DEFA14A

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of The Securities and Exchange Act of 1934

Date of Report (Date of earliest event reported):  March 31, 2010

TECHNOLOGY RESEARCH CORPORATION

(Exact name of registrant as specified in its charter)

Florida                                                                   013763                                                                                                59-2095002

(State or other jurisdiction                                       (Commission File Number)                                                                     (IRS Employer

              of incorporation)                                                                                                                             
60;                                       Identification No.)

5250-140th Avenue North, Clearwater, Florida                                                                                                                         ;                  33760

(Address of principal executive officers)                                                                                                                                                (Zip Code)

Registrant's telephone number, including area code: (727) 535-0572

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2 below):

[_] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

[_] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17CFR 240.14a-12)

[_] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

[_] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.13e-4(c))

Item 1.01  Entry into a Material Definitive Agreement.

As previously reported in a Current Report filed on March 3, 2010, and more particularly described in Item 2.01 below, which disclosure is incorporated herein by reference, Technology Research Corporation (“TRC”) entered into an agreement to acquire 100% of the issued and outstanding shares of common stock of Patco Electronics, Inc., a Florida corporation (“Patco”) held by its stockholders (the “Selling Shareholders”), pursuant to a Stock Purchase Agreement entered into by and between TRC and Patco on March 2, 2010 (the “Purchase Agreement”).

(a)           Entry into Employment Agreement.

As more particularly described in Item 2.01 below, concurrent with TRC’s acquisition of the Patco shares, Patco has entered into an employment agreement with Roger M. Boatman.  Mr. Boatman was the founder, principal controlling shareholder and served as the principal executive officer of Patco prior to TRC’s acquisition of the Patco shares.  Prior to closing the stock purchase transaction, Mr. Boatman resigned his position as an officer and director of Patco.

Effective as of the closing date of the Patco acquisition, Patco entered into the employment agreement with Mr. Boatman, pursuant to which he has agreed to perform such duties as may be requested by the TRC Board of Directors or its authorized designee.  The term of employment is for three years, unless sooner terminated in accordance with the provisions of the employment agreement.

Under his employment agreement, Mr. Boatman’s annual salary will be $120,000 and he will be entitled to participate in any benefit plans made available to the Patco employees.  In the event that Mr. Boatman’s employment is terminated without cause or by Mr. Boatman with good reason, he will be entitled to receive the salary and insurance allowance that would have been otherwise payable for the remaining term of the agreement.  In the event that Mr. Boatman’s employment is terminated with cause or he terminates his employment without good reason, he will not be entitled to receive any salary or benefits after termination.

Mr. Boatman’s employment agreement provides for a five year non-competition covenant and also includes confidentiality, non-solicitation and non-interference covenants.  A copy of Mr. Boatman’s employment agreement is filed herewith as Exhibit 10.1.  The foregoing description is qualified in its entirety by reference to the full text of such exhibit.

(b)           Lease Agreement.

Under the terms of the Purchase Agreement (as more particularly described in Item 2.01 below), Patco has entered into a lease agreement with Hosea Partners, Ltd., a Florida limited partnership that is managed by Roger M. Boatman, as its general partner.  The lease agreement provides that Patco will lease a 10,000 square foot manufacturing facility for a monthly rent of $7,000 under a triple net lease which requires Patco to pay all insurance, utilities, real property taxes and general maintenance on the manufacturing facility.  Hosea Partners, Ltd., as lessor, will be responsible for any repairs or maintenance required for the roof and structural components of the building.

The foregoing description of the lease agreement does not purport to be complete and is qualified in its entirety by reference to the full text of the lease agreement, which is filed with this report as Exhibit 10.2 and incorporated herein by reference.

Item 2.01 Completion of Acquisition or Disposition of Assets.

On March 31, 2010, TRC completed its acquisition of 100% of the issued and outstanding shares of Patco’s common stock.  The acquisition was consummated pursuant to a Purchase Agreement entered by and between TRC and the Selling Shareholders on March 2, 2010.  No vote by the TRC shareholders was required.

Under the terms of the Purchase Agreement, TRC delivered a cash payment of $5 million and 674,950 shares of its common capital stock to the Selling Shareholders.  The TRC shares issued to the Selling Shareholders at closing are restricted shares and will vest annually in equal increments over a three year period.  Of the total $7,500,000 payment, $500,000 in cash and 67,495 shares of TRC common stock will be held in escrow pursuant to the terms of an indemnity escrow agreement entered into by and among the Selling Shareholders, TRC and the escrow agent, a copy of which is attached hereto as Exhibit 10.3.

Under the terms of the Purchase Agreement, TRC agreed to grant certain demand registration rights to the Selling Shareholders under the terms of a registration rights agreement entered into by and between TRC and the Selling Shareholders, a copy of which is attached hereto as Exhibit 10.4.  In order to exercise these demand registration rights, the TRC shares delivered to the Selling Shareholders must be fully vested.  All registration rights will terminate and be of no effect forty-two months after the closing date of the Patco acquisition.

As additional consideration for the purchase of the Patco shares, TRC agreed to pay the Selling Shareholders an amount equal to nine percent (9%) of the additional revenues received and collected from the sale of Patco’s battery and charger products over the sum of $6,000,000, determined on an annual basis, commencing on April 1, 2010.  No additional earn-out payments will be made for any twelve month period commencing on the third anniversary date of the purchase of the Patco shares.

The foregoing description of the indemnity escrow agreement and the registration rights agreement, respectively, does not purport to be complete and is qualified in its entirety by reference to the full text of the indemnity escrow agreement and the registration rights agreement, which are filed with this report as Exhibit 10.3 and Exhibit 10.4, respectively, and incorporated herein by reference.

The foregoing description of the transaction contemplated by the Stock Purchase Agreement does not purport to be complete and is qualified in its entirety by reference to the full text of the Stock Purchase Agreement, which was filed with the Securities and Exchange Commission on March 3, 2010 as Exhibit 10.1 to the Company’s Current Report on Form 8-K, which is incorporated herein by reference.  A copy of the press release announcing the closing of the acquisition of Patco is filed with this report as Exhibit 99.1.

Item 3.02 Unregistered Sale of Equity Securities.

Pursuant to the Purchase Agreement described above in Item 2.01 of this Current Report, which disclosure is incorporated by reference, TRC issued 674,950 restricted shares of its common capital stock to the Selling Shareholders in exchange for 100% of the issued and outstanding shares of Patco stock held by such stockholders.  The issuance of these securities was made in reliance on the exemption from registration provided by Section 4(2) of the Securities Act of 1933.  Because of the small number of Patco shareholders, the absence of any general solicitation and sophistication of the parties, the transaction was determined not to involve any public offering.

Item 7.01 Regulation FD Disclosure.

On March 31, 2010, TRC announced the completion of the transaction described in Item 2.01 above.  A copy of the press release is furnished as Exhibit 99.1 to this report and is incorporated herein by reference.

The information contained in this Item 7.01 and Exhibits 99.1 and 99.2 to this report shall not be deemed to be “filed” for purposes of Section 18 of the Securities and Exchange Act of 1934, as amended, or otherwise subject to the liability of that section, and shall not be incorporated by reference into any filings made by TRC under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, except as may be expressly set forth by specific reference in such filing.

Item 9.01 Financial Statements and Exhibits.

(a)    Financial Statements of Business Acquired

The required audited financial statements of Patco as of December 31, 2009 and for the years ended December 31, 2009 and 2008 are attached hereto as Exhibit 99.2 and are incorporated in their entirety herein by reference.

(b)   Pro Forma Financial Information

The required pro forma financial information is not included with this Current Report.  The required pro forma financial statements will be filed by amendment as soon as practicable, but not later than 71 days after the date this Current Report on Form 8-K is required to be filed with the Securities and Exchange Commission.

(d)   Exhibits

Exhibit No.                                                  Description

10.1 Employment Agreement dated March 31, 2010 between Patco Electronics, Inc. and Roger M. Boatman

10.2 Lease Agreement dated March 31, 2010 between Patco Electronics, Inc. and Hosea Partners, Ltd.

10.3 Indemnity Escrow Agreement dated March 31, 2010 between Technology Research Corporation and the selling shareholders of Patco Electronics, Inc.

10.4 Registration Rights Agreement dated March 31, 2010 between Technology Research Corporation and the selling shareholders of Patco Electronics, Inc.

99.1 Press Release dated March 31, 2010

99.2 Financial statements listed in Item 9.01(a)

_________________________________________________________________________________________

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

TECHNOLOGY RESEARCH CORPORATION

Date:  April 1, 2010                                                                By: /s/ Thomas G. Archbold

Name:  Thomas G. Archbold

Title:  Chief Financial Officer

762988.1

EX-10.1

Exhibit 10.1

EMPLOYMENT AGREEMENT

This Employment Agreement (the “Agreement”) is made and entered into by and between Patco Electronics, Inc., a Florida corporation (the “Employer”), a wholly-owned subsidiary of Technology Research Corporation, a Florida corporation (“TRC”), and Roger M. Boatman, an individual resident of the State of Florida (the “Employee”).

BACKGROUND INFORMATION

Employee has certain skills, experience and abilities that are valuable to the success of Employer’s operations and future profitability.  Employer desires to retain and employ the services of Employee as a full-time employee in the position of President and Employee desires to work for and be employed by Employer in such position.  In consideration of the foregoing premises and of the mutual covenants and undertakings contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are acknowledged, the parties to this Agreement agree as follows:

OPERATIVE PROVISIONS

1.Term.  Unless earlier terminated as herein provided, the Employee’s employment with the Employer shall commence on the date that this Agreement is entered into (the “Effective Date”) and shall continue for a period of thirty-six (36) months thereafter.  The initial term of this Agreement may be extended for additional one year periods on the anniversary date of the Effective Date thereafter by written agreement executed by Employer and Employee.

2.Duties.  During the term of this Agreement, the Employee shall perform such duties as may be designated by the Board of Directors of Employer or the Board’s authorized designee.  In carrying out his responsibilities under this Agreement, Employee shall be required to report to an executive officer of TRC, as determined by the Board of Directors of Employer.  During such period, the Employee shall devote full attention, time and energies to the business and affairs of the Employer.  Employer agrees to comply with all applicable policies and procedures of Employer and TRC, as well as applicable laws in performing his duties for the Employer.  Employee agrees that he will perform his duties on behalf of the Employer from TRC’s main office located in Clearwater, Florida.

3.Compensation.  Subject to the provisions of  Section 5 of this Agreement, Employee will be paid an annual base salary of $120,000 (inclusive of any amounts subject to federal or state employment related withholding requirements).  Employer shall withhold from Employee’s salary all applicable federal, state and locate income and other payroll taxes.  Employee’s base salary will be payable in arrears in equal semi-monthly payments on the 15th and 30th day of each month or otherwise as the parties may agree.  For purposes of this Agreement, Employer shall be considered a “salary exempt employee”.

4.Benefits.  During the term of this Agreement, Employee will receive all fringe benefits enjoyed by other employees of Employer including, but not limited to, family health insurance, term life insurance, disability insurance, vacation, holiday, sick and other leave policies that may be in effect from time to time to the extent the Employee and his dependents are eligible for participation under the terms of such plans.

In addition, Employer agrees to be responsible for the co-pay requirements for Employee under Employer’s group health insurance policy, consistent with Employer’s employment and benefits policies for its salaried employees, as amended from time to time.  Employer shall also be entitled to receive three weeks of annual vacation for each year of employment completed with Employer, to be taken at such times as mutually agreed upon by Employer and Employee.

5.Termination of Employment.

a.Death of the Employee.  The employment period shall terminate immediately and automatically upon the death of the Employee; provided, however, that Employer shall pay to the estate of Employee the salary compensation which would otherwise be payable to Employee for up to thirty (30) days after Employee’s date of death.  After the payment described in the immediately preceding sentence, Employer shall have no further financial obligation to Employee or to his estate pursuant to this Agreement.

b.Termination by the Employer.  The Employer may terminate the employment period (i) immediately upon the delivery of a Notice of Termination (as defined in Section 5.d. of this Agreement) by the Employer to the Employee setting forth the facts that indicate that a determination has been made that the Employee has a “disability”, as defined in Section 5.e. of this Agreement; (ii) immediately upon delivery of a Notice of Termination by the Employer to the Employee setting forth the facts that indicate that an event constituting “cause” (as defined in Section 5.f. of this Agreement) has occurred, or on such later date as may be set forth in such Notice of Termination; or (iii) at any time without “cause” effective as of the 30th day following the delivery of a Notice of Termination by the Employer to the Employee, or on such later date as may be set forth in such Notice of Termination.

c.Termination by the Employee.  The Employee may terminate the employment period (i) immediately upon delivery of a Notice of Termination by the Employee to the Employer setting forth facts that indicate that an event constituting “good reason” (as defined in Section 5.g. of this Agreement) has occurred within the thirty (30) days immediately prior to the date of delivery of such Notice of Termination, or (ii) at any time without “good reason” effective as of the 30th day following the delivery of a Notice of Termination by the Employee to the Employer, or on such later date as may be set forth in such Notice of Termination.

d.Notice of Termination.  For purposes of this Agreement, a “Notice of Termination” shall mean a written notice (delivered in accordance with Section 9) that indicates the specific termination provision in this Agreement upon which the party intending to terminate the employment period is relying and sets forth in reasonable detail the facts and circumstances that provide a basis for termination of the employment period under such termination provision.

e.Definition of “Disability”.  For purposes of this Agreement, the Employee will be deemed to have a “Disability” under any of the following conditions: (i) the Employee is unable to render and perform substantially and continuously the Employee’s duties and services as required by this Agreement by reason of any medically determinable physical or mental condition that is expected to result in death or can be expected to last for a continuous period of not less than sixty (60) days or for ninety (90) days or more in any twelve-month period; (ii) the Employee is determined to be disabled in accordance with a disability income insurance program sponsored by the Employer; or (iii) the Employee is determined to be totally disabled by the Social Security Administration.  The determination of Employee’s “Disability” shall be made by an independent physician that is reasonably acceptable to Employer and Employee.  Any decision made by such independent physician shall be binding upon Employer and Employee.

f.Definition of “Cause”.  For purposes of this Agreement, “Cause” shall mean the Employee’s: (i) material and persistent failure to perform his duties and services in accordance with this Agreement, unless such failure is due to his Disability; (ii) breach of this Agreement or any portion or provision of this Agreement, including, but not limited to the restrictive covenants and confidentiality provisions contained in Sections 6 and 7 of this Agreement; (iii) failure to adhere to the TRC Code of Ethics or any employment policies of Employer, provided that Employee has been given a reasonable opportunity to comply with such policy; (iv) appropriation (or attempted appropriation) of a business opportunity of the Employer or TRC, including attempting to secure or securing any personal profit in connection with any transaction entered into on behalf of the Employer or its Affiliates; (v) misappropriation (or attempted misappropriation) of any of the Employer’s funds or property or funds or property of any Affiliate; (vi)  conviction of, the indictment for (or its procedural equivalent), or the entering of a guilty plea or plea of no contest with respect to, a felony, the equivalent thereof, or any other crime with respect to which imprisonment is a possible punishment; (vii) commission of any act involving fraud or moral turpitude, or a determination by the Employer, in its sole discretion, that the Employee has demonstrated a dependence upon any addictive substance, including alcohol, controlled substances, narcotics or barbiturates; or (viii) engaging in any conduct constituting gross negligence or recklessness, that is materially injurious to the Employer or TRC, a customer of the Employer or TRC, or any of the Employer’s Affiliates.

g.Definition of “Good Reason”.  For purposes of this Agreement, the phrase “Good Reason” means the Employer’s material breach of this Agreement, which breach shall not be cured by Employer within ten (10) business days after the Employee furnishes written Notice of Termination for Good Reason to Employer.

h.Effect of Termination of Employment Period; Post-Termination Benefits.  Upon the termination of the employment period in accordance with this Section of the Agreement, the Employee’s obligation to render to the Employer the services described in Section 2 of this Agreement shall cease and the Employer shall pay the Employee or, in the event of his death while amounts remain payable hereunder, his “designated beneficiary”, as follows:

(i)Termination by the Employer with Cause or by the Employee without Good Reason.  If the employment period is terminated in accordance with Section 5.b.(ii) or Section 5.c.(ii) of this Agreement, the Employee will be entitled to receive solely that portion of his base salary and health insurance allowance, payable in accordance with the Employer’s normal payroll practices, accrued by the Employee as of the effective date of the termination of employment.  The Employee shall not be entitled to receive any salary or benefits thereafter, except as otherwise required in accordance with federal or state law or the terms of the plans governing the benefits provided hereunder.

(ii)Termination by the Employer without Cause or by the Employee with Good Reason.  If the Employee is terminated without Cause or Employee terminates his employment with Good Reason, Employee will be entitled to receive the salary and insurance allowance that would have been payable for the remainder of the term of this Agreement.  Employee’s right to receive the continued salary payments under this Section 5.h. shall be contingent upon Employer’s delivery of a satisfactory release against the Employer and Employee’s continued compliance with the covenants set forth in Sections 6 and 7 of this Agreement.

(iii)Termination upon Disability.  If this Agreement is termi­nated as a result of Employee’s Disability, Employer will pay Employee’s base salary and health insurance allowance for the lesser of (i) the ninety (90) day period following the date that Employee is determined to be disabled, or (ii) the period until disability insurance benefits commence under the disability insurance coverage Employee has obtained, if any.

(iv)Termination upon Death. If this Agreement is terminated because of Employee’s death, the estate of Employee will be entitled to receive the base salary and health insurance allowance to which Employee is entitled to receive for a period of thirty (30) days after the date of death.  Any payments made under this Section shall be paid to the designated beneficiary, or, if no beneficiary has been designated by Employee in a written notice prior to his death, to Employee’s estate.  Thereafter, the Employer shall have no further obligations to Employee’s beneficiary or estate under this Agreement.

(v)Benefits upon Termination. Other than the continued payment of the health insurance allowance, as specified in Section 5.h.(iv) above, Employee will not receive any payment or other compensation for any vacation, holiday, sick leave, or other leave unused as of the termination of this Agreement.

(vi)Release.  No amount shall be payable to the Employee under Section 5.h.(ii), (iii) or (iv) following the termination of employment unless the Employee (or the Employee’s designated beneficiary in the event of termination of this Agreement due to the Employee’s death) signs and delivers to the Employer, within fifteen (15) days after the termination of employment, a release and waiver of claims in a form prepared by and acceptable to the Employer.

