sec document
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10K-A
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the fiscal year ended June 30, 2002
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from to
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Commission file number 001-8988
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ECC INTERNATIONAL CORP.
(Exact name of registrant as specified in its charter)
Delaware 23-1714658
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(State of other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
2001 West Oak Ridge Road, Orlando, Florida 32809-3803
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (407) 859-7410
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Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
Common Stock, $.10 par value American Stock Exchange
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Securities registered pursuant to Section 12(g) of the Act:
None
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(Title of class)
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 12 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
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ X ]
As of September 16, 2002, the aggregate market value of the Registrant's Common
Stock held by non-affiliates of the Registrant was $14,678,303. (This figure was
computed on the basis of the closing price for the Registrant's Common Stock on
September 16, 2002 using the number of shares held by stockholders who are not
officers, directors or record holders of 10% or more of the Registrant's
outstanding Common Stock. The characterization of such officers, directors and
10% stockholders as affiliates is for purposes of the computation only and
should not be construed as an admission for any purpose whatsoever that any of
such persons are, in fact, affiliates of the Registrant.)
As of September 16, 2002, there were 7,878,124 shares of the Registrant's Common
Stock, $0.10 par value per share, outstanding.
Information with respect to directors in Item 10 and the information required by
Items 11-13 is incorporated by reference to the definitive proxy statement of
the Registrant to be filed with the Commission in connection with its Annual
Meeting of Stockholders scheduled for December 13, 2002.
Page 1 of 11
ITEM 10 DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Set forth below are the directors and executive officers of the Company.
Directors
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JULIAN J. DEMORA, age 76, became a director in 1992. Mr. Demora is President of
the construction and development company, Key Realty and Development, Inc.
JAMES R. HENDERSON, age 44, became a director in 1999. Mr. Henderson has been
Vice President of Operations of Steel Partners, Ltd., for 3 years. He was
previously employed for 3 years by Ayden Corporation, most recently as President
and Chief Operating Officer. Prior to that he was employed by Unisys
Corporation. Mr. Henderson has been on the Board of Directors since 1999. Upon
the departure of Dr. James C. Garrett, the Board appointed Mr. Henderson as
Interim Chief Executive Officer effective July 1, 2002. Mr. Henderson serves on
the Board of Directors of SL Industries, Inc.
JESSE L. KRASNOW, age 53, became a director in 1976. Mr. Krasnow is a Partner in
the private investment firm of Lefferts/Fore LLC.
WARREN G. LICHTENSTEIN, age 37, became a director in 1999. Mr. Lichtenstein has
been a managing member of Steel Partners LLC, which is the general partner of
Steel Partners II, LP, 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, Inc., US Diagnostic, Inc., Tandy Crafts, Inc., Puroflow Inc., and
TAB Products Co.
MERRILL A. MCPEAK, age 66, 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., and Centerspan Communications, Inc.
ROBERT F. MEHMEL, age 40, became a director in 2000. Mr. Mehmel has been an
Executive Vice President of Business Operations and Strategy for DRS
Technologies since January 2000. Previously, he served as Director of Corporate
Development for Jabil Circuit from July 2000 to January 2001. Prior to that, he
was Vice President of Planning for L3 Communications from April 1997 to July
2000.
Page 2 of 11
Executive Officers
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Each of the following officers and key management employees of the Company was
elected by the Board of Directors and serves at the discretion of the Board.
Name Age Position with the Registrant Officer Since
---- --- ---------------------------- -------------
James R. Henderson 44 President, Chief Executive Officer 2002
Melissa A. Van Valkenburgh 49 Chief Financial Officer 1999
Terry W. Kohl* 45 Vice President, Business Development 2002
Mr. Henderson assumed his position in July 2002; Ms. Van Valkenburgh assumed her
position in March 1999; and Ms. Kohl assumed her position in July 2002.
JAMES R. HENDERSON has been Vice President of Operations of Steel Partners,
Ltd., for 3 years. He was previously employed for 3 years by Ayden Corporation,
most recently as President and Chief Operating Officer. Prior to that he was
employed by Unisys Corporation. Mr. Henderson has been on the Board of Directors
since 1999. Upon the departure of Dr. James C. Garrett, the Board appointed Mr.
