DEF 14A
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. ___)
Filed by the Registrant þ
Filed by a Party other than the Registrant o
Check the appropriate box:
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Preliminary Proxy Statement |
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Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) |
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Definitive Proxy Statement |
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Definitive Additional Materials |
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Soliciting Material Pursuant to §240.14a-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):
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TECHNICAL COMMUNICATIONS CORPORATION
Notice of Annual Meeting of Stockholders
To Be Held February 8, 2010
To Our Stockholders:
NOTICE IS HEREBY GIVEN that the 2010 Annual Meeting of Stockholders (the Meeting) of
Technical Communications Corporation, a Massachusetts corporation (the Company), will be held at
the offices of the Company, 100 Domino Drive, Concord, Massachusetts 01742, at 10:00 a.m. local
time on Monday, February 8, 2010, to:
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Elect one Class I Director to serve on the Board of Directors for a term of three years
expiring at the 2013 Annual Meeting of Stockholders; |
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Ratify the appointment of Caturano and Company, P.C. as the independent registered
public accounting firm of the Company for the fiscal year ending September 25, 2010; and |
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Consider and act upon such other business and matters as may properly come before the
Meeting or any adjournments thereof. |
The Board of Directors knows of no other matters to be presented at the Meeting.
Only stockholders of record of the Company at the close of business on December 11, 2009 are
entitled to notice of and to vote at the Meeting or any adjournments thereof.
All stockholders are cordially invited to attend the Meeting.
Whether or not you expect to attend the Meeting, please complete, sign, date and return the
enclosed proxy card in the envelope provided at your earliest convenience. If you return your
proxy, you may nevertheless attend the Meeting and vote your shares in person.
A copy of the Companys Annual Report to Stockholders for the fiscal year ended September 26,
2009, which contains financial statements and other information of interest to stockholders,
accompanies this Notice and the attached Proxy Statement.
By Order of the Board of Directors,
David A. White, Secretary
Concord, Massachusetts
January 8, 2010
It is important that your shares be represented at the Meeting. Whether or not you plan to attend
the Meeting, please promptly complete, sign, date and mail the enclosed proxy card in the envelope
provided, which requires no postage if mailed in the United States.
Important Notice Regarding the Availability of Proxy Materials
for the Annual Shareholder Meeting to be Held on February 8, 2010
This Proxy Statement and related materials are available at the Companys website at
www.tccsecure.com/investors.
This Proxy Statement relates to the Companys 2010 Annual Meeting of Stockholders to be held
on February 8, 2010 at 10:00 a.m. (local time) at the Companys offices located at 100 Domino
Drive, Concord, Massachusetts 01742.
The matters to be voted upon at such meeting are:
(1) the election of one Class I Director to serve on the Board of Directors for a term
of three years expiring at the 2013 Annual Meeting of Stockholders, and
(2) the ratification of Caturano and Company, P.C. as the Companys independent
registered public accounting firm for the fiscal year ending September 25, 2010.
The Board of Directors of the Company recommends a vote FOR each of Proposals 1 and 2 above.
Stockholders will also consider and act upon such other business and matters as may properly
come before such meeting or any adjournments thereof.
Only stockholders of record at the close of business on December 11, 2009 are entitled to
notice of and to vote at the meeting and any adjournments thereof.
Materials that will be available electronically at the website identified above include:
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The Notice of Annual Meeting of Stockholders; |
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This Proxy Statement; |
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The form of proxy card; and |
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The Companys Annual Report to Stockholders for the fiscal year ended September
26, 2009. |
If you wish to attend the meeting in person and need directions, please contact TCC Investor
Relations at (978) 287-5100.
Instructions on how to complete, sign, date and return the proxy card are provided thereon, as
well as a stockholders control/identification number(s).
TECHNICAL COMMUNICATIONS CORPORATION
100 Domino Drive
Concord, MA 01742
PROXY STATEMENT
for the
2010 Annual Meeting of Stockholders
February 8, 2010
This Proxy Statement is being furnished in connection with the solicitation of proxies by the
Board of Directors of Technical Communications Corporation, a Massachusetts corporation (the
Company), for use at the Companys 2010 Annual Meeting of Stockholders and any adjournments
thereof (the Meeting), to be held at the offices of the Company, 100 Domino Drive, Concord,
Massachusetts 01742, at 10:00 a.m. local time on Monday, February 8, 2010.
It is expected that the Notice of Meeting, this Proxy Statement and the accompanying proxy
card, and an Annual Report to Stockholders for the fiscal year ended September 26, 2009 containing
financial statements and other information of interest to stockholders, will be mailed to
stockholders on or about January 8, 2010.
SHARES OUTSTANDING AND VOTING PROCEDURES
Record Date and Outstanding Shares
Only record holders of shares of the Companys Common Stock, par value $0.10 per share, as of
the close of business on December 11, 2009 (the Record Date) are entitled to notice of and to
vote at the Meeting.
As of the Record Date, there were 1,451,967 shares of the Companys 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.
Proxies
If the enclosed proxy card is properly marked, signed, and returned in time to be voted at the
Meeting, and is not subsequently revoked, the shares represented will be voted in accordance with
the instructions marked thereon. 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 signing and delivering
a later-dated proxy or a written notice of revocation to the Secretary of the Company.
Stockholders attending the Meeting may also revoke their proxies by voting in person at the
Meeting. Attendance at the Meeting will not itself be deemed to revoke a proxy unless a stockholder
gives affirmative notice at the Meeting that such stockholder intends to revoke the proxy and vote
in person.
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Quorum and Approval
The presence in person or by proxy of the holders of a majority in interest of the shares of
Common Stock issued and outstanding on the Record Date and entitled to vote is required to
constitute a quorum at the Meeting. The stockholders entitled to vote that are present in person
or by proxy at the Meeting may adjourn the Meeting without additional notice unless a new record
date is or must be fixed. At any adjourned Meeting at which a quorum is present, any business may
be transacted that might have been transacted at the Meeting as originally scheduled.
Abstentions and broker non-votes will count is determining whether a quorum is present at the
Meeting and any adjourned Meeting. A broker non-vote occurs if the broker or other nominee who
holds shares represented by a proxy has not received instructions with respect to a particular
proposal and does not have discretionary authority with respect to such proposal. As a result of
recent rule changes, most brokers no longer have discretionary authority to vote for directors,
including in uncontested elections.
The affirmative vote of a plurality of the votes cast at the Meeting by the shares entitled to
vote thereon is required to elect a director. The affirmative vote of the holders of a majority of
the shares of Common Stock voting in person or by proxy at the Meeting and entitled to vote shall
be required for the ratification of the selection of the independent registered public accounting
firm. With respect to both proposals, abstentions and broker non-votes will not be included in the
totals, and will have no effect on the outcome of the vote.
Other Matters
The Board of Directors knows of no matters to be presented for consideration at the Meeting
other than as set forth in this Proxy Statement. 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 the
Company will be voted with respect thereto in accordance with the judgment of the persons named as
proxies.
No director, executive officer or nominee for director, nor any associate of any of the
foregoing, has any substantial interest, direct or indirect, by security holdings or otherwise, in
any matter to be acted upon at the Meeting (other than elections to office).
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PROPOSAL I. ELECTION OF DIRECTORS
The business corporation statute of Massachusetts requires, unless a company opts out, that
the terms of directors of public companies be staggered by dividing the number of directors into
three groups, as nearly equal in number as possible, with the number of directors subject to such
requirement being fixed by a vote of the board. The Companys Board of Directors currently
consists of four directors. Pursuant to the statute and the Companys By-laws, the members of the
Companys Board of Directors are divided into three classes, designated Class I, Class II and Class
III, each serving staggered three-year terms. The term of the Class I Director expires at the
Meeting; the term of the Class II Director expires at the 2011 Annual Meeting of Stockholders; and
the term of the Class III Directors expires at the 2012 Annual Meeting of Stockholders.
Directors elected by the stockholders at an annual meeting to succeed those whose terms expire
are of the same class as the directors they succeed and are elected for a term to expire at the
third annual meeting of stockholders after their election and until their successors are duly
elected and qualified. Vacancies in the Board, including a vacancy resulting from an enlargement
of the Board of Directors, shall be filled by the affirmative vote of a majority of the remaining
directors then in office, even though less than a quorum. Any director so elected holds office for
the remainder of the full term of the class of directors in which the vacancy occurred or the new
directorship was created and until the directors successor shall have been elected and qualified.
Nominees for Directors
One director is to be elected at the Meeting to fill the term of the Class I director that
expires at the Meeting. The Board of Directors, as recommended by its Compensation, Nominating and
Governance Committee, has nominated Mitchell B. Briskin for election as the Companys Class I
Director. Mr. Briskin is currently and has been a director of the Company since 1998 and has
consented to being named in this Proxy Statement and to serve if elected. If elected, the nominee
will hold office until the 2013 Annual Meeting of Stockholders and until his successor is duly
elected and qualified. The Board of Directors knows of no reason why 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 persons or for fixing the number of directors at a lesser number.
The affirmative vote of a plurality of the votes cast at the Meeting by the shares entitled to
vote thereon is required to elect a director. Thus, abstentions, broker non-votes and votes
withheld will not be included in the totals and will have no effect on the outcome of the vote.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR
THE ELECTION OF THE NOMINEE.
