UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
[X] ANNUAL REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended August 31, 1996
OR
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File No. 0-12807
PHOTOCOMM, INC.
Incorporated in the State of Arizona IRS No. 86-0411983
7681 East Gray Road, Scottsdale, Arizona 85260 (602)948-8003
Securities Registered under Section 12(b) of the Exchange Act:None
Securities Registered under Section 12(g) of the Exchange Act:
Common Stock, $0.10 par value
Check whether the issuer (1)filed all reports required to be filed
by Section 13 or 15(d) of the Exchange Act during the past 12
months (or for such shorter period that the registrant was required
to file such reports), and (2)has been subject to such filing
requirements for the past 90 days.
Yes (X) No ( )
Check if there is no disclosure of delinquent filers in response to
Item 405 of Regulation S-B contained in this form, and no
disclosure will be contained, to the best of the registrant's
knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. (X)
Revenues for the fiscal year ended August 31, 1996 were
$22,995,264.
Based upon the average of the bid and asked prices as of November
15, 1996, the aggregate market value of common stock held by non-
affiliates of the registrant was approximately $12,159,677.
Check whether the issuer has filed all documents and reports
required to be filed by Section 12, 13 or 15(d) of the Exchange Act
after the distribution of securities under a plan confirmed by a
court. Yes (X) No ( )
Common stock outstanding at November 15, 1996: 14,309,440 shares.
Documents incorporated by reference:
1. Certain portions of the Registrant's Information Statement, to
be filed pursuant to Regulation 14C of the Securities Exchange Act
of 1934, as amended, in connection with the Annual Meeting of the
Stockholders of the Registrant to be held on January 31, 1997, are
incorporated by reference into Part III of this report.
Exhibit Index at Page
Total Pages
TABLE OF CONTENTS
PART I Page
Item 1. Description of Business 3
Item 2. Description of Property 11
Item 3. Legal Proceedings 12
Item 4. Submission of Matters to a Vote of 12
Security Holders
PART II
Item 5. Market for Common Equity and Related 12
Stockholder Matters
Item 6. Management's Discussion and Analysis or 13
Plan of Operation
Item 7. Financial Statements 19
Item 8. Changes In and Disagreements with Accountants 20
on Accounting and Financial Disclosure
PART III
Item 9. Directors, Executive Officers, Promoters and 21
Control Persons, Compliance with Section 16(a)
of the Exchange Act
Item 10. Executive Compensation 21
Item 11. Security Ownership of Certain Beneficial 21
Owners and Management
Item 12. Certain Relationships and Related Transactions 21
Item 13. Exhibits and Reports on Form 8-K 22
PART I
Item 1. Description of Business
Company Background
Photocomm, Inc., directly and through its wholly-owned subsidiaries
(collectively, the "Company"), is engaged primarily in the
development, manufacturing and marketing of photovoltaic (solar
electric) power systems and related products. Photocomm was
incorporated in 1981 under the laws of the State of Arizona, as a
wholly-owned subsidiary of Programmed Land, Inc. ("PLI"), a
Scottsdale, Arizona based real estate company.
In 1990, the Company entered into a financial agreement with
Westinghouse Electric Corporation ("Westinghouse") pursuant to
which Westinghouse invested in equity and debt securities of the
Company and obtained options to purchase additional equity
securities. From 1990 through 1994 Westinghouse provided the
Company with $3.625 million in financial and operational support.
On November 9, 1993, the Company entered into a financial agreement
with The New World Power Corporation ("NWP") pursuant to which NWP
obtained a significant equity interest in the Company and obtained
options to purchase additional equity securities from the Company
and certain other stockholders of the Company. On August 30, 1994,
the Company, Westinghouse and NWP entered into an Exchange
Agreement pursuant to which NWP acquired all of Westinghouse's
equity and debt interest in the Company, as well as additional
accounts payable and accrued liabilities from the Company to
Westinghouse. NWP exchanged all of the debt securities,
convertible securities and accounts payable and accrued liabilities
for shares of the Company's Common Stock. In exchange for its
interest in the Company, Westinghouse received a minority interest
in NWP.
On November 21, 1996, the Company entered into a new financial and
strategic agreement with Golden Technologies, Inc. ("GTC") and NWP
(the "Stock Purchase Agreement"). Pursuant to the Stock Purchase
Agreement, GTC acquired NWP's 44% interest in the Company, and NWP
and the Company terminated all of their respective rights and
options pursuant to the November 9, 1993 Stock Purchase Agreement
and the August 30, 1994 Exchange Agreement. GTC also acquired from the
Company 1,000,000 shares of unregistered common stock for $2.75 per
share. In conjunction with the Stock Purchase Agreement, GTC
acquired 450,000 shares of unregistered common stock from PLI,
450,000 shares of unregistered common stock from Robert R.
Kauffman, the Company's President, 50,000 shares of unregistered
common stock from Myron Anduri, the Company's Senior Vice
President, and 50,000 shares of unregistered common stock from
Thomas LaVoy, the Company's Chief Financial Officer, at $2.75 per
share. The Company granted demand registration rights to GTC
covering the shares purchased from NWP and the Company and all
other shares they may own, provided GTC shall pay one-half the
costs of any demand registration. The Stock Purchase Agreement
also settled and dismissed litigation among NWP, GTC and the
Company relating to actions taken by the Company's Board of
Directors in September 1996. The Company agreed to rescind
certain defensive actions taken by the Board of Directors and
to redeem the Series C Junior Participating Preferred Shares
Rights Plan adopted in September 1996.
As a result of the foregoing transactions, as of November 21, 1996,
GTC held approximately 52% of the issued and outstanding shares of
common stock of the Company. In addition, GTC has the preemptive
right to subscribe for a proportionate share of all future equity
offerings of the Company provided GTC owns at least 20% of the
issued and outstanding stock of the Company or 6,000,000 shares.
In addition, the Stock Purchase Agreement permits GTC to designate
three members of the Company's six member Board of Directors. In
this regard, GTC has replaced all of the NWP directors (John Kuhns,
Gerald Cummins and Robert MacDonald) with Jeff Coors, John Coors
and Jed Burnham. GTC is a wholly-owned subsidiary of ACX
Technologies, Inc. ("ACX"). ACX, a New York Stock Exchange company.
On October 3, 1995, the Company acquired all of the assets and
assumed the related liabilities of Sunelco, Inc. ("Sunelco"), a
catalog distributor of solar electric products located in Hamilton,
Montana (the "Acquisition"). The aggregate consideration paid by
Photocomm in connection with the Acquisition was $914,986. The
Company issued 225,000 shares of Photocomm's Common Stock, $0.10
par value, valued at $400,000 and assumed liabilities of Sunelco of
$456,674 and paid $58,312 in cash. The assets purchased
principally consisted of certain inventories and other assets
valued by the parties at $456,674; and goodwill and intangible
assets valued by the parties at $458,312.
On February 2, 1996, Photocomm acquired all of the assets,
excluding certain accounts receivable, of Solarjack Manufacturing,
Inc. ("Solarjack"), a solar electric pumping products manufacturer
located in Safford, Arizona. The aggregate consideration paid by
Photocomm in connection with this acquisition was $1,737,240. The
Company paid $337,240 in cash and 560,000 shares of its Common
Stock, $0.10 par value, valued at $1,400,000. The assets purchased
consisted of inventories of $204,256; fixed assets of $441,578; and
goodwill of $1,091,406.
Solar Electric Industry - Background
Solar electric (technically, "photovoltaic") power generation is an
emerging, high technology industry based upon the recent commercial
application of advanced semiconductor devices which convert
sunlight directly to electricity.
The first applications of solar electric technology were in space
satellite power systems in the 1950's. These early solar electric
systems utilized in the U.S. space program were extremely
expensive, but their reliability and no fuel requirement proved
ideal for this remote application. As a potential earth-based
alternative energy source, solar electric systems offered the
additional benefits of silent, pollution-free power generation,
requiring no power lines and virtually no maintenance. Although
prohibitively expensive at the time for commercial use, the
potential of solar electric technology as an "ideal" energy
alternative generated world-wide interest and increasing levels of
research and development investments, particularly in the U.S. and
Japan. In the early 1970's, the dramatic increases in oil prices
and the accelerated search for energy alternatives spurred
investment in solar electric technologies, particularly by the
large oil companies. By the early 1980's, dramatic cost reductions
and greatly improved system performance set the stage for the
commencement of the market development phase of this emerging
technology in a wide range of commercial applications.
Technology
The fundamental element of a solar electric system is the
semiconductor device, or "cell" which generates a variable electric
current which is directly proportionate to the quantity of sunlight
energy absorbed. Solar cells are electrically interconnected to
form a "module" unit in which the cell groupings are formatted to
achieve desired module electrical power specifications, such as
voltage and current. The solar module is the power generating
component of a complete solar electric system. Additional
components of these systems are collectively termed "balance of
system" items, and typically comprise such products as electronic
controllers, batteries for energy storage, electrical fuses,
switches and wiring, and the actual device or "load" to be powered
such as lights, motors and other electrical devices.
Since the initial use of expensive solar electric power systems in
the space program, the major obstacle to broader commercial
application has been the high cost of the solar cells or modules.
During the past ten years it is estimated that over one billion
dollars has been invested worldwide by governments and corporations
in various research and development efforts targeted to achieve
cost reductions in the manufacturing of solar electric modules.
These continuing efforts have resulted in current module prices
that are less than one-third the pricing level of ten years ago.
Industry Structure
As a result of the extensive manufacturing capital requirements and
research expenditures, solar electric module production has been
dominated by large, multi-national oil and electronics companies in
the United States, Japan and Europe. Three companies are the
acknowledged world leaders in module manufacturing technology and
market share: Siemens Solar Industries, a division of Siemens A.G.
(manufacturing facility in California); Solarex Corporation, a
subsidiary of Amoco (headquartered in Rockville, Maryland); and
Kyocera in Japan. Other major international module manufacturers
are BP Solar (British Petroleum, U.K.), Sharp, Sanyo and Cannon
(Japan).
The major module manufacturers primarily market their product lines
through a network of distributors/dealers who resell modules, with
complementary components, to the end-user. The larger distributors
in this marketing channel are called "systems integrators" and
provide design, engineering and technical service to their
customers.
Markets and Products
The market for solar electric systems is primarily in "remote" area
applications, generally defined as those electric power
applications where access to utility power is not available,
relatively expensive or inconvenient. Examples of solar electric
market applications in which the Company participates include:
- - Telecommunication power
- - Rural homes and residences
- - Recreational vehicles and boats
- - Water pumping
- - Traffic signaling
- - Pipeline cathodic protection
- - Lighting
- - Solar irrigation power
- - Cellular payphone and call boxes
The Company's products are complete solar electric power systems,
system components and certain accessory products. Complete systems
consist of one or more photovoltaic modules, a controller to
monitor, regulate and control the output and, in most systems,
batteries to store the energy generated by the photovoltaic
modules. Occasionally, backup generators and/or inverters that
convert DC electric power to AC power are included as integral
components of a system. The Company markets standard prepackaged
systems for a wide range of applications. Each system contains the
basic components as well as related wiring and connections,
mounting devices, and other installation components as appropriate.
The Company also distributes system components including
photovoltaic modules, inverters, controllers, batteries, battery
chargers, switches, metering devices, mounting hardware and other
systems accessories.
Related equipment marketed by the Company includes water pumps,
light fixtures and propane refrigerators, most of which are either
integral to or used in conjunction with solar electric power
systems.
The Company also manufactures a line of proprietary "nonbreakable"
(non-glass construction) photovoltaic modules tradenamed Duravolttm.
Duravolt modules are specified in applications requiring maximum
durability and rugged construction such as:
- - Military applications (ManPac systems)
- - Marine applications
- - Traffic safety signal devices
- - Landscape irrigation applications
- - Park rest areas
- - Solar cars
Suppliers
The photovoltaic module is the most critical element comprising a
solar electric power system.
The Company has a photovoltaic module distribution arrangement with
Kyocera America, Inc. ("Kyocera"). The Company represents Kyocera
solar electric modules in the United States, Canada, Latin America
and South America. Kyocera, the world's third largest manufacturer
of solar electric modules, offers the Company competitive supply
terms and the opportunity to develop and establish a Western
Hemisphere dealer organization. The arrangement is informal, but
intended to be renewed annually by mutual agreement.
The Company's requirements for other solar electric systems
components and related equipment are purchased from numerous
vendors, and the Company believes that such components and
equipment are generally available from other sources at competitive
prices. Certain key systems components, such as Duravolt modules
and electronic controllers, are manufactured by the Company and are
considered by the Company to be proprietary.
Company Marketing Organization
The Company markets its products to a broad range of consumer,
commercial, industrial and government customers. Approximately
30% of the Company's sales are through a network of over 350
dealers who purchase products from the Company for resale to their
own customer accounts, and 10% direct retail customers primarily
accessed by the Company's Sunelco mail-order operation. The
remainder of Company sales are direct to end-user customers,
primarily industrial companies and government agencies. In recent
years, the Company has focused considerable marketing resources on
the wireless communication industry. This market represented
approximately 60% and 65% of the Company's sales in fiscal 1996 and
fiscal 1995, respectively. During its fiscal year ended August 31,
1996, the Company's customer base totaled over three thousand
accounts and no single customer accounted for more than 10% of the
Company's annual sales. During its fiscal year ended August 31,
1995, the U.S. Navy represented 15% of sales, and no other single
customer accounted for more than 10% of sales.
Historically, the Company's primary geographical marketing emphasis
has been in the Western and Southwestern United States, accounting
for approximately 75% of Company sales. The remainder of sales are
widely dispersed, with international customers accounting for
approximately 17% in fiscal 1996 and 12% in fiscal 1995.
Approximately 40% in fiscal 1996 and 25% in fiscal 1995 of Company
sales revenues are derived from consumer and residential-related
markets with historically strongest demand in the spring and summer
seasons, corresponding to the Company's third and fourth fiscal
year quarters.
The Company's regional sales centers are strategically located to
provide service and support in primary market areas. Including the
Company headquarters located in Scottsdale, Arizona, there are
currently nine regional offices located in:
Industrial Division Distribution Division
- San Diego, California - Scottsdale, Arizona
- Denver, Colorado - Tucson, Arizona
- Houston, Texas - Safford, Arizona
- Fort Myers, Florida - Hamilton, Montana
- Brisbane, Australia
Competition
The Company's competition in its major markets consists primarily
of numerous small distributors and dealers. Due to the broad range
of market applications, and a widely-dispersed geographical
customer base, industry competition is highly fragmented. In
certain situations, such as large projects, the Company's
competitors may include the major module manufacturers, such as
Siemens and Solarex, participating directly against the Company.
The domestic market for solar electric products, accounting for the
majority of the Company's sales, may be categorized by project size
into two primary competitive segments. Large projects, valued on
an installed cost basis at greater than $200,000 each, account for
about 5-10% of the domestic market and include government-funded
utility company demonstration projects. Small projects and
applications represent the majority of industry sales with an
average end-user system purchase price in the range of $2,500-
$100,000.
Although there are no known accurate industry surveys relative to
market size or actual solar electric system end-user purchases, the
Company estimates the total domestic market to be in the range of
$45-60 million in 1996. The "large project" market is
approximately $5-10 million with the remainder of sales in the
"small systems" category. The domestic "large project" market is
dominated by the major U.S. based solar electric module
manufacturers, principally Siemens Solar Industries located in
Camarillo, California and the Solarex Corporation in Rockville,
Maryland, both of which have substantially greater resources than
the Company. Module pricing is the primary competitive factor in
the "large project" market and the Company is at a disadvantage
relative to the major module manufacturers. The Company's sales
into the major project market are negligible.
The "small systems" market accounts for the majority of domestic
sales and is estimated to be on the order of $45-50 million in
1996. The domestic "small project" market accounted for
approximately $10.5 million or about 46% of the Company's total
sales in fiscal 1996. The Company's principal competition in the
domestic small project market consists of numerous regional
distributors who purchase solar electric modules from the major
manufacturers, including Siemens Solar and Solarex, and resell
modules and other system components to dealers and/or end-users.
The major competitive factors in the small project market are
service, technical capability and delivery.
In the international market, representing approximately 17% of the
Company's sales for the fiscal year ended August 31, 1996, the
Company sells directly to dealers and end-users. The Company's
international competition consists principally of the major
international module manufacturers, including U.S.-based Siemens
Solar and Solarex, and Japan-based Kyocera. Module pricing is an
important competitive factor internationally, and the Company is at
a disadvantage to the major module manufacturers. The Company
competes internationally on the basis of service and technical
capabilities.
Government Contracts
The Company completed its first U.S. Army Solar Panel Manufacturing
Contract in December 1991, with sales totaling approximately
$477,000 and $741,000 for fiscal years 1992 and 1991, respectively.
The Company was awarded a second subcontract with the U.S. Army in
June 1993. The $2,283,000 subcontract award was for first article
development (completed in fiscal 1994), and a one year production
contract which started in the first quarter of fiscal 1995 and was
completed in the fourth quarter of fiscal 1995. The general
contractor has options to purchase up to $4,000,000 in additional
procurements through October 1997.
The Company was also awarded a $3.6 million general contract with
the U.S. Navy on September 16, 1994. The contract provided for the
construction of a 290 Kw solar electric diesel power generation
system, which was completed in November 1995.
Backlogs
The Company's products are generally shipped within one to two
months after receipt of an order. The Company backlog as of
October 31, 1996 was approximately $4,500,000 (which includes no
Government orders). The comparable backorder levels in the previous
year was approximately $2,700,000.
Subsidiary Operations
In 1988, Balance of Systems Specialists, Inc. ("BOSS") was
acquired by Photocomm and continues to operate as a wholly-owned
subsidiary of the Company. BOSS manufactures certain of the
components sold by the Company, and also designs, engineers and
manufactures the Company's proprietary systems such as Solar
Irrigation Power Systems (SIPstm), and custom solar modules
tradenamed Duravolttm. On April 24, 1990, BOSS acquired the assets
of Solar Wind Energy, Inc., a custom manufacturer of solar electric
modules. The acquired assets are employed in a custom module
manufacturing division of BOSS producing specialty modules for
internal systems integration programs and certain industrial
customers.
On September 27, 1988, Photocomm acquired Sunland Industries, Inc.
("Sunland") through a reverse merger. Sunland was renamed
Photocomm Credit Corporation ("PCC") in 1994, and is a wholly-owned
subsidiary of the Company.
On June 22, 1990, the Company acquired all of the outstanding
common stock of Solar SignAge, Inc., a Texas corporation that has
been renamed Photocomm of Texas, Inc. Photocomm of Texas, Inc.
manufactures a complete line of solar electric generators
trademarked SunPaktm. SunPak generators are used in a wide range
of industrial power applications such as offshore oil platforms,
remote pipeline monitoring and telecommunications. Photocomm of
Texas, Inc. operates as a wholly-owned subsidiary of the Company.
On October 3, 1995, the Company acquired all the assets of Sunelco,
a Montana based corporation. Sunelco is one of the leading
catalog/mail order marketers of solar electric power system to
residential customers in the United States. Sunelco has become a
division of Photocomm and is conducting business at its regional
sales office in Hamilton, Montana.
On February 2, 1996, the Company acquired the assets of Solarjack,
an Arizona based corporation. Solarjack is one of the leading
solar water pumping manufacturers. Solarjack manufactures highly
efficient D.C. submersible pumps specifically for solar market
applications in the United States and throughout the world.
Solarjack has become a division of Photocomm and is conducting
business at its manufacturing plant in Safford, Arizona.
Employees
On November 15, 1996, the Company employed a total of 125 persons,
5 of whom are management and marketing personnel, 32 of whom are
engaged principally in sales, 38 of whom provide administrative,
engineering and secretarial services, and 50 of whom are
manufacturing personnel. No employee is subject to a collective
bargaining agreement. The Company believes it has favorable
relations with its employees.
Patents, Copyrights, Trade Secrets and Trademarks
The Company has certain copyright and trademark rights relating to
its products, and claims rights to various trade secrets and
proprietary rights. However, the Company does not believe that
these rights would necessarily preclude others from developing
substantially similar products. The Company markets its products
under a variety of registered and unregistered trademarks, none of
which it regards as being material to its overall success.
In 1990, the Company acquired two patents. The first patent, U.S.
Patent No. 4,319,310, was acquired for solar billboard signs. The
Company has been marketing solar electric signs since 1987. In
conjunction with the acquisition of Photocomm of Texas, Inc., the
Company also acquired rights to patents for solar electric
illuminated architectural signs.
The Company was awarded U.S. Patent No. 4,980,574 on December 25,
1990 for its Solar Irrigation Power Systems. The various patents
expire from 1997 to 2007.
Item 2. Description of Property
The Company owns and operates its 20,000 square foot facility in
Scottsdale, Arizona housing both its principal executive offices,
and manufacturing and distribution facility. The Company leases
space for regional sales offices and warehousing. The following
table describes the Company's principal leased facilities,
including square footage and lease termination dates:
Lease Approximate
Expiration floor area in
Location Date square feet
Scottsdale, AZ November 1998 10,750
Safford, AZ February 1999 8,000
Tucson, AZ December 1996 1,500
San Diego, CA Month to month 325
Denver, CO October 1997 2,642
Houston, TX August 1997 5,000
Hamilton, MT September 1998 2,500
Fort Myers, FL Month to Month 500
Brisbane, Australia September 1997 3,200
As of October 1996, the Company is leasing 10,750 square feet of
office/warehouse space in a building adjacent to the corporate
headquarters. The Company's CEO, Robert Kauffman, and CFO, Thomas
LaVoy, own this adjacent 20,000 square foot office/warehouse
building. The present lease has been negotiated at fair market
value rates. The Company anticipates that additional space may be
leased on those premises if required. Aggregate rent payments for
1996 were $225,516.
The Company believes that future space requirements can be met with
the present space as well as available leasable property in each of
its geographical areas to provide for sufficient facilities to
conduct its operations and expand its business in fiscal 1997.
Item 3. Legal Proceedings
The Company is not a party to any material threatened or pending
litigation.
Item 4. Submission of Matters to a Vote of Security Holders
No matter was submitted to a vote of the shareholders during the
fiscal fourth quarter ended August 31, 1996, through the
solicitation of proxies or otherwise.
PART II
Item 5. Market for Common Equity and Related Stockholder Matters
The Company's common stock trades on the NASDAQ small cap market
system under the symbol PCOM. The following information sets forth
the high and low bid quotations in dollars per share for the
Company's common stock as reported by NASDAQ during the last two
fiscal years.
Fiscal Year ended August 31, 1995 Low High
First Quarter (through November 30, 1994) $2.04 $2.22
Second Quarter (through February 28, 1995) 1.89 2.06
Third Quarter (through May 31, 1995) 1.87 2.08
Fourth Quarter (through August 31, 1995) 2.04 3.06
Fiscal Year ended August 31, 1996 Low High
First Quarter (through November 30, 1995) $2.03 $3.25
Second Quarter (through February 29, 1996) 2.43 3.37
Third Quarter (through May 31, 1996) 2.43 2.87
Fourth Quarter (through August 31, 1996) 2.12 2.87
The number of stockholders of record for the common stock of the
Company at the close of business on November 3, 1996 was 795. The
Company estimates that there are 3,800 beneficial owners of the
Company's common stock.
The Company has never paid cash dividends on the common stock, and
it intends for the foreseeable future to retain any earnings to
support the growth of its business.
Item 6. Management's Discussion and Analysis or Plan of Operation
Introduction
Photocomm's operating results reflect the Company's strategic
decision to focus on custom manufactured products, value-added
systems for industrial applications and continue to strengthen its
off-grid consumer business. The Company achieved profitability in
the first quarter of fiscal 1994 and has remained profitable in
each of the last 12 quarters. Profitability was achieved primarily
by a product mix transition to higher-margin manufactured products
and value-added systems, while stabilizing and reducing as a
percent of sales, selling, general and administrative expenses.
Industrial systems, primarily in the telecommunications industry,
continue to be a major marketing focus for the Company. The
wireless communication industry, which represents approximately 60%
of the Company's revenues, utilizes solar electric power systems in
cellular phone systems, Cell Extender sites, microwave repeater
sites, and remote data telemetry. The Company provides value-added
engineering, manufacturing, construction and system integration to
this important market.
The Company made a major market thrust in 1996 to improve its
already strong position in the consumer off-grid market. In
October the Company acquired Sunelco, a leading marketer of solar
electric power systems for residential customers in the United
States, and in February acquired Solarjack, a leading water pump
manufacturer and distributor of solar electric systems throughout
the world. The two acquisitions improved the Company's overall
market share in off-grid distribution, as well as added improved
gross margins reflected by the sales of a proprietary water pumping
product.
Results of Operations
The following table sets forth certain operational data as a
percent of net sales for the years indicated:
Year Ended August 31,
1996 1995 1994
Sales 100% 100% 100%
Cost of Sales 75% 76% 75%
Gross Profit 25% 24% 25%
Selling, General & Administrative 21% 20% 23%
Income from Operations 4% 4% 2%
1996 Compared to 1995
Net Sales
In fiscal 1996, the Company achieved a 12% increase in sales
revenue over the prior year. Company sales revenue totaled
$22,995,264 in fiscal year ending August 31, 1996, compared to
sales of $20,540,840 in the fiscal year ending August 31, 1995.
Approximately 20% of fiscal 1995 sales revenue, or $5.1 million,
were from non-recurring U.S. military contracts, with negligible
sales contributions in fiscal 1996. Excluding military contracts,
the Company's commercial sales increased by 49%.
The sales revenue gains are primarily attributed to a $3,058,000 or
45% increase in industrial products and systems, a $3,002,000 or
50% increase in residential off-grid home and water pumping
systems, and a $1,272,000 or 53% increase in international sales.
The increase in each of the Company's sales divisions is attributed
to the introduction of improved products and systems, and
additional sales resulting from the Sunelco and Solarjack
acquisitions, as well as continued marketing successes with little
or no effect related to price changes.
In fiscal 1996, the Company's sales mix changed slightly from
fiscal 1995. The Company derived approximately 60% of its sales
revenues from industrial, commercial and government customers, with
40% from distribution markets which primarily service consumer-
based dealers and retail customers. The sales mix in fiscal 1995
was 65% for industrial products and 35% from distribution markets.
The change is primarily due to new consumer-based business
resulting from the acquisitions of Sunelco and Solarjack in fiscal
1996.
Gross Profits
The Company's gross profits increased 15% to $5,759,169 for fiscal
1996 compared to $5,001,026 in the prior year. Gross margins were
25.0% in fiscal 1996 and 24.3% in fiscal 1995. The overall
increase was due to higher revenue volume and an increase in gross
profit margins in 1996 versus 1995. The higher gross profit
margins are attributed to higher profit business associated with
industrial products and systems, the addition of retail sales and
proprietary water pumping systems from the Sunelco and Solarjack
acquisitions, and the reductions of lower margin government
contract business in fiscal 1996 versus fiscal 1995.
Selling, General and Administrative Expenses
Selling, general and administrative expenses increased 20% in
fiscal 1996 versus fiscal 1995. Selling, general and
administrative expenses were $4,908,558 for fiscal 1996 and
$4,077,936 for fiscal 1995. The increase for fiscal 1996 is
attributed to additional market development in an effort to expand
revenue growth with most of the increases associated to additional
marketing expenses from the Sunelco and Solarjack acquisitions in
October 1995 and February 1996, respectively.
Other Income (Expense)
The Company's non-operating income and expense consist mainly of
interest expense and consulting income. Interest expense was
increased to $101,416 for fiscal 1996 from $96,502 for the prior
fiscal year. Interest expense was slightly higher in fiscal 1996
due to increased borrowings on the Company's line of credit. The
line was fully utilized and increased in the last half of fiscal
1996, while in fiscal 1995 the credit facility was approximately
50% utilized. Other income decreased to $48,132 for fiscal 1996
from $77,386 for fiscal 1995.
Income Tax Benefit
In fiscal 1996, after three consecutive profitable fiscal years,
the Company determined that realization of a deferred tax asset was
considered more likely than not, and therefore reduced the
valuation allowance established in previous years. The Company
recognized a $350,000 Income Tax Benefit from the adjustment of the
valuation allowance. The valuation allowance will be re-evaluated
on an on-going basis based upon generation of future taxable
income.
The Company has net operating loss carryforwards for federal income
tax purposes of approximately $5.9 million at August 31, 1996. The
remaining valuation allowance for further establishment of Deferred
Tax Assets and Income Tax Benefits is $1,370,000. The valuation
allowance will be re-evaluated on an on-going basis and management
expects, based upon current taxable income and future projections,
that the valuation allowance will be reduced on a quarterly basis
through fiscal 2000, at or about currently recognized Income Tax
Benefit amounts.