6.   Confidential Information.

a.Confidential Information Defined. For the purposes of this Agreement, the phrase "Confidential Information" means any and all of the following: trade secrets concerning the business and affairs of the Employer, TRC and its direct or indirect subsidiaries, predecessors and other affiliated entities (the “TRC Group”), product specifications, data, know-how, formulae, compositions, processes, designs, sketches, photographs, graphs, drawings, samples, inventions and ideas, past, current, and planned research and development, current and planned distribution methods and processes, customer lists, current and anticipated customer requirements, price lists, market studies, business plans, computer software and programs (including object code, machine code, and source code), computer software and database technologies, systems, structures, and architecture (and related formulae, compositions, processes, improvements, devices, know-how, inventions, discoveries, concepts, ideas, designs, and methods); information concerning the business and affairs of any member of the TRC Group (which includes historical financial statements, financial projections and budgets, historical and projected sales, capital spending budgets and plans, the names and backgrounds of key personnel, personnel training techniques and materials, however documented); and notes, analysis, compilations, studies, summaries, and other material prepared by or for any member of the TRC Group containing or based, in whole or in part, on any information included in the foregoing.  Notwithstanding the foregoing, Confidential Information shall not include any information that Employee demonstrates was or became generally available to the public other than as a result of a disclosure of such information by the Employee or any other person under a duty to keep such information confidential.

b.Access to the Confidential Information. Immediately upon the Employee’s execution of this Agreement and continuing throughout the Employee’s employment with Employer, the Employer shall provide the Employee with access to Confidential Information.  Employee acknowledges: (i) that the Employer has devoted substantial time, effort, and resources to develop and compile the Confidential Information; (ii) public disclosure of such Confidential Information would have an adverse effect on the Employer and its business; (iii) the Employer would not disclose such information to Employee, nor employ or continue to employ Employee without the agreements and covenants set forth in this Agreement; and (iv) the provisions of this Section 6 are reasonable and necessary to prevent the improper use or disclosure of Confidential Information.

c.Nondisclosure Duties Regarding the Confidential Information. Employee agrees to use his best efforts to preserve and protect the Confidential Information to the greatest degree possible and therefore agree as follows:

(i)           Nondisclosure Commitment. Employee will hold in strictest confidence the Confidential Information and will not disclose it to any person, except with the specific prior written consent of the Employer or as may be required by court order, law, government agencies with which the Employer deals in the ordinary course of its business, or except to the extent such disclosure is necessary for Employee to perform his duties under this Agreement. Any trade secrets of the Employer will be entitled to all of the protections and benefits afforded under applicable laws. If any information that the Employer deems to be a trade secret is ruled by a court of competent jurisdiction not to be a trade secret, such information will, nevertheless, be considered Confidential Information for purposes of this Agreement. Employee hereby waives any requirement that the Employer submit proof of the economic value of any trade secret or post a bond or other security. Employee will not remove from the premises of the Employer, copy or record (regardless of the media), any Confidential Information, except to the extent such removal, copying or recording is necessary for Employee to perform his duties. Employee acknowledges and agrees that all Confidential Information, and physical embodiments thereof, whether or not developed by Employee, are the exclusive property of the Employer.

(ii)           Third Party Information. Employee recognizes that the TRC Group has received and in the future will receive information from third  parties that is confidential or proprietary in nature and subject to a duty on the part of the TRC Group to maintain the confidentiality of such information and to use it only for certain limited purposes. Employee agrees that he owes the Employer, and such third parties, during his employment and thereafter, a duty to hold all such confidential or proprietary information in the strictest confidence and not to disclose it to any person (except as necessary in carrying out his duties under this Agreement) or to use it for the benefit of anyone other than for the Employer or such third party (consistent with the Employer’s agreement with such third party) without the express written authorization of the Employer.

(iii)           Returning Employer Documents. Employee agrees that, upon the termination of his employment, he will deliver to the Employer (and will not keep in his possession or deliver to any other person) all property, regardless of whether such items are represented in tangible, electronic, digital, magnetic or any other media, that Employee has produced or received during his employment with the Employer, whether or not related to the Confidential Information.

d.Disputes or Controversies. Employee recognizes that should a dispute or controversy arising from or relating to this Agreement be submitted for adjudication to any court or other third party, the preservation of the secrecy of Confidential Information may be jeopardized. All pleadings, documents, testimony, and records relating to any such adjudication will be maintained in secrecy and will be available for inspection by the Employer, Employee, and Employee’s or Employer’s respective attorneys and experts, who will agree, in advance and in writing, to receive, use, and maintain all such Confidential Information in secrecy, except as may be agreed by them in writing.

e.Time Period of Restrictions. The terms and conditions of this Section 6 shall apply during the course of Employee’s employment and for a five year period following the termination of this Agreement (including expiration upon non-renewal), unless sooner terminated in writing and signed by the Employer.

f.Enforcement. Employee acknowledges that (i) the Confidential Information is a valuable asset of the TRC Group and use of such Confidential Information would allow Employee to unfairly compete against the TRC Group, (ii) the restrictions contained in this Agreement are reasonable in scope and are necessary to protect the TRC Group’s legitimate interests in protecting its business, and (iii) any violation of the restrictions contained in this Agreement will cause significant and irreparable harm to the TRC Group for which the TRC Group has no adequate remedy at law.  The parties agree that damages at law, including, but not limited to, monetary damages, will or may be an insufficient remedy to the TRC Group and that (in addition to any remedies that are available to the TRC Group, all of which shall be deemed to be cumulative and retained by the TRC Group and not waived by the enforcement of any remedy available hereunder) the TRC Group shall also be entitled to obtain injunctive relief, including but not limited to a temporary restraining order, a temporary or preliminary injunction or a permanent injunction, to enforce the provisions of this Agreement, as well as an equitable accounting of and constructive trust for all profits or other benefits arising out of or related to any such violation, all of which shall constitute rights and remedies to which the TRC Group may be entitled.

7. Restrictions During and After Employment.

a.Restrictive Covenants.  Employee agrees that the Employer’s commitment to enter into this Agreement with Employee is based, in part, upon the Employer’s interest in restraining Employee from competing against the TRC Group.  Employee agrees that the restrictions in this Section are reasonable and do not impose a greater restraint than is necessary to protect the goodwill or other business interests of the TRC Group.  For these reasons, Employee agrees to the following:

(i)           Noncompetition.  During the five year period commencing on the Effective Date or, if this Agreement is extended, the period ending two years after the date this Agreement is terminated (the “Restrictive Period”), Employee will not, and will cause his Affiliates to not, directly or indirectly, alone or in conjunction with any other person or entity, engage or invest in, own, manage, operate, finance, control, or participate in the ownership, management, operation, financing or control of, be employed by, associated with, or in any manner connected with, lend the Employee’s name or any similar name to, lend the Employee’s credit to, or render services that are similar to the service he rendered to the Employer under this Agreement to any person or entity that is engaged in or intends to engage in business activities that are competitive with the Business of Employer, TRC or the TRC Group. For purposes of this Agreement, the “Business” of the Employer, TRC, and the TRC Group is (i) designing, manufacturing and marketing electrical safety products for the home and workplace; (ii) designing and supplying power monitoring and control equipment to the United States military and its prime contractors for tactical vehicles, naval vessels and mobile electric generators; (iii) manufacturing, producing, assembling, testing, marketing, promoting, and selling electronic products that utilize technology to enhance the performance of battery products; and (iv) any business activities and markets that may be added to the products and services offered by Employer, TRC or the TRC Group after the Effective Date.

(ii)           Solicitation of Customers.  During the Restrictive Period, Employee will not, and will cause his Affiliates to not, directly or indirectly, alone or in conjunction with any other person or entity, do business with or solicit Customer (as defined below) for purposes of selling products or services to such Customer that are in competition with the Employer’s Business. For purposes of this Agreement, the “Customers” of the Employer are those persons who, at any time during the course of Employee’ employment with the Employer are or were customers or clients of the TRC Group, as well as any prospective customers or clients of the TRC Group that were identifiable and known to Employee during his employment with the Employer.

(iii)           Solicitation of Employees. During the Restrictive Period, Employee will not, directly or indirectly, on behalf of himself or any other person or entity, solicit for employment or employ any current employee of any member of the TRC Group or any individual who was an employee of any member of the Employer at any time during the twelve month period prior to the solicitation or employment.

(iv)           Solicitation of Vendors.  During the Restrictive Period, Employee will not, either directly or indirectly, on behalf of himself or any other person or entity, solicit a current vendor or supplier of Employer for purposes of encouraging such vendor or supplier to cease or diminish providing products or services to any member of the TRC Group, or to change adversely the terms under which such vendor or supplier provides such products or services to any member of the TRC Group.

(v)           Non-interference.  During the Restrictive Period, Employee will not, directly or indirectly, interfere with the Employer’s relationship with any person who at the relevant time is an employee, contractor, supplier, or Customer of any member of the TRC Group. Following the termination of his employment, Employee will not, either directly or indirectly, access the computer systems of any member of the TRC Group, download files or any other information from the computer systems of any member of the TRC Group or in any way interfere, disrupt, modify or change any computer program used by any member of the TRC Group or any data stored on the computer systems of any member of the TRC Group.

b.Scope.  If any covenant contained in this Agreement is held to be unreasonable, arbitrary or against public policy, such covenant shall be considered divisible both as to time, Customers, competitive services and geographical area, such that each month within the specified period shall be deemed a separate period of time, each customer a separate customer, each competitive service a separate service and each geographical area a separate geographical area, resulting in an intended requirement that the longest lesser time and largest lesser customer base, service offering and geographical area determined not to be unreasonable, arbitrary or against public policy shall remain effective and be specifically enforceable.

c.Required Notice. Employee agrees that prior to beginning any new employment following the termination of employment with the Employer for any reason, Employee will provide the Employer with thirty (30) days’ written notice regarding his new employment. The notice will identify the Employee’s new employer, describe the duties Employee will perform for the new employer, and provide verification that Employee has informed the new employer of the confidentiality, noncompetition and other obligations under this Agreement.

d.Intent of Parties; Survival.  The covenants of Employee contained in Section 6 and Section 7 shall be construed as agreements independent of any other provision of Employee’s employment (including employment under this Agreement) and the existence of any claim Employee may have against the Employer shall not constitute a defense to the enforcement by the Employer of any covenants contained in Section 6 and Section 7.  The covenants contained in Section 6 and Section 7 shall survive the termination, expiration, non-renewal or cancellation of this Agreement.

8.Ownership of Intellectual Property.  Employee acknowledges and agrees that all work performed, and all ideas, concepts, materials, products, software, documentation, designs, architectures, specifications, flow charts, test data, deliverables, improvements, discoveries, methods, processes, or inventions, trade secrets or other subject matter that (a) relate to the Employer, TRC or TRC Group’s competitive business activities or actual or demonstrably anticipated development or contemplated expansion thereof in which the Employee was directly or indirectly involved, (b) result from any work performed by Employee, alone or with others, for Employer, TRC or the TRC Group, (c) are developed on the Employer’s time or using the Employer’s equipment, supplies, facilities or Confidential Information, or (d) are based upon the Confidential Information of the Employer, TRC or the TRC Group, whether in written, oral, electronic, photographic, optical or any other form (collectively, “Materials”) are the property of the Employer, and all rights, title and interest therein shall vest in the Employer, and all Materials shall be deemed to be works made for hire and made in the course of his employment relationship with the Employer.  To the extent that title to any Materials has not or may not, by operation of law, vest in the Employer, or such Materials may not be considered works made for hire, Employee hereby irrevocably assigns all rights, title and interest therein to the Employer.  All Materials belong exclusively to the Employer, with the Employer having the right to obtain and to hold in its or their own name, copyrights, patents, trademarks, applications, registrations or such other protection as may be appropriate to the subject matter, and any extensions and renewals thereof.  Employee hereby grants to the Employer and its successors or assigns an irrevocable power of attorney to perform any and all acts and execute any and all documents and instruments on his behalf as the Employer may deem appropriate in order to perfect or enforce the rights defined in this Section.  Employer further agrees to give the Employer, or any person designated by the Employer, at the Employer’s expense, any assistance reasonably required to perfect or enforce the rights defined in this Section.  Employee shall communicate and deliver to the Employer promptly and fully all Materials conceived or developed by him (alone or jointly with others) during the period of his employment relationship with the Employer.

9.   Miscellaneous Provisions.

a.           Definitions.

(i) Affiliate:  The term “Affiliate” when used in this Agreement shall mean any other person or entity that directly or indirectly controls, or is under common control with, or is controlled by the specified person or entity, and if a person, any member of the immediate family of such individual.  As used in this definition, “control” (including, with its correlative meanings, “controlled by” and “under common control with”) shall mean possession, directly or indirectly, of power to direct or cause the direction of management or policies (whether through ownership of securities or partnership or other ownership interests, by contract, or otherwise) and “immediate family” shall mean any parent, child, grandchild, spouse, or sibling.

(ii) Customers:The term “Customers” when used in this Agreementshall mean those persons who, at any time during Employee’s course of employment with the Employer are or were customers, clients, sales agents, or sales representatives of the Employer, predecessors of the Employer, TRC or Affiliates of TRC, as well as any prospective customers, clients, sales agents, or sales representatives of the Employer, TRC or Affiliates of TRC, which were identifiable and known to Employee during his employment with Employer.

b.           Notices.  All notices under this Agreement shall be in writing and shall be considered as properly given or made if hand delivered, sent by certified mail, overnight delivery service, facsimile or e-mail and addressed to the location set forth in the preamble to this Agreement or to such other address as any party may have designated by like notice furnished to all other parties hereto.  All notices shall be deemed effective when deposited in the U.S. mail, received by an overnight carrier or other delivery service or, when sent by facsimile or e-mail, when confirmation of delivery is obtained by the sender.

c.           Assignment.  This Agreement, including, but not limited to, the agreements contained in Sections 6 and 7 regarding non-competition, confidentiality, non-disparagement and non-solicitation, may be assignable by the Employer or TRC without the prior written consent of Employee.  This Agreement shall inure to the benefit of and be enforceable by the successors and assigns of the Employer or TRC, including any successor or assign to all or substantially all of the business and/or assets of the Employer, whether direct or indirect, by purchase, merger, consolidation, acquisition of stock or otherwise.  This is a personal service contract which shall not be assignable by Employee.

d.           Application of Florida Law; Jurisdiction.  This Agreement, and the application or interpretation thereof, shall be governed exclusively by its terms and by the laws of the State of Florida.  Venue for all purposes shall be deemed to lie within Pinellas County, Florida.  The parties agree that this Agreement is one for performance in Florida.  The parties to this Agreement agree that they waive any objection, constitutional, statutory or otherwise, to a Florida court’s exercise of jurisdiction over any dispute between them and specifically consent to the jurisdiction of the Florida courts.  By entering into this Agreement, the parties, and each of them understand that they may be called upon to answer a claim asserted in a Florida court.

e.           Legal Fees and Costs.  If a legal action is initiated by any party to this Agreement against the other party arising out of or relating to the alleged performance or non-performance of any right or obligation established hereunder, any and all fees, costs and expenses reasonably incurred by each successful party or its legal counsel in investigating, preparing for, prosecuting, defending against, or providing evidence, producing documents or taking any other action in respect of, such action shall be the obligation of and shall be paid or reimbursed by the unsuccessful party.

f.           Waiver of Jury Trial. The parties hereby acknowledge that any dispute arising out of this Agreement will necessarily include various complicated legal and factual issues and therefore knowingly, voluntarily and intentionally waive trial by jury in any litigation in any court with respect to, in connection with or arising out of this Agreement, or the validity, interpretation, or enforcement hereof.

g.           Waiver. The waiver by the Employer of a breach of this Agreement shall not be construed as a waiver of any subsequent breach by Employee.  The refusal or failure of the Employer to enforce the restrictive covenants contained herein or contained in any other similar agreement against any other employee, agent, or independent contractor of the Employer, TRC or its Affiliates, for any reason, shall not constitute a defense to the enforcement of this Agreement by the Employer or TRC against Employee, nor shall it give rise to any claim or cause of action by such Employee against the Employer, TRC or its Affiliates.

h.           Acknowledgments.  Employee acknowledges that he has been provided with a copy of this Agreement for review prior to signing it, that the Employer has encouraged Employee to have this Agreement reviewed by his attorney prior to signing it and that Employee understands the purposes and effects of this Agreement.  Employee further acknowledges that no statements made by Employer or TRC personnel or contained in the Employer or TRC employment materials of any kind (such as the Employer’s policy and procedures manuals) shall be construed to alter the at-will nature of Employee’s employment relationship with the Employer or imply that discharge will occur only for cause.

i.           Third Party Beneficiary.  TRC is an intended third party beneficiary and shall be entitled to pursue any action arising out of or relating to the alleged performance or non-performance of any right or obligation established under this Agreement.

IN WITNESS WHEREOF, the parties have executed this Agreement on the 31st day of March, 2010.

“EMPLOYER”

PATCO ELECTRONICS, INC.

                /s/ Owen Farren

       Owen Farren

Chief Executive Officer

                                                                                                         TECHNOLOGY RESEARCH CORPORATION

                                                                                                        /s/ Thomas G. Archbold

Thomas G. Archbold

Chief Financial Officer

 “EMPLOYEE”

/s/ Roger M. Boatman                                                                

Roger M. Boatman

EX-10.2

Exhibit 10.2

LEASE AGREEMENT

1.PARTIES.

This Lease is made this 31st day of March, 2010, by and between HOSEA PARTNERS, LTD., a Florida limited partnership (the “Landlord”), and PATCO ELECTRONICS, INC., a Florida corporation (the “Tenant”).  This agreement shall hereinafter be referred to as the “Lease”.

2.PREMISES.

Landlord hereby leases to Tenant and Tenant leases from Landlord, upon all of the conditions set forth herein, that certain building and real property, situated in Brevard County, Florida, the address of which is 1855 Shepard Drive, Titusville, FL  32780, more particularly described on Exhibit “A” attached hereto (the “Premises”).  The Premises include, but are not limited to, the heating, ventilating, air conditioning systems and the mechanical, electrical and plumbing systems serving the Premises.

3.TERM AND POSSESSION.

The term hereof shall be for a three year period commencing on March 31, 2010 (the “Commencement Date”) and ending on March 30, 2013, including two (2) three-year lease renewal options, unless sooner terminated by either party pursuant to the provisions of the Lease (the “Term”).

4.RENT.

4.1           Rent Payment, Proration and Sales Taxes. All rental and other payments due hereunder, and any sales tax due therein, shall be paid without notice or demand and without abatement, deduction or setoff for any reason unless specifically provided herein. Rent for any period during the Term hereof which is for less than one month shall be a pro rata portion of the monthly rent installment based on the number of days in such period and the number of days in the month in question. Rent shall be payable in lawful money of the United States to Landlord at the address stated herein or to such other persons or at such other places as Landlord may designate in writing. In addition, Tenant shall pay to Landlord all sales and use taxes imposed by the State of Florida or any other governmental authority from time to time.

4.2           Monthly Rent. Tenant hereby agrees to pay Landlord during the Term monthly rent to use the Premises in the amount of $7,000, plus sales tax, on the first day of each month for 36 months (the “Monthly Rent”). Upon execution of the Lease, Tenant shall pay to Landlord the Monthly Rent due for the first month of the Lease.

