<PAGE>
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
Filed by registrant /x/
Filed by a party other than the registrant / /
Check the appropriate box:
/ / Preliminary proxy statement
/x/ Definitive proxy statement
/ / Confidential, for use of the Commission only (as permitted by Rule
14a-6(e)(2))
/ / Definitive additional materials
/ / Soliciting material pursuant to Rule 14a-11(c)
or Rule 14a-12
TECHNICAL COMMUNICATIONS CORPORATION
(Name of Registrant as Specified in Its Charter)
-----------------------------------------------------------------
(Name of Person[s] Filing Proxy Statement, if other than the Registrant)
Payment of filing fee (Check the appropriate box):
/x/ No fee required
/ / Fee computed on table below per Exchange Act Rules 14a-(6)(i)(1)
and 0-11.
(1) Title of each class of securities to which transaction applies:
-----------------------------------------------------------------
(2) Aggregate number of securities to which transactions applies:
-----------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:1
-----------------------------------------------------------------
- ------------------
1 Set forth the amount on which the filing fee is calculated and state how it
was determined.
<PAGE>
(4) Proposed maximum aggregate value of transaction:
-----------------------------------------------------------------
(5) Total fee paid:
-----------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement number,
or the form or schedule and the date of its filing.
(1) Amount previously paid:
-----------------------------------------------------------------
(2) Form, schedule or registration statement no.:
-----------------------------------------------------------------
(3) Filing party:
-----------------------------------------------------------------
(4) Date filed:
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<PAGE>
TECHNICAL COMMUNICATIONS CORPORATION
Notice of Annual Meeting of Stockholders
To Be Held February 8, 1999
To our Stockholders:
Notice is hereby given that the Annual Meeting of Stockholders (the "Meeting")
of Technical Communications Corporation, a Massachusetts corporation (the
"Company"), will be held at the Company's offices, 100 Domino Drive, Concord,
Massachusetts 01742, at 10:00 a.m. on Monday, February 8, 1999:
1. To elect two (2) Class II Directors named herein, each to
serve for a term of three (3) years or until their respective
successors have been duly elected and qualified;
2. To ratify the selection of the firm of Arthur Andersen LLP as
auditors for the Company for the fiscal year ending October 2,
1999; and
3. To consider and act upon such other business and matters or
proposals as may properly come before the Meeting or any
adjournments thereof.
Only stockholders of record on the books of the Company at the close of business
on December 11, 1998, are entitled to notice of and to vote at the Meeting.
Please sign, date and return the enclosed proxy in the enclosed envelope at your
earliest convenience. If you return your proxy, you may nevertheless attend the
Meeting and vote your shares in person.
All stockholders are cordially invited to attend the Meeting.
By Order of the Board of Directors,
Edward E. Hicks, Clerk
Concord, Massachusetts
January 5, 1999
It is important that your shares be represented at the Meeting. Whether or not
you plan to attend the Meeting, please sign, date and mail the enclosed proxy in
the enclosed envelope, which requires no postage if mailed in the United States.
<PAGE>
TECHNICAL COMMUNICATIONS CORPORATION
PROXY STATEMENT
FOR
ANNUAL MEETING OF STOCKHOLDERS
February 8, 1999
Proxies enclosed with this proxy statement are solicited by and on behalf of the
Board of Directors (the "Board") of Technical Communications Corporation, a
Massachusetts corporation (the "Company"), for use at the Annual Meeting of
Stockholders (the "Meeting") to be held at the Company's offices, 100 Domino
Drive, Concord, Massachusetts, at 10:00 a.m. on Monday, February 8, 1999, and at
any adjournments thereof.
SHARES OUTSTANDING AND VOTING PROCEDURES
Only holders of record of outstanding shares of the Company's Common Stock as of
the close of business on December 11, 1998, are entitled to notice of and to
vote at the Meeting.
As of December 11, 1998, there were 1,294,541 shares of the Company's Common
Stock outstanding and entitled to vote. The shares of Common Stock are the only
voting securities of the Company. Stockholders are entitled to cast one vote for
each share held of record.
The Technical Communications Corporation Employees' Stock Ownership Plan (the
"ESOP") was terminated on October 1, 1997. The Internal Revenue Service
determined that such termination does not affect the qualified status of the
Plan. All vested shares of the ESOP will be distributed early in fiscal year
1999. Participants in the ESOP who execute proxies will have the shares
allocated to their accounts voted by the Trustee of the ESOP as they direct.
The ESOP also provides that the Trustee vote any shares allocated to
participants' accounts as to which he has not received voting instructions (as
well as unallocated shares) in the same proportion as shares in participants'
accounts as to which voting instructions are received. The Trustee of the ESOP
has indicated that he intends to follow these pass-through voting provisions
of the ESOP unless doing so would conflict with the requirements of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), including but not
limited to the prudence requirements of ERISA.