Net Income
The Company achieved net income of $1,147,327 or $.07 per common
share in fiscal 1996 compared to $903,974 or $.06 per common share
in the prior fiscal year. The 27% increase in net income is
attributed to higher sales and gross profits, offset by increases
in selling, general and administrative expenses, with significant
contributions coming from income tax benefits of net operating loss
carryforwards recognized in fiscal 1996.
Fiscal 1995 Compared to Fiscal 1994
Net Sales
In fiscal 1995, the Company achieved a 44% increase in sales
revenue over the prior year. Company sales revenue totaled
$20,540,840 in fiscal year ending August 31, 1995, compared to
sales of $14,271,787 in the fiscal year ending August 31, 1994.
The sales revenue gains are primarily attributed to $3,200,000 in
revenues for the U.S. Navy project, a $1,100,000 increase in the
distribution and international divisions, and approximately
$200,000 in sales of industrial products and systems in 1995 versus
1994. The increase in each of the Company's sales divisions is
attributed to introduction of improved products and systems, as
well as continued marketing successes, with little or no effect
related to price changes.
In fiscal 1995, the Company experienced a sales mix similar to
fiscal 1994. The Company derived approximately 65% of its sales
revenue from industrial, commercial and government customers, with
35% from distribution markets which primarily service consumer
based dealers and retail customers.
Gross Profits
The Company's gross profits increased 42% to $5,001,026 for fiscal
1995 compared to $3,532,402 in the prior year. Gross margins were
24.3% in fiscal 1995 and 24.7% in fiscal 1994. The overall
increase was due to increased revenue volume in fiscal 1995. The
slight decrease in fiscal 1995 gross margins is attributed to lower
margins associated with the Company's large U.S. Navy contract.
When the effect of this government contract is factored out of
fiscal 1995, the Company experienced a 2% increase in gross profit
margin in fiscal 1995. The Company expects continued improvement
in gross margins in fiscal 1996 due to anticipated increased sales
of higher gross profit proprietary products and systems.
Selling, General and Administrative Expenses
Selling, general and administrative expenses increased 23.5% in
fiscal 1995 versus fiscal 1994. Selling, general and
administrative expenses were $4,077,936 for fiscal 1995 and
$3,300,482 for fiscal 1994. The increase in expenses for fiscal
1995 is attributed to additional market development efforts in
fiscal 1995 in an effort to expand revenue growth.
Other Income (Expense)
The Company's non-operating income and expense consist mainly of
interest expense and consulting income. Interest expense was
reduced to $96,502 for fiscal 1995 from $128,896 for the prior
fiscal year. The decrease in interest expense was a result of
significant debt reduction in fiscal 1994. Total debt reduction in
fiscal 1994 was approximately $2,300,000, which occurred throughout
fiscal 1994. Other income decreased to $77,386 for fiscal 1995
from $112,917 for fiscal 1994.
Net Income
The Company achieved net income of $903,974 or $.06 per common
share in fiscal 1995 compared to $215,941 or $.00 per common share
in the prior fiscal year. The 319% increase in net income is
attributed to higher sales and gross profits and a decrease in
interest expense, which improvements were partially offset by
increases in SG&A expenses from the prior year.
Liquidity and Capital Resources
The Company's working capital position continues to improve.
Working capital increased to $5,719,557 at August 31, 1996 from
$4,745,020 at August 31, 1995 and $3,253,042 at August 31, 1994.
The Company's ratio of current assets to current liabilities
remains strong at 2.10 in fiscal 1996, but has been reduced
substantially from 3.80 in fiscal 1995. The reduction is a result
of a significant increase in current assets and current liabilities
in fiscal 1996 from fiscal 1995. Current assets have increased
from $6.5 million in fiscal 1995 to $10.9 million in fiscal 1996,
and current liabilities have increased from $1.7 million in fiscal
1995 to $5.2 million in fiscal 1996. The increases are a result of
substantial increases in operating assets and liabilities to
support significantly higher sales levels in the fourth quarter of
fiscal 1996, and to also support new operating requirements of
Sunelco and Solarjack, the Company's acquisitions in fiscal 1996.
Net cash used in operating activities in fiscal 1996, 1995 and 1994
were $1,059,137, $426,444 and $815,736, respectively. The major
uses of operating cash in 1996 were for accounts receivable and
inventory of $4,425,805 and a $527,050 increase in other assets
offset by increases in accounts payable and accrued expenses of
$2,361,164 and $1,526,554 from operating income and non-cash
expenses. The major uses of operating cash in fiscal 1995 were for
accounts receivable and inventory of $1,492,987 which were
primarily offset by net income of $903,974 and non-cash expenses of
$309,326. The fiscal 1994 operating cash uses were primarily for
accounts payable reductions of $1,152,913 with offsetting
contributions from income of $215,941 and non-cash expenses of
$257,617.
The Company's cash position has been reduced in fiscal 1996 from
fiscal 1995 and fiscal 1994. Cash levels at the end of the year
decreased to $200,105 from $520,269 at the end of fiscal 1995 and
$458,224 at the end of fiscal 1994. The Company anticipates cash
levels to improve in fiscal 1997 from cash flows from operating
activities, primarily with reductions of accounts receivables
related to large projects shipped in August of 1996, and reduction
of large work-in-process inventories at August 31, 1996 which are
being shipped during the first quarter of fiscal 1997.
Cash used for additions to property, plant and equipment and other
assets was $317,773 in fiscal 1996 versus $152,302 in fiscal 1995
and $329,279 in fiscal 1994. The cash used in 1996 was attributed
to approximately $110,000 for building and tenant improvements and
$180,000 for scheduled purchases of manufacturing equipment and
personal property. The cash used in fiscal 1995 was for scheduled
purchases of manufacturing equipment and personal property in the
normal course of the business. The fiscal 1994 additions were
comprised of $110,000 of office equipment, and approximately
$240,000 of manufacturing equipment. The manufacturing equipment
purchases were related to plant expansion requirements to fulfill
expanded industrial and government product orders. The Company
expects fiscal 1997 capital expenditures to be reduced to
approximately $250,000, which are consistent with fiscal 1994 and
fiscal 1995 capital expenditures. The Company does not have any
material equipment or other material commitments planned for fiscal
1997.
The cash paid for fiscal 1996 acquisitions of $395,552 was for the
cash portion of the acquisition cost, plus cash costs incurred to
acquire both companies. The Company did not have any acquisitions
in fiscal 1995 and fiscal 1994.
Cash provided by financing activities was $1,452,298 in fiscal
1996, $624,008 in fiscal 1995 and $1,508,798 in fiscal 1994. In
fiscal 1996, the financing was provided primarily by the Company's
bank line of credit which provided $1,199,099, with $480,849
contributed from issuance of common stock associated with the
Company Stock Option Plan, with offsetting repayments of long-term
debt of $192,295 and preferred stock dividend payments of $92,022.
In fiscal 1995, the financing was provided primarily by issuance of
common stock associated with the Company Stock Option Plan. In
addition, to the stock option exercises, the Company also obtained
$212,503 from bank line financing. In fiscal 1994, $2,012,181 was
provided as a result of the New World Power Corporation Stock
Purchase Agreement with offsetting repayments of long-term debt of
$396,709.
New Accounting Standard
Statement of Financial Accounting Standards No. 123 - "Accounting
for Stock-Based Compensation" ("SFAS 123") requires that companies
can elect to account for stock-based compensation plans using a
method based upon fair market value or continue measuring
compensation expense for those plans using the intrinsic value
method prescribed by Accounting Principles Board Opinion No. 25 -
"Accounting for Stock Issued to Employees" ("APB 25"). Companies
electing to continue using the intrinsic value method must take pro
forma disclosures in fiscal 1997 of net earnings and earnings per
share as if the fair value based method had been applied. The
Company will continue using APB 25; therefore, SFAS 123 is not
expected to have an impact on the Company's results of operations
or financial position.
On February 28, 1996, the Company renewed its credit line with
Wells Fargo Bank of Arizona. The credit line is a revolving line
with a maturity on February 27, 1997. It has certain operating
covenants, and is secured by the Company's inventory and accounts
receivable. Interest on the line is calculated at prime plus one
half of a point per annum, with interest-only payments payable
monthly. As of August 31, 1996, the Company had expanded its
credit line to $1,700,000 from $1,000,000 and is utilizing
approximately $1,400,000 of the credit facility.
On November 30, 1996, the Company's Mortgage Payable for $482,357
on the Corporate facility located in Scottsdale, Arizona, becomes
due and payable in full. The Company has obtained a commitment to
refinance the mortgage and expects to have a new mortgage in place
on or about November 30, 1996. The new terms of the mortgage
include reduction of the interest rate from 10.625% per annum to 8.75%.
The new term of the loan will be 10 years with a 20 year
amortization.
On November 21, 1996, the Company entered into a new financial and
strategic agreement with GTC and NWP (the "Stock Purchase
Agreement"). See "Description of Business - Company Background."
In connection with the Stock Purchase Agreement, GTC acquired from
the Company 1,000,000 shares of unregistered common stock for $2.75
per share resulting in proceeds to the Company of $2,750,000. In
conjunction with the Stock Purchase Agreement, GTC acquired 450,000
shares of unregistered common stock from Robert R. Kauffman, the
Company's President, 50,000 shares of unregistered common stock
from Myron Anduri, the Company's Senior Vice President and 50,000
shares of unregistered shares of common stock from Thomas LaVoy,
the Company's Chief Financial Officer, at $2.75 per share, all of
the above individuals exercised option shares which were purchased
from the Company for $633,000. The Company granted registration
rights to GTC covering the shares purchased from NWP and the
Company and all other shares they may own, provided GTC shall pay
one-half the costs of any demand registration. The Stock Purchase
Agreement also gives GTC the preemptive right to purchase its
proportionate share of all future offerings by the Company for so
long as GTC owns at least 20% of the issued and outstanding shares
of the Company or 6,000,000 shares, whichever is less. GTC's
preemptive right could limit the Company's ability to raise equity
financing from third parties in the future.
Although no assurances are possible, the Company believes its
future operating cash flows, access to its bank line of credit, and
ability to access additional equity such as employee stock options,
will provide adequate funding for current obligations, projected
operations and planned expansion for the next twelve months and the
foreseeable future.
Item 7. Financial Statements
PHOTOCOMM, INC. AND SUBSIDIARIES
INDEX TO FINANCIAL STATEMENTS
Page
Independent Auditors' Report F-1
Financial Statements:
Consolidated Balance Sheets, August 31, 1996 and 1995 F-2
Consolidated Statements of Operations, years ended F-3
August 31, 1996, 1995 and 1994
Consolidated Statements of Stockholders' Equity, F-4/5
years ended August 31, 1996, 1995 and 1994
Consolidated Statements of Cash Flows, years F-6
ended August 31, 1996, 1995 and 1994
Notes to Consolidated Financial Statements F-7
Schedules not listed above have been omitted because they are either not
applicable, not material or the required information is included in the
Financial Statements or related notes.
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
Photocomm, Inc.
We have audited the accompanying consolidated balance sheets of Photocomm,
Inc. and subsidiaries as of August 31, 1996 and 1995, and the related
consolidated statements of operations, stockholders' equity, and cash flows
for each of the years in the three-year period ended August 31, 1996. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of
Photocomm, Inc. and subsidiaries as of August 31, 1996 and 1995, and the
results of their operations and their cash flows for each of the years in
the three-year period ended August 31, 1996 in conformity with generally
accepted accounting principles.
KPMG Peat Marwick LLP
Phoenix, Arizona
October 18, 1996
PHOTOCOMM, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AUGUST 31, 1996 AND 1995
1996 1995
Assets
Current Assets:
Cash and cash equivalents $ 200,105 $ 520,269
Accounts receivable, net (note 3) 5,599,356 2,352,548
Inventories (note 4) 4,704,878 3,327,625
Other current assets 429,512 252,462
Total Current Assets 10,933,851 6,452,904
Property and equipment, net (note 5) 2,517,806 2,063,957
Deferred tax asset (note 8) 350,000 0
Other assets, net (note 2 and 6) 1,784,318 308,325
Total Assets $15,585,975 $8,825,186
========== ==========
Liabilities and Stockholders' Equity
Current Liabilities:
Current installments of long-term debt $ 82,096 $ 135,949
(note 7)
Line of credit (note 12) 1,399,099 200,000
Accounts payable 3,654,464 1,129,156
Other accrued expenses 78,635 242,778
Total Current Liabilities 5,214,294 1,707,883
Long-term debt, less current installments
(note 7) 638,388 720,163
Total Liabilities 5,852,682 2,428,046
Commitments, contingencies and subsequent
event (notes 7, 10 and 11)
Stockholders' Equity (notes 9 and 10):
Preferred stock: $.001 par value, 5,000,000
shares authorized;
Series A 12% convertible preferred stock,
125,000 shares authorized;109,972
shares issued and outstanding,
(liquidation preference $549,860) 110 110
Series AA 11% convertible preferred stock,
200,000 shares authorized; 52,565 and
69,365 shares issued and outstanding,
respectively (liquidation preference
$315,390) 53 69
Common stock; $.10 par value, 25,000,000
shares authorized; 14,307,444 and
13,014,159 shares issued and outstanding,
respectively 1,430,744 1,301,416
Additional paid-in capital 12,428,128 10,368,614
Accumulated deficit (4,125,742) (5,273,069)
Total Stockholders' Equity 9,733,293 6,397,140
Total Liabilities and Stockholders'
Equity $15,585,975 $8,825,186
========== =========
See accompanying notes to consolidated financial statements.
PHOTOCOMM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED AUGUST 31, 1996, 1995 AND 1994
1996 1995 1994
Sales, net $22,995,264 $20,540,840 $14,271,787
Cost of sales 17,236,095 15,539,814 10,739,385
Gross profit 5,759,169 5,001,026 3,532,402
Selling, general and
administrative expenses 4,908,558 4,077,936 3,300,482
Income from operations 850,611 923,090 231,920
Other income (expenses):
Interest expense (101,416) (96,502) (128,896)
Other, net 48,132 77,386 112,917
Income before income taxes 797,327 903,974 215,941
Income tax benefit 350,000 0 0
Net income $1,147,327 $ 903,974 $ 215,941
========= ======= =======
Preferred stock dividends
declared $ 92,022 $ 123,291 $ 166,149
========= ========= =========
Net income applicable to
common stockholders $1,055,305 $ 780,683 $ 49,792
========= ========= =========
Net income per common and
common equivalent share $ .07 $ .06 $ .00
==== ==== ====
Weighted average number of
common shares and common
equivalent shares 14,492,280 14,004,004 11,263,695
========== ========== =========
See accompanying notes to consolidated financial statements.
PHOTOCOMM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED AUGUST 31, 1995, 1994, AND 1993
See separate schedule
<PAGE> F4
<TABLE>
PHOTOCOMM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED AUGUST 31, 1995, 1994, AND 1993
<CAPTION>
Convertible Preferred Stock
---------------------------------------------
Series A Series B Series AA Common Stock Additional
------------- --------------- ------------- -------------------- Paid-In Accumulated
Shares Amount Shares Amount Shares Amount Shares Amount Capital Deficit Total
------- ------ --------- ---- ------ --- --------- ---------- ---------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, August 31, 1993 106,767 $107 222,222 $222 72,965 $73 9,010,037 $9,001,004 $7,163,790 ($6,392,984) $1,672,212
Common stock issued to private
investor, net of issuance costs
of $33,741 1,600,000 160,000 1,806,259 $1,966,259
Conversion of debenture into
common stock (note 10) 333,333 33,333 466,667 $500,000
Conversion of preferred stock into
common stock (note 10) (222,222) (222) 888,888 88,889 (88,667) ---
Conversion of preferred stock and
debenture into common stock
(note 10) (8,690) (9) 201,427 20,143 229,866 $250,000
Conversion of accounts payable and
accrued liabilities into common stock,
net of issuance costs of $2258 (note 10) 158,799 15,880 288,344 $304,224
Preferred stock issued for asset
acquisition, net of $907 costs (note 10) 20,000 20 107,073 $107,093
Common stock issued upon exercise of
stock options 48,275 4,827 44,260 $49,087
Preferred stock dividends declared
Series A ($0.15/share);
Series B ($0.20/share) (59,475) ($59,475)
Preferred stock dividends issued
Series A ($0.15/share);
Series B ($0.20/share) 3,205 3 8,690 9 59,463 $59,475
Cash dividends on Series A ($0.045/share)
and Series AA ($.066/share)
preferred stock (106,674) ($106,674)
Net income 215,941 $215,941
------- ---- ------- ---- ------ ---
Balance August 31, 1994 109,972 $110 --- --- 92,965 $93 12,240,759$1,224,076 $9,910,906 ($6,177,043) $4,958,142
<PAGE> F5
Convertible Preferred Stock
---------------------------------
Series A Series B Series AA Common Stock Additional
-------------- ------------- ------------- -------------------- Paid-In Accumulated
Shares Amount Shares Amount Shares Amount Shares Amount Capital Deficit Total
------- ---- ------ ------ ------ --- --------- ---------- ---------- ------------ ----------
Balance, August 31, 1994 109,972 $110 --- --- 92,965 $93 12,240,759 $1,224,076 $9,910,906 ($6,177,043) $4,958,142
Common Stock issued upon
exercise of stock options 639,000 63,900 544,415 $608,315
Series AA convertible
preferred stock issued to
private investor (note 10) 10,000 10 49,990 $50,000
Cash dividends on Series A
and Series AA preferred stock
($0.60 and $0.66/share respectiviely (123,291) ($123,291)
Series AA convertible
preferred stock converted
to common stock 4 to 1 (33,600)(34) 134,400 13,440 (13,406) ---
Net Income 903,974 $903,974
------- ---- ------ -------- ------- ---- ---------- ---------- ---------- ----------- ----------
Balance, August 31, 1995 109,972 $110 --- --- 69,365 $69 13,014,159 $1,301,416$10,368,614 ($5,273,069 $6,397,140
------- ---- ------ -------- ------- ---- ---------- ---------- ---------- ----------- ----------
Common stock issued upon
exercise of stock options 391,085 39,109 351,740 390,849
Common stock issued as part
of Sunelco purchase agreement
(note 2) 225,000 22,500 377,500 400,000
Common stock issued as part
of Solarjack purchase agreement
(note 2) 560,000 56,000 1,344,000 1,400,000
Common stock issued upon
exercise of warrants 50,000 5,000 85,000 90,000
Series AA convertible
preferred stock converted
to common stock 4 to 1 (16,800)(16) 67,200 6,720 (6,704) ---
Cash dividents on Series A
and Series AA preferred stock
($0.60 and $0.66/share respectively (92,022) (92,022)
Net Income 1,147,327 1,147,327
------- ---- ---- ---- ------- --- ---------- ---------- ----------- ------------ ----------
Balance, August 31, 1996 109,972 $110 --- -- 52,565 $53 14,307,444 $1,430,744 $12,428,128 ($4,125,742) $9,733,293
======= ==== === === ====== === ========== ========== =========== ============ ==========
</TABLE>
see accompanying notes to the consolidated financial statements
PHOTOCOMM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED AUGUST 31, 1996, 1995 AND 1994
1996 1995 1994
Cash flows from operating activities:
Net income $1,147,327 $ 903,974 $ 215,941
Adjustments to reconcile net income
to net cash used in operating activities:
Depreciation and amortization 379,227 309,326 257,617
Loss on disposal of assets - 3,030 -
Increase (decrease) in allowances
for doubtful accounts and
inventory obsolescence 6,000 (50,000) 50,000
(Increase) decrease in accounts
receivable (3,247,808) (870,272) 138,359
Increase in inventories (1,177,997) (622,715) (297,365)
Increase (decrease) in accounts
payable and accrued expenses 2,361,164 (29,319) (1,152,913)
Increase in deferred tax asset (350,000) - -
Increase in other current assets (177,050) (70,468) (27,375)
Net cash used in operating
activities (1,059,137) (426,444) (815,736)
Cash flows from investing activities:
Purchase of property and equipment (317,773) (152,302) (329,279)
Cash paid for acquisitions (395,552) - -
Purchase of patents, trademarks and
other assets - (11,340) (18,546)
Proceeds from sale of property
and equipment - 28,123 -
Net cash used in investing
activities (713,325) (135,519) (347,825)
Cash flows from financing activities:
Repayments of long-term debt (135,628) (123,518) (396,709)
Proceeds from issuance of debt 1,199,099 212,503 -
Proceeds from issuance of common stock 480,849 608,314 2,012,181
Proceeds from issuance of preferred
stock - 50,000 -
Cash dividends on preferred stock (92,022) (123,291) (106,674)
Net cash provided by
financing activities 1,452,298 624,008 1,508,798
Net increase (decrease) in cash and
cash equivalents (320,164) 62,045 345,237
Cash and cash equivalents at
beginning of year 520,269 458,224 112,987
Cash and cash equivalents at end
of year $ 200,105 $ 520,269 $ 458,224
========= ========= =========
See accompanying notes to consolidated financial statements.
PHOTOCOMM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AUGUST 31, 1996, 1995 AND 1994
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Business
Photocomm, Inc. and subsidiaries (the "Company") are engaged in the
manufacturing and marketing of solar electric systems in the U.S. At August
31, 1996 and 1995, Photocomm, Inc. was 46% and 48% owned by the New World
Power Corporation ("NWP"), respectively. At August 31, 1996, 1995 and 1994,
Photocomm, Inc. was 10%, 14% and 22% owned by Programmed Land, Inc. ("PLI"),
respectively. See notes 10 and 19.
Basis of Presentation
The consolidated financial statements include the accounts of Photocomm, Inc.
and its subsidiaries, Balance of Systems Specialists, Inc. ("BOSS"),
Photocomm of Texas, Inc. (previously Solar SignAge, Inc.), and Photocomm
Credit Corporation (previously Sunland Industries, Inc.). All material
intercompany balances and transactions between Photocomm, Inc. and its
subsidiaries have been eliminated in consolidation.
Income Recognition
Sales and related costs of sales are recorded when goods are shipped and
services rendered to customers.
Inventories
Inventories are valued at the lower of cost, determined by the first-in
first-out method, or market. Provisions are made for obsolete, slow moving
and non-salable inventory.
Property and Equipment
Property and equipment are stated at cost. Expenditures for additional
renewals and improvements are capitalized. Cost of repairs and maintenance
are expensed when incurred.
Depreciation of equipment is generally computed using straight-line methods
over 5 to 10 years. Leasehold improvements are amortized over the term of
the respective leases or life of the asset, whichever is shorter. The
building is being depreciated using the straight-line method over 31 years.
Goodwill
Goodwill, which represents the excess of purchase price over fair value of
net assets acquired, is amortized on a straight-line basis over the expected
periods to be benefited, generally 20 years. The Company assesses the
recoverability of these intangible assets by determining whether the
amortization of the goodwill balance over its remaining life can be recovered
through undiscounted future operating cash flows of the acquired operations.
PHOTOCOMM, INC. AND SUBSIDIARIES
The amount of goodwill impairment, if any, is measured based on projected
discounted future operating cash flows using a discount rate reflecting the
Company's average cost of funds. The assessment of the recoverability of
goodwill will be impacted if estimated future operating cash flows are not
achieved.
Income Per Share
Income per share has been determined by dividing the net income, decreased by
preferred dividends declared, by the weighted average number of common shares
outstanding during the year, including common stock equivalents.
Income Taxes
Income taxes are accounted for under the asset and liability method.
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases and operating loss and tax credit carryforwards. Deferred tax assets
and liabilities are measured using enacted tax rates expected to apply to
taxable income in the years in which those temporary differences are expected
to be recovered or settled. The effect on deferred tax assets and
liabilities of a change in tax rates is recognized in income in the period
that includes the enactment date.
Use of Estimates
Management of the Company has made a number of estimates and assumptions
relating to the reporting of assets and liabilities, and the disclosure of
contingent assets and liabilities to prepare these financial statements in
conformity with generally accepted accounting principles. Actual results
could differ from those estimates.
Stock Based Compensation
The Company applies the provisions of Accounting Principles Board Opinion No.
25, "Accounting for Stock Issued to Employees" for its stock-based
compensation programs, and does not intend to adopt the fair value accounting
rules as permitted by Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-Based Compensation" ("SFAS 123"). Accordingly, the
Company intends to adopt the disclosure provisions of SFAS 123 beginning in
fiscal 1997.
(2) ACQUISITIONS
On October 3, 1995, Photocomm acquired all of the assets and assumed the
related liabilities of Sunelco, Inc. ("Sunelco"), a distributor of solar
electric products located in Hamilton, Montana. The aggregate consideration
paid by Photocomm in connection with this acquisition was $914,986. The
Company issued 225,000 shares of Photocomm's Common Stock, $0.10 par value,
valued at $400,000, assumed Sunelco liabilities of $456,674 and paid $58,312
in cash. The assets purchased principally consisted of certain inventories
and other assets valued by the parties at $456,674 and goodwill of $458,312.
PHOTOCOMM, INC. AND SUBSIDIARIES
The acquisition of Sunelco has been accounted for as a purchase.
Accordingly, the purchase price was allocated to the net assets acquired
based upon their estimated fair market values. The excess of purchase price
over the fair market values of net assets acquired amounted to $458,312 which
is being amortized over 20 years using the straight line method.
On February 2, 1996, Photocomm acquired all of the assets excluding certain
accounts receivable, of Solarjack Manufacturing, Inc. ("Solarjack"), a solar
electric pumping products manufacturer located in Safford, Arizona. The
aggregate consideration paid by Photocomm in connection with this acquisition
was $1,737,240. The Company paid $337,240 in cash and 560,000 shares of its
Common Stock, $0.10 par value, valued at $1,400,000. The assets purchased
consisted of inventories of $204,256, fixed assets of $441,578 and goodwill
of $1,091,406. The acquisition of Solarjack has been accounted for as a
purchase. Accordingly, the purchase price was allocated to the net assets
acquired based upon their estimated fair market values. The excess of
purchase price over the fair market values of net assets acquired amounted to
$1,091,406 which is being amortized over 20 years using the straight line
method.
In connection with these acquisitions, Photocomm entered into covenants not
to compete with the principal owners of the Companies. Pursuant to these
agreements, Photocomm will make monthly payments through February 2001, in a
total aggregate amount of $400,000.
The accompanying consolidated statements of operations reflect the operating
results of Sunelco and Solarjack since the effective dates of the
acquisitions. Proforma unaudited consolidated operating results of the
Company, Sunelco and Solarjack for the years ended August 31, 1996 and 1995,
assuming the acquisitions had occurred on September 1, 1994, for fiscal 1996
and 1995, respectively, would be as follows: sales, $23,615,238 and
$23,335,369; net income, $1,249,076 and $1,162,457; and earnings per share,
$.08 each. These unaudited proforma results have been prepared for
comparative purposes only and include certain adjustments such as additional
amortization expense as a result of goodwill. They do not purport to be
indicative of the results of operations which actually would have resulted
had the combination been in effect on September 1, 1994 or of future results
of operations of the consolidated entities.
(3) ACCOUNTS RECEIVABLE
Accounts receivable consist of the following: 1996 1995
Trade accounts $5,625,356 $2,377,548
Less allowance for doubtful accounts (26,000) (25,000)
$5,599,356 $2,352,548
========= =========
PHOTOCOMM, INC. AND SUBSIDIARIES
(4) INVENTORIES
Inventories consist of the following: 1996 1995
Raw materials and goods purchased for resale $3,930,732 $2,807,796
Work-in-progress 824,146 544,829
4,754,878 3,352,625
Less allowance for obsolescence (50,000) (25,000)
$4,704,878 $3,327,625
========= =========
(5) PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
1996 1995
Land $ 300,000 $ 300,000
Building 891,284 826,930
Furniture and fixtures 394,387 322,743
Machinery and equipment 1,683,911 1,113,679
Billboard systems 418,963 424,412
Automobiles 10,381 -
Leasehold improvements 115,617 67,428
3,814,543 3,055,192
Less accumulated depreciation & amortization (1,296,737) (991,235)
$2,517,806 $2,063,957
========= =========
(6) OTHER ASSETS
Other assets consist of the following:
1996 1995
Goodwill $1,866,207 $ 316,490
Other 116,903 116,903
1,983,110 433,393
Less accumulated amortization (198,792) (125,068)
$1,784,318 $ 308,325
========= =======
(7) LONG-TERM DEBT
Long-term debt consist of the following:
1996 1995
Mortgage payable, interest rate of 10.625%,
principal and interest payable in monthly
installments of $4,852, with a final payment
of $482,357 on November 30, 1996;
collateralized by the land and building. The
Mortgage is being refinanced with an expected
completion date of November 30, 1996 (see
below). 483,504 489,977
PHOTOCOMM, INC. AND SUBSIDIARIES
Notes payable to Arizona Department of
Commerce, annual interest rate of 5%,
monthly payments of $5,966 through December
1999; collateralized by the land, building
and certain equipment; guaranteed by PLI,
by Company directors Robert R. Kauffman
and Donald Anderson, and by former director
Cedric Adams. 219,386 278,404
Notes payable to related parties in connection
with the acquisition of billboard systems,
annual interest rate of 10%, payable monthly
through September 1996. 5,672 70,191
Other 11,922 17,540
720,484 856,112
Current Installments 82,096 135,949
$ 638,388 $ 720,163
========= =========
Maturities of the long-term debt in years subsequent to 1996 are as follows:
1997, $82,096; 1998, $78,129; 1999, $82,028; 2000, $35,004; 2001, $12,399 and
thereafter, $430,828.
