-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, LDaTXw7QIvZEiWxnarz53tEmgZIRffy7m2yPxVcyA0qnotb1XFsGYjEEp4V3TvQH q5SENBuHZYBoFN8Rsr5Wvw== 0000741556-96-000036.txt : 19960717 0000741556-96-000036.hdr.sgml : 19960717 ACCESSION NUMBER: 0000741556-96-000036 CONFORMED SUBMISSION TYPE: DEF 14A PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960331 FILED AS OF DATE: 19960716 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: TECHNOLOGY RESEARCH CORP CENTRAL INDEX KEY: 0000741556 STANDARD INDUSTRIAL CLASSIFICATION: SWITCHGEAR & SWITCHBOARD APPARATUS [3613] IRS NUMBER: 592095002 STATE OF INCORPORATION: FL FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: DEF 14A SEC ACT: 1934 Act SEC FILE NUMBER: 000-13763 FILM NUMBER: 96595265 BUSINESS ADDRESS: STREET 1: 5250 140TH AVE NORTH CITY: CLEARWATER STATE: FL ZIP: 34620 BUSINESS PHONE: 8135350572 MAIL ADDRESS: STREET 1: 5250 140TH AVENUE NORTH CITY: CLEARWATER STATE: FL ZIP: 34620 DEF 14A 1 SCHEDULE 14A INFORMATION PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES EXCHANGE ACT OF 1934 Filed by the Registrant /X/ Filed by a Party other than the Registrant / / Check the appropriate box: / / Preliminary Proxy Statement / / Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) /X/ Definitive Proxy Statement / / Definitive Additional Materials / / Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12 Technology Research Corporation - ------------------------------------------------------------------------------- (Name of Registrant as Specified In Its Charter) - ------------------------------------------------------------------------------- (Name of Person(s) Filing Proxy Statement, if other than the Registrant) Payment of Filing Fee (Check the appropriate box): /X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2) or Item 22(a)(2) of Schedule 14A. / / $500 per each party to the controversy pursuant to Exchange Act Rule 14a-6(i)(3). / / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11. (1) Title of each class of securities to which transaction applies: (2) Aggregate number of securities to which transaction applies: (3) Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee is calculated and state how it was determined): (4) Proposed maximum aggregate value of transaction: (5) Total fee paid: / / Fee paid previously with preliminary materials. / / Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. (1) Amount Previously Paid: (2) Form, Schedule or Registration Statement No.: (3) Filing Party: (4) Date Filed: TECHNOLOGY RESEARCH CORPORATION Notice of Annual Meeting to Shareholders to be held August 22, 1996 To the Shareholders of TECHNOLOGY RESEARCH CORPORATION You are cordially invited to attend the Annual Meeting of Shareholders of Technology Research Corporation, a Florida corporation (the "Company"), which will be held on August 22, 1996, at 2:30 P.M. Eastern Daylight Savings Time, at the Summit Conference Center, 13575 58th Street North (Rubin Icot Center, Ulmerton Road), Clearwater, Florida, for the following purposes: 1. To elect five members of the Board of Directors who will be elected to a one-year term of office. 2. To ratify the selection by the Company's Board of Directors of KPMG Peat Marwick LLP, Certified Public Accountants, as independent auditors of the Company for its fiscal year ending March 31, 1997. 3. To consider and vote upon a proposal to adopt the 1996 Stock Option Performance Plan. 4. To consider and act upon any matters related to the foregoing purposes and to transact such other business as may properly be brought before the meeting and at any adjournments thereof. A Proxy Statement and Board of Directors Proxy are being mailed with this notice. You are invited to attend the meeting in person, but if you are unable to do so, the Board of Directors requests that you sign, date and return the proxy, as promptly as practicable, by means of the enclosed envelope. If you are present at the meeting and desire to vote in person, you may revoke the proxy, and if you receive more than one proxy (because of different addresses of stockholdings), please fill in and return each proxy to complete your representation. By order of the Board of Directors Robert S. Wiggins Chairman of the Board and Chief Executive Officer Clearwater, Florida July 12, 1996 Enclosures TECHNOLOGY RESEARCH CORPORATION 5250 140th Avenue North Clearwater, Florida 34620 PROXY STATEMENT FOR ANNUAL MEETING OF SHAREHOLDERS TO BE HELD AUGUST 22, 1996 I. Solicitation and Revocation of Proxies This Proxy Statement and accompanying form of proxy are being mailed on or about July 12, 1996 in connection with the solicitation by the Board of Directors of Technology Research Corporation, a Florida corporation (the "Company") of proxies to be used at the Annual Meeting of Shareholders, to be held on August 22, 1996 at 2:30 P.M. Eastern Daylight Savings Time, at the Summit Conference Center, 13575 58th Street North, Clearwater, Florida (Rubin Icot Center, Ulmerton Road) (the "Annual Meeting"), and at any and all adjournments thereof, for the purposes set forth in the accompanying notice of said meeting, dated July 12, 1996. As this solicitation is being made exclusively by the Board of Directors of the Company, any costs incurred in connection therewith will be borne by the Company. Brokerage houses and other nominees of record will be requested to forward all proxy solicitation material to the beneficial owners, and their expenses in such regard will also be paid by the Company. All proxies are being solicited by mail in the accompanying form, but further solicitation following the original mailing may be made by Board representatives or agents by telephone, telegraph or personal contact with certain shareholders. Execution of the enclosed proxy will not affect a shareholder's right to attend the meeting and vote in person. A shareholder giving a proxy may revoke it at any time before exercise, by either notifying the Secretary of the Company of its revocation, submitting a substitute proxy dated subsequent to the initial one or attending the Annual Meeting and voting in person. All properly executed proxy cards delivered pursuant to this solicitation and not revoked will be voted at the Annual Meeting in accordance with the directions given. If no specific instructions are given with regard to the matters to be voted upon, the shares represented by a signed proxy card will be voted FOR the election of the nominees listed below under the caption "Election of Directors", FOR the ratification of the appointment of KPMG Peat Marwick LLP as the Company's independent accountants, FOR the approval of the 1996 Stock Option Performance Plan, and if any other matters properly come before the Annual Meeting, the persons named as Proxies will vote upon such matters according to their best judgment. A proxy card is enclosed for your use. YOU ARE SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS TO COMPLETE, SIGN, DATE AND RETURN THE PROXY CARD IN THE ACCOMPANYING ENVELOPE. -1- A copy of the 1996 Annual Report to Stockholders, which includes the Company's Financial Statements for the fiscal year ended March 31, 1996, has been mailed with this Proxy Statement to all Stockholders entitled to vote at the Annual Meeting. II. Voting Securities and Principal Holders Thereof Only shareholders of record at the close of business on July 5, 1996 will be entitled to vote at the Annual Meeting. At the close of business on such record date, there were issued and outstanding 5,318,902 shares of the Company's common stock, $.51 par value per share (the "Common Stock"), each of which is entitled to one vote. There are no other classes of voting stock issued and outstanding. The presence, in person or by proxy, of a majority of the outstanding shares of Common Stock of the Company is necessary to constitute a quorum at the Annual Meeting. The affirmative vote of the holders of a majority of the shares of Common Stock represented in person or by proxy at the Annual Meeting is required to (i) elect directors; (ii) ratify the appointment of KPMG Peat Marwick LLP as the Company's independent certified public accountants for the year ending March 31, 1997; and (iii) adopt the 1996 Stock Option Performance Plan. The following table enumerates, as of July 5, 1996, the name, address, position with the Company, if any, and ownership, both by numerical holding and percentage interest, of the beneficial owners of more than five percent of the Company's outstanding Common Stock, of the directors of the Company, individually, by each of the five most highly compensated executive officers of the Company and of its directors and executive officers as a group: Name, Position and Address Shares Percentage of Beneficial Owner Beneficially Owned (1) of Class ------------------- ------------------ -------- Robert S. Wiggins, Director (2) 199,304 3.7% 1850 Jessica Road Clearwater, FL 34625 Raymond H. Legatti, Director (2) 145,906 2.7% 1567 Alexander Road Clearwater, FL 34616 Raymond B. Wood, Director (2) 175,240 3.3% 1513 Beverly Drive Clearwater, FL 34616 Edmund F. Murphy, Jr., Director (2) 29,668 0.6 50 Coe Road, #126 Belleair, FL 34616 Jerry T. Kendall, Director (2) 4,001 --- 520 Brightwaters Blvd. St. Petersburg, FL 33704 All directors and officers (2) 554,119 10.1% as a group (5 persons) -2- Footnotes: (1) For purposes of this table, a person or group of persons is deemed to be the "beneficial owner" of any shares that such person has the right to acquire within 60 days following July 5, 1996. For purposes of computing the percentage of outstanding shares held by each person or group of persons named above on a given date, any security that such person or persons has the right to acquire within 60 days following July 5, 1996 is deemed to be outstanding, but is not deemed to be outstanding for the purpose of computing the percentage ownership of any other person. (2) Includes the following shares subject to currently exercisable options held by Messrs. Wiggins (32,144), Legatti (42,772), Wood (56,914), Murphy (8,334) and Kendall (3,334). -3- III. Election of Directors A. Number and Composition of the Board of Directors. The By-Laws of the Company provide that its Board of Directors shall consist of not less than three members and may be composed of such higher number, as may be fixed from time to time by action of the Board of Directors or of the shareholders. The Board recommends that the exact number of directors not be determined by shareholder action, thus permitting the Board to increase or decrease the number of directors during