If the enclosed proxy is properly marked, signed and returned in time to be
voted at the Meeting, and is not subsequently revoked, the shares represented by
proxy will be voted in accordance with the instructions marked thereon. The
proxy is in ballot form so that a specification may be made (i) to grant or
withhold authority to vote for the election of Directors, and (ii) to vote for
or against, or abstain from voting on, the ratification of the firm of Arthur
Andersen LLP as the Company's auditors. Signed proxies returned to the Company
and not marked to the contrary will be voted in favor of each of the proposals
set forth in the proxy. Any stockholder may revoke a proxy at any time prior to
its exercise by filing a later-dated proxy or a written notice of revocation
with the Clerk of the Company. Stockholders attending the Meeting may also
revoke their proxies by voting in person at the Meeting.
The Board of Directors knows of no other matter to be presented at the Meeting.
If any other matter should be presented at the Meeting upon which a vote may be
properly taken, shares represented by all proxies received by Management of the
Company will be voted with respect thereto in accordance with the judgment of
the persons named as attorneys in the proxies.
2
<PAGE>
It is expected that this proxy statement and the accompanying proxy, and an
Annual Report to Stockholders, containing financial statements for the fiscal
year ended October 3, 1998, will be mailed to stockholders on or about January
5, 1999.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table shows, as of December 11, 1998, the ownership of common
stock of the Company by any person or group who is known to the Company to be
the beneficial owner of more than 5% of the Company's common stock outstanding
and entitled to vote as of such date.
<TABLE>
<CAPTION>
Beneficial Ownership Percent of
Name and Address (Number of Shares)(1) Class (1)
---------------- --------------------- ---------
<S> <C> <C>
Carl H. Guild, Jr., Trustee 78,975 (2) 6.1% (2)
Technical Communications Corporation Employees'
Stock Ownership Trust
100 Domino Drive
Concord, MA 01742-2892
Martindale Andres & Company, Inc. 77,000 (3) 5.9% (3)
200 Four Falls Corporate Center
Suite 200
West Conshohocken, PA 19428
M. Mahmud Awan 199,028 (4) 15.4% (4)
c/o TechMan International Corporation
242 Sturbridge Road
Charlton City, MA 01508-0949
Quest Advisory Corporation 127,200 (5) 9.8% (5)
c/o Charles M. Royce
1414 Avenue of the Americas
New York, NY 10019
</TABLE>
(1) Unless otherwise indicated, each of the persons named in the
table has sole voting and investment power with respect to the
shares set forth opposite such person's name. Information with
respect to beneficial ownership is based upon information
furnished by each stockholder.
(2) Held as Trustee for the ESOP and represents shares that are
allocated to the participants. Until vested shares of the
terminated plan have been distributed, each participant may
direct the Trustee as to the manner in which shares allocated
to his or her account shall be voted. The ESOP provides that
the Trustee shall vote any shares allocated to participants'
accounts as to which he has not received voting instructions
in the same proportion as to which voting rights are received.
Mr. Guild disclaims beneficial ownership of these 78,975
shares. As a result of Internal Revenue Service determination
that the October 1, 1997 termination of the Company's ESOP
Plan does not affect the qualified status of the Plan, all
vested shares of the terminated plan will be distributed early
in fiscal year 1999.
(3) The nature of ownership of Martindale Andres & Company ("MAC")
as set forth herein is based upon a Schedule 13D filed with
the Securities and Exchange Commission ("SEC") on September
15, 1998. The Schedule 13D was filed on
3
<PAGE>
behalf of a "group" (as defined in Section 13(d)(3) of the
Securities Exchange Act of 1934, as amended) consisting of
Dr. Mahmud Awan, Philip A. Phalon, Robert B. Bregman and
William C. Martindale, Jr., principal of MAC. Of the 77,000
shares, Mr. Martindale has sole dispositive and voting power
over 10,000 shares and shared dispositive and voting power
over 67,000 shares.
(4) Dr. Awan individually owns 118,850 shares of Common Stock.
TechMan International Corporation, which is wholly owned by
Dr. Awan, owns 80,178 shares of Common Stock.
(5) The nature of ownership of Quest Advisory Corporation
("Quest") as set forth herein is based upon their Schedule 13G
on file with the SEC. Quest in its capacity as investment
advisor may be deemed the beneficial owner of the 127,200
shares indicated in the above table, which shares are owned by
numerous clients of Quest. Mr. Royce disclaims beneficial
ownership of the 127,200 shares owned by Quest.
I. ELECTION OF DIRECTORS
THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS A VOTE "FOR" THE ELECTION AS
DIRECTORS OF THE NOMINEES LISTED BELOW.
A. Number of and Nominees for Directors
It is the intention of the persons named as proxies to vote the
proxies, unless authority to vote is specifically withheld, to elect as Class
II Directors Mr. David A. B. Brown and Mr. Robert T. Lessard. Each nominee
for director will be elected to hold office until the 2002 Annual Meeting of
Stockholders or until his successor is elected and qualified. The Board of
Directors knows of no reason why any such nominee should be unable or
unwilling to serve, but, if such should be the case, proxies may be voted for
the election of some other person or for fixing the number of directors as a
lesser number. Both nominees are currently directors of the Company.