The Company has obtained a commitment to refinance the mortgage in place on
or about November 30, 1996. The new terms include a 10 year term, 20 year
amortization, and 8.75% per annum interest rate.
(8) INCOME TAXES
The Company does not have any income tax expense for 1995 and 1994 due to
utilization of net operating loss carryforwards. The Company's tax benefit
of $350,000 in 1996 results from the establishment of a deferred tax asset
through adjustment in the valuation allowance.
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and liabilities as of August 31, 1996 and
1995 are as follows:
1996 1995
Deferred Tax Assets
Net operating loss carryforwards $1,700,000 $2,100,000
Inventory allowances 20,000 10,000
Accounts receivable, principally due
to allowance for doubtful accounts 10,000 10,000
Total gross deferred tax assets 1,730,000 2,120,000
Less: valuation allowance (1,370,000) (2,100,000)
Net deferred tax assets $ 360,000 $ 20,000
Deferred Tax Liabilities
Inventory, principally uniform
capitalization 10,000 20,000
Total gross deferred tax
liabilities 10,000 20,000
Net deferred tax asset $ 350,000 $ -
========= =========
PHOTOCOMM, INC. AND SUBSIDIARIES
The change in the valuation allowance was a net decrease of $730,000 for the
year. In assessing the realizability of deferred tax assets, management
considers whether it is more likely than not that some portion or all of the
deferred tax assets will not be realized. The ultimate realization of
deferred tax assets is dependent upon generation of future taxable income
during the periods in which those temporary differences become deductible.
Management considers the scheduled reversal of deferred tax liabilities,
projected future taxable income, and tax planning strategies in making this
assessment. Based upon the level of historical tax income and projections
for future taxable income over the periods which the deferred tax assets are
deductible, management believes it is more likely than not that the Company
will realize the benefits of these deductible differences, net of the
valuation allowance.
The decrease in the valuation allowance for fiscal 1996 resulted primarily
from the utilization of net operating loss carryforwards and the release of
certain valuation allowances based upon the Company's reevaluation of the
realizability of the remaining net operating loss carryforwards.
The Company has net operating loss (NOL) carryforwards for federal income tax
purposes of approximately $5.9 million at August 31, 1996. The NOLs are
comprised of $2.8 million for the parent company, $1.1 million for the BOSS
subsidiary and $2.0 million for the Photocomm Credit Corporation subsidiary.
These NOLs begin to expire in the year 2003 for the parent company and 2000
for the subsidiaries. Due to ownership changes, the parent company is
limited to $1.0 million per year of net operating loss carryforwards which
may be utilized. However, because these NOL's can be accumulated if unused,
the parent company has available the entire $2.8 million for fiscal 1997
utilization. Included in the NOL amounts is approximately $1.5 million
attributable to the deductions taken for stock options exercised, the benefit
of which will be credited to additional paid-in capital when realized.
(9) STOCK OPTION PLANS
The Company has a Stock Option Plan (the "Plan") which provides for the
issuance of 2,895,000 shares of common stock upon exercise of options under
the plan. Options granted under the Plan may be either (i) options intended
to constitute incentive stock options ("ISOS") under the Internal Revenue
Code of 1986, or (ii) non-statutory options. ISOS may be granted under the
Plan to employees and officers of the Company.
The Plan is administered by a committee consisting of non-affiliated members
of the Board of Directors. The committee, within the limitations of the
Plan, determines the persons to whom options will be granted, the number of
shares to be covered by each option, whether the options granted are intended
to be ISOS, the duration and rate of exercise of each option, the exercise
price per share and the manner of exercise, and the time, manner and form of
payment upon exercise of an option.
ISOS granted under the Plan may not be granted at a price less than the fair
market value of the common stock on the date of grant (or 110% of fair market
value in the case of employees or officers holding 10% or more of the voting
stock of the Company). The aggregate fair market value of shares for which
ISOS are granted to any employee exercisable for the first time by such
employee may not exceed $100,000. Non-statutory options granted under the
PHOTOCOMM, INC. AND SUBSIDIARIES
Plan may be issued at a price less than fair market value of the common stock
on the date of grant. The options generally become exercisable over a four
year period, and ultimately lapse if unexercised at the end of ten years.
Activity under the Stock Option Plan is as follows:
Company Stock Option Plan
Number of Shares Option price
Incentive Non-Statutory per share
Outstanding August 31, 1994 584,000 1,345,000 $0.75-$1.88
Granted 145,500 252,000 $1.675
Exercised (149,000) (490,000) $0.75-$1.88
Canceled (40,000) - $0.88-$1.88
Outstanding August 31, 1995 540,500 1,107,000 $0.75-$1.88
Granted 207,000 275,000 $2.75
Exercised (101,085) (270,000) $0.75-$1.88
Canceled (32,375) - $0.75-$2.75
Outstanding August 31, 1996 614,040 1,112,000 $0.88-$2.75
======= ========= ===========
At August 31, 1996 and 1995, options to purchase 786,041 and 1,032,212
shares, respectively, were exercisable at prices ranging from $0.88 to $1.88.
All options granted under the plan are non-transferable during an optionee's
lifetime, but are transferable at death by will or by laws of descent and
distribution. Options granted terminate within a specified period of time
following termination of an optionee's employment or position as a director
or consultant with the Company.
Earnings per share in fiscal 1996, 1995 and 1994 include conversion of the
stock options into common voting stock where the effect is dilutive.
(10) EQUITY TRANSACTIONS
The $5.00 Series A Preferred Stock is convertible on the basis of four common
shares per preferred share. The cumulative 12% dividend ($0.60 per share)
was payable in cash or in kind until September 20, 1993 and thereafter shall
be paid in cash. The Company has the right to redeem the outstanding
preferred stock at any time after August 31, 1996 for $5.00 per share. The
preferred stock has voting rights based upon the common stock conversion
rate. The Company issued 3,205 and 11,903 shares of Series A Preferred Stock
as dividends in-kind during 1994 and 1993, respectively. Cash dividends of
$51,619 and $65,983 were paid during 1996 and 1995, respectively.
The $6.00 Series AA Convertible Preferred Stock is convertible on the basis
of four common shares per preferred share. The cumulative 11% cash dividend
($0.66 per share) is payable quarterly. The Company has the right to redeem
the outstanding preferred stock at any time after the fifth anniversary of
the date of issuance of the shares for $6.00 per share. The Series AA
Preferred Stock has voting rights based upon the common stock conversion
rate. During 1996 and 1995, the Company paid $40,403 and $57,308 cash
dividends on the Series AA Convertible Preferred Stock, respectively. During
1996, 16,800 Series AA Convertible Preferred Stock were converted to 67,200
common shares in accordance with the common stock conversion rights of the
agreement.
PHOTOCOMM, INC. AND SUBSIDIARIES
Earnings per share for fiscal 1996, 1995 and 1994 do not include conversion
of the preferred stock into common voting stock as the effect is
antidilutive.
On November 9, 1993, the Company entered into a financial and strategic
agreement with NWP, Westinghouse, PLI and Robert R. Kauffman (the "Stock
Purchase Agreement"). Pursuant to the Stock Purchase Agreement, the Company
sold 1,600,000 shares of unregistered common stock to NWP for $1.25 per
share. The Company also issued NWP an option to purchase an additional
2,600,000 shares of unregistered common stock of the Company at $2.50 per
share until December 31, 1995, and up to 1,500,000 shares of unregistered
common stock of the Company at $3.00 per share until December 31, 1996 (the
"NWP Options"). Certain officers and directors of the Company who own, or
have an option to purchase, an aggregate of 1,000,000 shares of common stock
shall have the right, but not the obligation, to sell such 1,000,000 shares
to NWP upon the exercise of the NWP Options in lieu of shares to be issued by
the Company.
In conjunction with the Stock Purchase Agreement, NWP acquired 500,000 shares
of unregistered common stock from PLI and 90,000 shares of unregistered
common stock from Robert R. Kauffman at $1.25 per share. NWP also acquired
an option to purchase 2,000,000 unregistered shares from PLI at $2.00 per
share until December 31, 1994, and also acquired a right of first refusal
from PLI with respect to all of its shares of Company stock. On September
30, 1994, and February 10, 1995, NWP purchased 600,000 and 400,000 shares
from PLI pursuant to the PLI option. The remaining 1,000,000 share option
and right of first refusal expired February 10, 1995.
In conjunction with the Stock Purchase Agreement, NWP acquired 1,222,221
shares of unregistered common stock from Westinghouse in exchange for 203,704
shares of NWP unregistered common stock. As part of the Stock Purchase
Agreement, Westinghouse agreed to convert $500,000 of its subordinated
convertible debenture into 333,333 shares of unregistered common stock of the
Company, and converted 222,222 shares of Series B Convertible Preferred Stock
into 888,888 shares of unregistered common stock of the Company. NWP also
acquired a right of first refusal from Westinghouse with respect to all of
its shares of Company stock.
The Company granted registration rights to NWP with respect to all the shares
of the Company common stock issued or purchased by NWP pursuant to the Stock
Purchase Agreement.
On August 30, 1994, the Company entered into an Exchange Agreement with
Westinghouse and NWP. Pursuant to the Exchange Agreement, NWP acquired from
Westinghouse 1,800,000 shares of the Company's common stock, 8,690 shares of
Series B Convertible Preferred Stock, the remaining $250,000 Subordinated
Convertible Debenture and accounts payable and accrued liabilities totaling
$306,481 in exchange for 465,780 shares of NWP unregistered common stock.
NWP immediately converted the Series B Convertible Preferred Stock and
Subordinated Convertible Debenture into 201,427 shares of the Company's
common stock. NWP also exchanged the Westinghouse accounts payable and
accrued liabilities into 158,799 shares of the Company's common stock.
PHOTOCOMM, INC. AND SUBSIDIARIES
NWP owns 6,612,447 shares of common stock at August 31, 1996 purchased
pursuant to the Stock Purchase Agreement and the Exchange Agreement, which
represents approximately 46.2% of the issued and outstanding shares of common
stock and approximately 44.2% of the total voting shares of the Company. If
NWP were to acquire all of the foregoing shares, when added to the 6,612,447
shares it presently holds, NWP would hold 49.3% of the issued and outstanding
voting common stock of the Company (see note 19).
Westinghouse no longer maintains a minority interest in the Company, but does
own a minority interest in NWP.
(11) LEASES
The Company has leases covering office facilities and equipment. Total
rental expense was approximately $225,516, $118,000 and $108,000 in fiscal
1996, 1995 and 1994, respectively.
The following is a schedule of future minimum lease payments for non-
cancelable operating leases with initial terms of more than one year:
Years ending August 31 Amount
1996 $182,982
1997 115,734
1998 21,897
Total $320,613
=======
The Company leases certain of its facilities from certain officers and
employees of the Company. Rental expense from these leases was $80,024 for
fiscal 1996. Aggregate commitment for future minimum lease payments of
$249,849 are included in the above lease payment schedules.
(12) LINE OF CREDIT
On March 15, 1995, the Company entered into a $1,000,000 bank credit line and in
March and June of 1996, the credit line was further increased to $1,700,000. The
credit line is a revolving line and matures on February 28, 1997. It has
certain operating covenants, and is secured by the Company's inventory and
accounts receivable. Interest on the line is prime (8.25% at August 31, 1996)
plus one half of a point per annum, with interest-only payments payable monthly.
The credit line has a commitment fee equal to .5% of the average unused balance
payable quarterly. The outstanding balance on the line of credit as of August
31, 1996 was $1,399,099, and the Company had no covenant defaults.
PHOTOCOMM, INC. AND SUBSIDIARIES
(13) STATEMENTS OF CASH FLOWS INFORMATION
Additional cash flow information is as follows:
Years ended August 31
1996 1995 1994
Interest paid $101,416 $ 96,737 $209,276
======= ======= =======
No income taxes were paid in fiscal 1996, 1995 and 1994.
For purposes of the statements of cash flows, the Company considers all
highly liquid debt instruments with a maturity of three months or less at the
time of purchase to be cash equivalents.
Non-cash investing and financing activities include the following:
On October 1, 1995, in connection with the Sunelco acquisition (note 2), the
Company issued 225,000 shares of Photocomm's common stock valued at $400,000.
On February 2, 1996, in connection with the Solarjack acquisition (note 2),
the Company issued 560,000 shares of Photocomm's common stock valued at
$1,400,000.
On August 30, 1994, as part of the NWP Exchange Agreement (note 10), the
remaining Westinghouse $250,000 subordinated debenture and 8,690 shares of
Series B Convertible Preferred Stock were converted into 166,667 and 34,760
shares of the Company's common stock, respectively. In addition, $306,482 of
accounts payable and accrued liabilities was converted into 158,799 shares of
the Company's common stock as part of the same transaction.
On November 9, 1993, as part of the NWP Stock Purchase Agreement (note 10),
Westinghouse converted its $500,000 subordinated debenture into 333,333
shares of the Company's common stock. Westinghouse also converted 222,222
shares of Series B Convertible Preferred Stock into 888,888 shares of the
Company's common stock as part of the same transaction.
On October 1, 1993, the Company acquired $473,000 of solar illuminated
billboard systems from related parties (note 5). The Company offset $82,000
of its outstanding accounts receivable from the related parties, issued
20,000 shares of its Series AA Convertible Preferred Stock for $108,000, and
issued notes payable for $258,000. The remaining $25,000 was paid in cash.
(14) RELATED PARTIES
Robert R. Kauffman purchased 10,000 and 10,000 shares of the Series AA
Convertible Preferred Stock for $50,000 and $54,000 in fiscal years 1995 and
1993, respectively. He also purchased 15,000 shares of the Series A
Convertible Preferred Stock for $60,000 in fiscal 1992 (note 10).
PHOTOCOMM, INC. AND SUBSIDIARIES
(15) RETIREMENT SAVINGS PLAN
The Company has a 401(k) Retirement Savings Plan (the "Plan") which covers
certain employees 21 years of age and over who have completed one year of
service. Employees may voluntarily contribute up to 20% of pre-tax earnings
to the Plan, subject to a maximum IRS limit. The Company may contribute
additional amounts at its sole discretion. The Company contributions expense
to the Plan were $36,000 and $14,500 for the years ended August 31, 1996 and
1995, respectively.
(16) GEOGRAPHIC INFORMATION
The company operates in one industry segment and engages primarily in the
design, development, manufacture and marketing of solar electric products.
The Company sells its products to a broad range of dealers/distributors,
original equipment manufacturers, and end-users. Sales to unaffiliated
customers located outside the United States, primarily in North and South
America, aggregated approximately 17%, 12% and 15% of consolidated net sales
for the years ended August 31, 1996, 1995 and 1994, respectively.
(17) SUPPLEMENTAL FINANCIAL INFORMATION
Additions
Balance at charged to Balance
beginning costs and at end
Classification of period expenses Deductions1 of period
Year ended
August 31, 1994:
Allowance for
doubtful accounts $ 25,000 48,000 48,000 25,000
Reserve for obsolete
inventory 25,000 146,000 96,000 75,000
Year ended
August 31, 1995:
Allowance for
doubtful accounts $ 25,000 48,000 48,000 25,000
Reserve for obsolete
inventory 75,000 97,200 147,200 25,000
Year ended
August 31, 1996:
Allowance for
doubtful accounts $ 25,000 48,832 47,832 26,000
Reserve for obsolete
inventory 25,000 131,935 106,935 50,000
1 Allowance for doubtful accounts: Uncollectible accounts written off, net
of recoveries from accounts previously written off.
PHOTOCOMM, INC. AND SUBSIDIARIES
(18) FAIR VALUE OF FINANCIAL INSTRUMENTS
Statement of Financial Accounting Standards No. 107, "Disclosures about Fair
Value of Financial Instruments," requires that the Company disclose estimated
fair values for its financial instruments. Fair value estimates are made at
a specific point in time and are based on relevant market information and
information about the financial instrument; they are subjective in nature and
involve uncertainties, matters of judgment and, therefore, cannot be
determined with precision. These estimates do not reflect any premium or
discount that could result from offering for sale at one time the Company's
entire holdings of a particular instrument. Since the fair value is
estimated as of August 31, 1996, the amounts that will actually be realized
or paid in settlement of the instruments could be significantly different.
For the Company's cash and cash equivalents, the carrying amount is assumed
to be the fair value because of the liquidity of these instruments. The
carrying amount is assumed to be the fair value for accounts receivable,
accounts payable and other accrued expenses because of the short maturity of
the portfolios. The fair value of the Company's line of credit and long-term
debt approximates the terms in the marketplace they could be replaced.
Therefore, the fair value approximates the carrying value of these financial
instruments.
(19) SUBSEQUENT EVENT
On November 21, 1996, the Company entered into a new financial and strategic
agreement with GTC and NWP (the "Stock Purchase Agreement"). Pursuant to the
Stock Purchase Agreement, GTC acquired NWP's 44% interest in the Company, and
NWP and the Company terminated all of its rights and options pursuant to the
NWP, Westinghouse, PLI and Robert R. Kauffman November 9, 1993 Stock Purchase
Agreement. GTC also acquired from the Company 1,000,000 shares of
unregistered common stock for $2.75 per share. In conjunction with the Stock
Purchase Agreement, GTC acquired 450,000 shares of unregistered common stock
from PLI, 450,000 shares of unregistered common stock from Robert R.
Kauffman, the Company's president, 50,000 shares of unregistered common stock
from Myron Anduri, the Company's Senior Vice President, and 50,000 shares of
unregistered shares of common stock from Thomas LaVoy, the Company's Chief
Financial Officer, at $2.75 per share.
The Company granted demand registration rights to GTC covering the shares
purchased from NWP and the Company and all other shares they may own,
provided GTC shall pay one-half the costs of any demand registration. As of
November 21, 1996, GTC held approximately 52% of the issued and outstanding
shares of common stock of the Company. In addition, GTC has the preemptive
right to subscribe for its proportionate share of all future equity offerings
of the Company provided GTC owns at least 20% of the issued and outstanding
stock of the Company or 6,000,000 shares. GTC is a wholly-owned subsidiary
of ACX Technologies, Inc. ("ACX"), a New York Stock Exchange company.
Item 8. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure
The Company does not have any changes in and/or disagreements with
accountants on accounting and financial disclosure.
PART III
Certain information required by Part III is omitted from this
Report in that the registrant will file a definitive Information
Statement pursuant to Regulation 14A not later than 120 days after
the end of the fiscal year covered by this report, and certain
information included therein is incorporated herein by reference.
Item 9. Directors, Executive Officers, Promoters and Control
Persons, Compliance with Section 16(a) of the Exchange
Act
The information concerning the Company's directors required by this
item is incorporated by reference to the Company's Information
Statement.
The information concerning the Company's executive officers
required by this item is incorporated by reference to the
Information Statement hereof entitled "Information Concerning
Directors, Nominees and Officers".
Item 10. Executive Compensation
The information required by this item is incorporated by reference
to the Company's Information Statement.
Item 11. Security Ownership of Certain Beneficial Owners and
Management
The information required by this item is incorporated by reference
to the Company's Information Statement.
Item 12. Certain Relationships and Related Transactions
The information required by this item is incorporated by reference
to the Company's Information Statement.
PART IV
Item 13. Exhibits, Financial Statement Schedule and Reports on
Form 8-K
(a) Exhibits
The following exhibits are filed as part of this report:
Exhibit
Number Description Page
3.1 Articles of Merger (filed as Exhibit 3-B to
the Company's Annual Report on Form 10-K for
the year ended August 31, 1988 and incorporated
herein by reference).
3.2 Third Amended and Restated Articles of
Incorporation of the Company (filed as
Exhibit 3-D to the Company's Quarterly
Report on Form 10-Q for the quarter ended
May 31, 1990 and incorporated herein by
reference).
3.3 Amended and Restated Bylaws of the Company 24
dated November 19, 1996.
4.1 Specimen Certificate representing the Common
Stock of the Company (filed as Exhibit 4-A
to the Company's Annual Report on Form 10-K
for the year ended August 31, 1988 and
incorporated herein by reference).
4.2 Specimen Certificate representing the Series
A Convertible Preferred Stock of the Company
(filed as Exhibit 4.2 to the Company's Form
S-3 dated September 19, 1994 and incorporated
herein by reference).
4.3 Specimen Certificate representing the Series
AA Convertible Preferred Stock of the Company
(filed as Exhibit 4.3 to the Company's Form
S-3 dated September 19, 1994 and incorporated
herein by reference).
4.4 Specimen Certificate representing the Series
B Convertible Preferred Stock of the Company
(filed as Exhibit 4.4 to the Company's Form
S-3 dated September 19, 1994 and incorporated
herein by reference).
4.5 Registration Rights Agreement between the 39
Company and Golden Technologies, Inc. and
ACX Technologies, Inc. dated November 21, 1996.
10.1 Photocomm, Inc. Stock Option Plan, Non-Statutory
Stock Option Agreement and Incentive Stock Option
Agreement (filed as Exhibit 10-K to the Company's
Quarterly Report on Form 10-Q for the quarter
ended May 31, 1990 and incorporated herein by
reference).
10.2 Promissory Note, Deed of Trust, Assignment of
Rents Agreement and Mortgage Assumption Agreement
dated January 30, 1991 for the purchase of the
Corporate Headquarters Office Building located
at 7681 E. Gray Road, Scottsdale, Arizona (filed
as Exhibit 10-R to the Company's Quarterly Report
on Form 10-Q for the quarter ended February 28,
1991 and incorporated herein by reference).
10.3 Promissory Notes, Loan Agreement, Deed of Trust,
Security Agreement dated February 4, 1991 for
the Arizona Department of Commerce loans for the
construction of the 10,000 square foot addition
to the corporate headquarters and the purchase
and construction of additional module manufacturing
equipment (filed as Exhibit 10-S to the Company's
Quarterly Report on Form 10-Q for the quarter
ended February 28, 1991 and incorporated herein
by reference).
10.4 Convertible Preferred Stock Purchase Agreement
dated March 25, 1992 with Robert R. Kauffman
(filed as Exhibit 10-V to the Company's
Quarterly Report on Form 10-Q for the quarter
ended May 31, 1992 and incorporated herein
by reference).
10.5 Convertible Preferred Stock Subscription and
Purchase Agreement with Powers, Preferences
and Rights of the Series AA Private issue in
April and May of 1993. (Filed as Exhibit 10-X
to the Company's Quarterly Report on 10-Q for
the quarter ended May 31, 1993 and incorporated
by reference herein).
10.6 Convertible Preferred Stock Purchase Agreement
dated July 8, 1991 with Robert R. Kauffman
(filed as Exhibit 10-T to the Company's Quarterly
Report on Form 10-Q for the Quarter ended
May 31, 1991 and incorporated herein by
reference).
10.7 First Interstate Bank of Arizona, $1.2 53
Million Loan Agreement and Note Payable
dated February 28, 1996.
10.8 Agreement and Plan of Reorganization between
Photocomm, Inc., Sunelco, Inc. and Daniel M.
Brandborg and Rebecca M. Brandborg dated
October 3, 1995 (filed as Form 8-K, on
October 18, 1995 and incorporated herein by
reference).
10.9 Agreement and Plan of Reorganization between
Photocomm, Inc., Jadco Manufacturing and
James C. Allen dated January 31, 1996 (filed
as Form 8-K on February 14, 1996 and
incorporated herein by reference).
10.10 Executive Compensation Agreement between 78
Photocomm, Inc., ACX Technologies, Inc. and
Robert R. Kauffman dated November 20, 1996.
10.11 Executive Compensation Agreement between 88
Photocomm, Inc. and Thomas LaVoy dated
November 20, 1996.
10.12 Executive Compensation Agreement between 96
Photocomm, Inc. and Myron Anduri dated
November 20, 1996.
10.13 Executive Compensation Agreement between 100
Photocomm, Inc. and Donald Anderson dated
November 20, 1996.
10.14 Executive Compensation Agreement between 104
Photocomm, Inc. and Robert Spotts dated
November 20, 1996.
10.15 Executive Compensation Agreement between 108
Photocomm, Inc. and Ronald Kenedi dated
November 20, 1996.
10.16 Stock Purchase Agreement dated November 15, 112
1996 among Golden Technologies Company, Inc.,
The New World Power Corporation and Photocomm,
Inc.
10.17 Photocomm, Inc. 1996 Stock Option Plan and 132
Non-Statutory Stock Option Agreement dated
September 16, 1996 and November 19, 1996,
respectively.
??
10.18 First Interstate Bank Promissory Note
11 Computation of per share earnings for the year 142
ended August 31, 1996 and 1995.
22 List of Subsidiaries 144
23 Consent of Independent Auditors 145
27 Financial Data Schedule 146
(b) Reports on 8-K
None
(c) Financial Statements: Page
(1) Independent Auditors' Report F-1
(2) Consolidated Financial Statements and Notes F-2 -
to Consolidated Financial Statements of the F-18
Company for the years ended August 31, 1996,
1995 and 1994.
(d) Financial Statement Schedule.
Schedules not listed above have been omitted because of the
absence of conditions under which they are required or because
the required material information is included in the Financial
Statements or Notes to the Financial Statements included
herein.
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the
registrant has caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
PHOTOCOMM, INC.
By:
Robert R. Kauffman
President and Chief
Executive Officer
Date: November 27, 1996
In accordance with the Exchange Act, this report has been signed
below by the following persons on behalf of the registrant and in
the capacities and on the dates indicated.
Signature Capacity Date
Chief Financial Officer November 27, 1996
Thomas C. LaVoy
Director November 27, 1996
Donald E. Anderson
Chief Executive Officer November 27, 1996
Robert R. Kauffman and Director
Director November 27, 1996
Walter M. Baker
<TABLE>
<C> <S>
EXHIBIT 3.3
AMENDED AND RESTATED BYLAWS OF PHOTOCOMM, INC.
An Arizona corporation
1.01 Principal Office. The principal office for the transaction of the business
of the corporation in Arizona is hereby fixed and located at 7681 E. Gray Road,
in the city of Scottsdale, Maricopa County, Arizona. The Board of Directors is
hereby granted full power and authority to change said
principal office from one location to another in said County. Any such change
shall be noted on the Bylaws by the Secretary, opposite this section, or this
section may be amended to state the new location.
1.02 Other Offices. The Corporation may also have offices at such other places
both within or without the State of Arizona as the Board of Directors may from
time to time determine or the business of the Corporation may require.
II. STATUTES AND ARTICLES
2.01 References to Articles. Any reference herein made to the Corporation's
Articles will be deemed to refer to its Third Restated Articles of Incorporation
and all amendments thereto as at any given time on file with the Arizona
Corporation Commission, together with any and all certificates
theretofore filed by the Corporation with the Arizona Corporation Commission.
2.02 Seniority Thereof. The Statutes of the State of Arizona will in all
respects be considered superior to the Articles of Incorporation with any
inconsistency resolved in favor of said Statutes. The Statutes and Articles
will in all respects be considered senior and superior to these Bylaws,
with any inconsistency to be resolved in favor of the Statutes and Articles,
and with these Bylaws to be deemed automatically amended from time to time to
eliminate any such inconsistency which may then exist.
2.03 Control Share Acquisitions. Notwithstanding anything contained herein to
the contrary, the Corporation shall not be subject to or governed by Title 10,
Chapter 6, Article 2, Arizona Revised Statutes. (This provision has been
adopted effective November 1, 1990, pursuant to Arizona Revised Statutes Section
10-1211 A.5.)
III. SHAREHOLDERS' MEETINGS
3.01 Annual Meetings. Absent a resolution of the Board of Directors providing
otherwise, the annual meeting of the shareholders will be held during the month
of January of each year. The date, time of day and place of the annual
meeting of shareholder shall be as stated by the Secretary, at the direction
of the Board of Directors, or in the absence of action by the Board, at the
direction of the President, in the notice of such meeting given pursuant to
Section 3.04 hereof.
If any such annual meeting is for any reason not held on as aforesaid, a
special meeting may thereafter be called and held in lieu thereof, and the
same proceedings (including the election of directors) may be conducted
thereat as at an annual meeting. Any director elected at any annual meeting,
or special meeting in lieu of an annual meeting, will continue in
office until the election of his successor, subject to his earlier resignation
pursuant to Section 9.01 below. The Chairman may present any question for
consideration and action at an annual meeting of shareholders. Shareholders'
proposals will be included in proxy solicitation materials and considered
and submitted to a vote at an annual meeting only if the proponents of any such
proposals comply with the rules and regulations promulgated under Section 14(a)
of the Securities Exchange Act of 1934 and the Chairman, upon advice of
counsel, determines that such shareholders' proposals should be considered.