Henderson as Interim Chief Executive Officer effective July 1, 2002.
MELISSA A. VAN VALKENBURGH is a Certified Public Accountant who most recently
was Controller of Applied Materials Incorporated at their Austin, Texas site.
She previously served for 17 years at Rockwell International where she was
Controller of several of its Defense Electronic Divisions. Prior to that, she
worked in public accounting with Deloitte & Touche for 5 years.
THERESA W. KOHL has worked for ECC International Corp., since 1985. She began as
a Simulation Analyst and advanced through several positions over the years,
including Deputy Program Manager and Director of Contracts. Her most recent
position with the Company was as Business Area Director for Engagement Skills
Training Systems.
*Key management employees who are not "officers" for the purposes of Section 16
of the Securities Exchange Act of 1934 and the rules and regulations thereunder.
ITEM 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
Page 3 of 11
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 accrued interest at the rate
of 5.58% per year and matured 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 or for good reason (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 May 2001, the Company extended the terms of the Employment Agreement with Dr.
Garrett and the maturity date of the Promissory Note to July 1, 2002. The
Company also entered into a Change of Control Contract with Dr. Garrett that
provides for severance pay and incidental benefits if there is a change in
control of the Company (as defined in the Change of Control Contract). The
payment is a lump sum payment equal to 2.99 times one year's annual compensation
plus 1.01 times annual compensation in consideration of agreeing to extend the
non-competition and non-solicitation agreement for 48 months; provided, however,
that if such severance payment, when added to any other payments or benefits
that Dr. Garrett is entitled to receive under the Change of Control Contract,
results in any amount of the severance payment being subject to the excise tax
imposed by Section 4999 of the Internal Revenue Code, as amended, then the
amount that Dr. Garrett shall be scheduled to receive for abiding by all of the
terms and conditions of the non-competition agreement shall be reduced so that
no excise tax will be imposed on the severance payment. The agreement also
provides Dr. Garrett with the right to replace all stock options whether vested
or not with fully vested stock options (all of Dr. Garrett's stock options are
fully vested), or alternatively the right to receive a cash payment for
surrendering the options equal to the difference between the full exercise price
of each option surrendered and the greater of the price per share paid by the
acquirer in the change of control transaction or the market price of the
Company's Common Stock on the date of the change of control.
Upon recommendation of the Board of Directors of ECC, Dr. Garrett's contract was
not renewed. Pursuant to the Employment Agreement dated June 15, 1998, Dr.
Garrett will receive his base salary of $250,000 as severance and, medical and
dental benefits for a period of 12 months. On July 1, 2002, Dr. Garrett repaid
the Promissory Note in full, which included the principal balance of $146,250
and accrued interest through June 30, 2002 of $32,978.37 for a total of
$179,228.37.
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. Mr.
Andrew's employment was terminated in August 2002. He will receive his base
salary as severance and, medical and dental benefits for 4 months.
Page 4 of 11
On July 1, 2002, Mr. James R. Henderson entered into a Consultant Agreement with
the Company. Mr. Henderson is employed and compensated by Steel Partners, Ltd.
He is engaged as the Interim Chief Executive Officer for and on behalf of
Company upon the terms, covenants, and conditions set forth in the Consultant
Agreement dated July 1, 2002. He will not be entitled to employee benefits or
bonus programs set forth by the Company or its Board of Directors. However, if
deemed appropriate, the Board of Directors has the right to grant a monetary or
stock option bonus in recognition of Consultant's achievements and/or
outstanding performance during the duration of this agreement. Pursuant to this
agreement, the Company will pay Steel Partners II, LP $20,000 per month plus
necessary and approved travel expenses.
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, 2002 and two other executive officers of
the Company, both of whom were serving as executive officers on June 30, 2002
(the "Named Executive Officers").