The following table sets forth the year each director first became a
director, the position currently held by each director with the Company,
their principal occupation during the past five years, any other
directorships held by such person in any company subject to the reporting
requirements of the Securities Exchange Act of 1934, as amended, or in any
company registered as an investment company under the Investment Company Act
of 1940, as amended, and their age. The terms of the Class I Directors expire
at the 2001 Annual Meeting of Stockholders; the terms of the Class II
Directors expire at the 1999 Annual Meeting of Stockholders; and the terms of
the Class III Directors expire at the 2000 Annual Meeting of Stockholders.
<TABLE>
<CAPTION>
Amount and
Positions and Nature of Percent
Name and Year First Offices Beneficial Ownership of
Became a Director (1) (2) with the Company Age (# of shares)(3) Class(3)
------------------------ ---------------- --- ---------------- --------
<S> <C> <C> <C> <C>
Dr. Mahmud Awan (4) (18) Director, 46 199,028(5) 14.1%
1998 - Class I Director Chairman of the Board
Mitchell B. Briskin (6) Director 39 417(7) 0.0%
1998 - Class I Director
4
<PAGE>
David A. B. Brown (8) (18) Director 55 300 0.0%
1998 - Class II Director
Robert T. Lessard (9) Director 58 1,418(10) 0.1%
1997 - Class II Director
Carl H. Guild, Jr. (11) Director, 55 85,413(12) 6.1%
1997 - Class III Director Vice Chairman of the
Board, Chief
Executive Officer and
President
Donald Lake (13) Director 54 417(7) 0.0%
1998 - Class III Director
Thomas E. Peoples (14) Director 50 417(7) 0.0%
1998 - Class III Director
Non-Director Officers
John I. Gill - 1985(15) Executive Vice 59 19,551(16) 1.4%
President
All directors, director nominees 306,961(17) 23.9%
and officers as a group (8 persons)
</TABLE>
(1) Roland Gerard resigned from the Board on February 13, 1998.
Prior to that time he served as the President and Chief
Executive Officer. Dale A. Peterson served as President from
March 2, 1998 until his resignation from the Company on
September 19, 1998. James A. McCalmont resigned from the Board
on January 13, 1998. Arnold McCalmont resigned from the Board on
July 16, 1998. Herbert Lerner resigned from the Board and from
the positions of Treasurer and Chief Financial Officer on
November 19, 1998. On April 30, 1998, Mr. Briskin, Mr. Lake and
Mr. Peoples were all elected by the Board to fill vacancies on
the Board resulting from resignations.
(2) Philip A. Phalon did not continue as a director after the 1998
Annual Meeting of Stockholders on August 14, 1998.
(3) Unless otherwise indicated, each of the persons named in the
table has sole voting and investment powers with respect to the
shares set forth opposite such person's name. With respect to
each person or group, percentages are calculated based on the
number of shares beneficially owned plus shares that may be
acquired by such person or group within sixty days, upon the
exercise of stock options. Unless otherwise indicated herein,
none of the persons named in this table is, or was within the
past year, a party to any contract, arrangement or understanding
with any person with respect to any securities of the Company,
including, but not limited to, joint ventures, loan or option
arrangements, puts or calls, guarantees against loss or
guarantees of profit, division of losses or profits or the
giving or withholding of proxies. None of the persons named in
the table, nor any of their respective associates have any
arrangement or understanding with any person with respect to any
future employment by the Company or its affiliates, or with
respect to any
5
<PAGE>
future transactions to which the Company or any of its
affiliates will or may be a party. Except as otherwise
described herein, none of the persons named in this table
own any security of the Company of record but not
beneficially.
(4) Dr. Awan joined the Board of Directors and became Chairman of
the Board on November 19, 1998, following settlement of the
litigation set forth in Section I.F herein. Dr. Awan has served
as Chairman and Chief Executive Officer of TechMan International
Corporation, a privately held manufacturer of fiber optic
medical devices and communication systems, since 1982. Mr. Awan
was a member of the 13D Group as defined in Section I.F herein.
(5) Includes 80,178 shares owned by TechMan International, which is
wholly owned by Dr. Awan.
(6) Mr. Briskin, a principal at Concord Investment Partners since
1995, was deemed re-elected to the Board of Directors as of
August 14, 1998, in accordance with the terms of the
aforementioned settlement of the litigation. From 1990 to 1995,
Mr. Briskin was General Manager at General Chemical Corporation;
previously, he was a lawyer with Patterson, Belknap, Webb &
Tyler in New York City.
(7) Includes 278 shares each that may be acquired by Messrs.
Briskin, Lake and Peoples within sixty days, upon exercise of
stock options.
(8) Mr. Brown joined the Board of Directors on November 19, 1998,
filling a vacancy created by the resignation of Herbert A.
Lerner. Since 1984, Mr. Brown has been the president of The
Windsor Group, Inc., a business consulting firm focused on the
oil industry and international operations.
(9) Mr. Lessard was employed in a variety of management positions
from 1966 through December 1995 at the U.S. National Security
Agency ("NSA"), Department of Defense. During his final two
years at NSA, Mr. Lessard was the Group Chief in the Operations
Directorate responsible for communications and cryptographic
technology. Since his retirement in December 1995, he has
represented the Director of the National Security Agency on
several special projects.
(10) Includes 945 shares that may be acquired by Mr. Lessard within
sixty days, upon exercise of stock options.