4.3           Additional Rent.  The Landlord will have the right on behalf of the Tenant to make any payment which the Tenant is required to but has failed to make when due.  The amount of any such payment, together with any interest, cost or penalty, may, at the Landlord’s election, be added to and become part of the rent payment next coming due under this Lease, in which event it will constitute additional rent with the same effect as though it had originally been reserved as such.

4.4           General.  Monthly Rent shall be paid to Landlord without demand, setoff, or deduction whatsoever, except as specifically provided in this Lease, at Landlord’s address, or at such other place as Landlord shall designate in writing to Tenant.  Tenant’s obligations to pay rent is a covenant independent of the Landlord’s obligations under this Lease.  The Monthly Rent to be paid by Tenant is not based on any specific measurement of square footage in the Premises.

5.           OPERATING COSTS.

5.1           General.  Except as otherwise provided for below, Tenant acknowledges and agrees that it is intended that the Lease is a triple net lease.  Accordingly, Landlord shall not be responsible during the Term for any costs, charges, expenses and outlays with respect to the Premises, or the use and occupancy thereof, or the contents thereof, or the business carried on therein, and Tenant shall pay all charges, expenses, costs and outlays of every nature and kind relating to the Premises.  Landlord agrees that it will be responsible for any repairs or maintenance required for the roof and structural components of the building located on the Premises.

5.2           Real Estate Taxes.   Tenant will pay all taxes, including without limitation Real Estate Taxes (as defined below), personal property taxes and assessments assessed, levied, confirmed, or imposed during the Term of this Lease, on the Premises and all property and improvements located on the Premises, whether or not now customary or within the contemplation of Landlord and Tenant:

(a)           upon, measured by, or reasonably attributable to the cost or value of Tenant’s equipment, furniture, fixtures, and other personal property located in the Premises, or by the cost or value of any leasehold improvements made in or to the Premises by or for Tenant, regardless of whether title to the improvements is in Tenant or Landlord;

(b)           upon or measured by the Monthly Rent, including without limitation any gross receipts tax or excise tax levied by the federal government or any other governmental body with respect to the receipt of Monthly Rent;

(c)           upon or with respect to the possession, leasing, operation, management, maintenance, alteration, repair, use, or occupancy by Tenant of the Premises or any portion of the Premises;

(d)           upon this transaction or any document to which Tenant is a party creating or transferring an interest or an estate in the Premises;

(e)           upon the Premises and all personal property, furniture, fixtures, and equipment, and all replacements, improvements, or additions to them, whether owned by Landlord or Tenant; and

(f)           based in whole or in part on a Monthly Rent, whether made in addition to or in substitution for any other tax.

The term “Real Estate Taxes” shall mean the total of all of the taxes, assessments, excises, levies, and other charges by any public authority, which are general or special, ordinary or extraordinary, foreseen or unforeseen, or of any kind and nature whatsoever, and which shall during or in respect to the Term, be assessed, levied, charged, confirmed, or imposed on, or become due and payable out of, or become a lien on the Premises or appurtenances or facilities used in connection with the Premises.  Real Estate Taxes shall specifically include all ad valorem taxes, personal property taxes, transit taxes, special or extraordinary assessments, government levies, and all other taxes or other similar charges, if any, which are levied, assessed, or imposed on, or become due and payable in connection with the Premises or appurtenances or facilities used in connection with the Premises.  If, because of a future change in the method of taxation or in the taxing authority, or for any other reason, a franchise, income, transit, gross receipts, profits, or other tax or governmental imposition, however designated shall be levied against Landlord in substitution in whole or in part for the Real Estate Taxes, or instead of additions to or increases of Real Estate Taxes, or otherwise as a result of or based on or arising out of the ownership, use, or operation of the Premises, then the franchise, income, transit, gross receipts, profits, or other tax or governmental imposition shall be deemed to be included within the definition or “Real Estate Taxes.”

5.3           Other Impositions.  Tenant will not be obligated to pay local, state, or federal net income taxes assessed against Landlord; local, state, or federal capital gains taxes of Landlord; or sales, excise, franchise, gift, estate, succession, inheritance, or transfer taxes of Landlord.

5.4           Right to Contest Taxes. Tenant will have the right to contest the amount or validity, in whole or in part, of any tax by appropriate proceedings diligently conducted in good faith, only after paying the tax or posting such security as Landlord may reasonably require in order to protect the Premises against loss or forfeiture. Upon the termination of those proceedings, Tenant will pay the amount of the tax or part of the tax as finally determined, the payment of which may have been deferred during the prosecution of the proceedings, together with any costs, fees, interest, penalties, or other related liabilities. Landlord will not be required to join in any contest or proceedings unless the provisions of any law or regulations then in effect require that the proceedings be brought by or in the name of Landlord. In that event, Landlord will join in the proceedings or permit them to be brought in its name; however, Landlord will not be subjected to any liability for the payment of any costs or expenses in connection with any contest or proceedings, and Tenant will indemnify Landlord against and save Landlord harmless from any of those costs and expenses.

5.5           Direct Payments by Tenant. Tenant, at Landlord’s election, shall pay directly to the taxing authority when due any and all taxes required to be paid hereunder and Tenant shall provide proof of payment thereof within ten (10) days following the due date of the payment.

6.           RENEWAL OPTIONS.

Provided Tenant has not defaulted under any terms and conditions of this Lease, and Tenant provides written notice to Landlord at least ninety (90) days prior to expiration of the Term, Tenant shall be granted two options to renew the Lease for an additional  three-year term, upon terms and conditions to be agreed upon by the parties.  If the Landlord and Tenant cannot agree upon the terms and conditions of the renewal term during such 90 day period, this Lease shall terminate and be of no further force and effect.

7.           USE.

7.1           Use. The Premises shall be used and occupied by Tenant to operate and conduct the Business (as such term is defined in the Purchase Agreement entered into by and among Technology Research Corporation and Hosea Partners, Ltd., Roger M. Boatman, as Trustee of the Roger M. Boatman Trust, and Melvin R. Hall and Elsa G. Hall, as Joint Tenants with Right of Survivorship) and for no other purpose.  The Premises will be used only as an industrial, manufacturing, assembly and office facility and Tenant will not allow the Premises to be used for any improper, immoral or unlawful purpose.

7.2           Compliance with Laws and Restrictions. Tenant shall, at Tenant’s expense, execute and comply with all statutes, ordinances, rules, orders, regulations and requirements of the federal, state, county and city government, and of any and all of their departments and bureaus, applicable to the Premises, as well as all covenants and restrictions of record, and other requirements in effect during the Term or any part thereof, which regulate the use by Tenant of the Premises.

7.3           Condition of Premises. By taking possession of the Premises, Tenant shall be deemed to have accepted the Premises, subject to all applicable zoning, municipal, county and state laws, ordinances and regulations governing and regulating the use of the Premises, and any covenants or restrictions of record, as suitable for Tenant’s intended purposes, and in compliance with all terms and provisions hereof.

8.           MAINTENANCE, REPAIRS AND ALTERATIONS.

8.1           Maintenance.  Tenant shall, at Tenant’s sole cost and expense, maintain the Premises and all components thereof throughout the Term, in good, safe and clean order, condition and repair, including without limitation all plumbing, heating, air conditioning, ventilation, and electrical facilities and all components thereof, serving the Premises.  Landlord shall be responsible to maintain the roof and structural components of the buildings located on the Premises.  All repairs, restorations, and replacements will be in quality and class equal to the original work or installations.

8.2           Plate Glass.  Tenant shall maintain, repair, or replace, as necessary, all plate glass, if any, within or on the perimeter of the Premises.

8.3           Grounds; Parking Areas.  Tenant at Tenant’s expense, shall maintain, repair, or replace, as necessary, all landscaping, external lighting, parking areas and sidewalks serving the Premises.

8.4           Utility Services.  Tenant will also procure, or cause to be procured, without cost to Landlord, any and all necessary permits, licenses, or other authorizations required for the lawful and proper maintenance upon the Premises of wires, pipes, conduits, tubes, and other equipment and appliances for use in supplying any of the services to and upon the Premises. Landlord, upon request of Tenant, and at the sole expense and liability of Tenant, will join with Tenant in any application required for obtaining or continuing any of the services.  The installation of all utilities shall be subject to Landlord’s prior written approval, which approval shall not be unreasonably withheld.

8.5           Alterations and Additions.

(a)           Tenant shall not, without Landlord’s prior written consent, make any alterations, improvements, additions, or Utility Installations (as defined below) in, on, or to the Premises, which consent shall not be unreasonably withheld. Landlord may require that Tenant remove any or all of said alterations, improvements, additions or Utility Installations at the expiration of the Term, and restore the Premises to its prior condition. Should Tenant make any alterations, improvements, additions or Utility Installations without the prior approval of Landlord, in addition to all other remedies of Landlord for Tenant’s breach, Landlord may require that Tenant remove any or all of the same. As used in this Section, the term “Utility Installation” shall mean carpeting, window coverings, air lines, power panels, electrical distribution systems, lighting fixtures, space heaters, air conditioning and plumbing, if any.

(b)           Any alteration, improvement, addition or Utility Installation in or to the Premises that Tenant shall desire to make shall be presented to Landlord for approval in written form, with proposed detailed plans. If Landlord shall give its consent, the consent shall be deemed conditioned upon Tenant acquiring all necessary permits to do the work from appropriate governmental agencies, the furnishing of a copy thereof to Landlord prior to the commencement of the work, the compliance by Tenant with all conditions of said permits in a prompt and expeditious manner, and, if applicable, Tenant’s conducting its work so as not to interfere with any other tenants of the building in which the Premises is located.

(c)           Tenant shall pay, when due, and hereby agrees to indemnify and hold harmless Landlord for and from, all claims for labor or materials furnished or alleged to have been furnished to or for Tenant, at or for use in the Premises, which claims are or may be secured by any construction lien against the Premises or any interest therein. Tenant shall give Landlord not less than ten (10) days’ notice prior to the commencement of any work on the Premises which might give rise to any such lien or claim of lien, and Landlord shall have the right to post notices of non-responsibility in or on the Premises as provided by law.  If Tenant shall, in good faith, contest the validity of any such lien, claim or demand, then Tenant shall, at its sole expense, defend itself and Landlord against the same and shall pay and satisfy any adverse judgment that may be rendered thereon before the enforcement thereof against Landlord or the Premises.

(d)           Unless Landlord requires their removal, all alterations, improvements, additions and Utility Installations made on the Premises shall become the property of Landlord and remain upon and be surrendered with the Premises at the expiration of the Term without compensation to Tenant.

8.6           Landlord’s Interest Not Subject to Liens. As provided in § 713.10, Florida Statutes, the interest of Landlord shall not be subject to liens for improvements made by Tenant, and Tenant shall notify any contractor making such improvements of this provision. An appropriate notice of this provision may be recorded by Landlord in the Public Records of Brevard County, Florida, in accordance with said statute, without Tenant’s joinder or consent.

9.           INSURANCE-LANDLORD.

Landlord shall at all times during the Term carry fire, casualty and extended coverage insurance on the Premises.

10.           INSURANCE -TENANT.

During the Term of this lease, and prior to Tenant being given possession of the Premises, Tenant will obtain and maintain in good standing, at Tenant’s expense on an occurrence basis, the following insurance, in the amounts set forth below with insurance companies reasonable satisfactory to Landlord:

10.1           Property Insurance.  Tenant shall obtain and keep in force during the Term hereof a policy or policies of insurance covering loss or damage to the  Tenant’s fixtures, equipment or Tenant improvements therein, providing protection against fire and other perils (“all risk,” as such term is used in the insurance industry).

10.2.           Commercial Liability Insurance.  Tenant shall, at Tenant’s sole expense, obtain and keep in force during the Term hereof a commercial liability insurance policy of bodily injury and property damage insurance, insuring Tenant and Landlord against any liability arising out of the use, occupancy or maintenance of the Premises. Such insurance shall be on a combined single limits basis in an amount not less than one million dollars ($1,000,000.00) per occurrence and in an amount of not less than two million dollars ($2,000,000.00) annual aggregate limits.  All such insurance will be written on the most current occurrence ISO Commercial General Liability Form including without limitation, personal injury and contractual liability coverage for the performance by Tenant of the indemnity agreements set forth in this Lease, which insurance shall include a waiver of subrogation rights in favor of Landlord.

10.3           Liability Insurance. Tenant shall obtain and keep in force during the Term hereof a policy of combined single limit bodily injury and property damage insurance, insuring Landlord and Tenant, against any liability arising out of the ownership, use, occupancy or maintenance of areas exterior to the Premises and appurtenant thereto such as landscaped areas, walkways, driveways and parking areas, owned by Landlord, in an amount not less than One Million and No/100 Dollars ($1,000,000.00) per occurrence.

10.4           Employees’ Compensation. Tenant shall maintain and keep in force all employees’ compensation insurance (workers’ compensation) required under the laws of the State of Florida, and such other insurance as may be necessary to protect Landlord against any other liability to person or property arising hereunder by operation of law, whether such law is now in force or is adopted subsequent to the execution hereof.

10.5           Employer’s Liability Insurance.  Tenant shall obtain and keep in force during the Term of this Lease a policy for Employer’s Liability Insurance in an amount not less than One Million and No/100 Dollars ($1,000,000.00).

10.6           Tenant’s Default.  Should Tenant fail to keep in effect and pay for such insurance as it is in this section required to maintain, Landlord may do so, in which event, the insurance premiums paid by Landlord shall become due and payable forthwith and failure of Tenant to pay same on demand shall constitute a material breach of this lease.

10.7           Tenant’s Compliance.  Tenant shall properly and promptly comply with all rules, orders and regulations established under this Lease.  Tenant shall not do or permit to be done anything, which shall invalidate the insurance policies, referred to in this Section. Tenant agrees to pay any increase in the amount of insurance premiums over and above the rate now in force that may be caused by Tenant’s use or occupancy of the Premises.  All required insurance policies maintained by Tenant must be written as primary policies, not contributing with and not supplemental to the coverage that Landlord carriers or may carry.

10.8           Waiver of Subrogation. Landlord and Tenant each waive any and all rights to recover against the other or against any other tenant or occupant of the Premises, or against the officers, directors, shareholders, partners, joint venturers, employees, agents, customers, invitees, or business visitors of such other party, for any loss or damage to such waiving party arising from any cause covered by any property insurance required to be carried by such party pursuant to this Article 10 or any other property insurance actually carried by such party.  Landlord and Tenant from time to time will cause their respective insurers to issue appropriate waiver of subrogation rights endorsements to all property insurance policies carried in connection with the Premises or the contents of the Premises. Tenant agrees to cause all other occupants of the Premises claiming by, under, or through Tenant to execute and deliver to Landlord such a waiver of claims and to obtain such waiver of subrogation rights endorsements.

10.9           Adequacy of Coverage. Landlord, its agents, and employees make no representation that the limits of liability specified to be carried by Tenant pursuant to this Article 10 are adequate to protect Tenant.  If Tenant believes that any of such insurance coverage is inadequate, Tenant will obtain at Tenant’s sole expense such additional insurance coverage as Tenant deems adequate.

10.10           Insurance Policies.  Insurance required hereunder shall be with good and solvent insurance companies satisfactory to Landlord.  Tenant shall deliver to Landlord copies of policies of insurance required to be provided by Tenant under this Section or certificates evidencing the existence and amounts of such insurance and its compliance with the conditions set forth in this Section, including without limitation, Landlord as a named insured or additional insured thereunder. Such policies shall state that the insurance is primary over any insurance carried by Landlord. No such policy shall be cancelable or subject to reduction of coverage or other modification except after thirty (30) days’ prior written notice to Landlord, and the interest of Landlord under such policies shall not be affected by any default by Tenant under the provisions of such policies. Tenant shall, at least thirty (30) days prior to the expiration of such policies, furnish Landlord with renewals or “binders” thereof, or Landlord may order such insurance and charge the cost thereof to Tenant, which amount shall be payable by Tenant upon demand.  If required by any mortgage encumbering the Premises, the mortgagee shall also be a named or additional insured and the terms of all insurance policies shall comply with all other requirements of such mortgage.

10.11           Waiver of Claims.  Tenant hereby releases and waives its entire right of recovery against Landlord, for loss or damage arising out of, or incident to the perils actually insured against under this Section, which perils occur in, on, or about the Premises, whether due to the negligence of Landlord or Tenant or their agents, employees, contractors and/or invitees. Tenant shall, upon obtaining the policies of insurance required hereunder, give notice to the insurance carrier or carriers that the foregoing waiver of subrogation is contained in this Lease.

11.           DAMAGE OR DESTRUCTION.

11.1           Definitions.

(a)           “Premises Partial Damage” shall herein mean damage or destruction to the Premises to the extent that the cost of repair is less than fifty percent (50%) of the fair market value of the Premises immediately prior to such damage or destruction, or if applicable, damage or destruction to the building of which the Premises is a part to the extent that the cost of repair is less than fifty percent (50%) of the fair market value of such building as a whole immediately prior to such damage or destruction.

(b)           “Premises Total Destruction” shall herein mean damage or destruction to the Premises to the extent that the cost of repair is fifty percent (50%) or more of the fair market value of the Premises immediately prior to such damage or destruction, or if applicable, damage or destruction to the building of which the Premises is a part to the extent that the cost of repair is fifty percent (50%) or more of the fair market value of such building as a whole immediately prior to such damage or destruction.

(c)           “Insured Loss” shall herein mean damage or destruction which was caused by an event required to be covered by the insurance described herein.

11.2           Partial Damage - Insured Loss.  Subject to the provisions of section, if at any time during the Term hereof there is damage which is an Insured Loss and which falls into the classification of Premises Partial Damage, then Landlord shall, at Landlord’s sole cost, repair such damage as soon as reasonably possible and this Lease shall continue in full force and effect. In no event shall Landlord be obligated to make any repairs or replacements of any items other than those installed by or at the expense of Landlord, or to repair any damage except to the extent proceeds of insurance are available for such purpose.

11.3           Partial Damage - Uninsured Loss.  Subject to the provisions of Section, if at any time during the Term hereof there is damage which is not an Insured Loss and which falls within the classification of Premises Partial Damage, unless caused by a negligent or willful act of Tenant (in which event Tenant shall make the repairs at Tenant’s expense), Landlord may at Landlord’s option either (i) repair such damage as soon as reasonably possible at Landlord’s expense, in which event this Lease shall continue in full force and effect, or (ii) give written notice to Tenant within thirty (30) days after the date of the occurrence of such damage of Landlord’s intention to cancel and terminate this Lease, as of the date of the occurrence of such damage. In the event Landlord elects to give such notice of Landlord’s intention to cancel and terminate this Lease, Tenant shall have the right within ten (10) days after the receipt of such notice to give written notice to Landlord of Tenant’s intention to repair such damage at Tenant’s expense, without reimbursement from Landlord, in which event this Lease shall continue in full force and effect, and Tenant shall proceed to make such repairs as soon as reasonably possible. If Tenant does not give such notice within such 10-day period, this Lease shall be canceled and terminated as of the date of the occurrence of such damage. In no event shall Landlord be obligated to make any repairs or replacements of any items other than those installed by or at the expense of Landlord.

