SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
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(as permitted by Rule 14a-6(e)(2))
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Technology Research Corporation
- -------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- -------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
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TECHNOLOGY RESEARCH CORPORATION
Notice of Annual Meeting to Shareholders
to be held August 22, 1996
To the Shareholders of
TECHNOLOGY RESEARCH CORPORATION
You are cordially invited to attend the Annual Meeting of Shareholders of
Technology Research Corporation, a Florida corporation (the "Company"), which
will be held on August 22, 1996, at 2:30 P.M. Eastern Daylight Savings Time, at
the Summit Conference Center, 13575 58th Street North (Rubin Icot Center,
Ulmerton Road), Clearwater, Florida, for the following purposes:
1. To elect five members of the Board of Directors who will be elected
to a one-year term of office.
2. To ratify the selection by the Company's Board of Directors of KPMG
Peat Marwick LLP, Certified Public Accountants, as independent
auditors of the Company for its fiscal year ending March 31, 1997.
3. To consider and vote upon a proposal to adopt the 1996 Stock Option
Performance Plan.
4. To consider and act upon any matters related to the foregoing
purposes and to transact such other business as may properly be
brought before the meeting and at any adjournments thereof.
A Proxy Statement and Board of Directors Proxy are being mailed with this
notice. You are invited to attend the meeting in person, but if you are unable
to do so, the Board of Directors requests that you sign, date and return the
proxy, as promptly as practicable, by means of the enclosed envelope. If you
are present at the meeting and desire to vote in person, you may revoke the
proxy, and if you receive more than one proxy (because of different addresses
of stockholdings), please fill in and return each proxy to complete your
representation.
By order of the Board of Directors
Robert S. Wiggins
Chairman of the Board and
Chief Executive Officer
Clearwater, Florida
July 12, 1996
Enclosures
TECHNOLOGY RESEARCH CORPORATION
5250 140th Avenue North
Clearwater, Florida 34620
PROXY STATEMENT
FOR
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD AUGUST 22, 1996
I. Solicitation and Revocation of Proxies
This Proxy Statement and accompanying form of proxy are being mailed on
or about July 12, 1996 in connection with the solicitation by the Board of
Directors of Technology Research Corporation, a Florida corporation (the
"Company") of proxies to be used at the Annual Meeting of Shareholders, to be
held on August 22, 1996 at 2:30 P.M. Eastern Daylight Savings Time, at the
Summit Conference Center, 13575 58th Street North, Clearwater, Florida (Rubin
Icot Center, Ulmerton Road) (the "Annual Meeting"), and at any and all
adjournments thereof, for the purposes set forth in the accompanying notice
of said meeting, dated July 12, 1996.
As this solicitation is being made exclusively by the Board of Directors
of the Company, any costs incurred in connection therewith will be borne by
the Company. Brokerage houses and other nominees of record will be requested
to forward all proxy solicitation material to the beneficial owners, and their
expenses in such regard will also be paid by the Company. All proxies are
being solicited by mail in the accompanying form, but further solicitation
following the original mailing may be made by Board representatives or agents
by telephone, telegraph or personal contact with certain shareholders.
Execution of the enclosed proxy will not affect a shareholder's right to
attend the meeting and vote in person. A shareholder giving a proxy may revoke
it at any time before exercise, by either notifying the Secretary of the
Company of its revocation, submitting a substitute proxy dated subsequent to
the initial one or attending the Annual Meeting and voting in person.
All properly executed proxy cards delivered pursuant to this solicitation
and not revoked will be voted at the Annual Meeting in accordance with the
directions given. If no specific instructions are given with regard to the
matters to be voted upon, the shares represented by a signed proxy card will be
voted FOR the election of the nominees listed below under the caption "Election
of Directors", FOR the ratification of the appointment of KPMG Peat Marwick LLP
as the Company's independent accountants, FOR the approval of the 1996 Stock
Option Performance Plan, and if any other matters properly come before the
Annual Meeting, the persons named as Proxies will vote upon such matters
according to their best judgment.
A proxy card is enclosed for your use. YOU ARE SOLICITED ON BEHALF OF THE
BOARD OF DIRECTORS TO COMPLETE, SIGN, DATE AND RETURN THE PROXY CARD IN THE
ACCOMPANYING ENVELOPE.
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A copy of the 1996 Annual Report to Stockholders, which includes the
Company's Financial Statements for the fiscal year ended March 31, 1996, has
been mailed with this Proxy Statement to all Stockholders entitled to vote at
the Annual Meeting.
II. Voting Securities and Principal Holders Thereof
Only shareholders of record at the close of business on July 5, 1996 will
be entitled to vote at the Annual Meeting. At the close of business on such
record date, there were issued and outstanding 5,318,902 shares of the
Company's common stock, $.51 par value per share (the "Common Stock"), each of
which is entitled to one vote. There are no other classes of voting stock
issued and outstanding. The presence, in person or by proxy, of a majority of
the outstanding shares of Common Stock of the Company is necessary to
constitute a quorum at the Annual Meeting. The affirmative vote of the holders
of a majority of the shares of Common Stock represented in person or by proxy
at the Annual Meeting is required to (i) elect directors; (ii) ratify the
appointment of KPMG Peat Marwick LLP as the Company's independent certified
public accountants for the year ending March 31, 1997; and (iii) adopt the 1996
Stock Option Performance Plan.
The following table enumerates, as of July 5, 1996, the name, address,
position with the Company, if any, and ownership, both by numerical holding and
percentage interest, of the beneficial owners of more than five percent of the
Company's outstanding Common Stock, of the directors of the Company,
individually, by each of the five most highly compensated executive officers of
the Company and of its directors and executive officers as a group:
Name, Position and Address Shares Percentage
of Beneficial Owner Beneficially Owned (1) of Class
------------------- ------------------ --------
Robert S. Wiggins, Director (2) 199,304 3.7%
1850 Jessica Road
Clearwater, FL 34625
Raymond H. Legatti, Director (2) 145,906 2.7%
1567 Alexander Road
Clearwater, FL 34616
Raymond B. Wood, Director (2) 175,240 3.3%
1513 Beverly Drive
Clearwater, FL 34616
Edmund F. Murphy, Jr., Director (2) 29,668 0.6
50 Coe Road, #126
Belleair, FL 34616
Jerry T. Kendall, Director (2) 4,001 ---
520 Brightwaters Blvd.
St. Petersburg, FL 33704
All directors and officers (2) 554,119 10.1%
as a group (5 persons)
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Footnotes:
(1) For purposes of this table, a person or group of persons is deemed to be
the "beneficial owner" of any shares that such person has the right to acquire
within 60 days following July 5, 1996. For purposes of computing the
percentage of outstanding shares held by each person or group of persons named
above on a given date, any security that such person or persons has the right
to acquire within 60 days following July 5, 1996 is deemed to be outstanding,
but is not deemed to be outstanding for the purpose of computing the percentage
ownership of any other person.
(2) Includes the following shares subject to currently exercisable options
held by Messrs. Wiggins (32,144), Legatti (42,772), Wood (56,914), Murphy
(8,334) and Kendall (3,334).
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III. Election of Directors
A. Number and Composition of the Board of Directors. The By-Laws of the
Company provide that its Board of Directors shall consist of not less than
three members and may be composed of such higher number, as may be fixed from
time to time by action of the Board of Directors or of the shareholders. The
Board recommends that the exact number of directors not be determined by
shareholder action, thus permitting the Board to increase or decrease the
number of directors during the year and to fill any vacancy as it deems
advisable to do so. The Board is currently comprised of five members. All
five members of the Board of Directors will be elected at the 1996 Annual
Meeting.
B. Meetings and Committees of the Board. The Board of Directors has not
appointed a standing nominating committee. Nominees for election to the Board
are selected by the incumbent board at a regular meeting thereof. With the
exception of an Audit and Compensation Committee, no other standing Board
Committee has been formed as of the present time. Each of the incumbent
nominees for election to the Board has attended at least 75% of the aggregate
number of total meetings of the Board, and of total meetings of each committee
of which he is a member, which have been held during the last year. During the
Company's most recent fiscal year, ended March 31, 1996, the Board of Directors
of the Company held six Board meetings. The Audit and Compensation Committees
each held two meetings during the fiscal year. Messrs. Murphy and Kendall are
the members of the Audit and Compensation Committees.
Audit Committee. The Audit Committee has the principal function of
reviewing the adequacy of the Company's internal system of accounting controls,
conferring with the independent auditors, recommending to the Board of
Directors the appointment of independent auditors and considering other
appropriate matters regarding the financial affairs of the Company.