(11) In conjunction with the legal settlements reached by the Company
on November 19, 1998 and the appointment of Dr. Awan as Chairman
of the Board, Mr. Guild was named to the new position of Vice
Chairman of the Board on the same date. Mr. Guild had served as
Chairman of the Board and Chief Executive Officer of the Company
from February 13, 1998 until November 19, 1998; he continues to
serve as Chief Executive Officer and President. Mr. Guild was
elected to the Board on May 1, 1997 and had been an independent
consultant to the company from that time until February 13,
1998. From 1993 to 1997, he was a Senior Vice President with
Raytheon Engineers and Constructors, Inc., a unit of Raytheon
Company. Mr. Guild serves as President and Chief Executive
Officer of the Company pursuant to an Employment Agreement with
Company which has been previously filed with the Securities and
Exchange Commission on the Company's Form 10-K for the year
ending October 3, 1998.
(12) Includes 84,945 shares that may be acquired by Mr. Guild within
sixty days, upon exercise of stock options. Excludes 78,975 held
by the ESOP, which Mr. Guild, as
6
<PAGE>
Trustee of the ESOP, may be deemed to own beneficially. Mr.
Guild disclaims beneficial ownership of these shares.
(13) Mr. Lake has been a financial consultant to various government
agencies since 1991. Before initiating his consulting practice,
Mr. Lake served as Director of the International Banking
Services Division of the American Security Bank in Washington,
D.C.
(14) Mr. Peoples is the Vice President for International and
Washington Operations of Aerojet, a privately held aerospace and
defense contractor, and has been employed by that Company since
1992. Previously, Mr. Peoples served as Manager of Business
Development for Smart Munitions Programs at Raytheon Company.
(15) Mr. Gill has been employed by the Company since August, 1983.
(16) Includes 9,551 shares currently allocated to Mr. Gill under the
ESOP.
(17) Includes 86,724 shares that the directors and officers have
the right to acquire within 60 days of December 11, 1998, upon
the exercise of stock options.
(18) Dr. Awan and Mr. Brown were deemed elected pursuant to the
settlement agreement as set forth in Section I.F. herein.
A quorum being present, the affirmative vote of the holders of a
plurality of the shares of Common Stock voting in person or by proxy at the
Meeting is required to elect each director. Thus, abstention or broker non-votes
will not be included in the totals and will have no effect on the outcome of the
vote.
B. Meetings of the Board of Directors and Committees
The Board of Directors held fourteen meetings during the twelve months ended
October 3, 1998. Each of the directors attended at least 75% of the aggregate of
(a) the total number of meetings of the Board of Directors he was eligible to
attend and (b) the total number of meetings of all committees of the Board of
Directors on which he served which were held during fiscal year 1998.
The Audit Committee of the Board, of which Messrs. Briskin and Lake are members,
held four meetings during fiscal year 1998. Mr. Lerner and Mr. Phalon were
members of the Audit Committee until November 19, 1998. The Audit Committee
oversees the accounting and tax functions of the Company, recommends to the
Board the engagement of independent auditors for the year subject to approval by
the stockholders of the Company, reviews with management and the auditors the
plan and scope of the audit engagement, reviews the annual financial statements
of the Company and any recommended changes or modifications to control
procedures and accounting practices and policies, and monitors with management
and the auditors the Company's system of internal controls and its accounting
and reporting practices.
The Compensation Committee of the Board, of which Mr. Lessard is the only
member, held one meeting during fiscal year 1998. Mr. Guild was a member of the
Compensation Committee until February 1998 and Mr. James McCalmont was a member
until January 13, 1998. The Compensation Committee reviews and recommends to the
Board compensation for the President, the Chairman of the Board and outside
directors. It also reviews and recommends the adoption, amendment and
implementation of incentive compensation plans, stock option plans and other
7
<PAGE>
employee benefit plans and programs for the Company and officers and directors
of the Company.
During fiscal year 1998, the Company did not have a Nominating Committee or an
Operations Committee.
C. Compensation of Directors
Directors who are not regular employees of the Company received a fee of $1,200
for each meeting of the Board of Directors they attended during fiscal year
1998. In addition, each outside director is authorized to receive an annual
retainer of $2,800, paid in arrears in quarterly increments of $700. During
fiscal year 1998, directors also received a fee of $500 for each meeting of a
committee of the Board of Directors they attended. Mr. Herbert Lerner, who was
an employee of the Company until his resignation on November 19, 1998 was also
authorized to receive the retainer and fees for attendance at meetings.
In February 1997, the Board approved additional director compensation that was
intended to grant 1,000 share stock options under the Company's 1991 Stock
Option Plan and also to grant 500 shares of Technical Communications
Corporation's common stock to all directors on a pro rata basis, effective on
the date of the 1998 Annual Meeting of the Board of Directors. At the 1998
Annual Meeting of the Board of Directors on August 14, a total of 4,669
immediately exercisable options were granted with a term of five (5) years from
the date of the grant at an exercise price of $5.42, 85% of fair market value.
Seven different directors received these grants. In addition, a total of 2,865
shares of Common Stock were granted to ten different directors and former
directors at a price per share of $6.38 on August 14, 1998.