11.4           Total Destruction. If at any time during the Term hereof there is damage, whether or not an Insured Loss (including destruction required by any authorized public authority), which falls into the classification of Premises Total Destruction, this Lease shall automatically terminate as of the date of such damage, unless within ten (10) days after such damage occurs Landlord shall notify Tenant that Landlord shall repair such damage and shall thereafter repair the damage within a reasonable time.

11.5           Damage Near End of Term.  In the event that Tenant has an option to extend or renew this Lease, and the time within which said option may be exercised has not yet expired, Tenant shall exercise such option, if it is to be exercised at all, no later than twenty (20) days after the occurrence of an Insured Loss falling within the classification of Premises Partial Damage during the last six (6) months of the Term hereof. If Tenant duly exercises such option during said 20-day period, Landlord shall, at Landlord’s expense, repair such damage as soon as reasonably possible to the extent required under Section above, and this Lease shall continue in full force and effect. If Tenant fails to exercise such option during said 20-day period, then Landlord may, at Landlord’s option, terminate and cancel this Lease as of the expiration of said 20-day period by giving written notice to Tenant of Landlord’s election to do so within ten (10) days after the expiration of said 20-day period, notwithstanding any term or provision to the contrary in the grant of option to extend or renew.

11.6           Abatement of Rent; Tenant’s Remedies.

(a)           In the event of damage described above which Landlord or Tenant repairs or restores, the rent payable hereunder for the period during which such damage, repair or restoration continues shall be abated in proportion to the degree to which Tenant’s use of the Premises is impaired. Except for abatement of rent, if any, Tenant shall have no claim against Landlord for any damage suffered by reason of such damage, destruction, repair or restoration.

(b)           If Landlord shall be obligated to repair or restore the Premises and shall not commence such repair or restoration within ninety (90) days after such obligation shall accrue, Tenant may at Tenant’s option cancel and terminate this Lease by giving Landlord written notice of Tenant’s election to do so at any time prior to the commencement of such repair or restoration.  In such event, this Lease shall terminate as of the date of such notice and Tenant shall have no other rights against Landlord.

11.7           Termination; Advance Payments. Upon termination hereof pursuant to this Section, an equitable adjustment shall be made concerning advance rent and any advance payments made by Tenant to Landlord.

12.           PERSONAL PROPERTY TAXES.

Tenant shall pay prior to delinquency all taxes assessed against and levied upon trade fixtures, furnishings, equipment and all other personal property of Tenant contained on the Premises or elsewhere or on any leasehold improvements made to the Premises by Tenant, regardless of the validity thereof or whether title to such improvements shall be in the name of Tenant or Landlord. When possible, Tenant shall cause said trade fixtures, furnishings, equipment and all other personal property to be assessed and billed separately from the real property of Landlord.  If any of Tenant’s personal property shall be assessed with Landlord’s real property, Tenant shall pay Landlord the taxes attributable to Tenant’s personal property within ten (10) days after receipt of a written statement from Landlord setting forth the taxes applicable to Tenant’s property.

13.           UTILITIES.

13.1           Responsibility for Payment.  Tenant shall punctually pay for all water and sewer charges, and for all gas, heat, electricity, telephone, garbage collection and all other utilities and services consumed in connection with the Premises, together with any taxes thereon. If any such services are not separately metered as to the Premises, Tenant shall pay a reasonable proportion to be determined by Landlord of all charges jointly metered with other premises.

13.2           Additional Rent.  If charges to be paid by Tenant hereunder are not paid when due and Landlord elects to pay same, such charges shall be added to the subsequent month’s rent and shall be collectible from Tenant in the same manner as rent. Landlord shall not be liable for damage to Tenant’s business and/or inventory or for any other claim by Tenant resulting from an interruption in utility services.

14.           ASSIGNMENT AND SUBLETTING.

14.1           Landlord’s Consent Required. Tenant shall not voluntarily or by operation of law assign, mortgage, sublet, or otherwise transfer or encumber all or any part of Tenant’s interest in this Lease or in the Premises or Tenant’s possession thereof without Landlord’s prior written consent, which consent shall not be unreasonably withheld. Any attempted assignment, transfer, mortgage, encumbrance or subletting without Landlord’s consent shall be void, and shall constitute a breach hereof.  If Tenant desires to assign this Lease or to sublet the Premises or any portion thereof, it shall first notify Landlord of its desire to do so and shall submit in writing to Landlord: (i) the name of the proposed assignee or subtenant; (ii) the nature of the proposed assignee’s or subtenant’s business to be conducted on the Premises; (iii) the terms of the proposed assignment or sublease; and (iv) such financial information as Landlord may reasonably request concerning the proposed assignee or subtenant.

14.2           No Release or Waiver. Regardless of Landlord’s consent, no subletting or assignment shall release Tenant from Tenant’s obligation or alter the primary liability of Tenant to pay the rent and to perform all other obligations to be performed by Tenant hereunder. The acceptance of rent by Landlord from any other person shall not be deemed to be a waiver by Landlord of any provision hereof. Consent to one assignment or subletting shall not be deemed consent to any subsequent assignment or subletting. In the event of default by any assignee of Tenant or any successor of Tenant in the performance of any of the terms hereof, Landlord may proceed directly against Tenant without the necessity of exhausting remedies against said assignee. Landlord may consent to subsequent assignments or subletting hereof or amendments or modifications to this Lease with assignees of Tenant, without notifying Tenant, or any successor of Tenant, and without obtaining its or their consent thereto and such action shall not relieve Tenant of liability hereunder.

15.           DEFAULTS; REMEDIES.

15.1           Defaults.  The occurrence of any one or more of the following events shall constitute a material default and breach hereof by Tenant:

(a)           the vacating or abandonment of the Premises by Tenant;

(b)           the failure by Tenant to make any payment of rent or any other payment required to be made by Tenant hereunder, as and when due, where such failure shall continue for a period of ten (10) days from the due date;

(c)           the failure by Tenant to observe or perform any of the covenants, conditions or provisions hereof to be observed or performed by Tenant, other than described in Subsection (b) above, where such failure shall continue for a period of ten (10) days after written notice thereof from Landlord to Tenant; provided, however, that if the nature of Tenant’s default is such that more than 10 days are reasonably required for its cure, then Tenant shall not be deemed to be in default if Tenant commences such cure within said 10-day period and thereafter diligently prosecutes such cure to completion but in no event later than thirty (30) days after such written notice from Landlord; or

(d)           (i) the making by Tenant of any general arrangement or assignment for the benefit of creditors; (ii) Tenant becomes a “debtor” as defined under the Federal Bankruptcy Code or any successor statute thereto or any other statute affording debtor relief, whether state or federal (unless, in the case of a petition filed against Tenant, the same is dismissed within thirty (30) days), or admits in writing its present or prospective insolvency or inability to pay its debts as they mature, or is unable to or does not pay a material portion (in numbers or dollar amount) of its debts as they mature, (iii) the appointment of a trustee or receiver to take possession of all or a substantial portion of Tenant’s assets located at the Premises or of Tenant’s interest in this Lease; (iv) the attachment, execution or other judicial seizure of all or a substantial portion of Tenant’s assets located at the Premises or of Tenant’s interest in this Lease; or (v) the entry of a judgment against Tenant which affects Tenant’s ability to conduct its business in the ordinary course; provided, however, to the extent that any provision is contrary to any applicable law, such provision shall be of no force or effect to such extent only.

15.2           Remedies.  In the event of any default or breach hereof by Tenant, Landlord may (but shall not be obligated) at any time thereafter, with or without notice or demand and without limiting Landlord in the exercise of any right or remedy which Landlord may have by reason of such default or breach:

(a)           terminate Tenant’s right to possession of the Premises by any lawful means, in which case this Lease shall terminate and Tenant shall immediately surrender possession of the Premises to Landlord. In such event, Landlord shall be entitled to recover from Tenant all damages incurred by Landlord by reason of Tenant’s default, including accrued rent, the cost of recovering possession of the Premises;

(b)           re-enter and take possession of the Premises and relet or attempt to relet same for Tenant’s account, holding Tenant liable in damages for all expenses incurred by Landlord in any such reletting and for any difference between the amount of rents received from such reletting and those due and payable under the terms hereof;

(c)           declare all rents and charges due hereunder immediately due and payable, and thereupon all such rents and fixed charges to the end of the Term shall thereupon be accelerated, and Landlord may, at once, take action to collect the same by distress or otherwise; and/or

(d)           pursue any other remedy now or hereafter available to Landlord under state or federal laws or judicial decisions.

15.3           Default by Landlord.  Landlord shall not be in default unless Landlord fails to perform obligations required of Landlord within a reasonable time, but in no event later than thirty (30) days after written notice by Tenant to Landlord and to the holder of any first mortgage or deed of trust covering the Premises whose name and address shall have theretofore been furnished to Tenant in writing, specifying the obligation that Landlord has failed to perform; provided, however, that if the nature of Landlord’s obligation is such that more than thirty (30) days are required for performance, then Landlord shall not be in default if Landlord commences performance within such 30-day period and thereafter diligently prosecutes the same to completion. Notwithstanding any other provisions hereof, Landlord shall not be in default hereunder for failure to perform any act required of Landlord where such failure is due to inability to perform on account of strike, laws, regulations or requirements of any governmental authority, or any other cause whatsoever beyond Landlord’s control, nor shall Tenant’s rent be abated by reason of such inability to perform.

16.           CONDEMNATION.

If the whole or any part of the Premises is taken for any public or quasi-public use or under any statute or by right of eminent domain, or by governmental purchase in lieu thereof, the Term of this Lease shall cease with respect to the portion of the Premises so taken as of the date of such taking.  If the portion of the Premises so taken is such as to destroy its usefulness for the purpose for which it has been leased, the Tenant will have the right to terminate this Lease upon written notice to the Landlord of its election to do so furnished within sixty (60) days after it is ultimately determined what portion of the Premises will be so taken.  Upon the furnishing of such notice this Lease will immediately terminate and the rent will be paid proportionately up to the date of termination.  All damages awarded for any such taking will belong to and be the sole property of the Landlord, but Tenant shall have the right to seek and collect damages from the condemning authority arising out of its taking of any Tenant improvements, as to which amounts Landlord shall have no right of ownership.

17.           STATUS AND ESTOPPEL CERTIFICATES.

Each party shall, within ten days after request by the other party, furnish to the other party (or to any person designated by the other party) a certificate in recordable form: (a) that this Lease is in good standing and in full force and effect (or if not, specifying why it is not, including any existing and unwaived failure of the other party in the performance of its obligations); (b) that the certifying party has and claims no setoff or defense with respect to this Lease (or if any setoff or defense exists, specifying the same); (c) that this Lease is unmodified (or, if modified, specifying the modification); and (d) as to the time for which rent has been paid and the date on which the next rent is due.

18.           RELAY OF OFFICIAL NOTICES AND COMMUNICATIONS.

If either party receives any notice from a governmental body or governmental officer that pertains to the Premises (including those relating to taxes or rezoning), or receives any notice of litigation or threatened litigation affecting the Premises, the receiving party shall promptly send it (or a copy) to the other party.

19.           SUBORDINATION TO MORTGAGES.

The Tenant’s rights are and will be subject and subordinate to the lien of any mortgage or mortgages now or hereafter in force with respect to the Premises, and upon Landlord’s written request the Tenant shall execute and deliver a certificate or agreement reflecting the subordination.  As to any mortgage created during the lease Term, the Tenant will be entitled to a nondisturbance agreement recognizing the right of the Tenant to use and occupy the Premises as authorized by this Lease upon the payment of rent and other amounts that Tenant is obligated to pay and upon the performance by the Tenant of Tenant’s other obligations under this Lease.

20.           LANDLORD’S LIEN.

In addition to the statutory landlord’s lien, Landlord shall have, at all times, a valid security interest to secure payments of all rent, additional rent and other sums of money becoming due hereunder from Tenant, and to secure payment of any damages or loss which Landlord may suffer by reason of the breach by Tenant of any covenant, agreement or condition contained herein, upon all goods, wares, equipment, fixtures, furniture, improvements and other personal property of Tenant presently or which may hereafter be situated in the Premises, and all proceeds therefrom.  Tenant’s personal property shall not be removed from the Premises without the consent of Landlord until all arrearages in rent as well as any and all other sums of money then due to Landlord hereunder shall first have been paid and discharged and all the covenants, agreements and conditions hereof have been fully complied with and performed by Tenant. Upon the occurrence of an event of default by Tenant, Landlord may, in addition to any other remedies provided herein, enter upon the Premises and take possession of any and all goods, wares, equipment, fixtures, furniture, improvements and other personal property of Tenant situated in the Premises, without liability for trespass or conversion, and sell the same at public or private sale, with or without having such property at the sale, after giving Tenant reasonable notice of the time and place of any public sale or of the time after which any private sale is to be made, at which sale Landlord or its assigns may purchase unless otherwise prohibited by law. Unless otherwise provided by law, and without intending to exclude any other manner of giving Tenant reasonable notice, the requirement of reasonable notice shall be met if such notice is given in the manner prescribed in this Lease at least five (5) days before the time of sale. The proceeds from any such disposition, less any and all expenses connected with the taking of possession, holding and selling of the Premises (including reasonable attorneys’ fees and other expenses), shall be applied as a credit against the indebtedness secured by the security interest granted in this Section. Any surplus shall be paid to Tenant or as otherwise required by law; and Tenant shall pay any deficiencies forthwith. Upon request of Landlord, Tenant agrees to execute and deliver to Tenant a financing statement in form sufficient to perfect the security interest of Landlord in the aforementioned property and proceeds thereof under the provisions of the Uniform Commercial Code in force in the State of Florida. The statutory lien for rent is not hereby waived, the security interest herein granted being in addition and supplementary thereto.

21.           SIGNS.

Tenant shall not place any sign on or about the Premises without Landlord’s prior written consent.  Any signs erected on the premises shall become the property of the Landlord upon termination of the Lease.

22.           EASEMENTS.

Landlord reserves to itself the right, from time to time, to grant such easements, rights and dedications as Landlord deems necessary or desirable, and to cause the recordation of plats and restrictions, so long as such easements, rights, dedications, plats and restrictions do not unreasonably interfere with the use of the Premises by Tenant. Tenant shall promptly sign any of the aforementioned documents upon request of Landlord and failure to do so shall constitute a material breach hereof.

23.           HOLDING OVER.

(a)           The Tenant shall, at termination of this Lease by lapse of time or otherwise, deliver to Landlord immediate possession of the Premises.  If the Tenant fails to do so, the Tenant shall pay Landlord, for the time possession is withheld, an amount equal to 150% of the rent applicable immediately preceding the termination, prorated on a daily basis.  During the holdover period, Tenant’s obligations under this Lease (other than those relating to duration of the Lease) will continue in force and effect.  The provisions of this subparagraph do not impair any right of Landlord to repossess the Premises or to exercise any other remedy set forth in this Lease or allowed by law.

(b)           If the Tenant pays and Landlord accepts rent after the expiration of the Lease Term, the parties will not thereby be deemed to have extended or renewed this Lease but will be deemed to have established a month-to-month tenancy, during which tenancy the obligations of both parties under this Lease (other than those relating to duration of the Lease) will continue in force and effect.

24.           LANDLORD’S ACCESS.

Landlord and Landlord’s agents shall have the right to enter the Premises at reasonable times for the purpose of inspecting the same, posting notices of non-responsibility, showing the same to prospective purchasers, lenders, or tenants, performing any obligation of Tenant hereunder of which Tenant is in default, and making such alterations, repairs, improvements or additions to the Premises or to the building of which it is a part as Landlord may deem necessary or desirable, all without being deemed guilty of an eviction of Tenant and without abatement of rent, and Landlord may erect scaffolding and other necessary structures where reasonably required by the character of any work performed, provided that the business of Tenant shall be interfered with as little as reasonably practicable. Tenant hereby waives any claims for damages for any injury to or interference with. Tenant’s business, any loss of occupancy or quiet enjoyment of the Premises, and any other loss occasioned thereby. For each of the aforesaid purposes, Landlord shall at all times have and retain a key with which to unlock all of the doors in, upon and about the Premises, excluding Tenant’s vaults and safes, if any, and Landlord shall have the right to use any and all means which Landlord may deem proper to open said doors in an emergency in order to obtain entry to the Premise, and any entry to the Premises obtained by Landlord by any of said means shall not under any circumstances be construed or deemed to be a forcible or unlawful entry into, or a detainer of, the Premises, or an eviction of Tenant from the Premises or any portion thereof.  No provision hereof shall be construed as obligating Landlord to perform any repairs, alterations or to take any action not otherwise expressly agreed to be performed or taken by Landlord. Landlord may at any time place on or about the Premises any ordinary “For Sale” signs and Landlord may at any time during the last one hundred twenty (120) days of the Term hereof place on or about the Premises any ordinary “For Lease” signs, all without rebate of rent or liability to Tenant.

25.           INDEMNIFICATION, WAIVER AND RELEASE.

25.1           In General.  Tenant hereby indemnifies and shall protect and hold Landlord harmless from and against all liabilities, losses, claims, demands, costs, expenses and judgments of any nature arising, or alleged to arise, during the Term of this Lease, from or in connection with (a) any injury to, or the death of, any person, or any loss of or damage to property occurring on or about the Premises, in any case arising from or connected with the use of the Premises by Tenant after the Commencement Date; or (b) performance of any labor or services or the furnishing of any materials or other property in respect of the Premises or any part thereof by or at the request of Tenant after the Commencement Date (each being hereinafter identified as an “Indemnifiable Matter”).

25.2           Conditions of Indemnification.  With respect to any actual or potential claim, any written demand, the commencement of any action or occurrence of any other event which involves any Indemnifiable Matter (each a “Claim”):

(a)           Within 30 days (or such longer period as shall not materially prejudice the rights of the Tenant) after the Landlord first receives a written document presenting a Claim, or, if such Claim does not involve a third party Claim, after the Landlord first has actual knowledge of such Claim, Landlord shall furnish notice to the Tenant of such Claim, stating in reasonable detail the amount involved, if known, together with a copy of any written documentation furnished to the Landlord.

(b)           The Tenant shall have no obligation to indemnify the Landlord with respect to any Claim if the Landlord fails to give notice with respect thereto in accordance with Subsection (a) above.