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Members of the Board of Directors, Nominees and Executive Officers
The following table sets forth the name and address of each director, nominee and executive
officer of the Company, the year each current director first became a director, and the age and
positions currently held by each such individual with the Company. The following table is as of
December 11, 2009.
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Mitchell B. Briskin
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1998 |
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Class I Director |
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Robert T. Lessard
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1997 |
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Class II Director |
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Carl H. Guild, Jr.
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1997 |
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Class III Director,
Chairman of the
Board, Chief
Executive Officer and
President |
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Thomas E. Peoples
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1998 |
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61 |
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Class III Director |
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Non-Director Officers |
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Michael P. Malone
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Chief Financial
Officer, Treasurer
and Assistant
Secretary |
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The address of Messrs. Briskin, Lessard, Guild, Peoples and Malone is c/o Technical
Communications Corporation, 100 Domino Drive, Concord, Massachusetts 01742. |
Directors and Nominees
Mitchell B. Briskin. Mr. Briskin is a Managing Director at Stonebridge Associates, LLC, an
investment bank, where he has worked since 1999. Formerly, Mr. Briskin was a Principal at Concord
Investment Partners, a private equity investment group, from 1997 to 1999. From 1996 to 1997, Mr.
Briskin attended Harvard Business School. From 1990 to 1995, Mr. Briskin was General Manager at
General Chemical Corporation; previously, he was a lawyer with Patterson, Belknap, Webb & Tyler LLP
in New York, New York.
Robert T. Lessard. Mr. Lessard was employed in a variety of management positions from 1966
through 1995 at the U.S. National Security Agency, Department of Defense. During his final two
years at the NSA, Mr. Lessard was the Group Chief in the Operations Directorate responsible for
communications and cryptographic technology. Since his retirement in 1995, he has represented the
Director of the NSA on several special projects.
Carl H. Guild, Jr. Mr. Guild has been President and Chief Executive Officer of the Company
since 1998 and Chairman of the Board of Directors since 2001. He was also Vice-Chairman of the
Board from 1998 to 2001 and Chairman in 1998, and was an independent consultant to the Company from
1997 to 1998. From 1993 to 1997, he was a Senior Vice President with Raytheon Engineers and
Constructors, Inc., a former unit of Raytheon Company. Mr. Guild serves as President and Chief
Executive Officer of the Company pursuant to an Employment Agreement (as amended) with the Company,
which agreement is summarized under Employment Agreements in the Compensation section below.
- 4 -
Thomas E. Peoples. Mr. Peoples is Vice President and Managing Director of The Spectrum Group,
a Washington, DC area-based consulting firm with which he has been affiliated since 2004, and also
currently serves as Managing Director of Executive Counselors, LLC, a consulting company he
established in Virginia in 2005. Between 2001 and 2004, Mr. Peoples was retired. From 1999 to
2001, Mr. Peoples was the Senior Vice President for International and Washington Operations of
Gencorp, Inc., a publicly-held manufacturer of automotive, polymer, aerospace, and defense
products. From 1992 to 1999, Mr. Peoples was a Vice President of Aerojet, a privately-held
aerospace and defense contractor. Prior to 1992, Mr. Peoples served as Manager of Business
Development for Smart Munitions Programs at Raytheon Company. He is also a member of The Gerson
Lehman Council of Advisors in New York and a former Board member and Treasurer of the National
Guard Youth Foundation. Mr. Peoples was also an appointed member of the U.S. Department of Defense
Science Board from 2000 to 2002.
Officers
Michael P. Malone. Mr. Malone, Chief Financial Officer, Treasurer and Assistant Secretary,
joined the Company in 1998 as Director of Finance and Treasurer and became Chief Financial Officer
in 2000. From 1997 to 1998, he was the Controller at Vasca, Inc., a privately-held medical device
company. Prior to 1997, Mr. Malone was with ZOLL Medical Corporation, a publicly-traded medical
device company, for five years as its Controller and Treasurer. Mr. Malone and the Company are
parties to an Employment Agreement effective February 12, 2001, which agreement is summarized under
Employment Agreements in the Compensation section below.
Corporate Governance
The Board of Directors is currently composed of four members, each of whom, with the exception
of Mr. Guild, the Board has determined is an independent director as that term is defined in the
rules and regulations of the Nasdaq Stock Market (Nasdaq), including Rule 5605, and Rule 10A-3 of
the Securities Exchange Act of 1934, as amended (the Exchange Act). The Company does not utilize
any other definition or criteria for determining the independence of a director or nominee, and no
other transactions, relationships, or other arrangements exist to the Boards knowledge or were
considered by the Board in determining any directors or nominees independence.
The Board of Directors held four meetings during the fiscal year ended September 26, 2009 and
acted by written consent in lieu of a meeting once. Each director 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
that were held during fiscal year 2009. The Board of Directors currently has two committees, the
Audit Committee and the Compensation, Nominating and Governance Committee, each as described below.
Audit Committee
The Audit Committee of the Board, of which Mr. Briskin is the Chairman and sole current
member, held four meetings during fiscal year 2009. The Audit Committees primary function is to
assist the Board of Directors in fulfilling its oversight responsibilities by reviewing the
financial reports and other financial information of the Company, reviewing the Companys system of
internal controls regarding finance and accounting and the Companys auditing, accounting and
financial reporting processes, serving as an independent and objective party to
monitor the Companys financial reporting process and internal control system, reviewing and
appraising the audit efforts of the Companys independent registered public accounting firm, and
providing an open avenue of communication among the independent accountants, financial and senior
management, and the Board of Directors.
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The Audit Committee acts pursuant to an Audit Committee Charter, a copy of which is posted on
the Companys website at http://www.tccsecure.com/investors. The Audit Committees charter
requires that the committee review and update the charter periodically as conditions dictate. In
August 2009, the Audit Committees charter was reviewed and its contents reaffirmed.
The Board of Directors has determined that Mr. Briskin satisfies the definition of audit
committee financial expert as promulgated by the Securities and Exchange Commission (the
Commission) by virtue of his educational and work experience as described above. Mr. Briskin is
also independent under Nasdaqs listing standards for directors and Audit Committee members under
Rules 5605(b) and (c).
Compensation, Nominating and Governance Committee
The Companys Compensation, Nominating and Governance Committee (the Governance Committee)
consists of Messrs. Lessard (Chairman), Briskin and Peoples, and held four meetings during the 2009
fiscal year. As noted above, the Board has determined that each of these individuals satisfies
applicable independence requirements for directors as well as members of such committee under Rules
5605(d) and (e).
The primary function of the Governance Committee is to assist the Board of Directors in
discharging its responsibilities with respect to the Companys compensation and benefit programs,
the organization and membership of the Board, and corporate governance matters. The Governance
Committees goal is to assure that the composition, practices and operation of the Board contribute
to value creation and effective representation of the Companys stockholders, and to play a
leadership role in shaping the Companys corporate governance.
The Governance Committee acts pursuant to the Compensation, Nominating and Governance
Committee Charter, a copy of which is posted on the Companys website at
http://www.tccsecure.com/investors. The Governance Committees charter requires that the committee
review and reassess the adequacy of the charter annually and recommend any proposed changes to the
Board for approval. In August 2009, the Governance Committees charter was reviewed and its
contents reaffirmed. The Governance Committee must also annually evaluate its own performance.
In August 2004, the Board approved policies and procedures for the Governance Committee with
respect to the nomination of candidates to the Board and any committees thereof. These policies
and procedures are available on the Companys website at http://www.tccsecure.com/investors and are
summarized below, and have not been changed since adoption.
Nomination Policies and Procedures
The Governance Committee will accept for consideration any candidate properly recommended by a
stockholder; acceptance of a recommendation for consideration does not imply the committee will
nominate or recommend for nomination the proposed candidate.
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Stockholders who wish to nominate qualified candidates to serve as directors must notify the
Company in writing, by notice delivered to the attention of the Secretary of the Company at the
address of the Companys executive offices as set forth in the Companys periodic reports as filed
with the Commission, of a proposed nominee. Submissions may be by mail, courier or personal
delivery. E-mail submissions will not be considered. In order to ensure meaningful consideration
of such candidates, notice must be received not later than 120 calendar days prior to the first
anniversary of the date of the proxy statement for the prior years annual meeting of stockholders.
The notice must set forth as to each proposed nominee:
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the nominees name, age, business address and, if known, residence address, |
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his or her principal occupation or employment and business experience, |
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the number of shares of stock of the Company, if any, which are beneficially
owned by such nominee, and |
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any other information concerning the nominee that must be disclosed as to
nominees in proxy solicitations pursuant to applicable law, including but not
limited to any arrangements or agreements regarding the proposed candidates
nomination, all relationships between the proposed nominee and the recommending
stockholder and the Company, and all transactions between such parties. |
The notice must also set forth with respect to the stockholder giving the notice the name and
address, as they appear on the Companys books, of such stockholder, the number of shares of the
Company that are owned beneficially or of record by such stockholder and the time period such
shares have been held.