D. Certain Relationships and Related Transactions
Carl H. Guild, Jr., Vice Chairman of the Board, Chief Executive Officer
and President of the Company, is Trustee of the Technical Communications
Corporation Employees' Stock Ownership Trust. Herbert A. Lerner, who resigned as
a Director of the Company and as Company Treasurer and Chief Financial Officer
on November 19, 1998, was formerly a Trustee of the Employees' Stock Ownership
Plan. James A. McCalmont, a former Director of the Company, was also a Trustee
of the Employees' Stock Ownership Trust until his resignation from the Board on
January 13, 1998. At its August 27, 1997 meeting, the Board of Directors voted
to terminate the Employee Stock Ownership Plan effective October 1, 1997.
Edward E. Hicks, Esq., the Company's Secretary and Clerk, is a member
of a law firm that provides legal services to the Company.
On November 19, 1998, the Company settled certain litigation as set
forth in Section I.F herein. Pursuant to such settlement, the Company, Arnold
McCalmont, Herbert A. Lerner, Robert T. Lessard, Carl H. Guild, Jr., Mitchell B.
Briskin, Donald Lake and Thomas E. Peoples entered into a settlement agreement
with M. Mahmud Awan and Philip Phalon. The settlement agreement and standstill
agreement set forth mutual full releases as to the litigation and also include
provisions requiring, among other things, (i) the Company to reimburse the
former proxy contestants' expenses in payments aggregating $395,000, (ii) the
dissolution of the Awan/ Phalon group created to facilitate the proxy contest
and (iii) the former proxy contestants to abide by certain standstill provisions
until October 1, 2000.
8
<PAGE>
On June 27, 1995, the Company invested $250,800 for a minority interest
in Series B Preferred Stock of Net2Net Corporation, a privately held company
that develops high performance management and analysis systems for Asynchronous
Transfer Mode ("ATM") networks. The Company also paid a deposit for inventory,
purchased at a discounted price, valued at $244,200, as well as entered into a
distribution agreement with Net2Net that gave TCC the exclusive right to sell
Net2Net products to certain U.S. government departments. As of October 3, 1998,
$144,283 of the inventory had been sold and the remaining $99,917 has been
either written down or fully reserved. On May 15, 1998, Visual Networks, Inc.
("Visual"), a public company, merged with and into Net2Net. Under the terms of
the merger, all outstanding shares of Net2Net were exchanged for an aggregate of
2,250,000 shares of Visual common stock. Pursuant to an Escrow Agreement by
State Street Bank & Trust Company to indemnify and hold Visual and the Merger
Subsidiary harmless from the breach of default of representations, warranties,
covenants and agreements given or made by Net2Net, seven and one-half percent
(7.5%) of the aggregate number of shares of Visual Common Stock issued to
Net2Net stockholders in connection with the merger are being held in escrow
until the earlier of (i) three business days after the delivery by Visual's
independent certified public accountants of its reports for the fiscal year
ended December 31, 1998 or (ii) the close of business on March 31, 1999.
Pursuant to a Registration Rights Agreement, Visual has agreed to file a
registration statement covering the shares of Visual Common Stock issued in the
Merger by no later than one month after March 1, 1999. Until this registration
has been completed, Visual shares are considered restricted, in that they may
not be transferred or resold except as permitted under the Securities Act of
1933.
Net2Net's President was Stephen McCalmont, son of Arnold McCalmont, a
former director and former Chairman of Technical Communications Corporation, and
brother of James McCalmont, another former director of the Company. Both of
these gentlemen, in addition to Herbert A. Lerner, a former director, Chief
Financial Officer and Treasurer of the Company, were also investors in Net2Net
Corporation.
With the exception of Arnold M. McCalmont, former Chairman of the Board
and director, who retired in fiscal year 1998, and James A. McCalmont, who also
resigned from the Board in fiscal year 1998, no director or executive officer is
related to any other director or executive officer by blood or marriage.
E. Executive Compensation and Other Information
SUMMARY COMPENSATION TABLE
Fiscal Year 1998 Compensation
The following tables set forth certain summary information concerning
compensation paid or accrued by the Company during the past three fiscal years
to its Chief Executive Officer and the other executive officers of the Company
whose annual compensation during fiscal year 1998 exceeded $100,000 (hereafter
referred to as the "named executive officers"):
<TABLE>
<CAPTION>
Name and Fiscal All Other
Principal Position Year Salary Bonus Compensation
------------------ ---- ------ ----- -------------
<S> <C> <C> <C> <C>
Graham R. Briggs (1) 1998 $ 36,106 $ - $ 400(2)
Former Vice President of 1997 $ 96,324 $ 11,171(3) $ -
Finance 1996 $ 85,865 $ 1,500(3) $ 1,747(4)
9
<PAGE>
Roland S. Gerard (5) 1998 $ 62,399 $ - $ 18,274(6)
Former President and 1997 $158,708 $ 45,171(7) $ 1,173(8)
Chief Executive Officer 1996 $125,862 $ 15,000(7) $ 4,233(9)
John I. Gill 1998 $118,591 $ - $ 1,493(10)
Executive Vice President 1997 $116,325 $ 18,171(11) $ -
1996 $108,953 $ 1,500(11) $ 2,209(4)
Carl H. Guild, Jr. (12) 1998 $126,548 $ - $125,502(13)
Chief Executive Officer and 1997 $ - $ - $ 3,600(14)
President
</TABLE>
(1) Mr. Briggs was employed as the Company's Vice President of
Finance until January 14, 1998. From that time until Mr.