(c)           If the Claim involves a third party claim, then the Tenant shall have the right, at its expense and ultimate liability, regardless of the outcome, to engage counsel of its choice (subject to the right of Landlord to review each such choice and, if dissatisfied for substantive reasons, to require Tenant to seek alternative counsel), to litigate, defend, settle or otherwise attempt to resolve such Claim, except that the Landlord may fully participate, at the Landlord’s own cost, in such defense, settlement or other resolution, or, if Tenant fails to effect a defense, then at Tenant’s expense.  Landlord and Tenant will fully cooperate with each other and their respective counsel, as applicable, in connection with any such litigation, defense, settlement or other resolution, and neither party shall effect a settlement or other resolution of a Claim, without the consent of the other, that obligates the other to make any monetary payment.

25.3           Waiver and Release.  To the fullest extent permitted by law, Tenant, as a material part of the consideration to Landlord for this Lease, by this Section 25.3 waives and releases all claims against Landlord, its employees, and agents with respect to Tenant’s, its employee’s, agent’s and invitee’s property and all other matters for which Landlord has disclaimed liability pursuant to the provisions of this Lease. In addition, Tenant agrees that Landlord, its agents, and employees will not be liable for any loss, injury, death, or damage (including consequential damages) to property or Tenant’s business occasioned by theft; act of God; public enemy; injunction; riot; strike; insurrection; war; court order; requisition; order of governmental body or authority; fire; explosion; falling objects; steam, water, rain or snow; leak or flow of water (including water from the sprinkler system), rain or snow from the Premises or into the Premises or from the roof, street, subsurface, or from any other place, or by dampness, or from the breakage, leakage, obstruction, or other defects of the pipes, sprinklers, wires, appliances, plumbing, air conditioning, or lighting fixtures of the Premises; or from construction, repair, or alteration of the Premises or from any acts or omissions of any visitor of the Premises; or from any other cause whatsoever. Tenant acknowledges its obligation to obtain insurance to insure and indemnify itself from any and all losses to Tenant’s business and personal property and otherwise, and acknowledges it has and shall have no claim against Landlord for any such losses.  Tenant further acknowledges that Tenant’s insuror and all other persons and parties shall have no right of subrogation against Landlord nor against Landlord’s insuror for any losses encompassed by any portion of this Article 25; Tenant disclaims any such rights and acknowledges that Tenant cannot and will not make any such subrogation assignment.

26.           LANDLORD’S LIABILITY.

The term “Landlord” as used herein shall mean only the owner or owners at the time in question of the fee title or a tenant’s interest in a ground lease of the Premises, and in the event of any transfer of such title or interest, Landlord herein named (and in case of any subsequent transfers then the grantor) shall be relieved from and after the date of such transfer of all liability as respects Landlord’s obligations thereafter to be performed, provided that any funds in the hands of Landlord or the then grantor at the time of such transfer, in which Tenant has an interest, shall be delivered to the grantee. The obligations contained in this Lease to be performed by Landlord shall, subject to transfer of funds as aforesaid, be binding on Landlord’s successors and assigns only during their respective periods of ownership. Tenant shall look solely to the equity of the then owner of the Premises for the satisfaction of any remedies of Tenant in the event of a breach by Landlord of any of its obligations. Such exculpation of liability shall be absolute and without any exception whatsoever.

27.           RADON GAS DISCLOSURE.

The following language is required by law in any contract involving the sale or lease of any building within the State of Florida:

“RADON GAS: Radon is a naturally occurring radioactive gas that, when it has accumulated in a building in sufficient quantities, may present health risks to persons who are exposed to it over time. Levels of radon that exceed federal and state guidelines have been found in buildings in Florida. Additional information regarding radon and radon testing may be obtained from your county health department.”

28.           ENVIRONMENTAL COMPLIANCE.

28.1           General.  Tenant shall not use, generate, manufacture, produce, store, release, discharge or dispose of, on, under or about the Premises, or transport to or from the Premises, any Hazardous Substance (as defined below), or allow any other person or entity to do so. Tenant shall keep and maintain the Premises in compliance with, and shall not cause or permit the Premises to begin violation of, any Environmental Laws (as defined below).

28.2           Notice of Proceedings.  Tenant shall give prompt notice to Landlord of (i) any proceeding or inquiry by any governmental authority (including without limitation the Florida Environmental Protection Agency or Florida Department of Health and Rehabilitative Services) with respect to the presence of any Hazardous Substance on the Premises or the migration thereof from or to other property; (ii) all claims made or threatened by any third party against Tenant, Landlord or the Premises relating to any loss or injury resulting from any Hazardous Substance; and (iii) Tenant’s discovery of any occurrence or condition on any real property adjoining or in the vicinity of the Premises that could cause the Premises or any part thereof to be subject to any restrictions on the ownership, occupancy, transferability or use of the Premises under any Environmental Law or any regulation adopted in accordance therewith.

28.3           Liabilities for Costs.  Tenant shall protect, indemnify and hold harmless Landlord, its directors, officers, employees, agents, successors and assigns from and against any and all loss, damage, cost, expense or liability (including attorneys’ fees and costs) directly or indirectly arising out of or attributable to the use, generation, manufacture, production, storage, release, threatened release, discharge, disposal, transport or presence of a Hazardous Substance on, under, about, to or from the Premises for any acts or use of the Premises after the Commencement Date, including the costs of any necessary repair, cleanup or detoxification of the Premises, in any way arising from the acts of Tenant. The indemnification provided in this paragraph shall specifically apply to and include claims or actions brought by or on behalf of employees of Tenant, and Tenant hereby expressly waives any immunity to which Tenant may otherwise be entitled under any industrial or worker’s compensation laws. In the event Landlord shall suffer or incur any such costs, Tenant shall pay to Landlord the total of all such costs suffered or incurred by Landlord upon demand therefore by Landlord.

28.4           Definitions for Environmental Compliance.  “Environmental Laws” shall mean any federal, state or local law, statute, ordinance or regulation pertaining to health, industrial hygiene, or the environmental conditions on, under or about the Premises, including without limitation the Comprehensive Environmental Response Compensation and Liability Act of 1980, as amended from time to time (“CERCLA”), 42 U.S.C. §§ 9601 et seq., and the Resource Conservation and Recovery Act of 1976, as amended from time to time (“RCRA”), 42 U.S.C. §§ 6901 et seq. The term “Hazardous Substance” means any hazardous or toxic substances, materials or wastes, including, but not limited to, solid, semi-solid, liquid or gaseous substances which are toxic, ignitable, corrosive carcinogenic or otherwise dangerous to human, plant or animal health or well-being and those substances, materials, and wastes listed in the United States Department of Transportation Table (49 CFR 972.101) or by the Environmental Protection Agency as hazardous substances (40 CFR Part 302) and amendments thereto or such substances, materials and wastes which are or become regulated under any applicable local, state or federal law including, without limitation, any material, waste or substance which is (i) petroleum, (ii) oil, (iii) asbestos, (iv) polychlorinated biphenyls, (v) waste oils, (vi) designated as a “hazardous substance” pursuant to Section 311 of the Clean Water Act, 33 U.S.C. Section 1251 et seq. (33 U.S.C. Section 1321) or listed pursuant to Section 307 of the Clean Water Act (33 U.S.C. Section 1317, (vii) defined as a “hazardous waste” pursuant to Section 1004 of the Resource Conservation and Recovery Act, 42 U.S.C. Section 6901 et seq. (42 U.S.C. 6903) or (vii) defined as a “hazardous substance” pursuant to Section 101 of the Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C. Section 9601 et seq. (42 U.S.C. Section 9601).

28.5           Inspection Rights.  Landlord shall have the right to inspect the Premises and audit Tenant’s operations thereon to ascertain Tenant’s compliance with the provisions of this Lease at any reasonable time, and Tenant shall provide periodic certifications to Landlord, upon request, that Tenant is in compliance with the environmental restrictions contained herein. Landlord shall have the right, but not the obligation, to enter upon the Premises and perform any obligation of Tenant hereunder of which Tenant is in default, including without limitation, any remediation necessary due to environmental impact of Tenant’s operations on the Premises, without waiving or reducing Tenant’s liability for Tenant’s default hereunder.

29.           MISCELLANEOUS PROVISIONS.

(a)Notices.All notices, consents, approvals, joinders, waivers  and other communications required or permitted under this Agreement (each a “Communication”) shall be in writing and shall be considered properly given to the recipient party if furnished by hand delivery; deposited with (i) the United States Postal Service for delivery by registered or certified mail, return receipt requested and postage prepaid, or (ii) a commercial courier service (with charges prepaid); or sent by facsimile machine or by e-mail message.  Each communication shall be deemed delivered to the recipient, if : (A) delivered by hand, when so delivered; (B) deposited with the United States Postal Service, on the third day upon which mail service is provided following the date appearing on the receipt obtained from the Postal Service at the time of such deposit; (C) deposited with a commercial courier service, on the next courier delivery date following the date of such deposit (other than a Saturday, Sunday or legal holiday in the jurisdiction to which such Communication is directed); (D) sent by facsimile machine, on the date (other than a Saturday, Sunday or legal holiday in the jurisdiction to which such Communication is directed) as of which the sending party is in receipt of documentary evidence that the transmission has been successfully completed; and (E) sent by e-mail message, as of the date and time as of which the sending party is in receipt of an e-mail response from the recipient party acknowledging such receipt.  Whenever the furnishing of notice is required, the same may be waived in writing by the recipient party.

(b)Attorneys’ Fees.If either party brings an action to enforce the terms hereof or declare rights hereunder, the prevailing party in any such action shall be entitled to recover reasonable attorneys’ and legal assistants’ fees and costs incurred in connection therewith, on appeal or otherwise, including those incurred in litigation, arbitration, mediation, administrative or bankruptcy proceedings and in enforcing any right to indemnity herein.

(c)Force Majeure.Whenever a period of time is herein prescribed for action to be taken by Landlord, Landlord shall not be liable or responsible for, and there shall be excluded from the computation for any such period of time, any delays due to strikes, riots, acts of God, shortages of labor or materials, war, governmental laws, regulations or restrictions or any other causes of any kind whatsoever which are beyond the control of Landlord.

(d)Quiet Enjoyment.Upon Tenant paying the Monthly Rent for the Premises and observing and performing all of the covenants, conditions and provisions on Tenant’s part to be observed and performed hereunder, Tenant shall have quiet possession of the Premises for the entire Term hereof, subject to all of the provisions hereof.

(e)Binding Effect.Subject to any provisions hereof restricting assignment or subletting by Tenant, this Lease shall bind the parties, their personal representatives, successors and assigns.

(f)Severability.  The invalidity of any provision hereof under applicable law shall in no way affect the validity of any other provision hereof.

(g)Time of Essence.  Time is of the essence hereof.

(h)Additional Rent; Survival.  Any and all monetary obligations of Tenant under the terms hereof shall be deemed to be rent, shall be secured by any available lien for rent, and to the extent accrued, shall survive expiration or termination of the Term hereof.

(i)Security Measures.  Tenant hereby acknowledges that the rental payable to Landlord hereunder does not include the cost of guard service or other security measures, and that Landlord shall have no obligation whatsoever to provide same. Tenant assumes all responsibility for the protection of Tenant, its agents and invitees from acts of third parties.

(j)Construction.  Any conflict between the printed provisions hereof and the typewritten or handwritten provisions shall be controlled by the typewritten or handwritten provisions. Headings used herein shall not affect the interpretation hereof, being merely for convenience. The terms “Landlord” and “Tenant” shall include the plural and the singular and all grammar shall be deemed to conform thereto. If more than one person executes this Lease, their obligations shall be joint and several. The use of the words “include,” “includes” and “including” shall be without limitation to the items which may follow.

(k)Captions.  The parties mutually agree that the headings and captions contained in this Lease are inserted for convenience or reference only, and are not to be deemed part of or used in construing this Lease.

(l)Choice of Law and Jurisdiction.  Landlord and Tenant agree that Florida law (statutory, case law, and common law) shall apply exclusively to all disputes arising under this lease. Landlord and Tenant further agree that all such disputes must be filed and resolved exclusively within the jurisdiction of the Pinellas County Court system in Clearwater, Florida.

(m)Non-Waiver.  The failure of either party to insist upon compliance by the other party with any obligation, or to exercise any remedy, does not waive the right to do so in the event of a continuing or subsequent delinquency or default.  A party’s waiver of one or more defaults does not constitute a waiver of any other delinquency or default.  Landlord’s acceptance of rent does not waive any uncured delinquency or default by Tenant.

[SIGNATURES ON FOLLOWING PAGE]

“LANDLORD”

/s/ R. P. Checket                                           HOSEA PARTNERS, LTD., a Florida

Witness                                                                                                        limited partnership

/s/   Randy K. Sterns                                                                                   s/  Roger M. Boatman

Witness                                                                                                        Roger M. Boatman

      General Partner

“TENANT”

       PATCO ELECTRONICS, INC., a Florida

       corporation

/s/   R. P. Checket                                                                                          s/   Thomas G. Archbold                                                      

Witness                                                                                                          Thomas G. Archbold

         Chief Financial Officer

/s/   Randy K. Sterns                                                      

Witness

EX-10.3

Exhibit 10.3

INDEMNITY ESCROW AGREEMENT

INDEMNITY ESCROW AGREEMENT dated March 31, 2010 (the “Agreement”), entered into by and among TECHNOLOGY RESEARCH CORPORATION, a Florida corporation (the “Company”), and HOSEA PARTNERS, LTD., a Florida limited partnership; ROGER M. BOATMAN, as Trustee of the Roger M. Boatman Trust; MELVIN R. HALL and ELSA G. HALL, as Joint Tenants with Right of Survivorship (each a “Holder” and collectively, the “Holders”); and Bush Ross, P.A., 1801 North Highland Avenue, Tampa, Florida 33602 (the “Escrow Agent”).  Holders have formed HOSEA II, LLC, a Florida limited liability company  (“Hosea”), to hold and distribute proceeds from the Purchase Agreement, as defined below.  Accordingly, Hosea will enter into this Agreement at closing of the Purchase Agreement and will be deemed to be a “Holder” under the terms of this Agreement.

BACKGROUND INFORMATION

Concurrently with the execution of this Agreement, the Company and Holders have entered into a Stock Purchase Agreement, dated March 2, 2010 (the “Purchase Agreement”).  At the closing of the Purchase Agreement, the Company is delivering 67,495 shares of its common stock, issued in the name Hosea for the benefit of the Holders, and $500,000 in cash to the Escrow Agent.  This Agreement is being entered into for the purpose of securing timely performance by the Holders of their obligations under the Purchase Agreement.  Accordingly, for valuable consideration, the receipt and adequacy of which is acknowledged by each party to this Agreement, the parties agree as follows:

OPERATIVE PROVISIONS

1.Incorporation; Definitions.  Capitalized terms not expressly defined in this Agreement shall have the respective meanings given to them in the Purchase Agreement.

2.Delivery of Shares and Cash Payment.  The Company has delivered to the Escrow Agent a stock certificate or certificates representing 67,495 shares of its common capital stock, registered in the name of Hosea, as more particularly described in Exhibit “A” hereto (the “Shares”), together with stock power(s) duly executed by the Holders and in form sufficient to cause a transfer of registered ownership of the Shares if properly presented to the Company or its stock transfer agent.  All of the Shares shall be deemed to be issued and outstanding capital stock of the Company.  The Company has also delivered $500,000 in cash to the Escrow Agent to be held and released pursuant to the terms of this Agreement.  The Shares and $500,000 in cash, together with any investment earnings delivered to Escrow Agent pursuant to Section 3 below, shall hereinafter be referred to as the “Escrow Fund”.  The Escrow Agent acknowledges receipt of the Escrow Fund and an executed copy of the Purchase Agreement.

3.Maintenance of the Escrow Fund.  Upon receipt of the property specified in Paragraph 3, the Escrow Agent shall maintain such property in the Escrow Fund.  During the term of this Agreement, the Escrow Agent agrees to hold such property and any accumulated income thereon in escrow, to invest any income thereon in Permitted Investments and to disburse amounts in the Escrow Fund (including any income) in accordance with Sections 5-7 of this Agreement.  As used herein, the term “Permitted Investments” shall mean (a) United States Treasury obligations having a term to maturity of no more than 180 days, (b) money market bank accounts and mutual funds, and (c) any other investment approved by the Company and the Holders in writing.

4.Ownership Interests in Shares.

(a)           Interest of Holders.  The Shares shall be evidenced by certificates issued in the name of each Holder.

(b)           Legend on Shares.  Stock certificates representing the Shares will (until they are released to the Holders or the Company in accordance with this Agreement) bear the following legend:

“THE SECURITIES REPRESENTED HEREBY MAY BE OFFERED, SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED ONLY IN ACCORDANCE WITH THE TERMS OF AN INDEMNITY ESCROW AGREEMENT AMONG THE COMPANY, THE HOLDERS AND ESCROW AGENT.  A COPY OF SUCH AGREEMENT IS ON FILE AT THE PRINCIPAL OFFICE OF THE COMPANY.”

(c)           Dividends.  All stock dividends and other distributions made with respect to the Shares shall be delivered by the Company to the Escrow Agent and held by it under the provisions of this Agreement.

(d)           Voting Rights.  While the Escrow Agent has possession of the Shares, each Holder will retain and be able to exercise, with respect to such Shares, all voting rights and all other incidents of ownership of such Shares which are not inconsistent with the terms of this Agreement.  The Company, not the Escrow Agent, will be responsible for furnishing any proxy forms or other information generally distributed by the Company to its stockholders.

(e)           No Transfers or Encumbrances.  Prior to the release of the Shares by the Escrow Agent and delivery to each Holder pursuant to Section 5, Holders may not sell, assign or otherwise transfer, nor place any encumbrance on, any Shares or any beneficial interest therein, except: (i) for transfers made for estate planning purposes; or (ii) transfers by operation of law or laws of descent and distribution.  In the case of any permitted transfer, the transferee will be subject to all terms and provisions of this Agreement.  Prior to the release of the Shares by the Escrow Agent and delivery to each Holder pursuant to Section 5, no Shares nor any beneficial interest therein may be taken or reached by any legal or equitable process in satisfaction of any debt or other liability of a Holder, except to satisfy such Holder’s obligations under Article IX of the Purchase Agreement.  The Escrow Agent shall have no responsibility for determining or enforcing compliance with this paragraph, other than by retaining possession of the Shares.

(f)           Individual Holder Liability.  Payments for any finally determined Claims (as defined in Section 5 below) shall be deducted from the Shares and Escrow Fund pro rata in proportion to each Holder’s interest in the Shares and Escrow Fund.

5.Claims Against and Disbursements from the Escrow Fund.

(a)           General.  Pursuant to the terms of the Purchase Agreement, the Company and Indemnified Parties are entitled to be indemnified by the Holders for any Loss or breach of representations and warranties made by Holders under the provisions of Section 2.4 and Article IX of the Purchase Agreement.  All claims made pursuant to Section 2.4 and Article IX of the Purchase Agreement must be initiated prior to the Release Date (as defined in Section 5(b) of this Agreement).