Submissions received through this process will be forwarded to the Governance Committee for
review. Only those submissions that comply with these procedures and those nominees who satisfy
the qualifications determined by the Governance Committee for directors of the Company will be
considered.
When considering candidates, the Governance Committee strives to achieve a balance of
knowledge, experience and accomplishment such that the Companys Board reflects a diversity of
talent, age, skill, expertise and perspective. While there are no set minimum requirements, a
candidate should:
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be intelligent, thoughtful and analytical, |
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possess superior business-related knowledge, skills and experience, |
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reflect the highest integrity, ethics and character, and value such qualities
in others, |
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have excelled in both academic and professional settings, |
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demonstrate achievement in his or her chosen field, |
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be free of actual or potential conflicts of interest, |
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be familiar with regulatory and governance matters, |
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have the ability to devote sufficient time to the business and affairs of the
Company, and |
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demonstrate the capacity and desire to represent, fairly and equally, the best
interests of the Companys stockholders as a whole. |
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In addition to the above criteria (which may be modified from time to time), the Governance
Committee may consider such other factors as it deems in the best interests of the Company and its
stockholders, including a candidates independence, financial sophistication and special
competencies.
The Governance Committee identifies potential candidates through referrals and
recommendations, including by incumbent directors, management and stockholders, as well as through
business and other organizational networks. The Governance Committee may retain and compensate
third parties, including executive search firms, to identify or evaluate, or assist in identifying
or evaluating, potential director nominees.
Current members of the Board with the requisite skills and experience are considered for
re-nomination, balancing the value of the members continuity of service and familiarity with the
Company with that of obtaining a new perspective, and considering each individuals contributions,
performance and level of participation, the current composition of the Board, and the Companys
needs. If any existing members do not want to continue in service or if it is decided not to
re-nominate a director, new candidates are identified in accordance with those skills, experience
and characteristics deemed necessary for new nominees, and are evaluated based on the
qualifications set forth above. In every case, the Governance Committee meets (in person or
telephonically) to discuss each candidate, and may require personal interviews before final
approval. Once a slate is selected, the Governance Committee presents it to the full Board.
The Governance Committee does not currently, and does not intend in the future, to
differentiate between or alter the manner in which it evaluates candidates based on the
constituency (including stockholders) that proposed the candidate.
For a description of the Governance Committees role in evaluating and establishing
compensation programs, policies and levels for the Company, see the Compensation Discussion and
Analysis and Compensation sections below.
Stockholder Communications and Director Attendance at Annual Stockholder Meetings
The Board welcomes communications from stockholders and has adopted a procedure for receiving
and addressing such communications. Stockholders may send written communications to the entire
Board or individual directors, addressing them to Technical Communications Corporation, 100 Domino
Drive, Concord, MA 01742, Attention: Chief Financial Officer. All such communications will be
forwarded to the full Board of Directors or to any individual director or directors to whom the
communication is directed unless the communication is clearly junk mail or a mass mailing, a
business solicitation, advertisement or job inquiry, or is unduly hostile, threatening, illegal, or
similarly inappropriate, in which case the Company has the authority to discard the communication
or take appropriate legal action regarding the communication.
Recognizing that director attendance at the Companys annual meetings of stockholders can
provide stockholders with an opportunity to communicate with members of the Board of Directors, it
is the policy of the Board of Directors to strongly encourage, but not require, the members of the
Board to attend such meetings. All four of the directors attended the 2009 Annual Meeting of
Stockholders.
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The Companys policies regarding stockholder communications and director attendance (which may
be modified from time to time) can be found on the Companys website at
http://www.tccsecure.com/investors.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires the Companys officers, directors, and persons who
beneficially own more than 10% of a registered class of the Companys equity securities to file
reports of ownership and changes in ownership with the Commission. Officers, directors and
greater-than-10% stockholders are required by regulation to furnish the Company with copies of all
Section 16(a) reports they file.
Based solely on the Companys review of the copies of such reports and any amendments thereto
furnished to the Company during and with respect to the Companys 2009 fiscal year, or written
representations from certain reporting persons that they were not required to file, the Company
believes that during fiscal year 2009, its executive officers, directors, and greater-than-10%
stockholders complied with all applicable Section 16(a) filing requirements.
Certain Relationships and Related Person Transactions; Legal Proceedings
David A. White, the Companys Secretary, is a member of a law firm that provides legal
services to the Company. Fees paid to Mr. Whites law firm were approximately $55,000 for fiscal
year 2009 and approximately $75,000 for fiscal year 2008. There were no other transactions during
fiscal years 2009 or 2008, and there are no currently proposed transactions, to which the Company
was or is to be a participant and in which any related person had or will have a direct or indirect
material interest. There are no family relationships among the directors, executive officers or any
nominee therefor, and to the Companys knowledge no arrangements or understandings exist between
any director or nominee and any other person pursuant to which such director or nominee was or is
to be selected.
There are no material proceedings to which a director, executive officer or nominee is a party
adverse to the Company or its subsidiary or has a material interest adverse to the Company or its
subsidiary, nor to the Companys knowledge are there any proceedings or events material to an
evaluation of the ability or integrity of the Companys directors, nominees or executive officers.
Code of Ethics
The Company has adopted a Code of Business Conduct and Ethics, which applies to all of its
employees, officers and directors. A copy of this code can be found on the Companys website at
http://www.tccsecure.com/investors.
- 9 -
REPORT OF THE AUDIT COMMITTEE
The following is the report of the Audit Committee with respect to the Companys audited
financial statements for the fiscal year ended September 26, 2009.
The Audit Committee has reviewed and discussed the fiscal year 2009 audited financial
statements with management of the Company. The Audit Committee has discussed with the Companys
independent registered public accounting firm, Caturano and Company, P.C., the matters required to
be discussed by Statement on Auditing Standards No. 61 (as amended) as adopted by the Public
Company Accounting Oversight Board; received and reviewed the written disclosures and the letter
from the independent registered public accounting firm required by applicable requirements of the
Public Company Accounting Oversight Board regarding the independent registered public accounting
firms communications with the Audit Committee concerning independence; and discussed with the
independent registered public accounting firm its independence and any relationships that may
impact its objectivity and independence.
Based upon the review and discussions referred to above, the Audit Committee recommended to
the Board of Directors that the audited financial statements for the fiscal year ended September
26, 2009 be included in the Companys Annual Report on Form 10-K for filing with the Securities and
Exchange Commission. Mr. Briskin is the Chairman and sole member of the Audit Committee, and is
independent under the rules of the Nasdaq Stock Market.
Audit Committee
Mitchell B. Briskin
- 10 -
COMPENSATION DISCUSSION AND ANALYSIS
As noted above, one role of the Governance Committee of the Board of Directors, comprised
solely of non-employee, independent directors, is to assist the Board with discharging its
responsibilities relating to the compensation of TCCs employees, officers and directors, and the
development and administration of the Companys compensation and benefit programs.
The Governance Committee operates under a written charter, which was recently reviewed and
reaffirmed by the full Board of Directors, available at http://www.tccsecure.com/investors.
As set forth in the charter, the committees authority and responsibilities with respect to
compensation include:
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For executives, to assist with the development of an executive compensation program
supportive of the achievement of the Companys strategic goals and objectives, to
review and approve the goals and objectives relevant to the compensation of the Chief
Executive Officer of the Company, including an annual evaluation of the CEOs
performance and the establishment of the CEOs compensation and other material terms
of employment, and to review and approve senior management team member compensation; |
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For directors, to annually evaluate the appropriate level and form of compensation
for members of the Board and its committees, and to recommend changes to the Board
when appropriate; and |
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For employees generally, to monitor and review all general compensation strategies
and programs, including equity incentives and benefit programs. |
The following discussion provides information about the Companys compensation plans and
programs generally, as well as compensation awarded to, earned by or paid to our named executive
officers pursuant to applicable Commission rules and regulations. For additional information,
please see the Compensation section that follows this discussion and analysis.
Compensation Philosophy and Objectives
The philosophy underlying the Companys compensation plans is to provide compensation that
rewards both individual and organizational performance and align such compensation with shareholder
interests. The Company aims to make executive compensation sensitive to Company performance, which
is defined in terms of revenue growth and profitability. Compensation also must be competitive,
thereby enabling the Company to attract, retain and motivate highly-qualified individuals who
contribute to the Companys success, and reflective of the Companys financial position.
Procedure
Compensation decisions are made annually and are tied to the Companys fiscal year-end. For
each employee, a performance evaluation is conducted by his or her supervisor, the results of which
are shared with the employee. The evaluation encompasses a review of the employees individual
performance over the course of the fiscal year, and includes recognition of the achievement by TCC
of its strategic objectives and priorities. Compensation decisions for non-officer employees are
made after the results of the performance evaluations have been
considered and an informal analysis is completed that considers the goals of market competitiveness
and enhancement of shareholder value. No upward adjustment is made to an employees compensation if
the individuals performance does not merit, or if the Companys financial condition and
performance do not support, an adjustment.
- 11 -
The Governance Committee does not make individual compensation decisions for non-officer
employees. Rather, our Chief Executive Officer sets compensation levels and presents the aggregate
information to the Governance Committee for its information. Bonuses are typically paid in
December, and salary increases are effective October 1 and paid retroactively before the end of the
calendar year.