SUMMARY COMPENSATION TABLE
Annual Compensation
Name and ------------------- Long-Term All Other
Principal Position Year Salary Bonus Stock Options Compensation(1)
------------------ ---- ------ ----- ------------- ---------------
James C. Garrett(2).............. 2002 $250,000 $127,250 (4) $ - $44,974
President and Chief 2001 250,000 6,700 (5) 16,000 48,920
Executive Officer 2000 250,000 62,500 (6) 50,000 54,856
Glenn C. Andrew (3).............. 2002 $200,000 $101,800 (4) $ - $37,169
Executive Vice 2001 200,000 5,200 (5) 12,000 38,989
President 2000 200,000 50,000 (6) 20,000 44,595
Melissa A. Van Valkenburgh....... 2002 $160,000 $ 48,864 (4) - $19,718
Vice President, Finance 2001 160,000 2,500 (5) 8,000 71,433
Chief Financial Officer 2000 160,000 28,000 (6) 10,000 64,832
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(1) Includes the following: (a) the Company's contributions under the
Executive Savings Plan in 2002 for Messrs. Garrett and Andrew of $11,250
and $9,000, respectively, and for Ms. Van Valkenburgh of $7,200; (b) car
allowance for Messrs. Garrett and Andrew of $6,525, respectively; (c)
taxes paid by the Company for Messrs. Garrett and Andrew of $8,166 and
$6,618, respectively, and for Ms. Van Valkenburgh of $2,220; (d) the
Company's match to the 401K Plan in 2002 for Messrs. Garrett and Andrew
of $5,481 and $5,423, respectively, and for Ms. Van Valkenburgh of
$4,800; (e) life insurance premiums paid for Messrs. Garrett and Andrew
of $13,552 and $9,603, respectively, and for Ms. Van Valkenburgh of
$5,498.
(2) Dr. James C. Garrett served as President and Chief Executive Officer
until June 2002.
(3) Mr. Glenn Andrew served as Executive Vice President until August 2002.
Page 5 of 11
(4) Consists of bonuses earned during fiscal year 2002, but paid during
fiscal year 2003.
(5) Consists of bonuses earned during fiscal year 2001, but paid during
fiscal year 2002.
(6) Consists of bonuses earned during fiscal year 2000, but paid during
fiscal year 2001.
OPTION GRANTS
The following table sets forth certain information concerning grants of stock
options made during the fiscal year ended June 30, 2002 to each of the Named
Executive Officers. The Company granted no stock appreciation rights during the
fiscal year ended June 30, 2002.
OPTION GRANTS IN LAST FISCAL YEAR
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(3) 5% 10%
---- ------- ----------- -------- ---------- -- ---
James C. Garrett............. 16,000 38% $ 3.45 8/24/11 $ 34,714.98 $ 87,974.58
Glenn C. Andrew.............. 12,000 29% $ 3.45 8/24/11 26,036.24 65,980.94
Melissa A. Van Valkenburgh... 8,000 19% $ 3.45 8/24/11 17,357.49 43,987.29
(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.
(3) Dr. Garrett's employment was terminated in June 2002. Mr. Andrew's
employment was terminated in August 2002. Their options expire three
months after their termination date.
OPTION EXERCISES AND YEAR-END VALUES
No options were exercised by any of the named executive officers during the
fiscal year ended June 30, 2002. The following table sets forth certain
information concerning the number and value of unexercised options held by each
of the named executive officers on June 30, 2002. No stock appreciation rights
were exercised during fiscal 2002 by the named executive officers or were
outstanding at year-end.
Page 6 of 11
Aggregated Option Exercises in Last Fiscal Year
and Fiscal Year-End Option Values
Number of
Securities Underlying Value of Unexercised
Unexercised Options In-the-Money Options
at Fiscal Year-End at Fiscal Year-End(1)
Name Exercisable/Unexercisable Exercisable/Unexercisable
---- ------------------------- -------------------------
James C. Garrett........ 346/000/0 $0/$0
Glenn C. Andrew......... 82,086/0 $35,517/$0
Melissa A. Van Valkenburgh.. 58,000/0 $10,313/$0
(1) Value based on the last sales price per share ($3.10) of the Company's
Common Stock on June 30, 2002, as reported on the American Stock
Exchange, less the exercise price.