the year and to fill any vacancy as it deems advisable to do so. The Board is currently comprised of five members. All five members of the Board of Directors will be elected at the 1996 Annual Meeting. B. Meetings and Committees of the Board. The Board of Directors has not appointed a standing nominating committee. Nominees for election to the Board are selected by the incumbent board at a regular meeting thereof. With the exception of an Audit and Compensation Committee, no other standing Board Committee has been formed as of the present time. Each of the incumbent nominees for election to the Board has attended at least 75% of the aggregate number of total meetings of the Board, and of total meetings of each committee of which he is a member, which have been held during the last year. During the Company's most recent fiscal year, ended March 31, 1996, the Board of Directors of the Company held six Board meetings. The Audit and Compensation Committees each held two meetings during the fiscal year. Messrs. Murphy and Kendall are the members of the Audit and Compensation Committees. Audit Committee. The Audit Committee has the principal function of reviewing the adequacy of the Company's internal system of accounting controls, conferring with the independent auditors, recommending to the Board of Directors the appointment of independent auditors and considering other appropriate matters regarding the financial affairs of the Company. Compensation Committee. The Compensation Committee makes recommendations to the Board with respect to compensation and grants of stock options to management employees. In addition, the Compensation Committee administers plans and programs relating to benefits, incentives, stock options and compensation of the Company's Chief Executive Officer and other executive officers. Members of the Compensation Committee are not entitled to participate in the Company's employee benefit plans and stock option plans for its officers and management employees. C. Information Concerning Nominees. Unless authority is withheld as to the Board designated nominees, the shares represented by Board of Directors proxies properly executed and timely received will be voted for the election as Director of the nominees named below, individuals who presently serve as Directors of the Company. If such nominees cease to be a candidate for election for any reason, the proxy will be voted for a substitute nominee designated by the Board of Directors. The Board has no reason to believe the nominees will be unavailable to serve if elected. Board members owning shares of Common Stock intend to either be present and vote their shares in favor of the nominees listed below or give their proxy in support of such nominees. The -4- nominees listed below, if elected, will serve a one year term, expiring on the date of the annual meeting of shareholders in 1997. Certain information with respect to each nominee is hereafter set forth: Year Name Age Position First Elected - ---- --- -------- ------------- Robert S. Wiggins 66 Director, Chairman of the 1988 Board, Chief Executive Officer and Chief Financial Officer Raymond H. Legatti 64 Director and President 1981 Raymond B. Wood 61 Director and Senior 1981 Vice President Government Operations and Marketing Edmund F. Murphy, Jr. 67 Director 1988 Jerry T. Kendall 53 Director 1994 ROBERT S. WIGGINS, age 66, has been Chairman of the Board, Chief Executive officer and Director of the Company since March 1988 and in addition, is presently serving as the Company's Chief Financial Officer. From 1974 to 1987, he was Chairman, Chief Executive Officer and President of Paradyne Corporation, Largo, Florida, a data communications company. Mr. Wiggins served as a consultant for Paradyne from 1987 to March 1988. In addition, he spent three years with GTE Information Systems Division as a Vice President and 13 years in various sales and product development managerial positions with IBM Corporation. RAYMOND H. LEGATTI, age 64, has been President of the Company and a member of the Board since its founding in 1981. From 1980 to 1981, he served as Corporate Director of Electronic Activity for Square D Company, whose offices are located in Palatine, Illinois. From 1978 to 1980, he served as Manager of Square D operations in Clearwater, Florida. From 1975 to 1978, he served as President of Electromagnetic Industries, Inc., a subsidiary of Square D Company. During the prior 20 years, he was Vice President of Engineering, Director and General Manager of the Electronics Division of Electromagnetic Industries, Inc. which was acquired by Square D Company in 1974. He has served on the Board of Directors of the Building Equipment Division of the National Electrical Manufacturers Association ("NEMA") and was the Technical Representative for NEMA on the National Fire Prevention Association's Committee for Standards for Anesthetizing Locations. He has served as Chairman of the Ground Fault and Health Care sections of NEMA. Mr. Legatti was appointed as Technical Advisor to the United States National Committee of the International Electrotechnical Commission ("IEC") SC23E for GFCI technology and also is Chairman of the U.S. Technical advisory groups for IEC SC23E/WG2 and WG7, and serves as the expert delegate on several IEC committees representing the USA. Mr. Legatti is also Chairman of IEC 23E/WG7 Committee for Protective Devices -5- for Battery Powered Vehicles. Note: The IEC establishes International Electrical Standards. Mr. Legatti serves on the NEMA Electric Vehicle Council, and Mr. Legatti is also NEMA representative on the Electric Power Research Institute ("EPRI") Electric Vehicle Infrastructure Working Council ("IWC"); Health and Safety and Personnel Protection Committees, and also serves as liaison representative between the IWC and the TFC, and is a Member of the Task Group for the U. S. Consumer Products Safety Commission Home Electrical Systems Fire Project. Mr. Legatti also serves on the Underwriters Laboratories Advisory Committee. Mr. Legatti, English-born and educated, has acquired extensive management experience and expertise in the areas of electrical control and measurement in various environments. His 25 separate United States patents are applied in products in wide use in military engine generator systems, hospital insulated electrical systems, and in electrical safety products that protect against shock, electrocution and fires. RAYMOND B. WOOD, age 61, has been a Director and Senior Vice President of Government Operations and Marketing of the Company since its inception in 1981. From 1974 to 1981, he was Manager of Engine Generator Component Marketing for Square D Company. He was employed by Electromagnetic Industries, Inc. for 20 years prior to its acquisition by Square D Company. During this time, he held the positions of General Manager of Electromagnetic Industries of Georgia, Military Products Sales Manager, and Design and Project Engineer. Mr. Wood is a charter member of the Electrical Generating Systems Marketing Association ("EGSMA") and is Chairman of the Government Liaison committee for that organization. For the past 31 years, he has been involved in marketing and product application concerning control and measurement of electrical power and engine generator systems. During such 31-year period, Mr. Wood has had extensive contact with the military procurement testing and qualification locations, as well as with the prime contractors to the military. Mr. Wood is frequently consulted on an informal basis for solutions to problems, such as determining why engine generator sets are not functioning properly, by both the military and prime contractors. EDMUND F. MURPHY, JR., age 67, was appointed to membership on the Board of Directors by action of the incumbent Board taken as of May 10, 1988. Since 1981, Mr. Murphy has functioned as the sole owner and Chief Executive of Murphy Management Consultants, Inc., a Belleair, Florida based consulting firm providing advice to emerging companies, particularly those engaged in the manufacture and distribution of a proprietary product base. For the preceding eight years he served as Senior Vice President of International Marketing for Paradyne Corporation, a Largo, Florida based, publicly held distributor of data communications equipment. JERRY T. KENDALL, age 53, was appointed to Board of Director membership as of March 3, 1994. From 1977 to 1987, he held management positions, including Senior Vice President Sales, Executive Vice President and COO and President of Paradyne Corporation. From 1988 to 1989 he was President of Lasergate Systems and from 1990 to 1993 he was Senior Vice President of Security Tag Systems. Mr. Kendall is presently Vice President of Sales and Service North American Retail for Sensormatic Electronics Corporation in Deerfield Beach, Florida. -6- IV. Executive officers of the Registrant Name Age Position - ---- --- -------- Robert S. Wiggins 66 Chief Executive Officer, Chief Financial Officer, Chairman of the Board Raymond H. Legatti 64 President Raymond B. Wood 61 Senior Vice President of Government Operations and Marketing ROBERT S. WIGGINS, age 66, has served as Chairman of the Board, Chief Executive Officer and Director since March 1988. Additional biographical data on Mr. Wiggins may be found in Section III above. RAYMOND H. LEGATTI, age 64, served as the Company's President since the Company's inception in 1981. Additional biographical data on Mr. Legatti may be found in Section III above. RAYMOND B. WOOD, age 61, has served as the Senior Vice President of Government Operations and Marketing since the Company's inception in 1981. Additional biographical data on Mr. Wood may be found in Section III above. V. Ratification of Selection of Independent Auditors The Company's Board of Directors has selected the independent certified public accounting firm of KPMG Peat Marwick LLP to perform audit and related functions with respect to the Company's accounts for its fiscal year ending March 31, 1997. This is the thirteenth year that the firm has been selected to perform these services for the Company. The Board recommends ratification of its selection of KPMG Peat Marwick LLP as the Company's auditors. Should its selection be ratified, the Board reserves the right to discharge and replace such firm of auditors without further shareholder approval if it deems such a change to be in the best interests of the Company. One or more representatives of KPMG Peat Marwick LLP may be in attendance at the forthcoming annual shareholder meeting to respond to any appropriate