid in fiscal 2001
based upon performance in fiscal 2000.
12
<PAGE> 16
Long-Term Incentive Compensation
The Company's long-term incentive compensation program is implemented
through the grant of stock options under the Company's 1991 Option Plan and 1998
Stock Incentive Plan. This program is intended to align executive interests with
the long-term interests of stockholders by linking executive compensation with
stockholder enhancement. In addition, the program motivates executives to
improve long-term stock market performance by allowing them to develop and
maintain a significant, long-term equity ownership position in the Company's
Common Stock. Stock options are granted at prevailing market rates and generally
will have value only if the Company's stock price increases in the future.
Stock option awards are reviewed and considered by the Board, guided by
input and recommendations from management for each participant, the financial
results for the Company and the participant's present equity holdings in the
Company. All executive officers, including the Chief Executive Officer, are
eligible to receive awards under the Company's 1991 Option Plan and 1998 Stock
Incentive Plan.
Section 162(m) of the Internal Revenue Code of 1986, as amended (the
"Code"), generally disallows a tax deduction to public companies for
compensation over $1,000,000 paid to its Named Executive Officers. Qualifying
performance-based compensation will not be subject to the deduction limit if
certain requirements are met. No Named Executive Officer received compensation
exceeding this limit in fiscal year 2000. Although the Company does not
currently intend to qualify its annual incentive awards as performance-based, it
will continue to monitor the impact of Section 162(m) on the Company.
Chief Executive Officer Compensation
In June 1998, Dr. Garrett became the Company's Chief Executive Officer. Dr.
Garrett has a multi-year employment agreement with the Company that fixes his
annual base salary at $250,000 per year. Dr. Garrett also is entitled to receive
annual cash bonuses and stock options upon the satisfaction of agreed-upon
performance goals and objectives. For fiscal year 2000, Dr. Garrett earned a
cash bonus of $62,500. See "Employment Agreements." The Organization and
Compensation Committee believes that this compensation package is comparable to
those of chief executive officers of selected comparable companies and reflects
the Company's qualitative judgment of Dr. Garrett's expected contributions to
the Company during the term of the agreement.
Tom E. McGrath
Julian J. Demora
Merrill A. McPeak
13
<PAGE> 17
STOCK PERFORMANCE GRAPH
The following graph compares cumulative stockholder return on the Company's
Common Stock for the period from June 30, 1995 through June 30, 2000 with the
cumulative total return for (i) a peer group index, determined by the Company
consisting of CAC, Cubic Corporation, EDO Corporation, Evans & Sutherland Corp.,
Firearms Training Systems, Nichols Research Corp and United Industrial
Corporation (the "Peer Group Index") and (ii) the Russell 3000 Aerospace
Industry Index (the "Aerospace Industry Index").
In the preceding fiscal years, the Company's stock performance graph
compared the Company's stock performance with the performance of (i) the Russell
2000 Index and (ii) the Russell 3000 Index. Beginning in fiscal year 1999, the
Company substituted the Peer Group Index for the Russell 2000 Index because the
Company's Board of Directors determined that the Peer Group Index more
accurately reflects the industry sector in which the Company competes as well as
companies of similar size to the Company and, therefore, presents a better
comparison of the performance of the Company's Common Stock against the capital
stock of its peers than does the Russell 2000 Index.
COMPARATIVE FIVE-YEAR TOTAL RETURNS*
ECC INTERNATIONAL CORP., RUSSELL 3000 AEROSPACE, PEER GROUP
(PERFORMANCE RESULTS THROUGH 6/30/2000)
<TABLE>
<CAPTION>
ECC R3000 AEROSPACE PEER GROUP
--- --------------- ----------
<S> <C> <C> <C>
11-Mar-95 100.00 100.00 100.00
31-Mar-96 82.02 137.36 123.60
31-Mar-97 47.19 180.21 133.63
31-Mar-98 29.21 179.08 123.40
31-Mar-99 35.39 191.85 90.69
31-Mar-00 30.34 169.53 115.79
</TABLE>
---------------
Assumes $100 invested at the close of trading on the last trading day preceding
the first day of the fifth preceding fiscal year in ECC Common Stock, Russell
3000 Aerospace and Peer Group.
* Cumulative total return assumes reinvestment of dividends.
