<PAGE>   1
                       SECURITIES AND EXCHANGE COMMISSION

                              Washington, DC 20549

                       ----------------------------------

                                    FORM 10-K


[X]     ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
        ACT OF 1934
        For the fiscal year 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 _____ to _____           


                         Commission file number: 1-10596


                          ESCO Electronics Corporation
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)


        Missouri                                             43-1554045
        (STATE OR OTHER JURISDICTION                         (I.R.S. EMPLOYER
        OF INCORPORATION OR ORGANIZATION)                    IDENTIFICATION NO.)


        8888 Ladue Road, Ste. 200
        St. Louis, Missouri                                  63124-2090
        (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)             (ZIP CODE)


        REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE:

                                 (314) 213-7200


     SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:

                                                             Name of Each
                                                             Exchange on
    Title of Each Class                                      Which Registered
    -------------------                                      ----------------

    Common Stock Trust Receipts                              New York Stock
                                                             Exchange, Inc.

    Common Stock, par value $0.01 per                        New York Stock
    share                                                    Exchange, Inc.

    Preferred Stock Purchase Rights                          New York Stock
                                                             Exchange, Inc.



                            (Cover page 1 of 2 pages)


<PAGE>   2

           SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:

                                      None


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 filing requirements
for the past 90 days. Yes X  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 l0-K or any amendment to this
Form l0-K. [X]

Aggregate market value of the Common Stock Trust Receipts held by non-affiliates
of the registrant as of close of business on December 20, 1999: $134,021,591*

        * For purpose of this calculation only, without determining whether the
        following are affiliates of the registrant, the registrant has assumed
        that (i) its directors and executive officers are affiliates, and (ii)
        no party who has filed a Schedule 13D or 13G is an affiliate.


Number of Common Stock Trust Receipts outstanding at December 20, 1999:
12,437,814 Receipts.


                      DOCUMENTS INCORPORATED BY REFERENCE:

1. Portions of the registrant's Annual Report to Stockholders for fiscal year
   ended September 30, 1999 (the "1999 Annual Report") (Parts I and II).

2. Portions of the registrant's Proxy Statement dated December 9, 1999 (Part
   III).


















                            (Cover page 2 of 2 pages)






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                          ESCO ELECTRONICS CORPORATION
                       INDEX TO ANNUAL REPORT ON FORM 10-K


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<CAPTION>
Item    Description                                                         Page
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Part I

1.      Business  ............................................................ 1

                  The Company................................................. 1
                  Products.................................................... 1
                  Divested Business........................................... 3
                  Marketing and Sales......................................... 3
                  Intellectual Property....................................... 4
                  Backlog..................................................... 4
                  Purchased Components and Raw Materials...................... 4
                  Competition................................................. 4
                  Research and Development.................................... 5
                  Environmental Matters....................................... 5
                  Government Contracts........................................ 5
                  Employees................................................... 6
                  Financing................................................... 6
                  History of the Business..................................... 6
                  Forward-Looking Information................................. 7

2.      Properties............................................................ 7

3.      Legal Proceedings..................................................... 9

4.      Submission of Matters to a Vote of Security Holders...................10

Executive Officers of the Registrant..........................................10


Part II

5.      Market for the Registrant's Common Equity and Related
        Stockholder Matters...................................................10

6.      Selected Financial Data...............................................10

7.      Management's Discussion and Analysis of Financial Condition and
        Results of Operations.................................................11

7A.     Quantitative and Qualitative Disclosures About Market Risk............11

8.      Financial Statements and Supplementary Data...........................11

9.      Changes in and Disagreements with Accountants on Accounting and
        Financial Disclosure..................................................11
</TABLE>




                                        I



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<TABLE>
<CAPTION>
Item    Description                                                         Page
----    -----------                                                         ----
<S>     <C>                                                                 <C>

Part III

10.     Directors and Executive Officers of the Registrant....................11

11.     Executive Compensation................................................11

12.     Security Ownership of Certain Beneficial Owners and Management........11

13.     Certain Relationships and Related Transactions........................12


Part IV

14.     Exhibits, Financial Statement Schedules, and Reports on Form 8-K......12

SIGNATURES               .....................................................18

INDEX TO EXHIBITS        .....................................................19
</TABLE>




































                                       II



<PAGE>   5






                                     PART I


ITEM 1. BUSINESS

THE COMPANY

       ESCO Electronics Corporation ("ESCO") is a producer of products and
systems for industrial and commercial applications sold to customers world-wide.
ESCO's operating subsidiaries are: PTI Technologies Inc., PTI Advanced
Filtration Inc., PTI Technologies Limited, Filtertek Inc. ("Filtertek"),
Filtertek BV, Filtertek de Puerto Rico, Inc., Filtertek Do Brazil, Filtertek SA,
VACCO Industries ("VACCO"), EMC Test Systems, L.P. ("ETS"), Euroshield OY,
Distribution Control Systems, Inc. ("DCSI"), Rantec Microwave & Electronics,
Inc. ("Rantec"), and Comtrak Technologies, L.L.C. ("Comtrak"). These operating
subsidiaries are engaged primarily in the research, development, manufacture,
sale and support of the above-mentioned products and systems, and are
subsidiaries of Defense Holding Corp., a wholly-owned direct subsidiary of ESCO.
ESCO and its direct and indirect subsidiaries are hereinafter referred to
collectively as the "Company". The Company's businesses are subject to a number
of risks and uncertainties, including without limitation those discussed below.
See Item 3. "Legal Proceedings" in this report and "Management's Discussion and
Analysis" appearing in the 1999 Annual Report.

PRODUCTS

       The Company operates in four principal industry segments:
Filtration/Fluid Flow, Test, Communications and Other Products. See Note 11 of
the Notes to Consolidated Financial Statements in the 1999 Annual Report, which
Note is herein incorporated by reference.


                              FILTRATION/FLUID FLOW

       The Company's Filtration/Fluid Flow segment accounted for approximately
70 % of Company revenues in fiscal year 1999 (excluding revenues from Systems &
Electronics Inc. ("SEI"), which was divested on September 30, 1999).

       PTI Technologies Inc., PTI Advanced Filtration Inc. and PTI Technologies
Limited develop and manufacture a wide range of filtration products. PTI
Technologies Inc. is a leading supplier of filters to the commercial aerospace
market. Its major industrial business is derived from microfiltration products
that are used in a variety of markets and applications. The filtration membranes
for many of these applications are, or will be, produced by PTI Advanced
Filtration Inc., which also supplies filtration systems for use in the dairy
industry and industrial coatings. The industrial business also includes the
supply of filtration products for process and mobile fluid power applications.
PTI Technologies Limited manufactures and distributes filter products primarily
in the European industrial marketplace. In fiscal year 1998, PTI Technologies
Inc. formed a joint venture in India, known as "SANMAR-PTI Filters Limited",
with SANMAR Engineering Corporation to manufacture and sell filtration products
for the Indian and other international markets. VACCO and PTI Technologies Inc.
jointly develop and manufacture industrial filtration elements and systems
primarily used within the petrochemical and nuclear industries, where a premium
is placed on superior performance in a harsh environment. VACCO supplies
filters, latch valves and check valves to the aerospace industry, primarily for
use in satellite propulsion systems. VACCO also uses its etched disk technology
to produce quiet valves and manifolds for U.S. Navy applications.

       Filtertek develops and manufactures a broad range of high-volume,
original equipment manufacturer ("OEM") filtration products at its facilities in
North America, South America and Europe. Filtertek's products, which are
centered around its insert injection-molding technology wherein a filter medium
is inserted into the tooling prior to injection-molding of the filter housing,
have widespread applications in the medical and health care markets, automotive
fluid systems, and other commercial and industrial markets. A typical
application can require daily production of many thousands of units, at very
high levels of quality, that are generally



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produced in highly-automated manufacturing cells. Many of Filtertek's products
are patented or incorporate proprietary product or process design, or both.
Filtertek's products are typically supplied to OEM customers under long term
contracts. In fiscal year 1999, Filtertek introduced a number of new products
including several automotive transmission sump filters, medical flow control
devices and intravenous (IV) filters, and fuel filters for fuel pump
applications. Development of a number of new products with applications in water
filtration, Leukocyte blood filtration and depth media fuel filtration was
completed in fiscal year 1999, and these products are expected to provide
revenue growth in fiscal year 2000 and beyond.


                                      TEST

       The Company's Test segment accounted for approximately 14% of Company
revenues in fiscal year 1999 (excluding SEI revenues).

       ETS designs and manufactures electromagnetic compatibility ("EMC") test
equipment. It also supplies controlled radio frequency testing environments
(anechoic chambers), shielded rooms for high security data processing and secure
communication, and electromagnetic absorption materials. ETS's products include
antennas, antenna masts, turntables, current probes, field probes, TEM
(transverse electromagnetic) cells, GTEM (gigahertz transverse electromagnetic)
cells, microwave absorber, calibration equipment and other test accessories
required to do EMC testing. ETS also provides all the design, program management
and integration services required to supply customers with turnkey EMC
solutions. In fiscal year 1999, ETS was awarded a contract by General Motors,
valued at more than $20 million, to design and equip an EMC test facility. It is
expected that in fiscal years 2000 and 2001 revenues from this contract will
constitute approximately 20% to 25% of total revenues of the Test segment. This
project is expected to be completed in 2002. Euroshield OY designs and
manufactures a broad range of modular shielding systems and shielded doors, some
of which are proprietary, for the world market. It also provides the design,
program management and integration services to supply the European market with
turnkey EMC solutions.


                                 COMMUNICATIONS

       In fiscal year 1999, approximately 10% of Company revenues (excluding SEI
revenues) was derived from its Communications segment.

       DCSI is a leading manufacturer of two-way power line communication
systems for the utility industry. These systems provide electric utilities with
a patented communication technology for demand-side management, distribution
automation, and automatic meter reading capabilities, thus improving the
efficiency of power delivery to the consumer of electric energy. During fiscal
year 1999, DCSI experienced substantial revenue growth from the first full year
of shipments of an automatic meter reading ("AMR") system to the Puerto Rico
Electric Power Authority ("PREPA") under a multi-year contract signed in fiscal
year 1998 which is valued at more than $50 million. Revenue from this contract
amounted to approximately 56% of total Communications segment revenues in fiscal
year 1999. It is anticipated that in fiscal year 2000 the PREPA contract revenue
will constitute approximately 50% to 55% of total segment revenues. The current
contract will expire in fiscal year 2001. Also during 1999, DCSI was chosen to
supply the first phase of an AMR project to Wisconsin Public Service Co. ("WPS")
which covers roughly seventeen percent of WPS' customer base. DCSI anticipates
possible expansion of this system in fiscal years 2001-2003.


                                 OTHER PRODUCTS

       The Company's Other Products segment represented approximately six
percent of Company revenues in fiscal year 1999 (excluding SEI revenues).

       Rantec designs and manufactures high voltage and low voltage power
supplies, dc/dc converters and



                                       2


<PAGE>   7


power systems which are marketed to a broad range of customers worldwide.
Applications include medical and avionics CRT displays, as well as ground-based,
shipboard and airborne power systems for a wide variety of military platforms.
Rantec's newest development is a state-of-the-art, patented, miniature high
voltage technology which achieves the same basic functions of today's high
voltage power supplies in only 5% of the size. These products can meet a broad
range of display applications, from hand-held devices and notebook computers to
helmet-mounted displays and military avionics.

       Comtrak has developed a proprietary video security monitoring system,
which has applications in commercial and industrial security systems. Currently,
Comtrak is working jointly with ADT Security Services, Inc., who is selling this
system under its SecurVision7 trademark to a variety of markets.

       As previously disclosed, the Company intends to sell its Rantec microwave
antenna business, including its owned operations facility located in Calabasas,
California. This business includes the production of antennas for wireless
communications applications and airborne systems.


DIVESTED BUSINESS

       On September 30, 1999, ESCO sold SEI, its last major defense business, to
Engineered Systems and Electronics, Inc. ("Engineered Systems"). See Notes 2 and
11 of the Notes to Consolidated Financial Statements in the 1999 Annual Report,
which Notes are herein incorporated by reference. SEI is primarily in the
defense systems and electronics business, and principally supplies high-capacity
aircraft cargo loaders and transportation systems and weapon subsystems to the
armed forces. In addition, SEI designs and manufactures launching and guidance
systems and airborne radar systems. In fiscal year 1999, SEI accounted for
approximately 42% of total Company revenues. As a result of the sale of SEI, the
Company's defense-related sales have been reduced to approximately ten percent
of total sales.


MARKETING AND SALES

       The following comments relate to the Company's business in general:

       The Company's products generally are distributed to customers through a
domestic and foreign network of distributors, sales representatives and factory
salespersons. Utility communication systems are sold directly to the electric
utilities.

       The Company's defense products are sold directly or indirectly to the
U.S. Government under contracts with the Army, Navy and Air Force and
subcontracts with prime contractors of such entities. Including SEI results,
direct and indirect sales to the U.S. Government accounted for approximately
41%, 41% and 44% of the Company's total sales in the fiscal years ended
September 30, 1999, 1998 and 1997, respectively. See Note 11 of the Notes to
Consolidated Financial Statements in the 1999 Annual Report, which Note is
herein incorporated by reference.

       International sales (including SEI) accounted for approximately 18%, 16%
and 18% of the Company's total sales in the fiscal years ended September 30,
1999, 1998 and 1997, respectively. The increase in fiscal year 1999 was
primarily due to higher Far East sales at SEI. See Note 11 of the Notes to
Consolidated Financial Statements in the 1999 Annual Report. Historically, the
majority of these international sales have involved defense products. With the
divestiture of SEI, future international sales will predominantly involve
industrial and commercial products.

       The Company's international sales are subject to risks inherent in
foreign commerce, including currency fluctuations and devaluations, the risk of
war, changes in foreign governments and their policies, differences in foreign
laws, uncertainties as to enforcement of contract rights, and difficulties in
negotiating and litigating with foreign sovereigns.



                                       3


<PAGE>   8


INTELLECTUAL PROPERTY

       The Company owns or has other rights in various forms of intellectual
property (i.e., patents, trademarks, service marks, copyrights, mask works,
trade secrets and other items). As the Company has expanded its presence in
commercial markets, it is placing greater emphasis on developing intellectual
property and protecting its rights therein. The Company believes that this
increased emphasis should better position the Company to secure new business and
protect existing business for certain products. Although the Company considers
its patents to be of significant value in its operations, none of its business
segments is materially dependent on any single patent or group of patents.


BACKLOG

       The following information excludes backlog attributable to SEI. The
backlog of firm orders was approximately $142.9 million at September 30, 1999
and approximately $139.3 million at September 30, 1998. As of September 30,
1999, it is estimated that: (i) commercial business accounted for approximately
90% of the firm orders and defense business accounted for approximately 10%, and
(ii) domestic customers accounted for approximately 79% of the firm orders and
foreign customers accounted for approximately 21%. Of the total backlog of
orders at September 30, 1999, approximately 73% (including all commercial
orders) is expected to be completed in the fiscal year ending September 30,
2000.


PURCHASED COMPONENTS AND RAW MATERIALS

       The Company's products require a wide variety of components and
materials. Although the Company has multiple sources of supply for most of its
material requirements, certain components are supplied by sole-source vendors,
and the Company's ability to perform certain contracts depends on their
performance. In the past, these required raw materials and various purchased
components generally have been available in sufficient quantities. In the
Communications segment, DCSI utilizes a single source or a limited number of
sources to produce substantially all of DCSI's end-products. Although the
Company believes alternative suppliers of components and end-products are
available, the inability of DCSI to develop alternative sources quickly or
cost-effectively could have a material adverse effect on the Communications
segment.


COMPETITION

       The following comments apply to each of the Company's four segments:

       The Company faces intense competition from a large number of firms for
nearly all of its products. Although the Company is a leading supplier in
several of the markets it serves, the Company maintains a relatively small share
of the business in many of the markets in which it participates. Because of the
specialized nature of the Company's products, it is impossible to state
precisely its competitive position with respect to each of its products.
Substantial efforts are required in order to maintain existing business levels.
In the Company's major served markets, competition is driven primarily by
quality, price, technology and delivery performance. For most of its products,
the Company's competitors are larger and have greater financial resources than
the Company.

       Competition in the Company's major markets is broadly based, and global
in scope. Individual competitors range in size from annual revenues of less than
$1 million to billion dollar enterprises, such as Pall Corporation, a major
competitor in the filtration/fluid flow market. Competition can be particularly
intense during periods of economic slowdown, a situation which the Company
recently experienced in some of its filtration/fluid flow markets.




                                       4


<PAGE>   9


RESEARCH AND DEVELOPMENT

       Research and development and the Company's technological expertise are
important factors in the Company's business. Research and development programs
are designed to develop technology for new products or to extend or upgrade the
capability of existing products and to assess their commercial potential.

       In addition to its work under development contracts, the Company performs
research and development at its own expense. For the fiscal years ended
September 30, 1999, 1998 and 1997, total Company-sponsored research and
development expenses were approximately $7.7 million, $5.9 million and $6.2
million, respectively. Company-sponsored research and development expenses
attributable to SEI were approximately $1.5 million, $1.4 million and $1.1
million, respectively, for those years. Total customer-sponsored research and
development expenses were approximately $8.3 million, $10.2 million and $6.3
million for the fiscal years ended September 30, 1999, 1998 and 1997,
respectively. Such customer-sponsored expenses attributable to SEI were
approximately zero, zero and $0.1 million, respectively, for those years. The
decrease in fiscal year 1999 for customer-sponsored research and development
expenses was due to decreased activity at Rantec, partially offset by an
increase at Filtertek. The increase in fiscal year 1998 for such research and
development expenses was due to increased activity at Rantec and Filtertek.


ENVIRONMENTAL MATTERS

       The Company is involved in various stages of investigation and cleanup
relating to environmental matters. These matters primarily relate to Company
facilities located in Newbury Park, California and Riverhead, New York. Textron,
Inc. has indemnified the Company in respect of the cleanup expenses at the
Newbury Park facility, which is leased from a third party. In connection with
the sale of Hazeltine Corporation ("Hazeltine") in 1996, the Company retained
ownership of the Riverhead facility, and agreed to indemnify Hazeltine and
GEC-Marconi against certain environmental remediation expenses related to
Hazeltine's facility at Quincy, Massachusetts. The Company recently sold the
Riverhead facility, but has retained responsibility for any remaining
contamination issues. The relevant state agency has recently agreed that
remediation at the Riverhead facility may cease. The Company is also indirectly
involved in the remediation of off-site waste disposal facilities located in
Winter Park, Florida and Jackson County, Arkansas, with regard to both of which
the Company is one of a number of potentially responsible parties, and thus
bears a proportionate share of the total remediation expenses. It is very
difficult to estimate the potential costs of such matters and the possible
impact of these costs on the Company at this time due in part to: the
uncertainty regarding the extent of pollution; the complexity of Government laws
and regulations and their interpretations; the varying costs and effectiveness
of alternative cleanup technologies and methods; the uncertain level of
insurance or other types of cost recovery; and in the case of off-site waste
disposal facilities, the uncertain level of the Company's relative involvement
and the possibility of joint and several liability with other contributors under
applicable law. Based on information currently available, the Company does not
believe that the aggregate costs involved in the resolution of these
environmental matters will have a material adverse effect on the Company's
financial statements. See Item 3. "Legal Proceedings".


GOVERNMENT CONTRACTS

       A portion of the Company's contracts with the U.S. Government and
subcontracts with prime contractors of the U.S. Government are firm fixed-price
contracts. Under firm fixed-price contracts, work is performed and paid for at a
fixed amount without adjustment for the actual costs experienced in connection
with the contracts. Therefore, unless the customer actually or constructively
alters or impedes the work performed, all risk of loss due to cost overruns is
borne by the Company. All Government prime contracts and virtually all of the
Company's subcontracts provide that they may be terminated at the convenience of
the Government. Upon such termination, the Company is normally entitled to
receive the purchase price for delivered items, reimbursement for allowable
costs incurred and allocable to the contract (which do not include many ordinary
costs of doing business in a commercial context) and an allowance for profit on
the allowable costs incurred or adjustment for loss if completion of performance
would have resulted in a loss. The Company is also

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normally entitled to reimbursement of the cost it incurs to prepare and to
negotiate a settlement of the termination for convenience.

       The Company's backlog includes firm fixed-price U.S. Government
contracts, development programs and production programs in their early phases.
These programs have inherently high risks associated with design, first article
testing and customer acceptance. The profitability of such programs cannot be
assured, and they could represent exposure to the Company.

       The Company periodically reviews U.S. Government contracts in the
ordinary course to ascertain if customer actions or inactions have caused or
will cause increased costs. In the past, the Company has submitted requests for
equitable adjustments ("REAs") and claims seeking additional compensation, which
involved substantial amounts of money. Currently, the Company has no such REAs
or claims outstanding. However, in the future, to the extent any such REAs and
claims are finally resolved for less than the amounts anticipated, the Company's
financial position and operating results could be adversely affected.


EMPLOYEES

       As of October 31, 1999, the Company employed approximately 2,000 persons.


FINANCING

       The Company has a credit agreement, which has been amended and restated
as of February 7, 1997, and further amended as of May 6, 1997, November 21,
1997, June 29, 1998 and August 30, 1999, for a $40 million revolving credit
facility (together the "Credit Facility") with a group of banks agented by
Morgan Guaranty Trust Company of New York. The Credit Facility will mature and
expire on September 30, 2000, and contains customary events of default,
including change in control of the Company. Substantially all of the assets of
the Company are pledged under the credit facility. See "Management's Discussion
and Analysis - Capital Resources & Liquidity" in the 1999 Annual Report, and
Note 7 of the Notes to Consolidated Financial Statements in the 1999 Annual
Report, which Note is herein incorporated by reference.


HISTORY OF THE BUSINESS

       ESCO was incorporated in Missouri in August 1990 as a wholly-owned
subsidiary of Emerson Electric Co. ("Emerson") to be the indirect holding
company for Electronics & Space Corp. ("E&S"), Hazeltine, Southwest Mobile
Systems Corporation ("Southwest"), Rantec, VACCO and DCSI, which were then
Emerson subsidiaries. Ownership of ESCO and its subsidiaries was distributed on
October 19, 1990 (the "Distribution Date") by Emerson to its shareholders
through a special distribution (the "Distribution"). By means of the
Distribution, Emerson distributed one share of ESCO's common stock, par value
$0.01 per share (the "Common Stock"), for every 20 shares of Emerson common
stock owned on October 5, 1990. Pursuant to a Deposit and Trust Agreement (the
"Deposit and Trust Agreement") by and among Emerson, ESCO and Boatmen's Trust
Company, as voting trustee, in lieu of receiving a share of Common Stock on the
Distribution Date, each Emerson shareholder received a Common Stock trust
receipt (a "Receipt") representing the Common Stock and its associated preferred
stock purchase rights.

       In connection with the Distribution, Emerson, ESCO and ESCO's
subsidiaries entered into various agreements which dealt with, among other
things, Emerson's guarantee of certain contracts of ESCO's subsidiaries existing
at September 30, 1990. The Deposit and Trust Agreement provided that, if ESCO
should default in its obligations to indemnify Emerson with respect to the
aforesaid contract guarantee obligations of Emerson, Emerson would have the
right to direct the voting of the ESCO Common Stock represented by the Receipts
with respect to the election of directors. On November 10, 1999, Emerson gave
notice that its contract guarantee obligations have been discharged, and the
Deposit and Trust Agreement is being terminated. On or about January 17, 2000,
ESCO shareholders will receive shares of Common Stock in

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exchange for their Receipts.  See Notes 8 and 12  of the Notes to Consolidated
Financial Statements in the 1999 Annual Report.

       Effective September 30, 1993, ESCO's Board of Directors authorized an
accounting readjustment of the Company's balance sheet in accordance with the
accounting provisions applicable to a "quasi-reorganization," an elective
accounting procedure intended to restate assets and liabilities to fair values
and to eliminate any accumulated deficit in retained earnings. See Note 1(b) of
the Notes to Consolidated Financial Statements in the 1999 Annual Report, which
Note is herein incorporated by reference.

       On September 30, 1992, ESCO acquired ownership of Textron Filtration
Systems, Inc. from Textron, Inc. and renamed the entity "PTI Technologies Inc."
On March 12, 1993, ESCO acquired The Electro-Mechanics Company, a privately held
company, from its shareholders. On December 1, 1993, ESCO acquired all
outstanding stock of Schumacher Filters Limited (located in England) from
Kraftanlagen, AG of Germany, and renamed this entity "PTI Technologies Limited".
On December 29, 1994, ESCO acquired the assets of Ray Proof North America, a
division of Shielding Systems Corporation, a subsidiary of Bairnco Corporation.

       Effective September 30, 1995, E&S was merged into Southwest.
Subsequently, the latter entity's name was changed to Systems & Electronics Inc.

       Effective October 19, 1995, the assets of EMCO, the assets acquired from
Ray Proof North America, and the assets comprising Rantec's California and
Oklahoma radio/frequency anechoics business were transferred to a newly-formed
Texas limited partnership, EMC Test Systems, L.P. ("ETS"). The sole general
partner of ETS is Rantec Commercial, Inc., a wholly-owned subsidiary of Rantec.
The sole limited partner of ETS is Rantec Holdings, Inc., a wholly-owned
subsidiary of Defense Holding Corp.

       On July 22, 1996, ESCO sold 100% of the capital stock of Hazeltine to
GEC-Marconi Electronic Systems Corporation ("GEC-Marconi") . On February 7,
1997, ESCO acquired the filtration products and the thermoform packaging
businesses ("Filtertek") of Schawk, Inc. On December 31, 1997, ESCO acquired the
stock of Euroshield OY (located in Finland), and on July 1, 1998, ESCO acquired
the stock of Advanced Membrane Technology, Inc. and renamed it "PTI Advanced
Filtration Inc." See Note 2 of the Notes to Consolidated Financial Statements in
the 1999 Annual Report.

       On September 30, 1999, ESCO sold 100% of the capital stock of SEI to
Engineered Systems.


FORWARD-LOOKING INFORMATION

       The statements contained in this Item 1. "Business" and in Item 7.
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" concerning the Company's future revenues, profitability, financial
resources, utilization of net deferred tax assets, costs of Year 2000
compliance, product mix, production and deliveries, market demand, product
development, competitive position, impact of environmental matters and
statements containing phrases such as "believes", "anticipates", "may", "could",
"should", and "is expected to" are forward-looking statements made pursuant to
the safe harbor provisions of the Private Securities Litigation Reform Act of
1995. The Company's actual results in the future may differ materially from
those projected in the forward-looking statements due to risks and uncertainties
that exist in the Company's operations and business environment including, but
not limited to: changing economic conditions in served markets; delivery delays
or defaults by customers; performance issues with key suppliers and
subcontractors; and the Company's successful execution of internal operating
plans.



I
TEM 2. PROPERTIES

       The Company's principal buildings contain approximately 1,133,900 square
feet of floor space. Approximately 778,600 square feet are owned by the Company
and approximately 355,300 square feet are



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leased. Substantially all of the Company's owned properties are encumbered in
connection with the Company's Credit Facility. See Item 1. "Business -
Financing" and Note 7 of the Notes to Consolidated Financial Statements in the
1999 Annual Report. The principal plants and offices are as follows:


<TABLE>
<CAPTION>
                                        SQ. FT.        LEASE
                    SIZE                OWNED/         EXPIRATION          PRINCIPAL USE
LOCATION            (SQ. FT.)           LEASED         DATE                (INDUSTRY SEGMENT)
--------            ---------           ------         -----------         ------------------
<S>                 <C>                 <C>            <C>                 <C>

Huntley, IL         127,000             Owned                              Manufacturing (Filtration/Fluid
                                                                           Flow)

Patillas, PR        110,000             Owned                              Manufacturing (Filtration/Fluid
                                                                           Flow)

Durant, OK          100,000             Owned                              Manufacturing (Test)

Hebron, IL           99,800             Owned                              Management, Engineering and
                                                                           Manufacturing (Filtration/Fluid
                                                                           Flow)

South El Monte, CA   80,800             Owned                              Management, Engineering and
                                                                           Manufacturing (Filtration/Fluid
                                                                           Flow)

Newbury Park, CA     79,000             Leased         12-31-00            Management, Engineering and
                                                                           Manufacturing (Filtration/Fluid
                                                                           Flow)

Calabasas, CA        54,700             Owned                              Management, Engineering and
                                                                           Manufacturing (Other Products)

Stockton, CA         55,000             Leased         5-21-03             Manufacturing (Filtration/Fluid
                                                       (w/two 5-year       Flow)
                                                       renewal options)

Austin, TX           50,000             Leased         1-20-02             Management, Engineering and
                                                       (w/one 5-year       Manufacturing (Test)
                                                       renewal option)

Newbury Park, CA     46,100             Leased         10-31-01            Management, Engineering and
                                                       (w/two 5-year       Manufacturing (Filtration/Fluid
                                                       renewal options)    Flow)
                                                                
Los Osos, CA         40,000             Owned                              Engineering and Manufacturing
                                                                           (Other Products)

San Diego, CA        38,000             Leased         2-29-00             Management, Engineering and
                                                                           Manufacturing (Filtration/Fluid
                                                                           Flow)

Newcastle West,      37,000             Owned                              Manufacturing (Filtration/Fluid
Ireland                                                                    Flow)

St. Louis, MO        35,000             Owned                              Management, Engineering and
                                                                           Manufacturing (Communications)

</TABLE>




                                       8


<PAGE>   13



<TABLE>
<S>                   <C>               <C>               <C>                   <C>

Juarez, Mexico        34,400            Leased            12-31-01              Engineering and Manufacturing
                                                                                (Filtration/Fluid Flow)

Sheffield, England    33,500            Owned                                   Management, Manufacturing
                                                                                and Distributor (Filtration/Fluid
                                                                                Flow)

Plailly, France       33,000            Owned                                   Manufacturing (Filtration/Fluid
                                                                                Flow)

Sao Paulo, Brazil     31,000            Leased            12-14-02              Manufacturing (Filtration/Fluid
                                                                                Flow)

Eura, Finland         27,800            Owned                                   Management, Engineering and
                                                                                Manufacturing (Test)

St. Louis, MO         21,800            Leased            8-31-05               ESCO Headquarters
                                                          (w/two 5-year
                                                          renewal options)
</TABLE>


     In fiscal year 1999, the Company entered into a financing lease arrangement
covering (i) a property in Oxnard, California consisting of a 126,000 square
feet building, and (ii) a second property in Oxnard, California upon which a
127,000 square feet building will be constructed. All of the Company's current
Newbury Park and San Diego facilities will be transferred in fiscal year 2000 to
these new Oxnard properties, which will then comprise the management,
engineering and manufacturing operations for PTI Technologies Inc. and PTI
Advanced Filtration Inc. (Filtration/Fluid Flow segment).

     The Company believes its buildings, machinery and equipment have been
generally well maintained, are in good operating condition and are adequate for
the Company's current production requirements.



ITEM 3. LEGAL PROCEEDINGS

     In August 1994, a class action lawsuit was filed by Ronald and Angela Aprea
and other persons against Hazeltine in the Supreme Court of the State of New
York, Suffolk County, alleging personal injury and property damage caused by
Hazeltine's purported releases of hazardous materials at Hazeltine's facility at
Greenlawn, New York. In connection with the sale of Hazeltine, the Company
indemnified Hazeltine and GEC-Marconi against expenses and potential liability
related to this suit. The suit seeks compensatory and punitive damages, and an
order enjoining Hazeltine from discharging further hazardous materials and for
Hazeltine to remediate all damage to the property of the plaintiffs. The Company
believes that no one and no property has been injured by any release of
hazardous materials from Hazeltine's facility. In fiscal year 1995, the Court
dismissed two counts of the complaint as a result of Hazeltine's motion to
dismiss, and the plaintiffs filed an amended complaint. The plaintiffs filed a
motion to be certified as a class, and, early in fiscal year 1997, the Court
denied this motion. The plaintiffs appealed, and the state appellate court
affirmed the denial in fiscal year 1998. Management believes the Company will be
successful in defending this action and that the outcome will not have a
material adverse effect on the Company's financial statements. Currently,
settlement negotiations are underway. See Note 13 of the Notes to Consolidated
Financial Statements in the 1999 Annual Report, which Note is herein
incorporated by reference. See also Item 1. "Business - Environmental Matters"
in this report.





                                       9


<PAGE>   14



ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

     None.


EXECUTIVE OFFICERS OF THE REGISTRANT.

     The following sets forth certain information as of December 13 , 1999 with
respect to ESCO's executive officers. These officers have been elected to terms
which expire at the first meeting of the Board of Directors after the next
annual meeting of stockholders.


<TABLE>
<CAPTION>
Name                       Age      Position(s)
----                       ---      -----------
<S>                        <C>      <C>                                               
Dennis J. Moore*           61       Chairman, President and Chief Executive Officer

Charles J. Kretschmer      43       Vice President and Chief Financial Officer

Alyson S. Barclay          40       Vice President, Secretary and General Counsel

Victor L. Richey, Jr.      42       Vice President, Administration
</TABLE>


------------

*  Also a director and Chairman of the Executive Committee of the Board of
   Directors.

     There are no family relationships among any of the executive officers and
directors.

     Since October 1992, Mr. Moore has been Chairman, President and Chief
Executive Officer of ESCO.

     Mr.  Kretschmer  has been Vice  President of ESCO since  February 9, 1999
and Vice  President  and Chief  Financial  Officer since October 11, 1999.

     Ms. Barclay has been Vice President, Secretary and General Counsel of ESCO
since October 11, 1999.

     Mr. Richey has been Vice President, Administration of ESCO since May 7,
1998.



                                     PART II


ITEM 5.  MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.

     The information required by this item is incorporated herein by reference
to Notes 7 and 8 of the Notes to Consolidated Financial Statements, "Common
Stock Market Prices" and "Shareholders' Summary - Capital Stock Information"
appearing in the 1999 Annual Report. A special cash distribution of $3.00 per
share was paid to Stockholders in September 1996. No other cash dividends have
been declared on the Common Stock, and ESCO does not anticipate, currently or in
the foreseeable future, paying cash dividends on the Common Stock, although it
reserves the right to do so to the extent permitted by applicable law and
agreements. ESCO's dividend policy will be reviewed by the Board of Directors at
such future time as may be appropriate in light of relevant factors at that
time, based on ESCO's earnings and financial position and such other business
considerations as the Board deems relevant at that time.



ITEM 6.  SELECTED FINANCIAL DATA

     The information required by this item, with respect to selected financial
data, is incorporated herein by


                                       10


<PAGE>   15


reference  to  "Five-Year  Financial  Summary"  and Note 2 of the  Notes to
Consolidated Financial Statements appearing in the 1999 Annual Report.


ITEM 7.  MANAGEMENT'S  DISCUSSION  AND ANALYSIS OF FINANCIAL  CONDITION AND
         RESULTS OF OPERATIONS

     The information required by this item is incorporated herein by reference
to "Management's Discussion and Analysis" appearing in the 1999 Annual Report.



ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     The information required by this item is incorporated herein by reference
to "Management's Discussion and Analysis - Market Risk Analysis" appearing in
the 1999 Annual Report.



ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

     The information required by this item is incorporated herein by reference
to the Consolidated Financial Statements of the Company on pages 19 through 37
and the report thereon of KPMG LLP, independent certified public accountants,
appearing on page 39 of the 1999 Annual Report.



ITEM 9. CHANGES IN AND  DISAGREEMENTS  WITH  ACCOUNTANTS  ON ACCOUNTING AND
        FINANCIAL DISCLOSURE

     None.



                                    PART III


ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

     Information regarding nominees and directors appearing under "Nominees and
Continuing Directors" in ESCO's Notice of the Annual Meeting of the Stockholders
and Proxy Statement dated December 9, 1999 (the "2000 Proxy Statement") is
hereby incorporated by reference. Information regarding executive officers is
set forth in Part I of this Form 10-K.

     Information  appearing under "Section 16(a) Beneficial  Ownership Reporting
Compliance" in the 2000 Proxy Statement is hereby incorporated by reference.


ITEM  11.  EXECUTIVE COMPENSATION

     Information appearing under "Board of Directors and Committees" and
"Executive Compensation" (except for the "Report of the Human Resources And
Ethics Committee On Executive Compensation" and the "Performance Graph") in the
2000 Proxy Statement is hereby incorporated by reference.


ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     The information regarding beneficial ownership of Receipts representing
shares of common stock by nominees and directors, by executive officers, by
directors and executive officers as a group and by any five percent stockholders
appearing under "Security Ownership of Management" and "Security Ownership of
Certain Beneficial Owners" in the 2000 Proxy Statement is hereby incorporated by
reference.




                                       11


<PAGE>   16

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

         None.



                                     PART IV


ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

     (a)   Documents filed as a part of this report:

                1. The Consolidated Financial Statements of the Company on pages
                19 through 37 and the Independent Auditors' Report thereon of
                KPMG LLP appearing on page 39 of the 1999 Annual Report.

                2. Financial statement schedules have been omitted because the
                subject matter is disclosed elsewhere in the financial
                statements and notes thereto, is not required or not applicable,
                or the amounts are not sufficient to require submission.

                3.  Exhibits


<TABLE>

<S>            <C>                                                   <C>
2(a)(i)        Stock Purchase Agreement dated as of May              Incorporated by Reference, Exhibit 2
               23, 1996 between ESCO and GEC-Marconi                 [1]
               
2(a)(ii)       First Amendment Agreement dated as of July            Incorporated by Reference, Exhibit 2
               19, 1996 to Stock Purchase Agreement listed           [1]
               as Exhibit 2(a)(i) above
               
2(b)(i)        Acquisition Agreement dated December 18,              Incorporated by Reference, Exhibit
               1996 between the Company and Schawk, Inc.             2(a)[2]
               
2(b)(ii)       First Amendment dated as of February 6,               Incorporated by Reference, Exhibit
               1998 to Acquisition Agreement listed as               2(b) [2]
               Exhibit 2(b)(i) above
               
2(c)           Stock Purchase Agreement dated as of                  Incorporated by Reference, Exhibit
               August 23, 1999, as amended September 23,             2[3]
               1999 and September 30, 1999, among
               Engineered Systems and Electronics, Inc.,
               ESCO and Defense Holding Corp.
               
3(a)           Restated Articles of Incorporation of ESCO
               
3(b)           Bylaws of ESCO, as amended                            Incorporated by Reference, Exhibit
                                                                     3(b)[4]
               
4(a)           Specimen certificate for ESCO's Common                Incorporated by Reference, Exhibit
               Stock Trust Receipts                                  4(a) [5]
          
4(b)           Rights Agreement dated as of September 24,            Incorporated by Reference, Exhibit 
               1990 between ESCO and Boatmen's Trust                 4.2 [6]
               Company, as Rights Agent 
</TABLE>

 




                               12

<PAGE>   17





<TABLE>

<S>               <C>                                                   <C>
           

4(c)(i)           Credit Agreement dated as of September 23,            Incorporated by Reference, Exhibit 4
                  1990 (as amended and restated as of December          [2]
                  30, 1992, amended as of January 15, 1993,
                  October 15, 1993 and November 29, 1993,
                  amended and restated as of May 27, 1994,
                  amended as of August 5, 1994, amended and
                  restated as of September 29, 1995, amended as
                  of June 6, 1996 and August 2, 1996, and
                  amended and restated as of February 7, 1997)
                  among ESCO, Defense Holding Corp., the Banks
                  listed therein and Morgan Guaranty Trust
                  Company of New York, as Agent
                  
4(c)(ii)          Amendment dated as of May 6, 1997 to Credit           Incorporated by Reference, Exhibit
                  Agreement listed as Exhibit 4(c)(i) above             4(c)(ii)[7]

4(c)(iii)         Amendment dated as of November 21, 1997               Incorporated by Reference, Exhibit
                  to Credit Agreement listed as Exhibit 4(c)(i)         4(c)(iii)[7]
                  above

4(c)(iv)          Amendment dated as of June 29, 1998 to                Incorporated by Reference, Exhibit
                  Credit Agreement listed as Exhibit 4(c)(i)            4[8]
                  above

4(c)(v)           Amendment dated as of August 30, 1999 to
                  Credit Agreement listed as Exhibit 4(c)(i)
                  above

                  No other long-term debt instruments are filed
                  since the total amount of securities
                  authorized under any such instrument does not
                  exceed ten percent of the total assets of
                  ESCO and its subsidiaries on a consolidated
                  basis. ESCO agrees to furnish a copy of such
                  instruments to the Securities and Exchange
                  Commission upon request.

4(d)              Deposit and Trust Agreement dated as of               Incorporated by Reference, Exhibit
                  September 24, 1990 among ESCO, Emerson                4.3 [6]
                  Electric Co., Boatmen's Trust Company, as
                  Trustee, and the holders of Receipts from
                  time to time

10(a)             Distribution Agreement dated as of                    Incorporated by Reference, Exhibit
                  September 24, 1990 by and among ESCO,                 2.1 [6]
                  Emerson Electric Co., and ESCO's direct and
                  indirect subsidiaries

10(b)             Tax Agreement dated as of September 24,               Incorporated by Reference, Exhibit
                  1990 by and among ESCO, Emerson Electric              2.2 [6]
                  Co., and ESCO's direct and indirect
                  subsidiaries

10(c)(i)          1990 Stock Option Plan*                               Incorporated by Reference, Exhibit
                                                                        10.3[6]
</TABLE>

 




                               13

<PAGE>   18





<TABLE>

<S>               <C>                                                   <C>
10(c)(ii)         Amendment to 1990 Stock Option Plan dated             Incorporated by Reference, Exhibit
                  as of September 4, 1996*                              10(c)(ii) [9]

10(d)             Form of Incentive Stock Option Agreement*             Incorporated by Reference, Exhibit
                                                                        10(g) [5]

10(e)             Form of Incentive Stock Option Agreement -            Incorporated by Reference, Exhibit
                  Alternative*                                          10(h) [5]

10(f)             Form of Non-Qualified Stock Option                    Incorporated by Reference, Exhibit
                  Agreement*                                            10(i) [5]

10(g)             Form of Split Dollar Agreement*                       Incorporated by Reference, Exhibit
                                                                        10(j) [4]

10(h)             Form of Indemnification Agreement with each           Incorporated by Reference, Exhibit
                  of ESCO's directors.                                  10(k) [4]

10(i)             Stock Purchase Agreement dated as of                  Incorporated by Reference, Exhibit
                  August 20, 1992 by and between Textron,               10(l) [10]
                  Inc. and ESCO

10(j)(i)          1993 Performance Share Plan*                          Incorporated by Reference [11]

10(j)(ii)         Amendment to 1993 Performance Share                   Incorporated by Reference, Exhibit
                  Plan dated as of September 4, 1996*                   10(j)(ii) [9]

10(k)             Supplemental Executive Retirement Plan as             Incorporated by Reference, Exhibit
                  amended and restated as of August 2, 1993*            10(n) [12]

10(l)(i)          Directors' Extended Compensation Plan*                Incorporated by Reference, Exhibit
                                                                        10(o) [12]

10(l)(ii)         Compensatory Arrangement with former                  Incorporated by Reference, Exhibit
                  ESCO director*                                        10(l)(ii) [9]

10(m)(i)          1994 Stock Option Plan*                               Incorporated by Reference [13]

10(m)(ii)         Amendment to 1994 Stock Option Plan dated             Incorporated by Reference, Exhibit
                  as of September 4, 1996*                              10(m)(ii) [9]

10(n)             Form of Incentive Stock Option Agreement*             Incorporated by Reference, Exhibit
                                                                        10(n)[14]

10(o)             Form of Non-Qualified Stock Option                    Incorporated by Reference, Exhibit
                  Agreement*                                            10(o) [14]

10(p)             Severance Plan*                                       Incorporated by Reference, Exhibit
                                                                        10(p)[14]

10(q)             Performance Compensation Plan dated as of             Incorporated by Reference, Exhibit
                  August 2, 1993 (as amended and restated as            10(q) [9]
                  of October 1, 1995)*

10(r)             1997 Performance Share Plan*                          Incorporated by Reference [15]

10(s)             Notice Of Award--stock award to executive             Incorporated by Reference, Exhibit
                  officer*                                              10(s)[7]
</TABLE>

 




                               14

<PAGE>   19





<TABLE>

<S>               <C>                                                   <C>
10(t)             Notice of Award--stock award to executive             Incorporated by Reference, Exhibit
                  officer*                                              10(a)[8]

10(u)             Notice of Award--stock award to executive             Incorporated by Reference, Exhibit
                  officer*                                              10(b)[8]

10(v)             1999 Stock Option Plan*                               Incorporated by Reference, Exhibit
                                                                        4d[16]

10(w)             Form of Non-Qualified Stock Option                    Incorporated by Reference, Exhibit
                  Agreement*                                            4e[16]

10(x)             Form of Non-Qualified Stock Option                    Incorporated by Reference, Exhibit
                  Agreement-Alternative*                                4f[16]

10(y)             Form of Incentive Stock Option Agreement*             Incorporated by Reference, Exhibit
                                                                        4g[16]

10(z)             Form of Incentive Stock Option Agreement-             Incorporated by Reference, Exhibit
                  Alternative*                                          4h[16]

10(aa)            Employment Agreement with Executive
                  Officer*

10(bb)            Employment Agreement with Executive
                  Officer*[17]

10(cc)            Special Separation Agreement with Former
                  Executive Officer*

10(dd)            Severance Agreement with Former Executive
                  Officer*

13                The following-listed sections of the Annual
                  Report to Stockholders for the year ended
                  September 30, 1999:

                       Five-Year Financial Summary (p. 40)

                       Management's Discussion and Analysis
                         (pgs. 10-18)
                       Consolidated Financial Statements (pgs.
                         19-37) and Independent Auditors' Report
                         (p. 39)
                       Shareholders' Summary--Capital Stock
                         Information (p. 41)
                       Common Stock Market Prices (p. 40)

21                Subsidiaries of ESCO

23                Independent Auditors' Consent

27                Financial Data Schedule
</TABLE>






---------------

     [1] Incorporated by reference to Current Report on Form 8-K--date of
     earliest event reported: July 







                               15



<PAGE>   20



     22, 1996, at the Exhibit indicated.

     [2] Incorporated by reference to Form 10-Q for the fiscal quarter ended
     December 31, 1996, at the Exhibit indicated.

     [3] Incorporated by reference to Current Report on Form 8-K--date of
     earliest event reported: September 30, 1999, at the Exhibit indicated.

     [4] Incorporated by reference to Form l0-K for the fiscal year ended
     September 30, l991, at the Exhibit indicated.

     [5] Incorporated by reference to Form 10-K for the fiscal year ended
     September 30, 1990, at the Exhibit indicated.

     [6] Incorporated by reference to Registration Statement on Form 10, as
     amended on Form 8 filed September 27, 1990, at the Exhibit indicated.

     [7] Incorporated by reference to Form 10-K for the fiscal year ended
     September 30, 1997, at the Exhibit indicated.

     [8] Incorporated by reference to Form 10-Q for the fiscal quarter ended
     June 30, 1998, at the Exhibit indicated.

     [9] Incorporated by reference to Form 10-K for the fiscal year ended
     September 30, 1996, at the Exhibit indicated.

     [10] Incorporated by reference to Form 10-K for the fiscal year ended
     September 30, 1992, at the Exhibit indicated.

     [11] Incorporated by reference to Notice of the Annual Meeting of the
     Stockholders and Proxy Statement dated December 9, 1992.

     [12] Incorporated by reference to Form 10-K for the fiscal year ended
     September 30, 1993, at the Exhibit indicated.

     [13] Incorporated by reference to Notice of the Annual Meeting of the
     Stockholders and Proxy Statement dated December 8, 1994.

     [14] Incorporated by reference to Form 10-K for the fiscal year ended
     September 30, 1995, at the Exhibit indicated.

     [15] Incorporated by reference to Notice of the Annual Meeting of the
     Stockholders and Proxy Statement dated December 6, 1996.

     [16] Incorporated by reference to Form S-8 Registration Statement filed
     December 17, 1999, at the Exhibit indicated.

     [17] Identical Employment Agreements between ESCO and executive officers
     Alyson S. Barclay and Victor L. Richey, except that in the case of Ms.
     Barclay the minimum annual salay is $94,000.

     * Represents a management contract or compensatory plan or arrangement 
     required to be filed as an exhibit to this Form 10-K pursuant to Item 14(c)
     of this Part IV.

     (b) No report on Form 8-K was filed during the quarter ended September 30,
     1999.



                               16




<PAGE>   21

     (c) Exhibits: Reference is made to the list of exhibits in this Part IV,
 
    Item 14(a)3 above.

     (d) Financial Statement Schedules: Reference is made to Part IV, Item
     14(a)2 above.







                               17



<PAGE>   22




                                   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.

                                       ESCO ELECTRONICS CORPORATION

                                       By (s) D. J. Moore
                                          _____________________________________
                                              D.J. Moore
                                              Chairman, President and
                                              Chief Executive Officer

Dated: December 17, 1999

       Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below effective December 17, 1999, by the following
persons on behalf of the registrant and in the capacities indicated.

           SIGNATURE                                TITLE


 (s) D. J. Moore                         Chairman, President, Chief
_______________________________          Executive Officer and Director
 D.J. Moore                    


 (s) C.J. Kretschmer                     Vice President and Chief Financial
_______________________________          Officer (Principal Accounting Officer)
 C.J. Kretschmer                         

 (s) W.S. Antle III                      Director
_______________________________          
 W.S. Antle


 (s) J.J. Carey                          Director
_______________________________          
 J.J. Carey


 (s) J.M. McConnell                      Director
_______________________________          
 J.M. McConnell


 (s) L.W. Solley                         Director
_______________________________          
 L.W. Solley


 (s)J.M. Stolze                          Director
_______________________________          
 J.M. Stolze


 (s) D.C. Trauscht                       Director
_______________________________          
 D.C. Trauscht



                              18



<PAGE>   23




                       INDEX TO EXHIBITS


Exhibits are listed by numbers corresponding to the Exhibit Table of Item 601 in
Regulation S-K.

Exhibit No.       Exhibit

3(a)              Restated Articles of Incorporation of ESCO

4(c)(v)           Amendment Dated as of August 30, 1999 to Credit Agreement 
                  Listed as Exhibit 4(c)(i) herein

10(aa)            Employment Agreement with Executive Officer

10(bb)            Employment Agreement with Executive Officer

10(cc)            Special Separation Agreement with Former Executive Officer

10(dd)            Severance Agreement with Former Executive Officer

13                The following-listed sections of the Annual Report to 
                  Stockholders for the year ended September 30, 1999:

                               Five-year Financial Summary (p. 40)
                               Management's Discussion and Analysis (pgs. 10-18)
                               Consolidated Financial Statements (pgs. 19-37) 
                                  and Independent Auditors' Report (p. 39)
                               Shareholders' Summary--Capital Stock Information 
                                  (p. 41)
                               Common Stock Market Prices (p. 40)

21                Subsidiaries of ESCO

23                Independent Auditors' Consent

27                Financial Data Schedule

See Item 14(a)3 for a list of exhibits incorporated by reference


                                       19










<PAGE>   1
                                                                    Exhibit 3(a)


No.   00343584
   ---------------  


[THE SECRETARY                 STATE OF MISSOURI
 OF STATE SEAL]
                        ROY D. BLUNT, Secretary of State

                              CORPORATION DIVISION



                       RESTATED ARTICLES OF INCORPORATION

WHEREAS, ESCO ELECTRONICS CORPORATION a corporation organized and existing under
the General and Business Corporation Law has filed in the office of the
Secretary of State duplicate originals of Restated Articles of Incorporation and
has, in all respects, complied with the requirements of The General and Business
Corporation Law governing Restated Articles of Incorporation:

NOW, THEREFORE, I, ROY D. BLUNT, Secretary of State of the State of Missouri, by
virtue of the authority vested in me by law, do hereby certify that said
Restated Articles have, on the date hereof, become effective; that the address
of its Registered Office in Missouri is 8100 W. Florissant Avenue, St. Louis,
Missouri 63136; that its period of existence is perpetual and that the amount
of its authorized shares $600,000.00 dollars, and that said Restated Articles
supercede the original Articles of Incorporation and all amendments thereto.



                              IN TESTIMONY WHEREOF, I hereunto set my hand and
[THE STATE SEAL               affix the GREAT SEAL of the State of Missouri.
 OF MISSOURI]                 Done at the City
 of Jefferson, this 26th day of
                              September, Nineteen Hundred and Ninety.


                                             Ray D. Blunt
                                         ---------------------   
                                           Secretary of State

<PAGE>   2
                       RESTATED ARTICLES OF INCORPORATION
                                        
                                       OF
                                        
                          ESCO ELECTRONICS CORPORATION

     ESCO Electronics Corporation, a Missouri corporation, does hereby restate
its Articles of Incorporation as set forth in Exhibit A attached hereto, and
certifies that the Restated Articles of Incorporation correctly set forth,
without change, the corresponding provisions of the Articles of Incorporation
as theretofore amended and that the Restated Articles of Incorporation
supersede the original Articles of Incorporation and all amendments thereto.

     The shareholders of the corporation, representing a majority of the
outstanding shares entitled to vote, approved and adopted the above Restated
Articles of Incorporation on behalf of the corporation.

     Of the 1000 shares outstanding, 1000 of such shares were entitled to vote
on such amendment. The number of outstanding shares of any class entitled to
vote thereon as a class were as follows:



<TABLE>
<CAPTION>
                    Number of
  Class          Outstanding Shares
---------        ------------------
<S>              <C>
  Common              1000
</TABLE>


     The number of shares voted for and against the amendment was as follows:


<TABLE>
<CAPTION>
  Class          No. Voted For            No. Voted Against
---------        -------------            -----------------
<S>              <C>                      <C>
 Common              1000                      -0-
</TABLE>


<PAGE>   3
     IN WITNESS WHEREOF, the undersigned, (Vice) President has executed this
instrument and its (Assistant) Secretary has affixed its corporate seal hereto
and attested said seal on the 23rd day of September, 1990.

     CORPORATE                      ESCO ELECTRONICS CORPORATION
       SEAL



ATTEST:                             BY: /s/   D.R. Perkins
                                       -----------------------------------------
                                         Its: (Vice) President

/s/            ??
---------------------------------
(Assistant) Secretary



STATE OF MISSOURI   )
                    )    SS.
CITY OF ST. LOUIS   )

     I, Dawn M. LaBeau, notary public, do hereby certify that on this 25th day
of September, 1990, personally appeared before me D.R. Perkins, who, being by me
first duly sworn, declared that he is the (Vice) President of ESCO Electronics
Corporation, that he signed the foregoing document as (Vice) President of the
corporation, and that the statements therein  contained are true.

[SEAL]

                                        /s/ Dawn M. LaBeau
                                        -----------------------------------
                                             Notary Public

My Commission Expires:

       2-17-92
----------------------

       DAWN M. LaBEAU                            FILED AND CERTIFICATE
NOTARY PUBLIC - STATE OF MISSOURI                        ISSUED
     ST. CHARLES COUNTY                               SEP 26 1990
MY COMMISSION EXPIRES FEB. 17, 1992                    ROY D. BLUNT
                                            CORPORATION DEPT. SECRETARY OF STATE

7144A
Restated Articles
     
                                      -2-

<PAGE>   4
                                                                       EXHIBIT A





                                    RESTATED
                            ARTICLES OF INCORPORATION
                                       OF
                          ESCO ELECTRONICS CORPORATION


ARTICLE ONE

                                      NAME

     The name of the corporation (hereinafter referred to as the "Corporation")
is: ESCO Electronics Corporation.

                                   ARTICLE TWO

                          REGISTERED OFFICE AND AGENT

     The address, including street and number, if any, of the Corporation's
initial registered office in this state is 8100 W. Florissant Avenue, St.
Louis, Missouri 63136. The name of its initial agent at such address is Harley
M. Smith.

                                  ARTICLE THREE

                                 CAPITAL STOCK

     A.   CLASS AND NUMBER OF SHARES. The aggregate number, class and par value,
if any, of shares which the Corporation shall have authority to issue is
60,000,000 shares,

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consisting of 50,000,000 shares of Common Stock, par value $.01 per share, and
10,000,000 shares of Preferred Stock, par value $.01 per share.

     B. VOTING RIGHTS OF THE COMMON STOCK. Each holder of the Common Stock shall
be entitled to one vote per share of Common Stock on all matters to be voted on
by the stockholders.

     C. ISSUANCE OF PREFERRED STOCK, RIGHTS AND PREFERENCES THEREOF.

        1. The Preferred Stock may be issued from time to time in one or more
series, with such voting powers, full or limited, or no voting powers, and such
designations, preferences and relative, participating, optional or other special
rights, and qualifications, limitations or restrictions thereof, as shall be
stated in the resolution or resolutions providing for the issuance of such stock
adopted from time to time by the Board of Directors. Without limiting the
generality of the foregoing, in the resolution or resolutions providing for the
issuance of such shares of each particular series of Preferred Stock, subject to
the requirements of the laws of the State of Missouri, the Board of Directors is
also expressly authorized:

        (a) To fix the distinctive serial designation of the shares of the
series;

        (b) To fix the consideration for which the shares of the series are to
be issued;




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        (c) To fix the rate or amount per annum, if any, at which the holders of
the shares of the series shall be entitled to receive dividends, the dates on
which and the conditions under which dividends shall be payable, whether
dividends shall be cumulative or noncumulative, and if cumulative, the date or
dates from which dividends shall be cumulative;

        (d) To fix the price or prices at which, the times during which, and the
other terms, if any, upon which the shares of the series may be redeemed;

        (e) To fix the rights, if any, which the holders of shares of the series
have in the event of dissolution or upon distribution of the assets of the
Corporation;

        (f) From time to time to include additional shares of Preferred Stock
which the Corporation is authorized to issue in the series;

        (g) To determine whether or not the shares of the series shall be made
convertible into or exchangeable for other securities of the Corporation,
including shares of the Common Stock of the Corporation or shares of any other
series of the Preferred Stock of the Corporation, now or hereafter authorized,
or any new class of Preferred Stock of the Corporation hereafter authorized,
the price or prices or the rate or rates at which conversion or exchange may be
made, and the terms and conditions upon which the conversion or exchange right
shall be exercised;



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        (h) To determine if a sinking fund shall be provided for the purchase or
redemption of shares of the series and, if so, to fix the terms and the amount
or amounts of the sinking fund; and

        (i) To fix the other preferences and rights, privileges and restrictions
applicable to the series as may be permitted by law,

                                  ARTICLE FOUR

                        ADDITIONAL PROVISIONS REGARDING
                           CERTAIN SHAREHOLDER RIGHTS

     A. PREEMPTIVE RIGHTS. All preemptive rights of shareholders are hereby
denied, so that no stock or other security of the Corporation shall carry with
it and no holder or owner of any share or shares of stock or other security or
securities of the corporation shall have any preferential or preemptive right to
acquire additional shares of stock or any other security of the Corporation.

     B. CUMULATIVE VOTING. All cumulative voting rights are hereby denied, so
that none of the Common Stock, the Preferred Stock or any other security of the
Corporation shall carry with it and no holder or owner of any Common Stock,
Preferred Stock or any other security shall have any right to cumulative voting
in the election of directors or for any other purpose.





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     C. VOTING AGREEMENTS.

        1. The foregoing provisions are not intended to modify or prohibit any
provisions of any voting trust or agreement between or among holders or owners
of shares of stock or other securities of the Corporation.

        2. For so long as the Trust created pursuant to the Deposit and Trust
Agreement dated as of September 24, 1990 by and among the Corporation, Emerson
Electric Co. and Boatmen's Trust Company, as depositary and trustee thereunder
(the "Trustee"), as amended from time to time (the "Trust Agreement"), is in
existence, the Corporation shall not issue any "Voting Securities" as defined in
the Trust Agreement unless such securities are delivered to the Trustee to be
held and administered as required by the terms of the Trust Agreement.
Notwithstanding any provision to the contrary in these Articles of Incorporation
or the Bylaws of the Corporation, upon the occurrence and during the continuance
of a "Collateralization Default" as defined in the Trust Agreement, and as
permitted by the Trust Agreement, the Trustee may, at any time and from time to
time, exercise any and all rights, powers and privileges which it may have as a
shareholder of the Corporation for the purpose of calling a special meeting of
the shareholders of the Corporation, executing an action by written consent or
taking other appropriate action for the purpose of (a) removing one or more
Directors (including the entire Board of Directors), with or







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without cause, (b) increasing or decreasing the number of Directors comprising
the entire Board of Directors, (c) nominating and electing new Directors,
including filling any vacancy from time to time created, and/or (d) amending
these Articles of Incorporation or the Bylaws of the Corporation to accomplish
any of the foregoing purposes. Notice of any special meeting of shareholders
called for such purpose shall be given by the Corporation as soon as practicable
after call of the meeting by the Trustee, in accordance with all requirements of
law. Such notice need only comply with the minimum requirements imposed by law,
notwithstanding any longer time period or other requirements imposed by these
Articles of Incorporation or the Bylaws of the Corporation or otherwise.
Notwithstanding any provision to the contrary in these Articles of Incorporation
or the Bylaws of the Corporation, at any such meeting called by the Trustee, the
Trustee, exercising the voting rights of all shareholders of the Corporation
pursuant to the Trust Agreement, may remove, with or without cause, any
Director, or the entire Board of Directors, increase or decrease the number of
Directors comprising the entire Board of Directors, nominate and elect a new
Director for each vacancy, and/or amend these Articles of Incorporation or the
Bylaws of the Corporation to accomplish any of the foregoing purposes. Any such
action may, to the extent otherwise allowed by law, be taken without a meeting
of shareholders if consents in writing, setting forth the action






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so taken, are signed by the percentage required by law of the shareholders
entitled to vote with respect to the subject matter thereof. The provisions of
this Article Four, Section C(2) shall automatically terminate upon liquidation
of the Trust created pursuant to the Trust Agreement.

                                  ARTICLE FIVE

                                  INCORPORATOR

            The name and place of residence of the incorporator is:

                               Stephanie Morrison
                                549 N. Van Buren
                            Kirkwood, Missouri 63122

                                  ARTICLE SIX
                                    DIRECTORS

     A. NUMBER AND CLASSES OF DIRECTORS. The number of directors to constitute
the initial Board of Directors of the Corporation is three. Thereafter, subject
to the provisions set forth in Article Four, Section C(2) hereof, the number of
directors shall be fixed by, or in the manner provided in, the Bylaws of the
Corporation. The Board of Directors shall be divided into three classes, as
nearly equal in number as possible, with the mode of such classification to be
provided for in the Bylaws of the Corporation. Directors other than certain
Directors elected to the initial Board of Directors shall be elected to hold
office for a term of three years, with the term of office of one class expiring
each year. As used in


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these Articles of Incorporation, the term "entire Board of Directors" means the
total number of Directors fixed by, or in accordance with, these Articles of
Incorporation or the Bylaws of the Corporation.

     B. REMOVAL OF DIRECTORS. Subject to the rights, if any, of the holders of
any class of capital stock of the Corporation (other than the Common Stock) then
outstanding and subject to the provisions set forth in Article Four, Section
C(2) hereof, (1) any Director, or the entire Board of Directors, may be removed
from office at any time prior to the expiration of his or their term of office
only for cause and only by the affirmative vote of the holders of record of
outstanding shares representing at least 85% of all of the then outstanding
shares of capital stock of the Corporation then entitled to vote generally in
the election of Directors, voting together as a single class at a special
meeting of shareholders called expressly for that purpose (such vote being in
addition to any required class or other vote); and (2) any Director may be
removed from office by the affirmative vote of a majority of the entire Board of
Directors at any time prior to the expiration of his term of office, as provided
by law, in the event that the Director fails to meet any qualifications stated
in the Bylaws for election as a Director or in the event that the Director is in
breach of any agreement between the Director and the Corporation relating to the
Director's service as a Director or employee of the Corporation.












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     C. NOMINATIONS. Subject to the rights, if any, of holders of any class of
capital stock of the Corporation (other than the Common Stock) then outstanding,
nominations for the election of Directors may be made by the affirmative vote of
a majority of the entire Board of Directors or by any shareholder of record
entitled to vote generally in the election of Directors. Subject to the
provisions set forth in Article Four, Section C(2) hereof, any shareholder who
otherwise desires to nominate one or more persons for election as a Director at
any meeting of shareholders held at any time may do so only if the shareholder
has delivered timely notice of the shareholder's intent to make such
nominations, either by personal delivery or by United States mail, postage
prepaid, to the Secretary of the Corporation not less than 60 days nor more than
90 days prior to the meeting; provided, however, that if less than 50 days'
notice or prior public disclosure of the date of the meeting is given or made to
shareholders, such notice by the shareholder to be timely must be received not
later than the close of business on the 10th day following the day on which the
notice of the date of meeting was mailed or public disclosure was made,
whichever occurs first. A shareholder's notice to the Secretary shall set forth:
(1) the name and address of record of the shareholder who intends to make the
nomination; (2) a representation that the shareholder is a holder of record of
shares of capital stock of the Corporation entitled to vote at


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the meeting and intends to appear in person or by proxy at the meeting to
nominate the person or persons specified in the notice; (3) the class and number
of shares of the capital stock that are beneficially owned by the shareholder on
the date of such notice; (4) the name, age, business and residential addresses,
and principal occupation or employment of each proposed nominee; (5) the class
and number of shares of capital stock that are beneficially owned by such
nominee on the date of such notice; (6) a description of all arrangements or
understandings between the shareholder and each nominee and the name of any
other person or persons pursuant to which the nomination or nominations are to
be made by the shareholder; (7) any other information regarding each proposed
nominee that would be required to be included in a proxy statement filed
pursuant to the proxy rules of the Securities and Exchange Commission; and (8)
the written consent of each proposed nominee to being named as a nominee in the
proxy statement and to serve as a Director of the Corporation if so elected. The
Corporation may require any proposed nominee to furnish any other information it
may reasonably require to determine the eligibility of the proposed nominee to
serve as a Director of the Corporation. The presiding officer of the meeting
may, if the facts warrant, determine that a nomination was not made in
accordance with the foregoing procedure, and if he should make that
determination, he shall so declare at the meeting and the defective nomination
shall be disregarded.



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     D.   VACANCIES. Subject to the rights, if any, of the holders of any class
of capital stock of the Corporation (other than the Common Stock) then
outstanding and subject to the provisions set forth in Article Four, Section
C(2) hereof, any vacancies in the Board of Directors which occur for any reason
prior to the expiration of the term of office of the class in which the vacancy
occurs, including vacancies which occur by reason of an increase in the number
of Directors, shall be filled only by the Board of Directors, acting by the
affirmative vote of a majority of the remaining Directors then in office
(although less than a quorum).


                                 ARTICLE SEVEN
                                        
                                    DURATION
                                        
                 The duration of the Corporation is perpetual.
                                        
                                 ARTICLE EIGHT
                                        
                                    PURPOSES

     The Corporation is formed for the following purposes: 
     1.  To manufacture, sell and distribute any and all kinds of machinery,
equipment and things of any and all kinds;
     2.  To transact any lawful business in aid of the United States or any
instrumentality thereof or any political subdivision thereof, or any country
from time to time in alliance therewith; and


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     3.   To do anything permitted of corporations pursuant to the provisions
of The General and Business Corporation Law of Missouri, as amended from time
to time.

                                  ARTICLE NINE

                             SHAREHOLDERS' MEETINGS

     A.   SPECIAL MEETINGS.   Subject to the provisions set forth in Article
Four, Section C(2) hereof, a special meeting of the shareholders may be called
only by the Board of Directors pursuant to a resolution adopted by the
affirmative vote of a majority of the entire Board of Directors or by the
Chairman of the Board of Directors, a Vice Chairman of the Board of Directors,
or the President. Only such business shall be conducted, and only such
proposals shall be acted upon, as is specified in the call of any special
meeting of shareholders.

     B.   ANNUAL MEETINGS.    At any annual meeting of shareholders only such
business shall be conducted, and only such proposals shall be acted upon, as
shall have been properly brought before the meeting by the Board of Directors
or by a shareholder of record entitled to vote at such meeting. Subject to the
provisions set forth in Article Four, Section C(2) hereof, for a proposal to be
properly brought before an annual meeting by a shareholder, the shareholder
must have given timely notice, either by personal delivery or by Untied States
mail, postage prepaid, to the Secretary of the Corporation not less than 60
days nor more than 90 days prior 

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to the annual meeting; provided, however, that if less than 50 days' notice or
prior public disclosure of the date of the annual meeting is given or made to
shareholders, notice by the shareholder to be timely must be received not later
than the close of business on the 10th day following the earlier of (1) the
day on which notice of the date of the annual meeting was mailed or (2) the day
on which public disclosure was made. A shareholder's notice to the Secretary
shall set forth as to each matter the shareholder proposes to bring before the
annual meeting: (a) a brief description of the proposal desired to be brought
before the annual meeting and the reasons for conducting this business at the
annual meeting; (b) the name and address of record of the shareholder proposing
the business and any other shareholders known by such shareholder to be
supporting the proposal; (c) the class and number of shares of the capital stock
which are beneficially owned by the shareholder on the date of the shareholder
notice and by any other shareholders known by such shareholder to be supporting
the proposal on the date of the shareholder notice; and (d) any material
interest of the shareholder in the proposal.

     The Board of Directors may reject any shareholder proposal submitted for
consideration at the annual meeting which is not made in accordance with the
terms of this Article Nine or which is not a proper subject for shareholder
action in accordance with provisions of applicable law. Alternatively, if the
Board of Directors fails to consider the


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validity of any shareholder proposal, the presiding officer of the annual
meeting may, it the facts warrant, determine and declare at the annual meeting
that the shareholder proposal was not made in accordance with the terms of this
Article and, if he should make that determination, he shall so declare at the
meeting and the business or proposal shall not be acted upon. This provision
shall not prevent the consideration and approval or disapproval at the annual
meeting of reports of officers, directors and committees of the Board of
Directors, but, in connection with such reports, no new business shall be acted
upon at the meeting unless stated, filed and received as herein provided.

     C. ACTION BY WRITTEN CONSENT. Subject to the provisions set forth in
Article Four, Section C(2) hereof, any action required or permitted to be taken
by the shareholders of the Corporation may, if otherwise allowed by law, be
taken without a meeting of shareholders only if consents in writing, setting
forth the action so taken, are signed by all of the shareholders entitled to
vote with respect to the subject matter thereof.

                                   ARTICLE TEN
                              AMENDMENT OF BYLAWS

     Subject to the provisions set forth in Article Four, Section C(2) hereof,
the Bylaws of the Corporation may be amended, altered, changed or repealed, and
a provision or provisions inconsistent with the provisions of the Bylaws as

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they exist from time to time may be adopted, only by the majority of the entire
Board of Directors.

                                 ARTICLE ELEVEN
                            AMENDMENT OF ARTICLES OF
                                  INCORPORATION

     The Corporation reserves the right to amend, alter, change or repeal any
provision contained in these Articles of Incorporation in the manner now or
hereafter prescribed by law, and all rights and powers conferred herein on the
shareholders, directors and officers of the Corporation are subject to this
reserved power; provided, that (in addition to any required class or other vote)
the affirmative vote of the holders of record of outstanding shares representing
at least 85% of all of the outstanding shares of capital stock of the
Corporation then entitled to vote generally in the election of Directors, voting
together as a single class, shall be required to amend, alter, change or repeal,
or adopt any provision or provisions inconsistent with, Articles Four, Six,
Nine, Ten, Twelve, or this Article Eleven of these Articles of Incorporation,
subject, however, to the provisions set forth in Article Four, Section C(2)
hereof.












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                                 ARTICLE TWELVE
                      INDEMNIFICATION AND RELATED MATTERS

     A. ACTIONS INVOLVING DIRECTORS AND OFFICERS. The Corporation shall
indemnify each person (other than a party plaintiff suing his own behalf or in
the right of the Corporation) who at any time is serving or has served as a
director or officer of the Corporation against any claim, liability or expense
incurred as a result of this service, or as a result of any other service on
behalf of the Corporation, or service at the request of the Corporation as a
director, officer, employee, member or agent of another corporation,
partnership, joint venture, trust, trade or industry association or other
enterprise (whether incorporated or unincorporated, for-profit or
not-for-profit), to the maximum extent permitted by law. Without limiting the
generality of the foregoing, the Corporation shall indemnify any such person who
was or is a party (other than a party plaintiff suing on his own behalf or in
the right of the Corporation), or is threatened to be made a party, to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (including, but not limited to, an
action by or in the right of the Corporation) by reason of such service against
expenses (including, without limitation, attorneys' fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by him in connection
with such action, suit or proceeding.