3.02 Special Meeting. Special meetings of the shareholders may be held whenever
and wherever called for by the Board of Directors or by the written demand of
the holders of ten percent (10%) of all issued and outstanding shares of stock,
regardless of class. The business which may be conducted at any such special
meeting will be confined to the purposes stated in the notice thereof, and to
such additional matters as the chairman of such meeting may rule to be germane
to such purpose.
3.03 Action of Shareholders Without a Meeting. Any action required to be taken
or that might be taken at a meeting of the shareholders may be taken without a
meeting if a consent in writing, setting forth the action so taken, shall be
signed by the holders of all of the shares of outstanding stock entitled to
vote with respect to the subject matter of the action. Any such consent shall
be filed with the corporate records or made a part of the minutes of the
meeting.
3.04 Notices. Written notice stating the place, day and hour of any meeting of
shareholders and, in case of a special meeting, the purpose or purposes for
which the meeting is called, shall be delivered not less than ten (10) nor
more than fifty (50) days before the date of the meeting, either personally
or by mail, by the Secretary of the Corporation at the directions of the
person or persons calling the meeting, to each shareholder of record entitled
to vote at such meeting. If mailed, such notice shall be deemed to be delivered
when deposited in the first class United States Mail, addressed to the
shareholder at his address as it appears on the stock transfer books of the
Corporation. When a meeting is adjourned to another time or place, unless the
Bylaws otherwise require, notice need not be given of the adjourned meeting if
the time and place thereof are announced at the meeting at which the
adjournment is taken. At the adjourned meeting, the Corporation may transact
any business which might have been transacted at the original meeting. If the
adjournment is for more than thirty (30) days, or if after the adjournment, a
new record date is fixed for the adjourned meeting, a notice of the adjourned
meeting shall be given to each shareholder of record entitled to vote at the
meeting. Whenever any notice is required to be given to any shareholder, a
waiver thereof in writing signed by the person or persons entitled to such
notice, whether before or after the time stated therein, shall be equivalent
to the giving of such notice. Any such waiver shall be filed with the
corporate records or made a part of the minutes of the meeting. Attendance of
a person at a meeting shall constitute a waiver of notice of such meeting,
except when the person attends a meeting for the express purpose of objecting
to the transaction of any business because the meeting is not lawfully called
or convened.
3.05 Record Date for Shareholders. In order to determine the shareholders
entitled to notice of or to vote at any meeting of shareholders, or entitled to
express consent to corporation action in writing without a meeting, or entitled
to receive payment of any dividend or other distribution or
allotment of any rights, or entitled to exercise any rights with regard to any
lawful action, the Board of Directors may fix in advance a date, not exceeding
seventy (70) days nor less than ten (10) days preceding the date of such
meetings, as a record date for the determination of the shareholders of record
entitled to notice of, and to vote at, such meeting. The shares of stock, and
the shareholders "entitled to vote" (as that or any similar term is
hereinafter used) at any meeting of the shareholders will be determined as of
the applicable record date if one has been fixed as aforesaid; otherwise, if
no record date is fixed, the record date shall be at four o'clock in the
afternoon on the day before the day on which notice is given, or, the record
date for determining shareholders entitled to express consent to corporate
action in writing without a meeting shall be the time of the day on which
the first written consent is provided.
3.06 Quorum. A majority of the shares entitled to vote, represented in person
or by proxy, shall constitute a quorum at a meeting of shareholders. All shares
represented and entitled to vote on any single subject matter which may be
brought before the meeting shall be counted for the purposes of a quorum. Only
those shares entitled to vote on a particular subject matter shall be counted
for the purposes of voting on that subject matter. Business may be conducted
once a quorum is present and may continue until adjournment of the meeting
notwithstanding the withdrawal or temporary absence of sufficient shares to
reduce the number present to less than a quorum. The affirmative vote of the
majority of the shares then represented at the meeting and entitled to vote on
the subject matter shall be the act of the shareholders; provided, however,
that if the shares then represented are less than required to constitute a
majority if a quorum were present; provided further, the affirmative vote of
a majority of the shares then present is sufficient in all cases to adjourn
a meeting.
3.07 Voting Records; Election Inspectors. The Secretary of the Corporation
shall obtain from the transfer agent of the Corporation a complete record of
the shareholders entitled to vote at any meeting of shareholder or any
adjournment thereof, arranged in alphabetical order, with the address of and
the number of shares held by each. Such record shall be produced and kept open
at the time and place of the meeting and shall be subject to the inspection of
any shareholder during the whole time of the meeting for the purposes thereof.
The Board of Directors, in advance of any shareholders' meeting, may appoint an
Election Inspector or Inspectors to act at such meeting (and any adjournment
thereof). If an Election Inspector or Inspectors are not so appointed, the
chairman of the meeting may, or upon the request of any person entitled to vote
at the meeting will, make such appointment. If any person
appointed as an Inspector fails to appear or to act, a substitute may be
appointed by the chairman of the meeting. If appointed, the Election Inspector
or Inspectors (acting through a majority of them if there be more than one)
will determine the number of proxies and the number of shares represented at
the meeting in person and by proxy; they will receive and count votes, ballots
and consents and announce the results thereof; they will hear and determine all
challenges and questions pertaining to proxies and voicing; and, in general,
they will perform such acts as may be proper to conduct elections and
voting with complete fairness to all shareholders. No such Election Inspector
need be a shareholder of the Corporation.
3.08 Organization and Conduct of Meetings. Each shareholders' meeting will be
called to order and thereafter chaired by the Chairman of the Board if there is
one; or, if not, or if the Chairman of the Board is absent or so requests,
then by the President; or if both the Chairman of the Board and the President
are unavailable, then by such other officer of the corporation or such
shareholder as may be appointed by the Board of Directors. The Corporation's
Secretary will act as Secretary of each shareholders' meeting; in his
absence the chairman of the meeting may appoint any person (whether a
shareholder or not) to act as Secretary thereat. After calling a meeting to
order, the chairman thereof may require the registration of all shareholders
intending to vote in person, and the filing of all proxies, with the
Election Inspector or Inspectors, if one or more have been appointed (or, if
not, with the Secretary of the meeting). After the announced time for such
filing of proxies has ended, no further proxies or changes, substitutions or
revocations of proxies will be accepted. If directors are to be elected, a
tabulation of proxies so filed will, if any person entitled to vote in such
election so requests, be announced at the meeting (or adjournment thereof)
prior to the closing of the election polls.
Absent a showing of bad faith on his part, the chairman of a meeting will,
among other things, have absolute authority to fix the period of time
allowed for the registration of shareholders and the filing of proxies, to
determine the order of business to be conducted at such meeting and to
establish reasonable rules for expediting the business of the meeting
(including any informal, or question and answer, portions thereof).
3.09 Voting. Except as otherwise may be required by the Corporation's
Articles of Incorporation or by Statute, each share of stock represented at
any meeting of the shareholders shall be entitled to one vote. Except as
otherwise herein provided, the record holder of each share of stock, as
determined by the name appearing on the Corporation's books, shall be the
person empowered to cast the vote to which such share shall be entitled. The
affirmative vote of the majority of the shares then represented at any
meeting of shareholders and entitled to vote on the subject matter shall be
the act of the shareholders; provided however, that if the shares then
represented are less than required to constitute a quorum, the affirmative
vote must be such as would constitute a majority if a quorum were present;
provided further, the affirmative vote of a majority of the shares then
present is sufficient in all cases to adjourn a meeting. The voting will be
by ballot on any question as to which a ballot vote is demanded, prior to
the time the voting begins, by any person entitled to vote on such question;
otherwise a voice vote will suffice. No ballot or change of vote will be
accepted after the polls have been declared closed following the ending of
the announced time for voting.
The following additional provisions shall apply to the voting of shares:
(a) Treasury Stock. Shares of its own stock belonging to this Corporation or to
another corporation, if a majority of the shares entitled to vote in the
elections of directors of such other corporation is held by this Corporation,
shall neither be entitled to vote nor counted for quorum purposes. Nothing in
this subparagraph shall be construed as limiting the right of this
Corporation to vote its own stock held by it in a fiduciary capacity.
(b) Proxies. A shareholder may vote either in person or by proxy executed in
writing by the shareholder or by his duly authorized attorney-in-fact. In the
event any instrument granting a proxy shall designate two or more persons to
act as proxy, the majority of such persons present at the meeting, or if only
one should be present then that one, shall have and may exercise all the powers
conferred by such instrument upon all the persons so designated, unless such
instrument shall otherwise provide. No proxy shall be valid after eleven (11)
months from the date of its execution, unless otherwise provided in the
proxy. A duly executed proxy shall be irrevocable if it states that it is
irrevocable and if, and only as long as, it is coupled with an interest
sufficient at law to support an irrevocable power. A proxy may be made
irrevocable regardless of whether the interest with which it is coupled
is an interest in the share itself or an interest in the Corporation generally.
A proxy is not revoked by the death or incapacity of the maker unless, before
the vote is counted or quorum is determined, written notice of the death or
incapacity is given to the Corporation. A proxy may be revoked by an instrument
expressly revoking it, a duly executed proxy bearing a later date, or by the
attendance of the person executing the proxy at the meeting
and his voting of his shares personally.
(c) Corporate Shareholders. Shares standing in the name of another corporation,
domestic or foreign, may be voted by such officer, agent or proxy as the bylaws
of such other corporation may prescribe, or, in the absence of such provision, as
the Board of Directors of such other corporation may determine. The Secretary of
the Corporation or the Election Inspectors shall have the authority to require
that such documents be filed with the Secretary or Election Inspectors shall
reasonably require in order to verify the authority and power of any such
officer, agent or proxy to vote the shares of the Corporation held by any such
other corporation.
(d) Shares Held by Fiduciary. Shares held by an administrator, executor,
guardian, conservator or personal representative may be voted by him, either in
person or by proxy, without a transfer of such shares into his name.
Shares standing in the name of a trustee, other than a trustee in bankruptcy, may
be voted by him, either in person or by proxy, but no such trustee shall be
entitled to vote shares held by him without a transfer of such shares into his
name. Shares standing in the name of a receiver, trustee in bankruptcy, or
assignee for the benefit of creditors may be voted by such representative,-
either in person or by proxy. Shares held by or under the control of such a
receiver or trustee may be voted by such receiver or trustee, either in person or
by proxy, without the transfer thereof into his name if authority so to do be
contained in an appropriate order of the court by which such receiver or trustee
was appointed. The Secretary of the Corporation or the Election Inspectors shall
have the authority to require that such documents be filed with the Secretary of
the Corporation as the Secretary or Election Inspectors shall reasonably require
in order to verify the authority and power of such representative or other
fiduciary to vote the shares of the Corporation registered in the name of su
ch other person.
(e) Pledged Shares. A shareholder whose shares are pledged shall be entitled to
vote such shares until the shares have been transferred into the name of the
pledgee, and thereafter the pledgee shall be entitled to vote the
shares so transferred.
(f) Joint Owners. If the shares stand in names of two or more persons, whether
fiduciaries, members of a partnership, joint tenants, tenants in common, Tenants
by the entirety or tenants by community property or otherwise,
or if two or more persons have the same fiduciary relationship respecting the
same shares, unless the Corporation is given written notice to the contrary and
is furnished with a copy of the instrument or order appointing them or creating
the relationship wherein it is so provided, their acts with respect to voting
shall have the following effect:
(1) If only one votes, his acts binds.
(2) If more than one votes, the act of the majority so voting binds all.
(3) If more than one votes, but the vote is evenly split on any particular
matter, each faction may vote the shares in question proportionally.
3.10 Nominations of Directors. Nominations for election to the Board of Directors
of the Corporation at a meeting of shareholders may be made by the Board of
Directors or on behalf of the Board by a nominating committee appointed by the
Board, or by any shareholder of the Corporation entitled
to vote for the election of Directors at such meeting. Such nominations, other
than those made by or on behalf of the Board, shall be made by notice in writing
delivered or mailed by first class United States mail, postage prepaid, to the
Secretary of the Corporation, and received by him not less than thirty (30) days
nor more than (60) days prior to any meeting of shareholders called for the
election of Directors; provided, however, that if less than thirty-five (35) days
notice of the meeting is given to shareholders, such nomination shall have been
mailed or delivered to the Secretary of the Corporation not later than the close
of business on the seventy (7th) day following the day on which the notice of
meeting was mailed.
Such notice shall set forth as to each proposed nominee who is not an incumbent
Director (i) the name, age, business address and telephone number and, if known,
residence address of each nominee proposed in such notice, (ii) the principal
occupation or employment of each such nominee, (iii) the number of shares of
stock of the Corporation which are beneficially owned by each such nominee and by
the nominating shareholder, and (iv) any other information concerning the nominee
that must be disclosed with respect to nominees in proxy solicitations pursuant
to the rules, regulations and forms promulgated under Section 14(a) of the
Securities Exchange Act of 1934.
The Chairman of the meeting may, if the facts warrant, determine that a
nomination was not made in accordance with the foregoing procedure, and if he
should so determine, he shall so declare to the meeting and the defective
nomination shall be disregarded.
3.11 Election of Directors. At each election for directors, every shareholder
entitled to vote at such election shall have the right to vote, in person or by
proxy, the number of shares owned by him for as many persons as there are
directors to be elected and for whose election he has a right to vote, or to
cumulate his votes by giving one candidate as many votes as the number of his
shares, multiplied by the number of directors to be elected and for whose
election he has a right to vote, shall equal, or by distribution such votes on
the same principle among any number of such candidates.
3.12 Shareholder Approval or Ratification. The Board of Directors may submit any
contract or act for approval or ratification at any duly constituted meeting of
the shareholders, the notice of which either includes mention of
the proposed submittal or is waived as provided in Section 3.04 above. If any
contract or act so submitted is approved or ratified by a majority of the votes
cast thereon at such meeting, the same will be valid and as binding upon the
Corporation and all of its shareholders as if would be if approved and ratified
by each and every shareholder of the Corporation.
3.13 Informalities and Irregularities. All informalities or irregularities in any
call or notice of a meeting, or in the areas of credentials, proxies, quorums,
voting and similar matters, will be deemed waived if no objection is made at the
meeting.
IV. BOARD OF DIRECTORS
4.01 Powers. Subject to the limitations of the Articles of Incorporation, the
Bylaws, the Arizona General Corporation Law as to action to be authorized or
approved by the shareholders, and subject to the duties of Directors as
prescribed by the Bylaws, all corporation powers shall be exercised by or under
the authority of, and the business and affairs of the Corporation shall be
controlled by, the Board of Directors. In addition to any other powers granted by
the Arizona General Corporation Law, the Articles of Incorporation
and the Bylaws, it is hereby expressly declared that the Directors shall have the
following powers, to-wit:
(a) To select and remove all the other officers, agents and employees of the
Corporation, prescribe such powers and duties for them as may not be inconsistent
with law, with the Articles of Incorporation, or the Bylaws and fix their
compensation.
(b) To conduct, manage and control the affairs and business of the Corporation,
and to make such rules and regulations therefore not inconsistent with law, or
with the Articles of Incorporation or the Bylaws, as they may deem best.
(c) To designate any place within or without: the State of Arizona for the
holding of any shareholders' meeting or meetings; and to adopt, make and use a
corporate seal, and to prescribe the forms of certificate of stock, and to alter
the form of such seal and such certificates so that the same shall at all times
comply with applicable law.
(d) To authorize the issuance of shares of stock of the Corporation from time to
time, upon such terms as may be lawful, in consideration of money paid, labor
done or services actually rendered, debts or securities canceled, or
tangible or intangible property actually received, or in the case of shares
issued as a dividend against amounts transferred from surplus to stated capital.
(e) to borrow money and incur indebtedness for the purpose of the Corporation,
and to cause to be executed and delivered therefore, in the corporate name,
promissory notes, bonds, debentures, deeds of trust, mortgages, pledges,
hypothecations and other evidences of debt and securities therefore.
(f) To authorize a person or persons to sign and endorse all checks, drafts or
other forms for payments of money, notes, or other evidences of indebtedness,
issued in the name of or payable to the Corporation.
4.02 Membership. The business and affairs of the Corporation shall be managed by
its Board of Directors, consisting of six (6) directors until the January 1997
Annual Meeting of Shareholders, and seven members thereafter. At the first annual
meeting of shareholders and at each annual meeting thereafter, the shareholders
shall elect Directors to hold office until the next succeeding annual meeting.
Each Directors shall hold office until his successor is elected and qualified, or
until his earlier resignation or removal. The Directors need not be shareholders
or residents of the state of incorporation.
4.03 Vacancies. Any vacancy occurring in the Board of Directors may be filled by
the affirmative vote of a majority of the remaining directors though less than a
quorum, or by a sole remaining Director, and any Director so chosen shall hold
office until the next election of Directors when his successor
is elected and qualified. Any newly created directorship shall be deemed a
vacancy. When one or more Directors shall resign from the Board, effective at a
future time, a majority of the Directors then in office, including those who have
so resigned, shall have the power to fill such vacancy or vacancies, the
vote thereon to take effect when such resignation or resignations shall become
effective, and each Director so chosen shall hold office as herein provided in
the filling of other vacancies. If at any time, by reason of death or resignation
or other cause, a Corporation should have no Directors in office, then any
officer or any shareholder or an executor, administrator, trustee, guardian or
personal representative of a shareholder, or other fiduciary entrusted with like
responsibility for the person or estate of a shareholder, may call a special
meeting of shareholders.
4.04 Removal of Directors. At a meeting of the shareholders called expressly for
that purpose, Directors may be removed, with or without cause, by a vote of the
holders of a majority of the shares then entitled to vote at an election of
Directors; provided, however, that, if less than the entire
Board is to be removed, no none of the Directors may be removed if the votes cast
against his removal would be sufficient to elect him if then cumulatively voted
at an election of the entire Board of Directors.
4.05 Meetings. A regular meeting of the Directors shall be held immediately
after the adjournment of each annual shareholders meeting at the place at
which such shareholders meeting was held. Other meetings of the Board of
Directors, regular or special, may be held either within or without this
state, and may be held by means of conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other, and participation in a meeting so held shall
constitute presence in person at such meeting. Any director shall be
entitled to participate by conference telephone or similar communication
equipment, provided, however, the directors by resolution may preclude any
person who is not a director from participating or listening to any meeting
of the Board by such telephone or other equipment or otherwise. Regular
meetings other than annual meetings may be held without notice at regular
intervals at such places and times as the Board of Directors may from time
to time provide. Special meetings of the Board of Directors may be
held whenever and wherever (within the continental United States) called for by
the Chairman of the Board, the President or the number of Directors required to
constitute a quorum.
4.06 Notices. No notice need be given of regular meetings of the Board of
Directors. Written notice of the time and place (but not necessarily the purpose
or all of the purposes) of any special meeting will be given to each Director in
person or via mail or telegram addressed to him at his latest address appearing
on the Corporation's records. Notice to any Director of any such special meeting
will be deemed given sufficiently in advance when, if given by mail, the same is
deposited in the United States mail, with first-class postage thereon prepaid, at
least five (5) days before the meeting date, or if personally delivered or given
by telegram, the same is handed to the Director, or the telegram is delivered to
the telegraph office for fast transmittal, at least forty-eight (48) hours prior
to the convening of the meeting. Any Director may waive call or notice of any
meeting (and any adjournment thereof) at any time before, during which or after
it is held. Attendance of a Director at any meeting will automatically evidence
his waiver of call and notice of such meeting (and any adjournment thereof)
unless he is attending the meeting for the express purpose of objecting to the
transaction of business thereat because it has not been properly called or
noticed. No call or notice of a meeting of Directors will be necessary if each of
them waives the same in writing or by attendance as aforesaid. Any meeting, once
properly called and noticed (or as to which call and notice have been waived as
aforesaid) and at which a quorum is formed, may be adjourned to another time and
place by a majority of those in attendance. Notice of the time and place of
holding an adjourned meeting need not be given to absent Directors if
the time and place be fixed at the meeting adjourned.
4.07 Quorum. A majority of the number of Directors then serving shall constitute
a quorum for the transaction of business at any meeting or adjourned meeting of
the Board of Directors; provided, however, that in no event shall fewer than two
Directors constitute a quorum unless only one Director is then serving.
4.08 Action by Directors. The act of the majority of the Directors present at a
meeting at which a quorum is present shall be the act of the Board of Directors.
4.09 Presumption of Assent. A Director of the Corporation who is present at a
meeting of the Board of Directors, or of any committee, at which action is taken
on any corporate matter will be presumed to have assented to the action taken
unless his dissent is entered in the minutes of the meeting or unless he files
his written dissent to such action with the person acting as secretary of the
meeting before the adjournment thereof or forwards such dissent by
registered mail to the Secretary of the Corporation immediately after the
adjournment of such meeting. A right to dissent will not be available to a
Director who voted in favor of the action.
4.10 Compensation. By resolution of the Board, the Directors may be paid their
expenses, if any, of attendance at each meeting of the Board of Directors, or of
any committee, and may be paid a fixed sum for attendance at each such meeting or
a stated salary as a Director or committee member. No such payment will preclude
any Director from serving the Corporation in any other capacity and receiving
compensation therefore.
4.11 Action by Directors Without a Meeting. Any action required to be taken at a
meeting of the Board of Directors, or any action that may be taken at a meeting
of the Directors or the Executive Committee or other committee thereof, may be
taken without a meeting if all Directors or committee members
consent thereto in writing. Such consent shall have the same effect as a
unanimous vote.
4.12 Director Conflicts of Interest. No contract or other transaction between the
Corporation and one or more of its Directors or any other business entity in
which one or more of its Directors is a director or officer or is financially
interested shall be either void or violable because of such
relationship or interest or because such Director or Directors are present at a
meeting of the Board of Directors or committee thereof which authorizes, approves
or ratifies such contract or transaction or vote for such authorization, approval
or ratification if:
(a) the fact of the relationship or interest is disclosed or known to the Board
of Directors or committee thereof and the number of disinterested Directors or
committee members authorizing, approving or ratifying such
contract or transaction is sufficient for such authorization, approval or
ratification to be granted; or
(b) the fact of the relationship or interest is disclosed to the shareholders
entitled to vote and they authorized, approve or ratify such contract or
transaction; or
(c) the contract or transaction is fair and reasonable to the Corporation at the
time the contract or transaction is authorized, approved or ratified, in the
light of circumstances known to those entitled to vote thereon at
that time.
V. EXECUTIVE AND OTHER COMMITTEES
5.01 Creation. The Board of Directors may, by resolution adopted by an absolute
majority of the full Board of Directors, designate two or more of its members as
an Executive Committee, and may designate from among its members one or more
other committees. The designation of the Executive Committee
or any other committee and the delegation thereto of authority shall not operate
to relieve the Board of Directors, or any member thereof, of any responsibility
imposed by law.
5.02 Powers. The Executive Committee, when the Board of Directors is not in
session, shall have and may exercise all the authority of the Board of Directors
in the management of the business and affairs of the Corporation, subject to the
limitations as may be included in the Board's resolution and
the limitations set forth below. Neither the Executive Committee nor any other
committee shall have the authority of the Board of Directors in reference to the
following matters:
(a) The submission to the shareholders of any action that requires shareholders'
authorization or approval.
(b) The filling of vacancies on the Board of Directors or on any committee of the
Board of Directors.
(c) the amendment or repeal of the Bylaws, or the adoption of new Bylaws.
(d) The fixing of compensation of Directors for serving on the Board or on any
committee of the Board of Directors.
5.03 Tenure and Removal. The members of any committee shall hold office until the
next regular meeting of the Board of Directors and until their successors are
appointed by a new resolution of the Board of Directors. The Board of Directors,
with or without cause, may dissolve any committee or remove any
member thereof at any time.
5.04 Vacancies. Any vacancies occurring by reason of death, resignation, removal,
disqualification or otherwise may be filled by the full Board of Directors.
5.05 Organization. The members of the Executive Committee or other committee
shall elect a chairman of the committee, who shall appoint a secretary of the
same, and the committee shall otherwise fix its own rules or procedure which
shall not be inconsistent with these Bylaws. The Executive Committee or other
committee shall meet where and as provided by its rules.
5.06 Quorum and Voting. A majority of the members of the Executive Committee or
other committee shall constitute a quorum for the transaction of business at any
meeting thereof; provided, however, that the affirmative vote of a majority of
the members of the Executive Committee or other committee in
all cases shall be necessary for the adoption of any resolution.
5.07 Minutes. The Executive Committee and other committees are to keep regular
minutes of their proceedings and the transactions of their meetings and report
the same to the Board of Directors at the next meeting thereof. Such minutes
shall be open to the inspection of any Director upon application at the office of
the Corporation during business hours.
VI. BOOKS AND RECORDS
6.01 Books and Records. The Corporation shall keep correct and complete books and
records of account and shall keep minutes of the proceedings of its shareholders
and Board of Directors and committees thereof; and shall keep at its statutory
agent's office, or its principal place of business, or at the office of its
transfer agent or registrar, a record of its shareholders, giving the names and
addresses of all shareholders and the number and class of the shares held by
each. Any books, records and minutes may be in written form or in any other form
capable of being converted into written form within a reasonable time.
6.02 Inspection. Any person who shall have been a holder of record of shares of
stock of the Corporation or of a voting trust beneficial interest therefor at
least six (6) months immediately preceding his demand or shall be the holder of
record of, or the holder of record of a voting trust beneficial interest for, at
least five percent (5%) of all the outstanding shares of the Corporation, upon
written demand delivered to the Secretary of the Corporation or to the statutory
agent for receipt of service of process, stating the purpose thereof, shall have
the right to examine, in person, or by agent or attorney, at any reasonable time
or times, for any proper purpose its relevant books and records of accounts,
minutes, and record of shareholders and to make copies of or extracts therefrom.
6.03 Financial Statements Upon the written request of any shareholder or holder
of a voting trust beneficial interest for shares of the Corporation, the
Corporation shall mail to such shareholder or holder of a voting trust beneficial
interest its most recent financial statements showing in reasonable detail its
assets and liabilities and the results of its operations.
VII. OFFICERS
7.01 Officers. The officers of the Corporation shall be a President, a Vice
President, a Secretary, and a Treasurer, each of whom shall be elected by the
Board of Directors as hereinafter provided. The Board of Directors may also
choose a Chairman of the Board, additional Vice Presidents, and one or more
Assistant Secretaries and Assistant Treasurers. Any number of officers be held by
the same person, except that the offices of President and Secretary shall not be
held by the same person.
7.02 Appointment of Officers. The Board of Directors shall, at its organizational
meeting or Unanimous Action in Lieu Thereof, and from time to time thereafter as
it deems appropriate, choose a President, Vice President, a Secretary, and a
Treasurer, and may choose a Chairman of the Board. The
Board of Directors at any time may appoint such other officers and agents as its
shall deemed appropriate. All officers and agents of the Corporation shall have
such authority and perform such duties in the management of the Corporation as
may be provided in these Bylaws or as may be determined by resolution of the
Board of Directors not inconsistent with these Bylaws.
7.03 Removal of Officers. Any officer or agent of the Corporation may be removed
by the Board of Directors whenever in its judgment the best interests of the
Corporation will be served thereby. Such removal shall be without prejudice to
the contract rights, if any, of the person so removed; election or appointment of
an officer or agent shall not of itself create any such contract rights.
7.04 Salaries. The salaries of the officers shall be as fixed from time to time
by the Board of Directors. No officer shall be prevented from receiving a salary
by reason of the fact that he is also a Director of the Corporation.
7.05 Vacancies. A vacancy in any office because of death, resignation, removal,
disqualification, or otherwise, may be filled by the Board of Directors at any
time.
7.06 Delegation. The Board of Directors may, by resolution duly recorded in the
minutes of the Board of Directors, delegate to the President of the Corporation
the authority to fix the salaries and other compensation of any or
all officers of the Corporation except himself.
7.07 Chairman of the Board. The Board of Directors may elect a Chairman of the
Board to serve as a general executive officer of the Corporation, and, if
specifically designated as such by the Board, the Chairman will preside at all
meetings of the Directors and be vested with such other powers and duties
as the Board may from time to time delegate to him.