Lerner's resignation on November 19, 1998, Mr. Lerner had
performed the duties of the Vice President of Finance in his
capacity as Treasurer and Chief Financial Officer of the
Company.
(2) Represents the Company's 25% match on the first 6% of Mr.
Briggs' fiscal year 1998 401(k) contribution.
(3) These amounts of $11,171 and $1,500 were paid to Mr. Briggs
for services rendered in fiscal years 1996 and 1995,
respectively.
(4) Represents the Company's contribution for the respective
officer under the Company's Profit-Sharing Plan, a plan
qualified under Section 401(k) of the Internal Revenue Code
of 1986, as amended (the "Code"). The contribution is
determined by the Board of Directors in its sole discretion,
but may not exceed 15% of the Company's net profits before
taxes for any given Plan year, nor certain limits imposed by
the Internal Revenue Code.
(5) Mr. Gerard was terminated by the Company and resigned from the
Board of Directors on February 13, 1998.
(6) Includes income realized upon exercise of stock options, the
personal use portion of Mr. Gerard's car allowance and moving
expenses related to previous periods.
(7) These amounts of $45,171, and $15,000 were paid to Mr. Gerard
for services rendered in fiscal years 1996 and 1995,
respectively.
(8) Represents the personal use portion of Mr. Gerard's automobile
allowance.
(9) Represents the Company's $3,625 contribution to Mr. Gerard
under the Company's Profit-Sharing Plan as described in note
(3) above, plus $608 for the personal use portion of Mr.
Gerard's automobile allowance.
(10) Represents the Company's 25% match on the first 6% of Mr.
Gill's fiscal year 1998 401(k) contribution.
(11) These amounts of $18,171 and $1,500 were paid to Mr. Gill for
services rendered in fiscal years 1996 and 1995, respectively.
No payment was received in fiscal year 1998 for services
rendered in fiscal year 1997.
10
<PAGE>
(12) Prior to his employment as Chief Executive Officer of the
Company and his election as Chairman of the Board on February
13, 1998, Mr. Guild had been an independent consultant to the
Company and a Director since May 1, 1997.
(13) Includes consultant's fees and expenses of $109,689 related to
work performed in fiscal year 1997 and paid in fiscal year
1998, as well as work performed prior to February 13, 1998 and
paid in fiscal year 1998. The total also includes director's
fees of $11,300 from the beginning of fiscal year 1998 until
February 13, 1998, income realized upon receipt of company
stock of $3,015 as a result of the Company's August 14, 1998
grant of stock to members of its Board of Directors and $1,498
for the Company's 25% match on the first 6% of Mr. Guild's
fiscal year 1998 401(k) contribution.
(14) Includes director's fees earned and paid in fiscal year 1997.
Although Mr. Guild performed consulting services for the
Company in fiscal year 1997, no payments to him were made
until the following year.
Stock Options
Set forth below is an Option/SAR Grants table concerning individual
grants of stock options and SARs made during fiscal year 1998 to each of the
named executive officers.
Options/SAR Grants in Fiscal Year 1998
<TABLE>
<CAPTION>
Number of Percent of Total
Securities Options/SARs Exercise
Underlying Granted to of Base
Options/ Employees in FY Price Expiration
SARs Granted 1998(1) ($/sh) Date
------------- ----------------- --------- ----------
<S> <C> <C> <C> <C>
Graham R. Briggs - - -
Roland S. Gerard - - -
John I. Gill - - -
Carl H. Guild, Jr.(2) 20,000 18.8% $5.000 2/16/08
10,000 9.4% $5.500 2/16/08
10,000 9.4% $6.050 2/16/08
10,000 9.4% $6.655 2/16/08
945 0.9% $5.420 8/14/03
</TABLE>
(1) In fiscal year 1998, options to purchase a total of 106,369
shares of the Company's Common Stock were granted to
employees of the Company.
(2) Common Stock options were granted to Mr. Guild under the
1991 Plan on November 19, 1998. These options are exercisable
as follows: (i) 60,000 shares became exercisable on November
19, 1998 at an exercise price of $4.00 per share, (ii) 20,000
shares are exercisable on June 30, 1999 at an exercise price
of $4.00 and (iii) 20,000 shares are exercisable on September
30, 1999 at an exercise price of $4.00.
The above table does not include outstanding options granted to the
Company's former president, Dale G. Peterson, on March 2, 1998 to purchase
20,000 shares of Common Stock under the 1991 Plan. These shares were granted and
exercisable on that date at an exercise price of $6.38 per share. An additional
30,000 shares, granted on March 2, 1998, but not exercisable
11
<PAGE>
until anniversary dates of Mr. Peterson's employment in subsequent years,
were cancelled as a result of Mr. Peterson's resignation effective September
19, 1998.