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<PAGE>   20

     B. ACTIONS INVOLVING EMPLOYEES OR AGENTS.

        1. The corporation may, if it deems appropriate and as may be permitted
by this Article, indemnify any person (other than a party plaintiff suing on his
own behalf or in right of the Corporation) who at any time is serving or has
served as an employee or agent of the Corporation against any claim, liability
or expense incurred as a result of such service or as a result of any other
service on behalf of the Corporation, or service at the request of the
Corporation as a director, officer, employee, member or agent of another
corporation, partnership, joint venture, trust, trade or industry association or
other enterprise (whether incorporated or unincorporated, for-profit or
not-for-profit), to the maximum extent permitted by law or to such lesser extent
as the Corporation, in its discretion, may deem appropriate. Without limiting
the generality of the foregoing, the Corporation may indemnify any such person
who was or is a party (other than a party plaintiff suing on his own behalf or
in the right of the Corporation), or is threatened to be made a party, to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (including, but not limited to, an
action by or in the right of the Corporation) by reason of such service against
expenses (including, without limitation, attorneys' fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by him in connection
with the action, suit or proceeding.


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     2. To the extent that an employee or agent of the Corporation has been
successful on the merits or otherwise in defense of any action, suit or
proceeding referred to in Section B(1) of this Article, or in defense of any
claim, issue or matter therein, he shall be indemnified against expenses 
(including attorneys' fees) actually and reasonably incurred by him in
connection with the action, suit or preceding.

  C. DETERMINATION OF RIGHT TO INDEMNIFICATION IN CERTAIN CIRCUMSTANCES. Any
indemnification required under Section A of this Article or authorized by the
Corporation in a specific case pursuant to Section B of this Article (unless
ordered by a court) shall be made by the Corporation unless a determination is
made reasonably and promptly that indemnification of the director, officer,
employee or agent is not proper under the circumstances because he has not met
the applicable standard of conduct set forth in or established pursuant to this
Article. Such determination shall be made (1) by the Board of Directors by a
majority vote of a quorum consisting of Directors who were not parties to such
action, suit or proceeding, or (2) if such a quorum is not obtainable, or even
if obtainable a quorum of disinterested directors so directs, by independent
legal counsel in a written opinion, or (3) by majority vote of the shareholders;
provided that no such determination shall preclude an action brought in an
appropriate court to challenge such determination.










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     D. ADVANCE-PAYMENT OF EXPENSES. Expenses incurred by a person who is or was
a director or officer of the Corporation in defending a civil or criminal
action, suit or proceeding shall be paid by the Corporation in advance of the
final disposition of an action, suit or proceeding, and expenses incurred by a
person who is or was an employee or agent of the Corporation in defending a
civil or criminal action, suit or proceeding may be paid by the Corporation in
advance of the final disposition of such action, suit or proceeding as
authorized by or at the direction of the Board of Directors, in either case upon
receipt of an undertaking by or on behalf of the director, officer, employee or
agent to repay such amount if it shall ultimately be determined that he is not
entitled to be indemnified by the Corporation as authorized in or pursuant to
this Article.

     E. NOT EXCLUSIVE RIGHT. The indemnification provided by this Article shall
not be deemed exclusive of any other rights to which those seeking
indemnification may be entitled, whether under the Bylaws of the Corporation or
any statute, agreement, vote of shareholders or disinterested directors or
otherwise, both as to action in an official capacity and as to action in another
capacity while holding such office.

     F. INDEMNIFICATION AGREEMENTS AUTHORIZED. Without limiting the other
provisions of this Article, the Corporation is authorized from time to time,
without further action by the




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shareholders of the Corporation, to enter into agreements with any director,
officer, employee or agent of the Corporation providing such rights of
indemnification as the Corporation may deem appropriate, up to the maximum
extent permitted by law. Any agreement entered into by the Corporation with a
director may be authorized by the other directors, and such authorization shall
not be invalid on the basis that similar agreements may have been or may
thereafter be entered into with other directors.

     G. STANDARD OF CONDUCT. Except as may otherwise be permitted by law, no
person shall be indemnified pursuant to this Article (including without
limitation pursuant to any agreement entered into pursuant to section F of this
Article) from or on account of such person's conduct which is finally adjudged
to have been knowingly fraudulent, deliberately dishonest or willful misconduct.
The Corporation may (but need not) adopt a more restrictive standard of conduct
with respect to the indemnification of any employee or agent of the Corporation.

     H. INSURANCE. The Corporation may purchase and maintain insurance on behalf
of any person who is- or was a director, officer, employee or agent of the
Corporation, or who is or was otherwise serving on behalf or at the request of
the Corporation against any claim, liability or expense asserted against him and
incurred by him in any such capacity, or

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arising out of his status as such, whether or not the Corporation would have the
power to indemnify him against such liability under the provisions of this
Article.

     I. CERTAIN DEFINITIONS. For the purposes of this Article:

        1. Any director or officer of the Corporation who shall serve as a
director, officer or employee of any other corporation, partnership, joint
venture, trust or other enterprise of which the Corporation, directly or
indirectly, is or was the owner of 20% or more of either the outstanding equity
interests or the outstanding voting stock (or comparable interests), shall be
deemed to be so serving at the request of the Corporation, unless the Board of
Directors of the Corporation shall determine otherwise. In all other instances
where any person shall serve as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise of
which the Corporation is or was a stockholder or creditor, or in which it is or
was otherwise interested, if it is not otherwise established that such person
is or was serving as a director, officer, employee or agent at the request of
the Corporation, the Board of Directors of the Corporation may determine whether
such service is or was at the request of the Corporation, and it shall not be
necessary to show any actual or prior request for such service.

        2. References to a corporation include all constituent corporations
absorbed in a consolidation or merger as well as the resulting or surviving
corporation so that any









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person who is or was a director, officer, employee or agent of a constituent
corporation or is or was serving at the request of a constituent corporation as
a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise shall stand in the same position under
the provisions of this Article with respect to the resulting or surviving
corporation as he would if he had served the resulting or surviving corporation
as he would if he had served the resulting or surviving corporation in the same 
capacity.

        3. The term "other enterprise" shall include, without limitation,
employee benefit plans and voting or taking action with respect to stock or
other assets therein; the term "serving at the request of the corporation"
shall include, without limitation, any service as a director, officer, employee
or agent of the corporation which imposes duties on, or involves services by, a
director, officer, employee or agent with respect to any employee benefit plan,
its participants, or beneficiaries; and a person who acted in good faith and in
a manner he reasonably believed to be in the interest of the participants and
beneficiaries of an employee benefit plan shall be deemed to have satisfied any
standard of care required by or pursuant to this Article in connection with such
plan; the term "fines" shall include, without limitation, any excise taxes
assessed on a person with respect to an employee benefit plan and shall also
include any damages (including treble damages) and any other civil penalties.







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        J. SURVIVAL. Any indemnification rights provided pursuant to this
Article shall continue as to a person who has ceased to be a director, officer,
employee or agent and shall inure to the benefit of the heirs, executors and
administrators of such a person. Notwithstanding any other provision in these
Articles of Incorporation, any indemnification rights arising under or granted
pursuant to this Article shall survive amendment or repeal of this Article with
respect to any acts or omissions occurring prior to the effective time of such
amendment or repeal and persons to whom such indemnification rights are given
shall be entitled to rely upon such indemnification rights with respect to such
acts or omissions as a binding contract with the Corporation.

        K. LIABILITY OF THE DIRECTORS. It is the intention of the Corporation to
limit the liability of the directors of the Corporation, in their capacity as
such, whether to the Corporation, its shareholders or otherwise, to the fullest
extent permitted by law. Consequently, should The General and Business
Corporation Law of Missouri or any other applicable law be amended or adopted
hereafter so as to permit the elimination or limitation of such liability, the
liability of the directors of the Corporation shall be so eliminated or limited
without the need for amendment of these Articles or further action on the part
of the shareholders of the Corporation.











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                               STATE OF MISSOURI

                          OFFICE OF SECRETARY OF STATE           314/751-4609
                              JEFFERSON CITY 65102
                                     January 31, 1991









Re:       ESCO ELECTRONICS CORPORATION (00343584)

Dear Corporation:

     This is to advise that on this date we have filed for record in this office
a copy of the Statement of Reduction of Stated Capital of the above corporation.
We return herewith the duplicate "Filed" copy for your records.

     The fee for filing the document in this office is $20.00. This will
acknowledge receipt of your check for that amount.

                                        Very truly yours,

                                        ROY D. BLUNT 
                                        Secretary of State

                                        Corporation Division
                                        Amendment Desk



Enclosure

Ltr. #24
1/85

                                                                                
                                                     Received
                                                     Feb 7 1991
                                                     E&S LEGAL SERVICES

<PAGE>   28




                    STATEMENT OF REDUCTION OF STATED CAPITAL

                                       OF

                          ESCO ELECTRONICS CORPORATION

HONORABLE ROY D. BLUNT
SECRETARY OF STATE
STATE OF MISSOURI
JEFFERSON CITY, MISSOURI 65102

     Pursuant to the provisions of The General and Business Corporation Law of
Missouri, the undersigned corporation certifies the following:

     (1) The name of the corporation is ESCO ELECTRONICS CORPORATION.

     (2) The following resolution was adopted by the sole shareholder on October
         19, 1990:

     RESOLVED, that the sole shareholder of the Company deems it necessary and
advisable that the Company's Stated Capital be reduced from $120,010.00 to
$111,671.53 by reason of cancellation of 833,847 issued but not outstanding
share of Common Stock, par value $0.01 per share.

     (3) Of the 11,167,153 shares outstanding, 11,167,153 shares were entitled
         to vote on such reduction. The number of outstanding share entitled to
         vote thereon as a class was as follows:


<TABLE>
<CAPTION>
                                                  Number of 
               Class                          Outstanding Shares      
               -----                          ------------------      
<S>                                           <C>       
               Common                             11,167,153
</TABLE>


     (4) The number of shares voted for and against the reduction was as 
follows:


<TABLE>
<CAPTION>
          Class                  No. Voted For           No. Voted Against
          -----                  -------------           -----------------
<S>                               <C>                           <C>
          Common                  11,167,153                    0
</TABLE>





                                       1


<PAGE>   29
     (5)  Upon the filing of this Statement of Reduction, the stated capital and
          the paid-in surplus of the corporation stated as of September 30,
          1990, adjusted to give effect to the reduction, is as follows:


<TABLE>
<CAPTION>
                                  Before                       After
                                 Reduction                   Reduction
                                 ---------                   ---------
<S>                           <C>                           <C>            
Stated Capital                $    120,010.00               $    111,671.53
Paid-In Surplus               $482,548,112.53               $482,554,451.00
</TABLE>



     IN WITNESS WHEREOF, the undersigned (Senior Vice) President has executed
this instrument and its Secretary has attested to said instrument on the 22nd
day of January, 1991.

                                             ESCO ELECTRONICS CORPORATION

(CORPORATE SEAL)


ATTEST:                                      By  /s/   Philip M. Ford
                                                ------------------------------
                                                Philip M. Ford
                                                (Senior Vice) President


  /s/    Walter Stark
---------------------------------                           FILED
Walter Stark                                             JAN 31 1991      
Secretary                                               Ray D. Blunt
                                                      SECRETARY OF STATE
STATE OF MISSOURI        )                        
                         )    SS.
COUNTY OF ST. LOUIS      )


     I, Cynthia Sue Finazzo, a notary public, do hereby certify that on this 22
day of January, 1991, personally appeared before me Philip M. Ford who, being by
me first duly sworn, declared that he is the (Senior Vice) President of ESCO
ELECTRONICS CORPORATION, that he signed the foregoing document as (Senior Vice)
President of the corporation, and that the statements therein contained are
true.



[SEAL]                                            /s/ Cynthia Sue Finazzo
                                                  -------------------------
                                                        Notary Public     

My Commission Expires:


       CYNTHIA SUE FINAZZO
NOTARY PUBLIC--STATE OF MISSOURI
        ST. LOUIS COUNTY
MY COMMISSION EXPIRES JAN. 29, 1994









                                       2


<PAGE>   30
                           CERTIFICATE OF DESIGNATION
                                       OF
                        SERIES A PARTICIPATING CUMULATIVE
                                 PREFERRED STOCK

                                       OF

                          ESCO ELECTRONICS CORPORATION

                         Pursuant to Section 351 of the
                          Revised Statutes of Missouri


     We, D.J. Moore, President, and A.S. Barclay, Secretary, of ESCO Electronics
Corporation, a corporation organized and existing under the laws of the General
Business and Corporations Law of Missouri (the "GBCL"), in accordance with the
provisions thereof, DO HEREBY CERTIFY:

     That pursuant to the authority conferred upon the Board of Directors by the
Articles of Incorporation of the Corporation, the Board of Directors on
September 24, 1990, adopted the following resolution creating a series of
Preferred Stock in the amount and having the designation, voting powers,
preferences and relative, participating, optional and other special rights and
qualifications, limitations and restrictions thereof as follows:

     Section 1. Designation and Number of Shares. The shares of such series
shall be designated as "Series A Participating Cumulative Preferred Stock" (the
"Series A Preferred Stock"), and the number of shares constituting such series
shall be One Hundred Twenty Thousand (120,000). Such number of shares of the
Preferred Stock may be increased or decreased by resolution of the Board of
Directors; provided that no decrease shall reduce the number of shares of Series
A Preferred Stock to a number less than that of the shares then outstanding plus
the number of shares issuable upon exercise of outstanding rights, options or
warrants or upon conversion of outstanding securities issued by the Corporation.

     Section 2. Dividends and Distributions.

     (A) The holders of shares of Series A Preferred Stock shall be entitled to
receive, when, as and if declared by the Board of Directors out of funds legally
available for the purpose, quarterly dividends payable on March 31, June 30,
September 30 and December 31 of each year (each such date being referred to
herein as a "Quarterly Dividend Payment Date"), commencing on the first
Quarterly Dividend Payment Date after the first issuance of any share or
fraction of a share of Series A Preferred Stock, in an amount per share (rounded
to the nearest cent) equal to the greater of (a) $1.00 and (b) subject to the
provision for adjustment hereinafter set forth, 100 times the aggregate per
share amount of all cash dividends or other distributions and 100 times the
aggregate per share amount of all non-cash dividends or other distributions



<PAGE>   31

(other than (i) a dividend payable in shares of Common Stock (as hereinafter
defined) or (ii) a subdivision of the outstanding shares of Common Stock (by
reclassification or otherwise)), declared on the Common Stock, par value $.01
per share, of the Corporation (the "Common Stock") since the immediately
preceding Quarterly Dividend Payment Date, or, with respect to the first
Quarterly Dividend Payment Date, since the first issuance of any share or
fraction of a share of Series A Preferred Stock. If the Corporation shall at any
time after September 24, 1990 (the "Rights Declaration Date") pay any dividend
on Common Stock payable in shares of Common Stock or effect a subdivision or
combination of the outstanding shares of Common Stock (by reclassification or
otherwise) into a greater or lesser number of shares of Common Stock, then in
each such case the amount to which holders of shares of Series A Preferred Stock
were entitled immediately prior to such event under clause (b) of the preceding
sentence shall be adjusted by multiplying such amount by a fraction the
numerator of which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is the number of
shares of Common Stock that were outstanding immediately prior to such event.

     (B) The Corporation shall declare a dividend or distribution on the Series
A Preferred Stock as provided in paragraph (A) above immediately after it
declares a dividend or distribution on the Common Stock (other than as described
in clause (i) and (ii) of the first sentence of paragraph (A)); provided that if
no dividend or distribution shall have been declared on the Common Stock during
the period between any Quarterly Dividend Payment Date and the next subsequent
Quarterly Dividend Payment Date (or, with respect to the first Quarterly
Dividend Payment Date, the period between the first issuance of any share or
fraction of a share of Series A Preferred Stock and such first Quarterly
Dividend Payment Date), a dividend of $1.00 per share on the Series A Preferred
Stock shall nevertheless be payable on such subsequent Quarterly Dividend
Payment Date.

     (C) Dividends shall begin to accrue and be cumulative on outstanding shares
of Series A Preferred Stock from the Quarterly Dividend Payment Date next
preceding the date of issue of such shares of Series A Preferred Stock, unless
the date of issue of such shares is on or before the record date for the first
Quarterly Dividend Payment Date, in which case dividends on such shares shall
begin to accrue and be cumulative from the date of issue of such shares, or
unless the date of issue is a date after the record date for the determination
of holders of shares of Series A Preferred Stock entitled to receive a quarterly
dividend and on or before such Quarterly Dividend Payment Date, in which case
dividends shall begin to accrue and be cumulative from such Quarterly Dividend
Payment Date. Accrued but unpaid dividends shall not bear interest. Dividends
paid on shares of Series A Preferred Stock in an amount less than the total
amount of such dividends at the time accrued and payable on such shares shall be
allocated pro rata on a share-by-share basis among all such shares at the time
outstanding. The Board of Directors may fix a record date for the determination
of holders of shares of Series A Preferred Stock entitled to receive payment of
a dividend or distribution declared thereon, which record date shall not be more
than such number of days prior to the date fixed for the payment thereof as may
be allowed by applicable law.




                                       2

<PAGE>   32

     Section 3. Voting Rights. In addition to any other voting rights required
by law, the holders of shares of Series A Preferred Stock shall have the
following voting rights:

     (A)  Subject to the provision for adjustment hereinafter set forth, each
share of Series A Preferred Stock shall entitle the holder thereof to 100 votes
on all matters submitted to a vote of stockholders of the Corporation. If the
Corporation shall at any time after the Rights Declaration Date pay any dividend
on Common Stock payable in shares of Common Stock or effect a subdivision or
combination of the outstanding shares of Common Stock (by reclassification or
otherwise) into a greater or lesser number of shares of Common Stock, then in
each such case the number of votes per share to which holders of shares of
Series A Preferred Stock were entitled immediately prior to such event shall be
adjusted by multiplying such number by a fraction the numerator of which is the
number of shares of Common Stock outstanding immediately after such event and
the denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.

     (B)  Except as otherwise provided herein or by law, the holders of shares 
of Series A Preferred Stock and the holders of shares of Common Stock shall
vote together as a single class on all matters submitted to a vote of
stockholders of the Corporation.

     (C)  (i) If at any time dividends on any Series A Preferred Stock shall be
in arrears in an amount equal to six quarterly dividends thereon, the occurrence
of such contingency shall mark the beginning of a period (herein called a
"default period") which shall extend until such time when all accrued and unpaid
dividends for all previous quarterly dividend periods and for the current
quarterly dividend period on all shares of Series A Preferred Stock then
outstanding shall have been declared and paid or set apart for payment. During
each default period, all holders of Preferred Stock and any other series of
Preferred Stock then entitled as a class to elect directors, voting together as
a single class, irrespective of series, shall have the right to elect two
Directors.

     (ii) During any default period, such voting right of the holders of Series
A Preferred Stock may be exercised initially at a special meeting called
pursuant to subparagraph (iii) of this Section 3(C) or at any annual meeting of
stockholders, and thereafter at annual meetings of stockholders, provided that
neither such voting right nor the right of the holders of any other series of
Preferred Stock, if any, to increase, in certain cases, the authorized number of
Directors shall be exercised unless the holders of 10% in number of shares of
Preferred Stock outstanding shall be present in person or by proxy. The absence
of a quorum of holders of Common Stock shall not affect the exercise by holders
of Preferred Stock of such voting right. At any meeting at which holders of
Preferred Stock shall exercise such voting right initially during an existing
default period, they shall have the right, voting as a class, to elect Directors
to fill such vacancies, if any, in the Board of Directors as may then exist up
to two Directors or, if such right is exercised at an annual meeting, to elect
two Directors. If the number which may be so elected at any special meeting does
not amount to the required number, the holders of the Preferred Stock shall have
the right to make such increase in the number of Directors as shall be necessary
to permit the election by them of the required number. After the holders of the
Preferred Stock shall have exercised their right to elect Directors in any
default period and during





                                       3

<PAGE>   33


the continuance of such period, the number of Directors shall not be increased
or decreased except by vote of the holders of Preferred Stock as herein provided
or pursuant to the rights of any equity securities ranking senior to or pari
passu with the Series A Preferred Stock.

     (iii) Unless the holders of Preferred Stock shall, during an existing
default period, have previously exercised their right to elect Directors, the
Board of Directors may order, or any stockholder or stockholders owning in the
aggregate not less than 10% of the total number of shares of Preferred Stock
outstanding, irrespective of series, may request, the calling of special meeting
of holders of Preferred Stock, which meeting shall thereupon be called by the
President, a Vice President or the Secretary of the Corporation. Notice of such
meeting and of any annual meeting at which holders of Preferred Stock are
entitled to vote pursuant to this paragraph (C)(iii) shall be given to each
holder of record of Preferred Stock by mailing a copy of such notice to him at
his last address as the same appears on the books of the Corporation. Such
meeting shall be called for a time not earlier than 10 days and not later than
50 days after such order or request or in default of the calling of such meeting
within 50 days after such order or request, such meeting may be called on
similar notice by any stockholder or stockholders owning in the aggregate not
less than 10% of the total number of shares of Preferred Stock outstanding,
irrespective of series. Notwithstanding the provisions of this paragraph
(C)(iii), no such special meeting shall be called during the period within 50
days immediately preceding the date fixed for the next annual meeting of
stockholders.

     (iv)  In any default period, the holders of Common Stock, and other classes
of stock of the Corporation if applicable, shall continue to be entitled to
elect the whole number of Directors until the holders of Preferred Stock shall
have exercised their right to elect two Directors voting as a class, after the
exercise of which right (x) the Directors so elected by the holders of Preferred
Stock shall continue in office until their successors shall have been elected by
such holders or until the expiration of the default period, and (y) any vacancy
in the Board of Directors may (except as provided in paragraph (C)(ii) of this
Section 3) be filled by vote of a majority of the remaining Directors
theretofore elected by the holders of the class of stock which elected the
Director whose office shall have become vacant. References in this paragraph (C)
to Directors elected by the holders of a particular class of stock shall include
Directors elected by such Directors to fill vacancies as provided in clause (y)
of the foregoing sentence.

     (v)   Immediately upon the expiration of a default period, (x) the right of
the holders of Preferred Stock as a class to elect Directors shall cease, (y)
the term of any Directors elected by the holders of Preferred Stock as a class
shall terminate, and (z) the number of Directors shall be such number as may be
provided for in the articles of incorporation or bylaws irrespective of any
increase made pursuant to the provisions of paragraph (C)(ii) of this Section 3
(such number being subject, however, to change thereafter in any manner provided
by law or in the certificate of incorporation or bylaws). Any vacancies in the
Board of Directors effected by the provisions of clauses (y) and (z) in the
preceding sentence may be filled by a majority of the remaining Directors.

     (D)   The Articles of Incorporation of the Corporation shall not be amended
in any manner (whether by merger or otherwise) so as to adversely affect the
powers, preferences or


                                       4

<PAGE>   34


special rights of the Series A Preferred Stock without the affirmative vote of
the holders of a majority of the outstanding shares of Series A Preferred Stock,
voting separately as a class.

     (E)  Except as otherwise provided herein, holders of Series A Preferred
Stock shall have no special voting rights, and their consent shall not be
required for taking any corporate action.

     Section 4. Certain Restrictions.

     (A)  Whenever quarterly dividends or other dividends or distributions
payable on the Series A Preferred Stock as provided in Section 2 are in arrears,
thereafter and until all accrued and unpaid dividends and distributions, whether
or not declared, on outstanding shares of Series A Preferred Stock shall have
been paid in full, the Corporation shall not:

          (i)   declare or pay dividends on, or make any other distributions on,
     any shares of stock ranking junior (either as to dividends or upon
     liquidation, dissolution or winding up) to the Series A Preferred Stock;

          (ii)  declare or pay dividends on, or make any other distributions on,
     any shares of stock ranking on a parity (either as to dividends or upon
     liquidation, dissolution or winding up) with the Series A Preferred Stock,
     except dividends paid ratably on the Series A Preferred Stock and all such
     other parity stock on which dividends are payable or in arrears in
     proportion to the total amounts to which the holders of all such shares are
     then entitled;

          (iii) redeem, purchase or otherwise acquire for value any shares of
     stock ranking junior (either as to dividends or upon liquidation,
     dissolution or winding up) to the Series A Preferred Stock; provided that
     the Corporation may at any time redeem, purchase or otherwise acquire
     shares of any such junior stock in exchange for shares of stock of the
     Corporation ranking junior (as to dividends and upon dissolution,
     liquidation or winding up) to the Series A Preferred Stock; or

          (iv)  redeem, purchase or otherwise acquire for value any shares of
     Series A Preferred Stock, or any shares of stock ranking on a parity
     (either as to dividends or upon liquidation, dissolution or winding up)
     with the Series A Preferred Stock, except in accordance with a purchase
     offer made in writing or by publication (as determined by the Board of
     Directors) to all holders of Series A Preferred Stock and all such other
     parity stock upon such terms as the Board of Directors, after consideration
     of the respective annual dividend rates and other relative rights and
     preferences of the respective series and classes, shall determine in good
     faith will result in fair and equitable treatment among the respective
     series or classes.

     (B)  The Corporation shall not permit any subsidiary of the Corporation to
purchase or otherwise acquire for value any shares of stock of the Corporation
unless the


                                       5

<PAGE>   35

Corporation could, under paragraph (A) of this Section 4, purchase or otherwise
acquire such shares at such time and in such manner.

     Section 5. Reacquired Shares. Any shares of Series A Preferred Stock
redeemed, purchased or otherwise acquired by the Corporation in any manner
whatsoever shall be retired and cancelled promptly after the acquisition
thereof. All such shares shall upon their cancellation become authorized but
unissued shares of Preferred Stock without designation as to series and may be
reissued as part of a new series of Preferred Stock to be created by resolution
or resolutions of the Board of Directors as permitted by the Articles of
Incorporation or as otherwise permitted under Missouri Law.

     Section 6. Liquidation, Dissolution or Winding Up. Upon any liquidation,
dissolution or winding up of the Corporation, no distribution shall be made (1)
to the holders of shares of stock ranking junior (either as to dividends or upon
liquidation, dissolution or winding up) to the Series A Preferred Stock unless,
prior thereto, the holders of shares of Series A Preferred Stock shall have
received $1.00 per share, plus an amount equal to accrued and unpaid dividends
and distributions thereon, whether or not declared, to the date of such payment;
provided that the holders of shares of Series A Preferred Stock shall be
entitled to receive an aggregate amount per share, subject to the provision for
adjustment hereinafter set forth, equal to 100 times the aggregate amount to be
distributed per share to holders of Common Stock, or (2) to the holders of stock
ranking on a parity (either as to dividends or upon liquidation, dissolution or
winding up) with the Series A Preferred Stock, except distributions made ratably
on the Series A Preferred Stock and all such other parity stock in proportion to
the total amounts to which the holders of all such shares are entitled upon such
liquidation, dissolution or winding up. If the Corporation shall at any time
after the Rights Declaration Date pay any dividend on Common Stock payable in
shares of Common Stock or effect a subdivision or combination of the outstanding
shares of Common Stock (by reclassification or otherwise) into a greater or
lesser number of shares of Common Stock, then in each such case the aggregate
amount to which holders of shares of Series A Preferred Stock were entitled
immediately prior to such event under the proviso in clause (1) of the preceding
sentence shall be adjusted by multiplying such amount by a fraction the
numerator of which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is the number of
shares of Common Stock that were outstanding immediately prior to such event.

     Section 7. Consolidation, Merger, etc. If the Corporation shall enter into
any consolidation, merger, combination or other transaction in which the shares
of Common Stock are exchanged for or changed into other stock or securities,
cash or any other property, then in any such case the shares of Series A
Preferred Stock shall at the same time be similarly exchanged for or changed
into an amount per share, subject to the provision for adjustment hereinafter
set forth, equal to 100 times the aggregate amount of stock, securities, cash or
any other property, as the case may be, into which or for which each share of
Common Stock is changed or exchanged. If the Corporation shall at any time after
the Rights Declaration Date pay any dividend on Common Stock payable in shares
of Common Stock or effect a subdivision or combination of the outstanding shares
of Common Stock (by reclassification or otherwise) into a greater or lesser
number of shares of Common Stock, then in each such case the amount set forth


                                       6

<PAGE>   36


in the preceding sentence with respect to the exchange or change of shares of
Series A Preferred Stock shall be adjusted by multiplying such amount by a
fraction the numerator of which is the number of shares of Common Stock
outstanding immediately after such event and the denominator of which is the
number of shares of Common Stock that were outstanding immediately prior to such
event.

     Section 8.  No Redemption. The Series A Preferred Stock shall not be
redeemable.

     Section 9.  Rank. The Series A Preferred Stock shall rank junior (as to
dividends and upon liquidation, dissolution and winding up) to all other series
of the Corporation's preferred stock except any series that specifically
provides that such series shall rank junior to the Series A Preferred Stock.

     Section 10. Fractional Shares. Series A Preferred Stock may be issued in
fractions of a share which shall entitle the holder, in proportion to such
holder's fractional shares, to exercise voting rights, receive dividends,
participate in distributions and to have the benefit of all other rights of
holders of Series A Preferred Stock.


























                                       7

<PAGE>   37




     IN WITNESS WHEREOF, we have executed and subscribed this Certificate and do
affirm and acknowledge the foregoing as true under the penalties of perjury this
20th of December, 1999.


                                        /s/ D.J. Moore
                                        --------------------------------------
                                        President
Attest:

/s/ Alyson S. Barclay
-----------------------------------
Secretary


STATE OF MISSOURI                   )
                                    )     SS.
COUNTY OF ST. LOUIS                 )

     On this 20th day of December, 1999, before me, Norma J. Reger, a Notary
Public in the State of Missouri, personally appeared D.J. Moore, President of
ESCO Electronics Corporation, known to me to be the person who executed the
foregoing Certificate of Designation and acknowledged to me that he executed the
same pursuant to the authority given by the Board of Directors of such
corporation as his free and voluntary act, and as the free and voluntary act and
deed of such corporation, for the uses and purposes therein set forth.

                                    /s/ Norma J. Reger
                                    ------------------------------------------
                                    Notary Public


My Commission expires:

     06/24/2000
----------------------



<PAGE>   1


                                                                EXHIBIT 4 (c)(v)



                                                                 CONFORMED COPY

      FOURTH AMENDMENT, CONSENT AND WAIVER dated as of August 30, 1999 (this
      "Amendment"), to the Credit Agreement dated as of September 23, 1990, as
      amended and restated as of February 7, 1997, as amended by the Amendment
      dates as of May 6, 1997, the Amendment dates as of November 21, 1997 and
      the Third Amendment dated as of November 29, 1998 (the "Credit
      Agreement"), among ESCO ELECTRONIC CORPORATION, a Missouri corporation
      ("Parent"), DEFENSE HOLDING CORP., formerly Emerson Defense Holding Corp.,
      a Delaware corporation (the "Borrower"), the financial institutions party
      thereto as lenders (the "Banks") and MORGAN GUARANTY TRUST COMPANY OF NEW
      YORK, as Agent. Unless otherwise defined herein, capitalized terms shall
      have the meanings assigned to such terms in the Credit Agreement.

    The Borrower intends to sell all the capital stock of SEI to Engineered
Systems and Electronics, Inc. (the "Purchaser") for a purchase price not less
than $85,000,000 pursuant to the Stock Purchase Agreement (the "SEI Purchase
Agreement") dated August 23, 1999, among the Parent, the Borrower and the
Purchaser (the "SEI Sale"), substantially in the form attached hereto as Exhibit
A. The Borrower intends to use a portion of the proceeds of the
 SEI Sale to
repay the outstanding principal amount of the Term Loans and a portion of the
outstanding Working Capital Loans.

    The Borrower has requested that the Required Banks consent to the SEI Sale
and agree to amend and waive certain provisions of the Credit Agreement as
provided herein. The Required Banks are willing, on the terms, subject to the
conditions and to the extent set forth below, to consent to the SEI Sale and so
to amend and waive such provisions of the Credit Agreement.

    In consideration of the premises and the agreements, provisions and
covenants herein contained, the parties hereto hereby agree, on the terms and
subject to the conditions set forth herein, as follows:

    SECTION 1. Amendment. (a) Schedule 1 of the Credit Agreement is hereby
amended by deleting such Schedule in its entirety and substituting in lieu
thereof Schedule 1 hereto.

    SECTION 2. Consent and Waiver. The Required Banks hereby consent to the
consummation of the SEI Sale and waive compliance by the Borrower with Section
5.13 of the Credit Agreement to the extent (but only to the extent) necessary to
allow the consummation of the SEI Sale. The Required Banks further consent to
the execution and delivery by the Agent of all termination statements and other
documents with respect to the release of SEI from its obligations under the
Security Documents and the Guarantee Agreement and the release of the pledge of
the stock of SEI by the Borrower pursuant to the Pledge Agreement.

    SECTION 3. Representations and Warranties. Each of ESCO and the Borrower
represents and warrants to the Agent and each of the other Banks that:

    (a) After giving effect to this Amendment, the representations and
warranties set forth in Article IV of the Credit Agreement are true and correct
in all material respects with the same effect as if made on the date hereof,
except to the extent such representations and warranties expressly related to an
earlier date.

<PAGE>   2
          (b) After giving effect to his Amendment, no Event of Default or
     Default has occurred and is continuing.

     SECTION 4. Conditions to Effectiveness. This Amendment shall become
effective as of the date first above written when (a) the Agent shall have
received counterparts of this Amendment that, when taken together, bear the
signatures of ESCO, the Borrower and the Required Banks, (b) all outstanding
Term Loans and Working Capital Loans in excess of the Working Capital
Commitments, as reduced pursuant to this Amendment, shall have been prepaid in
full and (c) the SEI Sale shall have been consummated in accordance with its
terms.

     SECTION 5. Credit Agreement. Except as specifically amended and waived
hereby, the Credit Agreement shall continue in full force and effect in
accordance with the provisions thereof as in existence on the date hereof. After
the date hereof, any reference to the Credit Agreement shall mean the Credit
Agreement as amended hereby. This Amendment shall constitute a Loan Document for
all purposes under the Credit Agreement.

     SECTION 6. Applicable Law. THIS AMENDMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.

     SECTION 7. Counterparts. This Amendment may be executed in two or more
counterparts, each of which shall constitute an original but all of which when
taken together shall constitute but one contract. Delivery of an executed
signature page of this Amendment by facsimile transmission shall be effective as
delivery of a manually executed counterpart hereof.

     SECTION 8. Expenses. The Borrower agrees to reimburse the Agent for its
out-of-pocket expenses in connection with this Amendment, including the
reasonable fees, charges and disbursements of Cravath, Swaine & Moore, counsel
for the Agent.

     IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed by their respective authorized officers as of the day and year
first written above.

                                         
                                         ESCO ELECTRONICS CORPORATION,
                                         
                                         by /s/ Donald H. Nonnenkamp
                                            ------------------------------------
                                            Name:  Donald H. Nonnenkamp
                                            Title: Vice President & Treasurer
                                         
                                         DEFENSE HOLDING CORP.,
                                         
                                         by /s/ Dennis J. Moore
                                            ------------------------------------
                                            Name:  Dennis J. Moore
                                            Title: Chairman of the Board &
                                                   President


<PAGE>   3


                         MORGAN GUARANTY TRUST COMPANY OF NEW YORK,
                         individually and as Agent,

                         by  /s/ Sovanna L. Day
                             --------------------------------------------
                             Name:  Sovanna L. Day
                             Title: Vice President


                         BANK OF AMERICA, N.A.,

                         by  /s/ Steven A. Linton
                             --------------------------------------------
                             Name:  Steven A. Linton
                             Title: Vice President


                         THE BANK OF NEW YORK,

                         by  /s/ David G. Shedd
                             --------------------------------------------
                             Name:  David G. Shedd
                             Title: Vice President


                         FLEET BUSINESS CREDIT CORPORATION,

                         by  /s/ Daniel C. Dupre
                             --------------------------------------------
                             Name:  Daniel C. Dupre
                             Title: Vice President


                         THE BANK OF NOVA SCOTIA,

                         by  /s/ F.C.H. Ashby
                             --------------------------------------------
                             Name:  F.C.H. Ashby
                             Title: Senior Manager Loan Operations


                         FIRST UNION NATIONAL BANK OF NORTH CAROLINA

                         by  /s/ C. Jeffrey Seaton
                             --------------------------------------------
                             Name:  C. Jeffrey Seaton
                             Title: Senior Vice President





<PAGE>   4


                         NATIONAL CITY BANK

                         by  /s/ Barry C. Robinson
                             --------------------------------------------
                             Name:  Barry C. Robinson
                             Title: Vice President




<PAGE>   5

                                                                      SCHEDULE 1

                                  Commitments
                                  -----------


<TABLE>
<CAPTION>
                                 Working
                                 Capital         Total         Percentage of 
Name of Bank                    Commitment     Commitment     Total Commitment         
------------                    -----------    -----------    ----------------
<S>                             <C>            <C>            <C>

Morgan Guaranty Trust
Company of New York             $ 8,572,000    $ 8,572,000        21.43%


Bank of America, N.A.           $ 8,000,000    $ 8,000,000        20.00%


The Bank of New York            $ 6,572,000    $ 6,572,000        16.43%


Fleet Business Credit
Corporation                     $ 6,000,000    $ 6,000,000        15.00%


The Bank of Nova Scotia         $ 4,000,000    $ 4,000,000        10.00%


First Union National Bank
of North Carolina               $ 4,000,000    $ 4,000,000        10.00%


National City Bank              $ 2,856,000    $ 2,856,000         7.14%
                                -----------    -----------        -----


TOTAL                           $40,000,000    $40,000,000          100%
                                ===========    ===========        =====
                               
</TABLE>





<PAGE>   1


                                                                 EXHIBIT 10 (aa)



                              EMPLOYMENT AGREEMENT


         THIS AGREEMENT (the "Agreement"), made as of the 1st day of November,
1999 between ESCO ELECTRONICS CORPORATION, a Missouri corporation ("Company" or
"ESCO") and Dennis J. Moore, (the "Executive").