Compensation packages for our named executive officers are analyzed and discussed individually
by the Governance Committee, and decisions are made once the Governance Committee has obtained all
of the information it deems necessary. Information that is considered in making named executive
officer compensation decisions includes information provided to the Governance Committee via
presentations made to the committee by the named executive officers themselves. Such presentations
include highlights of achievements and milestones met by the officers in the fiscal year and the
results of each individuals performance self-evaluation. The Governance Committee also considers
the Companys financial condition and performance.
The accounting and tax treatment of compensation decisions generally have not been material
factors in determining the amount and type of compensation given to executive officers, other than
to balance the potential cost to the Company with the benefit or value to the executive. The tax
and accounting treatment of different compensation arrangements may play a greater role in the
decision-making process in the future. The effects on Section 409A of the Internal Revenue Code of
1986, as amended (the Code) also may be considered.
The Governance Committee has not to date employed any compensation consultants to assist it
with compensation decisions, although it is authorized by its charter to do so and reserves the
right to engage such consultants when and if deemed necessary or advisable. The Governance
Committee also has the authority to form, and delegate any of its responsibilities to,
subcommittees as it deems appropriate, although to date it has not done so.
Compensation Components
The components of compensation provided to named executive officers (as well as non-officer
employees) typically include base salary, annual discretionary bonuses and equity incentives. In
prior years, Company executives were provided only limited or no bonus compensation, annual salary
increases and equity grants, in each case due to the Companys financial performance. Positive
business results and prospects in the last few years have, however, enabled the Company to award
bonuses to its named executive officers for fiscal years 2009 and 2008, as discussed herein.
The Company also has in place retirement and change of control arrangements with its two named
executive officers, who also participate in the group benefits offered to all employees, such as
medical and life insurance.
- 12 -
Base Salary
Base salary levels for the Companys named executive officers are based on an informal review
of compensation for competitive positions in the market and reflect job responsibilities
and skills, level of experience, individual performance, judgments as to past and future
contributions to the Company, and the Companys compensation budget. Specific weight is not given
to any particular factor when establishing base salaries, although most weight is typically given
for individual performance. The Companys practice has been to review base salaries at the fiscal
year-end as noted above, although in unusual cases salaries may be reviewed more frequently if
circumstances dictate.
Annual Bonuses
Bonuses, when paid, are designed to tie awards to individual performance and motivate and
reward employees for their contributions to the Company. A number of factors are considered in
determining whether annual incentive awards should be paid, most importantly the achievement by the
Company of specified financial objectives and the achievement by the employees of individual
objectives. Recognition of individual performance and accomplishment is based on a subjective
analysis of each individuals performance; recognition of Company performance is based on an
evaluation of specified measures of corporate performance.
The Company has an Executive Bonus Program for the benefit of key management employees, which
traditionally has included only TCCs Chief Executive Officer and Chief Financial Officer, and an
informal bonus program for all other employees. For named executive officers, an initial plan is
set and approved by the Board of Directors at the beginning of the year and bonus awards are
determined out of such plan at year-end based on Company and individual performance. For
non-officer employees, the budget is established at year-end based on the Companys financial
performance during the year, and individual awards are determined through a consultative process
involving an employees supervisor and our Chief Executive Officer.
Under the Executive Bonus Program for 2009, the percentage of bonus opportunity and
performance milestones were as follows for both named executive officers:
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up to 15% of the bonus opportunity was tied to a backlog milestone, defined as
increasing backlog to a value of $8.5 million or greater during the 2009 fiscal
year; |
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up to 15% of the bonus opportunity was tied to the preparation of a strategic
investment plan (5%), identifying potential investment banks or business
development consultants (5%) and identifying potential investment opportunities
(5%) during the 2009 fiscal year; and |
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up to 40% of the bonus opportunity was tied to a profit (net income) milestone,
defined as achieving net income of at least $1,200,000 for the 2009 fiscal year. |
For Mr. Guild, our Chief Executive Officer, the remaining 30% of his bonus opportunity was
tied to the number of customers who entered into purchase contracts with the Company having a
specified minimum contract value. For Mr. Malone, our Chief Financial Officer, 30% of his bonus
opportunity was based on his achievement of additional responsibilities outlined by Mr. Malone and
evaluated by Mr. Guild and the Governance Committee.
Equity Incentives
As with base salary and bonus determinations, equity compensation awards are determined on an
informal, annual basis. An important objective of this component of compensation is to strengthen
the relationship between the long-term value of the Companys stock price and the potential
financial gain for employees, as well as retention of personnel. Historically the Company has
awarded employee stock options, which provide recipients the
opportunity to purchase shares of our Common Stock at a fixed price, and become valuable only
if the trading price of the Common Stock increases. The recipient is therefore motivated to remain
with the Company until the options vest and motivated to improve individual performance in support
of improved Company performance.
- 13 -
In selecting employees eligible to receive equity compensation grants (whether at the initial
hire date or through periodic grants) and determining the size of such grants, a variety of factors
are considered, including the job and responsibility level of the employee and past, current and
prospective services rendered, or to be rendered, to the Company by the employee. Determination of
the employees eligible to receive awards and the size of such awards is based on a subjective
analysis by the Governance Committee of each individuals position within the Company, his or her
performance and his or her growth potential and that of the Company.
The Company administers three plans that provide for the grant of equity incentive
compensation to officers, directors and employees. The Technical Communications Corporation 2005
Non-Statutory Stock Option Plan, as amended (the 2005 Plan), was adopted by the Board of
Directors in May 2005 and permits the grant of non-statutory stock options to purchase up to
200,000 shares of Common Stock to employees, directors and consultants. The stated purpose of the
2005 Plan is to promote the success and interests of the Company and its stockholders by permitting
and encouraging employees, directors and consultants of the Company to obtain a proprietary
interest in the Company or its subsidiaries through the grant of non-statutory options to purchase
shares of the Company. Determinations as to recipients of awards, option term, vesting period and
exercise price are made by the Goevernance Committee in its discretion. As of December 11, 2009,
the Company had issued a total of 156,500 options pursuant to the 2005 Plan and 43,500 shares were
still available for awards. If an option expires, terminates or becomes unexercisable for any
reason without being exercised in full, the unpurchased shares become available for future grant
under the 2005 Plan, as do any shares that are retained or withheld by the Company upon exercise of
an option in order to satisfy the exercise price for such option or any withholding taxes due with
respect to such exercise.
Under the Technical Communications Corporation 2001 Stock Option Plan, as amended (the 2001
Plan), the Company may grant non-qualified and incentive stock options to its employees, officers,
directors and consultants to purchase up to 350,000 shares of Common Stock. The stated purpose of
the 2001 Plan is to attract and retain the best available personnel for positions of substantial
responsibility, provide additional incentive to recipients, and promote the success of the
Companys business. According to the 2001 Plan, the exercise price of each incentive option must
equal or exceed the market price of the Companys stock on the date of grant, but may be set at any
price for non-qualified options. The maximum term for any option granted under the 2001 Plan is
ten years; vesting periods are at the Boards discretion and typically range between one and five
years. As of December 11, 2009, no shares remained available for awards under the 2001 Plan,
although shares may become available for grants as options expire or become unexercisable for any
reason without being exercised in full.
Stock option awards are still outstanding under the Technical Communications Corporation 1991
Stock Option Plan, as amended (the 1991 Plan), although such plan expired in 2001 and no new
awards can be made thereunder. The 1991 Plan provided for the issuance of up to 350,000 shares of
Common Stock upon exercise of incentive and non-statutory options granted to employees, consultants
and directors of the Company. The stated purpose of the 1991 Plan was the same as stated above for
the 2001 Plan. The terms of options granted were set by the Board, up to a maximum of 10 years for
incentive stock options. The Board also determined the exercise price of options granted under the
1991 Plan, subject to certain restrictions, including
the requirement that incentive stock options be granted at 100% of the fair market value on
the date of grant.
- 14 -
As of December 11, 2009, there were an aggregate of 900,000 shares authorized under these
plans, of which 492,700 were outstanding and 43,500 were available for grant.
In addition to its stock option plans, the Company established the Technical Communications
Corporation 1995 Employee Stock Purchase Plan (the Purchase Plan), which was available to all
employees who had at least one year of continuous employment with TCC, worked more than 20 hours
per week or more than five months per year, and whose ownership did not exceed 5% as a result of
participation in the Purchase Plan. The plan allowed employees to purchase, through the grant of
options, Common Stock of the Company at a discounted price through payroll withholdings. The
purchase price was set at 85% of the lesser of the market value of the Companys Common Stock as of
the grant date or the exercise date. For executive officers, the purchase price was set at the
average of the market value of the Companys Common Stock as of the grant date and the exercise
date. Market value was defined, as of a particular date, as the last sale price of our Common
Stock if quoted on an exchange or, if not so quoted, the average of bid and asked prices for the
Common Stock last quoted in the over-the-counter market. The Purchase Plan had 100,000 shares
authorized for distribution, of which 44,268 were still available for issuance as of September 30,
2006. The Purchase Plan expired on September 30, 2006 and there is no current intention to renew
such plan.