SOURCE: Russell/Mellon Analytical Services
14
<PAGE> 18
RATIFICATION OF THE APPOINTMENT OF
INDEPENDENT PUBLIC ACCOUNTANTS
The Board has selected PricewaterhouseCoopers LLP as the Company's
independent public accountants for the fiscal year ending June 30, 2001, subject
to ratification by stockholders at the Meeting. Although stockholder approval of
the Board's selection of PricewaterhouseCoopers LLP is not required by law, the
Board believes that it is advisable to give stockholders an opportunity to
ratify this selection. If this proposal is not approved at the Meeting, the
Board will reconsider the matter. It is not expected that any representative of
PricewaterhouseCoopers LLP will be present at the Meeting.
PricewaterhouseCoopers LLP served as the Company's independent public
accountants during fiscal 2000.
OTHER MATTERS
The Board knows of no business that will be presented for consideration at
the Meeting other than as stated in the Notice of Meeting. If any other business
properly comes before the Meeting, it is the intention of the persons named in
the enclosed proxy to vote or otherwise act in accordance with their judgment on
such matters.
The Company will bear the entire cost of soliciting proxies. In addition to
solicitations by mail, the Company's directors, officers and regular employees
may, without additional remuneration, solicit proxies by telephone, facsimile
and personal interviews. The Company reserves the right to retain outside
agencies for the purpose of soliciting proxies. Brokers, custodians and
fiduciaries in whose names stock is held will be requested to forward proxy
soliciting material to the owners of stock held in their names and the Company
will reimburse them for their reasonable out-of-pocket expenses in connection
with this service.
DEADLINE FOR SUBMISSION OF STOCKHOLDER PROPOSALS FOR THE 2001 ANNUAL MEETING
Any proposal that a stockholder of the Company wishes to be considered for
inclusion in the Company's proxy statement and proxy for the Company's 2001
Annual Meeting of Stockholders (the "2001 Annual Meeting") pursuant to Rule
14a-8 under the Exchange Act must be submitted to the Secretary of the Company
at its offices, 2001 West Oak Ridge Road, Orlando, Florida 32809-3803, no later
than June 17, 2001.
If a stockholder of the Company wishes to present a proposal before the
2001 Annual Meeting, but does not wish to have the proposal considered for
inclusion in the Company's proxy statement and proxy, such stockholder must also
give written notice to the Secretary of the Company at the address noted above.
The Secretary must receive such notice not less than 50 days, nor more than 75
days prior to the 2001 Annual Meeting; provided that, in the event that less
than 65 days' notice or prior public disclosure of the date of the 2001 Annual
Meeting is given or made, notice by the stockholder must be received not later
than the close of business on the 15th day following the date on which such
notice of the date of the meeting was mailed or such public disclosure was made,
whichever occurs first. If a stockholder fails to provide timely notice of a
proposal to be presented at the 2001 Annual Meeting, the proxies designated by
the Board of Directors of the Company will have discretionary authority to vote
on any such proposal.
15
<PAGE> 19
WHETHER OR NOT YOU EXPECT TO BE PRESENT AT THE MEETING, PLEASE SIGN, DATE
AND MAIL THE ENCLOSED PROXY. IF YOU ARE PRESENT AT THE MEETING, YOU MAY WITHDRAW
YOUR PROXY AND VOTE YOUR SHARES PERSONALLY.
By Order of the Board of Directors,
/s/ MELISSA VAN VALKENBURGH
Melissa A. Van Valkenburgh,
Secretary
Dated: October 11, 2000
16
<PAGE> 20
Attachment A
ECC INTERNATIONAL CORP.