                                WITNESSETH THAT:
WHEREAS, the Executive has been elected by the Board of Directors of the Company
to the positions of Chairman, President, and Chief Executive Officer of the
Company; and

         WHEREAS, the Executive possesses executive skills and experience which
the Company believes are of substantial value and importance to the success of
the Company's business operations; and

         WHEREAS, the Company wishes to retain the benefit of the services of
the Executive in connection with the conduct of its business; and

         WHEREAS, the Executive is willing to render service on the terms
hereinafter set forth;

         NOW, THEREFORE, in consideration of the mutual covenants herein
contained, the parties agree as follows.

         1.       TERM. This Agreement shall commence effective as of November
                  1, 1999, and shall continue until November 1, 2003, or such
                  shorter period as may be mutually agreed upon subject to the
                  termination provisions of this Agreement.

         2.       DUTIES. The Executive shall perform such duties normally
                  associated
 with the office(s) of Chairman, President and CEO
                  and such other duties assigned to him by the Board of
                  Directors of the Company.


         3.       SALARY. The Executive shall be paid an annual salary of not
                  less than Four hundred and twenty-five thousand dollars
                  ($425,000) during the term of this Agreement, increased in
                  accordance with the normal practices of the Company.


         4.       BONUS. The Executive shall be eligible to receive an annual
                  bonus during the term of this Agreement upon achieving
                  performance goals determined by the Human Resources and Ethics
                  Committee of the Board of Directors of the Company
                  ("Committee") in accordance with and subject to the terms of
                  the Company's Performance Compensation Plan ("PCP"), as in
                  effect from time to time.


         5.       OTHER INCENTIVE COMPENSATION. During the term of this
                  Agreement, the Executive shall be entitled to participate in
                  any stock options, restricted share awards, performance shares
                  and other executive compensation and benefits as the Committee
                  shall, from time to time, determine in its discretion.




                                       1


<PAGE>   2



         6.       WELFARE  BENEFITS. During the term of this Agreement, the
                  Executive shall be entitled to participate in such medical,
                  dental, life insurance, long-term disability insurance, and
                  other benefits which the Company provides from time to time to
                  other senior executive officers.


         7.       CLUB MEMBERSHIPS. The Company shall continue to pay the
                  monthly dues and related fees for the Executive's membership
                  in the clubs to which he belongs as of the date hereof.


         8.       AUTOMOBILE. During the term of this Agreement, the Company
                  shall continue to provide the Executive with an automobile in
                  accordance with Company policy, as in effect from time to
                  time.


         9.       FINANCIAL PLANNING. During the term of this Agreement, the
                  Company shall provide the Executive with financial planning
                  assistance up to the maximum limits established by Company
                  policy in effect from time to time.


         10.      TERMINATION OF EMPLOYMENT  IN CONNECTION WITH A CHANGE OF
                  CONTROL.   In recognition of the unique position of the
                  Executive as the Chairman, President and CEO of the Company,
                  it is hereby acknowledged and agreed that a Change of Control
                  as defined in the Company's Severance Plan (the "Severance
                  Plan") would necessarily result in a "change in the
                  [Executive's] . . . position or responsibilities (including
                  reporting responsibilities)" representing a "reduction in his
                  status, . . ., position or responsibilities as in effect
                  immediately prior thereto" within the meaning of paragraph
                  3(c)(iii) of the Severance Plan.  Consequently, the Executive
                  may give a Notice of Termination in accordance with such
                  Severance Plan based solely on the Change of Control, itself,
                  on or before the effective date of any Change of Control, such
                  notice to be effective on the effective date of the Change of
                  Control.  If such notice is given by the Executive, no further
                  compensation or benefits of any kind shall be payable to him
                  under this Agreement, but the Severance Plan Benefits shall be
                  paid in accordance with the terms and conditions of paragraph
                  4(a) and the other provisions of the Severance Plan.


         11.      TERMINATION OF EMPLOYMENT PRIOR TO TERMINATION IN CONNECTION
                  WITH A CHANGE OF CONTROL. During the term of this Agreement,
                  the Executive's employment may be terminated for any reason or
                  no reason without cause, by ESCO upon written notice to the
                  Executive. If the Executive is deceased, any sum payable under
                  these termination provisions to the Executive and not
                  otherwise directed by any plan referenced herein shall be paid
                  to Executive's spouse, if any, and if none, to the beneficiary
                  as designated in any records on file with ESCO Electronics
                  Corporation Retirement Plan, or if none, to the Executive's
                  estate.





                                       2


<PAGE>   3



                  a.       Termination by the Company other than for Cause.  


                           If, during the term of this Agreement, but under
                  circumstances not described in paragraph 10, above, the
                  Executive's employment is terminated by the Company for
                  reasons other than "Cause" (as hereinafter defined), then,
                  provided Executive executes the Standard Severance Agreement
                  and Release then in general use by ESCO for this purpose, the
                  Executive shall receive the following:


                  1. The Company shall continue to pay the Executive his base
                  salary at the rate in effect at the date of such termination
                  of employment for 36 months following such termination
                  ("Severance Period").


                  2. As a supplement to the payment of the Executive's base
                  salary rate under subparagraph 1, above, the Company shall
                  also pay the Executive his Average PCP Percentage (as
                  hereinafter defined) for 36 months following such termination.
                  For this purpose, his Average PCP Percentage shall be his
                  average annual percentage (of base salary) under the Company's
                  Performance Compensation Plan for the five consecutive fiscal
                  years immediately preceding the fiscal year in which the
                  termination occurs (disregarding the highest and lowest
                  percentage).


                  3. At the time of such termination of employment, the Company
                  shall pay the Executive the lump sum actuarial equivalent of a
                  supplemental retirement benefit equal to the difference
                  between (a) the amounts which would have been payable under
                  any tax-qualified defined benefit retirement plan (and any
                  non-qualified supplement to such plan) of ESCO's applicable to
                  the Executive (collectively, the "Retirement Plan") if he had
                  remained employed by the Company at his Base Salary and
                  Average PCP rate for three years after the Date of Separation
                  and (b) the amounts actually payable under the Retirement
                  Plan.


                  4. If the Executive is eligible for participation in the
                  Company's retiree medical plan, he shall participate therein
                  in accordance with its terms; otherwise upon proper
                  application by Executive and payment of the employee portion
                  of the premium, the Company shall furnish Executive medical
                  continuation in accordance with the Consolidated Omnibus
                  Budget Reconciliation Act of 1985, as amended ("COBRA");
                  provided that during the period of his eligibility the
                  Executive will pay only the rate which active employees pay
                  for similar coverage for up to 18 months.


                  5. The Company shall continue to provide the Executive the
                  financial planning services which the Company was providing at
                  the date of such termination, until the federal income tax
                  filing deadline for the Executive's third taxable year
                  following the taxable year during which such termination
                  occurs.


                                       3


<PAGE>   4



                  6. The Executive's life insurance and long term disability
                  benefits will terminate in accordance with the plans or
                  policies in effect at the time of such termination of
                  employment.


                  7. The Executive shall have the right to convert any split
                  dollar life insurance policy on his life which is in effect at
                  the date of such termination into an individual policy with
                  the Executive as the sole owner of such policy, except that
                  the Company shall be entitled to repayment of all premiums
                  paid by the Company on such policy.


                  8. The Company shall continue to pay the Executive's club
                  membership dues and related fees (which it is paying at the
                  time of such termination) for 36 months following such
                  termination, or until the Executive's death, if he dies during
                  such 36 month period.


                  9. The Company shall continue to lease for the benefit of the
                  Executive the automobile which is it leasing at the date of
                  such termination, for 36 months following such termination or
                  until the Executive's death if he dies during such 36 month
                  period. Upon the expiration of such 36 month period, if the
                  Executive is still alive, the Company shall purchase such
                  automobile and transfer all right, title and interest in it to
                  the Executive.


                  10. All outstanding stock options shall become fully vested
                  and exercisable, all restricted shares shall become fully
                  vested, and all awards outstanding under the Company's
                  Performance Share Plan shall be considered fully earned and
                  vested and shall be paid out and/or distributed upon such
                  termination, in accordance with the terms of the plan(s).


                  11. The Company agrees to provide the Executive with Directors
                  and Officers liability coverage during the Severance Period,
                  and for five years thereafter, for covered actions through the
                  date of Executive's separation from service subject to the
                  insurance carrier's approval of such coverage.


         b.       Termination by the Company for Cause.


                  If during the term of this Agreement, the Executive's
         employment is terminated for "cause" (as hereafter defined), he shall
         receive his regular salary and benefits through the date of
         termination. All other benefits shall cease unless specifically
         otherwise provided by the benefit plan(s).


         For purposes of this Agreement, "Cause" shall mean:

                  1. Executive's willful and continued failure to substantially
                  perform his duties (other than as a result of incapacity due
                  to physical or mental condition), after a written demand for
                  performance is delivered to Executive which specifically
                  identifies the manner in which Executive has not substantially
                  performed his duties; or

                                       4


<PAGE>   5


                  2. Executive's disability or incapacity which extends for a
                  period of nine consecutive months and which renders Executive,
                  in the judgement of the Board, substantially unable to perform
                  the services for which he has been employed, or

                  3. Executive's willful commission of misconduct which is
                  materially injurious to the Company, monetarily or otherwise;
                  provided that any material violation of paragraph 13 of this
                  Agreement by Executive during his employment shall constitute
                  willful misconduct without further proof of injury; or

                  4. conviction of Executive of a felony, or

                  5. a determination by the Board, after Executive has been
                  given written notice of the meeting of such Board at which
                  this question will be taken up and has had an opportunity to
                  appear before the Board at such meeting and defend himself,
                  that Executive has committed fraud, embezzlement, theft, or
                  misappropriation against or from the Company; or

                  6. Executive's material breach of any provision of this
                  Agreement.

For purposes of this paragraph 11, no act or failure to act shall be considered
"willful" unless done or omitted to be done without good faith and without a
reasonable belief that the act or omission was in the best interest of ESCO.

         c.       Termination by the Executive for Good Reason.

                           If, during the term of this Agreement, but under
                  circumstances not described in paragraph 10, above, the
                  Executive terminates his employment for "Good Reasons" (as
                  hereinafter defined), then, in addition to his regular salary
                  and benefits through the date of termination, provided the
                  Executive executes the Standard Severance Agreement and
                  Release then in general use by ESCO for this purpose, the
                  Executive shall receive the same benefits as if the Company
                  had terminated him other than for Cause. "Good Reason" shall
                  mean the occurrence of any one or more of the following
                  events:

                  1. any failure by the Company to comply with any of the
                  provisions of this Agreement, other than an isolated failure
                  not occurring in bad faith and which is remedied by the
                  Company promptly after receipt of written notice thereof given
                  by the Executive and other than a failure to comply with
                  paragraphs 3 through 9 hereof inclusive solely by reason of a
                  reduction in compensation or benefits that applies to all
                  Senior Management employees;

                  2. the Company's requiring the Executive to move his residence
                  from the Greater St. Louis, Missouri area;

                                       5


<PAGE>   6


                  3. The Company assigning duties to Executive which are,
                  expressly or in practical effect, a material and substantial
                  demotion from or substantial reduction of Executive's present
                  executive and/or managerial responsibilities, whether or not
                  accompanied by a reduction in remuneration, provided the
                  Executive has given not less than 30 days' written notice to
                  the Board of Directors of ESCO; or

                  4. any purported termination by the Company of the Executive's
                  employment otherwise than pursuant to a Change of Control
                  or for Cause as expressly permitted by this Agreement.

         12.      CONTINUED EMPLOYMENT NOT GUARANTEED.  None of the provisions
                  of this Agreement shall be construed as a guarantee of the
                  Executive's continued employment nor shall they limit the
                  ability of the Board of Directors of the Company to terminate
                  the employment relationship at any time, with or without cause
                  upon at least 30 days' advance written notice to the
                  Executive. None of the provisions of this Agreement shall be
                  construed as a guarantee on the part of the Executive that he
                  will continue to perform services for the Company nor shall
                  they limit the ability of the Executive to resign at any time
                  upon at least 30 days' advance written notice to the Company.

         13.      CONFIDENTIAL INFORMATION; COMPANY PROPERTY; NONSOLICITATION;
                  COMPANY INTERESTS. By and in consideration of the mutual
                  promises contained herein, and the compensation and benefits
                  to be provided by the Company hereunder, the Executive agrees
                  that:

                  (a)  The Executive shall hold in a fiduciary capacity for the
                       benefit of the Company and will not, during the period of
                       his employment disclose to anyone, directly or
                       indirectly, any trade secret or confidential information
                       regarding the business of ESCO Electronics Corporation or
                       any subsidiary company, including without limitation such
                       information referred to in paragraph 13(d) hereof.
                       Confidential Information for this purpose shall include,
                       but not be limited to, trade secrets, audit information,
                       ethics investigation information, product information,
                       engineering information, manufacturing information,
                       customer lists, employees, Company policies and
                       procedures, bidding and proposal information or strategy,
                       product cost or pricing information, any employee's
                       compensation, benefits or skills and specialties and
                       financial information, all (i) obtained by the Executive
                       during his employment by the Company, and (ii) not
                       otherwise public knowledge (other than because of an
                       unauthorized act by the Executive or another individual).
                       Upon the termination of employment, the Executive will
                       return to the Company all such Confidential Information
                       in his position which is in written, tangible,
                       electronic, magnetic, or other reproducible form without
                       retaining any copies thereof.  After termination of
                       employment, the Executive shall not communicate or
                       divulge such Confidential Information to anyone except
                       (a) an authorized representative of the Company, or (b)
                       to someone else when compelled by an order or subpoena of
                       a court or


                                       6

<PAGE>   7


                       other governmental body after at least two (2) weeks
                       prior written notice to the Company, if possible, and if
                       such written notice is not possible, then with as much
                       written or oral notice as is possible under the
                       circumstances.

                  (b)  Except as expressly provided herein, promptly following
                       the Executive's termination of employment, the Executive
                       shall return to the Company all property of the Company
                       and all copies thereof in the Executive's possession or
                       under his control or to which he has access nor shall he
                       attempt to reproduce or have reproduced any such
                       property, except that the Executive may retain his
                       diaries, Rolodexes, and calendars.

                  (c)  During the period commencing on the date hereof through
                       the Severance Period, the Executive will not solicit or
                       otherwise induce any employee of the Company or any
                       Company Affiliate to leave the employ of the Company or
                       such Company Affiliate or to become associated, whether
                       as an employee, officer, partner, director, consultant or
                       otherwise, with any business organization.

                  (d)  Executive will not, during the period of his employment
                       and for a period of three (3) years from the date he
                       ceases to be employed by the Company directly or
                       indirectly, either for himself or for any other person,
                       divert or take away or attempt to divert or take away
                       (call on or solicit or attempt to call on or solicit) any
                       of the Company's customers or distributors, including,
                       but not limited to, those with whom he became acquainted
                       while employed as an Executive for the Company. The
                       Executive specifically agrees that the three (3) year
                       period is reasonable.

                       If the Executive fails to comply with any of his
                       undertakings hereunder except as otherwise required by
                       law, no further payments or contracted benefits shall be
                       provided to or in respect of the Executive by the Company
                       pursuant to this Agreement or otherwise. The provisions
                       of paragraph 14 shall not apply to any alleged violations
                       of this paragraph and the Company shall be entitled to
                       obtain temporary and permanent injunctive relief, as well
                       as damages, for any violation of the provisions of this
                       paragraph by Executive.

         14.      ENFORCEMENT - ARBITRATION.  Except as provided in paragraph
                  13, any controversy or claim arising out of or relating to the
                  application, interpretation or enforcement of this Agreement,
                  and any claim of every nature and description by the Executive
                  against the Company and/or any of its parent, subsidiary,
                  affiliated entities, corporation, partnerships, and their
                  members, officers, directors, managers, partners, employees,
                  fiduciaries, administrators, agents or attorneys or by the
                  Company against the Executive which cannot be settled by
                  negotiation of the parties, including, but not limited to, any
                  and all claims arising subsequent to the date of this
                  Agreement under each of the statutes, common law, contractual
                  and other authorities enumerated in Exhibit A, attached hereto
                  and made a part thereof, shall be settled by final and binding
                  arbitration administered by the

                                       7


<PAGE>   8


                  American Arbitration Association ("Association") under its
                  Employment Dispute Resolution Rules (as amended and effective
                  on November 1, 1993, subject to the then-current fees) and
                  judgement on the award rendered by the arbitration may be
                  entered in any court having jurisdiction thereof subject to
                  the following provisions, except as otherwise mutually agreed
                  by the parties with respect to a particular dispute or
                  provision at the time:

                  a. If the parties cannot agree upon an arbitrator, a
                  seven-person panel shall be submitted to the parties by the
                  Association. If there is a non-selection of the first such
                  panel, the Association shall submit a second seven-person
                  panel to the parties. If there is still a non-selection, the
                  Association shall then appoint a single arbitrator in
                  accordance with its rules subject to each party's objection
                  for cause, and if the claim involves an alleged statutory
                  violation, the arbitrator shall be an attorney.

                  b. The initiating party shall pay one-half of the
                  administrative fee(s) and the defending party shall pay
                  one-half of such fee(s).

                  c. Each party may take two (2) depositions and the deposition
                  of any expert as a matter or right, and the parties may engage
                  in additional prehearing discovery only for good cause shown
                  to the arbitrator. Any documents to be introduced in evidence
                  and any documents subpoenaed, as well as a list of all
                  witnesses to be called, shall be submitted to the other party
                  at least thirty (30) days prior to the initial hearing date
                  unless the arbitrator otherwise orders.

                  d. Any hearing shall be recorded by a professional reporter.
                  Each party shall have at least thirty (30) days to submit
                  post-hearing briefs, and the hearing shall not be deemed
                  closed until after the date for submission of such briefs. Any
                  extensions are subject to the control of the arbitrator.

                  e. The arbitration provisions of this Agreement shall not
                  apply to any claims by the Executive for benefits if they are
                  not payable by the Company or if there is another final and
                  binding dispute resolution in the plan, for Workers'
                  Compensation or unemployment compensation or as excluded in
                  paragraph 13, hereof.

                  f. Notice of any claim must be given by the aggrieved party in
                  writing to the other party within six (6) months of the date
                  the aggrieved party first has knowledge of the event, or
                  should have knowledge of the event giving rise to the claim;
                  otherwise, the claim shall be void and deemed waived even if
                  there is a federal or state statute of limitations which would
                  have given more time to pursue the claim. The written notice
                  shall identify and describe the nature of each claim asserted,
                  the statutes, regulation, Agreement provision or other
                  authority on which it is based and a brief statement of the
                  facts supporting such claim. The notice

                                       8


<PAGE>   9


                  shall be sent by certified mail to the last address supplied
                  in writing by the other party.

                  g. The arbitrator acting under this Agreement may award
                  damages, and any other relief (s)he deems just and proper
                  which is provided in any statute applicable to the claim,
                  including attorney's fees. The decision of the arbitrator
                  shall be final and binding on all parties and anyone claiming
                  by or through them. The remedy provided in this paragraph 14
                  shall be the exclusive remedy for all unsettled disputes
                  between the parties except those specifically excepted in
                  subparagraph e. above.

         15.      SUCCESSORS AND ASSIGNS. This Agreement shall inure to the
                  benefit of the Executive and shall be binding upon the
                  Company, and its successors and assigns.

         16.      AMENDMENT. This Agreement may be amended by mutual written
                  agreement of the parties. The parties also recognize the
                  possibility of circumstances arising in which this Agreement
                  would be terminated by mutual written agreement without
                  terminating Executive's employment.

         17.      GOVERNING LAW. This Agreement shall be construed and
                  interpreted in accordance with the laws of the State of
                  Missouri, excluding Missouri's choice of law rules, and except
                  to the extent governed by federal law.


         18.      CONSULTANT SERVICES. The Company may ask the Executive to
                  serve as a consultant to the Company from time to time after
                  the Executive's employment ceases. Until October 1, 2003, the
                  Executive agrees to perform such consulting services as part
                  of this Agreement and recognizes that this Agreement covers
                  such consulting services up to a maximum of 30 hours per month
                  without any additional compensation other than as provided
                  herein.


         IN WITNESS WHEREOF, the foregoing Agreement has been executed effective
as of November 1, 1999.




    /s/ DENNIS J. MOORE
______________________________              ESCO ELECTRONICS CORPORATION
Dennis J. Moore

      1 NOV '99                               /s/ V.L. Richey
Date:__________________________         By:_____________________________________
                                        
                                                  VP Administration
                                        Title:__________________________________




                                                  1 NOV 99
                                        Date: ___________________

528523

                                       9

<PAGE>   10





                        EXHIBIT A TO EMPLOYMENT AGREEMENT


o    Title VII of the Civil Rights Act of 1964, as amended.
o    Age Discrimination in Employment Act, as amended (including the Older
     Workers Benefit Protection Act).
o    The Civil Rights Acts of 1866, 1870 and 1871.
o    The Civil Rights Act of 1991.
o    Fair Labor Standards Acts, as amended, (including Walsh-Healey,
     Davis-Bacon, and Service Contracts Acts) and any state labor standards
     acts.
o    Occupational Safety and Health Act
o    Employee Polygraph Protection Act
o    Worker Adjustment and Retraining Notification Act
o    Family and Medical Leave Act
o    The United States and Missouri Constitutions.
o    National Labor Relations Act, as amended.
o    Employee Retirement Income Security Act, as amended.
o    Americans with Disabilities Act.
o    Family and Medical Leave Act.
o    Missouri Human Rights Act.
o    Missouri Service Letter Statute.
o    Missouri Final Pay Act
o    All other common law and federal, state and local civil rights acts, acts
     regulating any term, condition, or privilege of employment, acts regulating
     the employment or reemployment of veterans or privacy rights, and all other
     regulations, orders and executive orders relating to any term, condition or
     privilege of employment.
o    This Agreement and all other contractual rights
o    Benefits payable by the Company and for which there is not another final
     and binding dispute resolution procedure provided in the plan, after
     exhaustion of any other such procedure.

                                       10



<PAGE>   1


                                                                 EXHIBIT 10 (bb)


                              EMPLOYMENT AGREEMENT


         THIS AGREEMENT (the "Agreement"), made as of the 3rd day of November,
1999, between ESCO ELECTRONICS CORPORATION, a Missouri corporation ("Company" or
"ESCO") and Charles J. Kretschmer, (the "Executive"),

                                WITNESSETH THAT:
         WHEREAS, the Executive possesses executive skills and experience which
the Company believes are of substantial value and importance to the success of
the Company's business operations; and

         WHEREAS, the Company wishes to retain the benefit of the services of
the Executive in connection with the conduct of its business; and

         WHEREAS, the Executive is willing to render service on the terms
hereinafter set forth;

         NOW, THEREFORE, in consideration of the mutual covenants herein
contained, the parties agree as follows:

         1.       TERM. This Agreement shall commence effective as of November
                  3, 1999, and shall continue until November 3, 2002, or such
                  shorter period as may be mutually agreed upon, subject to the
                  termination provisions of this Agreement.

         2.       DUTIES. The Executive shall perform such duties normally
                  associated with the office(s) of Vice President and Chief
                  Financial Officer and such other duties assigned to him by the
                  CEO of the Company.


         3.       SALARY. The Executive shall
 be paid an annual salary of not
                  less than One Hundred and Twenty Thousand Dollars ($120,000)
                  during the term of this Agreement, increased in accordance
                  with the normal practices of the Company.


         4.       BONUS. The Executive shall be eligible to receive an annual
                  bonus during the term of this Agreement upon achieving
                  performance goals determined by the Human Resources and Ethics
                  Committee of the Board of Directors of the Company
                  ("Committee") in accordance with and subject to the terms of
                  the Company's Performance Compensation Plan ("PCP") for senior
                  officers, as in effect from time to time.


         5.       OTHER INCENTIVE COMPENSATION. During the term of this
                  Agreement, the Executive shall be entitled to participate in
                  any stock options, restricted share awards, performance shares
                  and other executive compensation and benefits as the Committee
                  shall, from time to time determine in its discretion.


         6.       WELFARE BENEFITS. During the term of this Agreement, the
                  Executive shall be entitled to participate in such medical,
                  dental, life insurance, long-term disability


                                       1


<PAGE>   2



                  insurance, and other benefits which the Company provides from
                  time to time to other senior executive officers.


         7.       EXECUTIVE PERQUISITES. The Executive's perquisites, if any,
                  including but not limited to, automobile (leased or
                  allowance), club membership, and telephone, shall continue for
                  the length of salary continuation provided in section 9, at
                  their current level of payment, including any associated fees
                  or reimbursement.


         8.       TERMINATION OF EMPLOYMENT  IN CONNECTION WITH A CHANGE OF
                  CONTROL.  If, during the term of this Agreement, the
                  Executive's employment is terminated in connection with a
                  Change of Control under circumstances which would cause the
                  benefits described in the Company's Severance Plan (the
                  "Severance Plan") to become payable to the Executive (the
                  "Severance Plan Benefits"), no further compensation or
                  benefits of any kind shall be payable under this Agreement but
                  the Severance Plan Benefits shall be paid in accordance with
                  the terms and conditions of the Severance Plan.  Capitalized
                  terms not defined herein are defined in the Severance Plan
                  adopted August 10, 1995 by ESCO Electronics Corporation Board
                  of Directors.


         9.       TERMINATION OF EMPLOYMENT PRIOR TO TERMINATION IN CONNECTION
                  WITH A CHANGE OF CONTROL.


                  During the term of this Agreement, the Executive's employment
                  may be terminated for any reason or no reason without cause,
                  by ESCO upon written notice to the Executive. If the Executive
                  is deceased, any sum payable under these termination
                  provisions to the Executive and not otherwise directed by any
                  plan referenced herein shall be paid to Executive's spouse, if
                  any, and if none, to the beneficiary as designated in any
                  records on file with the ESCO Electronics Corporation
                  Retirement Plan, or if none to the Executive's estate.


                  A.       TERMINATION BY THE COMPANY OTHER THAN FOR CAUSE.  


                           If, during the term of this Agreement, but under
                  circumstances not described in paragraph 8, above, the
                  Executive's employment is terminated by the Company for
                  reasons other than "Cause" (as hereinafter defined), then,
                  provided Executive executes the Standard Severance Agreement
                  and Release then in general use by ESCO for this purpose, the
                  Executive shall receive the following :


                  (1) The Company shall continue to pay the Executive his base
                  salary at the rate in effect at the date of such termination
                  of employment for 12 months following such termination
                  ("Severance Period").


                  (2) As a supplement to the payment of the Executive's base
                  salary rate under subparagraph a, above, the Company shall
                  also pay the Executive his PCP Percentage (as hereinafter
                  defined) for 12 months following such termination. For this
                  purpose, his PCP Percentage shall be no less than his annual
                  percentage (of


                                       2


<PAGE>   3



                  base salary) under the Company's Performance Compensation Plan
                  in which the Executive participates, for the last fiscal year
                  prior to the termination.


                  (3) Upon proper application by Executive and payment of the
                  employee portion of the premium, the Company shall furnish
                  Executive medical continuation in accordance with the
                  Consolidated Omnibus Budget Reconciliation Act of 1985, as
                  amended ("COBRA"); provided that during the period of his
                  eligibility the Executive will pay only the rate which active
                  employees pay for similar coverage for up to 6 months.


                  (4) The Company shall continue to provide the Executive the
                  financial planning services which the Company was providing at
                  the date of such termination, until the federal income tax
                  filing deadline for the Executive's taxable year following the
                  taxable year during which such termination occurs.


                  (5) The Executive's life insurance and long term disability
                  benefits will terminate in accordance with the plans or
                  policies in effect at the time of such termination of
                  employment.


                  (6) All outstanding stock options shall become fully vested
                  and exercisable, and all earned awards outstanding under the
                  Company's Performance Share Plan shall be considered vested
                  and shall be paid out and/or distributed upon such
                  termination, subject to and in accordance with the terms of
                  the plan(s).


                  (7) If the Executive is not fully vested in his accrued
                  benefit under the ESCO Electronics Corporation Retirement Plan
                  ("Retirement Plan") the Company shall pay the Executive the
                  lump sum actuarial equivalent of his accrued benefit under the
                  Retirement Plan, calculated using the same actuarial
                  assumptions as are used in calculating whether small lump sum
                  benefits become payable under the Retirement Plan.


                  (8) The Company shall make available executive outplacement
                  assistance which it determines to be appropriate for
                  Executive.

                  B.       TERMINATION BY THE COMPANY FOR CAUSE.

                           If, during the term of this Agreement, the
                  Executive's employment is terminated for "Cause" (as hereafter
                  defined), he shall receive his regular salary and benefits
                  through the date of termination. All other benefits shall
                  cease unless specifically otherwise provided by the benefit
                  plan(s).

                  For purposes of this Agreement, "Cause" shall mean:

                  (1) Executive's willful and continued failure to substantially
                  perform his duties (other than as a result of incapacity due
                  to physical or mental condition), after a written demand for
                  performance is delivered to Executive which specifically
                  identifies the manner in which Executive has not substantially
                  performed his duties; or

                                       3


<PAGE>   4


                  (2) Executive's disability or incapacity which extends for a
                  period of nine consecutive months and which renders Executive,
                  in the judgement of the Board, substantially unable to perform
                  the services for which he has been employed, or

                  (3) Executive's willful commission of misconduct which is
                  materially injurious to the Company, monetarily or otherwise;
                  provided that any material violation of the provisions of
                  paragraph 11 of this Agreement by Executive during his
                  employment shall constitute willful misconduct without further
                  proof of injury; or

                  (4) conviction of Executive of a felony, or

                  (5) a determination by the Board, after Executive has been
                  given written notice of the meeting of such Board at which
                  this question will be taken up and has had an opportunity to
                  appear before the Board at such meeting and defend himself,
                  that Executive has committed fraud, embezzlement, theft, or
                  misappropriation against or from the Company; or

                  (6) Executive's breach of any material provisions of this
                  Agreement.

                           For purposes of this paragraph 9, no act or failure
                  to act shall be considered "willful" unless done or omitted to
                  be done without good faith and without a reasonable belief
                  that the act or omission was in the best interest of ESCO.

                  C.       TERMINATION BY THE EXECUTIVE FOR GOOD REASON.  

                           If, during the term of this Agreement, but under
                  circumstances not described in paragraph 8, above, the
                  Executive terminates his employment for "Good Reason" (as
                  hereinafter defined), then, in addition to his regular salary
                  and benefits through the date of termination, provided the
                  Executive executes the Standard Severance Agreement and
                  Release then in general use by ESCO for this purpose, the
                  Executive shall receive the same compensation and benefits as
                  if the Company had terminated him other than for Cause. "Good
                  Reason" shall mean the occurrence of any one or more of the
                  following events:

                  (1) any failure by the Company to comply with any of the
                  provisions of this Agreement, other than an isolated failure
                  not occurring in bad faith and which is remedied by the
                  Company promptly after receipt of written notice thereof given
                  by the Executive and other than a failure to comply with
                  paragraphs 3 through 7 hereof inclusive solely by reason of a
                  reduction in compensation or benefits that applies to all
                  Senior Management employees;

                                       4


<PAGE>   5


                  (2) the Company's requiring the Executive to move his
                  residence from the Greater St. Louis, Missouri area;

                  (3) the Company's assigning duties to Executive which are,
                  expressly or in practical effect, a material and substantial
                  demotion from or substantial reduction of Executive's present
                  executive or managerial responsibilities, whether or not
                  accompanied by a reduction in remuneration, provided the
                  Executive has given not less than 30 days' written notice to
                  ESCO's CEO of such demotion or reduction and such demotion or
                  reduction continues after a thirty day period; or

                  (4) any purported termination by the Company of the Executive
                  's employment otherwise than pursuant to a Change of Control
                  or for Cause as expressly permitted by this Agreement.

         10.      CONTINUED EMPLOYMENT NOT GUARANTEED.  This Agreement is
                  intended to outline certain salary and benefits payable to
                  Executive under certain specified circumstances and shall not
                  be construed as a guarantee of the Executive's continued
                  employment, nor shall they limit the ability of ESCO's CEO to
                  terminate the employment relationship at any time, with or
                  without cause upon at least 30 days' advance written notice to
                  the Executive. None of the provisions of this Agreement shall
                  be construed as a guarantee on the part of the Executive that
                  he will continue to perform services for the Company, nor
                  shall they limit the ability of the Executive to resign at any
                  time upon at least 30 days' advance written notice to the
                  Company.

         11.      CONFIDENTIAL INFORMATION; COMPANY PROPERTY; NONSOLICITATION;
                  COMPANY INTERESTS. By and in consideration of the mutual
                  promises contained herein, and the compensation and benefits
                  to be provided by the Company hereunder, the Executive agrees
                  that:

                  a. The Executive shall hold in a fiduciary capacity for the
                  benefit of the Company and will not, during the period of his
                  employment disclose to anyone, directly or indirectly, any
                  trade secret or confidential information regarding the
                  business of ESCO Electronics Corporation or any subsidiary
                  company, including without limitation such information
                  referred to in paragraph 11(d) hereof. Confidential
                  Information for this purpose shall include, but not be limited
                  to, trade secrets, audit information, ethics investigation
                  information, product information, engineering information,
                  manufacturing information, customer lists, employees, Company
                  policies and procedures, bidding and proposal information or
                  strategy, product cost or pricing information, any employee's
                  compensation, benefits or skills and specialties and financial
                  information, all (i) obtained by the Executive during his
                  employment by the Company, and (ii) not otherwise public
                  knowledge (other than because of an unauthorized act by the
                  Executive or another individual). Upon the termination of
                  employment, the Executive will return to the Company all such
                  Confidential Information in his position which is in written,
                  tangible, electronic,

                                       5


<PAGE>   6


                  magnetic, or other reproducible form without retaining any
                  copies thereof. After termination of employment, the Executive
                  shall not communicate or divulge such Confidential Information
                  to anyone except (a) an authorized representative of the
                  Company, or (b) to someone else when compelled by an order or
                  subpoena of a court or other governmental body after at least
                  two (2) weeks prior written notice to the Company, if
                  possible, and if such written notice is not possible, then
                  with as much written or oral notice as is possible under the
                  circumstances.

                  b. Except as expressly provided herein, promptly following the
                  Executive's termination of employment, the Executive shall
                  return to the Company all property of the Company and all
                  copies thereof in the Executive's possession or under his
                  control or to which he has access nor shall he attempt to
                  reproduce or have reproduced any such property, except that
                  the Executive may retain his diaries, Rolodexes, and
                  calendars.

                  c. During the period commencing on the date hereof through one
                  (1) year following the termination of Executive's employment
                  or through the Severance Period, whichever is longer, the
                  Executive will not solicit or otherwise induce any employee of
                  the Company or any Company Affiliate to leave the employ of
                  the Company or such Company Affiliate or to become associated,
                  whether as an employee, officer, partner, director, consultant
                  or otherwise, with any business organization.

                  d. Executive will not, during the period of his employment and
                  for a period of one (1) year from the date he ceases to be
                  employed by the Company, directly or indirectly, either for
                  himself or for any other person, divert or take away or
                  attempt to divert or take away (call on or solicit or attempt
                  to call on or solicit) any of the Company's customers or
                  distributors, including, but not limited to, those with whom
                  he became acquainted while employed as an Executive for the
                  Company. The Executive specifically agrees that the one (1)
                  year period is reasonable.