Compensation Committee. The Compensation Committee makes
recommendations to the Board with respect to compensation and grants of stock
options to management employees. In addition, the Compensation Committee
administers plans and programs relating to benefits, incentives, stock options
and compensation of the Company's Chief Executive Officer and other executive
officers. Members of the Compensation Committee are not entitled to
participate in the Company's employee benefit plans and stock option plans for
its officers and management employees.
C. Information Concerning Nominees. Unless authority is withheld as to
the Board designated nominees, the shares represented by Board of Directors
proxies properly executed and timely received will be voted for the election as
Director of the nominees named below, individuals who presently serve as
Directors of the Company. If such nominees cease to be a candidate for
election for any reason, the proxy will be voted for a substitute nominee
designated by the Board of Directors. The Board has no reason to believe the
nominees will be unavailable to serve if elected. Board members owning shares
of Common Stock intend to either be present and vote their shares in favor of
the nominees listed below or give their proxy in support of such nominees. The
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nominees listed below, if elected, will serve a one year term, expiring on the
date of the annual meeting of shareholders in 1997. Certain information with
respect to each nominee is hereafter set forth:
Year
Name Age Position First Elected
- ---- --- -------- -------------
Robert S. Wiggins 66 Director, Chairman of the 1988
Board, Chief Executive
Officer and Chief
Financial Officer
Raymond H. Legatti 64 Director and President 1981
Raymond B. Wood 61 Director and Senior 1981
Vice President Government
Operations and Marketing
Edmund F. Murphy, Jr. 67 Director 1988
Jerry T. Kendall 53 Director 1994
ROBERT S. WIGGINS, age 66, has been Chairman of the Board, Chief Executive
officer and Director of the Company since March 1988 and in addition, is
presently serving as the Company's Chief Financial Officer. From 1974 to 1987,
he was Chairman, Chief Executive Officer and President of Paradyne Corporation,
Largo, Florida, a data communications company. Mr. Wiggins served as a
consultant for Paradyne from 1987 to March 1988. In addition, he spent three
years with GTE Information Systems Division as a Vice President and 13 years in
various sales and product development managerial positions with IBM
Corporation.
RAYMOND H. LEGATTI, age 64, has been President of the Company and a member
of the Board since its founding in 1981. From 1980 to 1981, he served as
Corporate Director of Electronic Activity for Square D Company, whose offices
are located in Palatine, Illinois. From 1978 to 1980, he served as Manager of
Square D operations in Clearwater, Florida. From 1975 to 1978, he served as
President of Electromagnetic Industries, Inc., a subsidiary of Square D
Company. During the prior 20 years, he was Vice President of Engineering,
Director and General Manager of the Electronics Division of Electromagnetic
Industries, Inc. which was acquired by Square D Company in 1974. He has served
on the Board of Directors of the Building Equipment Division of the National
Electrical Manufacturers Association ("NEMA") and was the Technical
Representative for NEMA on the National Fire Prevention Association's Committee
for Standards for Anesthetizing Locations. He has served as Chairman of the
Ground Fault and Health Care sections of NEMA. Mr. Legatti was appointed as
Technical Advisor to the United States National Committee of the International
Electrotechnical Commission ("IEC") SC23E for GFCI technology and also is
Chairman of the U.S. Technical advisory groups for IEC SC23E/WG2 and WG7, and
serves as the expert delegate on several IEC committees representing the USA.
Mr. Legatti is also Chairman of IEC 23E/WG7 Committee for Protective Devices
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for Battery Powered Vehicles. Note: The IEC establishes International
Electrical Standards. Mr. Legatti serves on the NEMA Electric Vehicle Council,
and Mr. Legatti is also NEMA representative on the Electric Power Research
Institute ("EPRI") Electric Vehicle Infrastructure Working Council ("IWC");
Health and Safety and Personnel Protection Committees, and also serves as
liaison representative between the IWC and the TFC, and is a Member of the Task
Group for the U. S. Consumer Products Safety Commission Home Electrical Systems
Fire Project. Mr. Legatti also serves on the Underwriters Laboratories
Advisory Committee. Mr. Legatti, English-born and educated, has acquired
extensive management experience and expertise in the areas of electrical
control and measurement in various environments. His 25 separate United States
patents are applied in products in wide use in military engine generator
systems, hospital insulated electrical systems, and in electrical safety
products that protect against shock, electrocution and fires.
RAYMOND B. WOOD, age 61, has been a Director and Senior Vice President of
Government Operations and Marketing of the Company since its inception in 1981.
From 1974 to 1981, he was Manager of Engine Generator Component Marketing for
Square D Company. He was employed by Electromagnetic Industries, Inc. for 20
years prior to its acquisition by Square D Company. During this time, he held
the positions of General Manager of Electromagnetic Industries of Georgia,
Military Products Sales Manager, and Design and Project Engineer. Mr. Wood is
a charter member of the Electrical Generating Systems Marketing Association
("EGSMA") and is Chairman of the Government Liaison committee for that
organization. For the past 31 years, he has been involved in marketing and
product application concerning control and measurement of electrical power and
engine generator systems. During such 31-year period, Mr. Wood has had
extensive contact with the military procurement testing and qualification
locations, as well as with the prime contractors to the military. Mr. Wood is
frequently consulted on an informal basis for solutions to problems, such as
determining why engine generator sets are not functioning properly, by both the
military and prime contractors.
EDMUND F. MURPHY, JR., age 67, was appointed to membership on the Board of
Directors by action of the incumbent Board taken as of May 10, 1988. Since
1981, Mr. Murphy has functioned as the sole owner and Chief Executive of Murphy
Management Consultants, Inc., a Belleair, Florida based consulting firm
providing advice to emerging companies, particularly those engaged in the
manufacture and distribution of a proprietary product base. For the preceding
eight years he served as Senior Vice President of International Marketing for
Paradyne Corporation, a Largo, Florida based, publicly held distributor of data
communications equipment.
JERRY T. KENDALL, age 53, was appointed to Board of Director membership as
of March 3, 1994. From 1977 to 1987, he held management positions, including
Senior Vice President Sales, Executive Vice President and COO and President of
Paradyne Corporation. From 1988 to 1989 he was President of Lasergate Systems
and from 1990 to 1993 he was Senior Vice President of Security Tag Systems.
Mr. Kendall is presently Vice President of Sales and Service North American
Retail for Sensormatic Electronics Corporation in Deerfield Beach, Florida.
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IV. Executive officers of the Registrant
Name Age Position
- ---- --- --------
Robert S. Wiggins 66 Chief Executive Officer,
Chief Financial Officer,
Chairman of the Board
Raymond H. Legatti 64 President
Raymond B. Wood 61 Senior Vice President of
Government Operations and
Marketing
ROBERT S. WIGGINS, age 66, has served as Chairman of the Board, Chief Executive
Officer and Director since March 1988. Additional biographical data on Mr.
Wiggins may be found in Section III above.
RAYMOND H. LEGATTI, age 64, served as the Company's President since the
Company's inception in 1981. Additional biographical data on Mr. Legatti may
be found in Section III above.
RAYMOND B. WOOD, age 61, has served as the Senior Vice President of Government
Operations and Marketing since the Company's inception in 1981. Additional
biographical data on Mr. Wood may be found in Section III above.
V. Ratification of Selection of Independent Auditors
The Company's Board of Directors has selected the independent certified
public accounting firm of KPMG Peat Marwick LLP to perform audit and related
functions with respect to the Company's accounts for its fiscal year ending
March 31, 1997. This is the thirteenth year that the firm has been selected to
perform these services for the Company.
The Board recommends ratification of its selection of KPMG Peat Marwick
LLP as the Company's auditors. Should its selection be ratified, the Board
reserves the right to discharge and replace such firm of auditors without
further shareholder approval if it deems such a change to be in the best
interests of the Company.
One or more representatives of KPMG Peat Marwick LLP may be in attendance
at the forthcoming annual shareholder meeting to respond to any appropriate
questions which may be raised by shareholders and to make any statement which
they may care to address to the attending shareholders.
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VI. Proposal to Approve the 1996 Stock Option Performance Plan
Introduction
On July 1, 1996, the Board of Directors of the Company approved, subject
to shareholder approval, the 1996 Stock Option Performance Plan (the "1996
Plan"). Unless terminated earlier by the Board of Directors, the 1996 Plan
will terminate on June 30, 2006. Unless the 1996 Plan is approved by
shareholders, any stock options granted under the 1996 Plan shall be subject to
immediate forfeiture.
The purpose of the 1996 Plan is to further the long-term stability and
financial success of the Company by retaining key management employees of the
Company who are able to contribute to the financial success of the Company. It
is believed that ownership of Common Stock will stimulate the efforts of those
employees upon whose judgment, interest and efforts the Company will be largely
dependent upon for the successful growth of its business. It is also believed
that awards granted to such employees under the 1996 Plan will further the
identification of those employees' interests with those of the Company's
shareholders by including specific performance criteria, the attainment of
which will enable such employees to accelerate the exercise of their options.