PROXY FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD NOVEMBER 8, 2000
THIS PROXY IS SOLICITED ON BEHALF OF
THE BOARD OF DIRECTORS OF THE COMPANY
AND SHOULD BE RETURNED AS SOON AS POSSIBLE
The undersigned, having received notice of the Annual Meeting of
Stockholders and the Board of Directors' proxy statement therefor, and revoking
all prior proxies, hereby appoint(s) James C. Garrett and Jesse L. Krasnow, and
each of them, attorneys or attorney of the undersigned (with full power of
substitution in them and each of them) for and in the name(s) of the undersigned
to attend the Annual Meeting of Stockholders of ECC INTERNATIONAL CORP. (the
"Company") to be held on Wednesday, November 8, 2000 at 10:00 a.m. at ECC
International Corp., 2001 West Oak Ridge Road, Orlando, Florida, and any
adjournments thereof, and there to vote and act upon the following matters
proposed by the Company in respect of all shares of stock of the Company which
the undersigned may be entitled to vote or act upon, with all the powers the
undersigned would possess if personally present. None of the following proposals
are conditioned upon the approval of any of the other proposals.
In their discretion, the proxy holders are authorized to vote upon such
other matters as may properly come before the meeting or any adjournments
thereof. The shares represented by this proxy will be voted as directed by the
undersigned. IF NO DIRECTION IS GIVEN WITH RESPECT TO ANY ELECTION TO OFFICE OR
PROPOSAL, THIS PROXY WILL BE VOTED AS RECOMMENDED BY THE BOARD OF DIRECTORS.
Attendance of the undersigned at the meeting or at any adjournment thereof will
not be deemed to revoke this proxy unless the undersigned shall revoke this
proxy in writing.
WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING, YOU ARE URGED TO
SIGN, DATE AND MAIL THIS PROXY IN THE ACCOMPANYING ENVELOPE.
A VOTE "FOR" ALL DIRECTOR NOMINEES AND A VOTE "FOR" PROPOSAL NUMBER 2
IS RECOMMENDED BY THE BOARD OF DIRECTORS.
IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER
BUSINESS AS MAY PROPERLY COME BEFORE THE ANNUAL MEETING AND ANY ADJOURNMENT
THEREOF.
*FOLD AND DETACH HERE*
<PAGE> 21
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED BY THE
UNDERSIGNED STOCKHOLDER(S). IF NO OTHER INDICATION IS MADE, THE PROXIES SHALL
VOTE "FOR" ALL DIRECTOR NOMINEES AND "FOR" PROPOSAL NUMBER 2.
Please mark
your votes as
indicated in [X]
this example.
1. To elect the following nominees for director
(except as marked to the right):
FOR all nominees WITHHOLD
listed to the right AUTHORITY
(except as marked to vote for all nominees
to the contrary) listed to the right
[ ] [ ]
Julian J. Demora, James C. Garrett, James R. Henderson, Jesse L.
Krasnow, Warren G. Lichtenstein, Merrill A. McPeak and Robert F. Mehmel
(Instruction: To withhold a vote for an individual nominee, write the
name of such nominee in the space provided below. Your shares will be
voted for the remaining nominees.)
--------------------------------------------------------------
2. To ratify the appointment of PricewaterhouseCoopers LLP as the Company's
independent public accountants for the current year.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
MARK HERE IF YOU PLAN
TO ATTEND THE MEETING [ ]
MARK HERE FOR ADDRESS
CHANGE AND NOTE AT LEFT [ ]
DATED:___________________________, 2000
_______________________________________
Signature
_______________________________________
Signature if held jointly
NOTE: PLEASE SIGN EXACTLY AS NAME APPEARS
HEREON. WHEN SHARES ARE HELD BY JOINT OWNERS,
BOTH SHOULD SIGN. WHEN SIGNING AS ATTORNEY,
EXECUTOR, ADMINISTRATOR, TRUSTEE OR GUARDIAN,
PLEASE GIVE FULL TITLE AS SUCH. IF A CORPORATION,
PLEASE SIGN IN FULL CORPORATE NAME BY AUTHORIZED
OFFICER, GIVING FULL TITLE. IF A PARTNERSHIP,
PLEASE SIGN IN PARTNERSHIP NAME BY AUTHORIZED
PERSON, GIVING FULL TITLE.
*FOLD AND DETACH HERE*