Retirement, Severance, Change in Control and Similar Compensation
The Company does not offer or have in place any formal retirement, severance or similar
compensation programs (other than its 401(k) plan). Rather, the Company individually negotiates
with those employees for whom retirement, severance or similar compensation is deemed necessary.
Carl H. Guild, Jr.
Pursuant to his employment agreement, upon termination of his employment without cause by
the Company or upon his death or disability, Mr. Guild is entitled to receive severance pay in an
amount equal to the greater of six months base salary at the then-current level or the balance of
the term of the agreement, less applicable taxes and other required withholdings and amounts owed
to the Company, and including all health and other benefits to which he had been entitled while
employed by the Company at the Companys expense for at least six months. If the Company determines
not to renew Mr. Guilds employment agreement, he is entitled to an amount equal to six months
base salary at the then-current level, less applicable taxes and other required withholdings and
amounts owed to the Company, and the continuation of all health and other benefits to which he had
been entitled while employed by the Company at the Companys expense for at least six months.
Cause is defined as Mr. Guilds failure or refusal to perform the services specified in his
employment agreement or to carry out any lawful directions of the Board; conviction of a felony;
fraud or embezzlement involving the assets of the Company, its customers, suppliers or affiliates;
gross negligence or willful misconduct; or breach of any term of his employment agreement.
Mr. Guild may terminate his employment agreement upon prior written notice to the Company.
Upon his voluntary termination, he is entitled to severance pay defined as his base salary at the
then-current level, less applicable taxes and other required withholdings and amounts
owed to the Company equal to six months if the termination date is on the renewal date of
the agreement or the lesser of six months or the balance of the term of the agreement if the
termination date is before such renewal date.
- 15 -
In the event of a change in control of the Company where Mr. Guild resigns or is terminated
without cause by the Company within 24 months after such an event, any unvested options held shall
automatically vest and become immediately exercisable. In addition, Mr. Guild would be entitled to
receive severance pay in an amount equal to 24 months base salary at the then-current level, less
applicable taxes and other withholdings and amounts due and plus all accrued and unpaid expenses
and vacation time. In the event that any payment to be received pursuant to such change in control
or the value of any acceleration right in any Company stock options held in connection with the
change in control of the Company would be subject to an excise tax pursuant to Section 4999 of the
Code, whether in whole or in part as a result of being an excess parachute payment within the
meaning of such terms in Section 280G(b) of the Code, the amount payable will be increased (grossed
up) to cover the excise tax liability due under Section 4999 of the Code, if otherwise permitted
under the Code.
Change in control is defined as the occurrence of any one of the following: (a) any person
or entity, including a group as defined in Section 13(d) of the Exchange Act (other than the
Company, a wholly-owned subsidiary of the Company, or any employee benefit plan of the Company or
its subsidiaries), becoming the beneficial owner of the Companys securities having 51% or more of
the combined voting power of the then-outstanding securities of the Company that may be cast for
the election of directors of the Company; or (b) as the result of, or in connection with, any cash
tender or exchange offer, merger or other business combination, sale of assets or contested
election or any combination of the foregoing transactions, less than a majority of the combined
voting power of the then-outstanding securities of the Company or any successor corporation or
entity entitled to vote generally in the election of directors of the Company or such other
corporation or entity after such transaction, are held in the aggregate by holders of the Companys
securities entitled to vote generally in the election of directors of the Company immediately prior
to such transaction; or (c) the approval of the stockholders of the Company of a plan of
liquidation.
Michael P. Malone
Under Mr. Malones employment agreement, the Company has the right, upon written notice, to
terminate his employment (a) immediately at any time for cause or (b) at any time without
cause. Cause is defined as his failure or refusal to perform the services specified in his
employment agreement or to carry out any lawful directions of the Board; conviction of a felony;
fraud or embezzlement involving the assets of the Company, its customers, suppliers or affiliates;
gross negligence or willful misconduct; inability for a continuous period of at least 180 days in
the aggregate during any 360-day period to perform his duties due to a physical or mental
disability incapable of reasonable accommodation under applicable law; or breach of any term of his
employment agreement.
Upon termination of employment without cause by the Company, Mr. Malone is entitled to receive
severance pay in an amount equal to the greater of six months base salary at the then-current
level or his base salary for the balance of the term of the agreement. If the Company determines
not to renew Mr. Malones employment agreement, he is guaranteed, at the Companys option, at will
employment for six months or severance pay in an amount equal to six months base salary at the
then-current level. In either case, such amounts shall be less applicable taxes and other required
withholdings and amounts owed to the Company, plus all accrued but unpaid expenses and vacation
time.
- 16 -
In the event of a change in control of the Company where Mr. Malone resigns or is terminated
without cause by the Company within six months after such an event, any unvested options held shall
automatically vest and become immediately exercisable. In addition, Mr. Malone would be entitled to
receive severance pay in an amount equal to six months base salary at the then-current level, less
applicable taxes and other withholdings and amounts due and plus all accrued and unpaid expenses
and vacation time. In the event that any payment to be received pursuant to such change in control
or the value of any acceleration right in any Company stock options held in connection with the
change in control of the Company would be subject to an excise tax pursuant to Section 4999 of the
Code, whether in whole or in part as a result of being an excess parachute payment within the
meaning of such terms in Section 280G(b) of the Code, the amount payable to Mr. Malone will be
increased (grossed up) to cover the excise tax liability due under Section 4999 of the Code, if
otherwise permitted under the Code. Change in control in Mr. Malones employment agreement has
the same definition as that found in Mr. Guilds agreement, provided above.
No other employees receive or are entitled to receive any retirement, severance or similar
compensation.
Perquisites and Other Benefits
The Company generally does not provide its officers with these types of benefits. Messrs.
Guild and Malone have life insurance policies for which the Company pays the premium, and the
Company also typically matches up to a certain percentage of their contributions to the Companys
401(k) plan. Both of these benefits are generally available to all Company employees, subject to
certain limitations and restrictions. Messrs. Guild and Malone, like other employees, also are
entitled to participate in TCCs employee benefit plans offering group disability insurance, group
medical and hospitalization plans, and pension and profit-sharing plans.
Chief Executive Officer Compensation
Mr. Guild has been President and Chief Executive Officer of the Company since 1998 and
Chairman of the Board of Directors since 2001. His base salary for fiscal year 2009 was set at
$270,000, effective November 6, 2008. Mr. Guilds annual base salary was $246,000 for fiscal years
2008 and 2007.
Mr. Guild received a $33,750 annual performance bonus for fiscal year 2009. This bonus was
fully accrued but unpaid as of the Companys 2009 fiscal year-end, September 26, 2009, but was paid
to Mr. Guild as of December 31, 2009. Mr. Guild received a $80,000 annual performance bonus for
fiscal year 2008. This bonus was fully accrued but unpaid as of the Companys 2008 fiscal
year-end, September 27, 2008, but was paid to Mr. Guild as of December 31, 2008.
In fiscal 2009, the Board awarded Mr. Guild an option to purchase 3,500 shares of Common Stock
for his service as a director. These non-qualified options were granted on February 9, 2009 under
the 2005 Plan at an exercise price of $4.90 per share with a term of 10 years, and vested
immediately. Mr. Guild was granted options to purchase 3,500 shares in fiscal years 2008 and 2,500
shares in fiscal year 2007 for his service as a director. See Director Compensation below for
more information regarding these option grants.
- 17 -
See Retirement, Severance, Change in Control and Similar Compensation above for a
discussion of the severance payments payable to Mr. Guild under the terms of his employment
agreement (as amended).
Chief Financial Officer Compensation
Mr. Malone has been Chief Financial Officer of the Company since 2000 and Treasurer since
1998. His base salary for fiscal year 2009 was set at $150,000. Mr. Malones annual base salary
was $135,000 for fiscal year 2008, which increased to $150,000 on May 5, 2008.
Mr. Malone received a $15,750 annual performance bonus for fiscal year 2009. This bonus was
fully accrued but unpaid as of the Companys 2009 fiscal year-end, September 26, 2009, but was paid
to Mr. Malone as of December 31, 2009. Mr. Malone received a $30,000 annual performance bonus for
fiscal year 2008. This bonus was fully accrued but unpaid as of the Companys 2008 fiscal
year-end, September 27, 2008, but was paid to Mr. Malone as of December 31, 2008.
See Retirement, Severance, Change in Control and Similar Compensation above for a discussion
of the severance payments payable to Mr. Malone under the terms of his employment agreement.
Tax Considerations
Section 162(m) of the Code generally disallows a tax deduction to public companies for
compensation over $1,000,000 paid to certain employees, generally the Chief Executive Officer and
the four other most highly compensated executive officers. Qualifying performance-based
compensation is not subject to the deduction limit if certain requirements are met. In fiscal
2009, no compensation paid by the Company was nondeductible as a result of the $1,000,000
limitation. Furthermore, the Board of Directors believes that, given the general range of salaries
and bonuses for executive officers of the Company, the $1,000,000 threshold of Section 162(m) will
not be reached by any executive officer of the Company in the foreseeable future. Accordingly, the
Board has not formulated a policy to address non-qualifying compensation.