No current executive officers or directors of the Company are eligible to
participate in this Plan.
The principal features of the 1996 Plan are summarized below. This
summary is qualified by reference to the complete text of the 1996 Plan, a copy
of which is attached as Exhibit A.
General
The 1996 Plan authorizes the reservation of an aggregate of 400,000
authorized, but unissued, shares of Common Stock to be available for awards
under the Plan. For purposes of determining the number of shares that are
available for awards under the 1996 Plan, such number shall, if permissible
under Rule 16b-3 promulgated under Section 16(b) of the Securities Exchange Act
of 1934 ("Rule 16b-3"), include the number of shares surrendered by a
participant as payment upon exercise of an option or retained by the Company in
payment of applicable withholding taxes and any shares that are forfeited,
expire or terminate prior to their exercise. All shares will be issued
pursuant to a stock award and will consist of authorized but unissued shares or
shares which have been issued and reacquired by the Company as treasury shares.
Adjustments will be made in the number of shares which may be issued under
the 1996 Plan in the event of a future stock dividend, stock split or similar
pro rata change in the number of outstanding shares of Common Stock or the
future creation or issuance to shareholders generally of rights, options or
warrants for the purchase of Common Stock.
The Common Stock is traded on National Market System of the NASDAQ inter-
dealer quotation system, and on March 31, 1996, the closing price was $4.6875
per share.
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Eligibility
All present employees of the Company, exclusive of its current executive
officers, who hold positions with senior management responsibilities are
eligible to receive incentive awards under the 1996 Plan. The Company
estimates that it has approximately eight such employees at the present time.
Option Grants
On July 1, 1996 the Board of Directors approved the grant of incentive
stock options under the 1996 Plan to eight members of senior management,
subject to approval of the Company shareholders at its annual meeting to be
held on August 22, 1996. Each option entitles the holder to exercise up to an
aggregate total of 50,000 shares of the Company's Common Stock after such
option has been held for a period of ten years, less one day, the exercise of
which may be accelerated upon the Company's attainment of the following
performance conditions:
A. Performance Conditions for Accelerated Vesting:
Shares Carryover
Vested Early if Shares for
Fiscal Year Ended Revenue(4) Net Income(4) Targets Met Early Vesting
- ----------------- ------- ---------- ----------- -------------
March 31, 1997 $24,000,000 $2,600,000 20,000 17,000 (1)
March 31, 1998 35,000,000 3,800,000 20,000 15,000
or
17,000
March 31, 1999 50,000,000 5,400,000 10,000 -0- (2)(3)
(1) If the performance goals for 1997 are not met, then 17,000 of the 20,000
option shares eligible for early vesting are carried forward to 1998. In the
event that the performance goals for 1997 and 1998 are not met, then 32,000 of
the 40,000 option shares eligible for early vesting in 1997 and 1998 are
carried forward to 1999. If the performance goals for 1997 are met but missed
in 1998, then 17,000 of the 20,000 option shares are carried forward to 1999.
Any option shares that are not carried forward become subject again to the ten
year vesting schedule.
(2) If none of the performance goals for 1997, 1998 or 1999 are met, but
fiscal 1999 revenues and net income are each within 10% of the 1999 targets,
then each holder shall be entitled to accelerate the exercise of up to 25,000
shares, and the remaining 25,000 shares are again made subject to the ten year
vesting schedule.
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(3) If none of the performance goals for 1997, 1998 or 1999 are met and
revenues and net income for 1999 each fail to attain the within 10% target
noted above, then all 50,000 shares remain eligible for full vesting under the
ten year vesting schedule.
(4) Under the terms of the option agreements, the net income and revenues
figures will include income from the Company's normal operations and will
exclude significant acquisitions of assets or operations of another entity.
B. Examples. The following examples illustrate the vesting and
performance conditions set forth above:
Shares
Accelerated Shares Shares
if Accelerated Accelerated
Shares Performance if if
Accelerated Goal is Met Goal is Met Goal is Met
if in Second in Second First and
Performance and Third Year(Not Second Years
Goal is Met Years(Not First or (Not Third
Year Ended Each Year First Year) Third Year) Year
---------- --------- ----------- ----------- ----
March 31, 1997 20,000 -0- -0- 20,000
March 31, 1998 20,000 37,000 37,000 20,000
March 31, 1999 10,000 10,000 -0- -0-
Shares
Shares Accelerated Shares Shares
Accelerated if Goals Met Accelerated Accelerated
if Goals Met in in First if If Goals
First Year and Year(not Goals Met Not Met
Third Year(Not Second or in Third in any
Year Ended Second Year Third Year) Year Only Year
---------- ----------- ----------- --------- ----
March 31, 1997 20,000 20,000 -0- -0-
March 31, 1998 -0- -0- -0- -0-
March 31, 1999 27,000 -0- 42,000 -0- or
25,000 (2)(3)
The terms "operating revenues" and "net income" are defined in accordance
with annual audited financial statements prepared on behalf of the Company.
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C. Vesting and Forfeiture of Shares. Notwithstanding the Company's
failure to attain one or more of the accelerated vesting conditions set forth
above, each option granted under the 1996 Plan shall become 100% vested after
the grantee has held the option for a period of ten years less one day while
continuing to perform his management duties for the Company. Once the Option
has been held for a period of ten years less one day, the option will become
completely vested and may be exercised on the date that the option terminates.
Upon the termination of employment of a grantee, any Option shares that have
become fully vested may be exercised on the day of termination of employment.
Thereafter, all Options shall terminate. Upon the disability or death of a
grantee, any Option shares that have become fully vested may be exercised
within a period of twelve months from the date of death or disability in
accordance with the terms of the applicable Stock Option Agreement.
Administration
The 1996 Plan provides for administration by the Compensation Committee of
the Board of Directors or such other committee of the Board as may be appointed
from time to time (the "Committee"). No member of the Committee may
participate in the Plan. The Committee is comprised of not less than two
directors, each of whom is a "disinterested person", as defined in Rule 16b-
3(c)(2)(i) under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"). The Committee will have full and final authority to interpret the Plan,
establish rules and regulations for its operation, select employees of the
Company to receive awards, and determine the form, amount and other terms and
conditions of each award. The Committee has been authorized to approve grants
and administer the 1996 Plan under the applicable provisions of Rule 16b-3
under the Exchange Act.
Stock Options
Options to purchase shares of Common Stock granted under the 1996 Plan are
intended to be classified as incentive stock options. Incentive stock options
qualify for favorable income tax treatment under Section 422 of the Internal
Revenue Code of 1986, as amended, (the "Code"), while nonstatutory stock
options do not. The exercise price of an incentive stock option may not be
less than 100% (or, in the case of an incentive stock option granted to a 10%
shareholder, 110%), of the fair market value of the Common Stock on the date of
the option grant. The aggregate fair market value of the Company's Common
Stock that is issuable upon the exercise of an incentive stock option,
determined as of the date of grant, and that may be exercisable for the first
time in any calendar year is limited to $100,000. Any option shares that
exceed the $100,000 limitation will be deemed to be a nonstatutory option under
the 1996 Plan.
The Committee will determine the period during which any options awarded
may be exercised; provided, however, that incentive stock options may not be
exercised more than ten years after the date of grant of such option. The
Committee may grant options with a provision that an option not otherwise
exercisable will become exercisable upon a "change of control," as defined in
the 1996 Plan. In general, "change of control" means the acquisition of 51% or
more of the Common Stock or voting securities by a person or group and certain
changes in the membership of the Board of Directors.
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Awards will be evidenced by a written agreement containing such terms,
conditions, restrictions and/or limitations covering the grant of the award as
are not inconsistent with the 1996 Plan.
Transferability of Awards
All options and rights to receive incentive stock awarded under the 1996
Plan are generally not transferable other than by will or by the laws of
descent and distribution.
Amendment of the 1996 Plan and Awards
The Board may amend the 1996 Plan in such respects as it deems advisable;
provided that, if and to the extent required by Rule 16b-3, the shareholders of
the Company must approve any amendment that would (i) materially increase the
benefits accruing to participants under the 1996 Plan or (ii) materially
increase the number of shares of Common Stock that may be issued under the 1996
Plan or (iii) materially modify the requirements of eligibility for
participation in the 1996 Plan. Awards granted under the 1996 Plan may be
amended with the consent of the recipient so long as the amended award is
consistent with the terms of the 1996 Plan.
Federal Income Tax Consequences
A. Incentive Stock Options.
Under current U.S. federal tax law, the following is a brief summary of
the U.S. federal income tax consequences generally arising with respect to
awards of incentive stock options under the 1996 Plan.