questions which may be raised by shareholders and to make any statement which they may care to address to the attending shareholders. -7- VI. Proposal to Approve the 1996 Stock Option Performance Plan Introduction On July 1, 1996, the Board of Directors of the Company approved, subject to shareholder approval, the 1996 Stock Option Performance Plan (the "1996 Plan"). Unless terminated earlier by the Board of Directors, the 1996 Plan will terminate on June 30, 2006. Unless the 1996 Plan is approved by shareholders, any stock options granted under the 1996 Plan shall be subject to immediate forfeiture. The purpose of the 1996 Plan is to further the long-term stability and financial success of the Company by retaining key management employees of the Company who are able to contribute to the financial success of the Company. It is believed that ownership of Common Stock will stimulate the efforts of those employees upon whose judgment, interest and efforts the Company will be largely dependent upon for the successful growth of its business. It is also believed that awards granted to such employees under the 1996 Plan will further the identification of those employees' interests with those of the Company's shareholders by including specific performance criteria, the attainment of which will enable such employees to accelerate the exercise of their options. No current executive officers or directors of the Company are eligible to participate in this Plan. The principal features of the 1996 Plan are summarized below. This summary is qualified by reference to the complete text of the 1996 Plan, a copy of which is attached as Exhibit A. General The 1996 Plan authorizes the reservation of an aggregate of 400,000 authorized, but unissued, shares of Common Stock to be available for awards under the Plan. For purposes of determining the number of shares that are available for awards under the 1996 Plan, such number shall, if permissible under Rule 16b-3 promulgated under Section 16(b) of the Securities Exchange Act of 1934 ("Rule 16b-3"), include the number of shares surrendered by a participant as payment upon exercise of an option or retained by the Company in payment of applicable withholding taxes and any shares that are forfeited, expire or terminate prior to their exercise. All shares will be issued pursuant to a stock award and will consist of authorized but unissued shares or shares which have been issued and reacquired by the Company as treasury shares. Adjustments will be made in the number of shares which may be issued under the 1996 Plan in the event of a future stock dividend, stock split or similar pro rata change in the number of outstanding shares of Common Stock or the future creation or issuance to shareholders generally of rights, options or warrants for the purchase of Common Stock. The Common Stock is traded on National Market System of the NASDAQ inter- dealer quotation system, and on March 31, 1996, the closing price was $4.6875 per share. -8- Eligibility All present employees of the Company, exclusive of its current executive officers, who hold positions with senior management responsibilities are eligible to receive incentive awards under the 1996 Plan. The Company estimates that it has approximately eight such employees at the present time. Option Grants On July 1, 1996 the Board of Directors approved the grant of incentive stock options under the 1996 Plan to eight members of senior management, subject to approval of the Company shareholders at its annual meeting to be held on August 22, 1996. Each option entitles the holder to exercise up to an aggregate total of 50,000 shares of the Company's Common Stock after such option has been held for a period of ten years, less one day, the exercise of which may be accelerated upon the Company's attainment of the following performance conditions: A. Performance Conditions for Accelerated Vesting: Shares Carryover Vested Early if Shares for Fiscal Year Ended Revenue(4) Net Income(4) Targets Met Early Vesting - ----------------- ------- ---------- ----------- ------------- March 31, 1997 $24,000,000 $2,600,000 20,000 17,000 (1) March 31, 1998 35,000,000 3,800,000 20,000 15,000 or 17,000 March 31, 1999 50,000,000 5,400,000 10,000 -0- (2)(3) (1) If the performance goals for 1997 are not met, then 17,000 of the 20,000 option shares eligible for early vesting are carried forward to 1998. In the event that the performance goals for 1997 and 1998 are not met, then 32,000 of the 40,000 option shares eligible for early vesting in 1997 and 1998 are carried forward to 1999. If the performance goals for 1997 are met but missed in 1998, then 17,000 of the 20,000 option shares are carried forward to 1999. Any option shares that are not carried forward become subject again to the ten year vesting schedule. (2) If none of the performance goals for 1997, 1998 or 1999 are met, but fiscal 1999 revenues and net income are each within 10% of the 1999 targets, then each holder shall be entitled to accelerate the exercise of up to 25,000 shares, and the remaining 25,000 shares are again made subject to the ten year vesting schedule. -9- (3) If none of the performance goals for 1997, 1998 or 1999 are met and revenues and net income for 1999 each fail to attain the within 10% target noted above, then all 50,000 shares remain eligible for full vesting under the ten year vesting schedule. (4) Under the terms of the option agreements, the net income and revenues figures will include income from the Company's normal operations and will exclude significant acquisitions of assets or operations of another entity. B. Examples. The following examples illustrate the vesting and performance conditions set forth above: Shares Accelerated Shares Shares if Accelerated Accelerated Shares Performance if if Accelerated Goal is Met Goal is Met Goal is Met if in Second in Second First and Performance and Third Year(Not Second Years Goal is Met Years(Not First or (Not Third Year Ended Each Year First Year) Third Year) Year ---------- --------- ----------- ----------- ---- March 31, 1997 20,000 -0- -0- 20,000 March 31, 1998 20,000 37,000 37,000 20,000 March 31, 1999 10,000 10,000 -0- -0- Shares Shares Accelerated Shares Shares Accelerated if Goals Met Accelerated Accelerated if Goals Met in in First if If Goals First Year and Year(not Goals Met Not Met Third Year(Not Second or in Third in any Year Ended Second Year Third Year) Year Only Year ---------- ----------- ----------- --------- ---- March 31, 1997 20,000 20,000 -0- -0- March 31, 1998 -0- -0- -0- -0- March 31, 1999 27,000 -0- 42,000 -0- or 25,000 (2)(3) The terms "operating revenues" and "net income" are defined in accordance with annual audited financial statements prepared on behalf of the Company. -10- C. Vesting and Forfeiture of Shares. Notwithstanding the Company's failure to attain one or more of the accelerated vesting conditions set forth above, each option granted under the 1996 Plan shall become 100% vested after the grantee has held the option for a period of ten years less one day while continuing to perform his management duties for the Company. Once the Option has been held for a period of ten years less one day, the option will become completely vested and may be exercised on the date that the option terminates. Upon the termination of employment of a grantee, any Option shares that have become fully vested may be exercised on the day of termination of employment. Thereafter, all Options shall terminate. Upon the disability or death of a grantee, any Option shares that have become fully vested may be exercised within a period of twelve months from the date of death or disability in accordance with the terms of the applicable Stock Option Agreement. Administration The 1996 Plan provides for administration by the Compensation Committee of the Board of Directors or such other committee of the Board as may be appointed from time to time (the "Committee"). No member of the Committee may participate in the Plan. The Committee is comprised of not less than two directors, each of whom is a "disinterested person", as defined in Rule 16b- 3(c)(2)(i) under the Securities Exchange Act of 1934, as amended (the "Exchange Act"). The Committee will have full and final authority to interpret the Plan, establish rules and regulations for its operation, select employees of the Company to receive awards, and determine the form, amount and other terms and conditions of each award. The Committee has been authorized to approve grants and administer the 1996 Plan under the applicable provisions of Rule 16b-3 under the Exchange Act. Stock Options Options to purchase shares of Common Stock granted under the 1996 Plan are intended to be classified as incentive stock options. Incentive stock options qualify for favorable income tax treatment under Section 422 of the Internal Revenue Code of 1986, as amended, (the "Code"), while nonstatutory stock options do not. The exercise price of an incentive stock option may not be less than 100% (or, in the case of an incentive stock option granted to a 10% shareholder, 110%), of the fair market value of the Common Stock on the date of the option grant. The aggregate fair market value of the Company's Common Stock that is issuable upon the exercise of an incentive stock option, determined as of the date of grant, and that may be exercisable for the first time in any calendar year is limited to $100,000. Any option shares that exceed the $100,000 limitation will be deemed to be a nonstatutory option under the 1996 Plan. The Committee will determine the period during which any options awarded may be exercised; provided, however, that incentive stock options may not be exercised more than ten years after the date of grant of such option. The Committee may grant options with a provision that an option not otherwise exercisable will become exercisable upon a "change of control," as defined in the 1996 Plan. In general, "change of control" means the acquisition of 51% or more of the Common Stock or voting securities by a person or group and certain changes in the membership of the Board of Directors. -11- Awards will be evidenced by a written agreement containing such terms, conditions, restrictions and/or limitations covering the grant of the award as are not inconsistent with the 1996 Plan. Transferability of Awards All options and rights to receive incentive stock awarded under the 1996 Plan are generally not transferable other than by will or by the laws of descent and distribution. Amendment of the 1996 Plan and Awards The Board may amend the 