UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN
PROXY STATEMENT
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
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Check the appropriate box:
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Preliminary proxy statement
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Confidential, for use of the Commission only (as permitted by Rule 14a-6(e)(2))
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Definitive proxy statement
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Definitive additional materials
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Soliciting material under §240.14a-12
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TECHNICAL
COMMUNICATIONS CORPORATION
(Name of Registrant as Specified in Its Charter)
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(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
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Payment of filing fee (Check the appropriate box):
x
No fee required
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Fee computed on table below per Exchange Act Rules 14a-(6)(i)(1) and
0-11.
(1) Title
of each class of securities to which transaction applies:
(2) Aggregate
number of securities to which 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:
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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:
TECHNICAL COMMUNICATIONS CORPORATION
Notice of Annual Meeting of Stockholders
To Be Held February 12, 2018
To Our Stockholders:
NOTICE IS HEREBY GIVEN
that the 2018 Annual Meeting of Stockholders (the “Meeting”) of Technical Communications Corporation, a Massachusetts
corporation (the “Company”), will be held at the offices of the Company, 100 Domino Drive, Concord, Massachusetts 01742,
at 10:00 a.m. (local time) on Monday, February 12, 2018, to:
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Elect two Class III Directors to serve on the Board
of Directors for a term of three years expiring at the 2021 Annual Meeting of Stockholders;
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Hold a stockholder advisory vote on the compensation
of the Company’s named executive officers as disclosed in the proxy statement for the Meeting;
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Ratify the appointment of Moody, Famiglietti and Andronico,
LLP as the independent registered public accounting firm of the Company for the fiscal year ending September 29, 2018; and
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Consider and act upon such other business and matters
as may properly come before the Meeting or any adjournments thereof.
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The Board of Directors
knows of no other matters to be presented at the Meeting. Only stockholders of record of the Company at the close of business on
December 15, 2017 are entitled to notice of and to vote at the Meeting or any adjournments thereof.
All stockholders are cordially
invited to attend the Meeting. Whether or not you expect to attend the Meeting, please complete, sign, date and return the enclosed
proxy card in the envelope provided at your earliest convenience. If you return your proxy, you may nevertheless attend the Meeting
and vote your shares in person.
A copy of the Company’s
Annual Report to Stockholders on Form 10-K for the fiscal year ended September 30, 2017, which contains financial statements and
other information of interest to stockholders, accompanies this Notice and the attached Proxy Statement.
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By Order of the Board of Directors
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David A. White, Secretary
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Concord, Massachusetts
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January 8, 2018
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It is important that your
shares be represented at the Meeting. Whether or not you plan to attend the Meeting, please promptly complete, sign, date and mail
the enclosed proxy card in the envelope provided, which requires no postage if mailed in the United States.
Important
Notice Regarding the Availability of Proxy Materials
for the Annual Shareholder Meeting to be
Held on February 12, 2018
This Proxy Statement and
related materials are available at the Company’s website at
https://www.tccsecure.com/Investors.aspx
.
This Proxy Statement relates
to the Company’s 2018 Annual Meeting of Stockholders to be held on Monday, February 12, 2018 at 10:00 a.m. (local time) at
the Company’s offices located at 100 Domino Drive, Concord, Massachusetts 01742.
The matters to be voted
upon at such meeting are:
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the election of two Class III Directors to serve on the Board of Directors for a term of three
years expiring at the 2021 Annual Meeting of Stockholders;
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(2)
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a stockholder advisory vote on the compensation of the Company’s named executive officers
as disclosed in the proxy statement for the meeting; and
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the ratification of Moody, Famiglietti and Andronico, LLP as the independent registered public
accounting firm of the Company for the fiscal year ending September 29, 2018.
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Stockholders will also
consider and act upon such other business and matters as may properly come before such meeting or any adjournments thereof.
Only stockholders of record
at the close of business on December 15, 2017 are entitled to notice of and to vote at the meeting and any adjournments thereof.
Materials that will be
available electronically at the website identified above include:
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the Notice of Annual Meeting of Stockholders;
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the Proxy Statement for the meeting;
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the form of proxy card; and
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the Company’s Annual Report to Stockholders on Form 10-K for the fiscal year ended September
30, 2017.
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If you wish to attend the meeting in person
and need directions, please contact TCC Investor Relations at (978) 287-5100. Instructions on how to complete, sign, date and return
the proxy card are provided on the card, as well as a stockholder’s control/identification number(s).
TECHNICAL COMMUNICATIONS CORPORATION
100
Domino Drive
Concord, MA 01742
PROXY STATEMENT
for the
2018 Annual Meeting of Stockholders
February 12, 2018
This Proxy Statement is
being furnished in connection with the solicitation of proxies by the Board of Directors of Technical Communications Corporation,
a Massachusetts corporation (“TCC” or the “Company”), for use at the Company’s 2018 Annual Meeting
of Stockholders and any adjournments thereof (the “Meeting”), to be held at the offices of the Company, 100 Domino
Drive, Concord, Massachusetts 01742, at 10:00 a.m. (local time) on Monday, February 12, 2018.
It is expected that the
Notice of Meeting, this Proxy Statement and the accompanying proxy card, and an Annual Report to Stockholders on Form 10-K for
the fiscal year ended September 30, 2017 containing financial statements and other information of interest to stockholders, will
be mailed to stockholders on or about January 8, 2018.
Record Date and Outstanding Shares
Only record holders of
shares of the common stock, par value $0.10 per share, of the Company (the “Common Stock”) as of the close of business
on December 15, 2017 (the “Record Date”) are entitled to notice of and to vote at the Meeting.
As of the Record Date,
there were 1,839,877 shares of the Company’s Common Stock outstanding and entitled to vote. The shares of Common Stock are
the only voting securities of the Company. Stockholders are entitled to cast one vote for each share held of record.
Proxies
If the enclosed proxy card
is properly marked, signed, and returned in time to be voted at the Meeting, and is not subsequently revoked, the shares represented
will be voted in accordance with the instructions marked thereon. SIGNED PROXIES RETURNED TO THE COMPANY AND NOT MARKED TO THE
CONTRARY WILL BE VOTED AS RECOMMENDED BY THE BOARD OF DIRECTORS. Thus, proxies not marked to the contrary will be voted:
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in favor
of the nominees for election to the Board,
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in favor
of the compensation of our named executive officers as disclosed in this Proxy
Statement, and
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in favor
of ratification of the Company’s independent registered public accounting
firm.
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Any stockholder may revoke
a proxy at any time prior to its exercise by signing and delivering a later-dated proxy or a written notice of revocation to the
Secretary of the Company. Stockholders attending the Meeting may also revoke their proxies by voting in person at the Meeting.
Attendance at the Meeting will not itself be deemed to revoke a proxy unless a stockholder gives affirmative notice at the Meeting
that such stockholder intends to revoke the proxy and vote in person.
Quorum and Approval
The presence in person
or by proxy of the holders of a majority in interest of the shares of Common Stock issued and outstanding on the Record Date and
entitled to vote is required to constitute a quorum at the Meeting. The stockholders entitled to vote that are present in person
or by proxy at the Meeting may adjourn the Meeting without additional notice unless a new record date is or must be fixed. At any
adjourned Meeting at which a quorum is present, any business may be transacted that might have been transacted at the Meeting as
originally scheduled.
Abstentions and broker
non-votes will count in determining whether a quorum is present at the Meeting and any adjourned Meeting. A broker non-vote occurs
if the broker or other nominee who holds shares represented by a proxy has not received instructions with respect to a particular
proposal and does not have discretionary authority with respect to such proposal. Matters as to which brokers do not have discretionary
authority include the election of directors, even in uncontested elections, and the “say on pay” proposal.
The affirmative vote of
a plurality of the votes cast at the Meeting by the shares entitled to vote thereon is required to elect a director. Abstentions,
broker non-votes and votes withheld will not be included in the totals for director elections, and will have no effect on the outcome
of the vote.
The affirmative vote of
the holders of a majority of the shares of Common Stock voting on the matter shall be required for the stockholder advisory vote
on the compensation of the Company’s named executive officers as disclosed in the
Compensation
section (including
the tables therein) of this Proxy Statement. Abstentions and broker non-votes will not be included in the totals for the proposal,
and will have no effect on the outcome of the vote.
Lastly, the affirmative
vote of the holders of a majority of the shares of Common Stock voting on the matter is required for the ratification of the selection
of the Company’s independent registered public accounting firm. Abstentions and broker non-votes will not be included in
the totals for the proposal, and will have no effect on the outcome of the vote.
Other Matters
The Board of Directors
knows of no matters to be presented for consideration at the Meeting other than as set forth in this Proxy Statement. If any other
matter should be presented at the Meeting upon which a vote may be properly taken, shares represented by all proxies received by
the Company will be voted with respect thereto in accordance with the judgment of the persons named as proxies and consistent with
applicable law.
No director, executive
officer or nominee for director, nor any associate of any of the foregoing, has any substantial interest, direct or indirect, by
security holdings or otherwise, in any matter to be acted upon at the Meeting.
PROPOSAL I. ELECTION OF DIRECTORS
The business corporation
statute of Massachusetts requires, unless a company opts out, that the terms of directors of public companies be staggered by dividing
the number of directors into three groups, as nearly equal in number as possible, with the number of directors subject to such
requirement being fixed by a vote of the board. The Company’s Board of Directors currently consists of four directors. Pursuant
to the statute and the Company’s By-laws, the members of the Company’s Board of Directors are divided into three classes,
designated Class I, Class II and Class III, each serving staggered three-year terms. The term of the Class III Directors to be
elected at the Meeting expires at the 2021 annual meeting of stockholders; the term of the Class I Director expires at the 2019
annual meeting of stockholders; and the term of the Class II Director will expire at the 2020 annual meeting of stockholders.