A participant that is granted an incentive stock option will not recognize
any taxable income at the time of the grant of the option or at the time of its
exercise. If the participant disposes of the shares acquired pursuant to an
incentive stock option more than two years after the date of grant and more
than one year from the date of exercise, any gain or loss realized on a
subsequent disposition of the shares will be treated as a long-term capital
gain or loss, and the Company will not be entitled to any deduction for federal
income tax purposes.
However, the amount by which the fair market value of the shares at the
time of exercise exceeds the exercise price will be treated as an item
includable in the tax base upon which the "alternative minimum tax" may be
imposed. Assuming there is no disqualifying disposition, neither the grant nor
the exercise of an incentive stock option will produce a tax deduction for the
Company.
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If the shares purchased by the key employee pursuant to the exercise of an
incentive stock option are disposed of after the expiration of two years from
the date of the grant of the option and after one year from the date of
exercise, the gain or loss on the sale, based upon the difference between the
amount realized and the exercise price, will constitute long-term capital gain
or loss. Under current law, incentive stock options can result in the deferral
of income to the date the shares are sold at a rate significantly more
favorable than that applicable to non-statutory or other types of deferred
compensation. Capital losses may be deducted in full against capital gains but
only to a limited extent against ordinary income.
If the shares purchased by a key employee pursuant to the exercise of an
incentive stock option are sold within two years after the date of the grant of
the incentive stock option, or within one year after such shares are
transferred to the holder and the disqualifying disposition is deemed to be a
taxable disposition, so much of the gain as does not exceed the difference
between the exercise price and the lesser of the fair market value of the
shares on the date of exercise or the amount realized on the date of sale will
be taxable as compensation to the key employee. A tax deduction will be
allowable to the Company in an amount equal to the compensation recognized by
the key employee, provided such amount constitutes reasonable compensation to
the key employee and otherwise complies with Section 162(m) of the Code. If
the amount realized by the holder upon such disqualifying disposition exceeds
the fair market value of such shares on the exercise date, such excess will be
deemed to be short term capital gain. Conversely, if the option prices exceeds
the amount realized upon such disqualifying disposition, the difference will be
short term capital loss.
B. Nonstatutory Stock Options.
An employee will not incur federal income tax when he or she is granted a
nonstatutory stock option, Upon exercise of a nonstatutory stock option, an
employee generally will recognize compensation income, which is subject to
income tax withholding by the Company, equal to the difference between the fair
market value of the Common Stock on the date of the exercise and the option
price. The Committee has authority under the 1996 Plan to include provisions
allowing the employee to elect to have a portion of the shares he would
otherwise acquire upon exercise of an option withheld to cover his withholding
tax liabilities. The election will be effective only if approved by the
Committee and made in compliance with other requirements set forth in the 1996
Plan.
An employee may deliver shares of Common Stock instead of cash to acquire
shares under an incentive stock option or nonstatutory stock option without
having to recognize taxable gain (except in some cases with respect to
"statutory option stock") on any appreciation in value of the shares delivered.
"Statutory option stock" is stock acquired upon the exercise of incentive stock
options. However, if an employee delivers shares of "statutory option stock"
in satisfaction of all, or any part, of the exercise price under an incentive
stock option, and if the applicable holding periods of the "statutory option
stock" have not been met he will be considered to have made a taxable
disposition of the "statutory option stock."
-13-
Assuming the employee's compensation is otherwise reasonable and that the
new statutory limitations on compensation deductions by publicly held companies
imposed by Section 162(m) of the Code do not apply, the Company usually will be
entitled to a business expense deduction at the time and in the amount that the
recipient of a stock award recognizes ordinary compensation income. No
compensation deduction may be taken by the Company when a grantee exercises an
incentive stock option unless the employee disposes of Common Stock received
upon exercise thereof in violation of the holding period requirements imposed
by the Internal Revenue Code.
The foregoing discussion is not intended to be a complete description of
the federal income tax aspects of incentive stock options and non-qualified
stock options under the Code and is qualified by administrative and judicial
interpretations of applicable provisions of the Code, as amended from time to
time.
Vote Required
The adoption of the 1996 Stock Option Performance Plan requires the
affirmative vote of the holders of a majority of the shares present or
represented by properly executed and delivered proxies and entitled to vote at
an Annual Meeting.
THE BOARD OF DIRECTORS BELIEVES THAT APPROVAL OF THE
1996 STOCK OPTION PERFORMANCE PLAN IS IN THE
BEST INTEREST OF ALL SHAREHOLDERS AND, ACCORDINGLY,
RECOMMENDS A VOTE FOR THE ADOPTION OF THE PROPOSED
1996 STOCK OPTION PERFORMANCE PLAN.
-14-
VII. Executive Compensation
The tables that follow set forth for the years ended March 31, 1994, 1995
and 1996 all compensation paid to the Company's Chairman of the Board and Chief
Executive Officer and each of the other four most highly compensated executive
officers of the Company whose compensation exceeds $100,000. These tables
include a Summary Compensation Table, Option Grants and Aggregated Option
Exercises and Option Values table.
A. Summary Compensation Table
Long-Term
Annual Compensation (2)
Compensation (1) Awards
------------ ------
Name and Principal Stock All Other
Position Year Salary($) Bonus Options (#) Compensation
- -------- ---- --------- ----- ----------- ------------
Robert S. Wiggins 1996 225,000 -0- -0- 250 (3)
Chairman of the 1995 210,417 -0- 8,334 200 (3)
Board and CEO 1994 200,000 -0- -0- 200 (3)
Raymond H. Legatti 1996 106,425 -0- 1,700 250 (3)
President 1995 99,000 -0- 2,500 200 (3)
1994 90,000 -0- 2,500 200 (3)
H. Jay Hill, Senior 1996 93,750 (5) 13,335 -0- 15,534 (4)
Vice President of 1995 62,500 (6) 20,003 66,667 7,008 (4)
Sales and Marketing 1994 -0- -0- -0- -0-
(1) The column for "Other Annual Compensation" has been omitted because there
is no compensation required to be reported in such column. The aggregate
amount of perquisites and other personal benefits provided to the Company's
Chairman of the Board and other named executives did not exceed the lesser of
$50,000 or 10% of the total of annual salary and bonus of such officer.
(2) The columns "Restricted Stock Award" and "LTIP Payouts" have been deleted
because the Company does not currently offer either type of awards.
(3) The amount indicated consists of a matching contributions made by the
Company to its 401(k) Profit Sharing Plan.
(4) The amount indicated consists of non-qualified moving expenses and/or
temporary living expenses.
(5) Mr. Hill was an employee for the first 9 months of fiscal year 1996 and
therefore only 9 months of information is presented.
(6) Mr. Hill was an employee for the final 7 months of fiscal year 1995 and
therefore only 7 months of information is presented.
-15-
B. Stock Option Grants
The following table discloses, for the Company's Chairman of the Board and
the other named executives, any grants of stock options made by the Company
during the fiscal year ended March 31, 1996.
Option Grants
in the Fiscal Year Ended March 31, 1996
Individual Grant
Number of Percent of
Securities Total Options
Underlying Granted to
Option Employees in Exercise Expiration
Name Granted Fiscal Year Price Date
- ---- ------- ----------- ----- ----
Robert S. Wiggins -0-
Raymond H. Legatti 1,700 (1) 4.3% $5.4375 (2) August 23,
2005
H. Jay Hill -0-
(1) Mr. Legatti was granted a nonqualified stock option on August 23, 1995.
One third of such option shares may be exercised commencing one year after the
effective date of the grant, up to 66-2/3% of such shares become exercisable
commencing on the second anniversary date of the option grant, and 100% of such
shares become fully exercisable commencing on the third anniversary date of
such grant.
(2) The exercise price may be paid in cash, shares of Common Stock valued at
fair market value on the date of exercise or pursuant to a cashless exercise
procedure under which the optionee provides irrevocable instructions to a
brokerage firm to sell a portion of the exercised shares and remits to the
Company, out of the sale proceeds, an amount equal to the exercise price plus
all applicable withholding taxes.
-16-
C. Aggregated Option Exercised
The following table discloses, for the Company's Chairman of the Board and
the other named executives, the number of options exercised, the number of
unexercised options, and the value of those unexercised options for the fiscal
year ended March 31, 1996.