7.08 President and Vice President. The President will be the chief operating
officer of the Corporation and will supervise the business and affairs of the
Corporation and the performance, by all of its other officers of their respective
duties, subject to the control of the Board of Directors and of
its Chairman, if the Chairman has been specifically designated as the chief
executive office of the Corporation (failing which the President will be such
chief executive officer). One or more Vice Presidents may be elected by the Board
of Directors, each of whom, in the order designated by the Board, will be vested
with all of the powers and charged with all of the duties (including those herein
specifically set forth) of the President in the event of his absence or
disability. Each Vice President will perform such other duties as may from time
to time be delegated or assigned to him by the Chief Executive
Officer, the President or the Board of Directors. Except as may otherwise be
specifically provided in a resolution of the Board of Directors, the President or
any Vice President will be a proper officer to sign on behalf of the Corporation
any deed, bill of sale, assignment, option, mortgage, pledge, note, bond,
evidence of indebtedness, application, consent (to service of
process or otherwise), agreement, indenture or other instrument of any
significant importance to the Corporation.
7.09 Secretary. The Secretary will keep the minutes of meetings of the Board of
Directors, see that all notices are duly given in accordance with the provisions
of these Bylaws or as required by law, be custodian of the records of the
Corporation and of its seal and, in general, perform all duties incident to his
office. Except as may otherwise be specifically provided in a resolution of the
Board of Directors, the Secretary will be a proper officer to impress the
Corporation's seal on any instrument signed by the President or any Vice
President, and to attest to the same.
7.10 Treasurer. The Treasurer will keep full and accurate accounts of receipts
and disbursements in books belonging to the corporation, and will cause all money
and other valuable effects to be deposited in the name and to the
credit of the Corporation in such depositories, subject to withdrawal in such
manner, as may be designated by the Board of Directors. He will render to the
President, and to the Directors (at the regular meetings of the Board or whenever
they may require), an account of all his transactions as Treasurer and of the
financial condition of the Corporation.
7.11 Assistant Secretaries. There may be one or more Assistant Secretaries, and
such persons shall perform such functions as from time to time may be assigned to
them by the Board of Directors, the Chief Executive Officer, the President, any
Vice President, or the Secretary.
7.12 Assistant Treasurers. There may be one or more Assistant Treasurers. Such
persons shall perform such functions as from time to time may be assigned to them
by the Board of Directors, the Chief Executive Officer, the President,
any Vice President, or the Treasurer. No Assistant treasurer shall have power or
authority to collect, account for, or pay over any tax imposed by any federal,
state, or city government.
VIII. RESIGNATIONS
8.01 Resignations. Any director, committee member or officer may resign from his
office at any time by written notice delivered or addressed to the Corporation at
its principal place of business. Any such resignation will be
effective upon its receipt by the Corporation unless some later time is therein
fixed, and then from that time. The acceptance of a resignation will not be
required to make it effective.
IX. SEAL
9.01 Form Thereof. The seal of the Corporation will have inscribed thereon the
name of the Corporation and the State and year of its incorporation.
9.02 Use. Except to the extent otherwise required by law or these Bylaws, the
seal of the Corporation shall not be required to affixed to any document or act
of the Corporation in order for such document or act to be valid and binding upon
the Corporation.
9.03 Authorization. In the absence of the Secretary or Assistant Secretary, any
officer authorized by the Board of Directors to do so may affix the seal of the
Corporation to any instrument requiring a seal.
X. STOCK CERTIFICATES
10.01 Form Thereof. Each certificate representing
stock of the Corporation will be in such form as may from time
to time be approved by the Board of Directors, will be numbered
and will exhibit the holders name and the number of shares
represented thereby.
10.02 Signatures and Seal Thereon. All certificates issued for shares of the
Corporation's capital stock (whether new, re-issued or transferred) will bear the
signatures of the President or a Vice President, and of the Secretary or
Assistant Secretary, and the impression of the Corporation's corporate seal. The
signatures of such officers of the Corporation, and the impression of its
corporate seal, may be in facsimile form on any certificates which are manually
countersigned by or on behalf of an independent transfer agent.
and/or registrar duly appointed by the Corporation for the shares of stock
evidenced thereby. If a supply of unissued certificates bearing the facsimile
signature of a person remains when that person ceases to hold the Corporation
office indicated on such certificates, they may still be countersigned,
registered, issued and delivered by the Corporation's transfer agent and/or
registrar thereafter, the same as though such person had continued to hold the
office indicated on such certificate.
10.03 Ownership. The Corporation will be entitled to treat the registered owner
of any share as the absolute owner thereof and, accordingly, will not be bound to
recognize any beneficial, equitable or other claim to, or interest in, such share
on the part of any other person, whether or not it has notice thereof, except as
may expressly by provided by statute.
10.04 Transfers. Transfers of stock will be made on the books of the Corporation
only at the direction of the person or persons named in the certificate thereof,
or at the direction of his or their duly authorized attorney-in-fact or duly
appointed personal representative, and upon the surrender of such certificate,
properly endorsed, to the Secretary or the
duly authorized transfer agent or agents of the Corporation.
10.05 Lost Certificates. In the event of the loss, theft or destruction of any
certificate representing capital stock of this Corporation or of any predecessor
corporation, the Corporation may issue (or, in the case of any such stock as to
which a transfer agent and/or registrar have been appointed,
may direct such transfer agent and/or registrar to countersign, register and
issue) a certificate in lieu of that alleged to be lost, stolen, or destroyed,
upon such terms and conditions, including reasonable indemnification of the
Corporation, as the Board shall reasonable require, and cause the same to be
delivered to the owner of the stock represent thereby, provided that the owner
shall have submitted such evidence showing the circumstances of the alleged loss,
theft or destruction, and his ownership of the certificate, as the
Corporation considers satisfactory, together with any other facts which the
Corporation considers pertinent.
XI. REPEAL, ALTERATION OR AMENDMENT
11.01 Repeal, Alteration, or Amendment. These Bylaws may be repealed, altered, or
amended, or substitute bylaws may be adopted at any time, only by resolution duly
adopted by at least two-thirds (2/3) of the entire Board of Directors, subject to
repeal or change by action of the shareholders.
XII. MISCELLANEOUS
12.01 Indemnification. To the full extent permitted by Arizona law, the
Corporation shall indemnify and pay the expenses of any person who is or was
made, or threatened to be made, a party to an action or proceeding (whether
civil, criminal, administrative or investigative) by reason of the fact that he
is or was a director, officer, employee, trustee or agent of or for the
Corporation or is or was serving at the request or with the prior approval of the
Corporation as a director, officer employee, trustee or agent of another
corporation; trust or other enterprise. The Corporation shall have the power to
purchase and maintain insurance on behalf of any person who is or was a Director,
officer, employee, trustee or agent of or for the prior approval of the
Corporation as a director, officer, employee, trustee or agent of another
corporation, trust or enterprise, against any liability asserted against him and
incurred by him in any capacity or arising out his status as such, whether or not
the Corporation would have the power to indemnify him against such liability
under the provisions of these Bylaws.
12.02 Dividends. Dividends upon the capital stock of the Corporation, if any,
subject to the provisions of the Articles of Incorporation, may be declared by
the Board of Directors at any regular or special meeting, pursuant to law.
Dividends may be paid in cash, in property, or in shares of the capital stock,
subject to the provisions of the Articles of Incorporation and the Arizona
General Corporation Law. Before payment of any dividend, there may be set aside
out of any funds of the Corporation available for dividends such sum or
sums as the Directors from time to time, in their absolute discretion, think
proper as a reserve or reserves to meet contingencies, or for equalizing
dividends, or for repairing or maintaining any property of the Corporation, or
for such other purposes as the Directors shall think conducive to the interest
of the Corporation, and the Directors may modify or abolish any such reserve in
the manner in which it was created.
12.03 Representation of Shares of Other Corporations. The President or any Vice
President of this Corporation is authorized to vote, represent and exercise on
behalf of this Corporation all rights incident to any and all shares of any other
corporation or corporations standing in the name of this Corporation. The
authority herein granted to said officers to vote or represent on behalf of this
Corporation any and all shares held by this corporation in any other corporation
or corporations may be exercised either by such officers in person or by any
person authorized so to do by proxy or power of attorney duly executed by said
officers, provided, that the Board of Directors may from time to time confer the
foregoing authority upon any other person or persons.
12.04 Construction and Definitions. Unless the context otherwise requires, the
general provisions, rules of construction and definitions contained in the
Arizona General Corporation Law shall govern the construction of these Bylaws.
Without limiting the generality of the foregoing, the masculine gender includes
the feminine and neuter; and the singular number includes the plural and plural
number includes the singular; and the term person includes a corporation or
other entity as well as a natural person.
12.05 Fiscal Year. The fiscal year end of the Corporation shall be designated
and determined by the resolution of the Board of Directors form time to time.
12.06 Conduct of Meetings. The Board of Directors shall promulgate rules and
regulations and shall establish the rules of procedure applicable at all meetings
of shareholders and the Board of Directors or any committee thereof, and the
provisions thereof are incorporated herein by reference. Absent a specific rule
or regulation, the Chairman shall determine the order of business at any
shareholders or Board of Directors meeting and shall have authority, in his
discretion, to regulate the conduct of such meetings.
CERTIFICATION
The undersigned Secretary of PHOTOCOMM, INC., an Arizona corporation, hereby
certifies that the foregoing Bylaws of the Corporation were duly adopted pursuant
to the Unanimous Written Consent of the Board of Directors in Lieu of Special
Meeting, dated November 19, 1996.
Thomas C. LaVoy, Secretary
EXHIBIT 4.5
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement") dated as of November 21,
1996, among Photocomm, Inc., a Arizona corporation (the "Company"), Golden
Technologies, Inc., a Colorado corporation ("Golden Technologies") and ACX
Technologies, Inc., a Colorado corporation ("ACX") and for certain limited
purposes Robert R. Kauffman ("Kauffman") (collectively, the "Signataries").
RECITALS
A. Concurrently with the execution of this Agreement, Golden Technologies has
acquired from the Company shares of the Company's Common Stock and ACX has
acquired options to purchase the Company's Common Stock.
B. Subject to the terms of this Agreement, the Company and the Signataries desire
to enter into this Agreement pursuant to which the Signataries have the right to
cause the Company, upon request, to register with the Commission an offering
and sale of shares of Common Stock of the Company owned by the Signataries.
AGREEMENT
NOW, THEREFORE, in consideration of the premises and the agreements herein
contained, the parties to this Agreement agree as follows:
1. Definitions. As used in this Agreement, the following capitalized terms shall
have the following respective meanings:
a. ACX Shareholders - Golden Technologies, ACX and any Affiliate thereof which
may acquire shares of Common Stock, as long as such Person owns Registrable
Securities.
b. ACX Transferee - As set forth in Section 10 hereof.
c. Advice - As defined in Section 5.
d. Affiliate - Any Person that, directly or indirectly, through one or more
intermediaries, controls, or is controlled by, or is under common control with, a
Person; "control" means the ownership, directly or indirectly, of equity
securities or other ownership interest in a Person by another Person, which
represent more than 50% of the voting power or equity ownership in such Person.
e. Commission - The United States Securities and Exchange Commission or any other
Federal agency at the time administering the Securities Act.
f. Common Stock - The Common Stock, $.10 par value per share, of the Company.
g. Demand Registration - As defined in Section 2.
h. Exchange Act - The Securities Exchange Act of 1934, as amended, or any
successor Federal statute, and the rules and regulations of the Commission
thereunder.
i. Loss - As defined in Section 9.
j. Person - Any individual, corporation, partnership, trust, organization,
association, limited liability company, or other entity.
k. Piggyback Registration - As defined in Section 3.
1. Shareholders - The ACX Shareholders and Kauffman.
m. Registrable Securities - The Common Stock owned by the Shareholders from time
to time, any shares of Common Stock which may be issued or distributed in respect
thereof by way of stock dividend or stock split or other distribution,
recapitalization, merger, consolidation or reclassification or other
reorganization or otherwise. A Registrable Security shall cease to be a
Registrable Security when: (i) a registration statement with respect to the sale
of such security shall have become effective under the Securities Act and such
security shall have been disposed of in accordance with such registration
statement; (ii) such security shall have been distributed to the public pursuant
to Rule 144 (or any successor provision) under the Securities Act; (iii) such
security shall have been otherwise transferred and new certificates for such
security not bearing a legend restricting further transfer shall have been
delivered by the Company and subsequent disposition of such security shall not
require registration or qualification of such security under the Securities Act
or any similar state law then in force or (iv) such security shall have ceased to
be outstanding.
n. Registration Expenses - As set forth in Section 6 hereof.
o. Securities Act - The Securities Act of 1933, as amended, or any successor
Federal statute, and the rules and regulations of the Commission thereunder.
2. Demand Registration.
a. Requests for Registration. Upon the written request of any Shareholder
(provided that, such request by an ACX Shareholder only be made with the prior
written approval of ACX at any time the ACX Shareholders own Registrable
Securities) requesting that the Company effect the registration under the
Securities Act of all or part of the Registrable Securities (but at least a
number of Registrable Securities having an estimated market value of $1
million or all shares owned by the Shareholder if less) owned by such Shareholder
and specifying the intended method of disposition thereof, but subject to the
limitations set forth herein, the Company, within five days after receipt of such
notice, shall give written notice to all other Shareholders. As soon as practical
after sending the Company's notice, the Company shall file with the Commission
and use its best efforts to cause to become effective, a registration statement
under the Securities Act registering the offering and sale of:
i. the Registerable Securities which the Company has been requested to register
by such Shareholder; and
ii. all other Registerable Securities which the Company has been requested to
register by any other Shareholder for which the Company has received a written
request for inclusion within 15 days after the Shareholder's receipt of the
Company's notice [provided however, that Kauffman shall be eligible for inclusion
on a Demand Registration required by an ACX Shareholder only if his employment
with the Company has been terminated for whatever reason.]
all to the extent necessary to permit the disposition (in accordance with the
intended method of disposition) of the Registrable Securities (a "Demand
Registration").
b. Number of Demand Registrations.
i. The ACX Shareholders shall be entitled to require two Demand Registrations at
any time during which they own Registerable Securities.
ii. Kauffman shall be entitled to require one Demand Registration; provided, that
at the time of the requested Demand Registration his employment with the Company
has been terminated for whatever reason and he owns more than ONE HUNDRED AND
FIFTY THOUSAND (150,000) shares of Common Stock.
c. Priority of Demand Registration. If a requested registration pursuant to this
Section 2 involves an underwritten offering and the managing underwriter advises
the Company in writing that, in its opinion, the number of securities requested
to be included in such registration (including securities of the Company which
are not Registrable Securities) exceeds the number which can be sold in such
offering without a significant adverse effect on the price,
timing or distribution of the Registrable Securities offered, the Company will
(subject to the last sentence of this paragraph) include in such registration
only the Registrable Securities requested to be included in such registration. In
the event that the number of Registrable Securities requested to be included in
such registration exceeds the number which, in the opinion of such managing
underwriter, can be sold, then the Company will include in such registration the
Registerable Securities in the following priority:
i. first, 100% of the Registrable Securities which the Shareholder requested to
be included in such registration (or such lesser number of Registrable Securities
which is equal to the number which, in the opinion of the managing
underwriter, can be sold);
ii. second, any additional number of Registrable Securities which, in the opinion
of the managing underwriter, can be sold, such number to be allocated pro rata
among all requesting Shareholders (other than the Shareholder referred to in
clause (i) above) on the basis of the relative number of shares of Registrable
Securities then held by each such holder (provided that any shares thereby
allocated to any such holder that exceed such holder's request shall be
reallocated among the remaining requesting holders of Registrable Securities in
like manner).
In the event that the number of Registrable Securities requested to be included
in such registration is less than the number which, in the opinion of the
managing underwriter, can be sold, the Company may include in such registration
the securities the Company or any other holder of the Company's securities
proposes to sell up to the number of securities that, in the opinion of the
managing underwriter, can be sold without an adverse effect on the price, timing
or distribution of the Registrable Securities offered.
d. Selection of Underwriters. In accordance with Section 7, if a Shareholder so
elects, a requested registration pursuant to this Section 2 shall be in the form
of an underwritten offering through underwriters which shall be investment
banking firms of national reputation designated by the Company and satisfactory
to the Shareholder requiring such underwriting.
e. Expenses of Demand Registration. The Company and the ACX Shareholders shall
pay one-half of the Registration Expenses incurred in connection with each Demand
Registration required by an ACX Shareholder. [The Company shall pay all expenses
in connection with a Demand Registration required by Kauffman.]
3. Piggyback Registration.
a. Right to Piggyback. If the Company shall at any time propose to file a
registration statement under the Securities Act for an offering of securities of
the Company for cash (other than an offering relating to (i) a business
combination that is to be filed on Form S-4 under the Securities Act (or any
successor form thereto) or (ii) an employee benefit plan), the Company shall
provide prompt written notice of such proposal, in any event, not less than 15
days before the anticipated filing date, to the Shareholders of its intention to
do so and of the Shareholders' rights under this Section 3. The Company shall use
its best efforts to include such number of Registrable Securities in such
registration statement which the Company has been so requested to register by the
Shareholders (a "Piggyback Registration"), which request shall be made to the
Company within 15 days after Shareholder receives the Company's notice of such
proposed registration; provided, that if, at any time after giving written notice
of its intention to register any securities and prior to the effective date of
the registration statement filed in connection with such registration, the
Company shall determine for any reason not to register such securities, the
Company may, at its election, give written notice of such determination to the
Shareholders and, thereupon, shall be relieved of its obligation to register any
Registrable Securities in connection with such registration (but not from
its obligation to pay the registration expenses referred to in Section 6 incurred
in connection therewith). The Shareholder requesting to be included in a
registration pursuant to this Section 3 may elect, in writing prior to the
effective date of the registration statement filed in connection with such
registration, not to register such securities in connection with such
registration.
b. Priority of Piggyback Registration. If a registration pursuant to this Section
3 involves an underwritten offering as to which a Shareholder has requested a
Piggyback Registration and the managing underwriter reasonably and in good faith
advises the Company in writing that, in its opinion, the number of securities to
be included in such registration exceeds the number which can be sold in such
offering without an adverse effect on the price, timing or
distribution of such offering, then the Company will include in such registration
the Registerable Securities in the following priority.
i. Priority under a Primary Registration. If such registration is a primary
offering on behalf of the Company, the number of securities which all holders of
the Company's securities requested to be included in such registration shall be
reduced as necessary pro rata in proportion to the relative number of securities
requested by each such holder to be included until the number of securities to be
included in such registration no longer exceeds the number which can be sold in
such offering.
ii. Priority under a Secondary Registration. If such registration is a secondary
registration on behalf of the holders of the Company's securities other than
Registrable Securities (the "Requesting Holders"), the number of securities which
the Company's security holders other than the Requesting Holders requested to be
included in such registration:
(1) first, the number of securities which the Company seeks to register, if any
shall be reduced until the number of securities to be included in such
registration no longer exceeds the number which can be sold in such offering;
(2) second, the number of securities shall be reduced as necessary pro rata in
proportion to the relative number of securities requested by each such holder to
be included until the number of securities to be included in such registration no
longer exceeds the number which can be sold in such offering; and
(3) third, the number of securities which the Requesting Holders requested to be
included in such registration shall be reduced as necessary pro rata in
proportion to the relative number of securities requested by each such Requesting
Holder until the number of securities to be included in such registration no
longer exceeds the number which can be sold in such offering.
c. Effect of Piggyback Registration. No registration effected under this Section
3 shall be deemed to have been effected pursuant to Section 2 hereof or shall
release the Company of its obligation to effect any registration upon request
under Section 2 hereof.
4. Hold-Back Agreements.
a. Restrictions on Public Sale by Holder of Registrable Securities. The
Shareholders agree in connection with any registration effected by the Company
(other than an offering relating to (i) a business combination that is to be
filed on Form S-4 under the Securities Act (or any successor form thereto) or
(ii) an employee benefit plan) of the Company's securities, if requested by the
managing underwriters in an underwritten offering, not to effect any public sale
or distribution of securities of the Company the same as or similar to those
being registered, or any securities convertible into or exchangeable or
exercisable for such securities, including a sale pursuant to Rule 144 under the
Securities Act; except as part of such registration, during the 14-day period
prior to, and during the 90-day period (or, with respect to a Piggy-back
Registration, such longer period of up to 120 days as may reasonably be requested
by such managing underwriter) beginning on, the effective date of the related
registration statement, to the extent timely notified in writing by the Company
or the managing underwriters.
b. Restrictions on Public Sale by the Company and Others. The Company agrees in
connection with any registration of the Company's securities pursuant to Section
2 of this Agreement, if requested by the managing underwriters in an underwritten
offering not to effect any public sale or distribution of any securities the same
as or similar to those being registered by the Company, during the 14-day period
prior to, and during the 90-day period (or, with respect to a Piggyback
Registration, such longer period of up to 120 days as may reasonably be requested
by such managing underwriter) beginning on, the effective date of the related
registration statement to the extent timely notified in writing by the managing
underwriters, except as part of such registration; provided, that such
restrictions shall not limit the issuance of shares of Common Stock, or options
to purchase Common Stock, that the Company is required to issue pursuant to (i)
any employee stock option plan or non-employee director stock option plan in
effect at the time a request for a Demand Registration is made; (ii) the exercise
of any outstanding options or warrants with respect to the Common Stock; and
(iii) the exercise of any conversion or exchange right in accordance with the
terms of any other security convertible into or exchangeable for securities the
same as or similar to those being registered by the Company.
c. No Inconsistent Agreements. The Company will not enter into any agreement with
respect to its securities which is inconsistent with the rights granted to the
Shareholders by this Agreement.
5. Registration Procedures. Whenever any Registrable Securities are to be
registered pursuant to Section 2 or 3 of this Agreement, the Company will use its
best efforts to effect the registration and the sale of such Registrable
Securities in accordance with the intended method of disposition thereof, and
pursuant thereto the Company will as expeditiously as possible:
a. prepare and file with the Commission as soon as practicable but not later than
90 days after a receipt of a request to file such registration statement, a
registration statement with respect to such Registrable Securities on a
registration form appropriate for such registration and reasonably acceptable to
the Shareholder requesting such registration, and use its best efforts to cause
such registration statement to become effective, provided, that before filing a
registration statement or prospectus or any amendments or supplements thereto,
the Company will furnish to the Shareholder requesting such registration pursuant
to Section 2 or 3 of this Agreement and the underwriters, if any, draft copies of
all such documents proposed to be filed at least ten (10) business days prior
thereto, which documents will be subject to the reasonable review of such
Shareholder, the underwriters, if any, and their respective agents and
representatives and the Company will not file any registration statement or
amendment thereto or any prospectus or any supplement thereto (including such
documents incorporated by reference) to which such Shareholder shall reasonably
object;
b. notify the Shareholder requesting such registration and (if requested) confirm
such advice in writing, as soon as practicable after notice thereof is received
by the Company (i) when the registration statement or any amendment thereto has
been filed or becomes effective, the prospectus or any amendment or supplement to
the prospectus has been filed, (ii) of any request by the Commission for
amendments or supplements to the registration statement or the prospectus or for
additional information, (iii) of any stop order issued or threatened by the
Commission in connection therewith, (iv) if at any time the representations and
warranties of the Company contemplated by Section 7 cease to be true and correct,
and (v) of the receipt by the Company of any notification with respect to the
suspension of the qualification of the Registrable Securities for offering or
sale in any jurisdiction or the initiation or threatening of any proceeding for
such purpose;
c. use its best efforts to prevent the entry by the Commission of any stop order
or to remove it if entered;
d. prepare and file with the Commission such amendments, post-effective
amendments and supplements to such registration statement and the prospectus used
in connection therewith as may be necessary to keep such registration statement
effective for a period of not less than 120 days (or such shorter period which
will terminate when all Registrable Securities covered by such registration
statement have been sold or withdrawn, but not prior to the expiration of the
applicable period referred to in Section 4(3) of the Securities Act and Rule 174
thereunder, if applicable), cause the prospectus to be supplemented by any
required prospectus supplement, and as so supplemented to be filed pursuant to
Rule 424 under the Securities Act, and comply with the provisions of the
Securities Act with respect to the disposition of all securities covered by such
registration statement during such period in accordance with the intended methods
of disposition by the seller or sellers thereof set forth in such registration
statement;
e. furnish to each Shareholder requesting such registration and the underwriter
or underwriters, if any, without charge, one signed copy and such number of
conformed copies of such registration statement, each amendment and supplement
thereto, the prospectus included in such registration statement (including each
preliminary prospectus) and any amendments or supplements thereto, any documents
incorporated by reference therein and such other documents as any such
Shareholder or such underwriter may reasonably request to facilitate the
disposition of the Registrable Securities (it being understood that the Company
consents to the use of the prospectus (including the preliminary prospectus) and
any amendment or supplement thereto by the Shareholder requesting registration
and the underwriter or underwriters, if any, in connection with the offering and
sale of the Registrable Securities
covered by the prospectus or any amendment or supplement thereto);
f. use its reasonable best efforts to register or qualify such Registrable
Securities under such other securities or blue sky laws of such jurisdictions as
the Shareholder requesting registration reasonably request and do any and all
other acts and things that may reasonably be necessary or advisable to enable
such Shareholder to consummate the disposition in such jurisdictions of the
Registrable Securities owned by such Shareholder (provided that the Company will
not be required to (i) qualify generally to do business in any jurisdiction where
it would not otherwise be required to qualify but for this subparagraph, (ii)
subject itself to taxation in any such jurisdiction or (iii) consent to general
service of process in any such jurisdiction);
g. notify the Shareholder requesting such registration at any time when a
prospectus relating thereto is required to be delivered under the Securities Act,
of the occurrence of any event as a result of which the prospectus included in
such registration statement (as then in effect) contains an untrue statement of a
material fact or omits to state a material fact necessary to make the statements
therein, in light of the circumstances under which they were made, not misleading
and, as promptly as practicable thereafter, prepare and file with the Commission
a supplement or amendment to such prospectus so that, as thereafter delivered to
the purchasers of such Registrable Securities, such prospectus will not contain
an untrue statement of a material fact or omit to state a material fact necessary
to make the statements herein, in light of the circumstances under which they
were made, not misleading;
h. make generally available to its security holders an earnings statement
satisfying the provisions of Section 11(a) of the Securities Act no later than 60
days after the end of the 12-month period beginning with the first day of the
Company's first fiscal quarter commencing after the effective date of the
registration statement, which earnings statement shall cover said 12-month
period, and which requirement will be deemed to be satisfied if the Company
timely files complete and accurate information on Forms 10-Q, 10-K and 8-K under
the Exchange Act and otherwise complies with Rule 15S under the Securities Act as
soon as possible;
i. cause all such Registrable Securities to be listed or admitted for trading on
each securities exchange or quotation system on which securities issued by the
Company that are of the same class as the Registrable Securities are then listed
or admitted;
j. provide a transfer agent and registrar for all such Registrable Securities not
later than the effective date of such registration statement;
k. make available for inspection by any Shareholder, any underwriter
participating in any disposition pursuant to such registration statement and any
attorney, accountant or other agent retained by any such Shareholder or
underwriter all financial and other records, pertinent corporate documents and
properties of the Company, and cause the Company's officers, directors, employees
and independent certified public accountants to supply all information reasonably
requested by any such Shareholder, underwriter, attorney, accountant or agent in
connection with such registration statement;
l. use its best efforts to cause such Registrable Securities covered by such
registration statement to be registered with or approved by such other
governmental agencies or authorities as may be necessary to enable the sellers
thereof to consummate the disposition of such Registrable Securities;
m. obtain a "cold comfort" letter and updates thereof from the Company's
independent public accountants in customary form and covering such matters of the
type customarily covered by "cold comfort" letters as the seller or sellers of a
majority of the Registrable Securities being sold reasonably request;
n. if underwriters are engaged in connection with any registration referred to
in this Agreement, the Company shall enter into underwriting or other agreements
providing indemnification, representations, covenants, opinions and other
assurance to the underwriters in form and substance reasonably satisfactory to
such underwriters; and
o. enter into such customary agreements (including underwriting agreements
in customary form) and take all such other actions as the holders of a majority
of the Registrable Securities being sold or the underwriters, if any, reasonably
request to expedite or facilitate the disposition of such Registrable Securities.
The Company may require each Shareholder requesting a registration to furnish to
the Company such information regarding the distribution of such securities and
such other information relating to such Shareholder and its ownership of
Registrable Securities as the Company may from time to time reasonably request in
writing. Each such Shareholder agrees to furnish such information to the Company
and to cooperate with the Company as necessary to enable the Company to comply
with the provisions of this Agreement.
Upon receipt of any notice from the Company of the happening of any event of
the kind described in subsection (g) of this Section 5, a Shareholder selling
Registrable Securities will forthwith discontinue disposition of the Registrable
Securities until receipt of the copies of the supplemented or amended prospectus
contemplated by subsection (g) of this Section 5 or until such Shareholder is
advised in writing (the "Advice") by the Company that the use of the prospectus
may be resumed, and have received copies of any additional or supplemental
filings which are incorporated by reference in the prospectus and, if so directed
by the Company, such Shareholder will, or will request the managing underwriter
or underwriters, if any, to, deliver to
the Company (at the Company's expense) all copies, other than permanent file
copies then in such holder's possession of the prospectus covering such
Registrable Securities current at the time of receipt of such notice. In the
event that the Company shall give any such notice, the time period mentioned in
the subsection (d) of this Section 5 shall be extended by the number of days
during the period from and including the date of the giving of such notice to and
including the date when each Shareholder shall have received the copies of the
supplemented or amended prospectus contemplated by subsection (g) of this Section
5 or the Advice.