1996 Plan in such respects as it deems advisable; provided that, if and to the extent required by Rule 16b-3, the shareholders of the Company must approve any amendment that would (i) materially increase the benefits accruing to participants under the 1996 Plan or (ii) materially increase the number of shares of Common Stock that may be issued under the 1996 Plan or (iii) materially modify the requirements of eligibility for participation in the 1996 Plan. Awards granted under the 1996 Plan may be amended with the consent of the recipient so long as the amended award is consistent with the terms of the 1996 Plan. Federal Income Tax Consequences A. Incentive Stock Options. Under current U.S. federal tax law, the following is a brief summary of the U.S. federal income tax consequences generally arising with respect to awards of incentive stock options under the 1996 Plan. A participant that is granted an incentive stock option will not recognize any taxable income at the time of the grant of the option or at the time of its exercise. If the participant disposes of the shares acquired pursuant to an incentive stock option more than two years after the date of grant and more than one year from the date of exercise, any gain or loss realized on a subsequent disposition of the shares will be treated as a long-term capital gain or loss, and the Company will not be entitled to any deduction for federal income tax purposes. However, the amount by which the fair market value of the shares at the time of exercise exceeds the exercise price will be treated as an item includable in the tax base upon which the "alternative minimum tax" may be imposed. Assuming there is no disqualifying disposition, neither the grant nor the exercise of an incentive stock option will produce a tax deduction for the Company. -12- If the shares purchased by the key employee pursuant to the exercise of an incentive stock option are disposed of after the expiration of two years from the date of the grant of the option and after one year from the date of exercise, the gain or loss on the sale, based upon the difference between the amount realized and the exercise price, will constitute long-term capital gain or loss. Under current law, incentive stock options can result in the deferral of income to the date the shares are sold at a rate significantly more favorable than that applicable to non-statutory or other types of deferred compensation. Capital losses may be deducted in full against capital gains but only to a limited extent against ordinary income. If the shares purchased by a key employee pursuant to the exercise of an incentive stock option are sold within two years after the date of the grant of the incentive stock option, or within one year after such shares are transferred to the holder and the disqualifying disposition is deemed to be a taxable disposition, so much of the gain as does not exceed the difference between the exercise price and the lesser of the fair market value of the shares on the date of exercise or the amount realized on the date of sale will be taxable as compensation to the key employee. A tax deduction will be allowable to the Company in an amount equal to the compensation recognized by the key employee, provided such amount constitutes reasonable compensation to the key employee and otherwise complies with Section 162(m) of the Code. If the amount realized by the holder upon such disqualifying disposition exceeds the fair market value of such shares on the exercise date, such excess will be deemed to be short term capital gain. Conversely, if the option prices exceeds the amount realized upon such disqualifying disposition, the difference will be short term capital loss. B. Nonstatutory Stock Options. An employee will not incur federal income tax when he or she is granted a nonstatutory stock option, Upon exercise of a nonstatutory stock option, an employee generally will recognize compensation income, which is subject to income tax withholding by the Company, equal to the difference between the fair market value of the Common Stock on the date of the exercise and the option price. The Committee has authority under the 1996 Plan to include provisions allowing the employee to elect to have a portion of the shares he would otherwise acquire upon exercise of an option withheld to cover his withholding tax liabilities. The election will be effective only if approved by the Committee and made in compliance with other requirements set forth in the 1996 Plan. An employee may deliver shares of Common Stock instead of cash to acquire shares under an incentive stock option or nonstatutory stock option without having to recognize taxable gain (except in some cases with respect to "statutory option stock") on any appreciation in value of the shares delivered. "Statutory option stock" is stock acquired upon the exercise of incentive stock options. However, if an employee delivers shares of "statutory option stock" in satisfaction of all, or any part, of the exercise price under an incentive stock option, and if the applicable holding periods of the "statutory option stock" have not been met he will be considered to have made a taxable disposition of the "statutory option stock." -13- Assuming the employee's compensation is otherwise reasonable and that the new statutory limitations on compensation deductions by publicly held companies imposed by Section 162(m) of the Code do not apply, the Company usually will be entitled to a business expense deduction at the time and in the amount that the recipient of a stock award recognizes ordinary compensation income. No compensation deduction may be taken by the Company when a grantee exercises an incentive stock option unless the employee disposes of Common Stock received upon exercise thereof in violation of the holding period requirements imposed by the Internal Revenue Code. The foregoing discussion is not intended to be a complete description of the federal income tax aspects of incentive stock options and non-qualified stock options under the Code and is qualified by administrative and judicial interpretations of applicable provisions of the Code, as amended from time to time. Vote Required The adoption of the 1996 Stock Option Performance Plan requires the affirmative vote of the holders of a majority of the shares present or represented by properly executed and delivered proxies and entitled to vote at an Annual Meeting. THE BOARD OF DIRECTORS BELIEVES THAT APPROVAL OF THE 1996 STOCK OPTION PERFORMANCE PLAN IS IN THE BEST INTEREST OF ALL SHAREHOLDERS AND, ACCORDINGLY, RECOMMENDS A VOTE FOR THE ADOPTION OF THE PROPOSED 1996 STOCK OPTION PERFORMANCE PLAN. -14- VII. Executive Compensation The tables that follow set forth for the years ended March 31, 1994, 1995 and 1996 all compensation paid to the Company's Chairman of the Board and Chief Executive Officer and each of the other four most highly compensated executive officers of the Company whose compensation exceeds $100,000. These tables include a Summary Compensation Table, Option Grants and Aggregated Option Exercises and Option Values table. A. Summary Compensation Table Long-Term Annual Compensation (2) Compensation (1) Awards ------------ ------ Name and Principal Stock All Other Position Year Salary($) Bonus Options (#) Compensation - -------- ---- --------- ----- ----------- ------------ Robert S. Wiggins 1996 225,000 -0- -0- 250 (3) Chairman of the 1995 210,417 -0- 8,334 200 (3) Board and CEO 1994 200,000 -0- -0- 200 (3) Raymond H. Legatti 1996 106,425 -0- 1,700 250 (3) President 1995 99,000 -0- 2,500 200 (3) 1994 90,000 -0- 2,500 200 (3) H. Jay Hill, Senior 1996 93,750 (5) 13,335 -0- 15,534 (4) Vice President of 1995 62,500 (6) 20,003 66,667 7,008 (4) Sales and Marketing 1994 -0- -0- -0- -0- (1) The column for "Other Annual Compensation" has been omitted because there is no compensation required to be reported in such column. The aggregate amount of perquisites and other personal benefits provided to the Company's Chairman of the Board and other named executives did not exceed the lesser of $50,000 or 10% of the total of annual salary and bonus of such officer. (2) The columns "Restricted Stock Award" and "LTIP Payouts" have been deleted because the Company does not currently offer either type of awards. (3) The amount indicated consists of a matching contributions made by the Company to its 401(k) Profit Sharing Plan. (4) The amount indicated consists of non-qualified moving expenses and/or temporary living expenses. (5) Mr. Hill was an employee for the first 9 months of fiscal year 1996 and therefore only 9 months of information is presented. (6) Mr. Hill was an employee for the final 7 months of fiscal year 1995 and therefore only 7 months of information is presented. -15- B. Stock Option Grants The following table discloses, for the Company's Chairman of the Board and the other named executives, any grants of stock options made by the Company during the fiscal year ended March 31, 1996. Option Grants in the Fiscal Year Ended March 31, 1996 Individual Grant Number of Percent of Securities Total Options Underlying Granted to Option Employees in Exercise Expiration Name Granted Fiscal Year Price Date - ---- ------- ----------- ----- ---- Robert S. Wiggins -0- Raymond H. Legatti 1,700 (1) 4.3% $5.4375 (2) August 23, 2005 H. Jay Hill -0- (1) Mr. Legatti was granted a nonqualified stock option on August 23, 1995. One third of such option shares may be exercised commencing one year after the effective date of the grant, up to 66-2/3% of such shares become exercisable commencing on the second anniversary date of the option grant, and 100% of such shares become fully exercisable commencing on the third anniversary date of such grant. (2) The exercise price may be paid in cash, shares of Common Stock valued at fair market value on the date of exercise or pursuant to a cashless exercise procedure under which the optionee provides irrevocable instructions to a brokerage firm to sell a portion of the exercised shares and remits to the Company, out of the sale proceeds, an amount equal to the exercise price plus all applicable withholding taxes. -16- C. Aggregated Option Exercised The following table discloses, for the Company's Chairman of the Board and the other named executives, the number of options exercised, the number of unexercised options, and the value of those unexercised options for the fiscal year ended March 31, 1996. Aggregated Option Exercises in Fiscal Year Ended March 31, 1996 and Fiscal Year-End Option Values Aggregated Option Exercises in Fiscal