                           If the Executive fails to comply with any of his
                  undertakings hereunder, except as otherwise required by law no
                  further payments or contractual benefits shall be provided to
                  or in respect of the Executive by the Company pursuant to this
                  Agreement or otherwise. The provisions of paragraph 12 shall
                  not apply to any alleged violations of this paragraph, and the
                  Company shall be entitled to obtain temporary and permanent
                  injunctive relief, as well as damages, before any court of
                  competent jurisdiction in St. Louis County for any violation
                  of the provisions of this paragraph by Executive.

         12.      ENFORCEMENT - ARBITRATION. Except as provided in paragraph 11,
                  any controversy or claim arising out of or relating to the
                  application, interpretation or enforcement of this Agreement,
                  and any claim of every nature and description by the Executive
                  against the Company and/or any of its parent, subsidiary,
                  affiliated entities, corporation, partnerships, and their
                  members, officers, directors,

                                       6


<PAGE>   7


                  managers, partners, employees, fiduciaries, administrators,
                  agents or attorneys or by the Company against the Executive
                  which cannot be settled by negotiation of the parties,
                  including, but not limited to, any and all claims arising
                  subsequent to the date of this Agreement under each of the
                  statutes, common law, contractual and other authorities
                  enumerated in Exhibit A, attached hereto and made a part
                  hereof, shall be settled by final and binding arbitration
                  administered by the American Arbitration Association
                  ("Association") under its Employment Dispute Resolution Rules
                  (as amended and effective on November 1, 1993, subject to the
                  then-current fees) and judgement on the award rendered by the
                  arbitration may be entered in any court having jurisdiction
                  thereof subject to the following provisions, except as
                  otherwise mutually agreed by the parties with respect to a
                  particular dispute or provision at the time:

                  a. If the parties cannot agree upon an arbitrator, a
                  seven-person panel shall be submitted to the parties by the
                  Association. If there is a non-selection of the first such
                  panel, the Association shall submit a second seven-person
                  panel to the parties. If there is still a non-selection, the
                  Association shall then appoint a single arbitrator in
                  accordance with its rules subject to each party's objection
                  for cause, and if the claim involves an alleged statutory
                  violation, the arbitrator shall be an attorney.

                  b. The initiating party shall pay one-half of the
                  administrative fee(s) and the defending party shall pay
                  one-half of such fee(s).

                  c. Each party may take two (2) depositions and the deposition
                  of any expert as a matter or right, and the parties may engage
                  in additional prehearing discovery only for good cause shown
                  to the arbitrator. Any documents to be introduced in evidence
                  and any documents subpoenaed, as well as a list of all
                  witnesses to be called, shall be submitted to the other party
                  at least thirty (30) days prior to the initial hearing date
                  unless the arbitrator otherwise orders.

                  d. Any hearing shall be recorded by a professional reporter.
                  Each party shall have at least thirty (30) days to submit
                  post-hearing briefs, and the hearing shall not be deemed
                  closed until after the date for submission of such briefs. Any
                  extensions are subject to the control of the arbitrator.

                  e. The arbitration provisions of this Agreement shall not
                  apply to any claims by the Executive for benefits if they are
                  not payable by the Company or if there is another final and
                  binding dispute resolution in the plan, for Workers'
                  Compensation or unemployment compensation or as excluded in
                  paragraph 11, hereof.

                  f. Notice of any claim must be given by the aggrieved party in
                  writing to the other party within nine (9) months of the date
                  the aggrieved party first has knowledge of the event, or
                  should have knowledge of the event giving rise to the

                                       7


<PAGE>   8


                  claim; otherwise, the claim shall be void and deemed waived
                  even if there is a federal or state statute of limitations
                  which would have given more time to pursue the claim. The
                  written notice shall identify and describe the nature of each
                  claim asserted, the statutes, regulation, Agreement provision
                  or other authority on which it is based and a brief statement
                  of the facts supporting such claim. The notice shall be sent
                  by certified mail to the last address supplied in writing by
                  the other party.

                  g. The arbitrator acting under this Agreement may award
                  damages, and any other relief (s)he deems just and proper
                  which is provided in any statute applicable to the claim,
                  including attorney's fees, arbitration costs and
                  administrative fees, including but not limited to those
                  previously paid by the parties under 12(b). The decision of
                  the arbitrator shall be final and binding on all parties and
                  anyone claiming by or through them. The remedy provided in
                  this paragraph 12 shall be the exclusive remedy for all
                  unsettled disputes between the parties except those
                  specifically excepted in subparagraph (e) above.

         13.      If ESCO is the Employer, any agreement, representation, or
                  other action of the "Employer" herein shall be ESCO's own
                  obligation, enforceable by Executive against ESCO. If a
                  subsidiary of ESCO is the Employer, then ESCO agrees to cause
                  the Employer to honor any such agreement, representation, or
                  other action of the "Employer" herein; the obligation of
                  Executive, however, shall remain ESCO's and shall be
                  enforceable by Executive only against ESCO or, in accordance
                  with section 14 below, ESCO's successor or assignee.

         14.      SUCCESSORS AND ASSIGNS. This Agreement shall inure to the
                  benefit of the Executive and shall be binding upon the
                  Company, and its successors and assigns.

         15.      AMENDMENT. This Agreement may be amended by mutual written
                  agreement of the parties. The parties also recognize the
                  possibility of circumstances arising in which this Agreement
                  would be terminated by mutual written agreement without
                  terminating Executive's employment.

         16.      GOVERNING LAW. This Agreement shall be construed and
                  interpreted in accordance with the laws of the State of
                  Missouri, excluding Missouri's choice of law rules, and except
                  to the extent governed by federal law.


         17.      CONSULTANT SERVICES. The Company may ask the Executive to
                  serve as a Consultant to the Company from time to time after
                  the Executive's employment ceases. For one year after the
                  Executive's employment terminates, if the Executive is
                  receiving the compensation and benefits outlined in paragraph
                  8, 9(a) or 9(c), then the Executive agrees to perform up to 80
                  hours of consulting without additional compensation other than
                  as provided herein and reimbursement of any reasonable
                  out-of-pocket expenses necessarily required or approved in
                  advance.


                                       8


<PAGE>   9



         IN WITNESS WHEREOF, the foregoing Agreement has been executed effective
as of 12 November, 1999.
      

/s/ C.J. Kretschmer
_______________________________              ESCO ELECTRONICS CORPORATION


                                        
Date:       11/12/99                    By:    /s/ V.L. Richey
      __________________________               ________________________________

                                        Title: VP Admin
                                               ________________________________


                                        Date:  12 Nov. 99
                                               ________________________________






                                       9


<PAGE>   10





                        EXHIBIT A TO EMPLOYMENT AGREEMENT
                                   (MISSOURI)

o    Title VII of the Civil Rights Act of 1964, as amended.
o    Age Discrimination in Employment Act, as amended (including the Older
     Workers Benefit Protection Act).
o    The Civil Rights Acts of 1866, 1870 and 1871.
o    The Civil Rights Act of 1991.
o    Fair Labor Standards Acts, as amended, (including Walsh-Healey,
     Davis-Bacon, and Service Contracts Acts) and any state labor standards
     acts.
o    Occupational Safety and Health Act
o    Employee Polygraph Protection Act
o    Worker Adjustment and Retraining Notification Act
o    Family and Medical Leave Act
o    The United States and Missouri Constitutions.
o    National Labor Relations Act, as amended.
o    Employee Retirement Income Security Act, as amended.
o    Americans with Disabilities Act.
o    Family and Medical Leave Act.
o    Missouri Human Rights Act.
o    Missouri Service Letter Statute.
o    Missouri Final Pay Act
o    All other common law and federal, state and local civil rights acts, acts
     regulating any term, condition, or privilege of employment, acts regulating
     the employment or reemployment of veterans or privacy rights, and all other
     regulations, orders and executive orders relating to any term, condition or
     privilege of employment.
o    This Agreement and all other contractual rights
o    Benefits payable by the Company and for which there is not another final
     and binding dispute resolution procedure provided in the plan, after
     exhaustion of any other such procedure.

                                       10



<PAGE>   1


                                                                 EXHIBIT 10 (cc)




                                                                October 12, 1999



Mr. Philip M. Ford
30 Lake Forest Court South
St. Charles, MO  63301

RE:  SPECIAL SEPARATION AGREEMENT

Dear Phil:

         As we have discussed, your employment relationship with ESCO is being
terminated effective December 31,1999 (referred to in this Agreement as the
"Effective Date" or "Separation Date") and you agree to end your active
employment on or before that date when requested to do so in writing by ESCO. It
is important, therefore, to set forth all of the terms concerning your
termination in exchange for your release of all claims and demands of every
nature and description (except as expressly preserved below) against ESCO (as
defined below) in this Special Separation Agreement and Release ("Agreement").
The following constitutes all of the terms of our Agreement:

         1. PARTIES. In this Agreement, "you" means Philip M. Ford together with
your heirs, executors, successors, personal representatives, assigns and all
other persons and entities claiming by and through you. By "ESCO" we mean to
include ESCO Electronics Corporation, the parent corporation and all of its
subsidiaries, all of their related corporations, affiliates, including without
limitation, partnerships, departments, divisions,
 organizations, entities,
benefit plans, successors and assigns of each and all of them, and their
fiduciaries, administrators, partners, directors, officers, agents, attorneys
and employees of any of them.

         2. SPECIAL SEPARATION COMPENSATION AND BENEFITS.

         (a) ESCO shall continue to pay you (or your estate, if you die) your
Base Salary at the rate in effect at the date of your Separation from Service
("Separation") for 24 months following such Separation ("Special Benefit
Period"). The payments will be deposited into your checking account on each
regular employee pay day, commencing with the first regular employee pay day
after December 31, 1999. Except as provided herein, ESCO shall have no
obligation to make any further payment of compensation or benefits to you
(including without limitation, salary, vacation pay, severance pay, or pension
contributions) and shall have no obligation to provide you with any fringe
benefits (including without limitation life insurance, dental insurance, health
and medical insurance, and disability protection).


          (b) As a supplement to the payment of the your base salary rate under
subparagraph a, above, ESCO shall also pay you (or your estate, if you die) your
Average Performance Compensation Plan ("PCP") Percentage (as hereinafter
defined) for 24 months following such separation. For this purpose, your Average
PCP Percentage shall be your average annual percentage (of base salary) under
ESCO's Performance Compensation Plan for the five


                                       1


<PAGE>   2



consecutive fiscal years immediately preceding the fiscal year in which the
Separation occurs (disregarding the highest and lowest percentage).

         (c) The lump sum actuarial equivalent of a supplemental retirement
benefit equal to the difference between (a) the amounts which would have been
payable under any tax-qualified defined benefit retirement plan (and any
non-qualified supplement to such plan) of ESCO's applicable to you
(collectively, the "Retirement Plan") if you had remained employed by the
Company at your Base Salary and Average PCP rate for two years after the Date of
Separation and (b) the amounts actually payable under the Retirement Plan.

         (d) If you are eligible for participation in the ESCO's retiree medical
plan, you shall participate therein in accordance with its terms; otherwise upon
proper application by you and payment of the employee portion of the premium,
ESCO shall furnish you medical continuation in accordance with the Consolidated
Omnibus Budget Reconciliation Act of 1985, as amended ("COBRA"); provided that
during the period of your eligibility you will pay only the rate which active
employees pay for similar coverage for up to 18 months. ESCO reserves the right
to change insurance carriers and benefits for active employees during this
period with the possibility of corresponding changes in and effects on your
coverage.


         (e) ESCO shall continue to provide you the financial planning services
which ESCO was providing at the date of such Separation, until the federal
income tax filing deadline for your second taxable year following the taxable
year during which such Separation occurs.


         (f) Your life insurance and long term disability benefits will
terminate in accordance with these programs in effect at the time of such
Separation.


         (g) You shall have the right to convert any split dollar life insurance
policy on your life which is in effect at the date of such Separation into an
individual policy with you as the sole owner of such policy, except that ESCO
shall be entitled to repayment of all premiums paid by ESCO on such policy.


         (h) ESCO shall continue to pay your club membership dues and related
fees (which it is paying at the time of such Separation) for 24 months following
such Separation, or until your death, if you die during such 24 month period.


         (i) ESCO shall continue to lease for your benefit, the automobile which
it is leasing at the date of such Separation, for 24 months following such
separation or until your death if you die during such two year period. Upon the
expiration of such 24 month period, if you are still alive, ESCO shall purchase
such automobile and transfer all right, title and interest in it to you.


         (j) All outstanding stock options shall become fully exercisable, all
restricted shares shall become fully vested, and all awards outstanding under
the ESCO's Performance Share Plan shall be considered fully earned and vested
and shall be paid out upon such Separation, in accordance with the terms of the
plan(s).




                                       2


<PAGE>   3


         3. REGULAR AND ENHANCED BENEFITS. Attached to this letter as a
Supplement is a schedule listing those regular employment benefits which survive
this Agreement and a more detailed explanation of certain enhanced benefits.
This Supplement also describes all of the regular (that is, non-severance)
compensatory amounts and benefits (the "Regular Benefits") which are accrued and
payable to you as of your last day of employment. The amounts, terms, and
conditions of those Regular Benefits which are governed by separate written
employee benefit plans, programs, or agreements (the "Benefit Plans") are not
fully set forth on the Supplement and such Regular Benefits shall continue to be
governed by their respective Benefit Plans; the terms of the Benefit Plans are
not modified by this Agreement. You acknowledge that under the terms of the
Benefit Plans themselves, the termination of your employment may adversely
affect some or all of the Regular Benefits referred to in the Supplement, or
require you to act promptly to avoid a forfeiture or other adverse result. You
acknowledge that you have reviewed the terms of the Benefit Plans and understand
how those terms affect your Regular Benefits in connection with your Separation.



         4. (a) RELEASE OF ESCO. In consideration of the enhanced Special
Separation Payment and Benefits described in Paragraph 2, the other provisions
set forth herein, and other good and valuable consideration, except for
enforcement of the provisions and benefits specifically and explicitly promised,
preserved and set forth in this Agreement, you do hereby voluntarily and
knowingly, both individually and as a member of any class, and on behalf of your
heirs, personal representatives, successors, and assigns, RELEASE, ACQUIT AND
FOREVER DISCHARGE ESCO, its predecessors, successors and assigns, subsidiary and
affiliated corporations, firms, partnerships, business entities, and benefit
plans, and all of their officers, directors, employees, agents, fiduciaries,
administrators, partners, and attorneys, FROM ANY AND ALL DEMANDS, CLAIMS,
ACTIONS AND DAMAGES (whether known or unknown, foreseen or unforeseen, direct or
indirect, liquidated or not yet fully in being) of every nature and description
including, but not limited to, back pay, front pay, statutory liquidated
damages, compensatory and punitive damages, liabilities, suits, costs, expenses,
and compensation in any form, including attorneys' fees and reinstatement, in
any way arising in whole or in part, out of your employment with and the
Separation of your employment on or about the Effective Date including, but not
limited to, any and all of your rights under any and all federal, state or local
statutes, regulations, ordinances, executive orders, policies or under common
law or any alleged employee policy, manual, or contract of employment governing
ESCO's employment practices, the terms and conditions of your employment, or any
benefits of any nature and description allegedly contracted for or promised to
you, except only those sums specifically set forth in the foregoing provisions
of this Agreement. THE FOREGOING INCLUDES YOUR AGREEMENT TO WAIVE AND RELEASE
ANY AND ALL RIGHTS under all federal, state or local constitutional and
statutory provisions, orders and regulations prohibiting discrimination based on
race, color, sex, age, religion, handicap or disability, national origin,
ancestry, citizenship, disabled or other veteran's status or any other type of
employment discrimination prohibited by applicable law, including, but not
limited to, (a) Title VII of the Civil Rights Act of 1964, as amended, (b) The
Age Discrimination in Employment Act, as amended (including the Older Workers
Benefit Protection Act), (c) The Civil Rights Acts of 1866, 1870 and 1871, (d)
The Civil Rights Act of 1991, (e) The United States, and Missouri Constitutions,
(f) The National Labor

                                       3


<PAGE>   4


Relations Act, (g) The Employee Retirement Income Security Act, (h) The
Americans with Disabilities Act, (i) the Family and Medical Leave Act (j) The
Employee Retirement Income Security Act, (k) The Missouri Human Rights Act, (l)
and Missouri Service Letter Statute, and (m) all other federal, state and local
civil rights acts, regulations, orders and executive orders relating to any
term, condition or privilege of employment.

         (b) You acknowledge and agree that you are fully aware that there are
various federal, state and municipal laws which prohibit employment
discrimination based on (among other personal characteristics) the following:
race, color, age, sex, pregnancy, marital status, sexual orientation,
citizenship, religion, creed, national origin or ancestry, military or national
guard service, disability, handicap, mental, psychological record or prior
convictions, or entitlement to pension or employee benefits including
retirement, pension, stock or other incentive plans, and severance.

         (c) You also acknowledge and agree that you fully understand and are
aware that there are federal, state and municipal agencies which enforce and
administer these laws and ensure their enforcement.

         5. COVENANT NOT TO SUE. You agree never to institute, directly or
indirectly, any proceeding of any kind against ESCO on account of any matters
over which you have waived your rights in this Agreement, and to tender back the
Special Separation Pay and extra benefits enumerated in Paragraph 2, together
with interest at the rate of Nine Percent (9%) per annum, prior to attempting to
bring any such suit.

         6. ACKNOWLEDGMENT OF CONSIDERATION TO WHICH YOU WOULD NOT OTHERWISE BE
ENTITLED. You acknowledge that under this Agreement you are to receive
consideration to which you would not otherwise be entitled, absent this
Agreement. This consideration includes the Special Separation Pay and Benefits
described in Paragraph 2.

         7. You acknowledge that you have been given the opportunity to consult
with an attorney regarding this agreement, and that you fully understand this
agreement and the effect of signing it.

         8. ACCEPTANCE PERIOD. ESCO has informed you and you acknowledge that
you have up to forty-five (45) days from the date you receive this Agreement to
sign and accept it. It will then not become effective until eight (8) days after
you sign it. During the seven (7) days after you execute this document you may
revoke your acceptance. If you choose to revoke this Agreement, you must notify
ESCO no later than seven (7) days after you sign it. If you do not return the
signed Agreement to D. J. Moore within forty-five (45) days after receiving this
Agreement, ESCO will consider your non-action a refusal to agree to this
Agreement. You will, therefore, not be given the consideration described in
Paragraph 2 or any other discretionary payments or benefits provided herein.

         9. OWBRA INFORMATION  FURNISHED:  You acknowledge  receipt, on
October 12, 1999 of Attachment "A" to this Agreement.

                                       4


<PAGE>   5


         10.      CONFIDENTIAL  INFORMATION:  ESCO  PROPERTY,  NONSOLICITATION;
ESCO  INTERESTS.  By  and  in consideration of the benefits to be provided by
ESCO hereunder,  including the Special  Separation pay arrangements set forth
herein, you agree that:

         (a) You will hold in a fiduciary capacity for the company and you will
not, during the period of your employment, disclose to anyone, directly or
indirectly, any trade secret or confidential information regarding the business
of ESCO Electronics Corporation or any subsidiary company. Confidential
Information for this purpose shall include, but not be limited to, trade
secrets, audit information, ethics investigation information, product
information, engineering information, manufacturing information, customer lists,
employees, ESCO policies and procedures, bidding and proposal information or
strategy, product cost or pricing information, any employee's compensation,
benefits or skills and specialties and financial information (i) obtained by you
during your employment by ESCO, and (ii) not otherwise public knowledge (other
than because of an unauthorized act by you or another individual). Upon your
Separation, you will return to ESCO all such Confidential Information in your
possession which is in written, tangible, electronic, magnetic, or other
reproducible form without retaining any copies thereof. After Separation of
employment, you shall not communicate or divulge such Confidential Information
to anyone except (a) an authorized representative of ESCO, or (b) to someone
else when compelled by an order or subpoena of a court or other governmental
body after at least two (2) weeks prior written notice to ESCO, if possible, and
if such written notice is not possible, then with as much written or oral notice
as is possible under the circumstances.

         (b) Upon your Separation you shall immediately return to ESCO all of
ESCO's property, including without limitation, keys, credit cards, files, lists,
records, personal computers and related equipment, including computer disks and
other data used by you or ESCO in rendering services hereunder, or otherwise,
which may be in the Employee's possession or under your control, or to which you
have access, without retaining any copies or computerized duplicates thereof.

         (c) You will not solicit or otherwise induce any employee of ESCO or
any ESCO Affiliate to leave the employ of ESCO or such ESCO Affiliate or to
become associated, whether as an employee, officer, partner, director,
consultant or otherwise, with any business organization.


         (d) You will not, during the period of your employment and for a period
of two (2) years from the date you cease to be employed by ESCO, directly or
indirectly, either for yourself or for any other person, divert or take away or
attempt to divert or take away (call on or solicit or attempt to call on or
solicit) any of the Company's customers or distributors, including, but not
limited to, those with whom you became acquainted as an employee of ESCO. You
specifically agree that the two (2) year period is reasonable in light of the
payments and benefits provided by ESCO pursuant to this Contract.


         If you fail to comply with any of the undertakings hereunder, no
further payments or benefits shall be provided by ESCO.

                                       5


<PAGE>   6


         11. ENTIRE AGREEMENT. You agree that this document contains the final
and entire agreement between you and ESCO and that there are no representations,
inducements, arrangements or promises made by ESCO to you, or on which you
relied in executing this Agreement, either oral or written, other than those
expressly contained herein.

         12. GOVERNING LAW AND SEVERABILITY. This Agreement has been entered
into in the State of Missouri, and the validity, interpretation and legal effect
of this Agreement shall be governed by the laws of the State of Missouri;
exclusive of its choice of law provisions. Furthermore, any claim, dispute or
disagreement which may arise must be resolved within the State of Missouri and
in accordance with the substantive laws of the State of Missouri governing
contracts entered into and performed within the State. You agree to the
jurisdiction of the courts of this State and will use such courts to resolve any
dispute not resolved by discussions and negotiation of the parties.

         The invalidity or unenforceability of any provision of this Agreement
in any circumstance shall not affect the validity or enforceability of any other
provision of this Agreement, and except to the extent such provision is invalid
or unenforceable, this Agreement shall remain in full force and effect. Any
provision in this Agreement which is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective only to the extent
that such provision is prohibited or unenforceable, without invalidating or
affecting the remaining provisions hereof in such jurisdiction, and any such
prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.

         13. WAIVER OF BREACH. Failure of either party to exercise any of its
rights outlined in this Agreement shall not be construed as a Waiver or prevent
any party from thereafter enforcing the terms and conditions of the Agreement.

         14. TERMINATION OF EMPLOYMENT IN CONNECTION WITH A CHANGE OF CONTROL.
Prior to December 31, 1999, while you are actively employed, if your employment
is terminated in connection with a Change of Control under circumstances which
would cause the benefits described in ESCO's Severance Plan (the "Severance
Plan") to become payable to you (the "Severance Plan Benefits"), no further
compensation or benefits of any kind shall be payable under this Agreement but
the Severance Plan Benefits shall be paid in accordance with the terms of the
Severance Plan.

         15. NON-ADMISSION. You agree and acknowledge that ESCO does not admit
in any way that the terms and conditions of your employment or your Separation
from ESCO was in any way improper. Neither this Agreement or the offer this
Agreement describes constitutes, nor shall it be construed as, an admission by
ESCO of any liability or wrongdoing or any violation of federal, state or local
laws, regulation or ordinance and, to the contrary, any such interpretation or
inference is specifically denied.

                                       6


<PAGE>   7


         16. DISCLOSURE. You agree that you will not disclose the terms of this
Agreement to any person other than your spouse, your attorney, or a financial
advisor without the written consent of ESCO. You agree to advise such persons
that the terms of this Agreement are confidential. Breach of this provision
shall be considered a material breach of this Agreement.

         17. BINDING EFFECT. This agreement shall be binding upon and inure to
the benefit of the parties and their respective heirs, executors,
administrators, legal representatives, successors and assigns.

         18. REMEDIES. ESCO and you agree that, if either party breaches any of
the provisions of this Agreement, the non-breaching party shall be entitled to
all legal and equitable remedies provided by law, including restitution of any
monies paid pursuant to this Agreement. Moreover, the party that prevails in any
litigation related to a breach of this agreement shall be entitled to be
reimbursed by the opposing party for reasonable attorneys' fees, expenses and
court costs incurred in such litigation.


         19. CONSULTANT SERVICES. ESCO may ask you to serve as a consultant to
ESCO from time to time after your employment ceases. Until January 1, 2002, you
agree to perform such consulting services as part of this Agreement and
recognize that this Agreement covers such consulting services without any
additional compensation other than provided herein.



                                  ESCO ELECTRONICS CORPORATION

                                     
                                  By: /s/ D.J. Moore
                                     -------------------------------------------

                                  Title: Chairman, President & CEO 
                                        ----------------------------------------

                                  Date: October 12, 1999
                                       -----------------------------------------


I ACKNOWLEDGE THAT I HAVE FULLY READ THE ABOVE AND VOLUNTARILY ACCEPT IT WITH
KNOWLEDGE THAT IT CONTAINS EVERYTHING I HAVE BEEN PROMISED AND A FULL AND
COMPLETE RELEASE OF ALL CLAIMS OF EVERY NATURE AND DESCRIPTION AGAINST ESCO (AS
DEFINED IN PARAGRAPH NUMBER 1, ABOVE).

                                  /s/ Philip M. Ford
                                  ----------------------------------------------
                                  Philip M. Ford

                                  October 27, 1999
                                  ----------------------------------------------
                                  Date



                                       7



<PAGE>   1


                                                                 EXHIBIT 10 (dd)



                                October 18, 1999



Mr. Walter Stark
4 Robin Hill
St. Louis, MO  63124

RE:  SEVERANCE AGREEMENT

Dear Walter:

         As we have discussed, your employment relationship with ESCO is being
terminated effective December 31,1999 (referred to in this Agreement as the
"Effective Date" or "Termination Date") and you agree to end your active
employment on or before that date when requested to do so in writing by ESCO. It
is important, therefore, to set forth all of the terms concerning your
employment termination in exchange for your release of all claims and demands of
every nature and description (except as expressly preserved below) against ESCO
(as defined below) in this Severance Agreement and Release ("Agreement"). The
following constitutes all of the terms of our Agreement:

         1. PARTIES. In this Agreement, "you" means Walter Stark together with
your heirs, executors, successors, personal representatives, assigns and all
other persons and entities claiming by and through you. By "ESCO" we mean to
include ESCO Electronics Corporation, the parent corporation and all of its
subsidiaries, all of their related corporations, affiliates, including without
limitation, partnerships, departments, divisions, organizations,
 entities,
benefit plans, successors and assigns of each and all of them, and their
fiduciaries, administrators, partners, directors, officers, agents, attorneys
and employees of any of them.

         2. SEVERANCE COMPENSATION AND BENEFITS.

         (a) ESCO shall continue to pay you (or your estate, if you die) your
Base Salary at the rate in effect at the date of such Termination of employment
("Termination") for 24 months following such termination ("Severance Period").
The payments will be deposited into your checking account on each regular
employee pay day, commencing with the first regular employee pay day after
December 31, 1999. Except as provided herein, ESCO shall have no obligation to
make any further payment of compensation or benefits to you (including without
limitation, salary, vacation pay, severance pay, or pension contributions) and
shall have no obligation to provide you with any fringe benefits (including
without limitation life insurance, dental insurance, health and medical
insurance, and disability protection).

          (b) As a supplement to the payment of the your base salary rate under
subparagraph a, above, ESCO shall also pay you (or your estate, if you die) your
Average Performance Compensation Plan ("PCP) Percentage for 24 months following
such termination. For this purpose, your Average PCP Percentage shall be your
average annual percentage (of base salary) under ESCO's Performance Compensation
Plan for the five consecutive fiscal years


                                       1


<PAGE>   2



immediately preceding the fiscal year in which the Termination occurs
(disregarding the highest and lowest percentage).

         (c) The lump sum actuarial equivalent of a supplemental retirement
benefit equal to the difference between (a) the amounts which would have been
payable under any tax-qualified defined benefit retirement plan (and any
non-qualified supplement to such plan) of ESCO's applicable to you
(collectively, the "Retirement Plan") if you had remained employed by the
Company at your Base Salary and Average PCP rate for two years after the Date of
Termination and (b) the amounts actually payable under the Retirement Plan.

         (d) If you are eligible for participation in the ESCO's retiree medical
plan, you shall participate therein in accordance with its terms; otherwise upon
proper application by you and payment of the employee portion of the premium,
ESCO shall furnish you medical continuation in accordance with the Consolidated
Omnibus Budget Reconciliation Act of 1985, as amended ("COBRA"); provided that
during the period of your eligibility you will pay only the rate which active
employees pay for similar coverage for up to 18 months. ESCO reserves the right
to change insurance carriers for active employees during this period with the
possibility of corresponding changes in and effects on your coverage.


         (e) ESCO shall continue to provide you the financial planning services
which ESCO was providing at the date of such termination, until the federal
income tax filing deadline for your second taxable year following the taxable
year during which such Termination occurs.


         (f) Your life insurance and long term disability benefits will
terminate in accordance with these programs in effect at the time of such
termination of employment.


         (g) You shall have the right to convert any split dollar life insurance
policy on your life which is in effect at the date of such termination into an
individual policy with you as the sole owner of such policy, except that ESCO
shall be entitled to repayment of all premiums paid by ESCO on such policy.


         (h) ESCO shall continue to pay your club membership dues and related
fees (which it is paying at the time of such termination) for 24 months
following such termination, or until your death, if you die during such 24
months period.


         (i) ESCO shall continue the automobile allowance which it is providing
you at the date of such Termination, for 24 months following such Termination or
until your death if you die during such 24 months period.


         (j) All outstanding stock options shall become fully exercisable, all
restricted shares shall become fully vested, and all awards outstanding under
the ESCO's Performance Share Plan shall be considered fully earned and vested
and shall be paid out upon such termination, in accordance with the terms of the
plan(s).


         (k) ESCO shall provide you with outplacement assistance.


                                       2


<PAGE>   3


         3. REGULAR AND ENHANCED BENEFITS. Attached to this letter as a
Supplement is a schedule listing those regular employment benefits which survive
this Agreement and a more detailed explanation of certain enhanced benefits.
This Supplement also describes all of the regular (that is, non-severance)
compensatory amounts and benefits (the "Regular Benefits") which are accrued and
payable to you as of your last day of employment. The amounts, terms, and
conditions of those Regular Benefits which are governed by separate written
employee benefit plans, programs, or agreements (the "Benefit Plans") are not
fully set forth on the Supplement and such Regular Benefits shall continue to be
governed by their respective Benefit Plans; the terms of the Benefit Plans are
not modified by this Agreement. You acknowledge that under the terms of the
Benefit Plans themselves, the termination of your employment may adversely
affect some or all of the Regular Benefits referred to in the Supplement, or
require you to act promptly to avoid a forfeiture or other adverse result. You
acknowledge that you have reviewed the terms of the Benefit Plans and understand
how those terms affect your Regular Benefits in connection with your
Termination.

         4. (a) RELEASE OF ESCO. In consideration of the enhanced Severance
Payment and benefits described in Paragraph 2, the other provisions set forth
herein, and other good and valuable consideration, except for enforcement of the
provisions and benefits specifically and explicitly promised, preserved and set
forth in this Agreement, you do hereby voluntarily and knowingly, both
individually and as a member of any class, and on behalf of your heirs, personal
representatives, successors, and assigns, RELEASE, ACQUIT AND FOREVER DISCHARGE
ESCO, its predecessors, successors and assigns, subsidiary and affiliated
corporations, firms, partnerships, business entities, and benefit plans, and all
of their officers, directors, employees, agents, fiduciaries, administrators,
partners, and attorneys, FROM ANY AND ALL DEMANDS, CLAIMS, ACTIONS AND DAMAGES
(whether known or unknown, foreseen or unforeseen, direct or indirect,
liquidated or not yet fully in being) of every nature and description including,
but not limited to, back pay, front pay, statutory liquidated damages,
compensatory and punitive damages, liabilities, suits, costs, expenses, and
compensation in any form, including attorneys' fees and reinstatement, in any
way arising in whole or in part, out of your employment with and the termination
of your employment on or about the Effective Date including, but not limited to,
any and all of your rights under any and all federal, state or local statutes,
regulations, ordinances, executive orders, policies or under common law or any
alleged employee policy, manual, or contract of employment governing ESCO's
employment practices, the terms and conditions of your employment, or any
benefits of any nature and description allegedly contracted for or promised to
you, except only those sums specifically set forth in the foregoing provisions
of this Agreement. THE FOREGOING INCLUDES YOUR AGREEMENT TO WAIVE AND RELEASE
ANY AND ALL RIGHTS under all federal, state or local constitutional and
statutory provisions, orders and regulations prohibiting discrimination based on
race, color, sex, age, religion, handicap or disability, national origin,
ancestry, citizenship, disabled or other veteran's status or any other type of
employment discrimination prohibited by applicable law, including, but not
limited to, (a) Title VII of the Civil Rights Act of 1964, as amended, (b) The
Age Discrimination in Employment Act, as amended (including the Older Workers
Benefit Protection Act), (c) The Civil Rights Acts of 1866, 1870 and 1871, (d)
The Civil Rights Act of 1991, (e) The United States, and Missouri Constitutions,
(f) The National Labor Relations Act, (g) The Employee Retirement

                                       3


<PAGE>   4


Income Security Act, (h) The Americans with Disabilities Act, (i) the Family and
Medical Leave Act (j) The Employee Retirement Income Security Act, (k) The
Missouri Human Rights Act, (l) and Missouri Service Letter Statute, and (m) all
other federal, state and local civil rights acts, regulations, orders and
executive orders relating to any term, condition or privilege of employment.

         (b) You acknowledge and agree that you are fully aware that there are
various federal, state and municipal laws which prohibit employment
discrimination based on (among other personal characteristics) the following:
race, color, age, sex, pregnancy, marital status, sexual orientation,
citizenship, religion, creed, national origin or ancestry, military or national
guard service, disability, handicap, mental, psychological record or prior
convictions, or entitlement to pension or employee benefits including
retirement, pension, stock or other incentive plans, and severance.

         (c) You also acknowledge and agree that you fully understand and are
aware that there are federal, state and municipal agencies which enforce and
administer these laws and ensure their enforcement.

         5. COVENANT NOT TO SUE. You agree never to institute, directly or
indirectly, any proceeding of any kind against ESCO on account of any matters
over which you have waived your rights in this Agreement, and to tender back the
Severance Pay and extra benefits enumerated in Paragraph 2, together with
interest at the rate of Nine Percent (9%) per annum, prior to attempting to
bring any such suit.

         6. ACKNOWLEDGMENT OF CONSIDERATION TO WHICH YOU WOULD NOT OTHERWISE BE
ENTITLED. You acknowledge that under this Agreement you are to receive
consideration to which you would not otherwise be entitled, absent this
Agreement. This consideration includes the Severance Pay and Benefits described
in Paragraph 2.

         7. You acknowledge that you have been given the opportunity to consult
with an attorney regarding this agreement, and that you fully understand this
agreement and the effect of signing it.

         8. ACCEPTANCE PERIOD. ESCO has informed you and you acknowledge that
you have up to forty-five (45) days from the date you receive this Agreement to
sign and accept it. It will then not become effective until eight (8) days after
you sign it. During the seven (7) days after you execute this document you may
revoke your acceptance. If you choose to revoke this Agreement, you must notify
ESCO no later than seven (7) days after you sign it. If you do not return the
signed Agreement to D. J. Moore within forty-five (45) days after receiving this
Agreement, ESCO will consider your non-action a refusal to agree to this
Agreement. You will, therefore, not be given the consideration described in
Paragraph 2 or any other discretionary payments or benefits provided herein.