Directors elected by the
stockholders at an annual meeting to succeed those whose terms expire are of the same class as the directors they succeed and are
elected for a term to expire at the third annual meeting of stockholders after their election and until their successors are duly
elected and qualified. Vacancies on the Board, including a vacancy resulting from an enlargement of the Board of Directors, shall
be filled by the affirmative vote of a majority of the remaining directors then in office, even though less than a quorum. Any
director so elected holds office for the remainder of the full term of the class of directors in which the vacancy occurred or
the new directorship was created and until the director’s successor shall have been elected and qualified.
Nominees for Director
Two directors are to be
elected at the Meeting as the Class III directors. The Board of Directors, as recommended by its Compensation, Nominating and Governance
Committee, has nominated Carl H. Guild, Jr. and Thomas E. Peoples for election as the Company’s Class III Directors. Mr.
Guild is currently and has been a director of the Company since 1997 and has consented to being named in this Proxy Statement and
to serve if elected. Mr. Peoples is currently and has been a director of the Company since 1998 and has consented to being named
in this Proxy Statement and to serve if elected. If elected, the nominees will hold office until the 2021 Annual Meeting of Stockholders
and until their successors are duly elected and qualified. The Board of Directors knows of no reason why such nominees should be
unable to serve or for good cause will not serve, but, if such should be the case, proxies may be voted for the election of some
other person or persons.
The affirmative vote of
a plurality of the votes cast at the Meeting by the shares entitled to vote thereon is required to elect a director. Thus, abstentions,
broker non-votes and votes withheld will not be included in the totals and will have no effect on the outcome of the vote.
THE BOARD OF DIRECTORS RECOMMENDS
A VOTE “FOR”
THE ELECTION OF THE NOMINEES.
Members of the Board of Directors,
Nominees and Executive Officers
The following table sets
forth the name and address of each director, nominee and executive officer of the Company, the year each current director first
became a director, and the age and positions currently held by each such individual with the Company. The following table is as
of December 15, 2017.
Name and Address
(1)
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Year First Became
a Director
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Age
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Positions and Offices
with the Company
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Mitchell B. Briskin
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1998
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58
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Class I Director
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Francisco F. Blanco
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2011
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75
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Class II Director
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Carl H. Guild, Jr.
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1997
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73
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Class III Director, Chairman of the Board, Chief Executive Officer and President
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Thomas E. Peoples
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1998
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69
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Class III Director
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Non-Director Executive Officers
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Michael P. Malone
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58
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Chief Financial Officer, Treasurer and Assistant Secretary
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(1)
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The address of Messrs. Briskin, Blanco, Guild, Peoples and Malone is c/o Technical Communications
Corporation, 100 Domino Drive, Concord, Massachusetts 01742.
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Directors and Nominees
Mitchell B. Briskin.
Mr. Briskin served as Vice President of Strategic Relationships at Thermalin Diabetes, LLC, a next-generation insulin development
company, from April 2012 until May 2014, following which he retired. Mr. Briskin was a Managing Director at Stonebridge Associates,
LLC, an investment bank, where he worked from 1999 to 2012. Mr. Briskin was a Principal at Concord Investment Partners, a private
equity investment group, from 1997 to 1999. From 1996 to 1997, he attended Harvard Business School. From 1990 to 1995, Mr. Briskin
was General Manager at General Chemical Corporation; previously, he was a lawyer with Patterson Belknap Webb & Tyler LLP in
New York, New York.
Mr. Briskin’s qualifications
for election to and service on the Board of Directors include his financial expertise and knowledge and his understanding of the
Company’s accounting practices and general accounting principles. Mr. Briskin’s investment banking experience and legal
education and experience add other valuable perspectives to the Board.
Francisco F. Blanco.
Mr. Blanco is President and CEO of The Pola Group, LLC, a consulting firm focused on providing advice and assistance, strategic
direction and creative business development solutions for commercial and government clients, where he has worked since 2010. From
2001 to 2010, Mr. Blanco was Executive Vice President of the Intelligence and National Security Alliance (“INSA”),
a member-based non-profit, non-partisan, public-private organization that works to promote and recognize the highest standards
within the national security and intelligence communities. Prior to joining INSA, Mr. Blanco was employed in a variety of senior
management and leadership positions during his 30-year tenure at the U.S. Department of Defense.
Mr. Blanco’s qualifications
for election to and service on the Board of Directors include his industry experience, his government experience and relationships
with government leaders and agencies, his management and business development skills, and his in-depth understanding of the Company’s
products and their markets.
Carl H. Guild, Jr.
Mr. Guild has been President and Chief Executive Officer of the Company since 1998 and Chairman of the Board of Directors since
2001. He was also Vice-Chairman of the Board from 1998 to 2001 and Chairman in 1998, and was an independent consultant to the Company
from 1997 to 1998. From 1993 to 1997, he was a Senior Vice President with Raytheon Engineers and Constructors, Inc., a former unit
of Raytheon Company, a defense, homeland security and aerospace technology company. Mr. Guild serves as President and Chief Executive
Officer of the Company pursuant to an Employment Agreement (as amended) with the Company, which agreement is summarized under “Employment
Agreements” in the
Compensation
section below.
Mr. Guild’s qualifications
for election to and service on the Board of Directors include his management and leadership experience and financial acumen, his
deep understanding of the Company’s products, business and industry, including its international operations and customers,
and his demonstrated commitment to TCC and its stockholders.
Thomas E. Peoples.
Mr. Peoples currently serves as President of International Executive Counselors, LLC, a consulting company he established in Virginia
in 2005. Mr. Peoples was Vice President and Managing Director of The SPECTRUM Group, a Washington, DC area-based consulting firm
from 2004 to February 2015. Between 2001 and 2004, Mr. Peoples was retired. From 1999 to 2001, Mr. Peoples was the Senior Vice
President for International and Washington Operations of Gencorp, Inc., a publicly-held manufacturer of automotive, polymer, aerospace,
and defense products. From 1992 to 1999, Mr. Peoples was a Vice President of Aerojet, a privately-held aerospace and defense contractor.
Prior to 1992, Mr. Peoples served as Manager of Business Development for Smart Munitions Programs at Raytheon Company. He also
served in the U.S. Army between August 1966 and February 1987, retiring from service as a Lieutenant Colonel. He is also a former
Board member and Treasurer of the National Guard Youth Foundation and was an appointed member of the U.S. Department of Defense
Science Board from 2000 to 2002.
Mr. Peoples’s qualifications
for election to and service on the Board of Directors include his management and business experience, his government experience
and relationships with government leaders and agencies, his business development skills and engineering expertise, and his in-depth
understanding of the Company’s products and their markets.
Officers
Michael P. Malone.
Mr.
Malone, Chief Financial Officer, Treasurer and Assistant Secretary, joined the Company in 1998 as Director of Finance and Treasurer
and became Chief Financial Officer in 2000. From 1997 to 1998, he was the Controller at Vasca, Inc., a privately-held medical device
company. Prior to 1997, Mr. Malone was with ZOLL Medical Corporation, a publicly-traded medical device and software solutions company,
for five years as its Controller and Treasurer. Mr. Malone and the Company are parties to an Employment Agreement, which agreement
is summarized under “Employment Agreements” in the
Compensation
section below.
Corporate Governance
Board Composition and
Independence; Meetings
The Board of Directors
is currently composed of four members, each of whom, with the exception of Mr. Guild, the Board has determined is an “independent”
director as that term is defined in the rules and regulations of The Nasdaq Stock Market (“Nasdaq”), including Listing
Rule 5605, and Rule 10A-3 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The Company does
not utilize any other definition or criteria for determining the independence of a director or nominee, and no other transactions,
relationships, or arrangements exist to the Board’s knowledge or were considered by the Board in determining any director’s
or nominee’s independence.
The Board of Directors
held four meetings during the fiscal year ended September 30, 2017. Each director attended 100% of the aggregate of (a) the total
number of meetings of the Board of Directors he was eligible to attend, and (b) the total number of meetings of all committees
of the Board of Directors on which he served that were held during fiscal year 2017.
Board Structure; Role
in Risk Oversight
The Board currently combines
the role of Chairman of the Board with the role of Chief Executive Officer, with Carl H. Guild, Jr. serving in both capacities
since 2001. The Board believes that combining these roles fosters clear accountability, effective decision-making and alignment
on corporate strategy. The structure allows one person to speak for and lead the Company and avoids duplication of work and confusion
about who is in charge. Given the Company’s historic size and financial results, and the requirement that members of the
Board serve staggered terms, the Board has determined that neither dividing these roles nor designating a lead independent director
is necessary or would result in significant benefits to the Company. The Board believes that its composition and membership –
with 75% of its members considered independent - contribute to, and are currently sufficient for, effective independent oversight
and minimize any potential conflicts that may result from the combination of the CEO and Chairman roles.
The Board of Directors
oversees the business of the Company, including management performance and risk management, to assure that the long-term interests
of TCC’s stockholders are being served. The process to identify, analyze, report and manage risks has been developed informally
over time and involves managers reporting to the Chief Executive Officer and Chief Financial Officer, who in turn report to the
Board on the significant risks facing the Company. Each risk is discussed and quantified when possible and a plan is developed
to address and mitigate identified risks. Each committee of the Board is also responsible for reviewing the risk exposure of the
Company related to the committee’s areas of responsibility and providing input to management and the Board on such risks.
The Audit Committee is especially critical in this process, and such committee’s responsibilities include reviewing risk
management and compliance programs and consulting with management and the Board on risk identification, measurement and mitigation.
Committees
The Board of Directors
currently has two committees, the Audit Committee and the Compensation, Nominating and Governance Committee, each as described
below.