Set forth below is a table concerning each exercise of stock options
(or tandem SARs) and freestanding SARs during fiscal year 1998 by each of the
named executive officers and the value at October 3, 1998 of unexercised options
and SARs.
Aggregated Option/SAR Exercises for Fiscal Year Ended October 3, 1998 and Fiscal
Year Option/SAR Values
<TABLE>
<CAPTION>
Value of Unexercised
Number of Unexercised In-the-Money Options at
Options at Fiscal Year End Fiscal Year End(1)
-------------------------- -----------------------
Shares
Acquired Value Not Not
Name on Exercise Realized Exercisable Exercisable Exercisable Exercisable
---- ----------- -------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Carl H. Guild, Jr. - - 24,945(2) 46,000(3) - -
Roland S. Gerard - - - (4) - - -
</TABLE>
(1) Value is based on the difference between the option exercise price and
the fair market value at October 3, 1998 ($4.25 per share) multiplied
by the number of shares underlying the in-the-money portion of the
option.
(2) This represents grants of options under the 1991 Plan to buy 4,000
shares granted on May 1, 1997 at an exercise price of $8.875 per share,
20,000 shares granted on February 16, 1998 at an exercise price of
$5.00 per share and 945 shares granted on August 14, 1998 at an
exercise price of $5.420 per share.
(3) This represents unexercisable grants of options under the 1991 Plan to
buy 16,000 shares granted on May 1, 1997 at the following exercise
dates and prices: (i) 4,000 shares on May 1, 1999 at an exercise price
of $9.76 per share; (ii) 4,000 shares on May 1, 2000 at an exercise
price of $10.74 per share; (iii) 4,000 shares on May 1, 2001 at an
exercise price of $11.81 per share and (iv) 4,000 shares on May 1, 2002
at an exercise price of $12.99 per share. In addition, there are
unexercisable grants of options under the 1991 Plan to buy 30,000
shares granted on February 16, 1998 at the exercise dates and prices
detailed in the above table on fiscal year 1998 Stock Option/SAR Grant
activity.
(4) Options to purchase 100,000 shares of Common Stock under the 1991 Plan
granted to Mr. Gerard in previous years have all expired due to
termination of Mr. Gerard's employment with the Company in February
1998.
Compliance with Section 16(a) of the Securities Exchange Act Section 16(a) of
the Securities Exchange Act of 1934, as amended, requires the Company's officers
and directors, and persons who beneficially own more than ten percent (10%) of a
registered class of the Company's equity securities, to file reports of
ownership and changes in ownership with the Securities and Exchange Commission.
Officers, directors and greater-than-ten-percent stockholders are required by
regulation to furnish the Company with copies of all Section 16(a) reports they
file.
Based solely on the Company's review of the copies of such forms
received and written representations from certain reporting persons that they
were not required to file, the Company believes that during fiscal year 1998,
its executive officers, directors and greater-than-ten-percent stockholders
complied with all applicable Section 16(a) filing requirements.
12
<PAGE>
F. Legal Proceedings
On November 20, 1998, the Company announced the settlement of
shareholder litigation initiated by Philip Phalon and Dr. Mahmud Awan, which had
been pending in Middlesex County, Massachusetts Superior Court since February
1998. The Company also announced the simultaneous settlement of litigation
regarding the tabulation of voting results of the Company's 1998 annual
stockholders meeting held August 14, 1998 (the "1998 Stockholders Meeting"). In
connection with the settlement of these matters, Dr. Awan and Mr. Mitchell
Briskin were deemed elected at the 1998 Stockholders Meeting. Additionally, Mr.
David Brown was appointed to the Company's Board of Directors, filling the Board
seat held by Mr. Herbert Lerner, who, along with Mr. Philip Phalon, resigned
from the Board. Dr. Awan is serving as Chairman of the Board and Carl H. Guild,
Jr., the Company's Chief Executive Officer and President, is serving as Vice
Chairman of the Board, each to serve until the later of October 1, 2000 or such
date as their respective successors are elected and qualified. The Board now
consists of Mr. Guild, Mitchell Briskin, Donald Lake, Robert Lessard, Thomas
Peoples, David Brown and Dr. Awan. The Company's Board will remain classified,
with each director serving a staggered term as set forth above.
The settlement agreement and standstill agreement executed by the
Company and members of the opposition group that had filed a Form 13D (the "13D
Group") in the settlement of the above described litigation set forth mutual
full releases as to the litigation and also include provisions requiring (i) the
Company to reimburse the 13D Group's expenses in payments aggregating $395,000,
(ii) the dissolution of the 13D Group (Note: Members of the 13D Group plan to
file an amendment to their Form 13D dissolving the 13D Group in either December
1998 or January 1999.) and (iii) the former proxy contestants to abide by
certain standstill provisions until October 1, 2000.
The Company is also the defendant in Gerard v. Technical Communications
Corporation, et al., filed in United States District Court for the District of
Massachusetts in 1998. This case arises from disputes concerning the hiring and
termination of Roland Gerard, former president of the Company. According to the
Complaint, the Company violated federal securities laws in the hiring process
for Mr. Gerard by making false statements about the Company which induced him to
accept employment, the compensation for which included certain stock options.