         9. OWBRA INFORMATION FURNISHED:  You acknowledge  receipt, on October
18, 1999 of Attachment "A" to this Agreement.

                                       4


<PAGE>   5


         10.CONFIDENTIAL INFORMATION: ESCO  PROPERTY, NONSOLICITATION; ESCO
INTERESTS.  By and in consideration of the benefits to be provided by ESCO
hereunder, including the severance arrangements set forth herein, you agree
that:

         (a) You will hold in a fiduciary capacity for the company and you will
not, during the period of your employment, disclose to anyone, directly or
indirectly, any trade secret or confidential information regarding the business
of ESCO Electronics Corporation or any subsidiary company. Confidential
Information for this purpose shall include, but not be limited to, trade
secrets, audit information, ethics investigation information, product
information, engineering information, manufacturing information, customer lists,
employees, ESCO policies and procedures, bidding and proposal information or
strategy, product cost or pricing information, any employee's compensation,
benefits or skills and specialties and financial information (i) obtained by you
during your employment by ESCO, and (ii) not otherwise public knowledge (other
than because of an unauthorized act by you or another individual). Upon your
Termination, you will return to ESCO all such Confidential Information in your
possession which is in written, tangible, electronic, magnetic, or other
reproducible form without retaining any copies thereof. After termination of
employment, you shall not communicate or divulge such Confidential Information
to anyone except (a) an authorized representative of ESCO, or (b) to someone
else when compelled by an order or subpoena of a court or other governmental
body after at least two (2) weeks prior written notice to ESCO, if possible, and
if such written notice is not possible, then with as much written or oral notice
as is possible under the circumstances.

         (b) Upon your Termination, you shall immediately return to ESCO all of
the ESCO's property, including without limitation, keys, credit cards, files,
lists, records, personal computers and related equipment, including computer
disks and other data used by you or ESCO in rendering services hereunder, or
otherwise, which may be in the your possession or under your control, or to
which you have access, without retaining any copies or computerized duplicates
thereof.

         (c) You will not solicit or otherwise induce any employee of ESCO or
any ESCO Affiliate to leave the employ of ESCO or such ESCO Affiliate or to
become associated, whether as an employee, officer, partner, director,
consultant or otherwise, with any business organization.


         (d) You will not, during the period of your employment and for a period
of two (2) years from the date you cease to be employed by ESCO, directly or
indirectly, either for yourself or for any other person, divert or take away or
attempt to divert or take away (call on or solicit or attempt to call on or
solicit) any of the Company's customers or distributors, including, but not
limited to, those with whom you became acquainted as an employee of ESCO. You
specifically agree that the two (2) year period is reasonable in light of the
payments and benefits provided by ESCO pursuant to this Contract.


                                       5


<PAGE>   6


         If you fail to comply with any of the undertakings hereunder, no
further payments or benefits shall be provided by ESCO.

         11. ENTIRE AGREEMENT. You agree that this document contains the final
and entire agreement between you and ESCO and that there are no representations,
inducements, arrangements or promises made by ESCO to you, or on which you
relied in executing this Agreement, either oral or written, other than those
expressly contained herein.

         12. GOVERNING LAW AND SEVERABILITY. This Agreement has been entered
into in the State of Missouri, and the validity, interpretation and legal effect
of this Agreement shall be governed by the laws of the State of Missouri;
exclusive of its choice of law provisions. Furthermore, any claim, dispute or
disagreement which may arise must be resolved within the State of Missouri and
in accordance with the substantive laws of the State of Missouri governing
contracts entered into and performed within the State. You agree to the
jurisdiction of the courts of this State and will use such courts to resolve any
dispute not resolved by discussions and negotiation of the parties.

         The invalidity or unenforceability of any provision of this Agreement
in any circumstance shall not affect the validity or enforceability of any other
provision of this Agreement, and except to the extent such provision is invalid
or unenforceable, this Agreement shall remain in full force and effect. Any
provision in this Agreement which is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective only to the extent
that such provision is prohibited or unenforceable, without invalidating or
affecting the remaining provisions hereof in such jurisdiction, and any such
prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.

         13. WAIVER OF BREACH. Failure of either party to exercise any of its
rights outlined in this Agreement shall not be construed as a Waiver or prevent
any party from thereafter enforcing the terms and conditions of the Agreement.

         14. CHANGE OF CONTROL PRIOR TO DECEMBER 31, 1999. In the event that
there is a Change of Control as defined in ESCO's Severance Plan (the "Severance
Plan") prior to December 31, 1999, this Agreement shall become null and void and
the employees rights and obligations shall be governed by the terms of the
Severance Plan.

         15. NON-ADMISSION. You agree and acknowledge that ESCO does not admit
in any way that the terms and conditions of your employment or your separation
from ESCO was in any way improper. Neither this Agreement or the offer this
Agreement describes constitutes, nor shall it be construed as, an admission by
ESCO of any liability or wrongdoing or any violation of federal, state or local
laws, regulation or ordinance and, to the contrary, any such interpretation or
inference is specifically denied.

         16. DISCLOSURE. You agree that you will not disclose the terms of this
Agreement to any person other than your spouse, your attorney, or a financial
advisor without the written

                                       6


<PAGE>   7


consent of ESCO. You agree to advise such persons that the terms of this
Agreement are confidential. Breach of this provision shall be considered a
material breach of this agreement.

         17. BINDING EFFECT. This agreement shall be binding upon and inure to
the benefit of the parties and their respective heirs, executors,
administrators, legal representatives, successors and assigns.

         18. REMEDIES. ESCO and you agree that, if either party breaches any of
the provisions of this Agreement, the non-breaching party shall be entitled to
all legal and equitable remedies provided by law, including restitution of any
monies paid pursuant to this Agreement. Moreover, the party that prevails in any
litigation related to a breach of this agreement shall be entitled to be
reimbursed by the opposing party for reasonable attorneys' fees, expenses and
court costs incurred in such litigation.


         19. CONSULTANT SERVICES. ESCO may ask you to serve as a consultant to
ESCO from time to time after your employment ceases. Until January 1, 2002, you
agree to perform such consulting services as part of this Agreement and
recognize that this Agreement covers such consulting services without any
additional compensation other than provided herein.


                                  ESCO ELECTRONICS CORPORATION


                                  By:  /s/ Dennis J. Moore
                                       _________________________________________

                                  Title: Chairman, President & CEO
                                       _________________________________________

                                  Date: October 18, 1999
                                       _________________________________________


I ACKNOWLEDGE THAT I HAVE FULLY READ THE ABOVE AND VOLUNTARILY ACCEPT IT WITH
KNOWLEDGE THAT IT CONTAINS EVERYTHING I HAVE BEEN PROMISED AND A FULL AND
COMPLETE RELEASE OF ALL CLAIMS OF EVERY NATURE AND DESCRIPTION AGAINST ESCO (AS
DEFINED IN PARAGRAPH NUMBER 1, ABOVE).

                                  /s/ Walter Stark
                                  ______________________________________________
                                  Walter Stark


                                      10/18/99
                                  ______________________________________________
                                  Date
10/12/99

                                       7



<PAGE>   1


                                                                      EXHIBIT 13

MANAGEMENT'S DISCUSSION AND ANALYSIS



                The following discussion should be read in conjunction with the
consolidated financial statements and notes thereto.

Introduction
                ESCO Electronics Corporation (ESCO, the Company) is engaged in
            the design, manufacture, sale and support of engineered products
            used principally in filtration/fluid flow applications,
            electromagnetic compatibility (EMC) testing, and electric utility
            communications and control systems. Filtration/fluid flow and EMC
            testing products are supplied to a broad base of industrial and
            commercial customers worldwide. At the present time, electric
            utility communication systems are marketed primarily to customers in
            North America.
                ESCO operates principally in four business segments:
            Filtration/Fluid Flow, Test, Communications and Other. As part of
            Management's strategy to narrow the Company's product/market focus,
            ESCO's last major defense business, Systems & Electronics Inc. was
            sold on September 30, 1999 to Engineered Support Systems, Inc.
            (ESSI) for $85 million in cash, less working capital adjustments.
                In conjunction with this divestiture, the Company has taken a
            number of additional actions at September 30, 1999
 to further
            sharpen its focus on its primary served markets. ESCO is actively
            pursuing the sale of its microwave antenna business, which was
            operated as a part of Rantec Microwave & Electronics, Inc. Other
            actions include abandoning the active pursuit of certain business
            areas, exiting non-core, underperforming businesses, and
            restructuring the corporate overhead of the Company. Specifically,
            the Company plans to discontinue its investment in High Pressure Air
            Reducing Quiet Manifolds for surface ships (Filtration/Fluid Flow
            segment) as well as its Vehicle Location Systems (Other segment),
            and has reduced ongoing operating costs. These items are discussed
            in detail on page 12.
                The actions outlined above, taken collectively, mark a
            significant milestone in the transformation of ESCO from a primarily
            defense-oriented business to a supplier of engineered products used
            primarily in industrial and commercial applications.
                The ongoing business segments are comprised of the following
            operating entities;
                -   Filtration/Fluid Flow: PTI Technologies Inc. (PTI) and
                    Filtertek Inc. (Filtertek);
                -   Test: EMC Test Systems, L.P. (ETS),
                -   Communications: Distribution Control Systems, Inc. (DCSI),
                -   Other: Rantec Microwave & Electronics, Inc. (Rantec) and
                    Comtrak Technologies, L.L.C. (Comtrak): the ongoing
                    portions of this segment will include Rantec Power Systems
                    and Comtrak Securvision(R) product lines;
                -   Systems & Electronics Inc. (SEI) is included as a divested
                    business.
                ESCO enters the new millennium with meaningful growth prospects
            in its primary served markets, a substantially lower risk profile,
            more focused and with considerable financial flexibility.
                Management will deliver shareholder value through internal
            growth, selective acquisitions and share repurchase when warranted.

10


<PAGE>   2
MANAGEMENT'S DISCUSSION AND ANALYSIS

Reconciliation of adjusted net income

                The following table is not intended to present net earnings as
            defined within generally accepted accounting principles (GAAP), and
            is presented for informational purposes only.
                The table provides a reconciliation between the reported
            financials and what Management believes the 1999 operating results
            may have been after removing certain nonrecurring items and assuming
            that all of the actions taken during 1999 to reorient the business
            were complete at the beginning of the period. Management believes
            the estimated 1999 adjusted operating results provide a meaningful
            presentation for purposes of analyzing ESCO's ongoing financial
            performance. The estimated adjusted net earnings may not be
            indicative of future performance.

<TABLE>
<CAPTION>
                                                                 1999        Elimination           Adjusting                 1999
            (Dollars in millions, rounded)                As Reported             of SEI (a)           Items          As Adjusted
           -----------------------------------------------------------------------------------------------------------------------

            <S>                                           <C>                <C>                   <C>                <C>    
            Net sales                                          $416.1               172.8                 -                $243.3
                                                              -------                ----               ----               ------

              Cost of sales                                     317.7               139.6               (2.0) (b)           176.1
              Other charges related to cost of sales              3.9                 -                 (3.9) (c)              -
              SG&A expenses                                      74.4                21.6                 .8 (d)             53.6
              Interest expense (income)                           6.5                  .6               (8.2) (e)            (2.3)
              Other, net                                          4.9                  .3                (.3) (c)             4.3
              Restructuring charges                               5.1                 -                 (5.1) (c)              -
              Gain on sale of SEI                               (59.9)                -                 59.9 (c)               -
                                                              -------                ----               ----               ------

                    Total costs and expenses                    352.6               162.1               41.2                231.7
                                                              -------                ----               ----               ------

           Earnings before tax                                   63.5                10.7              (41.2)                11.6
            Income tax expense                                   13.0                 3.7               (5.4) (f)             3.9
                                                              -------                ----               ----               ------

            Net earnings before accounting change                50.5                 7.0              (35.8)                 7.7
                                                              -------                ----               ----               ------

            Cumulative effect of accounting change, net of tax  (25.0)                -                 25.0 (c)               -
                                                              -------                ----               ----               ------

                      Net earnings                              $25.5                 7.0              (10.8)              $  7.7
                                                              -------                ----               ----               ------


            Diluted EPS                                         $2.02                                                      $   .61
           -----------------------------------------------------------------------------------------------------------------------
</TABLE>

 
           (a)  Represents the operations of SEI which were included in the 1999
                GAAP reported results of operations.
           (b)  Represents the 1999 operating results of Rantec's microwave
                antenna business which is being offered for sale. Fiscal
                1999 net sales included $7.5 million related to Rantec's
                microwave antenna business.
           (c)  Represents the elimination of the nonrecurring items: includes
                the gain related to the divestiture of SEI, other charges
                related to the strategic initiatives described below, and the
                accounting change (SOP 98-5) adopted in the 1999 first quarter.
           (d)  Represents the net amount of the remaining corporate office
                operating expenses after the divestiture of SEI. This amount
                reflects a $4.2 million cost reduction from the $5 million
                amount recorded in 1999 and previously absorbed by the
                operations of SEI.
           (e)  Represents the estimated net interest impact of the SEI
                transaction proceeds and the cash impact of the other cost
                saving actions noted above, assuming that they occurred at the
                beginning of the period. The amount noted assumes all
                outstanding debt was repaid and the excess cash proceeds were
                invested with a 6% yield.
           (f)  Represents the amount necessary to reflect the adjusted
                effective tax rate at 33%, which represents the Company's
                estimated 1999 effective tax rate excluding the nonrecurring
                items.

                                                                              11

<PAGE>   3

MANAGEMENT'S DISCUSSION AND ANALYSIS

Other charges related to cost of sales, restructuring charges and gain on sale
of SEI
                During the fourth quarter of fiscal 1999, the Company
            implemented a major portion of its strategic operating plan. Its
            previously communicated strategy was to transform the Company from a
            primarily defense-oriented business to a supplier of engineered
            products used in industrial and commercial applications. As a result
            of implementing Management's strategic actions, the Company
            recognized certain nonrecurring items in its fourth quarter results
            of operations.
                These 1999 defined actions resulted in $3.9 million of other
            charges related to cost of sales and $5.1 million of restructuring
            charges. In addition, the Company recorded a gain on the sale of SEI
            of $59.9 million.
                The 1999 other charges related to cost of sales represent the
            write-off of inventory related to the abandonment of the High
            Pressure Air Reducing Quiet Manifolds for surface ships ($2.2
            million) and the Vehicle Location Systems ($.6 million) business
            areas. Additionally, the Company wrote down the Rantec microwave
            antenna product line inventory ($1.1 million) to net realizable
            value as a result of that business area being offered for sale.
                The 1999 restructuring charges are comprised of the following:
            costs related to exiting the microwave antenna business area ($1.1
            million); a write-off of the license agreement ($1.8 million)
            related to the abandonment of the Vehicle Location System business;
            and certain personnel separation costs ($2.2 million).
                The gain on sale of SEI of $59.9 million is calculated as: The
            gross proceeds of $85 million; less SEI's net book value of $30.6
            million; less working capital adjustments of $4.0 million; less
            transaction related expenses of $4.9 million; plus the $14.4 million
            curtailment gain related to pension and retiree medical liabilities
            transferred to the buyer.
                The $2.5 million of other charges related to cost of sales in
            1998 related to the settlement of a long-standing contract dispute
            on the original M1000 tank transporter program at SEI.
                The other charges related to cost of sales noted above are
            included in the calculation of gross profit discussed below.

Results of operations
            NET SALES
                Net sales of $416.1 million in 1999 increased $51 million (14%)
            over net sales of $365.1 million in 1998. SEI, which is included in
            the Divested Business segment, accounted for $38 million of the
            increase. Filtration/Fluid Flow, Test and Communications all had
            increased sales volume in 1999 while the Other segment had a $7
            million decrease in sales.
            Acquisitions, which occurred in 1998, also contributed to sales
            growth in 1999.
                Net sales of $365.1 million in 1998 decreased $13.4 million
            (3.5%) from net sales of $378.5 million in 1997, primarily due to a
            decrease in sales at SEI, which was divested on September 30, 1999.
            Filtration/Fluid Flow
                Net sales of $168.9 million in 1999 were $10.6 million (6.7%)
            higher than net sales of $158.3 million in 1998. The increase was
            primarily the result of new product introductions at Filtertek and
            PTI and increases in microfiltration sales at PTI. Blood filters for
            medical applications, increased shipments of disposable water filter
            cartridges, and automotive transmission sump filters and fuel
            filters all contributed to the growth at Filtertek. PTI's
            microfiltration businesses contributed approximately $8.3 million of
            additional sales in 1999. PTI's aerospace and industrial products
            experienced some softening in demand during 1999.
                Net sales of $158.3 million in 1998 increased $34.8 million
            (28.2%) from net sales of $123.5 million in 1997, primarily due to
            the February 1997 acquisition of Filtertek being included in the
            1998 results for the entire year. PTI's sales increased in 1998 over
            1997 due to increased aerospace and industrial shipments.

12


<PAGE>   4
MANAGEMENT'S DISCUSSION AND ANALYSIS

            TEST
                Net sales of $34.9 million in 1999 were $4.3 million (14.1%)
            higher than net sales of $30.6 million in 1998. The 1998 sales
            increased $4.5 million over the $26.1 million in sales recorded in
            1997. The increase in 1999 over 1998, as well as the 1998 increase
            over 1997 primarily is the result of additional EMC test chamber
            business at ETS. The 1999 sales were significantly impacted by
            additional revenue relating to the $20 million contract awarded in
            1999 by General Motors to design and build an electromagnetic
            compatibility (EMC) test complex in Milford, Michigan. This $20
            million contract is expected to be completed late in 2001 or early
            in 2002.

            COMMUNICATIONS
                Net sales of $24.7 million in 1999 were $5.7 million (30.0%)
            higher than net sales of $19.0 million in 1998. The 1998 sales
            increased $5.6 million over the $13.4 million in sales recorded in
            1997. The increase in 1999 over 1998, as well as the 1998 increase
            over 1997, primarily is the result of increased shipments to the
            Puerto Rico Electric Power Authority (PREPA). The current contract
            with PREPA to provide Automatic Meter Reading (AMR) systems using
            proprietary power line communications technology is valued at more
            than $50 million over a three-year period. At September 30, 1999,
            $33.2 million of the PREPA contract remains in backlog.

            OTHER
                Sales were $14.8 million, $22.2 million and $20.9 million in
            1999, 1998 and 1997, respectively. The decrease in 1999
            results from lower sales at Rantec.

            ORDERS AND BACKLOG
                Firm order backlog, excluding SEI, was $142.9 million at
            September 30, 1999, compared to $139.3 million at September 30,
            1998. Orders, excluding SEI, totaling $247.5 million were received
            in 1999, compared with $264.2 million in 1998. The decrease is the
            result of the 1998 amount having included the large PREPA contract
            ($50 million) received by DCSI.

            GROSS PROFIT
                The Company computes gross profit as: net sales, less cost of
            sales, less other charges related to cost of sales. The gross profit
            margin is the gross profit divided into net sales, expressed as a
            percentage.
                The gross profit margin was 22.7%, 26.1% and 24.2% in 1999, 1998
            and 1997, respectively. The decrease in 1999 versus 1998 is
            primarily the result of operating inefficiencies experienced at
            Rantec. The power supply business at Rantec experienced cost growth
            on certain development contracts in 1999, which also contributed to
            the lower gross margin. Most of these development contracts are now
            in production, and the related cost problems have been recognized.
                The 1998 gross margin increase over 1997 is the result of a more
            favorable sales mix. The 1997 gross margin was negatively impacted
            by the operations of SEI, which was sold on September 30, 1999.

            SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
                Selling, general and administrative expenses (SG&A) for 1999
            were $74.4 million, or 17.8% of net sales, compared with $68.3
            million, or 18.7% of net sales, for 1998. The 1999 SG&A included
            $3.2 million of additional expenses related to Advanced Membrane
            Technology, Inc. (consolidated within PTI) and Euroshield OY
            (consolidated within ETS) which were acquired in 1998 and are
            included in 1999 for the entire year versus a partial year in 1998.
            The percentage decrease in 1999 is the result of higher sales
            throughout the Company available to cover certain fixed costs.

                                                                              13


<PAGE>   5
MANAGEMENT'S DISCUSSION AND ANALYSIS

                SG&A for 1998 was $68.3 million, or 18.7% of net sales, compared
            with $64.1 million, or 16.9% of net sales, for 1997. The 1998 SG&A
            expenses included $4.6 million of additional expense at Filtertek as
            a result of their operations being included in 1998 for the entire
            year versus eight months of 1997. The percentage increase in 1998 is
            the result of lower sales.
            OPERATING PROFIT
                Operating Profit of $14.9 million in 1999 decreased from $26.9
            million in 1998. SEI, which is included in the Divested Business
            segment, accounted for $0.8 million of the decrease.
            Filtration/Fluid Flow, Communications, and Test all had increased
            operating profit in 1999 while the Other segment had a $13.4 million
            decrease in operating profit. The 1999 amounts were adversely
            affected by the $3.9 million of other charges related to cost of
            sales, and the $5.1 million of restructuring charges.
                Operating profit of $26.9 million in 1998 decreased $0.7 million
            from operating profit of $27.6 million in 1997 primarily due to the
            1997 other charges related to cost of sales at SEI, which was
            divested on September 30, 1999.
            FILTRATION/FLUID FLOW
                Operating profit of $11.9 million in 1999 was $1.4 million
            (13.3%) higher than operating profit of $10.5 million in 1998. The
            filtration/fluid flow amounts include the $2.2 million of
            nonrecurring charges related to the abandonment of the surface ship
            manifolds mentioned earlier. The recurring increase was primarily
            the result of new product introductions at Filtertek and PTI and
            increases in microfiltration profitability at PTI. Blood filters for
            medical applications, increased shipments of disposable water filter
            cartridges, and automotive transmission sump filters and fuel
            filters, all contributed to the growth in profitability at
            Filtertek. PTI's aerospace and industrial products experienced a
            slight decline during 1999 due to weaker demand in these markets.
                Operating profit of $10.5 million in 1998 increased $0.9 million
            (9.4%) from operating profit of $9.6 million in 1997, primarily as a
            result of PTI's increased operating profit in 1998 due to increased
            aerospace and industrial contributions.
            TEST
                Operating profit of $4.0 million in 1999 was $1.1 million
            (37.9%) higher than operating profit of $2.9 million in 1998. The
            1998 operating profit increased $0.3 million over the $2.6 million
            of operating profit recorded in 1997. The increase in 1999 over
            1998, as well as the 1998 increase over 1997, primarily is the
            result of additional EMC test chamber business at ETS, and an
            overall improvement in sales mix.
            COMMUNICATIONS
                Operating profit of $4.0 million in 1999 was $2.0 million (100%)
            higher than operating profit of $2.0 million in 1998. The 1998
            operating profit increased $1.0 million over the $1.0 million in
            operating profit recorded in 1997. The increase in 1999 over 1998,
            as well as the 1998 increase over 1997, primarily is the result of
            increased sales leverage.
            OTHER
                Operating profit was ($13.2) million, $0.3 million and $0.6
            million in 1999, 1998 and 1997, respectively. The decrease in 1999
            is the result of the nonrecurring charges related to Rantec's
            microwave antenna product line which is being offered for sale,
            Comtrak's nonrecurring charges and significant cost growth on
            certain development programs at Rantec power systems as mentioned
            above.
            INTEREST EXPENSE
                Interest expense decreased to $6.5 million in 1999 from $7.7
            million in 1998, primarily as a result of lower outstanding average
            borrowings throughout 1999. A significant amount of the outstanding
            borrowings in 1999 and 1998 were incurred with the February 1997
            acquisition of Filtertek. The timing of operating cash flows
            throughout 1999 also decreased the average outstanding borrowings.
                Interest expense increased to $7.7 million in 1998 from $5.2
            million in 1997, primarily as a result of higher outstanding average
            borrowings throughout 1998. The timing of operating cash flows
            throughout 1998 increased the average outstanding borrowings.

14


<PAGE>   6
MANAGEMENT'S DISCUSSION AND ANALYSIS

            OTHER COST AND EXPENSES, NET
                Other costs and expenses, net, increased in 1999 to $4.9 million
            from $2.9 million in 1998. The increase is primarily due to the
            impact in 1998 of PTI receiving a $1.6 million lease surrender
            payment (recorded as other miscellaneous income) for agreeing to
            vacate its current manufacturing facility in Newbury Park,
            California. PTI received $1.6 million immediately upon signing the
            agreement and will receive an additional $2.9 million on December
            31, 2000, or earlier, upon vacating the property. PTI has begun its
            relocation to new facilities in Oxnard, California. This relocation
            should be completed by September 30, 2000. The remainder of other
            costs and expenses, net, increased due to additional goodwill
            amortization related to the 1998 acquisitions discussed above.
                Other costs and expenses, net, decreased in 1998 to $2.9 million
            from $4.5 million in 1997, primarily due to the $1.6 million PTI
            lease surrender payment recorded in 1998. The remainder of other
            costs and expenses, net, were consistent in both periods presented.
            INCOME TAX EXPENSE
                Income tax expense of $13.0 million for 1999 reflects deferred
            tax expense of $11.6 million and foreign, state and local tax
            expense of $1.4 million. Income tax expense of $5.1 million for 1998
            reflects deferred tax expense of $6.1 million and foreign, state and
            local tax benefits of ($1) million. Income tax expense of $6.1
            million for 1997 reflects current Federal tax expense of $.2
            million, deferred tax expense of $4.8 million and foreign, state and
            local taxes of $1 million.
                Based on the Company's historical pretax income, together with
            the projection of future taxable income based upon its shift in
            strategic direction, Management believes it is more likely than not
            that the Company will realize the benefits of the net deferred tax
            asset existing at September 30, 1999. In order to realize the
            aforementioned net deferred tax asset before valuation allowance,
            the Company will need to generate future taxable income of
            approximately $221 million, of which $146 million is required to be
            realized prior to the expiration of the net operating loss (NOL)
            carryforward, of which $33 million will expire in 2006; $6 million
            will expire in 2007; $23 million will expire in 2009; $38 million
            will expire in 2010; $4 million will expire in 2011; $7 million will
            expire in 2018; and $35 million will expire in 2019. The net
            operating loss carryforward may be used to reduce future income tax
            cash payments.
                As a result of the sale of SEI in 1999, the Company will utilize
            approximately $35 million of the $77 million capital loss
            carryforward available from the sale of Hazeltine in 1996. At
            September 30, 1999, the Company had a capital loss carryforward for
            tax purposes of approximately $42 million. This capital loss
            carryforward may be used as a reduction of future capital gains
            recognized by the Company, at which time the Company may realize
            additional tax benefits. Any unused capital loss carryforward will
            expire in 2001.
                The Company's deferred tax valuation allowance of $32.5 million
            at September 30, 1999, was comprised of $17.7 million, which
            represents Management's best estimate of the portion of the deferred
            tax asset associated with temporary differences and NOLs which may
            not be realized, and a full valuation reserve in the amount of $14.8
            million for the portion of the deferred tax asset represented by the
            capital loss carryforward.
                The effective tax rate in 1999 was 20.5% compared with 30.9% in
            1998. The 1999 effective tax rate was favorably impacted by the
            utilization of the capital loss carryforward resulting from the
            divestiture of SEI. An analysis of the effective tax rates for 1999,
            1998 and 1997 is included in the notes to consolidated financial
            statements.
            CHANGE IN ACCOUNTING PRINCIPLE
                In April 1998, the American Institute of Certified Public
            Accountants (AICPA) issued Statement of Position (SOP) 98-5,
            "Reporting on the Costs of Start-up Activities." This SOP is
            applicable to all non-governmental entities and provides guidance on
            accounting for start-up activities, including precontract start-up
            costs and organization costs.

                                                                              15


<PAGE>   7
MANAGEMENT'S DISCUSSION AND ANALYSIS

                The Company had previously accounted for these costs under the
            guidance provided by SOP 81-1, "Accounting for Performance of
            Construction-type Contracts." SOP 98-5 amended SOP 81-1 by requiring
            precontract, start-up and organization costs to be expensed as
            incurred.
                The Company adopted the provisions of SOP 98-5 in the first
            quarter of fiscal year 1999 which resulted in a non-cash, after-tax
            charge of approximately $25 million, which was recognized as a
            cumulative effect of an accounting change.
                The after-tax charge related to precontract, start-up and
            organization costs incurred in anticipation of specific future
            contract awards which were based on specific customer identified
            requirements. The after-tax charge is comprised of the following
            programs: the Tunner 60K aircraft cargo loader at SEI ($17.2
            million), the Automatic Vehicle Location System at the Comtrak
            division of SEI ($2 million), the advanced video surveillance system
            (Securvision(R)) at Comtrak ($2 million), the Seawolf (U.S. Navy
            attack submarine) valve and manifold ship set program at VACCO
            Industries ($1.9 million), and other minor programs which aggregated
            to $1.9 million.

Capital resources & liquidity
                With the sale of SEI at September 30, 1999, the Company
            continued to successfully transition its business base from defense
            to commercial, and thereby dramatically lowered the operating risk
            profile of the Company. The significant working capital commitments
            previously required by the defense business of SEI no longer exist
            throughout the balance of ESCO.
                Net cash provided by operating activities increased in 1999 to
            $25.9 million from $20.3 million in 1998.The increase in 1999 is
            driven by the improvement in cash flow from working capital,
            primarily the lower investment in inventory.
                Net cash provided by operating activities was $20.3 million in
            1998, compared to $25.3 million in 1997 due to SEI related operating
            cash requirements.
                In 1999, 1998 and 1997, capital expenditures of $8.3 million,
            $12.9 million and $10.5 million, respectively, included
            manufacturing equipment at Filtertek and PTI. Capital expenditures
            related to SEI were $1.1 million, $1.5 million and $2.4 million in
            1999, 1998 and 1997, respectively. There were no commitments
            outstanding that were considered material for capital expenditures
            at September 30, 1999.
                At September 30, 1999, the Company had available a net operating
            loss (NOL) carryforward for tax purposes of approximately $146
            million. This NOL will expire beginning in year 2006 and ending in
            year 2019, and will be used to reduce future Federal income tax cash
            payments.
            ACQUISITIONS/DIVESTITURES
                On September 30, 1999, the Company sold SEI to Engineered
            Support Systems, Inc. for $85 million in cash, less working capital
            adjustments.
                On July 1, 1998, the Company completed the acquisition of
            Advanced Membrane Technology, Inc. (AMT) headquartered in San Diego,
            California. AMT was consolidated within PTI and was made a part of a
            newly formed business, PTI Advanced Filtration Inc., which designs
            and manufactures several types of filtration membrane and provides
            filtration systems for a variety of applications in the process
            industries. The transaction involved the purchase of AMT common
            stock for approximately $7 million in cash plus approximately
            450,000 shares of ESCO common stock valued at $8.6 million. The cash
            portion was financed with the Company's bank credit facility.
                On December 31, 1997, the Company completed the purchase of
            Euroshield OY for consideration which included $3.5 million in cash.
            Euroshield, located in Eura, Finland, designs and manufactures high
            quality radio frequency (RF) shielding products used in the
            electromagnetic compatibility (EMC) industry.
                On February 7, 1997, the Company completed the acquisition of
            the filtration and the thermoform packaging businesses (Filtertek)
            of Schawk, Inc. The fiscal 1997 transaction involved the purchase of
            assets and stock of certain subsidiary corporations

16


<PAGE>   8
MANAGEMENT'S DISCUSSION AND ANALYSIS

            of Schawk, Inc. for $92 million in cash plus working capital
            adjustments. The purchase was financed with cash and borrowings from
            the Company's bank credit facility. Filtertek is a leader in the
            manufacture of plastic insert injection molded filter assemblies.
            BANK CREDIT FACILITY
                The Company's $122 million bank credit facility was amended on
            August 30, 1999 to allow for the sale of SEI. Upon receipt of the
            proceeds from the sale of SEI, the outstanding principal amount of
            the Term Loan and a portion of the outstanding revolving credit
            facility were to be repaid. On September 30, 1999, the Company
            received the gross proceeds of $85 million from the sale of SEI and
            on October 1, 1999, the Company repaid all outstanding debt.
                Subsequent to the sale of SEI and the repayment of all
            outstanding debt on October 1, 1999, the credit facility was
            adjusted to a $40 million revolving credit facility. The revolving
            credit facility (subject to borrowing base asset limitations) is
            available for direct borrowings and/or the issuance of letters of
            credit. The maturity of the bank credit facility is September 30,
            2000. These credit facilities are provided by a group of banks, led
            by Morgan Guaranty Trust Company of New York.
                Cash flow from operations and borrowings under the bank credit
            facility are expected to provide adequate resources to meet the
            Company's capital requirements and operational needs for the
            foreseeable future.
                All of the Company's debt, prior to full repayment on October 1,
            1999, was priced at a percentage over LIBOR. The Company had reduced
            this risk through a rate swap agreement that provided a cap on LIBOR
            of 7% on $50 million of the long-term debt through September 30,
            1998, reducing to $40 million through September 30, 1999.
            SHARE REPURCHASE
                In 1996, the Company authorized an open market share repurchase
            program for up to two million shares of common stock over a period
            ended September 30, 1998. Approximately 180,000 shares were
            repurchased throughout that two-year period. During 1999, the
            Company authorized an additional open market repurchase program of
            up to 1.3 million shares, which is subject to market conditions and
            other factors and will cover a period ending September 29, 2000.
            Approximately 177,000 shares were repurchased in 1999. Subsequent to
            September 30, 1999, and with a portion of the available proceeds of
            the SEI sale, the Company is continuing its share repurchase
            program.
            OTHER
                Management believes that, for the periods presented, inflation
            has not had a material effect on the Company's results of
            operations.
                The Company is currently involved in various stages of
            investigation, remediation and litigation relating to environmental
            matters. Based on current information available, Management does not
            believe the aggregate costs involved in the resolution of these
            matters will have a material adverse effect on the Company's
            operating results, capital expenditures or competitive position.

Year 2000 issues
                The Year 2000 ("Y2K") issue refers to the inability of a
            date-sensitive computer program to recognize a two-digit date field
            designated as "00" as the year 2000. Mistaking "00" for 1900 could
            result in a system failure or miscalculations causing disruptions to
            operations including manufacturing, a temporary inability to process
            transactions, send invoices, or engage in other normal business
            activities. This is a significant issue for most, if not all,
            companies with far-reaching implications, some of which cannot be
            anticipated or predicted with any degree of certainty.

                                                                              17


<PAGE>   9
MANAGEMENT'S DISCUSSION AND ANALYSIS

            STATE OF READINESS
                The Company has designated a corporate Y2K coordination team
            comprised of various senior management members. Each operating unit
            has identified a Y2K coordinator responsible for planning and
            monitoring their Y2K program and reporting on a regular basis to the
            corporate team. The Company has assessed the magnitude of its Y2K
            issue and has already determined the requirements necessary to
            modify or replace certain portions of its software and hardware so
            that its computer systems, including information technology and
            non-information technology, would be able to function properly
            beyond December 31, 1999. This required replacement, reprogramming
            or other remedial action. The Company has communicated with its
            suppliers and customers to determine the extent of the Company's
            vulnerability to the failure of third parties to remediate their own
            Y2K issue. In conjunction with this assessment, the Company has
            finalized its action plans to address the Y2K issue, including
            contingencies to address unforeseen problems. The Company has used
            both internal and external resources to complete Y2K reprogramming,
            software replacement and testing.
            COSTS TO ADDRESS THE Y2K ISSUE
                The Company's plans anticipate completion of the Y2K remedial
            work by December 31, 1999. To date, the Company has incurred
            approximately $3 million related to the Y2K remedial work, of which
            $2 million is related to SEI. The total expected costs of the
            project and the date on which the Company plans to complete the Y2K
            remediation work are based on Management's best estimates, which
            were derived from numerous assumptions about future events,
            including the availability of certain resources, third-party
            modification plans, and other factors. However, there can be no
            guarantee that these estimates will be achieved and actual results
            could differ materially from those plans. Specific factors that
            might cause material differences include, but are not limited to,
            the availability and cost of personnel trained in this area and the
            ability to identify and correct all relevant computer codes.
            RISK ANALYSIS
                Like most large business entities, the Company is dependent upon
            its own internal technology and relies upon timely performance by
            its business partners. The Company's Y2K program is designed to
            identify and minimize its Y2K risk and includes significant testing
            and refinement of its internal systems to ensure, to the extent
            feasible, all systems will function before and after the Year 2000.
            The Company is continually updating its understanding of the Y2K
            risks posed to its business partners based on information obtained
            through surveys and interviews. This review was completed in
            calendar year 1999.
            CONTINGENCY PLANS
                Following its risk analysis as described above, the Company's
            Y2K program includes a contingency planning phase in which
            appropriate plans were made to attempt to minimize disruption to the
            Company's operations in the event of a Y2K failure. The Company has
            formulated plans to handle a variety of failure scenarios, including
            failures of its internal systems, as well as failures of significant
            business partners. The level of planning required is a function of
            the risks ascertained through the Company's investigating efforts.
            The Company completed its contingency planning across the enterprise
            in calendar year 1999.
                While no assurances can be given, because of the Company's
            extensive efforts to formulate and carry-out an effective Y2K
            program, the Company believes its program should effectively
            minimize disruption to the Company's operations due to the Year 2000
            issue.