COMPENSATION
Named Executive Officers
The following tables set forth all plan and non-plan compensation awarded to, earned by or
paid to the Chief Executive Officer and Chief Financial Officer of the Company, who were the only
named executive officers of the Company during its 2009 fiscal year, for all services rendered by
such officers to the Company and its subsidiaries in all capacities for the periods presented.
- 18 -
Summary Compensation Table
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Name |
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All |
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and |
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Option |
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Other |
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Principal Position |
|
Year |
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Salary |
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Bonus |
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Awards |
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Compensation |
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Total |
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|
($) |
|
|
($) |
|
|
($) |
|
|
($) |
|
|
($) |
|
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|
|
|
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|
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Carl H. Guild, Jr. |
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2009 |
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|
$ |
268,377 |
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|
$ |
33,750 |
(1) |
|
$ |
11,068 |
(2) |
|
$ |
4,271 |
(3) |
|
$ |
317,466 |
|
President, Chief
Executive Officer
and Chairman
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2008 |
|
|
$ |
246,006 |
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|
$ |
80,000 |
(1) |
|
$ |
19,207 |
(4) |
|
$ |
4,227 |
(3) |
|
$ |
349,440 |
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Michael P. Malone |
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2009 |
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|
$ |
150,010 |
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$ |
15,750 |
(5) |
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|
$ |
3,456 |
(6) |
|
$ |
169,216 |
|
Chief Financial
Officer, Treasurer
and Asst. Secretary
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2008 |
|
|
$ |
140,166 |
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|
$ |
30,000 |
(5) |
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|
|
|
|
$ |
3,557 |
(6) |
|
$ |
173,723 |
|
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|
(1) |
|
The bonus amount of $33,750 for fiscal 2009 was accrued but unpaid at September 26,
2009, and paid as of December 31, 2009. The bonus amount of $80,000 for fiscal 2008 was
accrued but unpaid at September 27, 2008, and paid as of December 31, 2008. |
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(2) |
|
Amount represents the award on February 9, 2009 of a non-qualified option to purchase
3,500 shares of Common Stock at $4.90 per share, which vested in full on that date. Such
award was made to Mr. Guild for his service as a director of the Company. The dollar
amount presented represents the aggregate fair value of the award on the date of grant.
The fair value of the option was estimated on the date of grant using the Black-Scholes
option pricing model with the following weighted average assumptions used for grants in
fiscal 2009: dividend yield of zero, expected volatility of 80%, risk-free interest rate
of 1.79%, and expected life of five years. |
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(3) |
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Includes the Companys 25% match on the first 6% of Mr. Guilds fiscal year 401(k)
contribution. Also includes life insurance premiums paid by the Company of $558 and $852
for each of fiscal years 2009 and 2008, respectively. |
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(4) |
|
Amount represents the award on February 11, 2008 of a non-qualified option to
purchase 3,500 shares of Common Stock at $7.40 per share, which vested in full on that
date. Such award was made to Mr. Guild for his service as a director of the Company. The
dollar amount presented represents the aggregate fair value of the award on the date of
grant. The fair value of the option was estimated on the date of grant using the
Black-Scholes option pricing model with the following weighted average assumptions used
for grants in fiscal 2008: dividend yield of zero, expected volatility of 97%, risk-free
interest rate of 2.71%, and expected life of five years. |
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(5) |
|
The bonus amount of $15,750 for fiscal 2009 was accrued but unpaid at September 26,
2009, and paid as of December 31, 2009. The bonus amount of $30,000 for fiscal 2008 was
accrued but unpaid at September 27, 2008, and paid as of December 31, 2008. |
|
(6) |
|
Includes the Companys 25% match on the first 6% of Mr. Malones fiscal year 401(k)
contribution. Also includes life insurance premiums paid by the Company of $756 and $852
for each of fiscal years 2009 and 2008, respectively. |
- 19 -
For information on equity incentive awards granted to our named executive officers, see
the disclosure below. For more information on compensation generally and information on severance
and change of control rights, see the Compensation Discussion and Analysis section above.
Employment Agreements
Carl H. Guild, Jr.
The Company entered into an employment agreement with Carl H. Guild, Jr., its President and
Chief Executive Officer, effective as of November 19, 1998 and amended November 8, 2001. The
original term of the agreement expired September 30, 2000; the agreement renews automatically
thereafter for successive periods of one year unless earlier terminated or not renewed. Mr.
Guilds agreement contains provisions specifying his annual compensation, subject to an annual
merit review by the Board of Directors. The agreement also provides for performance awards to be
paid at the discretion of the Companys Board of Directors, based on an assessment of exceptional
performance. Mr. Guilds base salary was increased to $270,000 in November 2008 from $246,000 and
he received performance awards in the amount of $33,750 for fiscal 2009 and $80,000 for fiscal
2008.
For a discussion of Mr. Guilds right to severance and change in control payments, see
Retirement, Severance, Change in Control and Similar Compensation in the Compensation Discussion
and Analysis section above. For information on stock options granted to Mr. Guild, see
Outstanding Equity Awards at Fiscal Year-End below.
Michael P. Malone
The Company entered into an employment agreement with Michael P. Malone, its Chief Financial
Officer, effective as of February 12, 2001. The original term of the agreement was 12 months, and
the agreement renews automatically for successive periods of one year unless earlier terminated or
not renewed. Mr. Malones agreement contains provisions specifying his annual base salary, subject
to an annual merit review by the Board of Directors. The agreement also provides for performance
awards to be paid at the discretion of the Companys Board of Directors, based on an exceptional
performance assessment. Mr. Malones base salary was $150,000 for fiscal years 2009 and 2008 and
he received performance awards in the amount of $15,750 for fiscal 2009 and $30,000 for fiscal
2008.
For a discussion of Mr. Malones right to severance and change in control payments, see
Retirement, Severance, Change in Control and Similar Compensation in the Compensation Discussion
and Analysis section above. For information on stock options granted to Mr. Malone, see
Outstanding Equity Awards at Fiscal Year-End below.
- 20 -
Outstanding Equity Awards at Fiscal Year-End
The following table sets forth certain information regarding unexercised options, unvested
stock awards, and equity incentive plan awards for our named executive officers outstanding as of
the end of the Companys 2009 fiscal year, which date was September 26, 2009.
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Option Awards |
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|
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|
|
|
Equity |
|
|
|
|
|
|
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Incentive Plan |
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Awards: |
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Number of |
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Number of |
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Number of |
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|
Securities |
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Securities |
|
|
Securities |
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|
Underlying |
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|
Underlying |
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Underlying |
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|
Unexercised |
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|
Option |
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|
Option |
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|
|
Unexercised |
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|
Unexercised |
|
|
Unearned |
|
|
Exercise |
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|
Expiration |
|
Name |
|
Options |
|
|
Options |
|
|
Options |
|
|
Price |
|
|
Date |
|
|
|
(#) Exercisable |
|
|
(#) Unexercisable |
|
|
(#) |
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|
($) |
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Carl H. Guild, Jr. |
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|
|
|
|
|
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|
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|
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|
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25,000 |
(1) |
|
|
|
|
|
|
|
|
|
|
2.03 |
|
|
|
11/13/10 |
|
|
|
|
37,500 |
(2) |
|
|
|
|
|
|
|
|
|
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0.90 |
|
|
|
11/08/11 |
|
|
|
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60,000 |
(3) |
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|
|
|
|
|
|
|
|
0.99 |
|
|
|
05/12/13 |
|
|
|
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87,362 |
(4) |
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|
|
|
|
|
|
|
3.55 |
|
|
|
02/09/14 |
|
|
|
|
2,500 |
(5) |
|
|
|
|
|
|
|
|
|
|
3.00 |
|
|
|
05/05/15 |
|
|
|
|
2,500 |
(5) |
|
|
|
|
|
|
|
|
|
|
3.90 |
|
|
|
02/13/16 |
|
|
|
|
2,500 |
(5) |
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|
|
|
|
|
|
|
|
|
4.00 |
|
|
|
02/12/17 |
|
|
|
|
3,500 |
(5) |
|
|
|
|
|
|
|
|
|
|
7.40 |
|
|
|
02/11/18 |
|
|
|
|
3,500 |
(5) |
|
|
|
|
|
|
|
|
|
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4.90 |
|
|
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02/09/19 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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224,362 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Michael P. Malone |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,000 |
(1) |
|
|
|
|
|
|
|
|
|
|
2.03 |
|
|
|
11/13/10 |
|
|
|
|
22,500 |
(6) |
|
|
|
|
|
|
|
|
|
|
0.90 |
|
|
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11/08/11 |
|
|
|
|
30,000 |
(3) |
|
|
|
|
|
|
|
|
|
|
0.99 |
|
|
|
05/12/13 |
|
|
|
|
34,938 |
(7) |
|
|
|
|
|
|
|
|
|
|
3.55 |
|
|
|
02/09/14 |
|
|
|
|
10,000 |
(8) |
|
|
|
|
|
|
|
|
|
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3.00 |
|
|
|
11/10/15 |
|
|
|
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|
|
|
|
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|
|
|
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Total |
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107,438 |
|
|
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|
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(1) |
|
Grants on November 13, 2000 under the 1991 Plan; options have 10 year term and were
fully vested as of November 13, 2003. |
|
(2) |
|
Grant on November 8, 2001 under the 2001 Plan; options have 10 year term and were
fully vested as of November 8, 2003. |
|
(3) |
|
Grants on May 12, 2003 under the 2001 Plan; options have 10 year term and were fully
vested as of May 12, 2005. |
|
(4) |
|
Original grant made on February 9, 2004 under the 2001 Plan of an option to purchase
100,000 shares. The option was cancelled on February 7, 2005 with respect to 12,638
shares when stockholders failed at the 2005 annual stockholders meeting to approve an
amendment to the 2001 Plan to increase the number of shares authorized under such plan by
100,000 shares. Options have 10 year term and were fully vested as of February 9, 2006. |
|
(5) |
|
Grants made on May 5, 2005, February 13, 2006, February 12, 2007, February 11, 2008
and February 9, 2009 under the 2005 Plan in consideration for Mr. Guilds service as a
director. All option grants made to directors in 2005 and thereafter have a term of 10
years and vest immediately, except for the grant on February 12, 2007, which vested on
October 1, 2007. |
- 21 -
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(6) |
|
Grant on November 8, 2001 under the 2001 Plan; options have a 10 year term and were
fully vested as of November 8, 2004. |
|
(7) |
|
Original grant made on February 9, 2004 under the 2001 Plan of an option to purchase
40,000 shares. The option was cancelled on February 7, 2005 with respect to 5,062 shares
when stockholders failed at the 2005 annual stockholders meeting to approve an amendment
to the 2001 Plan to increase the number of shares authorized under such plan by 100,000
shares. Options have 10 year term and were fully vested as of February 9, 2006. |
|
(8) |
|
Grant on November 10, 2005 under the 2005 Plan; options have 10 year term and were
fully vested as of November 10, 2008. |
Equity Incentive Plans
The Company administers three plans that provide for the grant of equity incentive
compensation to officers, directors and employees: the Technical Communications Corporation 2005
Non-Statutory Stock Option Plan, 2001 Stock Option Plan and 1991 Stock Option Plan. At December
11, 2009, there were an aggregate of 900,000 shares authorized under these plans, of which 492,700
were outstanding. Generally, these plans provide for the grant of equity awards to employees,
officers, directors and consultants of the Company, in each case in amounts, at prices and subject
to such restrictions and limitations as determined by the Board of Directors. For more information
about each plan, see Equity Incentives in the Compensation Discussion and Analysis section above.