Audit Committee
The Audit Committee of
the Board, which consists of Messrs. Briskin (Chairman), Blanco and Peoples, held four meetings during fiscal year 2017. The Audit
Committee’s primary function is to assist the Board of Directors in fulfilling its oversight responsibilities by:
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reviewing the financial reports and other financial information of the Company,
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reviewing the Company’s system of internal controls regarding finance and accounting and
the Company’s auditing, accounting and financial reporting processes,
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serving as an independent and objective party to monitor the Company’s financial reporting
processes and internal control systems,
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reviewing and appraising the audit efforts of the Company’s independent registered public
accounting firm,
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reviewing, approving and/or ratifying related person transactions, and
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providing an open avenue of communication among the independent accountants, financial and senior
management, and the Board of Directors.
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The Audit Committee acts
pursuant to an Audit Committee Charter, a copy of which is posted on the Company’s website at
https://www.tccsecure.com/Investors.aspx
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The Audit Committee’s charter requires that the committee review and update the charter periodically as conditions dictate.
In August 2017, the Audit Committee’s charter was reviewed and affirmed without change.
The Board of Directors
has determined that Mr. Briskin satisfies the definition of “audit committee financial expert” as promulgated by the
Securities and Exchange Commission (the “Commission”) by virtue of his educational and work experience as described
above. Mr. Briskin and each of the other members of the Audit Committee are also independent under Nasdaq’s listing standards
for directors and Audit Committee members under Rules 5605(b) and (c).
Compensation, Nominating
and Governance Committee
The Company’s Compensation,
Nominating and Governance Committee (the “Governance Committee”) consists of Messrs. Peoples (Chairman), Briskin and
Blanco, and held four meetings and acted by written consent in lieu of a meeting once during the 2017 fiscal year. As noted above,
the Board has determined that each of these individuals satisfies applicable independence requirements for directors as well as
members of such committee under Nasdaq Rules 5605(d) and (e).
The primary function of
the Governance Committee is to assist the Board of Directors in discharging its responsibilities with respect to the Company’s
compensation and benefit programs, the organization and membership of the Board, and corporate governance matters. The Governance
Committee’s goal is to assure that the composition, practices and operation of the Board contribute to value creation and
effective representation of the Company’s stockholders, and to play a leadership role in shaping the Company’s corporate
governance.
The Governance Committee
acts pursuant to the Compensation, Nominating and Governance Committee Charter, a copy of which is posted on the Company’s
website at
https://www.tccsecure.com/Investors.aspx
. The Governance Committee’s charter requires that the committee
review and reassess the adequacy of the charter annually and recommend any proposed changes to the Board for approval. In August
2017, the Governance Committee’s charter was reviewed and affirmed without change. The Governance Committee must also annually
evaluate its own performance.
The Board has approved
policies and procedures for the Governance Committee with respect to the nomination of candidates to the Board and any committees
thereof. These policies and procedures are available on the Company’s website at
https://www.tccsecure.com/Investors.aspx
and are summarized below, and have not been materially changed since adoption.
Nomination Policies
and Procedures
The Governance Committee
will accept for consideration any candidate properly recommended by a stockholder; acceptance of a recommendation for consideration
does not imply the committee will nominate or recommend for nomination the proposed candidate.
Stockholders who wish to
nominate qualified candidates to serve as directors must notify the Company in writing, by notice delivered to the attention of
the Secretary of the Company at the address of the Company’s executive offices as set forth in the Company’s periodic
reports as filed with the Commission, of a proposed nominee. Submissions may be by mail, courier or personal delivery. E-mail submissions
will not be considered. In order to ensure meaningful consideration of such candidates, notice must be received not later than
120 calendar days prior to the first anniversary of the date of the proxy statement for the prior year’s annual meeting of
stockholders.
The notice must set forth
as to each proposed nominee:
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the nominee’s name, age, business address and, if known, residence address,
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his or her principal occupation or employment and business experience,
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the number of shares of stock of the Company, if any, which are beneficially owned by such nominee,
and
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any other information concerning the nominee that must be disclosed as to nominees in proxy solicitations
pursuant to applicable law, including but not limited to any arrangements or agreements regarding the proposed candidate’s
nomination, all relationships between the proposed nominee and the recommending stockholder and the Company, and all transactions
between such parties.
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The notice must also set
forth with respect to the stockholder making the nomination the name and address, as they appear on the Company’s books,
of such stockholder, the number of shares of the Company that are owned beneficially or of record by such stockholder, and the
time period such shares have been held.
Submissions received through
this process will be forwarded to the Governance Committee for review. Only those submissions that comply with these procedures
and those nominees who satisfy the qualifications determined by the Governance Committee for directors of the Company will be considered.
When considering candidates,
the Governance Committee strives to achieve a balance of knowledge, experience and accomplishment such that the Board reflects
a diversity of talent, age, skill, expertise and perspective. While there are no set minimum requirements, a candidate should:
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be intelligent, thoughtful and analytical,
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possess superior business-related knowledge, skills and experience,
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reflect the highest integrity, ethics and character, and value such qualities in others,
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have excelled in both academic and professional settings,
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demonstrate achievement in his or her chosen field,
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be free of actual or potential conflicts of interest,
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be familiar with regulatory and governance matters,
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have the ability to devote sufficient time to the business and affairs of the Company, and
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demonstrate the capacity and desire to represent, fairly and equally, the best interests of the
Company’s stockholders as a whole.
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In addition to the above
criteria (which may be modified from time to time), the Governance Committee may consider such other factors as it deems in the
best interests of the Company and its stockholders, including a candidate’s independence, financial sophistication and special
competencies. The Governance Committee does not have a formal policy with regard to the consideration of diversity when identifying
and evaluating nominees but diversity may be considered when making nominations, including racial and ethnic diversity, gender,
and diversity of personal and professional experiences, backgrounds, skills and qualifications.
The Governance Committee
identifies potential candidates through referrals and recommendations, including by incumbent directors, management and stockholders,
as well as through business and other organizational networks. The Governance Committee may retain and compensate third parties,
including executive search firms, to identify or evaluate, or assist in identifying or evaluating, potential director nominees.
Current members of the
Board with the requisite skills and experience are considered for re-nomination, balancing the value of the member’s continuity
of service and familiarity with the Company with that of obtaining a new perspective, and considering each individual’s contributions,
performance and level of participation, the current composition of the Board, and the Company’s needs. If any existing members
do not want to continue in service or if it is decided not to re-nominate a director, new candidates are identified in accordance
with those skills, experience and characteristics deemed necessary for new nominees, and are evaluated based on the qualifications
set forth above. In every case, the Governance Committee meets (in person or telephonically) to discuss each candidate, and may
require personal interviews before final approval. Once a slate is selected, the Governance Committee presents it to the full Board.
The Governance Committee
does not currently, and does not intend in the future, to differentiate between or alter the manner in which it evaluates candidates
based on the constituency (including stockholders) that proposed the candidate.
For a description of the
Governance Committee’s role in evaluating and establishing compensation programs, policies and levels for the Company, see
the
Compensation Discussion and Analysis
and
Compensation
sections below.
Stockholder Communications and Director
Attendance at Annual Stockholder Meetings
The Board welcomes communications
from stockholders and has adopted a procedure for receiving and addressing such communications. Stockholders may send written communications
to the entire Board or individual directors, addressing them to Technical Communications Corporation, 100 Domino Drive, Concord,
MA 01742, Attention: Chief Financial Officer. All such communications will be forwarded to the full Board of Directors or to any
individual director or directors to whom the communication is directed unless the communication is clearly junk mail or a mass
mailing, a business solicitation, advertisement or job inquiry, or is unduly hostile, threatening, illegal, or similarly inappropriate,
in which case the Company has the authority to discard or take appropriate legal action regarding the communication.
Recognizing that director
attendance at the Company’s annual meetings of stockholders can provide stockholders with an opportunity to communicate with
members of the Board of Directors, it is the policy of the Board of Directors to strongly encourage, but not require, the members
of the Board to attend such meetings. Carl H. Guild attended the 2017 Annual Meeting of Stockholders on behalf of the Board; the
remaining directors were unable to attend due to inclement weather.
TCC’s policies regarding
stockholder communications and director attendance (which may be modified from time to time) can be found on the Company’s
website at
https://www.tccsecure.com/Investors.aspx
.
Section
16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange
Act requires the Company’s officers, directors, and persons who beneficially own more than 10% of a registered class of the
Company’s equity securities to file reports of ownership and changes in ownership with the Commission. Officers, directors
and greater
-
than-10% stockholders are required by regulation to
furnish the Company with copies of all Section 16(a) reports they file.
Based
solely on the Company’s review of the copies of such reports and any amendments thereto furnished to the Company during and
with respect to the Company’s 2017 fiscal year, or written representations from certain reporting persons that they were
not required to file, the Company believes that during fiscal year 2017, its officers, directors, and beneficial owners of more
than 10% of the Common Stock complied with all applicable Section 16(a) filing requirements
.
Certain Relationships and Related
Person Transactions; Legal Proceedings
David A. White, the Company’s
Secretary, is a member of a law firm that provides legal services to the Company. Fees paid to Mr. White’s law firm were
approximately $57,000 for fiscal year 2017 and approximately $54,000 for fiscal year 2016. There were no other transactions during
fiscal years 2017 or 2016, and there are no currently proposed transactions, to which the Company was or is to be a participant
and in which any related person had or will have a direct or indirect material interest. There are no family relationships among
the directors, executive officers or any nominee therefor, and to the Company’s knowledge no arrangements or understandings
exist between any director or nominee and any other person pursuant to which such director or nominee was or is to be selected
as a director or executive officer.