Market risk analysis
            MARKET RISK EXPOSURE
                Market risks relating to the Company's operations result
            primarily from changes in interest rates and changes in foreign
            currency exchange rates. Based on the current holdings of fixed-rate
            notes, the exposure to interest rate risk is not material. The
            Company is subject to foreign currency exchange rate risk relating
            to receipts from customers and payments to suppliers in foreign
            currencies. The Company hedges foreign currency commitments by
            purchasing foreign currency forward contracts. The Company does not
            consider the market risk exposure relating to currency exchange to
            be material.

18

<PAGE>   10

CONSOLIDATED STATEMENTS OF OPERATIONS


<TABLE>
<CAPTION>
Years ended September 30,
(Dollars in thousands, except per share amounts)                                    1999                1998                 1997
----------------------------------------------------------------------------------------------------------------------------------

<S>                                                                             <C>                  <C>                  <C>    
Net sales                                                                       $416,102             365,083              378,524

Costs and expenses:
     Cost of sales                                                               317,681             267,332              286,790
     Other charges related to cost of sales                                        3,927               2,500                   -
     Selling, general and administrative expenses                                 74,429              68,326               64,142
     Interest expense                                                              6,460               7,703                5,220
     Other, net                                                                    4,871               2,875                4,522
     Restructuring charges                                                         5,145                  -                    -
     Gain on sale of SEI                                                         (59,867)                 -                    -
                                                                                ---------              ------              -------

      Total costs and expenses                                                   352,646             348,736              360,674
                                                                                ---------              ------              -------


Earnings before income tax                                                        63,456              16,347               17,850

Income tax expense                                                                13,001               5,051                6,053
                                                                                ---------              ------              -------

Net earnings before accounting change                                            $50,455              11,296               11,797
Cumulative effect of accounting change, net of tax                               (25,009)                 -                    -
                                                                                ---------              ------              -------

         Net earnings                                                            $25,446              11,296               11,797
----------------------------------------------------------------------------------------------------------------------------------


Earnings per share:
     Net earnings before accounting change:
         Basic                                                                $     4.09                 .94                 1.00
         Diluted                                                                    4.00                 .90                  .96
                                                                                ---------               -----                -----

     Net earnings:
         Basic                                                                $     2.06                 .94                 1.00
         Diluted                                                                    2.02                 .90                  .96
                                                                                ---------               -----                -----

     Average common shares outstanding:
         Basic                                                                    12,332              12,015               11,805
         Diluted                                                                  12,614              12,550               12,274
----------------------------------------------------------------------------------------------------------------------------------
</TABLE>














See accompanying notes to consolidated financial statements.

                                                                              19


<PAGE>   11


CONSOLIDATED BALANCE SHEETS


<TABLE>
<CAPTION>
Years ended September 30,
(Dollars in thousands)                                                                                  1999                 1998
----------------------------------------------------------------------------------------------------------------------------------

ASSETS

CURRENT ASSETS:
<S>                                                                                                  <C>                    <C>  
     Cash and cash equivalents                                                                       $87,709                4,241
     Accounts receivable, less allowance for doubtful accounts of $574 and $664
      in 1999 and 1998, respectively                                                                  38,669               51,530
     Costs and estimated earnings on long-term contracts, less progress
      billings of $11,778 and $51,529 in 1999 and 1998, respectively                                   4,019               26,995
     Inventories                                                                                      39,590               81,579
     Other current assets                                                                              3,559                2,776
                                                                                                     --------              -------

      Total current assets                                                                           173,546              167,121
                                                                                                     --------              -------



PROPERTY, PLANT AND EQUIPMENT:
     Land and land improvements                                                                       10,582               14,318
     Buildings and leasehold improvements                                                             29,007               47,940
     Machinery and equipment                                                                          65,988               83,356
     Construction in progress                                                                          4,186                4,718
                                                                                                     --------              -------

                                                                                                     109,763              150,332
     Less accumulated depreciation and amortization                                                   38,445               52,323
                                                                                                     --------              -------

      Net property, plant and equipment                                                               71,318               98,009


Excess of cost over net assets of purchased businesses, less accumulated
     amortization of $6,631 and $4,557 in 1999 and 1998, respectively                                 68,950               72,512
Deferred tax assets                                                                                   44,783               44,740
Other assets                                                                                          19,788               26,920
                                                                                                     --------              -------

                                                                                                    $378,385              409,302
----------------------------------------------------------------------------------------------------------------------------------
</TABLE>


























See accompanying notes to consolidated financial statements.

20


<PAGE>   12

CONSOLIDATED BALANCE SHEETS


<TABLE>
<CAPTION>
Years ended September 30,
(Dollars in thousands)                                                                                  1999                 1998
----------------------------------------------------------------------------------------------------------------------------------

LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES:
<S>                                                                                                  <C>                   <C>   
     Short-term borrowings and current maturities of long-term debt                                  $20,598               30,111
     Accounts payable                                                                                 26,339               39,908
     Advance payments on long-term contracts, less costs incurred
      of $479 and $5,046 in 1999 and 1998, respectively                                                  682               11,442
     Accrued expenses                                                                                 30,598               25,346
                                                                                                     -------              -------

      Total current liabilities                                                                       78,217              106,807
                                                                                                     -------              -------

Other liabilities                                                                                      9,583               28,339
Long-term debt                                                                                        41,896               50,077
                                                                                                     -------              -------

      Total liabilities                                                                              129,696              185,223
                                                                                                     -------              -------

Commitments and contingencies                                                                             -                    -

SHAREHOLDERS' EQUITY:
     Preferred stock, par value $.01 per share, authorized 10,000,000 shares                              -                    -
     Common stock, par value $.01 per share, authorized 50,000,000 shares;
      Issued 12,782,663 and 12,641,664 shares in 1999 and 1998, respectively                             128                  126
     Additional paid-in capital                                                                      201,719              200,913
     Retained earnings since elimination of deficit at September 30, 1993                             52,723               27,277
     Accumulated other comprehensive loss                                                             (1,870)              (1,740)
                                                                                                     -------              -------

                                                                                                     252,700              226,576
     Less treasury stock, at cost (404,625 and 234,025 common shares in 1999
      and 1998, respectively)                                                                         (4,011)              (2,497)
                                                                                                     -------              -------

      Total shareholders' equity                                                                     248,689              224,079
                                                                                                     -------              -------

                                                                                                    $378,385              409,302
----------------------------------------------------------------------------------------------------------------------------------
</TABLE>



















See accompanying notes to consolidated financial statements.

                                                                              21


<PAGE>   13


CONSOLIDATED STATEMENTS OF SHAREHOLDER'S EQUITY


<TABLE>
<CAPTION>
                                                                                                                                  
                                                                                                Accumulated
Years ended September 30,                        Common Stock       Additional                        Other
                                             ---------------------     Paid-in     Retained   Comprehensive   Treasury
(in thousands)                                Shares       Amount      Capital     Earnings   Income (Loss)      Stock      Total
----------------------------------------------------------------------------------------------------------------------------------

<S>                <C> <C>                   <C>            <C>       <C>            <C>             <C>       <C>        <C>    
Balance, September 30, 1996                  12,415         $124      192,967        4,184           (1,762)   (4,380)    191,133
                                                                                                                          --------

Comprehensive income:
     Net earnings                                -            -            -        11,797               -         -       11,797
     Translation adjustments                     -            -            -            -                89        -           89
     Minimum pension liability, net              -            -            -            -             1,688        -        1,688
                                                                                                                          --------


Comprehensive income                             -            -            -            -                -         -       13,574

Stock options and stock compensation plans       63            1        1,696           -                -         45       1,742
Purchases into treasury                          -            -            -            -                -     (1,486)     (1,486)
----------------------------------------------------------------------------------------------------------------------------------

Balance, September 30, 1997                  12,478          125      194,663       15,981               15    (5,821)    204,963
                                                                                                                          --------

Comprehensive income:
     Net earnings                                -            -            -        11,296               -         -       11,296
     Translation adjustments                     -            -            -            -               324        -          324
     Minimum pension liability, net              -            -            -            -            (2,079)       -       (2,079)
                                                                                                                          --------

Comprehensive income                             -            -            -            -                -         -        9,541
                                                                                                                          --------

Stock options and stock compensation plans      164            1        1,137           -                -        405       1,543
Acquisitions of business                         -            -         5,113           -                -      3,496       8,609
Purchases into treasury                          -            -            -            -                -       (577)       (577)
----------------------------------------------------------------------------------------------------------------------------------

Balance, September 30, 1998                  12,642          126      200,913       27,277           (1,740)   (2,497)    224,079
                                                                                                                          --------

Comprehensive income:
     Net earnings                                -            -            -        25,446               -         -       25,446
     Translation adjustments                     -            -            -            -            (2,390)       -       (2,390)
     Minimum pension liability, net              -            -            -            -             2,260        -        2,260
                                                                                                                          --------

Comprehensive income                             -            -            -            -                -         -       25,316
                                                                                                                           -------

Stock options and stock compensation plans      141            2          806           -                -         48         856
Purchases into treasury                          -            -            -            -                -     (1,562)     (1,562)
----------------------------------------------------------------------------------------------------------------------------------

Balance, September 30, 1999                  12,783         $128      201,719       52,723           (1,870)   (4,011)    248,689
----------------------------------------------------------------------------------------------------------------------------------
</TABLE>















See accompanying notes to consolidated financial statements

22


<PAGE>   14

CONSOLIDATED STATEMENTS OF CASH FLOW


<TABLE>
<CAPTION>
Years ended September 30,
(Dollars in thousands)                                                              1999                1998                 1997
----------------------------------------------------------------------------------------------------------------------------------

Cash flows from operating activities:
<S>                                                                              <C>                  <C>                  <C>   
     Net  earnings                                                               $25,446              11,296               11,797
     Adjustments to reconcile net earnings to net cash
      provided by operating activities:
         Depreciation and amortization                                            17,021              17,460               14,423
         Changes in operating working capital                                     11,271              (8,594)              (2,666)
         Write-off of assets related to accounting change, net of tax             25,009                  -                    -
         Gain on sale of SEI                                                     (59,867)                 -                    -
         Effect of deferred taxes on tax provision                                11,560               6,121                4,816
         Other                                                                    (4,550)             (5,971)              (3,033)
                                                                                 --------               -----              -------

     Net cash provided by operating activities                                    25,890              20,312               25,337
                                                                                 --------               -----              -------


Cash flows from investing activities:
     Capital expenditures                                                         (8,291)            (12,896)             (10,526)
     Divestiture (acquisition) of businesses                                      85,000             (11,323)             (93,200)
                                                                                 --------               -----              -------

      Net cash provided (used) by investing activities                            76,709             (24,219)            (103,726)
                                                                                 --------               -----              -------


Cash flows from financing activities:
     Proceeds from long-term debt                                                     96               7,000               60,000
     Principal payments on long-term debt                                         (8,297)             (7,504)             (15,675)
     Net increase (decrease) in short-term borrowings                             (9,494)              3,476               18,500
     Purchases of common stock into treasury                                      (1,562)               (695)              (1,486)
     Other                                                                           126                  53                  659
                                                                                 --------               -----              -------

     Net cash provided (used) by financing activities                            (19,131)              2,330               61,998
                                                                                 --------               -----              -------

Net increase (decrease) in cash and cash equivalents                              83,468              (1,577)             (16,391)
Cash and cash equivalents at beginning of year                                     4,241               5,818               22,209
                                                                                 --------               -----              -------

Cash and cash equivalents at end of year                                         $87,709               4,241                5,818
----------------------------------------------------------------------------------------------------------------------------------


Changes in operating working capital:
     Accounts receivable, net                                                    $ 5,150              (1,745)              (2,997)
     Costs and estimated earnings on long-term contracts, net                     12,891               7,358               (3,048)
     Inventories                                                                  (9,230)            (17,737)              18,618
     Other current assets                                                         (1,402)                143                  734
     Accounts payable                                                                734                 245               (8,522)
     Advance payments on long-term contracts, net                                 (6,821)              5,094               (1,988)
     Accrued expenses                                                              9,949              (1,952)              (5,463)
                                                                                 --------               -----              -------

                                                                                 $11,271              (8,594)              (2,666)
----------------------------------------------------------------------------------------------------------------------------------



Supplemental cash flow information:
     Interest paid                                                                $6,579               7,521                4,981
     Income taxes paid                                                               254                 353                  720
----------------------------------------------------------------------------------------------------------------------------------
</TABLE>




See accompanying notes to consolidated financial statements.

                                                                              23

<PAGE>   15


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Summary of significant accounting policies

     (A) PRINCIPLES OF CONSOLIDATION 

     The consolidated financial statements include the accounts of ESCO
Electronics Corporation (ESCO) and its wholly owned subsidiaries (the Company).
All significant intercompany transactions and accounts have been eliminated in
consolidation. Certain prior year amounts have been reclassified to conform with
the 1999 presentation.

     (B) BASIS OF PRESENTATION

     Effective September 30, 1990, Emerson Electric Co. (Emerson) transferred
the stock of certain of its subsidiaries, primarily related to its government
and defense business, to ESCO and distributed all of the issued and outstanding
ESCO common stock to Emerson shareholders (the spin-off). Effective September
30, 1993, the Company implemented an accounting readjustment in accordance with
the accounting provisions applicable to a "quasi-reorganization" which restated
assets and liabilities to fair values and eliminated the deficit in retained
earnings. Fair values of the Company's financial instruments are estimated by
reference to quoted prices from market sources and financial institutions, as
well as other valuation techniques. The estimated fair value of each class of
financial instruments approximated the related carrying value at September 30,
1999 and 1998.

     (C) NATURE OF OPERATIONS

     The Company is engaged in the design, manufacture, sale and support of
engineered products used principally in filtration/fluid flow applications,
electromagnetic compatibility (EMC) testing, and electric utility communications
and control systems. Filtration/fluid flow and EMC testing products are supplied
to a broad base of industrial and commercial customers worldwide. At the present
time, electric utility communication systems are marketed primarily to customers
in North America. The Company operates in four principal industry segments:
Filtration/Fluid Flow, Test, Communications and Other.

     (D) USE OF ESTIMATES AND BUSINESS RISKS

     The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions, including estimates of anticipated contract costs and revenues
utilized in the earnings process, that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates. 

     (E) ACCOUNTING CHANGE 

     During the first quarter of 1999, the Company adopted Statement of Position
(SOP) 98-5, "Reporting on the Costs of Start-up Activities." Precontract costs
were incurred by the Company and capitalized under the previous guidance
provided by SOP 81-1, "Accounting for Performance of Construction-type
Contracts." As a result of adopting SOP 98-5 in 1999, the Company expensed these
costs which were recognized as a cumulative effect of an accounting change.

     (F) REVENUE RECOGNITION 

     Revenue is recognized on commercial sales when products are shipped or when
services are performed. Revenue on production contracts is recorded when
specific contract terms are fulfilled, usually by delivery or acceptance (the
units of production or delivery methods). Revenues from cost reimbursement
contracts are recorded as costs are incurred, plus fees earned. Revenue under
long-term contracts for which units of production or delivery are inappropriate
measures of performance is recognized on the percentage-of-completion method
based upon incurred costs compared to total estimated costs under the contract,
or are based upon equivalent units produced. Revenue under engineering contracts
is generally recognized as milestones are attained.

     (G) CASH AND CASH EQUIVALENTS 

     Cash equivalents include temporary investments that are readily convertible
into cash, such as certificates of deposit, commercial paper and treasury bills
with original maturities of three months or less. 

     (H) COSTS AND ESTIMATED EARNINGS ON LONG-TERM CONTRACTS 

     Costs and estimated earnings on long-term contracts represent unbilled
revenues, including accrued profits on long-term contracts accounted for under
the percentage-of-completion method, net of progress billings.

     (I) INVENTORIES 

     Inventories are carried at the lower of cost (first-in, first-out) or
market.

24

<PAGE>   16

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                Inventories under long-term contracts reflect accumulated
            production costs, factory overhead, initial tooling and other
            related costs less the portion of such costs charged to cost of
            sales and any progress payments received. In accordance with
            industry practice, costs incurred on contracts in progress include
            amounts relating to programs having production cycles longer than
            one year, and a portion thereof will not be realized within one
            year.
            (J) PROPERTY, PLANT AND EQUIPMENT
                Property, plant and equipment are recorded at cost. Depreciation
            and amortization are computed primarily on a straight-line basis
            over the estimated useful lives of the assets: buildings, 10-40
            years; machinery and equipment, 5-10 years; and office furniture and
            equipment, 5-10 years. Leasehold improvements are amortized over the
            remaining term of the applicable lease or their estimated useful
            lives, whichever is shorter.
            (K) EXCESS OF COST OVER NET ASSETS OF PURCHASED BUSINESSES
                Assets and liabilities related to business combinations
            accounted for as purchase transactions are recorded at their
            respective fair values. Excess of cost over the fair value of net
            assets purchased (goodwill) is amortized on a straight-line basis
            over the periods estimated to be benefited, not exceeding 40 years.
            The Company assesses the recoverability of this intangible asset by
            determining whether the amortization of the asset balance over its
            remaining life can be recovered through undiscounted future
            operating cash flows.
            (L) INCOME TAXES
                Income taxes are accounted for under the asset and liability
            method. Deferred tax assets and liabilities are recognized for the
            future tax consequences attributable to differences between the
            financial statement carrying amounts of existing assets and
            liabilities and their respective tax bases. Deferred tax assets and
            liabilities are measured using enacted tax rates expected to apply
            to taxable income in the years in which those temporary differences
            are expected to be recovered or settled. Deferred tax assets are
            reduced by a valuation allowance if it is more likely than not that
            some portion or all of the deferred tax assets will not be realized.
            The effect on deferred tax assets and liabilities of a change in tax
            rates is recognized in income in the period that includes the
            enactment date.
            (M) RESEARCH AND DEVELOPMENT COSTS
                Company-sponsored research and development costs include
            research and development and bid and proposal efforts related to the
            Company's products and services. Company-sponsored product
            development costs are charged to expense when incurred.
            Customer-sponsored research and development costs incurred pursuant
            to contracts are accounted for similar to other program costs.
            (N) FOREIGN CURRENCY TRANSLATION
                The financial statements of the Company's foreign operations are
            translated into U.S. dollars in accordance with SFAS No. 52,
            (SFAS 52) "Foreign Currency Translation." The resulting translation
            adjustments are recorded as a separate component of accumulated
            other comprehensive income.
            (O) EARNINGS PER SHARE
                Basic earnings per share is calculated using the weighted
            average number of common shares outstanding during the period.
            Diluted earnings per share is calculated using the weighted average
            number of common shares outstanding during the period plus shares
            issuable upon the assumed exercise of dilutive common share options
            and performance shares by using the treasury stock method. The
            number of shares used in the calculation of earnings per share for
            each year presented is as follows:


<TABLE>
<CAPTION>
            (In thousands)                                                          1999                1998                 1997
            ----------------------------------------------------------------------------------------------------------------------

            <S>                                                                   <C>                 <C>                  <C>   
            Weighted Average Shares Outstanding - Basic                           12,332              12,015               11,805
            Dilutive Options and Performance Shares                                  282                 535                  469
                                                                                 -------               -----                -----

            Adjusted Shares - Diluted                                             12,614              12,550               12,274
            ----------------------------------------------------------------------------------------------------------------------
</TABLE>


                Options to purchase 176,000, 84,000 and 94,800 shares of common
            stock at per share prices of $11.44 - $19.22 in 1999, $18.00 -
            $19.22 in 1998 and $12.38 in 1997 were outstanding during the years
            ended September 30, 1999, 1998 and 1997, respectively, but were not
            included in the respective computations of diluted EPS because the
            options' exercise price was greater than the average market price of
            the common shares. These options expire in 2007, 2008, and 2009.
            Approximately 190,000, 166,000 and 338,000 performance shares were
            outstanding but unearned at September 30, 1999, 1998 and 1997,
            respectively, and therefore, were not included in the respective
            computations of diluted EPS. The unearned performance shares expire
            in 2001.

                                                                              25


<PAGE>   17
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

            (P) STOCK-BASED COMPENSATION

                The Company measures its compensation cost of equity instruments
            issued under employee compensation plans under the provisions of
            Accounting Principles Board Opinion No. 25 (APB 25), "Accounting for
            Stock Issued to Employees," and related Interpretations.

            (Q) COMPREHENSIVE INCOME (LOSS)
                On October 1, 1998, ESCO adopted SFAS No. 130 (SFAS
            130),"Reporting Comprehensive Income." SFAS 130 established
            standards for reporting and presentation of comprehensive income or
            loss and its components in a full set of financial statements. This
            Statement requires the Company to report separately the translation
            adjustments of SFAS 52 defined above, and changes to the minimum
            pension liability as components of comprehensive income or loss.
            Management has chosen to disclose the requirements of this Statement
            within the consolidated statements of shareholders' equity.

2. Acquisitions/divestitures (unaudited)
                On September 30, 1999, the Company completed the sale of its
            Systems & Electronics Inc. (SEI) subsidiary to Engineered Support
            Systems, Inc. (ESSI). The Company sold 100% of the common stock of
            SEI for $85 million in cash, less working capital adjustments,
            resulting in a $59.9 million gain recorded in the 1999 results of
            operations. Certain assets and liabilities of SEI were retained by
            the Company, including the net operating loss carryforward.

                Included in the consolidated statements of operations are the
            operating results of SEI prior to its divestiture as follows:


<TABLE>
<CAPTION>
            (Dollars in millions)                                                   1999                1998                 1997
            ----------------------------------------------------------------------------------------------------------------------

            <S>                                                                  <C>                 <C>                  <C>  
            Net sales                                                              $172.8              135.0                194.6
            Cost of sales                                                           139.6               98.7                157.3
            Selling, general and administrative expenses                             21.6               22.6                 23.5
            Other costs and expenses, net                                              .9                1.1                   .7
                                                                                  -------               ----                 ----

              Earnings before income taxes                                       $  10.7                12.6                 13.1
            ----------------------------------------------------------------------------------------------------------------------
</TABLE>


                On July 1, 1998, the Company completed the acquisition of
            Advanced Membrane Technology, Inc. (AMT) and consolidated AMT within
            PTI. The transaction involved the purchase of AMT common stock for
            approximately $7 million in cash plus approximately 450,000 shares
            of ESCO common stock valued at $8.6 million.

                On December 31, 1997, the Company completed the purchase of
            Euroshield OY for consideration which included $3.5 million in cash.

                On February 7, 1997, the Company completed the acquisition of
            the filtration and the thermoform packaging businesses (Filtertek)
            of Schawk, Inc. The transaction involved the purchase of assets and
            stock of certain subsidiary corporations of Schawk, Inc. for $92
            million in cash plus working capital adjustments.

                All of the Company's acquisitions have been accounted for using
            the purchase method of accounting and accordingly, the respective
            purchase prices were allocated to the assets (including intangible
            assets) acquired and liabilities assumed based on estimated fair
            values at the date of acquisition. The excess cost of the
            acquisitions over the estimated fair value of the net assets
            acquired is being amortized on a straight-line basis over periods
            ranging from 15-40 years, depending on Management's assessment of
            its useful life. The financial results from these acquisitions have
            been included in the Company's financial statements from the date of
            acquisition.

3. Accounts receivable
                Accounts receivable consist of the following at September 30,
            1999 and 1998:


<TABLE>
<CAPTION>
            (Dollars in thousands)                                                                      1999                 1998
            ----------------------------------------------------------------------------------------------------------------------

            <S>                                                                                      <C>                   <C>   
            Commercial                                                                               $35,287               38,371
            U. S. Government and prime contractors                                                     3,382               10,801
            Other                                                                                        -                  2,358
                                                                                                      ------                -----

                Total                                                                                $38,669               51,530
            ----------------------------------------------------------------------------------------------------------------------
</TABLE>



26


<PAGE>   18

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                The decrease in U. S. Government and prime contractors accounts
            receivable is primarily due to the sale of SEI at September 30,
            1999. The 1998 accounts receivable included $11.2 million related to
            SEI.

4.    Inventories

                Inventories consist of the following at September 30, 1999 and
            1998:


<TABLE>
<CAPTION>
            (Dollars in thousands)                                                                      1999                 1998
            ----------------------------------------------------------------------------------------------------------------------

            <S>                                                                                      <C>                   <C>  
            Finished goods                                                                           $11,387                9,491
            Work in process - including long-term contracts                                           14,517               54,754
            Raw materials                                                                             13,686               17,334
                                                                                                     -------                -----

                Total                                                                                $39,590               81,579
            ----------------------------------------------------------------------------------------------------------------------
</TABLE>


                During 1999, approximately $38.5 million of inventories were
            written off as a result of the adoption of SOP 98-5. The 1998
            inventory balance included $31.3 million of inventories related to
            SEI.

5.    Property, plant and equipment

                Depreciation and amortization of property, plant and equipment
            for the years ended September 30, 1999, 1998 and 1997 were
            $13,598,000, $14,589,000 and $12,441,000, respectively.

                The Company leases certain real property, equipment and
            machinery under noncancelable operating leases. Rental expense under
            these operating leases for the years ended September 30, 1999, 1998
            and 1997 amounted to $6,324,000, $5,675,000 and $4,502,000,
            respectively. Future aggregate minimum lease payments under
            operating leases that have initial or remaining noncancelable lease
            terms in excess of one year as of September 30, 1999 are:


<TABLE>
<CAPTION>
            
            (Dollars in thousands)      Years ending September 30:
            ----------------------------------------------------------------------------------------------------------------------

                                        <S>                                                           <C>   
                                        2000                                                          $3,189
                                        2001                                                           2,744
                                        2002                                                           1,716
                                        2003                                                           1,259
                                        2004 and thereafter                                              613
                                                                                                       -----

                                          Total                                                       $9,521
            ----------------------------------------------------------------------------------------------------------------------
</TABLE>



6. Income tax expense

                  The principal components of income tax expense for the years
            ended September 30, 1999, 1998 and 1997 consist of:


<TABLE>
<CAPTION>
            (Dollars in thousands)                                                  1999                1998                 1997
            ----------------------------------------------------------------------------------------------------------------------

            Federal:
            <S>                                                                <C>                   <C>                    <C>
                Current                                                        $      -                   -                   223
                Deferred                                                          11,560               6,121                4,816
            State, local and foreign                                               1,441              (1,070)               1,014
                                                                               ---------              ------                -----
                Total                                                            $13,001               5,051                6,053
            ----------------------------------------------------------------------------------------------------------------------
</TABLE>







                                                                              27


<PAGE>   19

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                  The actual income tax expense for the years ended September
            30, 1999, 1998 and 1997 differs from the expected tax expense for
            those years (computed by applying the U.S. Federal statutory rate)
            as follows:


<TABLE>
<CAPTION>
                                                                                     1999                1998                1997
            ----------------------------------------------------------------------------------------------------------------------

            <S>                                                                    <C>                 <C>                <C>  
            Federal corporate statutory rate                                        35.0%               35.0%              35.0%
            Change in tax valuation allowance:
              Utilization of capital loss carryforward                             (19.3)                 -                  -
              Other                                                                  5.9                 3.0               (6.8)
            Income taxes, net of Federal benefits:
              State and local                                                        1.1                (2.8)               2.7
              Foreign                                                                1.2                  .4               (1.1)
            Other, net                                                              (3.4)               (4.7)               4.1
                                                                                   -----                ----               ----

              Effective income tax rate                                             20.5%               30.9%              33.9%
            ----------------------------------------------------------------------------------------------------------------------
</TABLE>


                The tax effects of temporary differences that give rise to
            significant portions of the deferred tax assets and liabilities at
            September 30, 1999, 1998 and 1997 are presented below:


<TABLE>
<CAPTION>
            (Dollars in thousands)                                                  1999                1998                 1997
            ----------------------------------------------------------------------------------------------------------------------

            Deferred tax assets:
                Inventories, long-term contract accounting,
            <S>                                                                  <C>                  <C>                 <C>   
                  contract cost reserves and others                               $4,169               4,283               10,008
                Pension and other postretirement benefits                          3,576              10,177               10,134
                Net operating loss carryforward                                   51,097              38,989               36,608
                Capital loss carryforward                                         14,824              27,074               27,074
                Other compensation-related costs and other cost accruals           5,262               6,703                6,254
                                                                                --------            --------             --------

                  Total deferred tax assets                                       78,928              87,226               90,078
            Deferred tax liabilities:
                Plant and equipment, depreciation methods
                  and acquisition asset allocations                               (1,671)             (1,516)              (2,005)
                                                                                --------             -------              -------

                  Net deferred tax asset before valuation allowance               77,257              85,710               88,073
            Less valuation allowance                                             (32,474)            (40,970)             (39,563)
                                                                                --------            --------             --------

                  Net deferred tax assets                                        $44,783              44,740               48,510
            ----------------------------------------------------------------------------------------------------------------------
</TABLE>


                Management believes it is more likely than not that with its
            projections of future taxable income, its shift in strategic
            direction, and after consideration of the valuation allowance, the
            Company will generate sufficient taxable income to realize the
            benefits of the net deferred tax assets existing at September 30,
            1999.

                In order to fully realize the net deferred tax assets before
            valuation allowance existing at September 30, 1999, the Company will
            need to generate future taxable income of approximately $221 million
            of which $146 million is required to be realized prior to the
            expiration of the net operating loss (NOL) carryforward, of which
            $33 million will expire in 2006; $6 million will expire in 2007; $23
            million will expire in 2009; $38 million will expire in 2010; $4
            million will expire in 2011; $7 million will expire in 2018; and $35
            million will expire in 2019. Also, the Company will need to generate
            future capital gains of approximately $42 million prior to 2001, at
            which time the capital loss carryforward will expire.

                During the year ended September 30, 1999, and as a result of the
            Company utilizing $35 million of capital loss carryforward relating
            to the sale of SEI, the Company decreased its deferred tax valuation
            allowance to $32.5 million. A full valuation allowance of $14.8
            million is being maintained against the deferred tax asset
            associated with the capital loss. The remaining balance of $17.7
            million represents Management's best estimate of the portion of
            deferred tax asset associated with temporary differences and NOLs
            which may not be realized. As a result of adopting SOP 98-5, in
            1999, the Company recorded a tax benefit of $13.5 million.
            Additionally, a net deferred tax asset of $3.7 million was recorded
            after taking into effect the sale of SEI.

28


<PAGE>   20

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


7.    Debt
                Long-term debt consists of the following at September 30, 1999
            and 1998:


<TABLE>
<CAPTION>
            (Dollars in thousands)                                                                      1999                 1998
            ----------------------------------------------------------------------------------------------------------------------

            <S>                                                                                      <C>                   <C>   
            Term loan                                                                                $49,000               57,000
            Other debt                                                                                   988                1,188
            Less current maturities                                                                   (8,092)              (8,111)
                                                                                                     -------               ------

                Long-term debt                                                                       $41,896               50,077
            ----------------------------------------------------------------------------------------------------------------------
</TABLE>


                The Company's $122 million bank credit facility was amended on
            August 30, 1999 to allow for the sale of SEI. Upon receipt of the
            proceeds from the sale of SEI, the outstanding principal amount of
            the Term Loan and a portion of the outstanding revolving credit
            facility were to be repaid. On September 30, 1999, the Company
            received the gross proceeds of $85 million from the sale of SEI and
            on October 1, 1999, the Company repaid all outstanding debt.
            Subsequent to the sale of SEI the credit facility was adjusted to a
            $40 million revolving credit facility. The revolving credit facility
            (subject to borrowing base asset limitations) is available for
            direct borrowings and/or the issuance of letters of credit. The
            maturity of the bank credit facility is September 30, 2000. These
            credit facilities are provided by a group of banks, led by Morgan
            Guaranty Trust Company of New York.
                The amended credit facility requires, as determined by certain
            financial ratios, a commitment fee ranging from 5/16% to 7/16% per
            annum on the unused portion. The terms of the credit facility
            provide that interest on borrowings may be calculated at a spread
            over the London Interbank Offered Rate (LIBOR), or certificate of
            deposit rates for various maturities, or based on the prime rate, at
            the Company's election. Substantially all of the assets of the
            Company are pledged under the credit facility. The most restrictive
            financial covenants of the credit facility include minimum interest
            coverage, limitations on leverage and minimum tangible net worth.
            Dividends may not exceed 25% of the Company's consolidated net
            earnings.
                During 1999 and 1998, the maximum aggregate short-term
            borrowings at any month-end were $42.0 million and $55.5 million,
            respectively; the average aggregate short-term borrowings
            outstanding based on month-end balances were $32.5 million and $39.8
            million, respectively; and the weighted average interest rates were
            6.3% in 1999 and 6.9% in both 1998 and 1997. The letters of credit
            issued and outstanding under the credit facility totaled $4.8
            million and $2.7 million at September 30, 1998 and 1997,
            respectively. Borrowings under the revolving credit facility were
            $12.5 million at September 30, 1999.

8. Capital stock
                The 12,782,663 and 12,641,664 common shares as presented in the
            accompanying consolidated balance sheets at September 30, 1999 and
            1998 represent the actual number of shares issued at the respective
            dates. The Company held 404,625 and 234,025 common shares in
            treasury at September 30, 1999 and 1998, respectively.
                Pursuant to a Deposit and Trust Agreement (the Trust Agreement),
            all of the outstanding shares of the Company's common stock are held
            in trust by a trustee on behalf of the persons otherwise entitled to
            hold the Company's common stock, and such persons, instead, hold
            common stock trust receipts (Receipts) representing the Company's
            common stock and associated preferred stock purchase rights (the
            Rights). Although the trustee is the record holder of the Company's
            common stock, each holder of a Receipt is generally entitled to all
            of the rights of a holder of the Company's common stock (including
            the right to vote and to receive dividends or other distributions),
            except in certain circumstances. Prior to the September 30, 1999
            sale of SEI, if the Company would have failed in certain
            circumstances to collateralize its obligations to indemnify Emerson
            with respect to Emerson's guarantees of certain of the Company's
            government contracts and for so long as such failure continues,
            Emerson would have had the right to direct the trustee how to vote
            in the election of directors and certain related matters. In
            conjunction with the sale of SEI, The Trust Agreement is being
            dissolved.
                During 1995, the Company adopted the 1994 Stock Option Plan, and
            in 1991, the Company adopted the 1990 Stock Option Plan (the Option
            Plans). The Option Plans permit the Company to grant key management
            employees (1) options to purchase shares of the Company's common
            stock (or Receipts representing such shares) or (2) stock
            appreciation rights with respect to all or any part of the number of
            shares covered by the options. As long as the Trust Agreement is in
            effect, an optionee will receive Receipts in lieu of shares. All
            outstanding options were granted at prices equal to fair market
            value at the date of grant.