Aggregated Option Exercises in Fiscal Year Ended
March 31, 1996 and Fiscal Year-End Option Values
Aggregated Option Exercises in Fiscal Year Ended
March 31, 1996 and Fiscal Year-End Option Values
Value of
Unexercised
Number of In-the-
Unexercised Money
Options at Options at
Fiscal Year- Fiscal Year-
End (#) End ($) (2)
Shares
Acquired on Value Exercisable/ Exercisable/
Name Exercise(#) Realized($)(1)Unexercisable Unexercisable
---- ----------- ----------- ------------- -------------
Robert S. Wiggins -0- -0- 32,144/ 113,174/0 (3)
8,334
Raymond H. Legatti 8,334 32,815 42,772/ 150,570/0 (3)
1,966
H. Jay Hill 11,111 7,291 -0- 0/36,456 (3)
(1) An individual option holder, upon exercise of an option, does not receive
cash equal to the amount set forth in the Value Realized column of this table.
The amount set forth above reflects the increase in the price of the Company's
Common Stock from the date of grant to the price of the Company's Common Stock
on the option exercise date (i.e. $4.6875 per share on March 31, 1996),
multiplied by the applicable number of options. No cash is realized until the
shares received upon exercise of an option are sold.
(2) Options are "in-the-money" at the fiscal year end if the fair market value
of the underlying securities on such date exceeds the exercise price of the
option.
(3) These amounts represent the difference between the exercise price of such
stock options and the closing price of the Company's stock on March 31, 1996.
-17-
D. Director Compensation
Although from time to time the Company has granted non-qualified stock
options and, in some instances, incentive stock options to certain Directors,
no cash compensation or fees for attending meetings of the Board are paid to
Directors.
VIII.Proposals of Security Holders
Proposals of Security Holders intended to be presented at the Annual
Meeting of Shareholders of the Company to be held in August 1997, in order to
be included in the Company's proxy statement and form of proxy relating to such
meeting, must be received by the Company, at its executive offices, not later
than March 1, 1997.
IX. Vote Required
A bare majority (2,659,452 shares) of the Company's outstanding common
capital stock will be necessary to constitute a quorum for the transaction of
business at the annual meeting, and each issue to be presented to the
shareholders for action will require the vote of a majority of the shares
represented at the meeting, either in person or by valid proxy. Because
members of the Board of Directors currently are deemed to beneficially own
554,119 of the Company's 5,318,902 shares of outstanding common stock, (10.1%),
approval of the Board's nominees for the Board of Directors and approval of
other actions recommended in this proxy are probable but are not assured.
X. Compliance with Section 16(a) of The Exchange Act
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
that the Company's officers and directors, and persons who own more than ten
per cent of a registered class of the Company's Common Stock, file initial
statements of beneficial ownership (Form 3), and statements of changes in
beneficial ownership (Forms 4 or 5), of Common Stock and other equity
securities of the Company with the Securities and Exchange Commission ("SEC").
Officers, directors and greater than ten per cent shareholders are required by
SEC regulations to furnish the Company with copies of all such forms they file.
To the best of the Company's knowledge and belief, based solely on its
review of the copies of such forms received that include written
representations from certain reporting persons that no additional forms were
required to be filed by such persons, the Company believes that all filing
requirements applicable to its officers, directors and greater than ten per
cent beneficial owners were complied with during the recent fiscal year.
-18-
XI. Other Matters
The management has no information that any other matter will be brought
before the Annual Meeting. If, however, other matters are presented, it is the
intention of the persons named in the accompanying form of proxy to vote the
proxy in accordance with their best judgment, discretionary authority to do so
being included in the proxy.
XII. Requests for Copies of Form 10-K
THE COMPANY WILL MAIL, WITHOUT CHARGE, TO ANY SHAREHOLDER OF RECORD OF COMMON
STOCK AS OF JULY 5, 1996, AND UPON WRITTEN REQUEST, A COPY OF THE COMPANY'S
ANNUAL REPORT ON FORM 10K, INCLUDING FINANCIAL STATEMENTS, SCHEDULES, AND LISTS
DESCRIBING ALL EXHIBITS THERETO. REQUESTS SHOULD BE ADDRESSED TO:
TECHNOLOGY RESEARCH CORPORATION
5250 140th AVENUE NORTH
CLEARWATER, FLORIDA 34620
ATTENTION: IDA C. LARSEN
SUCH INFORMATION SHALL ALSO BE MAILED TO ANY REQUESTING INDIVIDUAL NOT A
SHAREHOLDER OF RECORD WHO REPRESENTS IN WRITING THAT HE IS A BENEFICIAL OWNER
OF THE CORPORATION'S COMMON STOCK AS OF JULY 5, 1996.
-19-
TECHNOLOGY RESEARCH CORPORATION
APPENDIX A - PROXY CARD
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS-TO BE HELD AUGUST 22, 1996
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
Each of the undersigned, as the owner(s) as of July 5, 1996 of common stock of
Technology Research Corporation, a Florida corporation(the "Company") hereby
appoints Robert S. Wiggins, Chairman of the Board and Scott J. Loucks, and each
of them, jointly and severally, as attorney-in-fact and proxy, each with full
power of substitution for the limited purpose of voting all shares of the
common stock owned by the undersigned at the Annual Meeting of Shareholders of
the Company to be held at The Summit Conference Center, 13575 58th Street,
North, Clearwater, Florida(Rubin Icot Center, Ulmerton Road) at 2:30 P.M.,
Eastern Daylight Savings Time, August 22, 1996, and at any adjournments
thereof, but only in accordance with the following instructions:
If you are unable to attend the meeting personally, the Board of Directors
requests that you complete and mail the proxy to insure adequate shareholder
representations at the Meeting. As this proxy is being solicited by the Board
of Directors, you are encouraged to contact any member of the incumbent Board
if you have any question concerning this proxy or the matters referenced
herein.
(Continued on reverse side)
<TABLE>
<S> <C> <C>
1. Election of Directors Nominees: Robert S. Wiggins, Raymond H. Legatti, 2. Approval of KPMG Peat Marwick Certified
Raymond B. Wood, Edmund F. Murphy, Jr., Public Accountants, as independent
FOR all WITHHOLD Jerry T. Kendall auditors of the company for operating
nominees listed AUTHORITY year ending March 31, 1997
to the right to vote for all (Instruction: To withhold authority to vote
(except as marked nominees listed for any individual nominee listed above,
to the contrary) to the right strike a line through the nominee's name FOR AGAINST ABSTAIN
___ ___ ___ ___ ___
3. Approval of the 1996 Stock 4. In accordance with their best This proxy, when properly executed, will be
Option Performance Plan. judgment on any other matter voted in the manner directed herein by the
that may properly be voted undersigned shareholder(s). If none of the
FOR AGAINST ABSTAIN upon at the meeting. choices specified in Proposals 1, 2 and 3
shall be marked, the name proxy is
___ ___ ___ authorized and directed to vote FOR the
proposals as described therein and in
accordance with that certain Proxy
Statement dated July 12, 1996
Dated: _____________________________, 1996
__________________________________________
(Signature)
__________________________________________
(Printed Name)
If signing in a fiduciary or representative
capacity, please give full title as such.
If signing as a corporate officer, please
give your title and full name of the
corporation; or if ownership is in more
than one name, each additional owner should
sign.
PLEASE MARK, SIGN, DATE AND RETURN THIS
PROXY PROMPTLY USING THE ENCLOSED ENVELOPE.
</TABLE>
EXHIBIT A
TECHNOLOGY RESEARCH CORPORATION
1996 STOCK OPTION PERFORMANCE PLAN
TECHNOLOGY RESEARCH CORPORATION (the "Company") hereby adopts this
Technology Research Corporation 1996 Stock Option Performance Plan.
1. Purpose. The purpose of the Technology Research Corporation 1996
Stock Option Performance Plan (the "Plan") is to further the long term
stability and financial success of the Company by retaining key management
employees who can contribute to the financial success of the Company through
the use of stock incentives. It is believed that ownership of Company Stock
will stimulate the efforts of those employees upon whose judgment, interest and
efforts the Company will be largely dependent for the successful conduct of its
business. It is also believed that awards granted to such employees under
this Plan will also further the identification of those employees' interests
with those of the Company's shareholders. It is intended that each option
granted under the Plan shall constitute an "incentive stock option" within the
meaning of that term as contained in Section 422 of the Internal Revenue Code
of 1986.
The Plan has been adopted by the Board of Directors of the Company,
subject to the approval of the Company's shareholders at its 1996 Annual
Meeting of Shareholders. The Plan is intended to conform to the provisions
of Securities and Exchange Commission Rule 16b-3 ("Rule 16b-3").
2. Definitions. As used in the Plan, the following terms have the
meanings indicated:
(a) "Act" means the Securities Exchange Act of 1934, as amended.
(b) "Applicable Withholding Taxes" means the aggregate amount of federal,
state and local income and payroll taxes that the Company is required to
withhold in connection with any exercise of an Option or payment with respect
to Incentive Stock.
(c) "Award" means the award of an Incentive Stock Option or Nonstatutory
Option under the Plan.