Year Ended March 31, 1996 and Fiscal Year-End Option Values Value of Unexercised Number of In-the- Unexercised Money Options at Options at Fiscal Year- Fiscal Year- End (#) End ($) (2) Shares Acquired on Value Exercisable/ Exercisable/ Name Exercise(#) Realized($)(1)Unexercisable Unexercisable ---- ----------- ----------- ------------- ------------- Robert S. Wiggins -0- -0- 32,144/ 113,174/0 (3) 8,334 Raymond H. Legatti 8,334 32,815 42,772/ 150,570/0 (3) 1,966 H. Jay Hill 11,111 7,291 -0- 0/36,456 (3) (1) An individual option holder, upon exercise of an option, does not receive cash equal to the amount set forth in the Value Realized column of this table. The amount set forth above reflects the increase in the price of the Company's Common Stock from the date of grant to the price of the Company's Common Stock on the option exercise date (i.e. $4.6875 per share on March 31, 1996), multiplied by the applicable number of options. No cash is realized until the shares received upon exercise of an option are sold. (2) Options are "in-the-money" at the fiscal year end if the fair market value of the underlying securities on such date exceeds the exercise price of the option. (3) These amounts represent the difference between the exercise price of such stock options and the closing price of the Company's stock on March 31, 1996. -17- D. Director Compensation Although from time to time the Company has granted non-qualified stock options and, in some instances, incentive stock options to certain Directors, no cash compensation or fees for attending meetings of the Board are paid to Directors. VIII.Proposals of Security Holders Proposals of Security Holders intended to be presented at the Annual Meeting of Shareholders of the Company to be held in August 1997, in order to be included in the Company's proxy statement and form of proxy relating to such meeting, must be received by the Company, at its executive offices, not later than March 1, 1997. IX. Vote Required A bare majority (2,659,452 shares) of the Company's outstanding common capital stock will be necessary to constitute a quorum for the transaction of business at the annual meeting, and each issue to be presented to the shareholders for action will require the vote of a majority of the shares represented at the meeting, either in person or by valid proxy. Because members of the Board of Directors currently are deemed to beneficially own 554,119 of the Company's 5,318,902 shares of outstanding common stock, (10.1%), approval of the Board's nominees for the Board of Directors and approval of other actions recommended in this proxy are probable but are not assured. X. Compliance with Section 16(a) of The Exchange Act Section 16(a) of the Securities Exchange Act of 1934, as amended, requires that the Company's officers and directors, and persons who own more than ten per cent of a registered class of the Company's Common Stock, file initial statements of beneficial ownership (Form 3), and statements of changes in beneficial ownership (Forms 4 or 5), of Common Stock and other equity securities of the Company with the Securities and Exchange Commission ("SEC"). Officers, directors and greater than ten per cent shareholders are required by SEC regulations to furnish the Company with copies of all such forms they file. To the best of the Company's knowledge and belief, based solely on its review of the copies of such forms received that include written representations from certain reporting persons that no additional forms were required to be filed by such persons, the Company believes that all filing requirements applicable to its officers, directors and greater than ten per cent beneficial owners were complied with during the recent fiscal year. -18- XI. Other Matters The management has no information that any other matter will be brought before the Annual Meeting. If, however, other matters are presented, it is the intention of the persons named in the accompanying form of proxy to vote the proxy in accordance with their best judgment, discretionary authority to do so being included in the proxy. XII. Requests for Copies of Form 10-K THE COMPANY WILL MAIL, WITHOUT CHARGE, TO ANY SHAREHOLDER OF RECORD OF COMMON STOCK AS OF JULY 5, 1996, AND UPON WRITTEN REQUEST, A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10K, INCLUDING FINANCIAL STATEMENTS, SCHEDULES, AND LISTS DESCRIBING ALL EXHIBITS THERETO. REQUESTS SHOULD BE ADDRESSED TO: TECHNOLOGY RESEARCH CORPORATION 5250 140th AVENUE NORTH CLEARWATER, FLORIDA 34620 ATTENTION: IDA C. LARSEN SUCH INFORMATION SHALL ALSO BE MAILED TO ANY REQUESTING INDIVIDUAL NOT A SHAREHOLDER OF RECORD WHO REPRESENTS IN WRITING THAT HE IS A BENEFICIAL OWNER OF THE CORPORATION'S COMMON STOCK AS OF JULY 5, 1996. -19- TECHNOLOGY RESEARCH CORPORATION APPENDIX A - PROXY CARD PROXY FOR ANNUAL MEETING OF SHAREHOLDERS-TO BE HELD AUGUST 22, 1996 THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS Each of the undersigned, as the owner(s) as of July 5, 1996 of common stock of Technology Research Corporation, a Florida corporation(the "Company") hereby appoints Robert S. Wiggins, Chairman of the Board and Scott J. Loucks, and each of them, jointly and severally, as attorney-in-fact and proxy, each with full power of substitution for the limited purpose of voting all shares of the common stock owned by the undersigned at the Annual Meeting of Shareholders of the Company to be held at The Summit Conference Center, 13575 58th Street, North, Clearwater, Florida(Rubin Icot Center, Ulmerton Road) at 2:30 P.M., Eastern Daylight Savings Time, August 22, 1996, and at any adjournments thereof, but only in accordance with the following instructions: If you are unable to attend the meeting personally, the Board of Directors requests that you complete and mail the proxy to insure adequate shareholder representations at the Meeting. As this proxy is being solicited by the Board of Directors, you are encouraged to contact any member of the incumbent Board if you have any question concerning this proxy or the matters referenced herein. (Continued on reverse side) 1. Election of Directors Nominees: Robert S. Wiggins, Raymond H. Legatti, 2. Approval of KPMG Peat Marwick Certified Raymond B. Wood, Edmund F. Murphy, Jr., Public Accountants, as independent FOR all WITHHOLD Jerry T. Kendall auditors of the company for operating nominees listed AUTHORITY year ending March 31, 1997 to the right to vote for all (Instruction: To withhold authority to vote (except as marked nominees listed for any individual nominee listed above, to the contrary) to the right strike a line through the nominee's name FOR AGAINST ABSTAIN ___ ___ ___ ___ ___ 3. Approval of the 1996 Stock 4. In accordance with their best This proxy, when properly executed, will be Option Performance Plan. judgment on any other matter voted in the manner directed herein by the that may properly be voted undersigned shareholder(s). If none of the FOR AGAINST ABSTAIN upon at the meeting. choices specified in Proposals 1, 2 and 3 shall be marked, the name proxy is ___ ___ ___ authorized and directed to vote FOR the proposals as described therein and in accordance with that certain Proxy Statement dated July 12, 1996 Dated: _____________________________, 1996 __________________________________________ (Signature) __________________________________________ (Printed Name) If signing in a fiduciary or representative capacity, please give full title as such. If signing as a corporate officer, please give your title and full name of the corporation; or if ownership is in more than one name, each additional owner should sign. PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY PROMPTLY USING THE ENCLOSED ENVELOPE.
EX-99 2 1996 STOCK OPTION PERFORMANCE PLAN EXHIBIT A TECHNOLOGY RESEARCH CORPORATION 1996 STOCK OPTION PERFORMANCE PLAN TECHNOLOGY RESEARCH CORPORATION (the "Company") hereby adopts this Technology Research Corporation 1996 Stock Option Performance Plan. 1. Purpose. The purpose of the Technology Research Corporation 1996 Stock Option Performance Plan (the "Plan") is to further the long term stability and financial success of the Company by retaining key management employees who can contribute to the financial success of the Company through the use of stock incentives. It is believed that ownership of Company Stock will stimulate the efforts of those employees upon whose judgment, interest and efforts the Company will be largely dependent for the successful conduct of its business. It is also believed that awards granted to such employees under this Plan will also further the identification of those employees' interests with those of the Company's shareholders. It is intended that each option granted under the Plan shall constitute an "incentive stock option" within the meaning of that term as contained in Section 422 of the Internal Revenue Code of 1986. The Plan has been adopted by the Board of Directors of the Company, subject to the approval of the Company's shareholders at its 1996 Annual Meeting of Shareholders. The Plan is intended to conform to the provisions of Securities and Exchange Commission Rule 16b-3 ("Rule 16b-3"). 