The goal of the Companys equity incentive awards is to promote the success and interests of the
Company and its stockholders by permitting and encouraging recipients to obtain a proprietary
interest in the Company or its subsidiaries through the grant and exercise of such awards, and
motivating such recipients to remain with the Company and work towards its success.
Grants in Fiscal 2009
On February 9, 2009, the Board of Directors granted to each of the members of the Companys
Board of Directors options under the 2005 Plan to purchase 3,500 shares of Common Stock, for an
aggregate 14,000 shares. These non-qualified stock options, which are exercisable at $4.90 per
share, vested immediately. The options have a term of ten years. Such grants were the only grants
of stock options made to officers and directors of the Company during the 2009 fiscal year.
Retirement, Severance and Similar Compensation
No retirement, severance or similar compensation was paid to any employee during the 2009
fiscal year. For a description of the amounts that may be payable to our named executive officers,
please see Retirement, Severance, Change in Control and Similar Compensation above in the
Compensation Discussion and Analysis section. The Company also provides to all employees a 401(k)
tax qualified plan.
Compensation of Directors
The following table sets forth all compensation of the Companys directors for the fiscal year
ended September 26, 2009. Mr. Guild, our President, CEO and Chairman of the Board of Directors,
did not receive any compensation for his services as a director during the 2009 fiscal year other
than the option grant discussed above.
- 22 -
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Fees Earned or |
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All Other |
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|
Name |
|
Paid in Cash |
|
|
Option Awards |
|
|
Compensation |
|
|
Total |
|
|
|
($) |
|
|
($) |
|
|
($) |
|
|
($) |
|
Mitchell B. Briskin |
|
$ |
16,100 |
(1) |
|
$ |
11,068 |
(2)(3) |
|
|
|
|
|
$ |
27,168 |
|
Robert T. Lessard |
|
$ |
10,500 |
(1) |
|
$ |
11,068 |
(2)(3) |
|
|
|
|
|
$ |
21,568 |
|
Thomas E. Peoples |
|
$ |
10,500 |
(1) |
|
$ |
11,068 |
(2)(3) |
|
|
|
|
|
$ |
21,568 |
|
|
|
|
(1) |
|
Includes quarterly stipend and fees paid for Board of Directors and committee meetings
attended during the fiscal year. For Mr. Briskin, also includes quarterly stipend
received for serving as Chairman of the Audit Committee. |
|
(2) |
|
Amount represents the award of 3,500 non-qualified stock options, which vested
immediately. The dollar amount presented represents the aggregate fair value of the award
on the date of grant. The fair value of the option was estimated on the date of grant
using the Black-Scholes option pricing model with the following weighted average
assumptions used for grants in fiscal 2009: dividend yield of zero, expected volatility of
80%, risk-free interest rate of 1.79%, and expected life of five years. |
|
(3) |
|
Messrs. Briskin and Lessard each had 14,500 options outstanding at the 2009 fiscal
year-end, all of which were fully vested and exercisable. Mr. Peoples had 12,000 options
outstanding at the 2009 fiscal year-end, all of which were fully vested and exercisable. |
At the August 2007 Board of Directors meeting, the Board approved a change to the fees they
are paid. Effective October 1, 2007 the quarterly stipend was increased to $1,000 and the Board
meeting fee was increased to $1,500 per meeting attended. Members of the Audit Committee were paid
$1,000 for each Audit Committee meeting attended in person, and the Audit Committee Chairman
received a quarterly stipend of $400 in addition to the stipend he received as a director of the
Company. Members of the Governance Committee received $500 for each meeting attended in person and
held other than in connection with a regularly scheduled meeting of the Board of Directors.
Commencing in 2008, in connection with each annual meeting of stockholders, directors are
granted options to purchase 3,500 shares of Common Stock at an exercise price equal to the closing
price of the Common Stock on the date of such meeting. Stock options granted to directors are
considered non-qualified and vest immediately. Each grant expires ten years after the date of
grant, except that if a director ceases to be a director, the option terminates at the earlier of
10 years from the date of grant or three years from the last day as a director. At the May 2008
Board of Directors meeting, the Board approved a one-time bonus award of $10,000 for each outside
director in recognition of the fact that each had served for at least 10 years as a director of the
Company, provided that they continue to serve as directors until the end of the 2008 fiscal year.
These awards were paid in November 2008.
TCC reimburses members of the Board of Directors for their reasonable out-of-pocket expenses
incurred in attending Board and committee meetings. The Company believes that members of the Board
of Directors received compensation commensurate with their responsibilities to the Company and
appropriate for a company of TCCs size and revenues.
- 23 -
PROPOSAL II. RATIFICATION OF SELECTION OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Audit Committee has selected the firm of Caturano and Company, P.C., independent certified
public accountants, to serve as the Companys independent registered public accounting firm for the
fiscal year ending September 25, 2010. Caturano and Company, P.C. acted as the Companys
independent registered public accounting firm for the 2009 fiscal year.
It is expected that a member of Caturano and Company, P.C. will be present at the Meeting and
will be available to respond to appropriate questions and make a statement if they so desire.
Fees
Audit Fees. The aggregate fees billed by Caturano and Company, P.C. for professional services
rendered for the audit of the Companys annual financial statements for fiscal years 2009 and 2008,
and the reviews of the financial statements included within the Companys quarterly reports during
fiscal years 2009 and 2008, were approximately $21,630 (of total audit fees for fiscal 2009 of
$56,650, the remainder of which will be billed in fiscal year 2010) and $54,590, respectively.
Audit-Related Fees. No fees were billed by Caturano and Company, P.C. for assurance and
related services that were reasonably related to the performance of its audit or review of the
Companys financial statements for fiscal years 2009 and 2008.
Tax Fees. The aggregate fees billed by Caturano and Company, P.C. for professional services
rendered for tax compliance, tax advice and tax planning for the Company for each of fiscal years
2009 and 2008 were approximately $8,000 (of total fees for fiscal 2009 of $12,360, the remainder of
which will be billed in fiscal year 2010) and $15,250, respectively. These amounts represent those
billed for tax return preparation and tax advice for the Company and its subsidiary.
All Other Fees. No fees were billed by Caturano and Company, P.C. for products and services
provided other than those otherwise described above for fiscal years 2009 and 2008.
Pre-Approval Policies
It is the policy of the Audit Committee to pre-approve the audit and permissible non-audit
services performed by the Companys independent registered public accounting firm in order to
ensure that the provision of such services does not impair such firms independence, in appearance
or fact. In fiscal year 2009, the Audit Committee pre-approved all such services performed by
Caturano and Company, P.C.
- 24 -
Ratification
Stockholder ratification of the appointment of the Companys independent registered public
accounting firm is not required by the Companys By-laws or otherwise, but is being done as a
matter of good corporate governance. If stockholders fail to ratify the selection, the Audit
Committee will reconsider this selection. Even if the selection is ratified, the Audit Committee
in its discretion may direct the appointment of a different independent registered public
accounting firm at any time during the year if it determines that such a change would be in the best
interests of the Company and its stockholders.