There are no material proceedings
to which a director, executive officer or nominee is a party adverse to the Company or its subsidiary or has a material interest
adverse to the Company or its subsidiary, nor to the Company’s knowledge are there any proceedings or events material to
an evaluation of the ability or integrity of the Company’s directors, nominees or executive officers.
Code of Ethics
The
Company has a Code of Business Conduct and Ethics, which applies to all of its employees, officers and directors. A copy of this
code can be found on the Company’s website at
https://www.tccsecure.com/Investors.aspx
.
REPORT OF THE AUDIT COMMITTEE
The following is the report
of the Audit Committee with respect to the Company’s audited financial statements for the fiscal year ended September 30,
2017.
The Audit Committee has
reviewed and discussed the 2017 fiscal year audited financial statements with management. The Audit Committee has also discussed
with the Company’s independent registered public accounting firm, Moody, Famiglietti and Andronico, LLP, the matters required
to be discussed by Statement on Auditing Standards No. 61 (as amended) as adopted by the Public Company Accounting Oversight Board;
received and reviewed the written disclosures and the letter from the independent registered public accounting firm required by
applicable requirements of the Public Company Accounting Oversight Board regarding the independent registered public accounting
firm’s communications with the Audit Committee concerning independence; and discussed with the independent registered public
accounting firm its independence and any relationships that may impact its objectivity and independence.
Based upon the review and
discussions referred to above, the Audit Committee recommended to the Board of Directors that the audited financial statements
for the fiscal year ended September 30, 2017 be included in the Company’s Annual Report on Form 10-K for filing with the
Securities and Exchange Commission.
|
Audit Committee
|
|
Mitchell B. Briskin (Chair)
|
|
Thomas E. Peoples
|
|
Francisco F. Blanco
|
COMPENSATION DISCUSSION AND ANALYSIS
As noted above, one role
of the Compensation, Nominating and Governance Committee of the Board of Directors, comprised solely of non-employee, “independent”
directors, is to assist the Board with discharging its responsibilities relating to the compensation of TCC’s employees,
officers and directors, and the development and administration of the Company’s compensation and benefit programs.
The Governance Committee
operates under a written charter, which is available at
https://www.tccsecure.com/Investors.aspx
. As set forth in the charter,
the committee’s authority and responsibilities with respect to compensation include:
|
·
|
For executives
, to assist with the development of an executive compensation program supportive
of the achievement of the Company’s strategic goals and objectives, to review and approve the goals and objectives relevant
to the compensation of the Chief Executive Officer of the Company, including an annual evaluation of the CEO’s performance
and the establishment of the CEO’s compensation and other material terms of employment, and to review and approve senior
management team member compensation;
|
|
·
|
For directors
, to annually evaluate the appropriate level and form of compensation for members
of the Board and its committees, and to recommend changes to the Board when appropriate; and
|
|
·
|
For employees generally
, to monitor and review all general compensation strategies and programs
of the Company, including equity incentive and benefit programs.
|
The following discussion
provides information about the Company’s compensation plans and programs generally, as well as compensation awarded to, earned
by or paid to our “named executive officers” pursuant to applicable Commission rules and regulations. For additional
information, please see the
Compensation
section that follows this discussion and analysis.
Compensation Philosophy and Objectives
The philosophy underlying
the Company’s compensation plans is to provide compensation that rewards both individual and organizational performance and
align such compensation with stockholder interests. The Company aims to make executive compensation sensitive to and reflective
of Company performance and financial condition, which is defined in terms of revenue growth and profitability. Compensation also
must be competitive, thereby enabling the Company to attract, retain and motivate highly-qualified individuals who contribute to
the Company’s success.
Procedure
Compensation decisions
are made annually and are tied to the Company’s fiscal year-end. For each employee, a performance evaluation is conducted
by his or her supervisor, the results of which are shared with the employee. The evaluation encompasses a review of the employee’s
individual performance over the course of the fiscal year, and includes recognition of the achievement by TCC of its strategic
objectives and priorities. Compensation decisions for non-officer employees are made after the results of the performance evaluations
have been considered and an informal analysis is completed that considers the goals of market competitiveness and enhancement of
stockholder value. No upward adjustment is made to an employee’s compensation if the individual’s performance does
not merit, or if the Company’s financial condition and performance do not support, such an adjustment.
The Governance Committee
does not make individual compensation decisions for non-officer employees. Rather, our Chief Executive Officer sets compensation
levels and presents the aggregate information to the Governance Committee for its information. Bonuses are typically paid in December,
and salary increases are effective October 1 and paid retroactively before the end of the calendar year.
Compensation packages for
our named executive officers are analyzed and discussed individually by the Governance Committee, and decisions are made once the
Governance Committee has obtained all of the information it deems necessary. Information that is considered in making named executive
officer compensation decisions includes information provided to the Governance Committee via presentations made to the committee
by the named executive officers themselves. Such presentations include highlights of achievements and milestones met by the officers
in the fiscal year and the results of each individual’s performance self-evaluation. The Governance Committee also considers
the Company’s financial condition and performance.
The accounting and tax
treatment of compensation decisions generally have not been material factors in determining the amount and type of compensation
given to executive officers, other than to balance the potential cost to the Company with the benefit or value to the executive.
The tax and accounting treatment of different compensation arrangements may play a greater role in the decision-making process
in the future. The effects on Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”) also would
be considered when applicable.
The Governance Committee
has not to date employed any compensation consultants to assist it with compensation decisions, although it is authorized by its
charter to do so and reserves the right to engage such consultants when and if deemed necessary or advisable. The Governance Committee
also has the authority to form, and delegate any of its responsibilities to, subcommittees as it deems appropriate, although to
date it has not done so.
Compensation Components
The components of compensation
provided to named executive officers (as well as non-officer employees) typically include base salary, annual discretionary bonuses
and equity incentives. Bonuses and equity incentives have historically been granted in periods during which the Company’s
financial performance have supported such awards. Executive officers have not received these components of compensation when the
Company’s operating results have not been positive and/or the recipients have not achieved specified performance milestones.
No bonuses were paid with respect to fiscal year 2017 or 2016 to any named executive officer due to the financial performance of
the Company.
The Company also has in
place retirement and change of control arrangements with its two named executive officers, who participate in the group benefits
offered to all employees, such as medical and life insurance.
Base Salary
Base
salary levels for the Company’s named executive officers are based on an informal review of compensation for competitive
positions in the market and reflect job responsibilities and skills, level of experience, individual performance, judgments as
to past and future contributions to the Company, and the Company’s compensation budget. Specific weight is not given to any
particular factor when establishing base salaries, although most weight is typically given for individual performance. The Company’s
practice has been to review base salaries at the fiscal year-end as noted above, although in unusual cases salaries may be reviewed
more frequently if circumstances dictate.
Annual Bonuses
Bonuses, when paid, are
designed to tie awards to individual performance and motivate and reward employees for their contributions to the Company. A number
of factors are considered in determining whether annual bonuses should be paid, most importantly the achievement by the Company
of specified financial objectives and the achievement by the employees of individual objectives. Recognition of individual performance
and accomplishment is based on a subjective analysis of each individual’s performance; recognition of Company performance
is based on an evaluation of specified measures of corporate performance, such as corporate profits and sales order activity.
The Company has an Executive
Bonus Program for the benefit of key management employees – traditionally the Chief Executive Officer and Chief Financial
Officer – and an informal bonus program for all other employees. For named executive officers, an initial plan is set and
approved by the Governance Committee at the beginning of the fiscal year and bonus awards are determined out of such plan at year-end
based on Company and individual performance. For non-officer employees, the budget is established by management, subject to review
by the Governance Committee, at year-end based on the Company’s financial performance during the year, and individual awards
are determined through a consultative process involving an employee’s supervisor and our Chief Executive Officer.
Equity Incentives
As with base salary and
bonus determinations, equity compensation awards are determined on an informal, annual basis. An important objective of this component
of compensation is to strengthen the relationship between the long-term value of the Company’s stock price and the potential
financial gain for employees, as well as retention of personnel. Historically the Company has awarded stock options to its employees
and directors as the equity component of compensation, which provide recipients the opportunity to purchase shares of our Common
Stock upon vesting and become valuable only if the trading price of the Common Stock increases. The recipient is therefore motivated
to remain with the Company until the options vest and motivated to improve individual performance in support of improved Company
performance.
In selecting employees
eligible to receive equity compensation grants (whether at the initial hire date or through periodic grants) and determining the
size of such grants, a variety of factors are considered, including the job and responsibility level of the employee and past,
current and prospective services rendered, or to be rendered, to the Company by the employee. Determination of the employees eligible
to receive awards and the size of such awards is based on a subjective analysis by the Governance Committee, with input and recommendations
from Mr. Guild, of each individual’s position within the Company, his or her performance, and his or her growth potential
and that of the Company.
Equity Plans
The Company currently administers
two plans that provide for the grant of equity incentive compensation to officers, directors and employees.
The Technical Communications
Corporation 2005 Non-Statutory Stock Option Plan, as amended (the “2005 Plan”), was adopted by the Board of Directors
in May 2005 and permitted the grant of non-statutory stock options to purchase up to 200,000 shares of Common Stock to employees,
directors and consultants. The stated purpose of the 2005 Plan was to promote the success and interests of the Company and its
stockholders by permitting and encouraging employees, directors and consultants of the Company to obtain a proprietary interest
in the Company or its subsidiaries through the grant of non-statutory options to purchase shares of the Company. Determinations
as to recipients of awards, option term, vesting period and exercise price were made by the Governance Committee in its discretion.
As of December 15, 2017, the Company had issued a total of 208,500 options pursuant to the 2005 Plan. The 2005 Plan expired on
May 5, 2015 and as of December 15, 2017, no shares remained available for awards under such plan, although options to purchase
87,000 shares granted under the 2005 Plan remained outstanding.