6. Registration Expenses. Except as otherwise agreed in accordance with Section
2(d), all expenses incident to the Company's performance of or compliance with
this Agreement including, without limitation, all registration and filing fees,
fees and expenses of compliance with securities or blue sky laws (including
reasonable fees and disbursements of counsel in connection with blue sky
qualifications of the Registrable Securities), rating agency fees, printing
expenses, messenger and delivery expenses, internal expenses (including without
limitation, all salaries and expenses of the Company's officers and employees
performing legal or accounting duties), the fees and expenses incurred in
connection with the listing of the securities to be registered, if any, on each
securities exchange on which similar securities issued by the Company are then
listed and reasonable fees and disbursement of counsel for the Company and its
independent certified public accountants (including the expenses of any special
audit or "cold comfort" letters required by or incident to such performance),
Securities Act liability insurance (if the Company elects to obtain such
insurance), the reasonable fees and expenses of any special experts retained by
the Company in connection with such registration, and any reasonable out-of-
pocket expenses of such Shareholder (all such expenses being herein called
"Registration Expenses") will be borne by the Company; provided, that
Registration Expenses shall not
include, and the Company shall not be responsible for any underwriting fees,
discounts or commissions attributable to the sale of Registrable Securities,
which shall be paid by the Shareholder requesting such registration.
7. Underwritten Offerings.
a. Any Shareholder (provided that, such demand may only be made with the
prior written approval of ACX at any time that the ACX Shareholders own
Registerable Securities) may require that any registration pursuant to Section 2
be an underwritten registration. In the event such a registration is an
underwritten offering, the Company will enter into an underwriting agreement with
the managing underwriter or underwriters for such offering (which managing
underwriter or underwriters shall be an investment banking firm or firms of
national reputation designated by the Company and satisfactory to the Shareholder
requiring such underwriting), such agreement to be in form and substance
satisfactory to such Shareholder in its reasonable judgment and to contain such
representations and warranties by the Company and such other terms as are
customarily contained in agreements of such type. Shareholders selling
Registerable Securities shall be party to such underwriting agreement and may
require that any or all of the representations and warranties by, and the other
agreements on the part of, the Company to and for the benefit of such
underwriters shall also be made to and for the benefit of such Shareholders and
that any or all of the conditions precedent to the obligations of such
underwriters under such underwriting agreement be conditions precedent to the
obligations of such Shareholder. No Shareholder shall be required to make any
representations or warranties to or agreements with the Company or the
underwriters other than representations, warranties or
agreements regarding such Shareholder, its ownership of Registrable Securities
and its intended method of distribution and any other representation required by
law.
b. No Person may participate in any registration hereunder that is
underwritten unless such Person (a) agrees to sell such Person's securities on
the basis provided in any underwriting arrangements approved by the Person or
Persons entitled hereunder to approve such arrangements and (b) completes and
executes all questionnaires, powers of attorney, indemnities, underwriting
agreements and other documents required under the terms of such underwriting
arrangements.
8. Indemnification.
a. In connection with any offering of Registrable Securities pursuant to
Section 2 or 3 hereof, the Company agrees to indemnify, to the fullest extent
permitted by law, each of the Shareholders whose Registerable Securities are sold
in such offering, its officers and directors and each Person who controls such
Shareholder (within the meaning of the Securities Act) against all losses,
claims, damages, liabilities and expenses (including attorney's fees)
(collectively, "the Loss") arising out of or based upon any untrue or alleged
untrue statement of material fact contained in any registration statement,
prospectus or preliminary prospectus or any amendment thereof or supplement
thereto under which such Registrable Securities were registered under the
Securities Act or any omission or alleged omission of a material fact
required to be stated therein or necessary to make the statements therein not
misleading, except insofar as the same were made in reliance upon any written
information furnished in writing to the Company by such Shareholder expressly for
use therein which was not corrected in a subsequent writing by such Shareholder
prior to or concurrently with the sale of the Registrable
Securities to the Person asserting the Loss.
b. Each Shareholder agrees to indemnify, to the fullest extent permitted by
law, the Company, its officers and directors and each other Person, if any, who
controls the Company (within the meaning of the Securities Act) against the Loss
caused by any untrue or alleged untrue statement of material fact contained in
any registration statement, prospectus or preliminary prospectus or any amendment
thereof or supplement thereto under which such Registrable Securities were
registered under the Securities Act or any omission or alleged
omission of a material fact required to be stated therein or necessary to make
the statements therein not misleading, in each case to the extent, but only to
the extent, that the same was made in reliance upon any written information
furnished in writing to the Company by such Shareholder expressly for use therein
and which was not corrected in a subsequent writing by such Shareholder prior to
or concurrently with the sale of the Registrable Securities to the Person
asserting such Loss.
c. Each indemnified party shall give prompt notice to each indemnifying party of
any action threatened or commenced against it in respect of which indemnity may
be sought hereunder, but failure to so notify an indemnifying party shall not
relieve it from any liability which it may have otherwise than on account of the
indemnity agreement provided in this Section 8. In case of any notice under this
indemnity agreement with respect to any Loss with respect to any claim made
against an indemnified Person, the indemnifying party shall be entitled to
participate at its own expense in the defense, or if it so elects within a
reasonable time after receipt of such notice, jointly with any other indemnifying
party similarly notified, to assume the defense of any such claim; but if it so
elects to assume the defense, such defense shall be conducted by counsel chosen
by the indemnifying party and approved by the indemnified party. If the
indemnifying party does not elect within a reasonable time after receipt of such
notice to assume the defense of any such claim, the indemnified party shall be
entitled to assume the control of such defense, in which case the fees and
expenses incurred by such indemnified party in the conduct of such defense,
including the reasonable fees and expenses of counsel, shall be reimbursed by the
indemnifying party as the same are incurred from time to time by such indemnified
party. If the indemnifying party elects to assume the defense and retain such
counsel, the indemnified party, shall bear the fees and expenses of any
additional counsel thereafter retained by such indemnified party; provided,
however, that such indemnified party shall have the right to employ counsel to
represent it or any Person who controls it who may be subject to liability
arising out of any action in respect of which indemnity may be ought against the
indemnifying party if, in the reasonable judgment of the indemnified party's
counsel, there may be a conflict of interest between the indemnifying party and
the indemnified party or such control Person, in which event the fees and
expenses of appropriate separate counsel shall be borne by the indemnifying
party. In no event shall an indemnifying party be liable for the fees and
expenses of more than one counsel for an indemnified party (in addition to local
counsel) in connection with any one action or separate but similar or related
actions in the same jurisdiction arising out of the same general allegations or
circumstances.
d. If the indemnification provided for in this Section 8 from the indemnifying
party is unavailable to any indemnified party hereunder in respect of any Loss
referred to herein, then the indemnifying party, in lieu of indemnifying such
indemnified party, shall contribute to the amount paid or payable by such
indemnified party as a result of such Loss in such proportion as is appropriate
to reflect the relative fault of the indemnifying party and indemnified parties
in connection with the actions which resulted in such Loss, as well as any other
relevant equitable considerations. The relative fault of such indemnifying party
and indemnified parties shall be determined by reference to, among other things,
whether any action in question, including any untrue or alleged untrue statement
of a material fact or omission or alleged omission to state a material fact, has
been made by or relates to information supplied by, such indemnifying party or
indemnified parties, and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such action; provided, however,
that in no event shall the amount contributed by such Shareholder hereunder be an
amount greater than the dollar amount of the proceeds received by such
Shareholder upon the sale of the Registrable Securities giving rise to such
contribution obligation. The amount paid or payable by a party under this Section
8 as a result of the Loss referred to above shall be deemed to include any legal
or other fees or
expenses reasonably incurred by such party in connection with any investigation
or proceeding. The parties hereto agree that it would not be just and equitable
if contribution pursuant to this Section 8(d) were determined by pro rata
allocation or by any other method of allocation which
does not take into account the equitable considerations referred to herein.
9. ACX Transferees. Any Person acquiring from the ACX Shareholders, any
Registrable Securities, except for transferees acquiring Registrable Securities
in an offering registered under the Securities Act or in a sale made pursuant to
Rule 144 under the Securities Act, may elect, within 30 days of the date of the
transfer to it of such Registrable Securities, to sign the signature page
attached hereto as Annex A and thereby become a party to this
Agreement (each such Person, upon its signature of Annex A, a "ACX Transferee").
Each such ACX Transferee shall be bound by the terms of this Agreement and shall
hold such Registrable Securities with all the rights conferred, and subject to
all obligations and restrictions imposed, hereby.
10. Covenants Relating to Rule 144 and 144A. The Company covenants that it shall
use its best efforts to file the reports required to be filed by it under the
Exchange Act and the rules and regulations of the Commission thereunder for so
long as the Company is obligated to file such reports (or, if the Company ceases
to be required to file such reports, it shall, upon the
request of any Shareholder, make publicly available other information so that
Rule 144 shall be available to Shareholders, and it shall, if feasible, take such
further action as such Shareholder may reasonably request, all to the extent
required from time to time to enable such Shareholder to sell Registrable
Securities without registration under the Securities Act within the limitation of
the exemptions provided by (a) Rule 144 or Rule 144A under the Securities Act, as
such Rules may be amended from time to time, or (b) any similar rules or
regulations hereafter adopted by the Commission. Upon the request of any
Shareholder, the Company shall deliver to such Shareholder a written statement as
to whether it has complied with such requirements.
11. Miscellaneous.
a. Remedies for breach by the Company of its obligations to register the
Registrable Securities shall be as set forth herein. Each Shareholder, in
addition to being entitled to exercise all rights provided herein or granted by
law, including recovery of damages, will be entitled to specific performance of
its rights under this Agreement. The Company agrees that
monetary damages would not be adequate compensation for any loss incurred by
reason of a breach by it of the provisions of this Agreement and hereby agrees to
waive the defense in any action for specific performance that a remedy at law
would be adequate.
b. This Agreement contains the entire understanding of the parties hereto
with respect to its subject matter. This Agreement supersedes all prior
agreements and understandings between the parties with respect to its subject
matter. This Agreement may be amended and the observance of any term of this
Agreement may be waived (either generally or in a particular instance and either
retroactively or prospectively) only by a written instrument duly executed by the
Company and each of the Shareholders.
c. All covenants and agreements in this Agreement by or on behalf of any of
the parties hereto will bind and inure to the benefit of the respective
successors and permitted assigns of the parties hereto whether so expressed or
not.
d. Whenever possible, each provision of this Agreement will be interpreted
in such manner as to be effective and valid under applicable law, but if any
provision of this Agreement is held to be prohibited by or invalid under
applicable law, such provision will be ineffective only to the extent of such
prohibition or invalidity, without invalidating the remainder of this Agreement.
e. This Agreement may be executed in two or more counterparts, any one of
which need not contain the signatures of more than one party, but all such
counterparts taken together will constitute one and the same Agreement.
f. The descriptive headings of this Agreement are inserted for convenience
only and do not constitute a part of this Agreement.
g. The interpretation and construction of this Agreement and all matters relating
hereto, shall be governed by the law of the State of Arizona without regard to
the conflicts of laws provisions of such state.
h. All notices, demands or other communications to be given or delivered
under or by reason of the provisions of this Agreement will be in writing and
will be deemed to have been given when delivered personally, by facsimile or
mailed by certified or registered mail, return receipt requested and postage
prepaid, or by courier guaranteeing overnight delivery as follows:
(i) If to the Company and Kauffman, at:
Photocomm, Inc.
7681 East Gray Road
Scottsdale, Arizona 85260
Attention: Robert R. Kauffman
FAX: (602) 483-6431
with a copy to:
Oman, Schulenburg & Politan, P.L.C.
4801 E. Greenway Road
Scottsdale, AZ S5254
Attention: Steven P. Oman
FAX: (602) 953-2900
(ii) If to the ACX Shareholders, at:
ACX Technologies, Inc.
16000 Table Mountain Parkway
Golden, CO 80403
Attention: Jill B.W. Sisson, Esq.
FAX: (303) 271-7055
with a copy to:
Holme Roberts & Owen LLP
Suite 4100, 1700 Lincoln
Denver, Colorado 80203
Attention: W. Dean Salter, Esq.
FAX: (303) 866-0200
All such notices and communications shall be deemed to have been duly given: at
the time delivered by hand, if personally delivered; four business days after
being deposited in the mail, postage prepaid, if mailed; upon confirmation of
transmission, if by facsimile transmission; and on the next business day if
timely delivered to a courier guaranteeing overnight delivery.
IN WITNESS WHEREOF, the parties have duly signed this Agreement as of the day and
year first above written.
PHOTOCOMM, INC.
By:
Name:
Title:
ACX TECHNOLOGIES, INC.
By:
Name:
Title:
Robert R. Kauffman
ANNEX A TO REGISTRATION RIGHTS AGREEMENT
THE UNDERSIGNED hereby elects to become a party to the Registration Rights
Agreement dated as of , 1996 initially between Photocomm, Inc. Golden
Technologies Inc., ACX Technologies, Inc. and Robert R. Kauffman pursuant to
Section 9 of such Agreement.
[NAME OF ACX TRANSFEREE]
By:
Title:
EXHIBIT 10.7
First
Interstate
Bank
LOAN AGREEMENT
Borrower: PHOTOCOMM, INC., AN ARIZONA CORPORATION
7681 E. Gray Road
Scottsdale, AZ 85260
Lender: First Interstate Bank of Arizona, N.A.
Metro South Business Banking Center
100 W. Washington
P.O. Box 53456, Dept. #764
Phoenix, AZ 85072~56
THIS LOAN AGREEMENT between PHOTOCOMM, INC., AN ARIZONA CORPORATION
("Borrower")
and First Interstate Bank of Arizona, X. A. ("Lender") is made and executed on
the following terms and conditions. Borrower has received prior commercial loans
from Lender or has applied to Lender for a commercial loan or loans and other
financial accommodations, including those which may be described on any exhibit
or schedule attached to this Agreement. All such loans and financial
accommodations, together with all future loans and financial accommodations from
Lender to Borrower, are referred to in this Agreement Individually as the "Loan"
end collectively as the "Loans." Borrower understands and agrees that: (a) in
granting, renewing, or extending any Loan, Lender Is relying upon Borrower's
representations, warranties, and agreements, as set forth in this Agreement; (b)
the granting, renewing, or extending of any Loan by Lender at all times shall be
subject to Lender's sole Judgment and discretion; end (c) all such Loans shall be
and shall remain subject to the following terms and conditions of this Agreement.
TERM. This Agreement shall be effective as of February 28, 1996, and shall
continue thereafter until all Indebtedness of Borrower to Lender has been
performed in full or until February 28, 1997, whichever is later.
DEFINITIONS. The following words shall have the following meanings when used in
this Agreement. Terms not otherwise defined in this Agreement
shall have the meanings attributed to such terms in the Uniform Commercial Code.
All references to dollar amounts shall mean amounts in lawful money of the United
States of America.
Agreement. The word "Agreement" means this Loan Agreement, as this Loan Agreement
may be amended or modified from time to time, together with all exhibits and
schedules attached to this Loan Agreement from time to time.
Account. The word "Account" means a trade account, account receivable, or other
right to payment for goods sold or services rendered owing to
Borrower (or to a third party grantor acceptable to Lender).
Account Debtor. The words "Account Debtor" mean the person or entity obligated
upon an Account.
Advance. The word "Advance" means a disbursement of Loan funds under this
Agreement.
Borrower. The word "Borrower" means PHOTOCOMM, INC., AN ARIZONA
CORPORATION. The
word "Borrower" also includes, as applicable,
all subsidiaries and affiliates of Borrower as provided below in the paragraph
titled "Subsidiaries and Affiliates."
Borrowing Base. The words "Borrowing Base" mean, as determined by Lender from
time to time, the lesser of (a) $1,200,000.00; or (b) 75.000% Of the aggregate
amount of Eligible Accounts.
Business Day. The words "business Day" mean a day on which commercial banks are
open for business in the State of Arizona.
CERCLA. The word "CERCLA" means the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, as amended.
Cash Flow. The words "Cash Flow" mean net income after taxes, and exclusive of
extraordinary gains and income, plus depreciation and
amortization.
Collateral. The word "Collateral" means and includes without limitation all
property and assets granted as collateral security for a Loan, whether real or
personal property, whether granted directly or indirectly, whether granted now or
in the future, and whether granted in the form of a security interest, mortgage,
deed of trust, assignment, pledge, chattel mortgage, chattel trust, factor's
lien, equipment trust, conditional sale, trust receipt, lien, charge, lien or
title retention contract, lease or consignment intended as a security device, or
any other security or lien interest whatsoever, whether created by law, contract,
or otherwise. The word "Collateral" includes without limitation all collateral
described below in the section titled
"COLLATERAL."
Debt. The word "Debt" means all of Borrower's liabilities excluding Subordinated
Debt.
Eligible Accounts. The words "Eligible Accounts" mean, at any time, all of
Borrower's Accounts which contain selling terms and conditions
acceptable to Lender. The net amount of any Eligible Account against which
Borrower may borrow shall exclude all returns, discounts, credits,
and offsets of any nature. Unless otherwise agreed to by Lender in writing,
Eligible Accounts do not include:
(a) Accounts with respect to which the Account Debtor is an officer, an employee
or agent of Borrower.
(b) Accounts with respect to which the Account Debtor is a subsidiary of, or
affiliated with or related to Borrower or its shareholders, officers, or
directors.
(c) Accounts with respect to which goods are placed on consignment, guaranteed
sale, or other terms by reason of which the payment by
the Account Debtor may be conditional.
(d) Accounts with respect to which the Account Debtor is not a resident of the
United States, except to the extent such Accounts are
supported by insurance, bonds or other assurances satisfactory to Lender.
(e) Accounts with respect to which Borrower is or may become liable to the
Account Debtor for goods sold or services rendered by the
Account Debtor to Borrower.
(f) Accounts which are subject to dispute, counterclaim, or setoff.
(g) Accounts with respect to which the goods have not been shipped or delivered,
or the services have not been rendered, to the Account
Debtor.
(h) Accounts with respect to which Lender, in its sole discretion, deems the
creditworthiness or financial condition of the Account Debtor to
be unsatisfactory.
(i) Accounts of any Account Debtor who has filed or has had filed against it a
petition in bankruptcy or an application for relief under any provision of any
state or federal bankruptcy, insolvency, or debtor-in-relief acts; or who has had
appointed a trustee, custodian, or receiver for the assets of such Account
Debtor; or who has made an assignment for the benefit of creditors or has become
insolvent or fails generally to pay its debts (including its payrolls) as such
debts become due.
g) Accounts with respect to which the Account Debtor is the United States
government or any department or agency of the United States
(k) Accounts which have not been paid in full within 90 days from the invoice
date.
(I) That portion of the Accounts of any single Account Debtor which exceeds
10.000% of all of Borrower's Accounts.
(m) The entire balance of any Account of any single Account Debtor will be
ineligible whenever the portion of the Account over 90 days from
the invoice date is in excess of 25.000% of the total amount outstanding on the
Account.
ERISA. The word "ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
Event of Default. The words "Event of Default" mean and include without
limitation any of the Events of Default set forth below in the section titled
"EVENTS OF DEFAULT."
Expiration Date. The words "Expiration Date" mean the earlier of February 28,
1997 or the date of termination of Lender's commitment to lend under this
Agreement.
Grantor. The word "Grantor" means and includes without limitation each and all of
the persons or entities granting a Security Interest in any
Collateral for the Indebtedness, including without limitation all Borrowers
granting such a Security Interest.
Guarantor. The word "Guarantor" means and includes without limitation each and
all of the guarantors, sureties, and accommodation parties in
connection with any Indebtedness.
Indebtedness. The word "Indebtedness" means and includes without limitation all
Loans, together with all other obligations, debts and liabilities of Borrower to
Lender, or any one or more of them, as well as all claims by Lender against
Borrower, or any one or more of them; whether now or hereafter existing,
voluntary or involuntary, due or not due, absolute or contingent, liquidated or
unliquidated; whether Borrower may be liable individually or jointly with others;
whether Borrower may be obligated as a guarantor, surety, or otherwise; whether-
recovery upon such indebtedness may be or hereafter may become barred by any
statute of limitations; and whether such Indebtedness may be or hereafter may
become otherwise unenforceable.
Lender. The word "Lender" means First Interstate Bank of Arizona, N. A., its
successors and assigns.
Line of Credit. The words "Line of Credit" mean the credit facility described in
the Section titled "LINE OF CREDIT" below.
Liquid Assets. The words "Liquid Assets" mean Borrower's cash on hand plus
Borrower's receivables.
Loan. The word "Loan" or loans" means and includes without limitation any and all
commercial loans and financial accommodations from
Lender to Borrower, whether now or hereafter existing, and however evidenced,
including without limitation those loans and financial
accommodations described herein or described on any exhibit or schedule attached
to this Agreement from time to time.
Note. The word "Note" means and includes without limitation Borrower's promissory
note or notes, it any, evidencing Borrower's Loan obligations
in favor of Lender, as well as any substitute, replacement or refinancing note or
notes therefor.
Permitted Liens. The words "Permitted Liens" mean: (a) liens and security
interests securing Indebtedness owed by borrower to Lender; (b)
liens for taxes, assessments, or similar charges either not yet due or being
contested in good faith; (c) liens of materialmen, mechanics,
warehousemen, or carriers, or other like liens arising in the ordinary course of
business and securing obligations which are not yet delinquent; (d) purchase
money liens or purchase money security interests upon or in any property acquired
or held by Borrower in the ordinary course of business to secure indebtedness
outstanding on the date of this Agreement or permitted to be incurred under the
paragraph of this Agreement titled "Indebtedness and Liens"; (e) liens and
security interests which, as of the date of this Agreement, have been disclosed
to and approved by the Lender in writing; and (f) those liens and security
interests which in the aggregate constitute an immaterial and insignificant
monetary amount with respect to the net value of Borrower's assets.
Related Documents. The words "Related Documents" mean and include without
limitation all promissory notes, credit agreements, loan
agreements, environmental agreements, guaranties, security agreements, mortgages,
deeds of trust, and all other instruments, agreements and
documents, whether now or hereafter existing, executed in connection with the
Indebtedness.
Security Agreement. The words "Security Agreement" mean and include without
limitation any agreements, promises, covenants, arrangements,
understandings or other agreements, whether created by law, contract, or
otherwise, evidencing, governing, representing, or creating a Security
interest.
Security Interest. The words "Security Interest" mean and include without
limitation any type of collateral security, whether in the form of a lien,
charge, mortgage, deed of trust, assignment, pledge, chattel mortgage, chattel
trust, factor's lien, equipment trust, conditional sale, trust receipt, lien or
title retention contract, lease or consignment intended as a security device, or
any other security or lien interest whatsoever, whether created by law,
contract, or otherwise.
SARA. The word "SARA" means the Superfund Amendments and Reauthorization Act of
t986 as now or hereafter amended.
Subordinated Debt. The words "Subordinated Debt" mean indebtedness and
liabilities of Borrower which have been subordinated by written
agreement to indebtedness owed by Borrower to Lender in form and substance
acceptable to Lender.
Tangible Net Worth. The words "Tangible Net Worth" mean Borrower's total assets
excluding all intangible assets (i.e., goodwill, trademarks,
patents, copyrights, organizational expenses, and similar intangible items, but
including leaseholds and leasehold improvements) less total Debt.
Working Capital. The words "Working Capital" mean Borrower's current assets,
excluding prepaid expenses, less Borrower's current liabilities.
LINE OF CREDIT. Lender agrees to make Advances to Borrower from time to time
from the date of this Agreement to the Expiration Date, provided
the aggregate amount of such Advances outstanding at any time does not exceed the
Borrowing Base. Within the foregoing limits, Borrower may
borrow, partially or wholly prepay, and reborrow under this Agreement as follows.
Conditions Precedent to Each Advance. Lender's obligation to make any Advance to
or for the account of Borrower under this Agreement is
subject to the following conditions precedent, with all documents, instruments,
opinions, reports, and other items required under this Agreement to be in form
and substance satisfactory to Lender:
(a) Lender shall have received evidence that this Agreement and all Related
Documents have been duly authorized, executed, and delivered
by Borrower to Lender.
(b) Lender shall have received such opinions of counsel, supplemental opinions,
and documents as Lender may request.
(c) The security interests in the Collateral shall have been duly authorized,
created, and perfected with first lien priority and shall be in full force and
effect.
(d) All guaranties required by Lender for the Line of Credit shall have been
executed by each Guarantor, delivered to Lender, and be in full force and effect.
(e) Lender, at its option and for its sole benefit, shall have conducted an audit
of Borrower's Accounts, books, records, and operations, and Lender shall be
satisfied as to their condition.
(f) Borrower shall have paid to Lender all fees, costs, and expenses specified in
this Agreement and the Related Documents as are then and payable.
(g) There shall not exist at the time of any Advance a condition which would
constitute an Event of Default under this Agreement, and Borrower shall have
delivered to Lender the compliance certificate called for in the paragraph below
titled "Compliance Certificate."
Making Loan Advances. Advances under the credit facility, as well as directions
for payment from Borrower's accounts, may be requested orally or in writing by
authorized persons. Lender may, but need not, require that all oral requests be
confirmed in writing. Each Advance shall be conclusively deemed to have been made
at the request of and for the benefit of Borrower (a) when credited to any
deposit account of Borrower maintained with lender or (b) when advanced in
accordance with the instructions of an authorized person. Lender, at its Option,
may set a cutoff time, after which all requests for Advances will be treated as
having been requested on the next succeeding Business Day.
Mandatory Loan Repayments. If at any time the aggregate principal amount of the
outstanding Advances shall exceed the applicable Borrowing Base, Borrower,
immediately upon written or oral notice from Lender, shall pay to Lender an
amount equal to the difference between the outstanding principal balance of the
Advances and the Borrowing Base. On the Expiration Date, Borrower shall pay to
Lender in full the aggregate unpaid principal amount of all Advances then
outstanding and a(l accrued unpaid interest, together with all other applicable
fees, costs and charges, if any, not yet paid.
Loan Account. Lender shall maintain on its books a record of account in which
lender shall make entries for each Advance and such other debits and credits as
shall be appropriate in connection with the credit facility. Lender shall provide
Borrower with periodic statements of Borrower's account, which statements shall
be considered to be correct and conclusively binding on Borrower Unless Borrower
notifies Lender to the contrary within thirty (30) days after Borrower's receipt
of any such statement which Borrower deems to be incorrect.
COLLATERAL. To secure payment of the Line of Credit and performance of all other
Loans, obligations and duties owed by Borrower to Lender, Borrower (and others,
if required) shall grant to Lender Security Interests in such property and assets
as Lender may require (the "Collateral"), including without limitation
Borrower's present and future Accounts and general intangibles. Lenders Security
Interests in the Collateral shall be continuing liens and shall include the
proceeds and products of the Collateral, including without limitation the
proceeds of any insurance. With respect to the Collateral, Borrower agrees and
represents and warrants to Lender:
Perfection of Security Interests. Borrower agrees to execute such financing
statements and to take whatever other actions are requested by Lender to perfect
and continue Lender's Security Interests in the Collateral. Upon request of
Lender, Borrower will deliver to Lender any and all of the documents
evidencing or constituting the Collateral, and Borrower will note lender's
interest upon any and all chattel paper if not delivered to Lender for possession
by Lender. Contemporaneous with the execution of this Agreement, Borrower will
execute one or more UCC financing statements and any similar statements as may be
required by applicable law, and will file such financing statements and all such
similar statements in the appropriate location or locations. Borrower hereby
appoints Lender as its irrevocable attorney-in-fact for the purpose of executing
any documents necessary to perfect or to continue any Security Interest. Lender
may at any time, and without further authorization from Borrower, file a carbon,
photograph, facsimile, or other reproduction of any financing statement for use
as a financing statement. Borrower will reimburse Lender for all expenses for the
perfection, termination, and the continuation of the perfection of Lender's
security interest in the Collateral. Borrower promptly will notify Lender of
any change in Borrower's name including any change to the assumed business names
of Borrower. Borrower also promptly will notify Lender of any change in
Borrower's Social Security Number or Employer Identification Number. Borrower
further agrees to notify Lender in writing prior to any change in address or
location of Borrower's principal governance office or should Borrower merge or
consolidate with any other entity.
Collateral Records. Borrower does now, and at all times hereafter shall, keep
correct and accurate records of the Collateral, all of which records shall be
available to Lender or Lender's representative upon demand for inspection and
copying at any reasonable time. With respect to the Accounts, Borrower agrees to
keep and maintain such records as Lender may require, including without
limitation information concerning Eligible Accounts and Account balances and
agings.