The affirmative vote of the holders of a majority of the shares of Common Stock voting in
person or by proxy at the Meeting and entitled to vote shall be required for the ratification of
the selection of the independent registered public accounting firm. Thus, abstentions and broker
non-votes will not be included in the totals, and will have no effect on the outcome of the vote.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE RATIFICATION
OF THE INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR FISCAL
YEAR 2010.
- 25 -
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
The following table shows, as of December 11, 2009, the beneficial ownership of Common Stock
of the Company (including directors qualifying shares) by (i) any person or group who is known to
the Company to be the beneficial owner of more than 5% of the Companys Common Stock, (ii) each of
the current directors and nominees, (iii) each of the named executive officers, and (iv) all
current directors and executive officers of the Company as a group. As of December 11, 2009, there
were 1,451,967 shares of Common Stock outstanding.
|
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|
|
|
Name and Address of |
|
Amount and Nature of |
|
|
|
|
Beneficial Owner(1) |
|
Beneficial Ownership(1) |
|
|
Percent of Class |
|
Mitchell B. Briskin |
|
|
23,027 |
(2) |
|
|
1.6 |
% |
|
|
|
|
|
|
|
|
|
Carl H. Guild, Jr. |
|
|
297,959 |
(3) |
|
|
17.8 |
% |
|
|
|
|
|
|
|
|
|
Robert T. Lessard |
|
|
24,696 |
(2) |
|
|
1.7 |
% |
|
|
|
|
|
|
|
|
|
Thomas E. Peoples |
|
|
21,890 |
(4) |
|
|
1.5 |
% |
|
|
|
|
|
|
|
|
|
Michael P. Malone |
|
|
109,940 |
(5) |
|
|
7.1 |
% |
|
|
|
|
|
|
|
|
|
All current directors and
executive officers as a group
(5 persons) |
|
|
477,512 |
(6) |
|
|
26.2 |
% |
|
|
|
(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
persons name. With respect to each person or group, percentages are calculated based
on the number of shares beneficially owned, including shares that may be acquired by
such person or group, within 60 days of December 11, 2009, upon the exercise of stock
options or other purchase rights, but not the exercise of options or warrants held by
any other person. The address of Messrs. Briskin, Guild, Lessard, Peoples and Malone
is c/o Technical Communications Corporation, 100 Domino Drive, Concord, Massachusetts
01742. |
|
(2) |
|
Includes an aggregate of 14,500 shares issuable upon the exercise of stock
options. |
|
(3) |
|
Includes an aggregate of 224,362 shares issuable upon the exercise of stock
options. Includes 73,597 shares held jointly by Mr. Guild and his wife. |
|
(4) |
|
Includes an aggregate of 12,000 shares issuable upon the exercise of stock
options. |
|
(5) |
|
Includes an aggregate of 107,438 shares issuable upon the exercise of stock
options. |
|
(6) |
|
Includes an aggregate of 372,800 shares issuable upon the exercise of stock
options. |
Change in Control
The Company knows of no arrangements that may result or have resulted in a change in control
of the Company.
- 26 -
ADDITIONAL INFORMATION
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 other matters are properly presented to
the Meeting for action, it is intended that the persons named in the enclosed proxy card will vote
on such matters in accordance with their best judgment.
Stockholder Proposals for 2011 Annual Meeting
Proposals of stockholders for inclusion in the Proxy Statement and form of proxy for the
Companys 2011 Annual Meeting of Stockholders must be received by the Company at its principal
executive offices no later than September 10, 2010, and must comply with the applicable
requirements of federal securities laws. Stockholder proposals received outside this process will
be considered untimely if the Company is not provided written notice thereof at least 45 days prior
to the first anniversary of the date of mailing of this years proxy materials, as set forth on the
first page of this Proxy Statement, or November 24, 2010. In order to curtail controversy as to
the date on which the Company received a proposal, it is suggested that proponents submit their
proposals by certified mail, return receipt requested.
Expenses and Solicitations
The cost of the solicitation of proxies will be borne by the Company. Proxies will be
solicited principally through the mail. Further solicitation of proxies from some stockholders may
be personally made by directors, officers and regular employees of the Company, by telephone,
facsimile 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, custodians, nominees, and fiduciaries to forward copies of the
Companys proxy materials to those persons for whom they hold shares to request instructions for
voting the proxies. The Company will reimburse any such persons for their reasonable out-of-pocket
costs.
Householding
Certain stockholders who share the same address may receive only one copy of this Proxy
Statement and the 2009 Annual Report to Stockholders in accordance with a notice delivered from
such stockholders bank, broker or other holder of record, unless the applicable bank, broker or
other holder of record received contrary instructions. This practice, known as householding, is
designed to reduce printing and postage costs. If you own your shares through a bank, broker or
other holder of record and wish to either stop or begin householding, you may do so, or you may
request a separate copy of this Proxy Statement or the Annual Report, either by contacting your
bank, broker or other holder of record at the telephone number or address provided in the above
referenced notice, or by contacting TCC via telephone at (978) 287-5100 or in writing at Technical
Communications Corporation, 100 Domino Drive, Concord, Massachusetts, 01742, Attention: Investor
Relations. If you request to begin or stop householding, you should provide your name, the name of
your broker, bank or other record holder, and your account information.
- 27 -
Annual Report of Form 10-K
The Company will provide, upon written request and without charge to each stockholder entitled
to vote at the Meeting, a copy of the Companys Annual Report on Form 10-K as filed with the
Securities and Exchange Commission for the fiscal year ended September 26, 2009. A request for
copies of such report should be addressed to the Company at 100 Domino Drive, Concord,
Massachusetts 01742, Attention: Investor Relations.
- 28 -
ANNUAL MEETING OF STOCKHOLDERS OF
TECHNICAL COMMUNICATIONS CORPORATION
February 8, 2010
NOTICE OF INTERNET AVAILABILITY OF PROXY MATERIAL:
The Notice of Meeting, proxy statement, proxy card and Annual Report for the 2009 fiscal year
are available at {Insert web address where material will be hosted}
Please complete, sign, date
and return your proxy card
in the envelope provided as
soon as possible.
â Please detach along perforated line and mail in the envelope
provided. â
n 10030300000000000000 7020810
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PLEASE COMPLETE, SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE. PLEASE MARK YOUR VOTE IN BLUE OR BLACK INK AS SHOWN HERE
ý
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FOR
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AGAINST
|
|
ABSTAIN |
1.
|
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Elect one Class I Director to serve on the Board of Directors for a term
of three years expiring at the 2013 Annual Meeting of Stockholders. |
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Ratify the appointment of Caturano and Company, P.C. as registered
independent public accounting firm of the Company for the fiscal year ending September 25, 2010.
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NOMINEES: |
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FOR ALL NOMINEES
WITHHOLD AUTHORITY FOR ALL NOMINEES
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Mitchell B. Briskin Class I Director
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Consider and act upon such other business and matters as may properly come before the Meeting or any adjournments thereof. |
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The Board of Directors knows of no other matters to be presented at the
Meeting.
Only stockholders of record of the Company at the close of business on December 11, 2009 are entitled to notice of and to vote at the Meeting or
any adjournments thereof.
Whether or not you expect to attend the Meeting, please complete, sign, date and return the
enclosed proxy card in the envelope provided at your earliest convenience. If you return your
proxy, you may nevertheless attend the Meeting and vote your shares in person.
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To change the address on your account, please check the box
at right and indicate your new address in the address space
above. Please note that changes to the registered name(s)
on the account may not be submitted
via this method. |
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Signature
of Stockholder
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Date:
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Signature
of Stockholder
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Date:
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Note: |
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Please sign exactly as your name or names appear in this Proxy. When shares are held
jointly, each holder must sign. When signing as executor, administrator, attorney, trustee or
guardian, please give full title as such. If the signer is a corporation, please sign full
corporate name by a duly authorized officer, giving full title as such. If signer is a
partnership, please sign in partnership name by an authorized
person. |
n
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TECHNICAL COMMUNICATIONS CORPORATION
Proxy for Annual Meeting of Stockholders February 8, 2010
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints CARL H. GUILD, JR., MICHAEL P. MALONE and DAVID A. WHITE,
and each of them, proxies of the undersigned, with full powers of substitution to each, with all
the powers the undersigned would possess if personally present, to vote all of the shares of common
stock, $0.10 par value, of TECHNICAL COMMUNICATIONS CORPORATION the undersigned is entitled to vote
at the Annual Meeting of Stockholders to be held at 10:00 a.m. local time on February 8, 2010, and
at any adjournments thereof. This proxy, if properly executed, will be voted in the manner directed
herein by the undersigned stockholder and in the discretion of the proxies named herein on any
other business which may properly come before said meeting, all in accordance with and as described
in the Notice and accompanying Proxy Statement for said meeting, receipt of which is hereby
acknowledged. If no direction is made, the proxy will be voted FOR all proposal items. Please
vote, date and sign on the reverse side, and promptly return in the enclosed envelope.
(Continued and to be signed on the reverse side)
n
14475 n