In December 2016, the Board
of Directors approved and adopted an amendment to the Technical Communications Corporation 2010 Equity Incentive Plan (as amended,
the “2010 Plan”) upon the recommendation of the Governance Committee to increase the number of shares of Common Stock
authorized for issuance upon grants and awards to 400,000 shares. Such amendment was approved by shareholders at the 2017 Annual
Meeting. The 2010 Equity Plan now provides for the issuance of up to 400,000 shares of Common Stock pursuant to awards of stock
options (incentive and non-qualified), stock appreciation rights, and restricted stock to employees, directors and consultants
to the Company.
The stated purpose of the
2010 Plan is to promote the success and interests of the Company and its stockholders by permitting and encouraging participants
to obtain a proprietary interest in the Company through the grant of awards that are consistent with the Company’s goals
and that link the personal interests of participants to those of the Company’s stockholders. The 2010 Plan is further intended
to enable the Company to attract, retain and motivate those whose services are deemed critical to the success of the Company and
align the interests of such individuals with those of the Company. Determinations as to award recipients, duration, price, vesting
and performance requirements and other material terms are made by the Governance Committee, although there are specific requirements
as to the price and term of certain awards depending on the award type and recipient. If any award under the 2010 Plan is canceled,
terminates, expires or lapses for any reason without having been exercised in full, any shares subject to such award that remain
unpurchased are available for future grant. In addition, any shares retained by the Company upon exercise of an award in order
to satisfy the exercise price of such award, or any withholding taxes due with respect to such exercise, are treated as not issued
and shall continue to be available. At the same time, shares issued under the 2010 Plan and later repurchased by the Company are
not available for future grant or sale. As of December 15, 2017, there were outstanding options to purchase an aggregate 159,281
shares pursuant to the 2010 Plan and 240,719 shares were still available for awards.
Retirement, Severance, Change in Control and Similar Compensation
The Company does not
offer or have in place any formal retirement, severance or similar compensation programs other than its 401(k) plan. Rather, the
Company individually negotiates with those employees for whom retirement, severance or similar compensation is deemed necessary.
A description of the severance arrangements with the Company’s named executive officers follows.
Carl H. Guild, Jr.,
President and Chief Executive Officer
Pursuant to his employment
agreement, upon termination of his employment without “cause” by the Company or upon his death or disability, Mr. Guild
is entitled to receive severance pay in an amount equal to the greater of six months’ base salary at the then-current level
or the balance of the term of the agreement, less applicable taxes and other required withholdings and amounts owed to the Company,
and including all health and other benefits to which he had been entitled while employed by the Company at the Company’s
expense for at least six months. If the Company determines not to renew Mr. Guild’s employment agreement, he is entitled
to an amount equal to six months’ base salary at the then-current level, less applicable taxes and other required withholdings
and amounts owed to the Company, and the continuation of all health and other benefits to which he had been entitled while employed
by the Company at the Company’s expense for at least six months.
“Cause”
is defined as Mr. Guild’s failure or refusal to perform the services specified in his employment agreement or to carry out
any lawful directions of the Board; conviction of a felony; fraud or embezzlement involving the assets of the Company, its customers,
suppliers or affiliates; gross negligence or willful misconduct; or breach of any term of his employment agreement.
Mr. Guild may terminate
his employment agreement upon prior written notice to the Company. Upon his voluntary termination, he is entitled to severance
pay – defined as his base salary at the then-current level, less applicable taxes and other required withholdings and amounts
owed to the Company – equal to six months if the termination date is on the renewal date of the agreement or the lesser of
six months or the balance of the term of the agreement if the termination date is before such renewal date.
In the event of a change
in control of the Company where Mr. Guild resigns or is terminated without cause by the Company within 24 months after such an
event, any unvested options held shall automatically vest and become immediately exercisable. In addition, Mr. Guild would be entitled
to receive severance pay in an amount equal to 24 months’ base salary at the then-current level, less applicable taxes and
other withholdings and amounts due and plus all accrued and unpaid expenses and vacation time. In the event that any payment to
be received pursuant to such change in control or the value of any acceleration right in any Company stock options held in connection
with the change in control of the Company would be subject to an excise tax pursuant to Section 4999 of the Code, whether in whole
or in part as a result of being an “excess parachute payment” within the meaning of such terms in Section 280G(b) of
the Code, the amount payable will be increased (grossed up) to cover the excise tax liability due under Section 4999 of the Code,
if otherwise permitted under the Code.
“Change in control”
is defined as the occurrence of any one of the following: (a) any person or entity, including a “group” as defined
in Section 13(d) of the Exchange Act (other than the Company, a wholly-owned subsidiary of the Company, or any employee benefit
plan of the Company or its subsidiaries), becoming the beneficial owner of the Company’s securities having 51% or more of
the combined voting power of the then-outstanding securities of the Company that may be cast for the election of directors of the
Company; or (b) as the result of, or in connection with, any cash tender or exchange offer, merger or other business combination,
sale of assets or contested election or any combination of the foregoing transactions, less than a majority of the combined voting
power of the then-outstanding securities of the Company or any successor corporation or entity entitled to vote generally in the
election of directors of the Company or such other corporation or entity after such transaction, are held in the aggregate by holders
of the Company’s securities entitled to vote generally in the election of directors of the Company immediately prior to such
transaction; or (c) the approval of the stockholders of the Company of a plan of liquidation.
Michael P. Malone,
Treasurer and Chief Financial Officer
Under Mr. Malone’s
employment agreement, the Company has the right, upon written notice, to terminate his employment (a) immediately at any time for
“cause” or (b) at any time without “cause”. Cause is defined as his failure or refusal to perform the services
specified in his employment agreement or to carry out any lawful directions of the Board; conviction of a felony; fraud or embezzlement
involving the assets of the Company, its customers, suppliers or affiliates; gross negligence or willful misconduct; inability
for a continuous period of at least 180 days in the aggregate during any 360-day period to perform his duties due to a physical
or mental disability incapable of reasonable accommodation under applicable law; or breach of any term of his employment agreement.
Upon termination of
employment without cause by the Company, Mr. Malone is entitled to receive severance pay in an amount equal to the greater of six
months’ base salary at the then-current level or his base salary for the balance of the term of the agreement. If the Company
determines not to renew Mr. Malone’s employment agreement, he is guaranteed, at the Company’s option, at will employment
for six months or severance pay in an amount equal to six months’ base salary at the then-current level. In either case,
such amounts shall be less applicable taxes and other required withholdings and amounts owed to the Company, plus all accrued but
unpaid expenses and vacation time.
In the event of a change
in control of the Company where Mr. Malone resigns or is terminated without cause by the Company within six months after such an
event, any unvested options held shall automatically vest and become immediately exercisable. In addition, Mr. Malone would be
entitled to receive severance pay in an amount equal to six months’ base salary at the then-current level, less applicable
taxes and other withholdings and amounts due and plus all accrued and unpaid expenses and vacation time. In the event that any
payment to be received pursuant to such change in control or the value of any acceleration right in any Company stock options held
in connection with the change in control of the Company would be subject to an excise tax pursuant to Section 4999 of the Code,
whether in whole or in part as a result of being an “excess parachute payment” within the meaning of such terms in
Section 280G(b) of the Code, the amount payable to Mr. Malone will be increased (grossed up) to cover the excise tax liability
due under Section 4999 of the Code, if otherwise permitted under the Code. “Change in control” in Mr. Malone’s
employment agreement has the same definition as that found in Mr. Guild’s agreement, provided above.
No other employees
receive or are entitled to receive any retirement, severance or similar compensation.
Perquisites
and Other Benefits
The
Company generally does not provide its officers with “perks” or similar types of benefits. Messrs. Guild and Malone
have life insurance policies for which the Company pays the premium, and the Company also typically matches up to a certain percentage
of their contributions to the Company’s 401(k) plan. Both of these benefits are generally available to all Company employees,
subject to certain limitations and restrictions. Messrs. Guild and Malone, like other employees, also are entitled to participate
in TCC’s employee benefit plans offering group disability insurance, group medical and hospitalization plans, and retirement
and profit-sharing plans.
Chief Executive Officer Compensation
Mr. Guild has been
President and Chief Executive Officer of the Company since 1998 and Chairman of the Board of Directors since 2001. His base salary
for each of fiscal years 2017 and 2016 was $285,000.
Mr. Guild did not receive
a bonus with respect to the fiscal years ended September 30, 2017 and October 1, 2016 due to the Company’s financial condition
at year-end and the lack of achievement by the Company and Mr. Guild of specified performance milestones for the periods.
In fiscal 2017, the
Board awarded Mr. Guild an option to purchase 3,500 shares of Common Stock for his service as a director, as it did for all other
directors. These non-qualified options were granted on February 13, 2017 under the 2010 Plan at an exercise price of $2.50 per
share with a term of 10 years, and vest over a five year period. Mr. Guild also was awarded a non-qualified option to purchase
3,500 shares of Common Stock for his service as a director during fiscal 2016. These non-qualified options were granted on February
8, 2016 under the 2010 Plan at an exercise price of $2.90 per share with a term of 10 years, and vest over a five year period.
See “Director Compensation” in the
Compensation
section below for more information regarding such director option
grants.
See “Retirement,
Severance, Change in Control and Similar Compensation” above for a discussion of the severance payments payable to Mr. Guild
under the terms of his employment agreement.
Chief Financial Officer Compensation
Mr. Malone has
been Chief Financial Officer of the Company since 2000 and Treasurer since 1998. His base salary for each of fiscal years 2017
and 2016 was $160,000.
Mr. Malone did not
receive a bonus with respect to the fiscal years ended September 30, 2017 and October 1, 2016 due to the Company’s financial
condition at year-end and the lack of achievement by the Company and Mr. Malone of specified performance milestones for the periods.