(d) "Beneficiary" means the person or persons entitled to receive a
benefit pursuant to an Award upon the death of a Participant.
(e) "Board" means the Board of Directors of the Company.
A-1
(f) "Change of Control" means:
(1) The acquisition by any unrelated person of beneficial ownership
(as that term is used for purposes of the Act) of 51% or more of the then
outstanding shares of common stock of the Company or the combined voting power
of the then outstanding voting securities of the Company entitled to vote
generally in the election of directors. The term "unrelated person" means any
person other than (1) the Company, (2) an employee benefit plan or trust of the
Company, or (3) a person who acquires stock of the Company pursuant to an
agreement with the Company that is approved by the Board in advance of the
acquisition, unless the acquisition results in a Change of Control pursuant to
subsection (ii) below. For purposes of this subsection, a "person" means an
individual, entity or group, as that term is used for purposes of the Act.
(2) Any tender or exchange offer, merger or other business
combination, sale of assets or contested election, or any combination of the
foregoing transactions, pursuant to which the persons who were directors of
the Company before such transaction cease to constitute a majority of the Board
of Directors of the Company or any successor to the Company.
(g) "Code" means the Internal Revenue Code of 1986, as amended.
(h) "Committee" means the committee appointed to administer the Plan.
(i) "Company" means Technology Research Corporation.
(j) "Company Stock" means common stock of the Company. In the event of a
change in the capital structure of the Company, the shares resulting from such
a change shall be deemed to be Company Stock within the meaning of the Plan.
(k) "Corporate Change" means a consolidation, merger, dissolution or
liquidation of the Company, or a sale or distribution of assets or stock (other
than in the ordinary course of business) of the Company,
(l) "Date of Grant" means the date as of which an Award is made by the
Committee.
(m) "Disability" or "Disabled" means, as to an Incentive Stock Option, a
Disability within the meaning of Section 22(e)(3) of the Code.
(n) "Fair Market Value" means (i) if the Company Stock is traded on an
exchange, the mean of the highest and lowest registered sales prices of the
Company Stock on the exchange on which the Company Stock generally has the
greatest trading volume, or (ii) if the Company Stock is traded in the over-
the-counter market, the mean between the closing bid and asked prices as
reported by NASDAQ. Fair Market Value shall be determined as of the applicable
date specified in the Plan or, if there are no trades on such date, the value
shall be determined as of the last preceding day on which the Company Stock is
traded.
A-2
(o) "Incentive Stock Option" means an Option intended to meet the
requirements of, and qualify for favorable Federal income tax treatment under
Section 422 of the Code.
(p) "Insider" means a person subject to Section 16(b) of the Act.
(q) "Nonstatutory Stock Option" means an Option that does not meet the
requirements of Section 422 of the Code, or that is otherwise not intended to
be an Incentive Stock Option and is so designated.
(r) "Option" means a right to purchase Company Stock granted under the
Plan, at a price determined in accordance with the Plan.
(s) "Participant" means an employee who receives an Award under the Plan.
(t) "Rule 16b-3" means Rule 16b-3 of the Act. A reference in the Plan to
Rule 16b-3 shall include a reference to any corresponding subsequent rule or
any amendments to Rule 16b-3 enacted after the effective date of the Plan.
(u) "10% Shareholder" means a person who owns, directly or indirectly,
stock possessing more than 10% of the total combined voting power of all
classes of stock of the Company. Indirect ownership of stock shall be
determined in accordance with Code section 424(d).
(v) "Vested Option" means an option which a Participant is entitled to
exercise after holding such option for a period of ten years, less one day,
unless he is entitled to accelerate the exercise of such option in accordance
with the terms of an applicable Stock Option Agreement.
3. Stock. The shares which may be issued and delivered upon exercise of
options granted under the Plan shall be shares of the Company's authorized but
unissued or issued and reacquired common stock, $.51 par value per share (the
"Shares"). The aggregate number of Shares which may be issued on exercise of
all options granted under the Plan shall not exceed 400,000 Shares. Shares
allocable to Options granted under the Plan that expire or otherwise terminate
unexercised and shares that are forfeited pursuant to vesting restrictions on
Options awarded under the Plan may again be subjected to an Award under this
Plan. For purposes of determining the number of shares that are available for
Awards under the Plan, such number shall, if permissible under Rule 16b-3,
include the number of shares surrendered by a Participant or retained by the
Company in payment of Applicable Withholding Taxes.
A-3
4. Shareholder Approval. Subject to the approval of the holders of
Company Stock voted, in person or by proxy, at the 1996 Annual Meeting of
Shareholders of the Company, this Plan shall be effective as of July 1, 1996.
5. Eligibility. Any member of senior management of the Company who, in
the judgment of the Committee, has contributed or can be expected to contribute
to the profits or growth of the Company shall be eligible to receive awards
under the Plan. The Committee shall have the power and complete discretion to
select eligible employees to receive Awards and to determine for each employee
the terms, conditions and nature of the Award and the number of shares to be
allocated to each employee as part of the Award.
6. Stock Options. Incentive Stock Options and Nonstatutory Stock Options
may be granted under the Plan in such numbers, at such prices and on such terms
and conditions as the Committee shall determine, provided that such options
shall comply with and be subject to the following terms and conditions:
(a) Annual Grant Limitation.
No employee shall be granted an Incentive Stock Option to the extent that
the aggregate Fair Market Value of Shares made subject to such option
(determined as of the date such option is granted) which are exercisable for
the first time by a key employee during any one calendar year exceeds the sum
of $100,000 (the "Limitation Amount"). Incentive Stock Options granted under
the Plan and all other plans of the Company or affiliated entity of the Company
shall be aggregated for purposes of determining whether the Limitation Amount
has been exceeded. The Committee may impose such conditions as it deems
appropriate on an Incentive Stock Option to ensure that the foregoing
requirement is met. If any Incentive Stock Options that are granted under the
Plan have an aggregate Fair Market Value that exceeds the Limitation Amount,
the excess Options will be treated as Nonstatutory Stock Options to the extent
permitted by law.
(b) Option Agreement.
All options granted under the Plan shall be evidenced by a written option
agreement stating the number of shares capable of being purchased upon its
exercise and otherwise in such form as the Committee may periodically approve
and containing such terms and conditions, including the period of exercise and
whether in installments or otherwise, as shall be contained therein, which need
not be the same for all options.
(c) Date of Grant.
The date on which an option grant is approved by the Committee shall be
considered the date on which such option is granted (the "Date of Grant"), and
shall be reflected in the option agreement. All options under this Plan shall
be granted within 10 years of the date this Plan is adopted.
A-4
(d) Option Price.
Each option agreement shall state the purchase price of each Share capable
of being acquired upon exercise of the option, which price shall be determined
by the Committee with respect to each option granted but shall not be less than
ONE HUNDRED PERCENT (100%) of the fair market value of each such Share on the
Date of Grant (or, in the case of any optionholder owning more than ten percent
of the voting power of all classes of stock of the Company, not less than ONE
HUNDRED AND TEN PERCENT (110%) of the Fair Market Value of the Shares on the
Date of Grant. In the event that Share prices are not published for the Date
of Grant, such value shall be determined by calculating the weighted average of
the closing prices or the mean between such bid and asked prices, as
applicable, on the nearest trading dates occurring before and after the
valuation date, in accordance with such rules as may be established by the
Committee.
(e) Option Exercise.
All options granted under the Plan shall be deemed to be Vested Options
after the holder has held such option for a period of ten years, less one day,
and shall become exercisable at such times and in such installments (which may
be cumulative) as the Committee shall provide in the terms of each individual
option. No option may be exercised until such Option has been held for at
least one year; subject, however, to the right to accelerate the exercise
thereof in accordance with the terms of an applicable Stock Option Agreement.
All Vested Options and Options that have become exercisable from time to time
may be exercised in whole or in part in accordance with the terms of the
applicable Stock Option Agreement; provided, however, that the Committee shall
be authorized to require that any partial exercise be with respect to a minimum
number of Shares.
(f) Forfeiture or Exercise of Option.
In the event that a Participant ceases employment with the Company, all
options shall be forfeited, or be exercised, as follows:
(1) In the event of a Participant's termination of employment, the
Participant's Vested Options shall be forfeited immediately unless such options
are exercised on the date of termination.
(2) Upon the disability of a Participant, the Participant's Vested
Options shall be exercisable within twelve months (or such shorter period as
the Code may require) of the Participant's date of disability.
(3) If the Participant dies while in the employment of the Company,
the Participant's estate, personal representative, or designated beneficiary
shall have the right to exercise such Vested Options within one year of the
Participant's death (or such shorter period as the Code or the terms of the
applicable Stock Option Agreement may require).