(b)           Claims.  From time to time on or before the second anniversary of the Closing Date (the “Release Date”), the Company may give written notice (a “Notice”) to the Holders and the Escrow Agent specifying in reasonable detail the nature and dollar amount of any claim it may have under the Purchase Agreement (each a “Claim”).  The Company may make more than one Claim with respect to the Escrow Fund.  If the Holder gives written notice to the Company and the Escrow Agent disputing any Claim (a “Counter Notice”) within ten (10) days following the date of the Notice regarding such Claim, such Claim shall be resolved as provided below.  If no Counter Notice is delivered by the Holder to the Company and the Escrow Agent within such ten (10) day period, then the dollar amount of any Claim, as set forth in the Notice, shall be deemed established and the Escrow Agent shall promptly assign, pay, transfer and convey to the Company an amount equal to each such Claim from the Escrow Fund.  If a Counter Notice is given with respect to a Claim, the Escrow Agent shall make payment of all or a portion with respect thereto only (i) to the extent a Claim is not disputed by a Counter Notice; (ii) in accordance with joint written instructions of the Company and the Holder; or (iii) in accordance with a final non-appealable order of a court of competent jurisdiction.  Any court order shall be accompanied by a legal opinion by counsel for the presenting party to the effect that the order is final and non-appealable.  The Escrow Agent shall act on such court order and legal opinion without further question.

(c)           Claims Procedure.  To make a claim against the Escrow Fund, the Company shall submit a Notice to the Escrow Agent which sets forth a representation that the Company or any other person indemnified under the Purchase Agreement (“Claimant” or “Claimants”) has incurred an indemnifiable loss, liability, claim, damage or expense (“Loss”) or there has been a claim asserted against the Company that could result in a Loss, which Notice shall include information regarding (A) the type of Loss for which indemnification is sought under the Purchase Agreement, and (B) the dollar amount of such Loss, or, if the amount of such Loss cannot  be quantified, a good faith estimate of the Loss.  Such Notice shall be include a certificate of the Company that Claimant has complied with any applicable provisions of the Purchase Agreement regarding such Loss.  The Company shall also  therein verify that a copy of such Notice has been sent to Holder.

(d)           Disbursements to Company.  Following receipt of the Notice, the Escrow Agent shall release to the Company, from the Escrow Fund, on the first (1st) business day following the twentieth (20th) day after the Escrow Agent’s receipt of the Notice, an amount equal to such claim; provided, however, that the Escrow Agent shall not make any disbursements as provided herein if the Escrow Agent receives in writing, signed by Holder, within the relevant period, accompanied by a certificate from Holder that a copy of such Counter Notice has been sent to the Company.  Once it is determined that Escrow Agent shall be required to distribute amounts from the Escrow Fund to the Company in payment of any Loss, Escrow Agent shall distribute 2/3 of such amount in the form of cash and 1/3 of such amount in Shares.  In determining the number of Shares to be released in payment of any Loss, the parties agree that the Shares shall be valued at the price of the Company’s common stock determined under Section 2.3 of the Purchase Agreement.

(e)           Delivery of the Escrow Fund to Holders.  The Escrow Agent shall deliver to Holders within twenty (20) days after the Release Date all remaining property held in the Escrow Fund (including accumulated income) after subtracting the sum of (i) the amount of any Loss (including estimates) claimed in Notices delivered prior to the Release Date which have not been paid by Escrow Agent; and (ii) the amount of any Loss (including estimates) claimed in Notices which are the subject of a dispute pursuant to a Counter Notice as of such date.  All stock dividends and other distributions made with respect to the Shares shall be delivered by the Company to the Escrow Agent and held by it under the provisions of this Agreement.

(f)           Authorized Representative.  Holders hereby designate Roger M. Boatman to receive notices of any Claims and to act as the authorized representative on behalf of Holders (“Authorized Representative”) in furnishing notice to the Company and advising the Company of any action taken on behalf of Holders.  The Company shall be entitled to act on and rely upon the actions of and deliveries to Authorized Representative in carrying out the terms of this Agreement.  In the event that Roger M. Boatman is unable to serve in this capacity, Holders agree to designate a replacement Authorized Representative and advise the Company of such action.

6.Escrow Ledger.  The Escrow Agent shall create and maintain a written record of:  (i) each Holder’s name and address; (ii) each Holder’s interest in the Escrow Fund by number of Shares; (iii) each Holder’s interest in other assets held in the Escrow Fund; (iv) each Holder’s percentage interest in the total number of Shares; (v) each Holder’s interest in the number of Shares subject to pending contested Claims (defined in Section 5); and (vi) Shares to be released to each Holder on the Release Date.  The escrow ledger shall also reflect the total number of Shares remaining in the Escrow Fund.

The Escrow Agent shall adjust the escrow ledger from time to time to reflect changes in each Holder’s interest in the Shares and Escrow Fund, to account for any changes in the capitalization of the Company or to account for pending contested Claims or satisfaction of such Claims.  This duty will continue until the Escrow Agent is required to deliver or release all funds and Shares from the Escrow Fund.  Absent manifest error, Escrow Agent’s determinations as to the escrow ledger shall be binding and conclusive on all parties to this Agreement. ­

7.Termination of Escrow.The termination of this escrow shall occur on the Release Date, subject, however, to the disposition of a “Valid Claim”.  The Escrow Fund shall only be used to satisfy Claims, if any, that are the subject of a Notice delivered prior to the Release Date (each a “Valid Claim”).  Therefore, if a Valid Claim is pending and/or in dispute as of the Release Date, the Escrow Fund shall not be disbursed or released until resolution of such Valid Claim at which time the Escrow Fund will be disbursed by the Escrow Agent in accordance with this Agreement.  Any amounts of the Escrow Fund remaining after satisfaction or termination of all Valid Claims shall be delivered by the Escrow Agent to the Holders within ten (10) days (i) after final disposition of such Valid Claims; (ii) after delivery by Holders of a certification that final disposition of such Valid Claim has been made and supported by a legal opinion confirming the disposition of such Claim; or (iii) pursuant to joint written instructions from the parties hereto.

8.   Rights and Limitations upon Duty of Escrow Agent.

The Escrow Agent:

(a)           shall not be obligated to deliver any share certificate unless the same shall have been first actually received by the Escrow Agent pursuant to the provisions hereof;

(b)           shall not be responsible in any manner for the validity or sufficiency of any share certificate received by it in its capacity as Escrow Agent;

(c)           shall be entitled to act upon any written certificate, statement, notice, demand, request, consent, agreement or other instrument, and to rely upon its due execution, the validity and effectiveness of its provisions, and the accuracy and completeness of any information therein contained, as long as the Escrow Agent shall in good faith believe the instrument to be genuine and to have been signed or presented by an authorized person;

(d)           shall be entitled to request and receive from any party hereto such documents in addition to those provided for herein as the Escrow Agent may deem necessary to resolve any questions of fact involved in the provisions hereof;

(e)           may, at the expense of the remaining parties hereto, consult independent counsel of its choice in respect to any question relating to its duties or responsibilities under this Agreement, and shall not be liable for any action taken or omitted in good faith on advice of such counsel;

(f)           shall be under no obligation to advance any funds in connection with the maintenance or administration of this Agreement, to institute or defend any action, suit or legal proceeding in connection herewith, or to take any other action likely to involve the Escrow Agent in expense, unless first indemnified by the remaining parties hereto, or any of them, as the case may be, to the Escrow Agent’s satisfaction;

(g)           shall not be bound by any amendment to this Agreement or by any other agreement among the remaining parties hereto except such amendment or agreement as shall have been executed by the Escrow Agent;

(h)           shall have only such duties and responsibilities as are expressly set forth in this Agreement, together with a general fiduciary duty of reasonable diligence in the performance of its obligations hereunder;

(i)           may resign and be discharged from its duties hereunder at any time by giving notice of such resignation to the remaining parties hereto specifying a date when such resignation shall take effect (which date shall be no fewer than ten (10) days after the date of mailing or other delivery of such notice).  Upon receipt of such notice, a successor escrow agent shall be appointed by the remaining parties hereto, such successor escrow agent to become Escrow Agent hereunder upon the resignation date specified in the subject notice.  If the remaining parties are unable to agree upon a successor escrow agent within fifteen (15) days after the date of such notice, the Escrow Agent shall be entitled to appoint its own successor and shall continue to act in its fiduciary capacity until its successor accepts the escrow by written notice delivered to the parties hereto and takes possession of the escrowed assets.  If the Escrow Agent is unable, despite the use of its best efforts, to obtain the services of a successor, it may petition a court of competent jurisdiction for an order effecting such an appointment or providing another remedy, and, pending entry, may deposit the escrowed assets in the court’s registry;

(j)           shall be indemnified and held harmless by each of the remaining parties hereto against any and all liabilities incurred by it hereunder, except for those resulting from the willful misconduct or gross negligence of the Escrow Agent;

(k)           shall have a lien upon all escrowed assets in an amount sufficient to secure all liabilities, expenses, fees, costs or charges paid, incurred or earned by it arising out of or resulting from this escrow arrangement, and the right, superior to all duties imposed upon it under this Agreement, to retain possession of all escrowed assets pending satisfaction of all such amounts;

The Company and the Holder may at any time agree to substitute a new escrow agent by giving notice thereof to the Escrow Agent then acting.

9.   Compensation and Expenses.

For any services which it may be required or reasonably deem appropriate to render hereunder (other than the passive receipt and holding of shares), the Escrow Agent shall not receive any compensation for such services.

10.   Miscellaneous Provisions.

(a)           Notices.  All notices or other communications required or permitted to be given pursuant to this Agreement shall be in writing and shall be considered as properly given or made if hand delivered, mailed from within the United States by certified or registered mail, or sent by prepaid telegram to the applicable address(es) appearing in the preamble to this Agreement, or to such other address as a party may have designated by like notice forwarded to the other parties hereto.  All notices, except notices of change of address, shall be deemed given when mailed or hand delivered and notices of change of address shall be deemed given when received.

(b)           Binding Agreement; Non-Assignability.  Each of the provisions and agreements herein contained shall be binding upon and enure to the benefit of the personal representatives, heirs, devisees, successors and assigns of the respective parties hereto; but none of the rights or obligations attaching to any party shall be assignable.

(c)           Entire Agreement.  This Agreement, and the other documents referenced herein, constitute the entire understanding of the parties hereto with respect to the subject matter hereof, and no amendment, modification or alteration of the terms hereof shall be binding unless the same be in writing, dated subsequent to the date hereof and duly approved and executed by each of the parties hereto.

(d)           Attorneys’ Fees.  If either party brings an action to enforce the terms hereof or declare rights hereunder, the prevailing party in any such action shall be entitled to recover reasonable attorneys’ and legal assistants’ fees and costs incurred in connection therewith, on appeal or otherwise, including those incurred in litigation, arbitration, mediation, administrative or bankruptcy proceedings and in enforcing any right to indemnity herein.

(e)           Severability.  Every provision of this Agreement is intended to be severable.  If any term or provision hereof is illegal or invalid for any reason whatever, such illegality or invalidity shall not affect the validity of the remainder of this Agreement.

(f)           Headings.  The headings of this Agreement are inserted for convenience and identification only, and are in no way intended to describe, interpret, define or limit the scope, extent or intent hereof.

 (g)           Application of Florida Law.  This Agreement, and the application or interpretation thereof, shall be governed exclusively by its terms and by the laws of the State of Florida.  Venue for all purposes shall be deemed to lie within Pinellas County, Florida.

(h)           Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

[SIGNATURES ON FOLLOWING PAGES]

IN WITNESS WHEREOF, the parties hereto have executed and delivered this Agreement the day and year first written above.

THE COMPANY:

TECHNOLOGY RESEARCH CORPORATION,

a Florida corporation

/s/ Owen Farren                                                                           

Owen Farren

Chief Executive Officer

HOLDERS:

HOSEA PARTNERS, LTD., a Florida limited

partnership

/s/  Roger M. Boatman                                                                           

Roger M. Boatman

General Partner

/s/  Roger M. Boatman

Roger M. Boatman, as Trustee of the Roger M.

Boatman Trust

/s/  Melvin R. Hall                                                                           

Melvin R. Hall, as Joint Tenant with Right of

Survivorship

/s/  Elsa G. Hall                                                                           

Elsa G. Hall, as Joint Tenant with Right of

Survivorship

HOSEA II, LLC, a Florida limited liabilitycompany

/s/  Roger M. Boatman                                                                           

Roger M. Boatman

Manager

ESCROW AGENT:

BUSH ROSS, P.A.

/s/  Randy K. Sterns                                                                           

Randy K. Sterns

Shareholder

-  -

                                                                                                                                            
60;                                                               EXHIBIT A

ESCROW SHARES

Name	Number of Shares
Hosea II, LLC, a Florida limited liability company*	67,495
*For the benefit of its members and the Holders identified above

-  -

EX-10.4

Exhibit 10.4

REGISTRATION RIGHTS AGREEMENT

This Registration Rights Agreement is made and entered into as of March 31, 2010 (as amended, modified or supplemented from time to time, this “Agreement”) by and between, Technology Research Corporation, a Florida corporation (the “Company”),and each securityholder identified on the signature pages hereto (each, including its successors and assigns, a “Holder” and collectively the “Holders”).  Holders have formed Hosea II, LLC, a Florida limited liability company (“Hosea”), to hold and distribute the proceeds of the Purchase Agreement, as defined below.  Accordingly, Hosea will enter into this Agreement at closing of the Purchase Agreement and will be deemed to be a Holder for purposes of this Agreement.

This Agreement is made pursuant to the Stock Purchase Agreement, dated as of the date hereof between the Sellers and the Buyer (as defined therein) (the “Purchase Agreement”).

1.Definitions. Capitalized terms used and not otherwise defined herein that are defined in the Purchase Agreement shall have the meanings given such terms in the Purchase Agreement.  As used in this Agreement, the following terms shall have the following meanings:

“Commission” means the U.S. Securities and Exchange Commission.

“Common Stock” means shares of the Company’s common stock, par value $0.51 per share.

“Company” has the meaning given to such term in the Preamble hereto.

 “Exchange Act” means the Securities Exchange Act of 1934, as amended, and any successor statute.

“Holder” or “Holders” means the Sellers identified in the Purchase Agreement to the extent any of them hold Registrable Securities.

“Indemnified Party” has the meaning set forth in Section 7(c).

“Indemnifying Party” has the meaning set forth in Section 7(c).

 “Prospectus” means the prospectus included in the Registration Statement (including, without limitation, a prospectus that includes any information previously omitted from a prospectus filed as part of an effective registration statement in reliance upon Rule 430A promulgated under the Securities Act), as amended or supplemented by any prospectus supplement, with respect to the terms of the offering of any portion of the Registrable Securities covered by the Registration Statement, and all other amendments and supplements to the Prospectus, including post-effective amendments, and all material incorporated by reference or deemed to be incorporated by reference in such Prospectus.

“Registrable Securities” means the TRC Shares that have become fully vested and any Common Stock issued as a dividend or other distribution with respect to, or in exchange for or in replacement of the TRC Shares; provided, however, that Registrable Securities shall not include any shares of Common Stock which have been sold to the public either pursuant to a registration statement or Rule 144, or which have been sold in a private transaction in which the transferor’s rights under this Agreement are not assigned.  The term “Registrable Securities” shall include only those Registrable Securities that are issued and outstanding as of the Closing Date or issued as replacement shares of Common Stock for such Registrable Securities.

“Registration Statement” means each registration statement required to be filed hereunder, including the Prospectus therein, amendments and supplements to such registration statement or Prospectus, including pre- and post-effective amendments, all exhibits thereto, and all material incorporated by reference or deemed to be incorporated by reference in such registration statement.

“Requesting Holders” has the meaning set forth in Section 3(a).

“Requested Stock” has the meaning set forth in Section 3(a).

“Rule 144” means Rule 144 promulgated by the Commission pursuant to the Securities Act, as such rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same effect as such rule.

“Rule 415” means Rule 415 promulgated by the Commission pursuant to the Securities Act, as such rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same purpose and effect as such rule.

“Securities Act” means the Securities Act of 1933, as amended, and any successor statute.

“Selling Expenses” means all underwriting discounts, selling commissions and stock transfer taxes applicable to the sale of Registrable Securities and fees and disbursements of counsel for any Holder (other than the fees and disbursements of counsel included in Registration Expenses).

“TRC Shares” means shares of Common Stock issued by the Company to the Holders pursuant to the Purchase Agreement.

2.Registration Rights.

(a)Demand Registration.  Upon the written request delivered to the Company (a “Notice”) of the Holders of at least one-third (1/3) of the Shares of the then-outstanding and fully vested Registrable Securities, the Company shall file with the Commission, as soon as reasonably practicable following the receipt of the Notice, a Registration Statement under the Securities Act providing for the resale of the Registrable Securities (which may, at the option of the Holders giving such Notice, be a Registration Statement under the Securities Act that provides for the resale of the Registrable Securities pursuant to Rule 415 from time to time by the Holders).  The Company shall use its commercially reasonable efforts to cause such Registration Statement to be declared effective by the Commission as soon as reasonably practicable after the initial filing of the Registration Statement.  Any Registration Statement shall provide for the resale pursuant to any method or combination of methods legally available to, and requested by, the Holders of any and all Registrable Securities covered by such Registration Statement.  The Company shall use its commercially reasonable efforts to cause each Registration Statement filed pursuant to this Section 2 to be continuously effective, supplemented and amended to the extent necessary to ensure that it is available for the resale of all Registrable Securities by the Holders until all Registrable Securities covered by such Registration Statement have ceased to be Registrable Securities (the “Effectiveness Period”).  Each Registration Statement when effective (and the documents incorporated therein by reference) shall comply in all material respects as to form with all applicable requirements of the Securities Act and shall not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading.  The Company shall be required to file no more than two Registration Statements requested by the Holders..

(b)Delay Rights.  If the Company determines that its compliance with its obligations under this Section 2 would be materially detrimental to the Company because such registration would (a) materially interfere with a significant acquisition, reorganization or other similar transaction involving the Company, (b) require premature disclosure of material information that the Company has a bona fide business purpose for preserving as confidential or (c) render the Company unable to comply with applicable securities laws, then the Company shall have the right to postpone compliance with its obligations under Section 2(a) for a period of not more than six months, provided, that such right pursuant to this Section 2(b) may not be utilized more than once in any 12-month period.

(c)Other Securities.  The Company may include in any registration other securities for sale for its own account or for the account of any other person; provided that, if the underwriter for the offering shall determine that the number of shares proposed to be offered in such offering would be reasonably likely to adversely affect such offering, then the securities to be sold by the Holders shall be included in such registration before any securities proposed to be sold for the account of the Company or any other person.

(d)Cooperation by Holders.  The Company shall have no obligation to include in a Registration Statement the Registrable Securities of a selling Holder who has failed to timely furnish such information that, in the opinion of counsel to the Company, is reasonably required in order for the registration statement or prospectus supplement, as applicable, to comply with the Securities Act.