2. Definitions. As used in the Plan, the following terms have the meanings indicated: (a) "Act" means the Securities Exchange Act of 1934, as amended. (b) "Applicable Withholding Taxes" means the aggregate amount of federal, state and local income and payroll taxes that the Company is required to withhold in connection with any exercise of an Option or payment with respect to Incentive Stock. (c) "Award" means the award of an Incentive Stock Option or Nonstatutory Option under the Plan. (d) "Beneficiary" means the person or persons entitled to receive a benefit pursuant to an Award upon the death of a Participant. (e) "Board" means the Board of Directors of the Company. A-1 (f) "Change of Control" means: (1) The acquisition by any unrelated person of beneficial ownership (as that term is used for purposes of the Act) of 51% or more of the then outstanding shares of common stock of the Company or the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors. The term "unrelated person" means any person other than (1) the Company, (2) an employee benefit plan or trust of the Company, or (3) a person who acquires stock of the Company pursuant to an agreement with the Company that is approved by the Board in advance of the acquisition, unless the acquisition results in a Change of Control pursuant to subsection (ii) below. For purposes of this subsection, a "person" means an individual, entity or group, as that term is used for purposes of the Act. (2) Any tender or exchange offer, merger or other business combination, sale of assets or contested election, or any combination of the foregoing transactions, pursuant to which the persons who were directors of the Company before such transaction cease to constitute a majority of the Board of Directors of the Company or any successor to the Company. (g) "Code" means the Internal Revenue Code of 1986, as amended. (h) "Committee" means the committee appointed to administer the Plan. (i) "Company" means Technology Research Corporation. (j) "Company Stock" means common stock of the Company. In the event of a change in the capital structure of the Company, the shares resulting from such a change shall be deemed to be Company Stock within the meaning of the Plan. (k) "Corporate Change" means a consolidation, merger, dissolution or liquidation of the Company, or a sale or distribution of assets or stock (other than in the ordinary course of business) of the Company, (l) "Date of Grant" means the date as of which an Award is made by the Committee. (m) "Disability" or "Disabled" means, as to an Incentive Stock Option, a Disability within the meaning of Section 22(e)(3) of the Code. (n) "Fair Market Value" means (i) if the Company Stock is traded on an exchange, the mean of the highest and lowest registered sales prices of the Company Stock on the exchange on which the Company Stock generally has the greatest trading volume, or (ii) if the Company Stock is traded in the over- the-counter market, the mean between the closing bid and asked prices as reported by NASDAQ. Fair Market Value shall be determined as of the applicable date specified in the Plan or, if there are no trades on such date, the value shall be determined as of the last preceding day on which the Company Stock is traded. A-2 (o) "Incentive Stock Option" means an Option intended to meet the requirements of, and qualify for favorable Federal income tax treatment under Section 422 of the Code. (p) "Insider" means a person subject to Section 16(b) of the Act. (q) "Nonstatutory Stock Option" means an Option that does not meet the requirements of Section 422 of the Code, or that is otherwise not intended to be an Incentive Stock Option and is so designated. (r) "Option" means a right to purchase Company Stock granted under the Plan, at a price determined in accordance with the Plan. (s) "Participant" means an employee who receives an Award under the Plan. (t) "Rule 16b-3" means Rule 16b-3 of the Act. A reference in the Plan to Rule 16b-3 shall include a reference to any corresponding subsequent rule or any amendments to Rule 16b-3 enacted after the effective date of the Plan. (u) "10% Shareholder" means a person who owns, directly or indirectly, stock possessing more than 10% of the total combined voting power of all classes of stock of the Company. Indirect ownership of stock shall be determined in accordance with Code section 424(d). (v) "Vested Option" means an option which a Participant is entitled to exercise after holding such option for a period of ten years, less one day, unless he is entitled to accelerate the exercise of such option in accordance with the terms of an applicable Stock Option Agreement. 3. Stock. The shares which may be issued and delivered upon exercise of options granted under the Plan shall be shares of the Company's authorized but unissued or issued and reacquired common stock, $.51 par value per share (the "Shares"). The aggregate number of Shares which may be issued on exercise of all options granted under the Plan shall not exceed 400,000 Shares. Shares allocable to Options granted under the Plan that expire or otherwise terminate unexercised and shares that are forfeited pursuant to vesting restrictions on Options awarded under the Plan may again be subjected to an Award under this Plan. For purposes of determining the number of shares that are available for Awards under the Plan, such number shall, if permissible under Rule 16b-3, include the number of shares surrendered by a Participant or retained by the Company in payment of Applicable Withholding Taxes. A-3 4. Shareholder Approval. Subject to the approval of the holders of Company Stock voted, in person or by proxy, at the 1996 Annual Meeting of Shareholders of the Company, this Plan shall be effective as of July 1, 1996. 5. Eligibility. Any member of senior management of the Company who, in the judgment of the Committee, has contributed or can be expected to contribute to the profits or growth of the Company shall be eligible to receive awards under the Plan. The Committee shall have the power and complete discretion to select eligible employees to receive Awards and to determine for each employee the terms, conditions and nature of the Award and the number of shares to be allocated to each employee as part of the Award. 6. Stock Options. Incentive Stock Options and Nonstatutory Stock Options may be granted under the Plan in such numbers, at such prices and on such terms and conditions as the Committee shall determine, provided that such options shall comply with and be subject to the following terms and conditions: (a) Annual Grant Limitation. No employee shall be granted an Incentive Stock Option to the extent that the aggregate Fair Market Value of Shares made subject to such option (determined as of the date such option is granted) which are exercisable for the first time by a key employee during any one calendar year exceeds the sum of $100,000 (the "Limitation Amount"). Incentive Stock Options granted under the Plan and all other plans of the Company or affiliated entity of the Company shall be aggregated for purposes of determining whether the Limitation Amount has been exceeded. The Committee may impose such conditions as it deems appropriate on an Incentive Stock Option to ensure that the foregoing requirement is met. If any Incentive Stock Options that are granted under the Plan have an aggregate Fair Market Value that exceeds the Limitation Amount, the excess Options will be treated as Nonstatutory Stock Options to the extent permitted by law. (b) Option Agreement. All options granted under the Plan shall be evidenced by a written option agreement stating the number of shares capable of being purchased upon its exercise and otherwise in such form as the Committee may periodically approve and containing such terms and conditions, including the period of exercise and whether in installments or otherwise, as shall be contained therein, which need not be the same for all options. (c) Date of Grant. The date on which an option grant is approved by the Committee shall be considered the date on which such option is granted (the "Date of Grant"), and shall be reflected in the option agreement. All options under this Plan shall be granted within 10 years of the date this Plan is adopted. A-4 (d) Option Price. Each option agreement shall state the purchase price of each Share capable of being acquired upon exercise of the option, which price shall be determined by the Committee with respect to each option granted but shall not be less than ONE HUNDRED PERCENT (100%) of the fair market value of each such Share on the Date of Grant (or, in the case of any optionholder owning more than ten percent of the voting power of all classes of stock of the Company, not less than ONE HUNDRED AND TEN PERCENT (110%) of the Fair Market Value of the Shares on the Date of Grant. In the event that Share prices are not published for the Date of Grant, such value shall be determined by calculating the weighted average of the closing prices or the mean between such bid and asked prices, as applicable, on the nearest trading dates occurring before and after the valuation date, in accordance with such rules as may be established by the Committee. (e) Option Exercise. All options granted under the Plan shall be deemed to be Vested Options after the holder has held such option for a period of ten years, less one day, and shall become exercisable at such times and in such installments (which may be cumulative) as the Committee shall provide in the terms of each individual option. No option may be exercised until such Option has been held for at least one year; subject, however, to the right to accelerate the exercise thereof in accordance with the terms of an applicable Stock Option Agreement. All Vested Options and Options that have become exercisable from time to time may be exercised in whole or in part in accordance with the terms of the applicable Stock Option Agreement; provided, however, that the Committee shall be authorized to require that any partial exercise be with respect to a minimum number of Shares. (f) Forfeiture or Exercise of Option. In the event that a Participant ceases employment with the Company, all options shall be forfeited, or be exercised, as follows: (1) In the event of a Participant's termination of employment, the Participant's Vested Options shall be forfeited immediately unless such options are exercised on the date of termination. (2) Upon the disability of a Participant, the Participant's Vested Options shall be exercisable within twelve months (or such shorter period as the Code may require) of the Participant's date of disability. (3) If the Participant dies while in the employment of the Company, the Participant's estate, personal representative, or designated beneficiary shall have the right to exercise such Vested Options within one year of the Participant's death (or such shorter period as the Code or the terms of the applicable Stock Option Agreement may require). (4) All non-vested Options shall be forfeited effective as of the date of termination of employment. A-5 (g) Mechanics of Exercise. A person entitled to exercise any portion of an option granted under the Plan may exercise the same at anytime, either in whole or in part, by delivering written notice of exercise to the office of the Secretary of the Company or to such other location as may be designated by the Committee, specifying therein the number of Shares with respect to which the option is being exercised, which notice shall be accompanied by payment in full of the purchase price of the Shares being acquired. Payment may be made wholly or partly in cash or in shares of Company Stock already owned by the optionholder or by authorizing the Company to retain a sufficient number of Shares which would otherwise be issuable upon exercise of the option, valued for purposes of such payment as of the date of exercise. Subject to the optionholder's compliance with Section 16(b) of the Exchange Act, the