(4) All non-vested Options shall be forfeited effective as of the
date of termination of employment.
A-5
(g) Mechanics of Exercise.
A person entitled to exercise any portion of an option granted under the
Plan may exercise the same at anytime, either in whole or in part, by
delivering written notice of exercise to the office of the Secretary of the
Company or to such other location as may be designated by the Committee,
specifying therein the number of Shares with respect to which the option is
being exercised, which notice shall be accompanied by payment in full of the
purchase price of the Shares being acquired. Payment may be made wholly or
partly in cash or in shares of Company Stock already owned by the optionholder
or by authorizing the Company to retain a sufficient number of Shares which
would otherwise be issuable upon exercise of the option, valued for purposes
of such payment as of the date of exercise. Subject to the optionholder's
compliance with Section 16(b) of the Exchange Act, the Committee may also
permit the holder to simultaneously exercise an option and sell the Shares
thereby acquired pursuant to a "cashless exercise" arrangement and accept
payment from a broker-dealer selected by and approved of in all respects by the
Committee, and use the proceeds from such sale as payment of the exercise price
of such options. No Shares shall be issued until full payment therefore has
been made in the manner set forth above or in any combination of the methods
set forth above, in each case to the extent approved by the Committee. If any
adjustment has been effected so as to establish a right by an optionholder to
acquire a fractional share, such fraction shall be rounded upward to the next
whole number.
(h) Expiration of Option.
Each option granted under the Plan shall expire and all rights to purchase
Shares thereunder shall cease ten years after the Date of Grant or on such
prior date as may be fixed by the Committee and specified in the subject option
agreement; provided that any option granted to a key employee owing more than
ten percent of the voting power of all classes of stock of the Company shall
similarly expire five years after the Date of Grant.
(i) Investment Purpose.
Unless the Committee chooses to register or qualify the Shares under the
Securities Act of 1933, as amended (the "Act"), pursuant to the provisions set
forth in Section 11(g) below, each option is granted on the express condition
that the purchase of Shares upon an exercise thereof shall be made for
investment purposes only and not with a view to their resale or further
distribution unless such Shares, at the time of their issuance and delivery,
are registered under the Securities Act, or, alternatively, at some time
following such issuance their resale is determined by counsel for the Company
to be exempt from the registration requirements of the Act and of any other
applicable law, regulation or ruling. Any Shares so registered shall be
promptly listed with each securities exchange through which any class of the
Company's capital stock or other securities are traded.
A-6
(j) Compliance with Exchange Act.
With respect to Insiders that are subject to the Act, all transactions
under this Plan, including the exercise of Options, delivery of Shares in
payment of the exercise prior to sale of the Company Stock purchased upon the
exercise of such Options are intended to comply with all applicable conditions
of Rule 16b-3 or its successors under the Act. The Committee shall be
authorized to monitor all such transactions by Insiders to ensure such
compliance and to the extent any provision of the Plan or action by the
Committee fails to so comply, it shall be deemed null and void to the extent
permitted by law.
7. Applicable Withholding Taxes. Each Participant shall agree, as a
condition of receiving an Award, to pay to the Company, or make arrangements
satisfactory to the Company regarding the payment of, all Applicable
Withholding Taxes with respect to the Award. Until the Applicable Withholding
Taxes have been paid or arrangements satisfactory to the Company have been
made, no stock certificates shall be issued to the Participant. As an
alternative to making a cash payment to the Company to satisfy Applicable
Withholding Tax obligations, the Committee may establish procedures permitting
the Participant to elect to (a) deliver shares of already owned Company Stock
or (b) have the Company retain that number of shares of Company Stock that
would satisfy all or a specified portion of the Applicable Withholding Taxes.
Any such election shall be made only in accordance with procedures established
by the Committee and, in the case of an Insider, in accordance with Rule 16b-3.
8. Termination, Modification, Change. If not sooner terminated by the
Board, this Plan shall terminate at the close of business on June 30, 2006.
No Awards shall be made under the Plan after its termination. The Board may
terminate the Plan or may amend the Plan in such respects as it shall deem
advisable; provided, that, if and to the extent required by Rule 16b-3, no
change shall be made that increases the total number of shares of Company Stock
reserved for issuance pursuant to Awards granted under the Plan, expands the
class of persons eligible to receive Awards, or materially increases the
benefits accruing to Participants under the Plan, unless such change is
authorized by the shareholders of the Company. Notwithstanding the foregoing,
the Board may unilaterally amend the Plan and Awards as it deems appropriate
to ensure compliance with Rule 16b-3 and to cause Incentive Stock Options to
meet the requirements of the Code and regulations thereunder. Except as
provided in the preceding sentence, a termination or amendment of the Plan
shall not, without the consent of the Participant, adversely affect a
Participant's rights under an Award previously granted to him.
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9. Change in Capital Structure.
(a) Adjustments to Capital Structure.
In the event of a stock dividend, stock split or combination of shares,
spin-off, reclassification, recapitalization, merger or other change in the
Company's capital stock (including, but not limited to, the creation or
issuance to shareholders generally of rights, options or warrants for the
purchase of common stock or preferred stock of the Company), the number and
kind of shares of stock or securities of the Company to be issued under the
Plan (under outstanding Awards and Awards to be granted in the future), the
exercise price of Options, and other relevant provisions shall be
appropriately adjusted by the Committee, whose determination shall be binding
on all persons. If the adjustment would produce fractional shares with respect
to any Award, the Committee may adjust appropriately the number of shares
covered by the Award so as to eliminate the fractional shares.
(b) Change of Control.
If a Change of Control or Corporate Change occurs, the Committee may take
such actions with respect to outstanding Awards as the Committee deems
appropriate. These actions may include, but shall not be limited to,
accelerating the vesting and expiration dates of Options. The effectiveness of
such acceleration or release of restrictions shall be conditioned upon the
consummation of the applicable Change of Control or Corporate Change.
10. Administration of the Plan.
(a)Disinterested Persons on Committee.
The Plan shall be administered by a Committee consisting of two or more
outside directors of the Company, who shall be appointed by the Board. The
Board may designate the Compensation Committee of the Board to be the Committee
for purposes of the Plan. If and to the extent required by Rule 16b-3 of the
Act, all members of the Committee shall be "disinterested persons" as that term
is defined in Rule 16b-3. If any member of the Committee fails to qualify as a
"disinterested person," such person shall immediately cease to be a member of
the Committee and shall not take part in future Committee deliberations.
Committee members may resign at any time by delivering written notice to the
Board. Vacancies in the Committee shall be filled by the Board.
(b) Conditions of Option Grants.
The Committee shall have the authority to impose such limitations or
conditions upon an Award as the Committee deems appropriate to achieve the
objectives of the Award and the Plan. Without limiting the foregoing and in
addition to the powers set forth elsewhere in the Plan, the Committee shall
have the power and complete discretion to determine (i) which eligible
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employees shall receive an Award and the nature of the Award; (ii) the number
of shares of Company Stock to be covered by each Award; (iii) the Fair Market
Value of Company Stock; (iv) the time or times when an Award shall be granted;
(v) whether an Award shall become vested over a period of time, according to a
performance-based vesting schedule or otherwise, and when it shall be fully
vested; (vi) whether a Change of Control or Corporate Change exists; (vii) the
performance criteria and other factors relevant to the acceleration of vesting
dates for such Options; (viii) when Options may be exercised; (ix) whether to
approve a Participant's election with respect to Applicable Withholding Taxes;
(x) conditions relating to the length of time before disposition of Company
Stock received in connection with an Award is permitted; (xi) notice provisions
relating to the sale of Company Stock acquired under the Plan; and (xii) any
additional requirements relating to Awards that the Committee deems
appropriate.
(c) Technical Amendments.
The Committee shall have the power to correct any defect, supply any
omission or reconcile any inconsistency in the Plan of a procedural nature in
such manner and to such extent as it shall deem advisable to maintain the Plan
in the manner intended; but it shall have no power to add to, subtract from or
modify any of the substantive terms of the Plan, change or add to any benefits
provided hereby, or waive or fail to apply any requirements existing as a
condition precedent to the actual award of such benefits.
(d) Plan Regulations.
The Committee may adopt rules and regulations for carrying out the Plan.
The Committee shall have the express discretionary authority to construe and
interpret the Plan and the Award agreements, to resolve any ambiguities, to
define any terms, and to make any other determinations required by the Plan or
an Award agreement. The interpretation and construction of any provisions of
the Plan or an Award agreement by the Committee in good faith shall be final
and conclusive. The Committee may consult with counsel, accountants, brokers,
or consultants who may be counsel to the Company, and shall not incur any
liability for any action taken in good faith in reliance upon the advice of
counsel.