Mr. Malone also was not awarded any stock options or other equity incentives during fiscal years 2017 or 2016.
See “Retirement,
Severance, Change in Control and Similar Compensation” above for a discussion of the severance payments payable to Mr. Malone
under the terms of his employment agreement.
Tax Considerations
Section
162(m) of the Code generally disallows a tax deduction to public companies for compensation over $1,000,000 paid to certain employees,
generally the Chief Executive Officer and the four other most highly compensated executive officers. Qualifying performance-based
compensation is not subject to the deduction limit if certain requirements are met. In fiscal 2017, no compensation paid by the
Company was nondeductible as a result of the $1,000,000 limitation. Furthermore, the Board of Directors believes that, given the
general range of salaries and bonuses for executive officers of the Company, the $1,000,000 threshold of Section 162(m) will
not be reached by any executive officer of the Company in the foreseeable future. Accordingly, the Board has not formulated a policy
to address non-qualifying compensation.
Say on Pay Proposal and Vote
As discussed under
Proposal II below, stockholders will have the opportunity to cast their vote on the compensation of TCC’s named executive
officers as described in this Proxy Statement at the Meeting. The advisory vote will not be binding on the Governance Committee
or the Board of Directors. However, the Governance Committee and the Board will review the voting results and any concerns raised
by stockholders will be considered when determining future compensation arrangements and making decisions about future compensation
programs and practices. The Board and Governance Committee also may consult directly with stockholders to better understand any
issues and concerns. Stockholders (not including broker non-votes) have voted in favor of the compensation of the Company’s
named executive officers every year since being given the opportunity to do so. At the Company’s 2011 annual stockholders
meeting and again at the 2017 annual meeting of stockholders, stockholders voted in favor of including an advisory vote on executive
compensation in the Company’s proxy materials every year as recommended by the Board, which annual vote the Board implemented.
COMPENSATION
Named Executive Officers
The following tables
set forth all plan and non-plan compensation awarded to, earned by or paid to the Chief Executive Officer and Chief Financial Officer
of the Company, who were the only “named executive officers” of the Company during its 2017 fiscal year, for all services
rendered by such officers to the Company and its subsidiary in all capacities for the periods presented.
Summary Compensation Table
Name
and
Principal
Position
|
|
Year
|
|
Salary
|
|
|
Bonus
|
|
|
Option
Awards
|
|
|
All
Other
Compensation
|
|
|
Total
|
|
|
|
|
|
|
($)
|
|
|
|
($)
|
|
|
|
($)
|
|
|
|
($)
|
|
|
|
($)
|
|
Carl H. Guild, Jr.
President, Chief
Executive Officer
|
|
2017
|
|
$
|
285,006
|
(1)
|
|
|
—
|
|
|
$
|
5,815
|
(2)
|
|
$
|
6,765
|
(3)
|
|
$
|
297,586
|
|
and Chairman
|
|
2016
|
|
$
|
285,006
|
(1)
|
|
|
—
|
|
|
$
|
5,846
|
(4)
|
|
$
|
6,386
|
(3)
|
|
$
|
297,238
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Michael P. Malone
Chief Financial Officer, Treasurer and Assistant
|
|
2017
|
|
$
|
160,014
|
(5)
|
|
|
—
|
|
|
|
—
|
|
|
$
|
6,000
|
(6)
|
|
$
|
166,014
|
|
Secretary
|
|
2016
|
|
$
|
160,014
|
(5)
|
|
|
—
|
|
|
|
—
|
|
|
$
|
6,000
|
(6)
|
|
$
|
166,014
|
|
|
(1)
|
Mr. Guild’s annual base salary was set at $285,000 effective March 1, 2012.
|
|
(2)
|
Amount represents an award on February 13, 2017 of a non-qualified option to purchase 3,500 shares
of Common Stock at $2.50 per share, which vests over a five year period and has a 10 year term. Such award was made to Mr. Guild
for his service as a director of the Company. The dollar amount presented includes the aggregate fair value of the award on the
date of grant. The fair value of the option was estimated on the date of grant using the Black-Scholes option pricing model with
the following weighted average assumptions used for grants in fiscal 2017: dividend yield of 0%, expected volatility of 72%, risk-free
interest rate of 2.0%, and expected life of 6.5 years.
|
|
(3)
|
Includes the Company’s 25% match on the first 6%, and 30% match on the second 6%, of Mr.
Guild’s 401(k) contributions for fiscal 2017 and 2016. Also includes life insurance premiums paid by the Company of $360
and $285 for each of fiscal years 2017 and 2016, respectively.
|
|
(4)
|
Amount represents an award on February 8, 2016 of a non-qualified option to purchase 3,500 shares
of Common Stock at $2.90 per share, which vests over a five year period and has a 10 year term. Such award was made to Mr. Guild
for his service as a director of the Company. The dollar amount presented includes the aggregate fair value of the award on the
date of grant. The fair value of the option was estimated on the date of grant using the Black-Scholes option pricing model with
the following weighted average assumptions used for grants in fiscal 2016: dividend yield of 0%, expected volatility of 60%, risk-free
interest rate of 1.42%, and expected life of 6.5 years.
|
|
(5)
|
Mr. Malone’s annual base salary was set at $160,000 effective March 1, 2012.
|
|
(6)
|
Includes the Company’s 25% match on the first 6%, and 30% match on the second 6%, of Mr.
Malone’s 401(k) contributions for fiscal 2017 and 2016. Also includes life insurance premiums paid by the Company of $720
for each of fiscal years 2017 and 2016.
|
For further information
on equity incentive awards granted to our named executive officers, see the disclosure below. For more information on compensation
generally and information on severance and change of control rights, see the
Compensation Discussion and Analysis
section
above.
Employment Agreements
Carl H. Guild, Jr.
The Company entered
into an employment agreement with Carl H. Guild, Jr., its President and Chief Executive Officer, effective as of November 19, 1998
and amended November 8, 2001. The original term of the agreement expired September 30, 2000; the agreement renews automatically
thereafter for successive periods of one year unless earlier terminated or not renewed. Mr. Guild’s agreement contains provisions
specifying his annual compensation, subject to an annual merit review by the Board of Directors. The agreement also provides for
performance awards to be paid at the discretion of the Company’s Board of Directors, based on an assessment of exceptional
performance. Mr. Guild’s base salary was set at $285,000 effective March 1, 2012 and has not changed since such date. No
performance awards were earned with respect to fiscal 2017 and 2016.
For a more in-depth
discussion of Mr. Guild’s right to receive annual performance bonuses and his right to severance and change in control payments,
see the
Compensation Discussion and Analysis
section above. For information on stock options granted to Mr. Guild, see “Outstanding
Equity Awards at Fiscal Year-End” below.
Michael P. Malone
The Company entered
into an employment agreement with Michael P. Malone, its Chief Financial Officer, effective as of February 12, 2001. The original
term of the agreement was 12 months, and the agreement renews automatically for successive periods of one year unless earlier terminated
or not renewed. Mr. Malone’s agreement contains provisions specifying his annual base salary, subject to an annual merit
review by the Board of Directors. The agreement also provides for performance awards to be paid at the discretion of the Company’s
Board of Directors, based on an exceptional performance assessment. Mr. Malone’s base salary was set at $160,000 effective
March 1, 2012 and has not changed since such date. No performance awards were earned with respect to fiscal 2017 and 2016.
For a more in-depth
discussion of Mr. Malone’s right to receive annual performance bonuses and his right to severance and change in control payments,
see the
Compensation Discussion and Analysis
section above. For information on stock options granted to Mr. Malone, see
“Outstanding Equity Awards at Fiscal Year-End” below.
Outstanding Equity Awards at Fiscal
Year-End
The following table
sets forth certain information regarding unexercised options held by our named executive officers outstanding as of the end of
the Company’s 2017 fiscal year, which date was September 30, 2017.
|
|
Option Awards
|
Name
|
|
Number
of
Securities
Underlying
Unexercised
Options
|
|
|
Number
of
Securities
Underlying
Unexercised
Options
|
|
|
Equity
Incentive Plan
Awards:
Number of
Securities
Underlying
Unexercised
Unearned
Options
|
|
|
Option
Exercise
Price
|
|
|
Option
Expiration
Date
|
|
|
(#) Exercisable
|
|
|
(#) Unexercisable
|
|
|
(#)
|
|
|
($)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Carl H. Guild, Jr.
|
|
|
3,500
|
(1)
|
|
|
—
|
|
|
|
—
|
|
|
|
7.02
|
|
|
02/08/20
|
|
|
|
18,900
|
(2)
|
|
|
—
|
|
|
|
—
|
|
|
|
11.51
|
|
|
07/29/20
|
|
|
|
3,500
|
(3)
|
|
|
—
|
|
|
|
—
|
|
|
|
9.77
|
|
|
05/05/21
|
|
|
|
3,500
|
(4)
|
|
|
—
|
|
|
|
—
|
|
|
|
10.20
|
|
|
05/03/22
|
|
|
|
3,500
|
(5)
|
|
|
—
|
|
|
|
—
|
|
|
|
4.67
|
|
|
02/11/23
|
|
|
|
3,500
|
(6)
|
|
|
—
|
|
|
|
—
|
|
|
|
7.65
|
|
|
02/12/24
|
|
|
|
1,400
|
(7)
|
|
|
2,100
|
(7)
|
|
|
—
|
|
|
|
4.05
|
|
|
05/07/25
|
|
|
|
700
|
(8)
|
|
|
2,800
|
(8)
|
|
|
—
|
|
|
|
2.90
|
|
|
02/08/26
|
|
|
|
—
|
|
|
|
3,500
|
(9)
|
|
|
—
|
|
|
|
2.50
|
|
|
02/13/27
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Michael P. Malone
|
|
|
10,501
|
(2)
|
|
|
—
|
|
|
|
—
|
|
|
|
11.51
|
|
|
07/29/20
|
|
(1)
|
Granted on February 8, 2010 under the 2005 Plan; options have 10 year term and were fully vested
as of February 8, 2010.