3.Piggy-Back Registration.

(a)If at any time after the Closing Date, the Company proposes to register any of its securities under the Securities Act in connection with the public offering of such securities solely for cash (other than a registration on Form S-4, Form S-8, or any successor or similar forms or a registration on any form that does not permit secondary sales), whether for the account of the Company or otherwise, it will promptly, but not later than thirty (30) days before the anticipated date of filing such registration statement, give written notice to all record holders of the Registrable Securities.  Upon the written request from any Holders (the “Requesting Holders”) within 15 days after receipt of any such notice from the Company, the Company will, except as herein provided, cause all of the Registrable Securities covered by such request (the “Requested Stock”) held by the Requesting Holders to be included in such registration statement, all to the extent requisite to permit the sale or other disposition by the prospective seller or sellers of the Requested Stock; provided, further, that nothing herein shall prevent the Company from, at any time, abandoning or delaying any registration.

(b)If any registration pursuant to Section 3(a) shall be underwritten in whole or in part, the Company may require that the Requested Stock be included in the underwriting on the same terms and conditions as the securities otherwise being sold through the underwriters.  In such event, the Requesting Holders shall, if requested by the underwriters, execute an underwriting agreement in customary form containing standard representations and warranties by the selling stockholders.  If in the good faith judgment of the managing underwriter of such public offering the inclusion of all of the Requested Stock would reduce the number of shares to be offered by the Company or interfere with the successful marketing of the shares of stock offered by the Company, the number of shares of Requested Stock otherwise to be included in the underwritten public offering may be reduced pro rata (by number of shares) among the Requesting Holders and all other holders of registration rights who have requested inclusion of their securities or excluded in their entirety if so required by the underwriter.  To the extent only a portion of the Requested Stock is included in the underwritten public offering, those shares of Requested Stock which are thus excluded from the underwritten public offering and any other securities of the Company held by such holders shall be withheld from the market by the Holders thereof for a period, not to exceed 90 days, which the managing underwriter reasonably determines is necessary in order to effect the underwritten public offering.  The obligation of the Company under Section 3(a) shall not apply after the earlier of (i) the date that all of the Registrable Securities have been sold pursuant to Rule 144 or an effective registration statement, or (ii) such time as the Registrable Securities are eligible for immediate resale pursuant to Rule 144(b)(1) under the Securities Act to the Holders.

(c)If the registration statement is an offering to be made on a continuous basis pursuant to Rule 415 and is not on a Form S-3, and the Commission advises the Company that all of the Requested Stock may not be included under Rule 415(a)(i), then the number of shares of Requested Stock otherwise to be included in such registration statement may be reduced pro rata (by number of shares) among the Requesting Holders and all other holders of registration rights who have requested inclusion of their securities to an amount to which is permitted by the Commission for resale under Rule 415(a)(i).

(d)If a Holder decides not to include all of its Registrable Securities in any registration statement thereafter filed by the Company, such Holder shall nevertheless continue to have the right to include any Registrable Securities in any subsequent registration statement or registration statements as may be filed by the Company with respect to offerings of its securities, all upon the terms and conditions set forth herein.

(e)If any Holder disapproves of the terms of any such underwriting, such Holder may elect to withdraw therefrom by written notice to the Company and the underwriter, delivered at least ten (10) business days prior to the effective date of the registration statement.  Any Registrable Securities excluded or withdrawn from such underwriting shall be excluded and withdrawn from the registration.  For any Holder which is a partnership or corporation, the partners, stockholders, subsidiaries, parents and affiliates of such Holder, or the estates and family members of any such partners and retired partners and any trusts for the benefit of any of the foregoing Persons shall be deemed to be a single “Holder”, and any pro rata reduction with respect to such “Holder” shall be based upon the aggregate amount of shares carrying registration rights owned by all entities and individuals included in such “Holder”, as defined in this sentence.

(f)It shall be a condition precedent to the obligations of the Company to take any action pursuant to this Section 3 that the selling Holders shall furnish to the Company such information regarding themselves, the Registrable Securities held by them and the intended method of disposition of such securities as shall be required to effect the registration of their Registrable Securities.

4.Registration Procedures. If and whenever the Company is required by the provisions of this Agreement to effect the registration of any Registrable Securities under the Securities Act, the Company will, as expeditiously as reasonably possible:

(a)prepare and file with the Commission a Registration Statement with respect to such Registrable Securities, respond as promptly as reasonably possible to any comments received from the Commission, and use its best efforts to cause such Registration Statement to become and remain effective, and promptly provide to the Holders copies of all filings and Commission letters of comment relating thereto and before filing a Registration Statement or Prospectus or any amendments or supplements thereto, furnish to the Holders copies of all such documents proposed to be filed, including documents incorporated by reference in the Prospectus and, if requested by the Holders, the exhibits incorporated by reference, and the Holders shall have the opportunity to object to any information pertaining to itself that is contained therein and the Company will make the corrections reasonably requested by the Holders with respect to such information prior to filing any Registration Statement or amendment thereto or any Prospectus or any supplement thereto;

(b)prepare and file with the Commission such amendments and supplements to such Registration Statement and the Prospectus used in connection therewith as may be necessary to comply with the provisions of the Securities Act with respect to the disposition of all Registrable Securities covered by such Registration Statement and to keep such Registration Statement effective for the Effectiveness Period;

(c)furnish to the Holders such number of copies of the Registration Statement and the Prospectus included therein (including each preliminary Prospectus and any amendments and supplements to the Registration Statement and the Prospectus) and such other documents as the Holders reasonably may request to facilitate the public sale or disposition of the Registrable Securities covered by such Registration Statement;

(d)use its best efforts to register or qualify the Holder’s Registrable Securities covered by such Registration Statement under the securities or “blue sky” laws of such jurisdictions within the United States as the Holders may reasonably request and do any and all other acts and things which may be reasonably necessary or advisable to enable the Holders to consummate the disposition in such jurisdiction of the Registrable Securities; provided, however, that the Company shall not for any such purpose be required to qualify generally to transact business as a foreign corporation in any jurisdiction where it is not so qualified or to consent to general service of process in any such jurisdiction;

(e)list the Registrable Securities covered by such Registration Statement with any securities exchange on which the Common Stock of the Company is then listed;

(f)immediately notify the Holders at any time when a Prospectus relating thereto is required to be delivered under the Securities Act, of the happening of any event as a result of which the Prospectus contained in such Registration Statement, as then in effect, includes an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein not misleading, and, at the request of the Holders, the Company shall prepare a supplement or amendment to such Prospectus so that, as thereafter delivered to the purchasers of Registrable Securities, such Prospectus shall not contain an untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statement therein not misleading;

(g)to the extent pertinent to the registration and sale of the Registrable Securities under the Registration Statement, make available for inspection by the Holders and any attorney, accountant or other agent retained by the Holders, all publicly available, non-confidential financial and other records, pertinent corporate documents and properties of the Company, and, to the extent pertinent to the registration and sale of the Registrable Securities under the Registration Statement, cause the Company’s officers, directors and employees to supply all publicly available, non-confidential information reasonably requested by the attorney, accountant or agent of the Holders;

(h)provide a transfer agent and registrar for all such Registrable Securities not later than the effective date of such Registration Statement;

(i)if requested, cause to be delivered, immediately prior to the effectiveness of the Registration Statement, letters from the Company’s independent certified public accountants addressed to the Holders (unless the Holders does not provide to such accountants the appropriate representation letter required by rules governing the accounting profession) stating that such accountants are independent public accountants within the meaning of the Securities Act and the applicable rules and regulations adopted by the Commission thereunder, and otherwise in customary form and covering such financial and accounting matters as are customarily covered by letters of the independent certified public accountants delivered in connection with primary or secondary underwritten public offerings, as the case may be; and

(j)at all times after the Company has filed a Registration Statement with the Commission pursuant to the requirements of either the Securities Act or the Exchange Act, the Company shall file all reports required to be filed by it under the Securities Act and the Exchange Act and the rules and regulations adopted by the Commission thereunder, and take such further action as the Holders may reasonably request, all to the extent required to enable the Holders to be eligible to sell Registrable Securities pursuant to Rule 144 (or any similar rule then in effect).

5.Registration Expenses.  Subject to the limitation set forth below, all expenses relating to the Company’s compliance with Sections 2, 3 and 4 hereof, including, without limitation, all registration, filing and listing application fees, costs of distributing any prospectuses and supplements thereto, printing expenses, fees and disbursements of counsel and independent public accountants for the Company, fees and expenses (including counsel fees) incurred in connection with complying with state securities or “blue sky” laws, Nasdaq listing fees, fees of transfer agents and registrars, fees (collectively, the “Registration Expenses”) shall be paid by the Company.  The Company shall not be obligated to pay more than $30,000 for such Registration Expenses.  All Selling Expenses incurred in connection with any registrations hereunder, shall be borne by the Holders of the securities so registered pro rata on the basis of the number of shares so registered. The Company shall only be responsible for the Registration Expenses provided for in this Agreement.  The obligation of the Company to bear the expenses described above shall apply irrespective of whether a registration becomes effective, is withdrawn or suspended, is converted to another form of registration and irrespective of when any of the foregoing shall occur.

6.Termination of Registration Rights.  All registration rights granted under this Section 6 shall terminate and be of no further force and effect forty-two (42) months after the closing date of the Purchase Agreement.

7.Indemnification.

(a)In the event of a registration of any Registrable Securities under the Securities Act pursuant to this Agreement, the Company will indemnify and hold harmless each Holder, and its officers, directors and each other person, if any, who controls such Holder within the meaning of the Securities Act, against any losses, claims, damages or liabilities, joint or several, to which such Holder, or such persons may become subject under the Securities Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in any Registration Statement under which such Registrable Securities were registered under the Securities Act pursuant to this Agreement, any preliminary Prospectus or final Prospectus contained therein, or any amendment or supplement thereof, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading or any violation or alleged violation by the Company of the Securities Act, the Exchange Act or applicable “blue sky” laws, and will reimburse each Holder, and each such person for any reasonable legal or other expenses incurred by them in connection with investigating or defending any such loss, claim, damage, liability or action; provided, however, that the Company will not be liable in any such case if and to the extent that any such loss, claim, damage or liability arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission so made in conformity with information furnished by or on behalf of such Holder or any such person in writing specifically for use in any such document.

(b)In the event of a registration of the Registrable Securities under the Securities Act pursuant to this Agreement, the Holders will indemnify and hold harmless the Company, and its officers, directors and each other person, if any, who controls the Company within the meaning of the Securities Act, against all losses, claims, damages or liabilities, joint or several, to which the Company or such persons may become subject under the Securities Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact which was furnished in writing by the Holders to the Company expressly for use in (and such information is contained in) the Registration Statement under which such Registrable Securities were registered under the Securities Act pursuant to this Agreement, any preliminary Prospectus or final Prospectus contained therein, or any amendment or supplement thereof, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and will reimburse the Company and each such person for any reasonable legal or other expenses incurred by them in connection with investigating or defending any such loss, claim, damage, liability or action; provided, however, that the Holders will be liable in any such case if and only to the extent that any such loss, claim, damage or liability arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission so made in conformity with information furnished in writing to the Company by or on behalf of the Holders specifically for use in any such document.  Notwithstanding the provisions of this paragraph, the Holders shall not be required to indemnify any person or entity in excess of the amount of the aggregate net proceeds received by the Holders in respect of Registrable Securities in connection with any such registration under the Securities Act.

(c)Promptly after receipt by a party entitled to claim indemnification hereunder (an “Indemnified Party”) of notice of the commencement of any action, such Indemnified Party shall, if a claim for indemnification in respect thereof is to be made against a party hereto obligated to indemnify such Indemnified Party (an “Indemnifying Party”), notify the Indemnifying Party in writing thereof, but the omission so to notify the Indemnifying Party shall not relieve it from any liability which it may have to such Indemnified Party other than under this Section 7(c) and shall only relieve it from any liability which it may have to such Indemnified Party under this Section 7(c) if and to the extent the Indemnifying Party is prejudiced by such omission.  In case any such action shall be brought against any Indemnified Party and it shall notify the Indemnifying Party of the commencement thereof, the Indemnifying Party shall be entitled to participate in and, to the extent it shall wish, to assume and undertake the defense thereof with counsel satisfactory to such Indemnified Party, and, after notice from the Indemnifying Party to such Indemnified Party of its election so to assume and undertake the defense thereof, the Indemnifying Party shall not be liable to such Indemnified Party under this Section 7(c) for any legal expenses subsequently incurred by such Indemnified Party in connection with the defense thereof; if the Indemnified Party retains its own counsel, then the Indemnified Party shall pay all fees, costs and expenses of such counsel; provided, however, that, if the defendants in any such action include both the Indemnified Party and the Indemnifying Party and the Indemnified Party shall have reasonably concluded that there may be reasonable defenses available to it which are different from or additional to those available to the Indemnifying Party or if the interests of the Indemnified Party reasonably may be deemed to conflict with the interests of the Indemnifying Party, the Indemnified Party shall have the right to select one separate counsel and to assume such legal defenses and otherwise to participate in the defense of such action, with the reasonable expenses and fees of such separate counsel and other expenses related to such participation to be reimbursed by the Indemnifying Party as incurred.

(d)In order to provide for just and equitable contribution in the event of joint liability under the Securities Act in any case in which either (i) the Holders, or any officer, director or controlling person of the Holders, makes a claim for indemnification pursuant to this Section 7 but it is judicially determined (by the entry of a final judgment or decree by a court of competent jurisdiction and the expiration of time to appeal or the denial of the last right of appeal) that such indemnification may not be enforced in such case notwithstanding the fact that this Section 7 provides for indemnification in such case, or (ii) contribution under the Securities Act may be required on the part of the Holders or such officer, director or controlling person of the Holders in circumstances for which indemnification is provided under this Section 7; then, and in each such case, the Company and the Holders will contribute to the aggregate losses, claims, damages or liabilities to which they may be subject (after contribution from others) in such proportion so that the Holders is responsible only for the portion represented by the percentage that the public offering price of its securities offered by the Registration Statement bears to the public offering price of all securities offered by such Registration Statement; provided, however, that, in any such case, (A) the Holders will not be required to contribute any amount in excess of the public offering price of all such securities offered by it pursuant to such Registration Statement; and (B) no person or entity guilty of fraudulent misrepresentation (within the meaning of Section 10(f) of the Act) will be entitled to contribution from any person or entity who was not guilty of such fraudulent misrepresentation.

(e)Notwithstanding anything in this Section 7 to the contrary, an Indemnifying Party shall not be required to indemnify an Indemnified Party for any amounts in excess of $2,500,000.

(f)The indemnification provided for under this Agreement shall remain in full force and effect regardless of any investigation made by or on behalf of the indemnified party or any officer, director or controlling Person of such indemnified party and shall survive the transfer of securities.

8.Underwriter Requested Restrictions.  Each Holder hereby agrees that such Holder shall not sell, transfer, make any short sale of, grant any option for the purchase of, or enter into any hedging or similar transaction with the same economic effect as a sale, any TRC Shares held by such Holder (other than those included in the registration) for a period specified by the representative of the underwriters of Common Stock (or other securities) of the Company not to exceed ten (10) day prior and one hundred eighty (180) days following the effective date of a registration statement of the Company filed under the Securities Act; provided that all officers and directors of the Company and holders of at least five percent (5%) of the Company's voting securities enter into similar agreements and only if such Persons remain subject thereto (and are not released from such agreement) for such 180 day period.  Each Holder agrees to execute and deliver such other agreements as may be reasonably requested by the Company or the underwriter which are consistent with the foregoing or which are necessary to give further effect thereto.

In addition, if requested by the Company or the representative of the underwriters of Common Stock (or other securities) of the Company, each Holder shall provide, within ten (10) days of such request, such information as may be required by the Company or such representative in connection with the completion of any public offering of the Company's securities pursuant to a registration statement filed under the Securities Act.

The obligations described in this Section 8 shall not apply to a registration relating solely to employee benefit plans on Form S-1 or Form S-8 or similar forms that may be promulgated in the future, or a registration relating solely to a Commission Rule 145 transaction on Form S-4 or similar forms that may be promulgated in the future.  The Company may impose stop-transfer instructions with respect to the TRC Shares subject to the foregoing restriction until the end of said one hundred eighty (180) day period.  Each Holder agrees that any transferee of any shares of Registrable Securities shall be bound by this Section 8.

9.Rule 144 Reporting.  With a view to making available to the Holders the benefits of certain rules and regulations of the Commission which may permit the sale of the Registrable Securities to the public without registration, the Company agrees to use its best efforts to:

(a)make and keep public information available, as those terms are understood and defined in Commission Rule 144 or any similar or analogous rule promulgated under the Securities Act, at all times after the effective date of this Agreement;

(b)file with the Commission, in a timely manner, all reports and other documents required of the Company under the Exchange Act; and

(c)so long as a Holder owns any Registrable Securities, furnish to such Holder forthwith upon request: a written statement by the Company as to its compliance with the reporting requirements of said Rule 144 of the Securities Act, and of the Exchange Act (at any time after it has become subject to such reporting requirements); a copy of the most recent annual or quarterly report of the Company; and such other reports and documents as a Holder may reasonably request in availing itself of any rule or regulation of the Commission allowing it to sell any such securities without registration.

10.Miscellaneous.

(a)Remedies.  In the event of a breach by the Company or by a Holder, of any of their respective obligations under this Agreement, each Holder or the Company, as the case may be, in addition to being entitled to exercise all rights granted by law and under this Agreement, including recovery of damages, will be entitled to specific performance of its rights under this Agreement.

(b)Compliance.  Each Holder covenants and agrees that it will comply with the prospectus delivery requirements of the Securities Act as applicable to it in connection with sales of TRC Shares pursuant to any Registration Statement.

(c)Amendments and Waivers.  The provisions of this Agreement, including the provisions of this sentence, may not be amended, modified or supplemented, and waivers or consents to departures from the provisions hereof may not be given, unless the same shall be in writing and signed by the Company and the Holders of the then outstanding Registrable Securities.  Notwithstanding the foregoing, a waiver or consent to depart from the provisions hereof with respect to a matter that relates exclusively to the rights of certain Holders and that does not directly or indirectly affect the rights of other Holders may be given by Holders of at least a majority of the Registrable Securities to which such waiver or consent relates; provided, however, that the provisions of this sentence may not be amended, modified, or supplemented except in accordance with the provisions of the immediately preceding sentence.