(e) Committee Action.
A majority of the members of the Committee shall constitute a quorum, and
all actions of the Committee shall be taken by a majority of the members
present. Notwithstanding the preceding sentence, the Committee shall initially
have two members and any action taken by such members must be by unanimous
consent until such time as one or more additional members are appointed to the
committee. Any action may be taken by a written instrument signed by, all of
the members, by vote at a telephonic or other meeting or by memorandum or other
written instrument signed by the Committee members and any action so taken
shall be fully effective as if it had been taken at a meeting.
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(f) Compensation of Committee Members.
The members of the Committee shall receive no special compensation as a
result of the rendition of their services to the Plan, but shall be entitled
to receive reimbursement for any reasonable expenses actually incurred in
administering the Plan, as long as the same are substantiated in such manner as
the Board may require. All such expenses as authorized by the Board shall be
paid by the Company. No member of the Committee shall be personally liable for
any action, determination or interpretation made in good faith with respect to
the Plan or the Options, and all members of the Committee shall be fully
protected by the Company in respect of any such action, determination or
interpretation.
(g) Participant Information.
The Company shall furnish to the Committee in writing such information as
the Committee may request in the exercise of its powers and duties in the
administration of the Plan, which information may include, but shall not be
limited to, the name of each employee of the Company and his or her date of
birth, employment, and, if known, probable termination of service.
11. Miscellaneous Provisions.
(a) Interpretation.
The terms of this Plan and Awards granted pursuant to the Plan are subject
to all present and future regulations and rulings of the Secretary of the
Treasury or his delegate relating to the qualification of Incentive Stock
Options under the Code and they are subject to all present and future rulings
of the Securities Exchange Commission with respect to Rule 16b-3. If any
provision of the Plan or an Award conflicts with any such regulation or ruling,
to the extent applicable, the Committee shall cause the Plan to be amended, and
shall modify the Award, so as to comply, or if for any reason amendments cannot
be made, that provision of the Plan and/or the Award shall be void and of no
effect.
(b) Tax Withholding.
The Company shall have the right to deduct from any payment or settlement
under the Plan, including, without limitation, the exercise of any stock
option, or the delivery of any Shares, any federal, state, local or other taxes
of any kind which the Committee, in its sole discretion, deems necessary to be
withheld to comply with the Code and/or any other applicable law, rule or
regulation. In addition, in the event that the optionholder disposes of any
Shares within the two year period following the grant, or within the one year
period following exercise of an incentive stock option (each a "Disqualifying
Disposition"), the Company shall have the right to require the optionholder to
remit to the Company an amount sufficient to satisfy all federal, state, and
local withholding tax requirements as a condition to registering the transfer
of such Shares on its books. If the Committee, in its sole discretion, permits
Shares of the Company's common stock to be used to satisfy any such tax
withholding, such Shares shall be valued based on the fair market value of such
Shares as of the date the tax withholding is required to be made, as determined
by the Committee.
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(c) No Right to Employment.
Neither the adoption of the Plan, the granting of any option, nor the
execution of any option agreement, shall confer upon any employee of the
Company any right to continued employment with the Company, as the case may be,
nor shall it interfere in any way with the right, if any, of the Company to
terminate the employment of any employee at any time for any reason.
(d) Unfunded Plan.
The Plan shall be unfunded and the Company shall not be required to
segregate any assets in connection with any options awarded under the Plan.
Any liability of the Company to any person with respect to any options awarded
under the Plan shall be based solely upon the contractual obligations that may
be created as a result of the Plan or any such award or agreement. No such
obligation of the Company shall be deemed to be secured by any pledge of,
encumbrance on, or other interest in, any property or asset of the Company.
Nothing contained in the Plan or any option agreement shall be construed as
creating in respect of any Participant (or beneficiary thereof or any other
person) any equity or other interest of any kind in any assets of the Company
or creating a trust of any kind or a fiduciary relationship of any kind between
the Company, and/or any such Participant, any beneficiary or any other person.
(e) Fringe Benefit and Compensation Programs.
Payments and other benefits received by a Participant under an option
agreement made pursuant to the Plan shall not be deemed a part of a
optionholder's compensation for purposes of the determination of benefits under
any other employee welfare or benefit plans or arrangements, if any, provided
by the Company unless expressly provided in such other plans or arrangements,
or except where the Committee expressly determines in writing that inclusion of
any option or portion of an option should be included to accurately reflect
competitive compensation practices or to recognize that any option has been
made in lieu of a portion of a competitive annual base salary or other cash
compensation. Options granted under the Plan may be made in addition to, in
combination with, or as alternatives to, grants, awards or payments under any
other plans or arrangements of the Company. The existence of the Plan
notwithstanding, the Company may adopt such other compensation plans or
programs and additional compensation arrangements as it deems necessary to
attract, retain and motivate its employees.
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(f) Other Legal Compliance.
The Committee may require, as a condition of any payment or share
issuance, that certain agreements, undertakings, representations, certificates
and/or information, as the Committee may deem necessary or advisable, be
executed or provided to the Company to assure compliance with all such
applicable laws or regulations. Any certificate for Shares delivered under the
Plan may be subject to such stock-transfer orders and such other restrictions
as the Committee may deem advisable under the rules, regulations, or other
requirements of the Securities and Exchange Commission, any stock exchange
upon which the Shares are then listed, and any applicable federal or state
securities law. The Committee may cause a legend or legends to be put on any
such share certificates to make appropriate reference to such restrictions.
If at any time and from time to time the Committee determines, in its sole
discretion, that the listing, registration or qualification of any option, or
any Shares or property covered by or subject to such option, upon any
securities exchange or under any foreign, federal, state or local securities or
other law, rule or regulation is necessary or desirable as a condition to or in
connection with the granting or such option or the issuance or delivery of
Shares or otherwise, no such award may be exercised, or paid in Shares or other
property, unless such listing, registration or qualification shall have been
effected free of any conditions that are not acceptable to the Committee.
(g) Registration of Shares.
The Committee may determine, in its sole discretion, that the registration
or qualification under any federal or state law of any Shares to be granted
pursuant to the Plan (whether to permit the grant of stock options or the
resale or other disposition of any such Shares by or on behalf of the key
employees receiving such Shares) may be necessary or desirable and, in any such
event, if the Committee so determines, delivery of the certificates of the
Shares shall not be made until such registration or qualification shall have
been completed. In that connection, the Company agrees that it will use its
best efforts to effect such registration or qualification when it deems such
action to be in the best interests of the Company, provided, however, that
the Company shall not be required to use its best efforts to effect such
registration under the Securities Act, as amended, other than to file a Form
S-8, as presently in effect, or other such forms as may be in effect from time
to time.
(h) Compliance with the Exchange Act.
All transactions under this Plan that involve persons subject to Section
16 of the Exchange Act are intended to comply with all applicable conditions
of Rule 16b-3 or its successors under the Exchange Act. To the extent any
provision of the Plan or action by the Committee fails to so comply, it shall
be deemed null and void to the extend permitted by law and deemed advisable by
the Committee.
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(i) Leaves of Absence/Transfers.
The Committee shall have the power to promulgate rules and regulations and
to make determinations, as it deems appropriate, under the Plan in respect of
any leave of absence from the Company granted to an optionholder. Without
limiting the generality of the foregoing, the Committee may determine whether
any such leave of absence shall be treated as if the optionholder has
terminated employment with the Company.
(j) No Assignment of Benefits.
No option grant or other benefit payable under this Plan shall, except as
otherwise specifically provided by this Plan or by law, be transferable in any
manner other than by will or the laws of descent and distribution, and any
attempt to transfer any such benefit shall be void. All benefits payable
under this Plan shall not in any manner be subject to the debts, contracts,
liabilities, engagements, or torts of any person who shall be entitled to such
benefit, nor shall it be subject to attachment or legal process for or against
such person.
(k) Notices.
Every direction, revocation or notice authorized or required by the Plan
shall be deemed delivered to the Company (i) on the date it is personally
delivered to the Secretary of the Company at its principal executive offices
or (ii) three business days after it is sent by registered or certified mail,
postage prepaid, addressed to the Secretary at such offices, and shall be
deemed delivered to an optionee (i) on the date it is personally delivered to
him or her or (ii) three business days after it is sent by registered or
certified mail, postage prepaid, addressed to him or her at the last address
shown for him or her on the records of the Company.
(l) Governing Law.
The Plan and all actions taken thereunder shall be governed by and
construed in accordance with the laws of the State of Florida, without regard
to principles of conflict of laws. Any titles and headings herein are for
reference purposes only, and shall in no way limit, define or otherwise affect
the meaning, construction or interpretation of any provisions of the Plan.
Dated: July 1, 1996
Technology Research Corporation
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