                                                                              29


<PAGE>   21

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                Information regarding stock options awarded under the Option
            Plans is as follows:


<TABLE>
<CAPTION>
                                                               1999                         1998                     1997
                                                     -------------------------       --------------------      -------------------

                                                                    ESTIMATED                  Estimated                Estimated
                                                        SHARES     AVG. PRICE       Shares    Avg. Price       Shares  Avg. Price
            ----------------------------------------------------------------------------------------------------------------------

            <S>                                        <C>         <C>            <C>         <C>             <C>      <C>  
            October 1,                                 953,716        $  8.61      998,486       $  6.18      889,930       $6.04
                Granted                                522,600         $10.76       89,500        $18.14      227,450      $10.78
                Exercised                              (17,270)       $  7.72     (107,964)      $  7.58      (68,371)      $6.87
                Cancelled                              (21,604)        $12.00      (26,306)      $  7.20      (50,523)      $9.28
            ----------------------------------------------------------------------------------------------------------------------

            September 30,                            1,437,442          $9.35      953,716       $  8.61      998,486     $  6.18

            At September 30,
                  Reserved for future grant            242,725
                  Exercisable                          698,464          $9.36      509,559       $  7.46      404,387       $6.18
            ----------------------------------------------------------------------------------------------------------------------
</TABLE>


                During 1996, the Company announced a stock repurchase program.
            Under this program, the Company was authorized to purchase up to two
            million shares of its common stock in the open market through
            September 30, 1998. Approximately 180,000 shares were repurchased
            throughout that two-year period. In October 1998, the Company
            authorized an additional open market repurchase program of up to 1.3
            million shares, which is subject to market conditions and other
            factors and will cover a period ending September 29, 2000.
            Approximately 177,000 shares were repurchased in 1999.
                During 1993 and 1997, the Board of Directors authorized, and the
            shareholders approved, the Performance Share Plans (the Plans). The
            maximum number of shares available for issue under the Plans is
            875,000 shares. As of September 30, 1999, 856,000 shares have been
            awarded and 666,522 shares have been earned.
                At September 30, 1999, there were 50,000 shares of restricted
            stock outstanding and held by certain key executives. These shares
            will be earned ratably through the period ending September 30, 2001.
                The Company has a Preferred Stock Purchase Rights Plan pursuant
            to which a dividend of one Right was declared for each outstanding
            share of the Company's common stock. Each Right entitles the holder
            to purchase one one-hundredth of a share of preferred stock at an
            initial purchase price of $25. Approximately 120,000 preferred
            shares are reserved for issuance under this plan. Under certain
            conditions involving the acquisition of, or an offer for, 20% or
            more of the Company's common stock, all holders of Rights, except an
            acquiring entity, would be entitled (1) to purchase, at a defined
            price, common stock of the Company or an acquiring entity at a value
            twice the defined price, or (2) at the option of the Board, to
            exchange each Right for one share of common stock. The Rights remain
            in existence until September 30, 2000, unless renewed, redeemed
            earlier (at one cent per Right), exercised or exchanged under the
            terms of the plan.
                The Company adopted the disclosure-only provisions of SFAS No.
            123. Under APB No. 25, no compensation cost was recognized for the
            Company's stock option plans. Had compensation cost for the
            Company's stock option plans and performance share plans been
            determined based on the fair value at the grant date for awards in
            1999 and 1998 consistent with the provisions of this Statement, the
            Company's net earnings and net earnings per share would have been as
            follows:



<TABLE>
<CAPTION>
                                                                                                          Pro forma (Unaudited)
            (Dollars in thousands, except per share amounts)                                            1999                 1998
            ----------------------------------------------------------------------------------------------------------------------

            <S>                                                                                      <C>                   <C>   
            Net earnings                                                                             $24,779               11,221
            Net earnings per share:
                Basic                                                                                   2.01                  .93
                Diluted                                                                                 1.96                  .89
            ----------------------------------------------------------------------------------------------------------------------
</TABLE>


                The fair value of each option grant is estimated on the date of
            grant using the Black-Scholes option-pricing model with the
            following weighted-average assumptions used for grants in 1999 and
            1998, respectively: expected dividend yield of 0% in both periods;
            expected volatility of 35.3% and 37.2%, risk-free interest rate of
            5.89% and 4.42%, and expected life based on historical exercise
            periods of 4.05 years and 4.11 years.

30


<PAGE>   22
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                To determine the fair value of grants under the Performance
            Share Plans, the probability that performance milestones would be
            met were applied to the ESCO stock price on the date of grant. This
            probability was based on an estimated average annual growth rate of
            10.0% and an annualized volatility of 38.4% and 32.5% in 1999 and
            1998, respectively.

9.    Retirement and other benefit plans
                Substantially all employees are covered by defined benefit or
            defined contribution pension plans maintained by the Company for the
            benefit of its employees. Benefits are provided to employees under
            defined benefit pay-related and flat-dollar plans, which are
            primarily noncontributory. Annual contributions to retirement plans
            equal or exceed the minimum funding requirements of the Employee
            Retirement Income Security Act or applicable local regulations.
                Net periodic benefit cost for the years ended September 30,
            1999, 1998 and 1997 is comprised of the following:


<TABLE>
<CAPTION>
            (Dollars in millions)                                                   1999                1998                 1997
            ----------------------------------------------------------------------------------------------------------------------

            Defined benefit plans:
            <S>                                                                  <C>                  <C>                  <C>
                Service cost                                                        $4.1                 3.5                  3.3
                Interest cost                                                        6.7                 6.1                  5.4
                Expected return on plan assets                                      (7.5)               (6.7)                (5.8)
                Amortization of service costs                                         .3                  .2                   .1
                Net actuarial loss                                                    .8                  .1                   .2
                Curtailment gain                                                    (8.5)                 -                    -
                Settlement loss                                                      2.9                  -                    -
                                                                                     ---                 ---                  ---
                                                                                     ---                 ---                  ---
                  Net periodic benefit cost                                         (1.2)                3.2                  3.2
            Defined contribution plans                                                .7                  .4                   .4
                                                                                     ---                 ---                  ---
              Total                                                                 $(.5)                3.6                  3.6
            ----------------------------------------------------------------------------------------------------------------------
</TABLE>


                The Company recognized a curtailment gain and a settlement loss
            in 1999 as a result of the sale of SEI on September 30, 1999.
                The projected benefit obligation, accumulated benefit
            obligation, and fair value of plan assets for defined benefit
            pension plans with accumulated benefit obligations in excess of plan
            assets were $1.5 million, $1.1 million and zero, respectively, as of
            September 30, 1999, and $26.3 million, $25.7 million and $20.7
            million, respectively, as of September 30, 1998.
                The net benefit obligation of the Company's defined benefit
            pension plans as of September 30, 1999 and 1998 is shown below:


<TABLE>
<CAPTION>
            (Dollars in millions)                                                                       1999                 1998
            ----------------------------------------------------------------------------------------------------------------------

            Change in benefit obligation -
            <S>                                                                                        <C>                   <C> 
              Net benefit obligation at beginning of year                                              $96.0                 77.6
              Service cost                                                                               4.1                  3.4
              Interest cost                                                                              6.7                  6.1
              Plan amendments                                                                             .8                   .1
              Actuarial (gain) loss                                                                     (5.5)                11.7
              Gross benefits paid                                                                       (3.2)                (2.9)
              Divestitures                                                                             (27.9)                  -
              Curtailments                                                                             (10.6)                  -
              Settlements                                                                              (33.3)                  -
                                                                                                         ---                  ---
                    Net benefit obligation at end of year                                              $27.1                 96.0
            ----------------------------------------------------------------------------------------------------------------------
</TABLE>







                                                                              31


<PAGE>   23
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                The plan assets of the Company's defined benefit pension plans
            at September 30, 1999 and 1998 are shown below:


<TABLE>
<CAPTION>
            (Dollars in millions)                                                                       1999                 1998
            ----------------------------------------------------------------------------------------------------------------------

            Change in plan assets:
            <S>                                                                                        <C>                   <C> 
                Fair value of plan assets at beginning of year                                         $77.9                 78.9
                Actual return on plan assets                                                            16.9                  (.8)
                Employer contributions                                                                   3.7                  2.7
                Divestitures                                                                           (66.8)                  -
                Gross benefits paid                                                                     (3.2)                (2.9)
                                                                                                         ---                  ---

                    Fair value of plan assets at end of year                                           $28.5                 77.9
            ----------------------------------------------------------------------------------------------------------------------
</TABLE>


                The Company's defined benefit pension plans recognized the
            following net amounts at September 30, 1999 and 1998:


<TABLE>
<CAPTION>
            (Dollars in millions)                                                                       1999                 1998
            ----------------------------------------------------------------------------------------------------------------------

            <S>                                                                                        <C>                 <C>   
            Funded status at end of year                                                                $1.3                (18.1)
            Unrecognized prior service cost                                                               .4                  1.9
            Unrecognized net actuarial (gain) loss                                                      (5.6)                 7.3
                                                                                                         ---                  ---
                    Accrued benefit cost                                                               $(3.9)                (8.9)
                                                                                                         ---                  ---
            Amounts recognized in the balance sheet consist of:
                Prepaid benefit cost                                                                    $ -                    .5
                Accrued benefit cost                                                                    (3.9)                (9.4)
                Additional minimum liability                                                             (.1)                (4.1)
                Intangible asset                                                                          .1                  1.8
                Accumulated other comprehensive income                                                    -                   2.3
                                                                                                         ---                  ---
                    Accrued benefit liability                                                          $(3.9)                (8.9)
            ----------------------------------------------------------------------------------------------------------------------
</TABLE>


                Pension plan assets consist principally of marketable securities
            including common stocks, bonds, and interest-bearing deposits.
                The benefit obligations of the defined benefit plans as of
            September 30, 1999 and 1998 were based on discount rates of 7.75%
            and 6.75%, respectively, and an assumed rate of increase in
            compensation levels of 4%. The 1999, 1998 and 1997 pension expense
            for the defined benefit plans was based on a 7.75%, 6.75% and 7.50%
            discount rate, respectively, a 4% increase in compensation levels,
            and a 10% expected long-term rate of return on plan assets.
                In addition to providing retirement income benefits, the Company
            provides unfunded postretirement health and life insurance benefits
            to certain retirees. To qualify, an employee must retire at age 55
            or later and the employee's age plus service must equal or exceed
            75. Retiree contributions are defined as a percentage of medical
            premiums. Consequently, retiree contributions increase with
            increases in the medical premiums. The life insurance plans are
            noncontributory and provide coverage of a flat dollar amount for
            qualifying retired employees.
                Net periodic postretirement benefit cost is comprised of the
            following:


<TABLE>
<CAPTION>
            (Dollars in millions)                                                   1999                1998                 1997
            ----------------------------------------------------------------------------------------------------------------------

            <S>                                                                    <C>                   <C>                  <C>
            Service cost                                                           $  .2                  .2                   .2
            Interest cost                                                             .7                 1.1                  1.2
            Net amortization and deferral                                            (.3)                 -                    -
            Curtailment gain recognized                                             (8.7)                 -                    -
                                                                                     ---                 ---                  ---
                Net periodic postretirement benefit cost                           $(8.1)                1.3                  1.4
            ----------------------------------------------------------------------------------------------------------------------
</TABLE>



32


<PAGE>   24

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


                The net benefit obligation for postretirement benefits at
            September 30, 1999 and 1998 is shown below:


<TABLE>
<CAPTION>
            (Dollars in millions)                                                                       1999                 1998
            ----------------------------------------------------------------------------------------------------------------------

            <S>                                                                                        <C>                   <C> 
            Net benefit obligation at beginning of year                                                $16.0                 15.5
            Service cost                                                                                  .2                   .2
            Interest cost                                                                                 .7                  1.1
            Actuarial (gain) loss                                                                       (5.8)                 1.5
            Curtailments                                                                                (8.7)                  -
            Gross benefits paid                                                                         (1.4)                (2.3)
                                                                                                        ----                  ---

                Net benefit obligation at end of year                                                   $1.0                 16.0
            ----------------------------------------------------------------------------------------------------------------------
</TABLE>


                The plan assets for postretirement benefits at September 30,
            1999 and 1998 are shown below:


<TABLE>
<CAPTION>
            (Dollars in millions)                                                                       1999                 1998
            ----------------------------------------------------------------------------------------------------------------------

            <S>                                                                                         <C>                  <C>   
            Fair value of plan assets at beginning of year                                              $ -                    -
            Employer contributions                                                                       1.4                  2.3
            Gross benefits paid                                                                         (1.4)                (2.3)
                                                                                                         ---                   --

                Fair value of plan assets at end of year                                                $ -                    -
            ----------------------------------------------------------------------------------------------------------------------
</TABLE>


                The Company recognized the following net amounts for
            postretirement benefits at September 30, 1999 and 1998:


<TABLE>
<CAPTION>
            (Dollars in millions)                                                                       1999                 1998
            ----------------------------------------------------------------------------------------------------------------------

            <S>                                                                                        <C>                  <C>   
            Funded status at end of year                                                               $(1.0)               (16.0)
            Unrecognized prior service cost                                                               -                   (.1)
            Unrecognized net actuarial (gain) loss                                                      (4.6)                 1.1
                                                                                                        ----                  ---

                Accrued benefit costs                                                                  $(5.6)               (15.0)
                                                                                                        ----                  ---

            Amounts recognized in the balance sheet consist of -
                Accrued benefit liability                                                              $(5.6)               (15.0)
            ----------------------------------------------------------------------------------------------------------------------
</TABLE>


                The net benefit obligation of the plans as of September 30, 1999
            and 1998 were based on discount rates of 7.75% and 6.75%,
            respectively. The September 30, 1999 net benefit obligation was
            based on a health care cost trend of 6.5% for fiscal 1998, gradually
            grading down to an ultimate rate of 5.5% by 2002. The September 30,
            1998 net benefit obligation was based on a health care cost trend of
            7% for fiscal 1997, gradually grading down to an ultimate rate of
            5.5% by 2002. A 1% increase in the health care cost trend rate for
            each year would increase the September 30, 1999 net benefit
            obligation by approximately $30,000, while a 1% decrease in the
            health care cost trend rate for each year would decrease the
            September 30, 1999 net benefit obligation by approximately $35,000.
                The fiscal 1999 and 1998 net periodic benefit costs were based
            on discount rates of 7.75% and 6.75%, respectively. The net periodic
            benefit cost was based on an assumed health care cost trend of 6.5%
            and 7.0% for 1999 and 1998, respectively, gradually grading down to
            5.5% by fiscal year 2002. A 1% increase in the health care cost
            trend rate for each year would increase the aggregate of the service
            cost and interest cost components of the fiscal 1999 net periodic
            benefit cost by approximately $3,600, while a 1% decrease in the
            health care cost trend rate for each year would decrease the
            aggregate of the service cost and interest cost components of the
            fiscal 1999 net periodic benefit cost by approximately $4,400.



                                                                              33


<PAGE>   25

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

10.   Other financial data
                Items charged to operations during the years ended September 30,
            1999, 1998 and 1997 included the following:


<TABLE>
<CAPTION>
            (Dollars in thousands)                                                  1999                1998                 1997
            ----------------------------------------------------------------------------------------------------------------------

            <S>                                                                 <C>                  <C>                  <C>  
            Maintenance and repairs                                               $7,078               6,751                5,828
            Salaries and wages                                                   132,671             133,507              113,953
                                                                                ---------              ------              -------

            Research and development costs:
                Company-sponsored                                                 $7,716               5,866                6,161
                Customer-sponsored                                                 8,332              10,201                6,341
                                                                                ---------              ------              -------

                Total                                                            $16,048              16,067               12,502
            ----------------------------------------------------------------------------------------------------------------------
</TABLE>


                The increase in 1998 research and development costs is due to
            the inclusion of Filtertek for the full year and additional
            expenditures at Rantec.
                Accrued expenses included accrued employee compensation of $6.0
            million and $10.2 million at September 30, 1999 and 1998,
            respectively.

11.   Business segment information
                The Company is organized based on the products and services that
            it offers. Under this organizational structure, on an ongoing basis,
            the Company will operate in four principal segments:
            Filtration/Fluid Flow, Test, Communications and Other.
            Filtration/Fluid Flow operations consist of PTI Technologies Inc.
            (PTI) and Filtertek Inc. (Filtertek). PTI develops and manufactures
            a wide range of filtration products and is a leading supplier of
            filters to the commercial aerospace market. Filtertek develops and
            manufactures a broad range of high-volume, original equipment
            manufacturer (OEM) filtration products at its facilities in North
            America, South America and Europe. Test operations consist of EMC
            Test Systems, L.P. (ETS) and principally involve the design and
            manufacture of EMC test equipment, test chambers, shielded rooms for
            high security data processing and secure communication, and
            electromagnetic absorption materials. Communications operations
            consist of Distribution Control Systems, Inc. (DCSI) and are
            principally involved in providing two-way power line communication
            systems for the utility industry. These systems provide the electric
            utilities with a patented communication technology for demand-side
            management, distribution automation and automatic meter reading
            capabilities. The Divested Business segment consists of Systems &
            Electronics Inc. (SEI). As of September 30, 1999, ESCO sold SEI to
            Engineered Support Systems, Inc. to pursue the Company's strategy of
            focusing on its commercial businesses. SEI was in the defense
            systems and electronics business and principally supplied
            high-capacity aircraft cargo loaders and transportation systems and
            weapon subsystems to the armed forces. In addition, SEI designed and
            manufactured launching and guidance systems and airborne radar
            systems. The Other segment is principally comprised of Rantec
            Microwave & Electronics, Inc. (Rantec) which designs and
            manufactures antennas and antenna feeds for wireless communications
            systems and produces power supplies widely used in high performance
            displays, such as cockpit instrumentation, engineering workstations
            and medical imaging. Rantec's microwave antenna business is being
            offered for sale. Other also includes the operations of Comtrak.
                Accounting policies of the segments are the same as those
            described in the summary of significant accounting policies in Note
            1. The Company evaluates the performance of its operating segments
            based on operating profit (loss), which is defined as: net sales,
            less cost of sales, less other charges related to cost of sales,
            less SG&A expenses and less restructuring charges. Intersegment
            sales and transfers are not significant. Segment assets consist
            primarily of customer receivables, inventories and fixed assets
            directly associated with the production processes of the segment.
            Segment assets also include goodwill. Segment depreciation and
            amortization is based upon the direct assets listed above.



34


<PAGE>   26
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


<TABLE>
<CAPTION>
            NET SALES
            Year ended September 30,
            (Dollars in millions)                                                   1999                1998                 1997
            ----------------------------------------------------------------------------------------------------------------------

            <S>                                                                   <C>                 <C>                  <C>  
            Filtration/Fluid Flow                                                  $168.9              158.3                123.5
            Test                                                                     34.9               30.6                 26.1
            Communications                                                           24.7               19.0                 13.4
            Other                                                                    14.8               22.2                 20.9
            Divested Business                                                       172.8              135.0                194.6
                                                                                  -------              -----                -----

            Consolidated totals                                                    $416.1              365.1                378.5
            ----------------------------------------------------------------------------------------------------------------------
</TABLE>



<TABLE>
<CAPTION>
            OPERATING PROFIT (LOSS)
            Year ended September 30,
            (Dollars in millions)                                                   1999                1998                 1997
            ----------------------------------------------------------------------------------------------------------------------

            <S>                                                                    <C>                 <C>                   <C>
            Filtration/Fluid Flow                                                   $11.9               10.5                  9.6
            Test                                                                      4.0                2.9                  2.6
            Communications                                                            4.0                2.0                  1.0
            Other                                                                   (13.2)                .3                   .6
            Divested Business                                                        10.4               11.2                 13.8
            Reconciliation to consolidated totals (Corporate)                        (2.2)                -                    -
                                                                                  -------              -----                -----

            Consolidated totals                                                     $14.9               26.9                 27.6
            ----------------------------------------------------------------------------------------------------------------------
</TABLE>


                The 1999 operating profit (loss) includes $3.9 million of other
            charges related to cost of sales and $5.1 million of restructuring
            charges described earlier.
                The filtration/fluid flow segment in 1999 includes $2.2 million
            of other charges related to cost of sales attributable to the
            write-off of inventory resulting from the abandonment of the High
            Pressure Air Reducing Quiet Manifold for surface ships. The
            remaining $1.7 million balance relates to Rantec and Comtrak, and is
            included in the Other segment.
                The 1999 restructuring charges of $5.1 million are included in
            the following segments: the $1.1 million of costs related to exiting
            the Rantec microwave antenna business area, and the $1.8 million
            write-off of the license agreement related to the abandonment of the
            Vehicle Location System at Comtrak are included in the Other
            segment. The $2.2 million of personnel separation costs are included
            as a Corporate expense.
                The total nonrecurring charges included in 1999 operating profit
            (loss) amounted to $9.1 million. The Other segment also includes
            $3.8 million of charges related to cost growth on certain
            development programs at Rantec power systems.
                The $2.5 million of other charges related to cost of sales in
            1998 related to SEI and is included in Divested Business.


<TABLE>
<CAPTION>
            IDENTIFIABLE ASSETS
            Year ended September 30,
            (Dollars in millions)                                                   1999                1998                 1997
            ----------------------------------------------------------------------------------------------------------------------

            <S>                                                                   <C>                 <C>                  <C>  
            Filtration/Fluid Flow                                                  $195.0              203.0                177.2
            Test                                                                     22.2               21.5                 17.0
            Communications                                                           13.9               14.6                  9.7
            Other                                                                    19.2               36.1                 34.0
            Divested Business                                                         -                 80.3                 89.5
            Reconciliation to consolidated totals (Corporate assets)                128.0               53.8                 50.8
                                                                                  -------               ----                 ----

            Consolidated totals                                                    $378.3              409.3                378.2
            ----------------------------------------------------------------------------------------------------------------------
</TABLE>


                Corporate assets consist primarily of deferred taxes and cash
            balances.

                                                                              35


<PAGE>   27

   
    


<TABLE>
<CAPTION>
            DEPRECIATION AND AMORTIZATION
            Year ended September 30,
            (Dollars in millions)                                                   1999                1998                 1997
            ----------------------------------------------------------------------------------------------------------------------

            <S>                                                                    <C>                 <C>                   <C>
            Filtration/Fluid Flow                                                   $10.7               10.5                  7.5
            Test                                                                      0.9                0.9                  0.7
            Communications                                                            1.2                1.2                  1.1
            Other                                                                     1.2                1.2                  1.0
            Divested Business                                                         3.0                3.6                  4.1
                                                                                    -----               ----                 ----

            Consolidated totals                                                     $17.0               17.4                 14.4
            ----------------------------------------------------------------------------------------------------------------------
</TABLE>




<TABLE>
<CAPTION>
            CAPITAL EXPENDITURES, NET
            Year ended September 30,
            (Dollars in thousands)                                                  1999                1998                 1997
            ----------------------------------------------------------------------------------------------------------------------

            <S>                                                                     <C>                 <C>                  <C>
            Filtration/Fluid Flow                                                    $6.3                7.3                  6.4
            Test                                                                      0.2                0.3                  0.4
            Communications                                                            0.3                2.5                  0.3
            Other                                                                     0.4                1.3                  1.0
            Divested Business                                                         1.1                1.5                  2.4
                                                                                     ----               ----                 ----

            Consolidated totals                                                      $8.3               12.9                 10.5
            ----------------------------------------------------------------------------------------------------------------------
</TABLE>



<TABLE>
<CAPTION>
            ESCO'S GEOGRAPHIC INFORMATION FOR 1999, 1998 AND 1997 FOLLOWS:
            Net sales to customers
            (Dollars in millions)                                                   1999                1998                 1997
            ----------------------------------------------------------------------------------------------------------------------

            <S>                                                                    <C>                 <C>                  <C>  
            North America                                                          $346.9              313.0                319.7
            Europe                                                                   37.0               37.6                 31.0
            Middle East                                                               3.1                3.9                  6.0
            Far East                                                                 23.5                8.6                 17.8
            Other                                                                     5.6                2.0                  4.0
                                                                                   ------              -----                -----

            Consolidated totals                                                    $416.1              365.1                378.5
            ----------------------------------------------------------------------------------------------------------------------
</TABLE>



<TABLE>
<CAPTION>
            LONG-LIVED ASSETS
            (Dollars in millions)                                                   1999                1998
            ----------------------------------------------------------------------------------------------------------------------

            <S>                                                                    <C>                 <C> 
            North America                                                           $63.8               89.2
            Europe                                                                    7.5                8.8
                                                                                    -----               ----

            Consolidated totals                                                     $71.3               98.0
            ----------------------------------------------------------------------------------------------------------------------
</TABLE>


                Net sales are attributed to countries based on location of
            customer. Long-lived assets are attributed to countries based on
            location of the asset.

12.   Emerson contract guarantees
                Emerson had directly or indirectly guaranteed or was otherwise
            liable for the performance of most of the Company's contracts with
            its customers which existed at September 30, 1990 (the Guaranteed
            Contracts). The Guaranteed Contracts and any potential liability
            related to these contracts were assumed by the purchaser of SEI at
            September 30, 1999.


36


<PAGE>   28
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

13.   Commitments and Contingencies
                At September 30, 1999, the Company had $7.3 million in letters
            of credit outstanding as guarantees of contract performance.
            Subsequent to the sale of SEI, $2.7 million of this amount which
            relates to SEI will be transferred to the acquirer.
                In 1994, an action was commenced against the Company's Hazeltine
            subsidiary alleging injury caused by Hazeltine's purported release
            of hazardous materials. The Company believes that no one and no
            property were injured by any release of hazardous substances from
            Hazeltine's plant. In 1996, the plaintiffs filed a motion to be
            certified as a class. The motion was denied and the plaintiffs
            appealed. The appellate court affirmed the denial. Based upon the
            current facts, the Company is not able to estimate the probable
            outcome. Therefore, no provision for this litigation has been made
            in the accompanying consolidated financial statements. Management
            believes the Company will be successful in defending this action and
            that the outcome will not have a material adverse effect on the
            Company's financial statements. This contingent liability was
            retained by the Company when Hazeltine was divested in 1996.
                As a normal incidence of the businesses in which the Company is
            engaged, various claims, charges and litigation are asserted or
            commenced against the Company. In the opinion of management, final
            judgments, if any, which might be rendered against the Company in
            current litigation are adequately reserved, covered by insurance, or
            would not have a material adverse effect on its financial
            statements.

14. Other Charges related to cost of sales
                Other charges related to cost of sales of $3.9 million in 1999
            represent the write-off of inventory related to the strategic
            abandonment of the High Pressure Air Reducing Quiet Manifolds for
            surface ships ($2.2 million) and the Vehicle Location Systems ($.6
            million) business areas. Additionally, the Company wrote down the
            Rantec microwave antenna product line inventory ($1.1 million) to
            net realizable value as a result of the anticipated sale of that
            business area.
                Other charges related to cost of sales of $2.5 million in 1998
            resulted from the Company's settlement of a long-standing contract
            dispute on the original M1000 tank transporter program at SEI.

15.   Quarterly financial information (Unaudited)


<TABLE>
<CAPTION>
            (Dollars in thousands,                                      First       Second         Third       Fourth      Fiscal
            except per share amounts)                                 Quarter      Quarter       Quarter      Quarter        Year
            ----------------------------------------------------------------------------------------------------------------------

            1999
            <S>                                                      <C>            <C>          <C>          <C>         <C>    
            Net sales                                                $ 88,193       96,214       113,978      117,717     416,102
            Gross profit                                               22,894       25,036        27,951       18,613      94,494
            Net earnings before accounting change                       1,515        2,047         4,072       42,821      50,455
            Net earnings                                              (23,494)       2,047         4,072       42,821      25,446
            Earnings per share before accounting change:
                Basic                                                     .12          .17           .33         3.46        4.09
                Diluted                                                   .12          .16           .32         3.36        4.00
            ----------------------------------------------------------------------------------------------------------------------

            1998
            Net sales                                                $ 78,077       86,030        98,236      102,740     365,083
            Gross profit                                               22,029       24,596        25,641       22,985      95,251
            Net earnings                                                2,610        3,240         3,847        1,599      11,296
            Earnings per share:
                Basic                                                     .22          .27          .32           .13         .94
                Diluted                                                   .21          .26          .31           .12         .90
            ----------------------------------------------------------------------------------------------------------------------
</TABLE>


                Gross profit is computed as net sales, less cost of sales, less
            other charges related to cost of sales. The 1999 first quarter
            reflects the impact of adopting SOP 98-5. The 1999 fourth quarter
            reflects the impact of the SEI divestiture and the nonrecurring
            costs incurred.

                                                                              37


<PAGE>   29


            INDEPENDENT AUDITOR'S REPORT


            THE BOARD OF DIRECTORS AND SHAREHOLDERS
            ESCO ELECTRONICS CORPORATION:
                We have audited the accompanying consolidated balance sheets of
            ESCO Electronics Corporation and subsidiaries as of September 30,
            1999 and 1998, and the related consolidated statements of
            operations, shareholders' equity, and cash flows for each of the
            years in the three-year period ended September 30, 1999. These
            consolidated financial statements are the responsibility of the
            Company's Management. Our responsibility is to express an opinion on
            these consolidated financial statements based on our audits.
                We conducted our audits in accordance with generally accepted
            auditing standards. Those standards require that we plan and perform
            the audit to obtain reasonable assurance about whether the financial
            statements are free of material misstatement. An audit includes
            examining, on a test basis, evidence supporting the amounts and
            disclosures in the financial statements. An audit also includes
            assessing the accounting principles used and significant estimates
            made by management, as well as evaluating the overall financial
            statement presentation. We believe that our audits provide a
            reasonable basis for our opinion.
                In our opinion, the consolidated financial statements referred
            to above present fairly, in all material respects, the financial
            position of ESCO Electronics Corporation and subsidiaries as of
            September 30, 1999 and 1998, and the results of their operations and
            their cash flows for each of the years in the three-year period
            ended September 30, 1999, in conformity with generally accepted
            accounting principles.
                As discussed in note 1 to the consolidated financial statements,
            the Company adopted Statement of Position 98-5, "Reporting on the
            Costs of Start-Up Activities," in 1999.


            KPMG LLP


            St. Louis, Missouri
            November 10, 1999




                                                                              39


<PAGE>   30
FIVE-YEAR FINANCIAL SUMMARY


<TABLE>
<CAPTION>
            (Dollars in millions, except per share amounts)              1999 (1)     1998 (2)     1997 (3)     1996 (4)    1995 (5)
            ----------------------------------------------------------------------------------------------------------------------

            For years ended September 30:
            <S>                                                         <C>           <C>          <C>          <C>         <C>  
                Net sales                                               $416.1        365.1        378.5        438.5       441.0
                Interest expense                                           6.5          7.7          5.2          4.8         5.5
                Earnings (loss) before income taxes                       63.5         16.3         17.9         14.8       (29.5)
                Net earnings (loss) before accounting change              50.5         11.3         11.8         26.1       (30.3)
                Net earnings (loss)                                       25.5         11.3         11.8         26.1       (30.3)

            Earnings (loss) per share:
                Earnings (loss) before accounting change:
                    Basic                                                4.09           .94         1.00         2.32       (2.76)
                    Diluted                                              4.00           .90          .96         2.26       (2.76)
                Net earnings (loss)
                    Basic                                                2.06           .94         1.00         2.32       (2.76)
                    Diluted                                              2.02           .90          .96         2.26       (2.76)
            As of September 30:
                Working capital                                           95.3         60.3         62.3         86.2        71.4
                Total assets                                             378.4        409.3        378.2        307.8       378.0
                Long-term debt                                            41.9         50.1         50.0         11.4        23.5
                Shareholders' equity                                     248.7        224.1        205.0        191.1       182.3
            ----------------------------------------------------------------------------------------------------------------------
</TABLE>


            (1) Includes the gain on sale of SEI, accounting change, $5.1
                million of restructuring charges, and $3.9 million of other
                charges related to cost of sales.

            (2) Includes the acquisitions of Euroshield (December 31,1997) and
                AMT (July 1, 1998) (see Footnote 2 of Notes to Consolidated
                Financial Statements).

            (3) Includes the acquisition of Filtertek in February 1997 (see
                Footnote 2 of Notes to Consolidated Financial Statements).

            (4) Includes the sale of Hazeltine; $25.3 million of other charges
                related to cost of sales; and includes an adjustment to the
                income tax valuation reserve.

            (5) Includes $16.5 million of other charges related to cost of sales
                and a change in accounting estimate.



--------------------------------------------------------------------------------

COMMON STOCK MARKET PRICES


                The Company's common stock trust receipts and the underlying
            common stock and associated preferred stock purchase rights
            (subsequently referred to as common stock) are listed on the New
            York Stock Exchange under the symbol "ESE." The following table
            summarizes the high and low prices of the Company's common stock for
            each quarter of 1999 and 1998.


<TABLE>
<CAPTION>
                                                        1999                      1998
                           -------------------------------------------------------------------
                           Quarter               HIGH          LOW          High          Low
                           -------------------------------------------------------------------
                           <S>                  <C>          <C>          <C>           <C>
                           First                11 3/4        8 3/4       19 15/16      163/16
                           Second               11 1/4        9 3/16      18 7/16       16
                           Third                11 7/8       10 1/8       20 3/4        165/8
                           Fourth               13 3/8       11 3/4       19 5/16        85/8
                           -------------------------------------------------------------------
</TABLE>




40


<PAGE>   31

SHAREHOLDER'S SUMMARY


            CAPITAL STOCK INFORMATION

                ESCO Electronics Corporation common stock trust receipts (and
            the underlying common stock and associated preferred stock purchase
            rights) (symbol ESE) are listed on the New York Stock Exchange.

                There were approximately 8,178 holders of record of trust
            receipts representing shares of common stock at September 30, 1999.


                                                                              41





<PAGE>   1
                                                                      EXHIBIT 21


                                 SUBSIDIARIES OF
                          ESCO ELECTRONICS CORPORATION



<TABLE>
<CAPTION>
                                        STATE OR JURISDICTION OF
                                        INCORPORATION OR                        NAME UNDER WICH
NAME                                    ORGANIZATION                            IT DOES BUSINESS
----                                    ------------------------                ----------------
<S>                                     <C>                                     <C>
Comtrak Technologies, L.L.C.            Missouri                                Same

Defense Holding Corp.                   Delaware                                Same

Distribution Control Systems            Puerto Rico                             Same
Caribe, Inc.

Distribution Control Systems, Inc.      Missouri                                Same

EMC Test systems, L.P.                  Texas                                   Same

Euroshield OY                           Finland                                 Same

Filtertek BV                            Netherlands                             Same

Filtertek de Puerto Rico, Inc.          Delaware                                Same

Filtertek Do Brazil                     Brazil                                  Same

Filtertek Inc.                          Delaware                                Same and Tek
                                                                                Packaging Division

Filtertek SA                            France                                  Same

PTI Advanced Filtration Inc.            Delaware                                Same

PTI Technologies Inc.                   Delaware                                Same

PTI Technologies Limited                England                                 Same

Rantec Microwave & Electronics, Inc.    Delaware                                Same

VACCO Industries                        California                              Same
</TABLE>










<PAGE>   1
                                                                      Exhibit 23













                         Independent Auditors' Consent





The Board of Directors
ESCO Electronics Corporation:


We consent to incorporation by reference in the registration statements (Nos.
33-39737, 33-47916, 33-98112 and 333-92945) on Form S-8 of ESCO Electronics
Corporation of our report dated November 10, 1999, relating to the consolidated
balance sheets of ESCO Electronics Corporation and subsidiaries as of September
30, 1999 and 1998, and the related consolidated statements of operations,
shareholders' equity, and cash flows for each of the years in the three-year
period ended September 30, 1999, which report appears in the September 30, 1999
Annual Report on Form 10-K of ESCO Electronics Corporation.






                                              KPMG LLP





St. Louis, Missouri
December 21, 1999









<TABLE> <S> <C>


<ARTICLE> 5
       
<S>                             <C>
<PERIOD-TYPE>                   12-MOS
<FISCAL-YEAR-END>                          SEP-30-1999
<PERIOD-START>                             OCT-01-1998
<PERIOD-END>                               SEP-30-1999
<CASH>                                          87,709
<SECURITIES>                                         0
<RECEIVABLES>                                   39,243<F1>
<ALLOWANCES>                                       574
<INVENTORY>                                     39,590
<CURRENT-ASSETS>                               173,546
<PP&E>                                         109,763
<DEPRECIATION>                                  38,445
<TOTAL-ASSETS>                                 378,385
<CURRENT-LIABILITIES>                           78,217
<BONDS>                                              0
<PREFERRED-MANDATORY>                                0
<PREFERRED>                                          0
<COMMON>                                           128
<OTHER-SE>                                     248,561
<TOTAL-LIABILITY-AND-EQUITY>                   378,385
<SALES>                                        416,102
<TOTAL-REVENUES>                               416,102
<CGS>                                          317,681
<TOTAL-COSTS>                                  341,315
<OTHER-EXPENSES>                                 4,871
<LOSS-PROVISION>                                     0
<INTEREST-EXPENSE>                               6,460
<INCOME-PRETAX>                                 63,456
<INCOME-TAX>                                    13,001
<INCOME-CONTINUING>                             50,455
<DISCONTINUED>                                       0
<EXTRAORDINARY>                                      0
<CHANGES>                                            0
<NET-INCOME>                                    25,446
<EPS-BASIC>                                       2.06
<EPS-DILUTED>                                     2.02
<FN>
<F1>This number does not include 11.8 million of Costs and Estimated Earnings on
Long-Term Contracts
</FN>
        

</TABLE>