Collateral Schedules, Concurrently with the execution and delivery of this
Agreement, Borrower shall execute and deliver to Lender a schedule of Accounts
and Eligible Accounts, in form and substance satisfactory to the Lender.
Thereafter and at such frequency as Lender shall require, Borrower shall execute
and deliver to Lender such supplemental schedules of Eligible Accounts and such
other matters and information relating to
Borrower's Accounts as Lender may request.
Representations and Warranties Concerning Accounts. With respect to the Accounts,
Borrower represents and warrants to Lender: (a) Each Account represented by
Borrower to be an Eligible Account for purposes of this Agreement conforms to the
requirements of the definition of an Eligible Account; (b) All Account
information listed on schedules delivered to Lender will be true and correct,
subject to immaterial variance; and (c) Lender, its assigns, or agents shall have
the right at any time and at Borrower's expense to inspect, examine, and audit
Borrower's records and to confirm with Account Debtors the accuracy of such
Accounts.
REPRESENTATIONS AND WARRANTIES. Borrower represents and warrants to Lender, as
of
the date of this Agreement, as of the date of each disbursement of Loan proceeds,
as of the date of any renewal, extension or modification of any Loan, and at all
times any Indebtedness exists:
Organization. Borrower is a corporation which is duly organized, validly
existing, and in good standing under the laws of the State of Arizona and is
validly existing and in good standing in all states in which Borrower is doing
business. Borrower has the full power and authority to own its properties and to
transact the businesses in which it is presently engaged or presently proposes to
engage. Borrower also is duly qualified as a foreign corporation and is in good
standing in all states in which the failure to so qualify would have a material
adverse effect on its businesses or financial condition.
Authorization. The execution, delivery, and performance of this Agreement and all
Related Documents by Borrower, to the extent to be executed, delivered or
performed by Borrower, have been duly authorized by all necessary action by
Borrower; do not require the consent or approval of any other person, regulatory
authority or governmental body; and do not conflict with, result in a violation
of, or constitute a default under (a) any provision of its articles of
incorporation or organization, or bylaws, or any agreement or other instrument
binding upon Borrower or {b) any law, governmental regulation, court decree, or
order applicable to Borrower.
Financial Information. Each financial statement of Borrower supplied to Lender
truly and completely disclosed Borrower's financial condition as of the date of
the statement, and there has been no material adverse change in Borrower's
financial condition subsequent to the date of the most recent financial statement
supplied to Lender. Borrower has no material contingent obligations except as
disclosed in such financial statements.
Legal Effect. This Agreement constitutes, and any instrument or agreement
required hereunder to be given by Borrower when delivered will constitute, legal,
valid and binding obligations of Borrower enforceable against Borrower in
accordance with their respective terms.
Properties. Except far Permitted Liens, Borrower owns and has good title to all
of Borrower's properties free and clear of a(l Security Interests, and has not
executed any security documents or financing statements relating to such
properties, All of Borrower's properties are titled in Borrower's legal name, and
Borrower has not used, or filed a financing statement under, any other name for
at least the last five (5) years.
Hazardous Substances. The terms "hazardous waste," "hazardous substance,"
"disposal," "release," and "threatened release," as used in this Agreement, shall
have the same meanings as set forth in the "CERCLA," "SARA," the Hazardous
Materials Transportation Act, 49 U.S.C. Section 1801, et seq., the Resource
Conservation and Recovery Act, 49 U.S.C. Section 6901, et seq., or other
applicable state or Federal laws, rules, or regulations adopted pursuant to any
of the foregoing. Except as disclosed to and approved by Lender in writing,
Borrower represents and warrants that: (a) During the period of Borrower's
ownership of the properties, there has been no use, generation, manufacture,
storage, treatment, disposal, release or threatened release of any hazardous
waste or substance by any person on, under, or about any of the properties. (b)
Borrower has no knowledge of, or reason to believe that there has been (i) any
use, generation, manufacture, storage, treatment, disposal, release, or
threatened release of any hazardous waste or substance by any prior owners or
occupants of any of the properties, or (ii) any actual or threatened litigation
or claims of any kind by any person relating to such matters. (c) Neither
Borrower nor any tenant, contractor, agent or other authorized user of any of the
properties shall use, generate, manufacture, store, treat, dispose of, or release
any hazardous waste or substance on, under, or about any of the properties; and
any such activity shall be conducted in compliance with all applicable federal,
state, and local laws, regulations, and ordinances, Including without limitation
those laws, regulations and ordinances described above. Borrower authorizes
Lender and its agents to enter upon the properties to make such inspections and
tests as Lender may deem appropriate to determine compliance of the properties
with this section of the Agreement, Any inspections or tests made by Lender shall
be at Borrower's expense and for Lender's purposes only and shall not be
construed to create any responsibility or liability on the part of Lender to
Borrower or to any other person. The representations and warranties contained
herein are based on Borrower's due diligence in investigating the properties for
hazardous waste. Borrower hereby (a) releases and waives any future claims
against Lender for indemnity or contribution in the event Borrower becomes liable
for cleanup or other costs under any such laws, and (b) agrees to indemnify and
hold harmless lender against any and all claims, losses, liabilities, damages,
penalties, and expenses which Lender may directly or indirectly sustain or suffer
resulting from a breach of this section of the Agreement or as a consequence of
any use, generation, manufacture, storage, disposal, release or threatened
release occurring prior to Borrower's ownership or interest in the properties,
whether or not the same was or should have been known to Borrower. The provisions
of this section of the Agreement, including the obligation to indemnify, shall
survive the payment of the Indebtedness and the termination or expiration of this
Agreement and shall not be affected by Lender's acquisition of any interest in
any of the properties, whether by foreclosure or otherwise.
Litigation and Claims. No litigation, claim, investigation, administrative
proceeding or similar action (including those for unpaid taxes) against Borrower
is pending or threatened, and no other event has occurred which may materially
adversely affect Borrower's financial condition or properties, other than
litigation, claims, or other events, if any, that have been disclosed to and
approved by Lender in writing.
Taxes. To the best of Borrower's knowledge, all tax returns and reports of
Borrower that are or were required to be filed, have been filed, and all taxes,
assessments and other governmental charges have been paid in full, except those
presently being or to be contested by Borrower in good faith in the ordinary
course of business and for which adequate reserves have been provided.
Lien Priority. Unless otherwise previously disclosed to Lender in writing,
Borrower has not entered into or granted any Security Agreements, or permitted
the filing or attachment of any Security Interests on or affecting any of the
Collateral directly or indirectly securing repayment of Borrower's Loan and Note,
that would be prior or that may in any way be superior to Lender's Security
Interests and rights in and to such Collateral.
Binding Effect. This Agreement, the Note, all Security Agreements directly or
indirectly securing repayment of Borrower's Loan and Note and all of the Related
Documents are binding upon Borrower as well as upon Borrower's successors,
representatives and assigns, and are legally enforceable in accordance with their
respective terms.
Commercial Purposes. Borrower intends to use the Loan proceeds solely for
business or commercial related purposes.
Employee Benefit Plans. Each employee benefit plan as to which Borrower may have
any liability complies in all material respects with all applicable requirements
of law and regulations, and (i) no Reportable Event nor Prohibited Transaction
(as defined in ERISA) has occurred with respect to any such plan, (ii) Borrower
has not withdrawn from any such plan or initiated steps to do so, and (iii) no
steps have been taken to terminate any such plan.
Location of Borrower's Offices and Records. Borrower's place of business, or
Borrower's Chief executive office, if Borrower has more than one place of
business, is located at 7681 E. Gray Road, Scottsdale, AZ 85260. Unless Borrower
has designated otherwise in writing this location is also the office or offices
where Borrower keeps its records concerning the Collateral.
Information. All information heretofore or contemporaneously herewith furnished
by Borrower to Lender for the purposes of or in connection with this Agreement or
any transaction contemplated hereby is, and all information hereafter furnished
by or on behalf of Borrower to Lender will be, true and accurate in every
material respect on the date as of which such information is dated or certified;
and none of such information is or will be incomplete by omitting to state any
material fact necessary to make such information not misleading.
Survival of Representations and Warranties. Borrower understands and agrees that
Lender, without independent investigation, is relying upon the above
representations and warranties in extending Loan Advances to Borrower. Borrower
further agrees that the foregoing representations and warranties shall be
continuing in nature and shall remain in full force and effect until such time as
Borrower's Indebtedness shall be paid in full, or until this Agreement shall be
terminated in the manner provided above, whichever is the last to occur.
AFFIRMATIVE COVENANTS. Borrower covenants and agrees with Lender that, while this
Agreement is in effect, Borrower will:
Litigation. Promptly inform Lender in writing of (a) all material adverse changes
in Borrower's financial condition, and (b) all existing and all threatened
litigation, claims, investigations, administrative proceedings or similar actions
affecting Borrower or any Guarantor which could materially affect the financial
condition of Borrower or the financial condition of any Guarantor.
Financial Records. Maintain its books and records in accordance with generally
accepted accounting principles, applied on a consistent basis, and permit Lender
to examine and audit Borrower's books and records at all reasonable times.
Financial Statements. Furnish Lender with, as soon as available, but in no event
later than ninety (90) days after the end of each fiscal year, Borrower's balance
sheet and income statement for the year ended, audited by a certified public
accountant satisfactory to Lender, and, as soon as available, but in no event
later than forty five (45) days after the end of each month, Borrower's balance
sheet and profit and loss statement for
the period ended, prepared and certified as correct to the best knowledge and
belief by Borrower's chief financial officer or other officer or person
acceptable to Lender. All financial reports required to be provided under this
Agreement shall be prepared in accordance with generally accepted accounting
principles, applied on a consistent basis, and certified by Borrower as being
true and correct.
Additional Information. Furnish such additional information and statements, lists
of assets and liabilities, agings of receivables and payables. inventory
schedules, budgets, forecasts, tax returns, and other reports with respect to
Borrower's financial condition and business operations as
Lender may request from time to time.
Financial Covenants and Ratios. Comply with the following covenants and ratios:
Tangible Net Worth. Maintain a minimum Tangible Net Worth of not less than
$5,500,000.00.
Net Worth Ratio. Maintain a ratio of Total Liabilities to Tangible Net Worth of
less than 1.00 to 1.00.
Current Ratio. Maintain a ratio of Current Assets to Current
Liabilities in excess of 1.50 to 1.00.
The following provisions shall apply for purposes of determining compliance with
the foregoing financial covenants and ratios: to be measured on a quarterly
basis. Except as provided above, all computations made to determine compliance
with the requirements contained in this paragraph shall be made in accordance
with generally accepted accounting principles, applied on a consistent basis, and
certified by Borrower as being true and correct.
Insurance. Maintain fire and other risk insurance, public liability insurance,
and such other insurance as Lender may require with respect to Borrower's
properties and operations, in form, amounts, coverages and with insurance
companies reasonably acceptable to Lender. Borrower, upon request of Lender, will
deliver to Lender from time to time the policies or certificates of insurance in
form satisfactory to Lender, including stipulations that coverages will not be
canceled or diminished without at Least ten (10) days' prior written notice to
Lender. Each insurance policy also shall include an endorsement providing that
coverage in favor of Lender will not be impaired in any way by any act, omission
or default of Borrower or any other person. In connection with all policies
covering assets in which Lender holds or is offered a security interest for the
Loans, Borrower will provide Lender with such loss payable or other endorsements
as Lender may require.
Insurance Reports. Furnish to Lender, upon request of Lender, reports on each
existing Insurance policy showing such information as Lender may reasonably
request, including without limitation the following: (a) the name of the insurer;
(b) the risks insured; (c) the amount of the policy; (d) the properties insured;
(e) the then current property values on the basis of which insurance has been
obtained, and the manner of determining those values; and (f) the expiration date
of the policy. In addition, upon request of the lender (however not more often
than annually), Borrower will have an independent appraiser satisfactory to
Lender determine, as applicable, the actual cash value or replacement cost of any
Collateral. The cost of such appraisal shall be paid by Borrower.
Other Agreements. Comply with all terms and conditions of all other agreements,
whether now Or hereafter existing, between Borrower and any other party and
notify Lender immediately in writing of any default in connection with any other
such agreements.
Loan Fees and Charges. In addition to all other agreed upon fees and charges, pay
the following: So long as Lender shell have any obligation to extend or continue
credit to Borrower in any form, Borrower shall pay to Lender, on the lest day of
each quarter, e
nonrefundable loan fee in the amount of one half of one percent (.50%) of the
coverage unused balance of the Loan during the preceding year.
Loan Proceeds. Use all Loan proceeds solely for Borrower's business operations,
unless specifically consented to the contrary by Lender in writing.
Taxes, Charges and Liens. Pay and discharge when due all of its indebtedness and
obligations, including without limitation all assessments, taxes, governmental
charges, levies and liens, of every kind and nature, imposed upon Borrower or its
properties, income, or profits, prior to the date on which penalties would
attach, and all lawful claims that, if unpaid, might become a lien or charge upon
any of Borrower's properties, income, or profits. Provided however, Borrower will
not be required to pay and discharge any such assessment, tax, charge, levy, lien
or claim so long as (a) the legality of the same shall be contested in good faith
by appropriate proceedings, and (b) Borrower shall have established on its books
adequate reserves with respect to such contested assessment, tax, charge, levy,
lien, or claim in accordance with generally accepted accounting practices.
Borrower, upon demand of Lender, will furnish to Lender evidence of payment of
the assessments, taxes, charges, levies, liens and claims and will authorize the
appropriate governmental official to deliver to Lender at any time a written
statement of any assessments, taxes, charges, levies, liens and claims against
Borrower's properties, income, or profits.
Performance. Perform and comply with all terms, conditions, and provisions set
forth in this Agreement and in the Related Documents in a timely manner, and
promptly notify Lender if Borrower learns of the occurrence of any event which
constitutes an Event of Default under this Agreement or under any of the Related
Documents.
Operations. Maintain executive and management personnel with substantially the
same qualifications and experience as the present executive and management
personnel; provide written notice to Lender of any change in executive and
management personnel; conduct its business affairs in a reasonable and prudent
manner and in compliance with all applicable federal, state and municipal laws,
ordinances, rules and regulations
respecting its properties, charters, businesses and operations, including without
limitation, compliance with the Americans With Disabilities Act and with all
minimum funding standards and other requirements of ERISA and other laws
applicable to Borrower's employee benefit plans.
Inspection. Permit employees or agents of Lender at any reasonable time to
inspect any and all Collateral for the Loan or Loans and Borrower's other
properties and to examine or audit Borrower's books, accounts, and records and to
make copies and memoranda of Borrower's books, accounts, and records. If Borrower
now or at any time hereafter maintains any records (including without limitation
computer generated records and computer software programs for the generation of
such records) in the possession of a third party, Borrower, upon request of
Lender, shall notify such party to permit Lender free access to such records at
all reasonable times and to provide Lender with copies of any records it may
request, all at Borrower's expense.
Compliance Certificate. Unless waived in writing by Lender, provide Lender within
45 days of quarter end and at the time of each disbursement of Loan proceeds with
a certificate executed by Borrower's chief financial officer, or other officer or
person acceptable to Lender, certifying that the representations and warranties
set forth in this Agreement are true and correct as of the date of the
certificate and further certifying that, as of the date of the certificate, no
Event of Default exists under this Agreement.
Environmental Compliance and Reports. Borrower shall comply in all respects with
all environmental protection federal, state and local laws, statutes, regulations
and ordinances; not cause or permit to exist, as a result of an intentional or
unintentional action or omission on its part or on the part of any third party,
on property owned and/or occupied by Borrower, any environmental activity where
damage may result to the environment, unless such environmental activity is
pursuant to and in compliance with the conditions of a permit issued by the
appropriate federal, state or local governmental authorities; shall furnish to
Lender promptly and in any event within thirty (30) days after receipt thereof a
copy of any notice, summons, lien, citation, 02-28-1996 directive, letter or
other communication from any governmental agency or instrumentality concerning
any intentional or unintentional action or omission on Borrower's part in
connection with any environmental activity whether or not there is damage to the
environment and/or other natural resources.
Additional Assurances. Make, execute and deliver to Lender such promissory notes,
mortgages, deeds of trust, security agreements, financing statements,
instruments, documents and other agreements as Lender or its attorneys may
reasonably request to evidence and secure the Loans and to perfect all Security
Interests.
RECOVERY Of ADDITIONAL COSTS. If the imposition of or any change in any law,
rule, regulation or guideline, or the interpretation or application of any
thereof by any court or administrative or governmental authority (including any
request or policy not having the force of law) shall impose, modify or make
applicable any taxes (except U.S. federal, state or local income or franchise
taxes imposed on Lender), reserve requirements, capital adequacy requirements or
other obligations which would (a) increase the cost to Lender for extending or
maintaining the credit facilities to which this Agreement relates, (b) reduce the
amounts payable to Lender under this Agreement or the Related Documents, or (c)
reduce the rate of return on Lender's Capitol
as a consequence of Lender's obligations with respect to the credit facilities to
which this Agreement relates, then Borrower agrees to pay Lender such additional
amounts as will compensate Lender therefor, within five (5) days after Lender's
written demand for such payment, which demand shall be accompanied by an
explanation of such imposition or charge and a calculation in reasonable detail
of the additional amounts payable by Borrower,
which explanation and calculations shall be conclusive in the absence of manifest
error.
NEGATIVE COVENANTS. Borrower covenants and agrees with Lender that while this
Agreement is in effect, Borrower shall not, without the prior written consent of
Lender:
Indebtedness and Liens. (a) Except for trade debt incurred in the normal course
of business and indebtedness to Lender contemplated by this Agreement, create,
incur or assume indebtedness for borrowed money, including capital leases, (b)
except as allowed as a Permitted Lien, sell, transfer, mortgage, assign, pledge,
lease, grant a security interest in, or encumber any of Borrower's assets, or (c)
sell with recourse any of Borrower's accounts, except to Lender.
Continuity of Operations. (a) Engage in any business activities substantially
different than those in which Borrower is presently engaged, (b) cease
operations, liquidate, merge, transfer, acquire or consolidate with any other
entity, change ownership, change its name, dissolve or transfer or sell
Collateral out of the ordinary course of business, (c) pay any dividends on
Borrower's stock (other than dividends payable in its stock),
provided, however that notwithstanding the foregoing, but only so long as no
Event of Default has occurred and is continuing or would result from the payment
of dividends, if Borrower is a "Subchapter S Corporation" (as defined in the
Internal Revenue Code of 1986, as amended), Borrower may pay cash dividends on
its stock to its shareholders from time to time in amounts necessary to enable
the shareholders to pay income taxes and make estimated income tax payments to
satisfy their liabilities under federal and state law which arise solely from
their status as Shareholders of a Subchapter S Corporation because of their
ownership of shares of stock of Borrower, or (d) purchase or retire any of
Borrower's outstanding shares or alter or amend Borrower's capital structure.
Loans, Acquisitions end Guaranties. (a) Loan, invest in or advance money or
assets, (b) purchase, create or acquire any interest in any other enterprise or
entity, or (c) incur any obligation as surety or guarantor other than in the
ordinary course of business.
CESSATION OF ADVANCES. If Lender has made any commitment to make any Loan to
Borrower, whether under this Agreement or under any other agreement, Lender shall
have no obligation to make Loan Advances or to disburse Loan proceeds if: (a)
borrower or any Guarantor is in default under the terms of this Agreement or any
of the Related Documents or any other agreement that Borrower or any Guarantor
has with Lender, or the occurrence of any event or condition which after notice
or the passage of time would constitute an Event of Default; (b) Borrower or any
Guarantor becomes insolvent, files a petition in bankruptcy or similar
proceedings, or is adjudged a bankrupt; (c) there occurs a material adverse
change in Borrower's financial condition, in the financial condition of any
Guarantor, or in the value of any Collateral securing any Loan; (d) any Guarantor
seeks, claims or otherwise attempts to limit, modify or revoke such Guarantor's
guaranty of the Loan or any other loan with Lender; or (e) Lender in good faith
deems itself insecure, even though no Event of Default shall have occurred.
AGING AND LISTING OF ACCOUNTS RECEIVABLE AND PAYABLE. Borrower
covenants and
agrees with Lender that, while this Agreement is in
effect, Borrower shall deliver to Lender within thirty(30) days after the end of
each month, a detailed aging of Borrower's accounts and contracts receivable and
accounts payable as of the last day of that month, together with an explanation
of any adjustments made at the end of that month, all in a form acceptable to
Lender.
BORROWING BASE CERTIFICATE. Unless waived in writing by Lender, Borrower agrees
to provide Lender with a Borrower's Certificate within thirty (30) days of month
end. Each "Borrower's Certificate" shall be in a form acceptable to Lender duly
executed by Borrower and detailing the status of the Line of Credit as of the
date of thereon.
ADDITIONAL PROVISIONS. Borrower covenants and agrees with Lender that, while this
Agreement is in effect, Borrower will deliver to Lender quarterly 10-Q reports
within 45 days of quarter end and Borrower's annual report and 10-K within 90
days of fiscal year end.
ADDITIONAL DEFINITION. Times Fixed Charge Coverage. The words "Times Fixed
Charge Coverage" mean the trailing twelve month cash flow (i.e., net income plus
depreciation plus interest expense) divided by current maturities of long term
debt plus interest expense.
Current Assets. The words "Current Assets" mean Borrower's cash on hand plus
Borrower's receivables plus inventory.
Current Liabilities. The words "Current Liabilities" mean all Borrower's notes
payable plus Borrower's accounts payable plus Borrower's income taxes payable
plus Borrower's accruals plus Borrower's current portion of long term debt.
Current Ratio. The words "Current Ratio" mean Borrower's total Current Assets
divided by Borrower's total Current Liabilities.
Additional AFFIRMATIVE COVENANTS. Borrower covenants and agrees with Lender that,
while this Agreement is in effect, Borrower will comply with the following ratio:
Times Fixed Charge Coverage. Maintain a ratio of 1.50 to 1.00 measured on a
quarterly basis.
SUBLIMlT FOR LETTERS OF CREDIT. Subject to the terms of this Agreement/Promissory
Note, Lender will issue commercial letters of credit ("Letter of Credit") on
behalf of Borrower to support Borrower's purchases of inventory or for other
business purposes agreed to by Lender. Up to $450,000.00 of credit under the Line
of Credit will be available to Borrower for issuance by Lender of letters of
credit, subject to documentation acceptable to
Lender; provided that in no event shall the entire amount of credit under the
Line of Credit, including the face amount of such letters of credit, exceed
$1,200,000.00.
RIGHT OF SETOFF. Borrower grants to Lender a contractual possessory security
interest in, and hereby assigns, conveys, delivers, pledges, and transfers to
Lender all Borrower's right, title and interest in and to, Borrower's accounts
with Lender (whether checking, savings, or some other account), including without
limitation all accounts held jointly with someone else and all accounts Borrower
may open in the future, excluding however all IRA, Keogh, and trust accounts.
Borrower authorizes Lender, to the extent permitted by applicable law, to charge
or setoff all sums owing on the Indebtedness against any and all such accounts.
EVENTS OF DEFAULT. Each of the following shall constitute an Event of Default
under this Agreement: Default on Indebtedness. Failure of Borrower to make any
payment when due on the Loans.
Other Defaults. Failure of Borrower or any Grantor to comply with or to perform
when due any other term, obligation, covenant or condition contained in this
Agreement or in any of the Related Documents, or failure of Borrower to comply
with or to perform any other term, obligation covenant or condition contained
in any other agreement between Lender and Borrower.
Default In Favor of Third Parties. Should borrower or any Grantor default under
any loan, extension of credit, security agreement, purchase or sales agreement,
or any other agreement, in favor of any other creditor or person that may
materially affect any of Borrower's property or Borrower's or any Grantor's
ability to repay the Loans or perform their respective obligations under this
Agreement or any of the related Documents.
False Statements. Any warranty, representation or statement made or furnished to
Lender by or on behalf of Borrower or any Grantor under this Agreement or the
Related Documents is false or misleading in any material respect at the time made
or furnished, or becomes false or misleading at any time thereafter.
Defective Collateralization. This Agreement or any of the Related Documents
ceases to be in full force and effect (including failure of any Security
Agreement to create a valid and perfected Security Interest) at any time and for
any reason.
Insolvency. The dissolution or termination of Borrower's existence as a going
business, the insolvency of Borrower, the appointment of a receiver for any part
of Borrower's property, any assignment for the benefit of creditors, any type of
creditor workout, or the commencement Of any proceeding under any bankruptcy or
insolvency laws by or against Borrower.
Creditor or Forfeiture Proceedings. Commencement of foreclosure or forfeiture
proceedings, whether by judicial proceeding, self-help, repossession or any other
method, by any creditor of Borrower, any creditor of any Grantor against any
collateral securing the Indebtedness, or by any governmental agency. This
includes a garnishment, attachment, or levy on or of any of Borrower's deposit
accounts with Lender. However, this Event of Default shall not apply if there is
a good faith dispute by Borrower or Grantor, as the case may be, as to the
validity or reasonableness of the claim which is the basis of the creditor or
forfeiture proceeding, and if Borrower or Grantor gives Lender written notice of
the creditor of forfeiture proceeding and furnishes reserves or a surety bond for
the creditor or forfeiture proceeding satisfactory to Lender.
Events Affecting Guarantor. Any of the preceding events occurs with respect to
any Guarantor of any of the Indebtedness or any Guarantor dies or becomes
incompetent, or revokes or disputes the validity of, or liability under, any
Guaranty of the indebtedness. Lender, at its option, may, but shall not be
required to, permit the Guarantor's estate to assume conditionally the
obligations arising under the guaranty in a manner satisfactory to Lender, and,
in doing so, cure the Event of Default.
Change In Ownership. Any change in ownership of twenty-five percent (25%) or more
of the common stock of Borrower.
Adverse Change. A material adverse change occurs in Borrower's financial
condition, or Lender believes the prospect of payment or performance of the
Indebtedness is impaired.
Insecurity. Lender, in good faith, deems itself insecure.
Cure Periods. Prior to exercising any right or remedy by Lender, unless a
different grace period is provided in this Agreement, Lender shall give written
notice of any default upon which such right or remedy is dependent, so long as
Lender has not provided notice of a similar default within the previous twelve
months, and, if such default is of a nature that can be cured by Borrower, allow
the following time periods for such correction:
(a) If the default relates to the nonpayment of money, ten days;
(b) If the default relates to the nonperformance of any covenant herein made, or
the existence of any condition that may be cured by Borrower, other than the
nonpayment of money, fifteen days.
No notice need to be given or period for cure allowed by Lender for breach of any
warranty or representation when made or in the event of any insolvency, or in the
event of administration of property in any legal or equitable proceeding of any
kind, including, without limitation, any proceeding under federal bankruptcy law
or any other similar statute now or hereafter in effect, or in the event of any
other default that Lender reasonably determines to be of a nature beyond
Borrower's reasonable power to correct.
EFFECT OF AN EVENT OF DEFAULT. If any Event of Default shall occur, except where
otherwise provided in this Agreement or the Related Documents, all commitments
and obligations of Lender under this Agreement or the Related Documents or any
other agreement immediately will terminate (including any obligation to make Loan
Advances or disbursements), and, at Lender's option, all Loans immediately will
become due and payable, all without notice of any kind to Borrower, except that
in the case of an Event of Default of the type described in the "Insolvency"
subsection above, such acceleration shall be automatic and not optional. In
addition, Lender shall have all the rights and remedies provided in the Related
Documents or available at law, in equity, or otherwise. Except as may be
prohibited by applicable law, all of Lender's rights and remedies shall be
cumulative and may be exercised singularly or concurrently. Election by Lender to
pursue any remedy shall not exclude pursuit of any other remedy, and an election
to make expenditures or to take action to perform an obligation of Borrower or of
any Grantor shall not affect Lender's right to declare a default and to exercise
its rights and remedies.
MISCELLANEOUS PROVISIONS. The following miscellaneous provisions are a part of
this Agreement:
Amendments. This Agreement, together with any Related Documents, constitutes the
entire understanding and agreement of the parties as to the matters set forth in
this Agreement. No alteration of or amendment to this Agreement shall be
effective unless given in writing and signed by the party or parties sought to be
charged or bound by the alteration or amendment.
Applicable Law. This Agreement has been delivered to Lender and accepted by
Lender In the State of Arizona. If there is a lawsuit, Borrower agrees upon
Lender's request to submit to the Jurisdiction of the courts of Maricopa County,
the State of Arizona Subject to the provisions on arbitration, this Agreement
shall be governed by and construed in accordance with the laws of the State of
Arizona.
Arbitration.