Committee may also permit the holder to simultaneously exercise an option and sell the Shares thereby acquired pursuant to a "cashless exercise" arrangement and accept payment from a broker-dealer selected by and approved of in all respects by the Committee, and use the proceeds from such sale as payment of the exercise price of such options. No Shares shall be issued until full payment therefore has been made in the manner set forth above or in any combination of the methods set forth above, in each case to the extent approved by the Committee. If any adjustment has been effected so as to establish a right by an optionholder to acquire a fractional share, such fraction shall be rounded upward to the next whole number. (h) Expiration of Option. Each option granted under the Plan shall expire and all rights to purchase Shares thereunder shall cease ten years after the Date of Grant or on such prior date as may be fixed by the Committee and specified in the subject option agreement; provided that any option granted to a key employee owing more than ten percent of the voting power of all classes of stock of the Company shall similarly expire five years after the Date of Grant. (i) Investment Purpose. Unless the Committee chooses to register or qualify the Shares under the Securities Act of 1933, as amended (the "Act"), pursuant to the provisions set forth in Section 11(g) below, each option is granted on the express condition that the purchase of Shares upon an exercise thereof shall be made for investment purposes only and not with a view to their resale or further distribution unless such Shares, at the time of their issuance and delivery, are registered under the Securities Act, or, alternatively, at some time following such issuance their resale is determined by counsel for the Company to be exempt from the registration requirements of the Act and of any other applicable law, regulation or ruling. Any Shares so registered shall be promptly listed with each securities exchange through which any class of the Company's capital stock or other securities are traded. A-6 (j) Compliance with Exchange Act. With respect to Insiders that are subject to the Act, all transactions under this Plan, including the exercise of Options, delivery of Shares in payment of the exercise prior to sale of the Company Stock purchased upon the exercise of such Options are intended to comply with all applicable conditions of Rule 16b-3 or its successors under the Act. The Committee shall be authorized to monitor all such transactions by Insiders to ensure such compliance and to the extent any provision of the Plan or action by the Committee fails to so comply, it shall be deemed null and void to the extent permitted by law. 7. Applicable Withholding Taxes. Each Participant shall agree, as a condition of receiving an Award, to pay to the Company, or make arrangements satisfactory to the Company regarding the payment of, all Applicable Withholding Taxes with respect to the Award. Until the Applicable Withholding Taxes have been paid or arrangements satisfactory to the Company have been made, no stock certificates shall be issued to the Participant. As an alternative to making a cash payment to the Company to satisfy Applicable Withholding Tax obligations, the Committee may establish procedures permitting the Participant to elect to (a) deliver shares of already owned Company Stock or (b) have the Company retain that number of shares of Company Stock that would satisfy all or a specified portion of the Applicable Withholding Taxes. Any such election shall be made only in accordance with procedures established by the Committee and, in the case of an Insider, in accordance with Rule 16b-3. 8. Termination, Modification, Change. If not sooner terminated by the Board, this Plan shall terminate at the close of business on June 30, 2006. No Awards shall be made under the Plan after its termination. The Board may terminate the Plan or may amend the Plan in such respects as it shall deem advisable; provided, that, if and to the extent required by Rule 16b-3, no change shall be made that increases the total number of shares of Company Stock reserved for issuance pursuant to Awards granted under the Plan, expands the class of persons eligible to receive Awards, or materially increases the benefits accruing to Participants under the Plan, unless such change is authorized by the shareholders of the Company. Notwithstanding the foregoing, the Board may unilaterally amend the Plan and Awards as it deems appropriate to ensure compliance with Rule 16b-3 and to cause Incentive Stock Options to meet the requirements of the Code and regulations thereunder. Except as provided in the preceding sentence, a termination or amendment of the Plan shall not, without the consent of the Participant, adversely affect a Participant's rights under an Award previously granted to him. A-7 9. Change in Capital Structure. (a) Adjustments to Capital Structure. In the event of a stock dividend, stock split or combination of shares, spin-off, reclassification, recapitalization, merger or other change in the Company's capital stock (including, but not limited to, the creation or issuance to shareholders generally of rights, options or warrants for the purchase of common stock or preferred stock of the Company), the number and kind of shares of stock or securities of the Company to be issued under the Plan (under outstanding Awards and Awards to be granted in the future), the exercise price of Options, and other relevant provisions shall be appropriately adjusted by the Committee, whose determination shall be binding on all persons. If the adjustment would produce fractional shares with respect to any Award, the Committee may adjust appropriately the number of shares covered by the Award so as to eliminate the fractional shares. (b) Change of Control. If a Change of Control or Corporate Change occurs, the Committee may take such actions with respect to outstanding Awards as the Committee deems appropriate. These actions may include, but shall not be limited to, accelerating the vesting and expiration dates of Options. The effectiveness of such acceleration or release of restrictions shall be conditioned upon the consummation of the applicable Change of Control or Corporate Change. 10. Administration of the Plan. (a)Disinterested Persons on Committee. The Plan shall be administered by a Committee consisting of two or more outside directors of the Company, who shall be appointed by the Board. The Board may designate the Compensation Committee of the Board to be the Committee for purposes of the Plan. If and to the extent required by Rule 16b-3 of the Act, all members of the Committee shall be "disinterested persons" as that term is defined in Rule 16b-3. If any member of the Committee fails to qualify as a "disinterested person," such person shall immediately cease to be a member of the Committee and shall not take part in future Committee deliberations. Committee members may resign at any time by delivering written notice to the Board. Vacancies in the Committee shall be filled by the Board. (b) Conditions of Option Grants. The Committee shall have the authority to impose such limitations or conditions upon an Award as the Committee deems appropriate to achieve the objectives of the Award and the Plan. Without limiting the foregoing and in addition to the powers set forth elsewhere in the Plan, the Committee shall have the power and complete discretion to determine (i) which eligible A-8 employees shall receive an Award and the nature of the Award; (ii) the number of shares of Company Stock to be covered by each Award; (iii) the Fair Market Value of Company Stock; (iv) the time or times when an Award shall be granted; (v) whether an Award shall become vested over a period of time, according to a performance-based vesting schedule or otherwise, and when it shall be fully vested; (vi) whether a Change of Control or Corporate Change exists; (vii) the performance criteria and other factors relevant to the acceleration of vesting dates for such Options; (viii) when Options may be exercised; (ix) whether to approve a Participant's election with respect to Applicable Withholding Taxes; (x) conditions relating to the length of time before disposition of Company Stock received in connection with an Award is permitted; (xi) notice provisions relating to the sale of Company Stock acquired under the Plan; and (xii) any additional requirements relating to Awards that the Committee deems appropriate. (c) Technical Amendments. The Committee shall have the power to correct any defect, supply any omission or reconcile any inconsistency in the Plan of a procedural nature in such manner and to such extent as it shall deem advisable to maintain the Plan in the manner intended; but it shall have no power to add to, subtract from or modify any of the substantive terms of the Plan, change or add to any benefits provided hereby, or waive or fail to apply any requirements existing as a condition precedent to the actual award of such benefits. (d) Plan Regulations. The Committee may adopt rules and regulations for carrying out the Plan. The Committee shall have the express discretionary authority to construe and interpret the Plan and the Award agreements, to resolve any ambiguities, to define any terms, and to make any other determinations required by the Plan or an Award agreement. The interpretation and construction of any provisions of the Plan or an Award agreement by the Committee in good faith shall be final and conclusive. The Committee may consult with counsel, accountants, brokers, or consultants who may be counsel to the Company, and shall not incur any liability for any action taken in good faith in reliance upon the advice of counsel. (e) Committee Action. A majority of the members of the Committee shall constitute a quorum, and all actions of the Committee shall be taken by a majority of the members present. Notwithstanding the preceding sentence, the Committee shall initially have two members and any action taken by such members must be by unanimous consent until such time as one or more additional members are appointed to the committee. Any action may be taken by a written instrument signed by, all of the members, by vote at a telephonic or other meeting or by memorandum or other written instrument signed by the Committee members and any action so taken shall be fully effective as if it had been taken at a meeting. A-10 (f) Compensation of Committee Members. The members of the Committee shall receive no special compensation as a result of the rendition of their services to the Plan, but shall be entitled to receive reimbursement for any reasonable expenses actually incurred in administering the Plan, as long as the same are substantiated in such manner as the Board may require. All such expenses as authorized by the Board shall be paid by the Company. No member of the Committee shall be personally liable for any action, determination or interpretation made in good faith with respect to the Plan or the Options, and all members of the Committee shall be fully protected by the Company in respect of any such action, determination or interpretation. (g) Participant Information. The Company shall furnish to the Committee in writing such information as the Committee may request in the exercise of its powers and duties in the administration of the Plan, which information may include, but shall not be limited to, the name of each employee of the Company and his or her date of birth, employment, and, if known, probable termination of service. 