|
|
(2)
|
Granted on July 29, 2010 under the 2010 Plan; options have 10 year term and vested as to 20% of
the shares on each of the first five anniversaries of the date of grant.
|
|
(3)
|
Granted on May 5, 2011 under the 2010 Plan; options have 10 year term and were fully vested as
of May 5, 2011.
|
|
(4)
|
Granted on May 3, 2012 under the 2005 Plan; options have 10 year term and were fully vested as
of May 3, 2012.
|
|
(5)
|
Granted on February 11, 2013 under the 2005 Plan; options have 10 year term and were fully vested
as of February 11, 2013.
|
|
(6)
|
Granted on February 12, 2014 under the 2005 Plan; options have 10 year term and were fully vested
as of February 12, 2014.
|
|
(7)
|
Granted on May 7, 2015 under the 2010 Plan; options have 10 year term and vest as to 20% of the
shares on each of the first five anniversaries of the date of grant.
|
|
(8)
|
Granted on February 8, 2016 under the 2010 Plan; options have 10 year term and vest as to 20% of
the shares on each of the first five anniversaries of the date of grant.
|
|
(9)
|
Granted on February 13, 2017 under the 2010 Plan; options have 10 year term and vest as to 20%
of the shares on each of the first five anniversaries of the date of grant.
|
Equity Incentive
Plans
The Company currently
administers two plans that provide for the grant of equity incentive compensation to officers, directors and employees: the Technical
Communications Corporation 2010 Equity Incentive Plan and the 2005 Non-Statutory Stock Option Plan. At December 15, 2017, there
were an aggregate of 600,000 shares authorized under these plans, of which options to purchase 246,281 shares were outstanding
and 240,791 shares were available for issuance upon future grants and awards. Generally, these plans provide for the grant of equity
awards to employees, officers, directors and consultants of the Company, in each case in amounts, at prices and subject to such
restrictions and limitations as determined by the Board of Directors or a committee thereof and in compliance with applicable law,
including the Code. For more information about each plan, see “Equity Incentives” in the
Compensation Discussion
and Analysis
section above. The goal of the Company’s equity incentive awards is to promote the success and interests
of the Company and its stockholders by permitting and encouraging recipients to obtain a proprietary interest in the Company or
its subsidiaries through the grant and exercise of such awards, and motivating such recipients to remain with the Company and work
towards its success.
Grants in Fiscal
2017
On February 13, 2017,
the Board of Directors granted to each of the members of the Company’s Board of Directors options under the 2010 Plan to
purchase 3,500 shares of Common Stock, for an aggregate 14,000 shares. These non-qualified stock options, which are exercisable
at $2.50 per share, vest 20% per year commencing the first anniversary of the date of grant and have a term of 10 years. Such grants
were the only grants of stock options made to executive officers and directors of the Company during the 2017 fiscal year.
Retirement, Severance and Similar
Compensation
No retirement, severance
or similar compensation was paid to any employee during the 2017 fiscal year. For a description of the amounts that may be payable
to our named executive officers upon their resignation, retirement, termination or a change in control, please see “Retirement,
Severance, Change in Control and Similar Compensation” above in the
Compensation Discussion and Analysis
section.
The Company also provides to all employees a 401(k) tax qualified plan.
Compensation of Directors
The following table
sets forth all compensation paid to the Company’s directors for the fiscal year ended September 30, 2017. Mr. Guild, our
President, CEO and Chairman of the Board of Directors, did not receive any compensation for his service as a director during the
2017 fiscal year other than the option grant discussed above.
Name
|
|
Fees
Earned or
Paid in Cash
|
|
|
Option Awards
|
|
|
All
Other
Compensation
|
|
|
Total
|
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mitchell B. Briskin
|
|
$
|
30,100
|
(1)
|
|
$
|
5,815
|
(2)(3)
|
|
|
-
|
|
|
$
|
35,915
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Thomas E. Peoples
|
|
$
|
24,500
|
(1)
|
|
$
|
5,815
|
(2)(3)
|
|
|
-
|
|
|
$
|
30,315
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Francisco F. Blanco
|
|
$
|
24,500
|
(1)
|
|
$
|
5,815
|
(2)(3)
|
|
|
-
|
|
|
$
|
30,315
|
|
|
(1)
|
Includes quarterly stipend and fees paid for Board of Directors and committee meetings attended
during the fiscal year. For Mr. Briskin, also includes quarterly stipend received for serving as Chairman of the Audit Committee.
|
|
(2)
|
Amount represents the award on February 13, 2017 of a non-qualified option to purchase 3,500 shares
of Common Stock at $2.50 per share, which option vests over a five year period and has a 10 year term. The dollar amount presented
represents the aggregate fair value of the award on the date of grant. The fair value of the option was estimated on the date of
grant using the Black-Scholes option pricing model with the following weighted average assumptions used for grants in fiscal 2017:
dividend yield of 0%, expected volatility of 72%, risk-free interest rate of 2.0%, and expected life of 6.5 years.
|
|
(3)
|
Mr. Briskin had 35,000 options outstanding at the 2017 fiscal year-end, of which 26,600 were fully
vested and exercisable. Mr. Peoples had 35,000 options outstanding at the 2017 fiscal year-end, of which 26,600 were fully vested
and exercisable. Mr. Blanco had 17,500 options outstanding at the 2017 fiscal year-end, of which 9,100 were fully vested and exercisable.
|
Board members are entitled
to receive a Board meeting fee of $2,500 per meeting attended (whether in person or via telephone conference, so long as the duration
of the meeting attended exceeds 30 minutes), which fee can be waived. Board members also receive a quarterly stipend of $3,500
for their service. Members of the Audit Committee are paid $1,000 for each Audit Committee meeting that is not held in connection
with a regularly scheduled Board meeting, and the Audit Committee Chairman receives, commencing January 1, 2015, a quarterly stipend
of $1,400 in addition to the stipend he receives as a director of the Company. Members of the Governance Committee receive
$500 for each meeting that is held other than in connection with a regularly scheduled meeting of the Board of Directors.
Commencing in 2008,
directors are annually granted options to purchase 3,500 shares of Common Stock at an exercise price equal to the closing price
of the Common Stock on the date of grant. Stock options granted to directors are considered non-qualified and, beginning in fiscal
year 2015, vest 20% per year commencing on the first anniversary of the date of grant; prior director option grants vested immediately.
Each grant expires 10 years after the date of grant, except that if a director ceases to be a director, the option terminates at
the earlier of 10 years from the date of grant or three years from the last day as a director.
TCC reimburses members
of the Board of Directors for their reasonable out-of-pocket expenses incurred in attending Board and committee meetings. The Company
believes that members of the Board of Directors received compensation during fiscal year 2017 commensurate with their responsibilities
to the Company and appropriate for a company of TCC’s size and revenues.
PROPOSAL II. STOCKHOLDER ADVISORY
VOTE
ON EXECUTIVE COMPENSATION
The Dodd-Frank Wall
Street Reform and Consumer Protection Act (the “Reform Act”) and Section 14A of the Exchange Act entitle stockholders
to cast a non-binding, advisory vote on the compensation of executives as described in a company’s proxy statement, otherwise
known as “say on pay” proposals. The legislation makes clear that these votes do not overrule a Board’s compensation
decisions, impose additional fiduciary duties on the Board, or limit stockholders’ ability to make other compensation-related
proposals.
The Company’s
guiding compensation philosophy, as discussed above in
Compensation Discussion and Analysis
, is to provide compensation
that rewards individual and organizational performance and align such compensation with the interests of long-term stockholders.
The Company aims to make executive compensation sensitive to Company performance, which is defined in terms of revenue growth and
profitability. Compensation also must be competitive, thereby enabling the Company to attract, retain and motivate highly-qualified
individuals who contribute to the Company’s success.
We believe that the
Company’s executive compensation programs have been effective at providing appropriate incentives for the achievement of
targeted results, aligning pay and performance, creating an ownership culture in which award recipients think and act like stockholders,
and enabling TCC to attract and retain some of the most talented executives in the communications security device and system industry.
Revenues for the 2017
fiscal year were $4,209,000 with a net loss of $1,429,000 or $(0.78) per share. Delays in the receipt of certain foreign and domestic
contracts, coupled with customer and production delivery requirements, resulted in lower than expected revenue for fiscal 2017.
Major domestic and international contracts also did not materialize during the fiscal year as expected due to long government procurement
cycles. The Company expects that sales will improve over the next 12 months and hopes to experience increased demand for communications
security devices, systems and services, and will continue to commit resources, although at a reduced rate, to internal product
development during the 2018 fiscal year and beyond.
Compensation actions
taken with respect to fiscal 2017 for TCC’s named executive officers reflected the Company’s results. Specifically,
in recognition of both the Company’s disappointing financial performance and poor individual achievement of performance milestones,
no annual performance bonuses related to company performance were awarded to our CEO or CFO. Stockholders are encouraged to read
the
Compensation Discussion and Analysis
and
Compensation
sections of this Proxy Statement for a more detailed discussion
of how the Company’s compensation programs reflect our overarching compensation philosophy and core principles and how such
philosophy and principles were implemented when making compensation decisions for 2017.
Our Board values constructive
dialogue on compensation and other governance topics, and recognizes the interest that investors have in executive compensation.
In response to the passage of the Reform Act and in recognition of growing support for advisory votes on compensation and our stockholders’
say-on-pay and say-when-on-pay votes, stockholders currently have the opportunity to vote on an advisory resolution concerning
the compensation of our executives on an annual basis.