Page 7 of 11
ITEM 12 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The following table sets forth certain information, as of August 31, 2002, 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:
Shares of Common Percentage of
Stock Beneficially Outstanding Shares of
Name of Beneficial Owner Owned(1) Common Stock(2)
------------------------ ------------------ ---------------------
5% STOCKHOLDERS:
Dimensional Fund Advisor, Inc.
1299 Ocean Avenue, 11th Floor
Santa Monica, CA 90401 .................................... 619,264 (3) 7.9%
Franklin Resources, Inc.
77 Mariners Island Blvd.
San Mateo, CA 94404 ....................................... 500,000 (4) 6.4%
Steel Partners II, L.P.
150 East 52nd Street, 21st Floor
New York, NY ............................................... 2,290,200 (5) 29.2%
DIRECTORS;
Julina D. Demora ............................................. 484,776 (6) 6.2%
James C.Garrett .............................................. 386,200 (7) 4.7%
James R. Henderson ........................................... 5,000 (8) *
Jesse L. Krasnow ............................................. 109,252 (9) 1.4%
Warren G. Lichtenstein........................................ 2,300,200 (10) 29.3%
Merrill A. McPeak ............................................ 127,743 (11) 1.6%
Robert F. Mehmel ............................................. 15,000 (12) *
OTHER NAMED EXECUTIVE OFFICERS:
Glen Andrew .................................................. 83,479 (13) 1.1%
Melissa Van Valkenburgh ...................................... 58,557 (14) *
All directors and excutives officers as a group (9 persons)... 3,570,207 (15) 42.2%
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* 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, 2002. 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, 2002. Unless otherwise
indicated, each person or entity referred to above has sole voting and
investment power with respect to the shares listed. The inclusion herein
of any shares deemed beneficially owned does not constitute an admission
of beneficial ownership of such shares.
Page 8 of 11
(2) For purposes of this table, the total number of shares outstanding and
the number of outstanding shares of Common Stock for each person is
adjusted to include the number of shares of Common Stock subject to stock
options held by such person.
(3) On February 1, 2002, 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 and voting power
over 619,264 of such beneficially owned shares of Common Stock.
(4) On February 14, 2002, Franklin Resources, 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.
Franklin Resource, Inc., reported sole dispositive and voting power over
500,000 of such beneficially owned shares of Common Stock.
(5) The foregoing is derived from information provided by Steel Partners II,
L.P. Steel Partners II, L.P., reported sole dispositive and voting power
over 2,290,200 of such beneficially owned shares of Common Stock.
(6) Includes 479,776 shares which are held in trust for the benefit of Mr.
Demora and 5,000 shares subject to outstanding stock options.
(7) Includes 346,000 shares subject to outstanding stock options.
(8) Consists of 5,000 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, 84,152 shares held jointly by Mr. Krasnow and
his wife, and 5,000 shares subject to outstanding stock options.
(10) Includes shares described in (5) and 5,000 shares owned directly by Mr.
Lichtenstein and 5,000 shares subject to outstanding stock options. Mr.
Lichtenstein is the managing member of Steel Partners LLC, which is the
general partner of Steel Partners II, LP, and as a result, may be
considered the beneficial owner of the shares held by Steel Partners II,
LP, although Mr. Lichtenstein disclaims such beneficial ownership, except
as to his pecuniary interest therein.
(11) Includes 90,000 shares subject to outstanding stock options.
(12) Consists of 15,000 shares subject to outstanding stock options.
(13) Includes 82,086 shares subject to outstanding stock options.
(14) Includes 58,000 shares subject to outstanding stock options.
(15) Includes the shares described in notes 6-14 above.
Page 9 of 11
ITEM 12 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None.
Page 10 of 11
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
By: /s/ Melissa Van Valkenburgh
---------------------------
Melissa Van Valkenburgh
Chief Financial Officer
Date: October 28, 2002
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