(d)Notices.  Any notice or request hereunder may be given to the Company or the Holders at the respective addresses set forth below or as may hereafter be specified in a notice designated as a change of address under this Section 10(d). Any notice or request hereunder shall be given by registered or certified mail, return receipt requested, hand delivery, overnight mail, Federal Express or other national overnight next day carrier (collectively, “Courier”) or telecopy (confirmed by mail).  Notices and requests shall be, in the case of those by hand delivery, deemed to have been given when delivered to any party to whom it is addressed, in the case of those by mail or overnight mail, deemed to have been given three (3) business days after the date when deposited in the mail or with the overnight mail carrier, in the case of a Courier, the next business day following timely delivery of the package with the Courier, and, in the case of a telecopy, when confirmed. The address for such notices and communications shall be as follows:

If to the Company:                                Technology Research Corporation

5250 140th Avenue North

Clearwater, FL 33760

Fax:  (727) 535-4828

Attention:  Thomas G. Archbold, Chief Financial Officer

If to Holders: To the address set forth under Holder’s name on the signature page hereto

If to any other Person who is

then the registered Holder: To the address of such Holder as it appears in the stock transfer books of the Company or such other address as may be designated in writing hereafter in accordance with this Section 10(d) by such Person.

(e)Successors and Assigns.  This Agreement shall inure to the benefit of and be binding upon the successors and permitted assigns of each of the parties and shall inure to the benefit of each Holder.  The Company may not assign its rights or obligations hereunder without the prior written consent of each Holder.  Each Holder may assign their respective rights hereunder in the manner and to the persons and entities as permitted under the TRC Shares.

(f)Execution and Counterparts.  This Agreement may be executed in any number of counterparts, each of which when so executed shall be deemed to be an original and, all of which taken together shall constitute one and the same agreement.  In the event that any signature is delivered by facsimile or electronic transmission, such signature shall create a valid binding obligation of the party executing (or on whose behalf such signature is executed) the same with the same force and effect as if such facsimile or electronic signature were the original thereof.

(g)Governing Law; Jurisdiction. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF FLORIDA APPLICABLE TO CONTRACTS MADE AND PERFORMED IN SUCH STATE, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW. The Company and Holders hereby consent and agree that the state or federal courts located in the County of Pinellas, State of Florida shall have exclusive jurisdiction to hear and determine any proceeding between the Company, on the one hand, and the Holders, on the other hand, pertaining to this Agreement or to any matter arising out of or related to this Agreement.

(h)Cumulative Remedies.  The remedies provided herein are cumulative and not exclusive of any remedies provided by law.

(i)Severability. If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction to be invalid, illegal, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions set forth herein shall remain in full force and effect and shall in no way be affected, impaired or invalidated, and the parties hereto shall use their reasonable efforts to find and employ an alternative means to achieve the same or substantially the same result as that contemplated by such term, provision, covenant or restriction.  It is hereby stipulated and declared to be the intention of the parties that they would have executed the remaining terms, provisions, covenants and restrictions without including any of such that may be hereafter declared invalid, illegal, void or unenforceable.

(j)Headings. The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof.

[Signature pages follows.]

IN WITNESS WHEREOF, the parties have executed this Registration Rights Agreement as of the date first written above.

THE COMPANY:

TECHNOLOGY RESEARCH CORPORATION

/s/ Owen Farren

Owen Farren

Chief Executive Officer

HOLDERS:

HOSEA PARTNERS, LTD., a Florida limited

partnership

/s/ Roger M. Boatman

Roger M. Boatman

General Partner

Address for Notices to Hosea Partners, Ltd.:

/s/ Roger M. Boatman

Roger M. Boatman, as trustee of the Roger M.

Boatman Trust

Address for Notices to Boatman:

/s/ Melvin R. Hall

Melvin R. Hall, as Joint Tenant with Right of

  Survivorship

/s/ Elsa G. Hall

Elsa G. Hall, as Joint Tenant with Right of

  Survivorship

Address for Notices to Hall:

HOSEA II, LLC,a Florida limited liability company

/s/ Roger M. Boatman

Roger M. Boatman

Manager

Address for Notices to Hosea II, LLC:

EX-99.1

Exhibit 99.1

For:  TECHNOLOGY RESEARCH CORPORATION	Contact: Thomas G. Archbold
5250 140th Avenue North	Chief Financial Officer
Clearwater, Florida   33760	Tel: (727) 812-0659
Owen Farren, President and CEO	Fax: (727) 535-9691
Web Page: www.trci.net

       TECHNOLOGY RESEARCH CORPORATION COMPLETES ACQUISITION OF PATCO ELECTRONICS

CLEARWATER, FLORIDA, March 31, 2010 - Technology Research Corporation (“TRC”), (NASDAQ-TRCI), is pleased to announce that today it closed on the previously announced acquisition of Patco Electronics, Inc. (“Patco”).  TRC acquired 100% of the stock of Patco from its shareholders for $5.0 million in cash, approximately 675,000 shares of TRC common stock and contingent cash payments if certain revenue targets are met for either or both of the two years after the closing of the transaction. The cash portion of the purchase price was funded with cash on hand.

Patco, located in Titusville, Florida, designs and manufactures battery management tools for secondary or re-chargeable batteries in several battery chemistries, including lead acid and lithium ion.  Patco’s product solutions support customers in military, commercial and industrial sectors.  For the year ended December 31, 2009, Patco had revenue of approximately $6 million and net income of approximately $1.7 million.  The acquisition is expected to be accretive to TRC’s earnings per share in its fiscal year ending March 31, 2011.

Roger Boatman, President of Patco, will also serve as Chief Technology Officer for TRC and will take a leadership role in the evaluation and development of new innovative solutions for our customers.  Mr. Boatman will report to Owen Farren, TRC’s Chairman, President and Chief Executive Officer.

Owen Farren said, “TRC is excited to have Patco join TRC.  Roger Boatman and the Patco team bring a culture of product innovation and quality that is synergistic with TRC’s strategy of developing customer-focused power storage and power management solutions.”

TRC is an internationally recognized leader in electrical safety products that prevent electrocution and electrical fires and protect against serious injury from electrical shock.  Based on its core technology in ground fault sensing, products are designed to meet the needs of the consumer, commercial and industrial markets worldwide.  The Company also supplies power monitors and control equipment to the United States Military and its prime contractors.

“Safe Harbor” Statement under the Private Securities Litigation Reform Act of 1995:  Some of the statements in this report constitute forward-looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995 and the Securities Exchange Act of 1934.  These statements are related to future events, other future financial performance or business strategies, and may be identified by terminology such as "may," "will," "should," "expects," "scheduled," "plans," "intends," "anticipates," "believes," "estimates," "potential," or "continue," or the negative of such terms, or other comparable terminology.  These statements are only predictions.  Actual events as well as results may differ materially.  In evaluating these statements, you should specifically consider the factors described throughout this report.  We cannot be assured that future results, levels of activity, performance or goals will be achieved.

EX-99.2

Exhibit 99.2

PATCO ELECTRONICS, INC.

Financial Statements

December 31, 2009 and 2008

(With Independent Auditors’ Report Thereon)

Independent Auditors’ Report

The Board of Directors

PATCO Electronics, Inc.:

We have audited the accompanying balance sheets of PATCO Electronics, Inc. (Company) as of December 31, 2009 and 2008, and the related statements of operations, stockholders’ equity and cash flows for the years then ended.  These financial statements are the responsibility of the Company’s management.  Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted in the United States of America.  Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement.  The Company is not required to have, nor were we engaged to perform an audit of its internal control over financial reporting.  Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.  Accordingly, we express no such opinion.  An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation.  We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of PATCO Electronics, Inc. as of December 31, 2009 and 2008, and the results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.

February 26, 2010

PATCO ELECTRONICS, INC.

Balance Sheets

December 31, 2009 and 2008

Assets	2009			2008
Current assets:
Cash	$	1,187,080			368,906
Accounts receivable, net		269,600			670,405
Due from stockholder		3,065			-
Inventories		549,716			763,059
Prepaid expenses and other current assets		11,016			-
Total current assets		2,020,477			1,802,370
Property and equipment, net		155,044			179,405
	$	2,175,521			1,981,775
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	42,366			69,933
Accrued expenses		22,101			25,622
Bank lines of credit		-			89,512
Customer deposits		-			659,985
Income taxes payable		739,000			247,000
Total current liabilities		803,467			1,092,052
Long-term liabilities:
Deferred tax liability		51,000			58,000
Total long-term liabilities		51,000			58,000
Total liabilities		854,467			1,150,052
Stockholders’ equity:
Common stock, $.01 par value, authorized 1,000,000 shares;
208,000 shares issued and outstanding		2,080			2,080
Additional paid in capital		68,490			68,490
Treasury stock (15,500 shares at cost)		(80,700	)		(80,700	)
Retained earnings		1,331,184			841,853
Total stockholders’ equity		1,321,054			831,723
Total liabilities and stockholders’ equity	$	2,175,521			1,981,775

See accompanying independent auditors' report and notes to financial statements.

PATCO ELECTRONICS, INC.

Statement of Operations

Years Ended December 31, 2009 and 2008

	2009			2008
Net sales	$	5,988,013			3,044,320
Cost of sales		2,763,905			1,796,350
Gross profit		3,224,108			1,247,970
Selling, general and administrative expenses		386,319			300,213
Research, development and engineering		89,389			121,786
Operating income		2,748,400			825,971
Interest income (expense)		2,678			(329	)
Income before provision for income taxes		2,751,078			825,642
Income tax expense		(1,024,847	)		(305,003	)
Net income	$	1,726,231			520,639

See accompanying independent auditors' report and notes to financial statements.

PATCO ELECTRONICS, INC. Statements of Stockholders' Equity Years Ended December 31, 2009 and 2008
			Additional								Total
	Common		Paid-in		Treasury			Retained			Stockholders’
	Stock		Capital		Stock			Earnings			Equity
Balances at December 31, 2007	$	2,080		68,490		(29,200	)		321,214			362,584
Common stock repurchase		-		-		(51,500	)		-			(51,500	)
Net income		-		-		-			520,639			520,639
Balances at December 31, 2008		2,080		68,490		(80,700	)		841,853			831,723
Dividends		-		-		-			(1,236,900	)		(1,236,900	)
Net income		-		-		-			1,726,231			1,726,231
Balances at December 31, 2009	$	2,080		68,490		(80,700	)		1,331,184			1,321,054

See accompanying independent auditors' report and notes to financial statements.

PATCO ELECTRONICS, INC.

Statements of Cash Flows

Years Ended December 31, 2009 and 2008

	2009			2008
Cash flows from operating activities:
Net income	$	1,726,231			520,639
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation		43,964			32,775
Deferred income taxes		(7,000	)		58,000
Changes in operating assets and liabilities:
Accounts receivable		400,805			(631,485	)
Inventories		213,343			(461,945	)
Prepaid expenses and other current assets		(11,016	)		-
Accounts payable and accrued expenses		(31,088	)		69,606
Customer deposits		(659,985	)		659,985
Income taxes payable		492,000			202,799
Net cash provided by operating activities		2,167,254			450,374
Cash flows from investing activities:
Additions to property and equipment		(19,603	)		(165,876	)
Due from stockholder, net		(3,065	)		15,000
Net cash used in investing activities		(22,668	)		(150,876	)
Cash flows from financing activities:
Net borrowings (repayment) on bank lines of credit		(89,512	)		81,667
Distribution to related party		(1,236,900	)		-
Purchase of treasury stock		-			(51,500	)
Net cash (used in) provided by financing activities		(1,326,412	)		30,167
Net increase in cash		818,174			329,665
Cash at beginning of year		368,906			39,241
Cash at end of year	$	1,187,080			368,906
Supplemental disclosure of cash flow information:
Cash paid for interest	$	-			329
Cash paid for income taxes	$	539,847			44,201

See accompanying independent auditors' report and notes to financial statements.

PATCO ELECTRONICS, INC.

Notes to Financial Statements

December 31, 2009 and 2008

(1)         Summary of Significant Accounting Policies

(a)         Organization

PATCO Electronics, Inc. (Company) was incorporated under the laws of the State of Florida on July 15, 1991.  The Company provides the electronics industry with state of the art battery management tools spanning the chemistries employed in secondary batteries.  The Company’s principal business is located in central Florida.

Management evaluated all subsequent events through February 26, 2010, the date the financial statements were available to be issued.

(b)         Cash and Equivalents

Cash and equivalents include highly liquid investments with original maturities of three months or less.

(c)         Accounts Receivable, Net

Credit is extended based on evaluation of the customer’s financial condition and generally collateral is not required.  The Company estimates the allowance for doubtful accounts based on a detail review of past due accounts at the end of the period, the historical relationship of charge offs to annual sales and various other factors it considers appropriate in the circumstances.  The Company charges uncollectible receivables against the allowance when there is no response or working solution from a customer.  Credit losses are provided for in the financial statements and historically have been within management’s expectations.

(d)         Revenue Recognition

Revenue from the sale of products is recognized when an order has been received and accepted, pricing is fixed, delivery has occurred and title to the product has passed and collectability is reasonably assured.  There is no installation obligation subsequent to product shipment.

(e)         Inventories

Inventories are stated at the lower of cost (using the first-in, first-out (FIFO) method) or market.

(f)         Property and Equipment, Net

Property and equipment are carried at cost.  Depreciation is computed using the straight-line method over the estimated useful lives of the assets.  When assets are retired or otherwise disposed of, the cost and related accumulated depreciation are removed from the accounts and any resulting gain or loss is recognized currently.  The cost of maintenance and repairs is charged to expense as incurred.

Property and equipment are periodically evaluated for impairment.  No such impairment was considered necessary by management during 2009 and 2008.

PATCO ELECTRONICS, INC.

Notes to Financial Statements - Continued

(1)         Summary of Significant Accounting Policies - Continued

(g)         Concentration of Credit Risk

The Company maintains cash balances at a local office of a regional financial institution.  From time to time cash balances may exceed amounts insured by the Federal Deposit Insurance Corporation.

(h)         Estimates

In preparing financial statements in conformity with accounting principles generally accepted in the United States of America, management makes estimates and assumptions that affect the required amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements, as well as the reported amounts of revenues and expenses during the reporting period.  Actual results could differ from those estimates.

(i)         Income Taxes

The Company accounts for income taxes under the asset and liability method.  Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases.  Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which the temporary differences are expected to be recovered or settled.  The effect of deferred tax assets and liabilities of the change in tax rates is recognized in income in the period that includes the enactment date.

In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized.  The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible.  Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies in making this assessment.  Based upon the levels of historical taxable income and projections of future taxable income over which the deferred tax assets are deductible, the Company believes that it is more likely than not that it will be able to realize the benefits of its deductible differences.  Accordingly, a valuation allowance has not been provided for in the accompanying financial statements.

During 2009, the Company adopted Accounting Standards Codification Topic 740, “Income Taxes” (ASC 740).  ASC 740 prescribes a recognition and measurement of tax positions taken or expected to be taken in a tax return.  For those benefits to be recognized, a tax position must be more likely than not to be sustained upon examination by taxing authorities.  The implementation of ASC 740 did not have a material impact on the Company’s financial statements for the year ended December 31, 2009.  Tax years 2006 to 2009 remain subject to examination by the IRS.

PATCO ELECTRONICS, INC.

Notes to Financial Statements - Continued

(1)         Summary of Significant Accounting Policies - Continued

(j)         Fair Value of Financial Instruments

The carrying amounts of cash, accounts receivable, other current assets, accounts payable, and accrued liabilities approximate fair value due to the short maturity of those instruments.  Lines of credit and long-term debt reflect interest rates that are currently available to the Company based on the financing arrangements and collateral provided. As a result, the carrying amount of lines of credit and long-term debt approximates fair value.

(2)         Inventories

Inventories consist of the following at December 31, 2009 and 2008:

	2009		2008
Raw materials	$	401,684		694,751
Work in process		135,867		54,848
Finished goods		12,165		13,460
	$	549,716		763,059

(3)         Property and Equipment, Net

Property and equipment, net consists of the following at December 31, 2009 and 2008:

							Estimated
							useful life
	2009			2008			(years)
Machinery and equipment	$	460,717			441,114			5 - 10
Office furniture and computer equipment		45,609			53,111			5 - 10
		506,326			494,225
Less accumulated depreciation		(351,282	)		(314,820	)
	$	155,044			179,405

On June 23, 2009, the Company purchased land and building that it previously leased from a related entity owned by one of its stockholders for $1,600,000.  The Company paid $500,000 cash and issued a $1,100,000 note payable.  The transaction was subsequently rescinded effective June 24, 2009.  The net cash impact of these transactions was $1,236,900 and is shown as financing activity in the statements of cash flows.

Depreciation expense was approximately $44,000 and $33,000 for the years ended December 31, 2009 and 2008, respectively.

PATCO ELECTRONICS, INC.

Notes to Financial Statements - Continued

(4)         Bank Lines of Credit

The Company has two line of credit agreements with financial institutions totaling $150,000 of available credit.  Interest on these lines is payable monthly at the banks’ commercial rate plus 1.5% (3.25% at December 31, 2009).  Amounts outstanding at December 31, 2009 and 2008 were approximately $0 and $90,000, respectively.

(5)         Leases

The Company leases its facility on a month to month basis from one of its stockholders.  Rent expense was approximately $95,000 and $76,000 for the years ended December 31, 2009 and 2008, respectively. This lease also requires the Company pay property taxes, insurance, sales taxes and other occupancy costs.

(6)         Income Taxes

Income tax expense consists of the following:

	2009							2008
	Current		Deferred			Total		Current		Deferred		Total
Federal	$	882,734		(6,050	)		876,684		211,003		50,123		261,126
State		149,113		(950	)		148,163		36,000		7,877		43,877
	$	1,031,847		(7,000	)		1,024,847		247,003		58,000		305,003

Income tax expense differs from the amounts computed by applying an effective U.S. federal income tax rate of 34% to the results before income taxes due to the following:

	2009			2008
Computed “expected” tax expense	$	935,366			280,718
Increase in taxes resulting from:
Permanent and other differences		(6,825	)		(4,235	)
State tax, net of federal benefit		96,306			28,520
Income tax expense	$	1,024,847			305,003

Temporary differences and carryforwards which give rise to deferred tax liabilities are as follows:

	2009		2008
Deferred tax liabilities:
Depreciation	$	51,000		58,000

PATCO ELECTRONICS, INC.

Notes to Financial Statements - Continued

(7)         Significant Customers

Sales to three and two customers represented approximately 75% of the Company’s total sales for 2009 and 2008.  At December 31, 2009 and 2008, approximately $169,000 and $575,000, respectively, of accounts receivable were due from these customers.

The Company sells products to customers throughout the United States and certain foreign countries.  Credit limits, ongoing credit evaluations and account monitoring are utilized to minimize the risk of loss. Collateral generally is not required.

(8)         Significant Vendors

Purchases from two vendor represented approximately 50% and 74% of the Company’s total purchases for 2009 and 2008, respectively.

(9)         Stock Options

On June 16, 2008, the Company issued 22,000 options to purchase common stock to an employee.  The options have a strike price of $12.75 per share, and vest over five years.  The Company valued the options using the Black – Scholes – Merton Model valuation technique.  The issuance of these stock options did not have a material effect on the Company’s financial statements.