11. Miscellaneous Provisions. (a) Interpretation. The terms of this Plan and Awards granted pursuant to the Plan are subject to all present and future regulations and rulings of the Secretary of the Treasury or his delegate relating to the qualification of Incentive Stock Options under the Code and they are subject to all present and future rulings of the Securities Exchange Commission with respect to Rule 16b-3. If any provision of the Plan or an Award conflicts with any such regulation or ruling, to the extent applicable, the Committee shall cause the Plan to be amended, and shall modify the Award, so as to comply, or if for any reason amendments cannot be made, that provision of the Plan and/or the Award shall be void and of no effect. (b) Tax Withholding. The Company shall have the right to deduct from any payment or settlement under the Plan, including, without limitation, the exercise of any stock option, or the delivery of any Shares, any federal, state, local or other taxes of any kind which the Committee, in its sole discretion, deems necessary to be withheld to comply with the Code and/or any other applicable law, rule or regulation. In addition, in the event that the optionholder disposes of any Shares within the two year period following the grant, or within the one year period following exercise of an incentive stock option (each a "Disqualifying Disposition"), the Company shall have the right to require the optionholder to remit to the Company an amount sufficient to satisfy all federal, state, and local withholding tax requirements as a condition to registering the transfer of such Shares on its books. If the Committee, in its sole discretion, permits Shares of the Company's common stock to be used to satisfy any such tax withholding, such Shares shall be valued based on the fair market value of such Shares as of the date the tax withholding is required to be made, as determined by the Committee. A-10 (c) No Right to Employment. Neither the adoption of the Plan, the granting of any option, nor the execution of any option agreement, shall confer upon any employee of the Company any right to continued employment with the Company, as the case may be, nor shall it interfere in any way with the right, if any, of the Company to terminate the employment of any employee at any time for any reason. (d) Unfunded Plan. The Plan shall be unfunded and the Company shall not be required to segregate any assets in connection with any options awarded under the Plan. Any liability of the Company to any person with respect to any options awarded under the Plan shall be based solely upon the contractual obligations that may be created as a result of the Plan or any such award or agreement. No such obligation of the Company shall be deemed to be secured by any pledge of, encumbrance on, or other interest in, any property or asset of the Company. Nothing contained in the Plan or any option agreement shall be construed as creating in respect of any Participant (or beneficiary thereof or any other person) any equity or other interest of any kind in any assets of the Company or creating a trust of any kind or a fiduciary relationship of any kind between the Company, and/or any such Participant, any beneficiary or any other person. (e) Fringe Benefit and Compensation Programs. Payments and other benefits received by a Participant under an option agreement made pursuant to the Plan shall not be deemed a part of a optionholder's compensation for purposes of the determination of benefits under any other employee welfare or benefit plans or arrangements, if any, provided by the Company unless expressly provided in such other plans or arrangements, or except where the Committee expressly determines in writing that inclusion of any option or portion of an option should be included to accurately reflect competitive compensation practices or to recognize that any option has been made in lieu of a portion of a competitive annual base salary or other cash compensation. Options granted under the Plan may be made in addition to, in combination with, or as alternatives to, grants, awards or payments under any other plans or arrangements of the Company. The existence of the Plan notwithstanding, the Company may adopt such other compensation plans or programs and additional compensation arrangements as it deems necessary to attract, retain and motivate its employees. A-11 (f) Other Legal Compliance. The Committee may require, as a condition of any payment or share issuance, that certain agreements, undertakings, representations, certificates and/or information, as the Committee may deem necessary or advisable, be executed or provided to the Company to assure compliance with all such applicable laws or regulations. Any certificate for Shares delivered under the Plan may be subject to such stock-transfer orders and such other restrictions as the Committee may deem advisable under the rules, regulations, or other requirements of the Securities and Exchange Commission, any stock exchange upon which the Shares are then listed, and any applicable federal or state securities law. The Committee may cause a legend or legends to be put on any such share certificates to make appropriate reference to such restrictions. If at any time and from time to time the Committee determines, in its sole discretion, that the listing, registration or qualification of any option, or any Shares or property covered by or subject to such option, upon any securities exchange or under any foreign, federal, state or local securities or other law, rule or regulation is necessary or desirable as a condition to or in connection with the granting or such option or the issuance or delivery of Shares or otherwise, no such award may be exercised, or paid in Shares or other property, unless such listing, registration or qualification shall have been effected free of any conditions that are not acceptable to the Committee. (g) Registration of Shares. The Committee may determine, in its sole discretion, that the registration or qualification under any federal or state law of any Shares to be granted pursuant to the Plan (whether to permit the grant of stock options or the resale or other disposition of any such Shares by or on behalf of the key employees receiving such Shares) may be necessary or desirable and, in any such event, if the Committee so determines, delivery of the certificates of the Shares shall not be made until such registration or qualification shall have been completed. In that connection, the Company agrees that it will use its best efforts to effect such registration or qualification when it deems such action to be in the best interests of the Company, provided, however, that the Company shall not be required to use its best efforts to effect such registration under the Securities Act, as amended, other than to file a Form S-8, as presently in effect, or other such forms as may be in effect from time to time. (h) Compliance with the Exchange Act. All transactions under this Plan that involve persons subject to Section 16 of the Exchange Act are intended to comply with all applicable conditions of Rule 16b-3 or its successors under the Exchange Act. To the extent any provision of the Plan or action by the Committee fails to so comply, it shall be deemed null and void to the extend permitted by law and deemed advisable by the Committee. A-12 (i) Leaves of Absence/Transfers. The Committee shall have the power to promulgate rules and regulations and to make determinations, as it deems appropriate, under the Plan in respect of any leave of absence from the Company granted to an optionholder. Without limiting the generality of the foregoing, the Committee may determine whether any such leave of absence shall be treated as if the optionholder has terminated employment with the Company. (j) No Assignment of Benefits. No option grant or other benefit payable under this Plan shall, except as otherwise specifically provided by this Plan or by law, be transferable in any manner other than by will or the laws of descent and distribution, and any attempt to transfer any such benefit shall be void. All benefits payable under this Plan shall not in any manner be subject to the debts, contracts, liabilities, engagements, or torts of any person who shall be entitled to such benefit, nor shall it be subject to attachment or legal process for or against such person. (k) Notices. Every direction, revocation or notice authorized or required by the Plan shall be deemed delivered to the Company (i) on the date it is personally delivered to the Secretary of the Company at its principal executive offices or (ii) three business days after it is sent by registered or certified mail, postage prepaid, addressed to the Secretary at such offices, and shall be deemed delivered to an optionee (i) on the date it is personally delivered to him or her or (ii) three business days after it is sent by registered or certified mail, postage prepaid, addressed to him or her at the last address shown for him or her on the records of the Company. (l) Governing Law. The Plan and all actions taken thereunder shall be governed by and construed in accordance with the laws of the State of Florida, without regard to principles of conflict of laws. Any titles and headings herein are for reference purposes only, and shall in no way limit, define or otherwise affect the meaning, construction or interpretation of any provisions of the Plan. Dated: July 1, 1996 Technology Research Corporation A-13 -----END PRIVACY-ENHANCED MESSAGE-----