The Complaint also alleges breach of contract, wrongful termination, and civil
conspiracy. At present, the Company's motion to dismiss is pending. Because of
the early stage of the litigation, it is impossible to determine the ultimate
outcome. The Company is determined to contest this suit vigorously.
II. RATIFICATION OF SELECTION OF AUDITORS
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE RATIFICATION OF THE SELECTION
OF ARTHUR ANDERSEN LLP AS AUDITORS.
The Board of Directors has selected the firm of Arthur Andersen LLP, independent
certified public accountants, to serve as auditors for the fiscal year ending
October 2, 1999. Arthur Andersen LLP served as the Company's auditors for fiscal
year 1998. A quorum being present, the affirmative vote of the holders of a
majority of the shares of Common Stock voting in person or by proxy on the
appointment of the auditors shall be required for approval. Thus, abstentions or
broker non-votes will not be included in the totals and will have no effect on
the outcome of the vote.
13
<PAGE>
It is expected that a member of the firm of Arthur Andersen LLP will be present
at the Meeting and will be available to respond to appropriate questions.
III. OTHER MATTERS
The Board of Directors of the Company is not aware of any matter, other than
those described above, that may come before the meeting. However, if any matters
are properly presented to the meeting for action, it is intended that the
persons named in the enclosed proxy will vote on such matters in accordance with
their best judgment.
PROPOSALS OF STOCKHOLDERS
It is currently contemplated that the 2000 Annual Meeting of Stockholders will
be held on February 14, 2000. Proposals of stockholders intended to be present
at that annual meeting of stockholders must be received by the Company at its
principal executive offices no later than September 7, 1999, for inclusion in
the Proxy Statement and Form of Proxy relating to that meeting and must comply
with the applicable requirements of federal securities laws. In order to curtail
controversy as to the date on which a proposal was received by the Company, it
is suggested that proponents submit their proposals by certified mail, return
receipt requested.
EXPENSES AND SOLICITATION
The cost of the solicitation of proxies will be borne by the Company. Proxies
will be solicited principally through the mails. Further solicitation of proxies
from some stockholders may be made by directors, officers and regular employees
of the Company, personally, by telephone, telegraph or special letter. No
additional compensation, except for reimbursement of reasonable out-of-pocket
expenses, will be paid for any such further solicitation. In addition, the
Company may request banks, brokers and their custodians, nominees and
fiduciaries to solicit customers of theirs who have shares of the Company
registered in the name of a nominee. The Company will reimburse any such persons
for their reasonable out-of-pocket costs.
ADDITIONAL INFORMATION
The Company will provide, without charge to each stockholder entitled to a vote
at the Meeting, a copy of the Company's Annual Report to the Securities and
Exchange Commission on Form 10-K for the year ending October 3, 1998. A request
for copies of such report should be addressed to the Company at 100 Domino
Drive, Concord, Massachusetts 01742, Attention: Investor Relations.
14
<PAGE>
TECHNICAL COMMUNICATIONS CORPORATION
Proxy for Annual Meeting of Stockholders -- February 8, 1999
The undersigned hereby appoints CARL H. GUILD, JR. and EDWARD E. HICKS, or
either of them, the action of both of them voting to be controlling,
attorneys of the undersigned, with full powers of substitution, with all the
powers the undersigned would possess if personally present, to vote the stock
of the undersigned in TECHNICAL COMMUNICATIONS CORPORATION at the Annual
Meeting of Stockholders to be held at 10:00 a.m. on February 8, 1999 and at
any adjournments thereof.
This proxy, if properly executed, will be voted in the manner directed herein
by the undersigned stockholder. If no direction is made, the proxy will be
voted FOR items 1 and 2.
Please vote, date and SIGN on the REVERSE SIDE, and promptly return in the
enclosed envelope.
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS. IT WILL BE VOTED AS
DIRECTED AND IF NO CHOICE IS INDICATED IT WILL BE VOTED FOR ITEMS 1 AND 2.
CONTINUED...
<PAGE>
<TABLE>
<S> <C>
---- Please mark your
A | X | votes as in this
---- example using
dark ink only.
- ----------------------------------------------------------------------------------------------------------------------------
WITHHOLD FOR AGAINST ABSTAIN
FOR AUTHORITY Nominees: David A. B. Brown (2) PROPOSAL NO. 2 ---- ---- ----
(1) ELECTION OF ---- ---- Robert T. Lessard | | | | | |
DIRECTORS | | | | ---- ---- ----
---- ----
(3) PROPOSAL NO. 3 ---- ---- ----
| | | | | |
---- ---- ----
(2) The Board of Directors recommends that
you vote FOR the ratification of Arthur Andersen
LLP. To ratify the selection of the firm of Arthur
Andersen LLP as the Company's auditors.
(3) In their discretion, the proxies are
authorized to vote upon such other business
as may properly come before this meeting.
_________________________________ DATE __________________, 1999 _________________________________ DATE __________________, 1999
SIGNATURE SIGNATURE IF HELD JOINTLY
Please sign exactly as the name appears stenciled on this Proxy. When signing as attorney, executors, administrators, trustee
or guardian, please set forth your full title. If the stockholder is a corporation, the signature should be that of an
authorized officer who should indicate his or her title.
</TABLE>