Accordingly, stockholders
are being asked to vote on the following resolution at the Meeting:
RESOLVED
, that the compensation
paid to the Company’s named executive officers as disclosed in the
Compensation
section (including the tables and
narrative discussion therein) of this Proxy Statement be hereby APPROVED.
Stockholders will
have the opportunity to vote for or against such resolution, or abstain from voting. The affirmative vote of the holders of a majority
of the shares of Common Stock voting on the matter shall be required to approve the stockholder advisory vote on executive compensation
as disclosed in this Proxy Statement. Abstentions and broker non-votes will not be included in the totals for the proposal, and
will have no effect on the outcome of the vote.
The advisory vote
will
not be binding
on the Governance Committee or the Board of Directors. However, the Governance Committee and the Board will
review the voting results and any concerns raised by stockholders will be considered when determining future compensation arrangements
and making decisions about future compensation programs and practices. The Board and Governance Committee also may consult directly
with stockholders to better understand any issues and concerns.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE
“FOR”
THE ADVISORY RESOLUTION APPROVING EXECUTIVE
COMPENSATION.
PROPOSAL III. RATIFICATION OF SELECTION
OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM
Independent Registered Pubic Accounting
Firm
The Audit Committee
has selected the firm of Moody, Famiglietti & Andronico, LLP (“MFA”), independent certified public accountants,
to serve as the Company’s independent registered public accounting firm for the fiscal year ending September 29, 2018. MFA
acted as the Company’s independent registered public accounting firm for the company’s 2017 and 2016 fiscal years.
It is expected that
a member of MFA will be present at the Meeting and will be available to respond to appropriate questions and make a statement if
he or she so desires.
Fees
Audit Fees.
The aggregate fees billed by MFA for professional services rendered for the audit of the Company’s annual financial statements
for fiscal year 2017, and the reviews of the financial statements included in the Company’s quarterly reports during fiscal
year 2017, were approximately $42,000 (of total audit fees for fiscal 2017 of $87,000, the remainder of which will be billed in
fiscal year 2018). The aggregate fees billed by MFA for professional services rendered for the audit of the Company’s annual
financial statements for fiscal year 2016, and the reviews of the financial statements included in the Company’s quarterly
reports during fiscal year 2016, were approximately $87,000
.
Audit-Related Fees.
No fees were billed by MFA for assurance and related services that were reasonably related to the performance of such firm’s
audit or review of the Company’s financial statements for fiscal years 2017 and 2016.
Tax Fees.
The
aggregate fees billed by MFA for professional services rendered for tax compliance, tax advice and tax planning for the Company
for each of fiscal years 2017 and 2016 was approximately $16,500.
All Other Fees.
No fees were billed by MFA for products or services provided other than those otherwise described above for fiscal years 2017
and 2016.
Pre-Approval Policies
It is the policy of
the Audit Committee to pre-approve the audit and permissible non-audit services performed by the Company’s independent registered
public accounting firm in order to ensure that the provision of such services does not impair such firm’s independence, in
appearance or fact. In fiscal year 2017, the Audit Committee pre-approved all such services performed by MFA.
Ratification
Stockholder ratification
of the appointment of the Company’s independent registered public accounting firm is not required by the Company’s
By-laws or otherwise, but is being done as a matter of good corporate governance. If stockholders fail to ratify the selection,
the Audit Committee will reconsider this selection. Even if the selection is ratified, the Audit Committee in its discretion may
direct the appointment of a different independent registered public accounting firm at any time during the year if it determines
that such a change would be in the best interests of the Company and its stockholders.
The affirmative vote
of the holders of a majority of the shares of Common Stock voting on the matter is required for the ratification of the selection
of the independent registered public accounting firm. Abstentions and broker non-votes will not be included in the totals for the
proposal, and will have no effect on the outcome of the vote.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE
“FOR” THE RATIFICATION OF THE INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
FOR FISCAL YEAR 2018.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS
AND MANAGEMENT
The following table
shows, as of December 15, 2017, the beneficial ownership of Common Stock of the Company by (i) any person or group who is known
to the Company to be the beneficial owner of more than 5% of the Company’s Common Stock, (ii) each of TCC’s current
directors and nominees, (iii) each of the Company’s named executive officers, and (iv) all current directors and executive
officers of the Company as a group. As of December 15, 2017, there were 1,839,877 shares of Common Stock outstanding.
Name and Address of
Beneficial Owner
(1)
|
|
Amount and Nature of
Beneficial Ownership
(1)
|
|
|
Percent of Class
|
|
|
|
|
|
|
|
|
Francisco F. Blanco
|
|
|
10,500
|
(2)
|
|
|
0.6
|
%
|
|
|
|
|
|
|
|
|
|
Mitchell B. Briskin
|
|
|
34,777
|
(3)
|
|
|
1.9
|
%
|
|
|
|
|
|
|
|
|
|
Carl H. Guild, Jr.
|
|
|
337,859
|
(4)
|
|
|
18.0
|
%
|
|
|
|
|
|
|
|
|
|
Thomas E. Peoples
|
|
|
28,090
|
(5)
|
|
|
1.5
|
%
|
|
|
|
|
|
|
|
|
|
Michael P. Malone
|
|
|
90,756
|
(6)
|
|
|
4.9
|
%
|
|
|
|
|
|
|
|
|
|
All current directors, executive officers and 5% holders as a group (5 persons)
|
|
|
501,982
|
(7)
|
|
|
25.7
|
%
|
|
(1)
|
Unless otherwise indicated, each of the persons named in the table has sole voting and investment
power with respect to the shares set forth opposite such person’s name. With respect to each person or group, percentages
are calculated based on the number of shares beneficially owned, including shares that may be acquired by such person or group,
within 60 days of December 15, 2017, upon the exercise of stock options or other purchase rights, but not the exercise of options
or warrants held by any other person. The address of Messrs. Blanco, Briskin, Guild, Peoples and Malone is c/o Technical Communications
Corporation, 100 Domino Drive, Concord, Massachusetts 01742.
|
|
(2)
|
Represents 10,500 shares issuable upon the exercise of stock options.
|
|
(3)
|
Includes 28,000 shares issuable upon the exercise of stock options.
|
|
(4)
|
Includes 39,900 shares issuable upon the exercise of stock options, and 297,959 shares held jointly
by Mr. Guild and his wife.
|
|
(5)
|
Includes 28,000 shares issuable upon the exercise of stock options.
|
|
(6)
|
Includes 10,501 shares issuable upon the exercise of stock options.
|
|
(7)
|
Includes an aggregate 116,901 shares issuable upon the exercise of stock options.
|
Change in Control
The Company knows of
no arrangements (including any pledge by any person of securities of TCC) that may result or have resulted in a change in control
of the Company.
ADDITIONAL INFORMATION
Other Matters
The Board of Directors
of the Company is not aware of any matter, other than those described above, that may come before the Meeting. However, if any
other matters are properly presented to the Meeting for action, it is intended that the persons named in the enclosed proxy card
will vote on such matters in accordance with their best judgment.
Stockholder Proposals for 2019 Annual
Meeting
Proposals of stockholders
for inclusion in the Proxy Statement and form of proxy, including director nominees, for the Company’s 2019 Annual Meeting
of Stockholders must be received by the Company at its principal executive offices no later than September 10, 2018, and must comply
with the applicable requirements of federal securities laws and the Company’s nomination procedures as discussed herein.
Stockholder proposals received outside this process will be considered untimely if the Company is not provided written notice thereof
at least 45 days prior to the first anniversary of the date of mailing of this year’s proxy materials, as set forth on the
first page of this Proxy Statement, or November 24, 2018. In order to curtail controversy as to the date on which the Company received
a proposal, it is suggested that proponents submit their proposals by certified mail, return receipt requested.
Expenses and Solicitations
The cost of the solicitation
of proxies will be borne by the Company. Proxies will be solicited principally through the mail. Further solicitation of proxies
from some stockholders may be personally made by directors, officers and regular employees of the Company, by telephone, electronic
mail, facsimile or special letter. No additional compensation, except for reimbursement of reasonable out-of-pocket expenses, will
be paid for any such further solicitation by such individuals.
In addition, the Company
may request banks, brokers, custodians, nominees, and fiduciaries to forward copies of the Company’s proxy materials to those
persons for whom they hold shares to request instructions for voting the proxies. The Company will reimburse any such persons for
their reasonable out-of-pocket costs.
Householding
Certain
stockholders who share the same address may receive only one copy of this Proxy Statement (which includes the Notice of Internet
Availability of Proxy Materials) and the 2017 Annual Report to Stockholders in accordance with a notice delivered from such stockholders’
bank, broker or other holder of record, unless the applicable bank, broker or other holder of record received contrary instructions.
This practice, known as “householding,” is designed to reduce printing and postage costs. If you own your shares through
a bank, broker or other holder of record and wish to either stop or begin householding, you may do so, or you may request a separate
copy of this Proxy Statement (which includes the Notice of Internet Availability of Proxy Materials) or the Annual Report, either
by contacting your bank, broker or other holder of record at the telephone number or address provided in the above referenced notice,
or by contacting TCC via telephone at (978) 287-5100 or in writing at Technical Communications Corporation, 100 Domino Drive, Concord,
Massachusetts, 01742, Attention: Investor Relations. If you request to begin or stop householding, you should provide your name,
the name of your broker, bank or other record holder, and your account information.
Annual Report of Form 10-K
The Company will provide,
upon written request and without charge to each stockholder entitled to vote at the Meeting, a copy of the Company’s Annual
Report on Form 10-K as filed with the Commission for the fiscal year ended September 30, 2017. A request for copies of such report
should be addressed to the Company at 100 Domino Drive, Concord, Massachusetts 01742, Attention: Investor Relations.
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