Binding Arbitration. Upon the demand of any party ("Party/Parties"), to a
Document (as defined below), whether made before the institution of any judicial
proceeding or not more than 60 days after service of a complaint, third party
complaint, cross-claim or counterclaim or any answer thereto or any amendment to
any of the above, any Dispute (as defined below) shall be resolved by binding
arbitration in accordance with the terms of this Arbitration Program. A Dispute"
shall include any action, dispute, claim or controversy of any kind, whether
founded in contract, tort, statutory or common law, equity, or otherwise, now
existing or hereafter arising between any of the Parties arising out of,
pertaining to or in connection with any agreement, document or instrument to
which this Arbitration Program is attached or in which it appears or is
referenced or any related agreements, documents, or instruments (Documents"). Any
Party who fails to submit to binding arbitration following a lawful demand by
another Party shall bear all costs and expenses, including reasonable attorneys'
fees, (including those incurred in any trial, bankruptcy proceeding or on appeal)
incurred by the other Party in obtaining a stay of any pending judicial
proceeding and compelling arbitration of any Dispute. The parties agree that any
agreement, document or instrument which includes, attaches to or incorporates
this Arbitration Program represents a transaction involving commerce as that term
is used in the Federal Arbitration Act, ("FAA") Title 9 United States Code. THE
PARTIES UNDERSTAND THAT BY This AGREEMENT THEY HAVE DECIDED THAT THEIR DISPUTES
SHALL BE RESOLVED BY BINDING ARBITRATION RATHER THAN IN COURT, AND ONCE DECIDED
BY Arbitration NO DISPUTE CAN LATER BE BROUGHT, FILED OR PURSUED IN COURT.
Governing Rules. Arbitrations conducted pursuant to this Arbitration Program
shall be administered by the American Arbitration Association ("AAA"), or other
mutually agreeable administrator ("Administrator") in accordance with the terms
of this Arbitration Program and the Commercial Arbitration Rules of the AAA.
Proceedings hereunder shall be governed by the provisions of the Federal
Arbitration Act (Title 9 of the United States Code). The arbitrator(s) shall
resolve all Disputes in accordance with the applicable substantive law designated
in the Documents. Judgment upon any award rendered hereunder may be entered in
any court having jurisdiction; provided, however that nothing herein shall be
construed to be a waiver by any party that is a bank of the protections afforded
pursuant to 12 U.S.C. 91 or any similar applicable state law.
Preservation of Remedies. No provision of, nor the exercise of any rights under,
this arbitration clause shall limit the right of any Party to: (a)foreclose
against any real or personal property collateral or other security, or obtain a
personal or deficiency award; (b) exercise self-help remedies (including
repossession and setoff rights); or (c) obtain provisional or ancillary remedies
such as injunctive relief, sequestration, attachment, replevin, garnishment, or
the appointment of a receiver from a court having jurisdiction. Such rights can
be exercised at any time except to the extent such action is contrary to a final
award or decision in any arbitration proceeding. The institution and maintenance
of an action as described above shall not constitute a waiver of the right of any
Party to submit the Dispute to arbitration, nor render inapplicable the
compulsory arbitration provisions hereof. Any claim or Dispute related to
exercise of any self-help, auxiliary or other rights under this paragraph shall
be a dispute hereunder.
Arbitrator Powers and Qualifications; Awards. The Parties agree to select a
neutral "qualified" arbitrator or a panel of three "qualified" arbitrators to
resolve any Dispute hereunder. "Qualified" means a practicing attorney, with not
less than 10 years practice in commercial law, licensed to practice in the state
of the applicable substantive taw designated in the Documents. A Dispute in which
the claims or amounts in controversy do not exceed $1,000,000.00, shall be
decided by a single arbitrator. A single arbitrator shall have authority to
render an award up to but not to exceed $1,000,000.00 including all damages of
any kind whatsoever, costs, fees, attorneys' fees and expenses. Submission
to a single arbitrator shall be a waiver of all Parties' claims to recover more
than 51,000,000.00. A Dispute involving claims or amounts in controversy
exceeding $1,000,000.00 shall be decided by a majority vote of a panel of three
qualified arbitrators. An arbitration panel shall be composed of one arbitrator
who would be qualified to sit as a single arbitrator hereunder, one who has at
least ten years experience in commercial lending and one who has at least ten
years experience in the Borrower's industry. The arbitrator(s) shall be empowered
to, at the written request of any Party in any Dispute, (a) to consolidate in a
single proceeding any multiple party claims that are-substantially identical or
based upon the same underlying transaction; (b) to consolidate any claims and
Disputes between other Parties which arise out of or relate to the subject matter
hereof, including all claims by or against borrowers, guarantors, sureties and or
owners of collateral; and (c) to administer multiple arbitration claims as class
actions in accordance with Rule 23 of the Federal Rules of Civil Procedure. In
any consolidated proceeding the first arbitrator(s) selected in any proceeding
shall conduct the consolidated proceeding unless disqualified due to conflict of
interest. The arbitrator(s) shall be empowered to resolve any dispute regarding
the terms of this arbitration clause, including questions about the arbitrability
of any Dispute, but shall have no power to change or alter the terms of this
Arbitration Program. The prevailing Party in any Dispute shall be entitled to
recover its reasonable attorneys' fees in any arbitration, and the arbitrator(s)
shall have the power to award such fees. The award of the arbitrator(s) shall be
in writing and shall set forth the factual and legal basis for the award.
Miscellaneous. All statutes of limitation applicable to any Dispute shall apply
to any proceeding in accordance with this arbitration clause. The Parties agree,
to the maximum extent practicable, to take any action necessary to conclude an
arbitration hereunder within 180 days of the filing of a Dispute with the
Administrator. The arbitrator(s) shall be empowered to impose sanctions for any
Party's failure to proceed within the times established herein. Arbitrations
shall be conducted in the state of the applicable substantive law designated in
the Documents. The provisions of this Arbitration Program shall survive any
termination, amendment, or expiration hereof or of the Documents unless the
Parties otherwise expressly agree in writing. Each Party agrees to keep all
Disputes and arbitration proceedings strictly confidential, except for
disclosures of information required in the ordinary course of business of the
Parties or as required by applicable law or regulation. If any provision of this
Arbitration Program is declared invalid by any court, the remaining provisions
shall not be affected thereby and shall remain fully enforceable.
Caption Headings. Caption headings in this Agreement are for convenience purposes
only and are not to be used to interpret or define the provisions of this
Agreement.
Multiple Parties; Corporate Authority. All obligations of Borrower under this
Agreement shall be joint and several, and all references to Borrower shall mean
each and every Borrower. This means that each of the Borrowers signing below is
responsible for all obligations in this Agreement.
Consent to Loan Participation. Borrower agrees and consents to Lender's sale or
transfer, whether now or later, of one or more participation interests in the
Loans to one or more purchasers, whether related or unrelated to Lender. Lender
may provide, without any limitation whatsoever, to any one or more purchasers, or
potential purchasers, any information or knowledge Lender may have about Borrower
or about any other matter relating to the Loan, and Borrower hereby waives any
rights to privacy it may have with respect to such matters. Borrower additionally
waives any and all notices of sale of participation interests, as well as all
notices of any repurchase of such participation interests. Borrower also agrees
that the purchasers of any such participation interests will be considered as the
absolute owners of such interests in the Loans and will have all the rights
granted under the participation agreement or agreements governing the sale of
such participation interests. Borrower further waives all rights of offset or
counterclaim that it may have now or later against Lender or against any
purchaser of such a participation interest and unconditionally agrees that either
Lender or such purchaser may enforce Borrower's obligation under the Loans
irrespective of the failure or insolvency of any holder of any interest in the
Loans. Borrower further agrees that the purchaser of any such participation
interests may enforce its interests irrespective of any personal claims or
defenses that Borrower may have against Lender.
Costs and Expenses. Borrower agrees to pay upon demand all of Lender's allocated
costs of in house counsel and expenses, including without limitation
attorneys' fees, incurred in connection with the preparation, execution,
enforcement, modification and collection of this Agreement or in connection with
the Loans made pursuant to this Agreement. Lender may pay someone else to help
collect the Loans and to enforce this Agreement, and Borrower will pay that
amount. This includes, subject to any limits under applicable law, lender's
attorneys' fees and Lender's legal expenses, whether or not there is a lawsuit,
including attorneys' fees for bankruptcy proceedings (including efforts to modify
or vacate any automatic stay or injunction), appeals, and any anticipated post
judgment collection services. Borrower also will pay any court costs, in addition
to ail other sums provided by law.
Notices. All notices required to be given under this Agreement shall be given in
writing, may be sent by telefacsimilie, and shall be effective when actually
delivered or when deposited with a nationally recognized overnight courier or
deposited in the United States mail, first class, postage prepaid, addressed to
the party to whom the notice is to be given at the address shown above. Any party
may change its address for notices under this Agreement by giving formal written
notice to the other parties, specifying that the purpose of the notice is to
change the party's address. To the extent permitted by applicable law, if there
is more than one Borrower, notice to any Borrower will constitute notice to all
Borrowers. For notice purposes, Borrower agrees to keep Lender informed at all
times of Borrower's current address(es).
Severability. If a court of competent jurisdiction finds any provision of this
Agreement to be invalid or unenforceable as to any person or circumstance, such
finding shall not render that provision invalid or unenforceable as to any other
persons or circumstances. If feasible, any such offending provision shall be
deemed to be modified to be within the limits of enforceability or validity;
however, if the offending provision cannot be so modified, it shall be stricken
and all other provisions of this Agreement in all other respects shall remain
valid and enforceable.
Subsidiaries and Affiliates of Borrower. To the extent the context of any
provisions of this Agreement makes it appropriate, including without limitation
any representation, warranty or covenant, the word "Borrower" as used herein
shall include all subsidiaries and affiliates of Borrower. Notwithstanding the
foregoing however, under no circumstances shall this Agreement be construed to
require Lender to make any Loan or other financial accommodation to any
subsidiary or affiliate of Borrower.
Successors and Assigns. All covenants and agreements contained by or on behalf of
Borrower shall bind its successors and assigns and shall inure to the benefit of
Lender, its successors and assigns. Borrower shall not, however, have the right
to assign Its rights under this Agreement or any interest therein, without the
prior written consent of Lender.
Survival. All warranties, representations, and covenants made by Borrower in this
Agreement or in any certificate or other instrument delivered by Borrower to
Lender under this Agreement shall be considered to have been relied upon by
Lender and will survive the making of the Loan and delivery to Lender of the
Related Documents, regardless of any investigation made by Lender or on Lender's
behalf.
Time Is of the Essence. Time is of the essence in the performance of this
Agreement.
Waiver. Lender shall not be deemed to have waived any rights under this Agreement
unless such waiver is given in writing and signed by Lender. No delay or omission
on the part of Lender in exercising any right shall operate as a waiver of such
right or any other right. A waiver by Lender of a provision of this Agreement
shall not prejudice or constitute a waiver of Lender's right otherwise to demand
strict compliance with that provision or any other provision of this Agreement.
No prior waiver by Lender, nor any course of dealing between Lender and Borrower,
or between Lender and any Grantor, shall constitute a waiver of any of Lender's
rights or of any obligations of Borrower or of any Grantor as to any future
transactions. Whenever the consent of Lender is required under this Agreement,
the granting of such consent by Lender in any instance shall not constitute
continuing consent in subsequent instances where such consent is required, and in
all cases such consent may be granted or withheld in the sole discretion of
Lender.
BORROWER ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS
LOAN AGREEMENT, AND
BORROWER AGREES TO ITS TERMS. THIS AGREEMENT IS DATED AS OF
FEBRUARY 28, 1996.
BORROWER:
PHOTOCOMM, INC. AN ARIZONA CORPORATION
X___________________________________
Authorized Officer
LENDER:
First Interstate Bank of Arizona, N. A.
By:
X___________________________________
Authorized Officer
First
Interstate
Bank
PROMISSORY NOTE
Borrower:PHOTOCOMM, INC., AN ARIZONA CORPORATION
7681 E. Gray Road
Scottsdale, AZ 85260
Lender:First Interstate Bank of Arizona, N. A.
Metro South Business Banking Center
100 W. Washington
P.O. Box 53456, Dept. #764
Phoenix, AZ 85072-3456
Principal Amount: $1,200,000.00
Initial Rate: 8.750%
Date of Note: February 28, 1996
PROMISE TO PAY. PHOTOCOMM, INC., AN ARIZONA CORPORATION ("Borrower")
promises to
pay to First Interstate Bank of Arizona N. A. ("Lender"), or order, in lawful
money of the United States of America, the principal amount of One Million Two
Hundred Thousand & 00/100 Dollars ($1,200,000.00) or so much as may be
outstanding, together with interest on the unpaid outstanding principal balance
of each advance. interest shall be calculated from the date of each advance until
repayment of each advance.
PAYMENT. Borrower will pay this loan in one payment of all outstanding principal
plus all accrued unpaid Interest on February 28, 1997. In addition, Borrower will
pay regular monthly payments of accrued unpaid interest beginning March 31, 1996,
and all subsequent interest payments are due on the last day of each month after
that. Interest on this Note is computed on a 365/360 simple interest basis; that
is, by applying the ratio of the annual interest rate over a year of 360 days,
multiplied by the outstanding principal balance, multiplied by the actual number
of days the principal balance is outstanding. Borrower will pay Lender at
Lender's address shown above or at such other place as Lender may designate in
writing. Unless otherwise agreed or required by applicable law, payments will be
applied in any order at Lender's sole discretion.
VARIABLE INTEREST RATE. The interest rate on this Note is subject to change from
time to time based on changes in an index which is the First Interstate Bank of
Arizona, N.A. Prime Rate, which is an index Lender announces from time to time
for pricing certain loans (the "Index"). The Index is not necessarily the lowest
rate charged by Lender on its loans and is set by Lender in its sole discretion.
If the Index becomes unavailable during the term of this loan, Lender may
designate a substitute index after notifying Borrower. Lender will tell Borrower
the current Index rate upon Borrower's request. Borrower understands that Lender
may make loans based on other rates as well. The interest rate change will not
occur more often than each day. The Index currently is 8.250% per annum. The
interest rate to be applied to the unpaid principal balance of this Note will be
at a rate of 0.500 percentage points over the Index, resulting in an initial rate
of 8.750% per annum. NOTICE: Under no circumstances will the interest rate on
this Note be more than the maximum rate allowed by applicable law.
PREPAYMENT. Borrower may pay without penalty all or a portion of the amount owed
earlier than it is due. Early payments will not, unless agreed to by Lender in
writing, relieve Borrower of Borrower's obligation to continue to make payments
of accrued unpaid interest.
DEFAULT. Borrower will be in default if any of the following happens: (a)
Borrower fails to make any payment when due. (b) Borrower breaks any
promise Borrower has made to Lender, or Borrower fails to comply with or to
perform when due any other term, obligation, covenant, or condition contained in
this Note or any agreement related to this Note, or in any other agreement or
loan Borrower has with Lender. (c) Borrower defaults under any loan, extension of
credit, security agreement, purchase or sales agreement, or any other agreement,
in favor of any other creditor or person that may materially affect any of
Borrower's property or Borrower's ability to repay this Note or perform
Borrower's obligations under this Note or any of the Related Documents. (d) Any
representation or statement made or furnished to Lender by Borrower or on
Borrower's behalf is false or misleading in any material respect either now or at
the time made or furnished. (e) Borrower becomes insolvent, a receiver is
appointed for any part of Borrower's property, borrower makes an assignment for
the benefit of creditors, or any proceeding is Commenced either by Borrower or
against borrower under any bankruptcy or insolvency laws. (f) Any creditor tries
to take any of Borrower's property on or in which Lender has a lien or security
interest. This includes a garnishment of any of Borrower's accounts with Lender.
(g) Any of the events described in this default section occurs with respect to
any guarantor of this Note. (h) A material adverse change occurs in Borrower's
financial condition, or Lender believes the prospect of payment or performance of
the Indebtedness is impaired. (i) Lender in good faith deems itself insecure.
If any default, other than a default in payment, is curable and if Borrower has
not been given a notice of a breach of the same provision of this Note
within the preceding twelve (12) months, it may be cured (and no event of default
will have occurred) if Borrower, after receiving written notice from
Lender demanding cure of such default: (a) cures the default within fifteen 15)
days; or (b) if the cure requires more than fifteen (15) days, immediately
initiates steps which Lender deems in Lender's sole discretion to be sufficient
to cure the default and thereafter continues and completes all
reasonable and necessary steps sufficient to produce compliance as soon as
reasonably practical.
LENDER'S RIGHTS. Upon default, Lender may declare the entire unpaid principal
balance on this Note and all accrued unpaid interest immediately due, without
notice, and then Borrower will pay that amount. Upon default, including failure
to pay upon final maturity, Lender, at its option, may also, if
permitted under applicable law, increase the variable interest rate on this Note
to 4.500 percentage points over the Index. The interest rate will not
exceed the maximum rate permitted by applicable law. Lender may hire or pay
someone else to help collect this Note if Borrower does not pay. Borrower also
will pay Lender that amount. This includes, subject to any limits under
applicable law, Lender's attorneys' fees and Lender's legal expenses whether or
not there is a lawsuit, including attorneys' fees and legal expenses for
bankruptcy proceedings (including efforts to modify or vacate any automatic stay
or injunction), appeals, and any anticipated post-judgment collection services.
If not prohibited by applicable law, Borrower also will pay any court costs, in
addition to all other sums provided by law. This Note has been delivered to
Lender and accepted by Lender in the State of Arizona. If there is a lawsuit,
Borrower agrees upon Lender's request to submit to the jurisdiction of the courts
of Maricopa County, the State of Arizona Subject to the provisions on
arbitration, this Note shall be governed by and construed in accordance with the
laws of the State of Arizona.
RIGHT OF SETOFF. Borrower grants to Lender a contractual possessory security
interest in, and hereby assigns, conveys, delivers, pledges, and transfers to
Lender all Borrower's right, title and interest in and to, Borrower's accounts
with Lender (whether checking, savings, or some other account), including without
limitation all accounts held jointly with someone else and all accounts Borrower
may open in the future, excluding however all IRA, Keogh, and trust accounts.
Borrower authorizes Lender, to the extent permitted by applicable law, to charge
or setoff all sums owing on this Note against any and all such accounts.
LINE OF CREDIT. This Note evidences a revolving line of credit. Advances under
this Note, as well as directions for payment from borrower's accounts, may be
requested orally or in writing by Borrower or by an authorized person. Lender
may, but need not, require that all oral requests be confirmed in writing.
Borrower agrees to be liable for all sums either: (a) advanced in accordance with
the instructions of an authorized person or (b) credited to any of Borrower's
accounts with Lender. The unpaid principal balance owing on this Note at any time
may be evidenced by endorsements on this Note or by Lender's internal records,
including daily computer print outs. Lender will have no obligation to advance
funds under this Note if: (a) Borrower or any guarantor is in default under the
terms of this Note or any agreement that Borrower or any guarantor has with
Lender, including any agreement made in connection with the signing of this Note;
(b) Borrower or any guarantor ceases doing business or is insolvent; (c) any
guarantor seeks, claims or otherwise attempts to limit, modify or revoke such
guarantor's guarantee of this Note or any other loan with Lender; (d) Borrower
has applied funds provided pursuant to this Note for purposes other than those
authorized by Lender; or (e) Lender in good faith deems itself insecure under
this Note or any other agreement between Lender and Borrower.
GENERAL PROVISIONS. Lender may delay or forgo enforcing any of its rights or
remedies under this Note without losing them. borrower and any other person who
signs, guarantees or endorses this Note, to the extent allowed by law, waive
presentment, demand for payment, protest and notice of dishonor. Upon any change
in the terms of this Note, and unless otherwise expressly stated in writing, no
party who signs this Note, whether as maker, Guarantor, accommodation maker or
endorser, shall be released from liability. All such parties agree that Lender
may renew or extend (repeatedly and for any length of time) this loan, or release
any party or guarantor or collateral; or impair, fail to realize upon or perfect
Lender's security interest in the collateral; and take any other action deemed
necessary by Lender without the consent of or notice to anyone. All such parties
also agree that Lender may modify this loan without the consent of or notice to
anyone other than the party with whom the modification is made.
EFFECTIVE RATE. Borrower agrees to an effective rate of interest that is the rate
specified in this Note plus any additional rate resulting from any other charges
in the nature of interest paid or to be paid in connection with this Note.
PRIOR TO SIGNING THIS NOTE, BORROWER READ AND UNDERSTOOD ALL THE
PROVISIONS OF
THIS NOTE, INCLUDING THE VARIABLE INTEREST RATE PROVISIONS. BORROWER
AGREES TO
THE TERMS OF THE NOTE AND ACKNOWLEDGES RECEIPT OF A COMPLETED
COPY OF THE NOTE.
BORROWER:
PHOTOCOMM, INC., AN ARIZONA CORPORATION
________________________________________
Authorized Officer
EXHIBIT 10.10
EXECUTIVE COMPENSATION AGREEMENT
This Executive Compensation Agreement (this "Agreement"), is entered into
as of the ___ day of November, 1996 ("Effective Date"), between PHOTOCOMM, INC.,
an Arizona corporation (the "Company"), and ROBERT R. KAUFFMAN ("Executive").
The Company and Executive are collectively referred to herein as the "Parties."
This Agreement automatically shall supersede any agreement between the Company
and Executive concerning Executive's employment by the Company.
SECTION I. AGREEMENT OF THE PARTIES
The Company agrees to employ Executive and Executive agrees to serve in the
employ of Company as follows:
(a) Executive agrees to serve the Company as President and Chief Executive
Officer during the term of this Agreement. Executive further agrees to use his
best efforts, and apply his skill and experience, to the proper performance of
his duties hereunder and to the business and affairs of the Company. Executive
agrees to serve the Company faithfully, diligently and to the best of his
ability.
(b) The principal location from which Executive will serve the Company and
perform his duties hereunder shall be Scottsdale, Arizona.
The Company shall compensate Executive for his services as provided herein.
SECTION II. TERM OF EMPLOYMENT
Executive's employment shall commence under the terms of this Agreement on the
Effective Date, and shall continue hereunder until December 31, 2001, unless this
Agreement is terminated in accordance with Section VII. Notwithstanding the
foregoing, the term of this Agreement shall automatically renew and extend for
one additional year as of January 1 of each year, commencing January 1, 2002,
unless either party gives written notice to the other party at least six (6)
months prior to January 1 of any such year to the effect that this Agreement
should not be further extended, in which event the term of this Agreement shall
terminate upon the next succeeding December 31.
SECTION III. COMPENSATION; BENEFITS
A. Base Compensation. Continuing from the Effective Date, the Company shall
pay Executive a base annual salary of $210,000. Commencing upon January 1, 1997,
the Company shall pay Executive a base annual salary of $230,000. Executive's
base annual salary may be increased by the Company during the term of this
Agreement based upon the Executive's and the Company's performance.
Notwithstanding the foregoing, in the case of substantial and persistent
deterioration of the Company's performance, the Company may reduce Executive's
base annual salary consistent with similar salary reductions of other Company
officers until the Company's performance improves. Executive's base annual
salary shall be paid by the Company in semi-monthly installments commensurate
with the Company's normal employee pay days.
B. Incentive Compensation. The Company shall also provide Executive
incentive compensation as follows:
1. Annual Cash Bonus. Executive shall be awarded an annual cash bonus based
upon Company performance in an amount to be determined by the Board of
Directors of the Company pursuant to this subparagraph. Prior to or
shortly after the beginning of each fiscal year of the Company, Executive
shall submit for Board approval the Company's fiscal year performance
goals, including an operating plan and financial budget. Following the end
of the fiscal year the Board shall determine the extent to which said goals
have been achieved and the amount of the cash bonus based upon such
performance. The target amount of such cash bonus shall be in the range of
from thirty (30%) percent to fifty (50%) percent of Executive's annual base
salary and shall be payable within thirty (30) days following public
release of the Company's fiscal year results.
2. Annual Stock Option Grant. For the Company's 1996 Employee Stock Option
Award Program Executive shall be granted non-qualified stock options to
purchase 400,000 shares of the Company's common stock pursuant to the 1996
Stock Option Plan. The vesting of said option shares shall occur as
follows: 50,000 shares as of January 1, 1997, an additional 100,000 shares
as of January 1, 1998, an additional 150,000 shares as of January 1, 1999,
and the final 100,000 shares as of January 1, 2000. The number of options
for subsequent years of the term hereof shall be determined annually by the
Board of Directors giving primary consideration to the number of options
granted each prior year and Executive's contribution to Company
performance. All of the options shall be at the then existing market price
as determined by the Board, or an appropriate committee thereof, with an
exercise term of 10 years. Executive's options shall have all rights and
benefits related to stock options of the Company contemplated by the
Employee Stock Option Plan of the Company.
C. Supplemental Benefits. Nothing contained in this Section III shall
affect or in any way limit Executive's rights as an employee of the Company to
participate in any profit sharing plan, supplemental compensation arrangements or
any other fringe benefits offered by the Company to its employees as set forth in
the Company's employee handbook, and compensation received by Executive hereunder
shall be in addition to the foregoing except that the severance benefits set
forth in this Agreement shall be exclusive. Without limiting the generality of
the foregoing, the Company shall additionally provide the following supplemental
benefits to Executive:
1. Life and Disability Insurance. The Company shall maintain in force (i) a
Five Hundred Thousand Dollar ($500,000) term life insurance policy with
Executive's designated beneficiary, and (ii) a disability insurance policy
with a total monthly benefit of at least 50% of Executive's monthly base
salary.
2. Financial, Legal and Tax Services Reimbursement. The Company shall reimburse
Executive for expenses incurred by him for personal financial, legal and
tax services, up to a maximum of $5,000.00 in any calendar year. The
foregoing reimbursement limit shall increase by five (5%) percent each
calendar year commencing January 1, 1997.
3. Supplemental Medical Expense Reimbursement. The Company shall directly pay
or reimburse to Executive, medical expenses of Executive and Executive's
immediate family members which are incurred in excess of the Company's
group medical insurance coverage to a limit of $7,500 each calendar year
("Supplemental Medical Expense Reimbursement Plan"). The foregoing
Supplemental Medical Expense Reimbursement limit shall increase by five
(5%) percent each calendar year commencing January 1, 1997.
SECTION IV. SALARY CONTINUATION UPON DISABILITY
In the event Executive shall, by reason of illness or other incapacity, become
unable to perform the services agreed upon herein ("Disability" or "Disabled"),
the Company shall continue to compensate Executive for twelve (12) months
commencing from the date of such Disability at his base monthly salary less any
amounts actually received by Executive from the disability insurance policies
carried by the Company for the benefit of Executive pursuant to Section III.C
above.
SECTION V. STOCK PUT OPTION
If Executive's employment terminates, Executive, or Executive's estate, shall
have the right and option ("Put Option") to have ACX Technologies, Inc. ("ACX")
purchase up to 500,000 shares of the Company's common stock owned by Executive
for a net purchase price per share equal to the applicable amount indicated
below:
Year of Put Exercise Purchase Price Per Share
1997 $2.75
1998 $3.25
1999 $3.75
2000 $4.25
2001 $4.75
Thereafter By mutual agreement, but not less than
$4.75 per share
The Put Option may be exercised by Executive giving written notice thereof to the
Company within thirty (30) days following the date of termination, except that if
Executive's employment is terminated pursuant to Section VII.C, then such notice
may be given by Executive within six (6) months following the date of termination
("Notice of Exercise"). Thereafter, the Executive's Put Option shall expire.
The closing of the share purchase shall occur within thirty (30) days following
Notice of Exercise, at which time Executive shall deliver the appropriate number
of unencumbered shares to ACX and ACX shall deliver the purchase price to the
Executive.
The number of shares to be sold by the Executive to ACX under the Put Option
shall be adjusted in the event of any change in the Company's capital stock on or
before the closing by reason of the declaration or payment of stock dividends or
the declaration or conclusion of split-ups, mergers, recapitalizations,
combinations, subdivisions, conversions, exchanges of shares or the like, such
that, in each case the number or class of shares or other securities or property
to be put by the Executive for the prices above indicated are the equivalent
number into which 500,000 of the Executive's shares of the Company's common stock
has been converted. This provision is intended to maintain the value of
Executive's Put Option in the event of any dilution of the Company's stock. The
operation of this provision should not result in a net gain or loss to either
party with respect to the value of Executive's Put Option.
SECTION VI. ADDITIONAL COMPENSATION TO EXECUTIVE
The Company shall pay Executive the sum of $40,000.00 on January 2, 1997. The
parties acknowledge that said payment may be deferred pursuant to a deferred
compensation agreement to be mutually agreed between the parties. In the event
that the parties fail to negotiate said deferred compensation agreement prior to
December 31, 1996, then said payment shall be made as above indicated.
SECTION VII. TERMINATION
A. Definitions. For purposes of this Agreement the following terms shall
have the meanings set forth below.
1. Termination by the Company of Executive's Employment for "cause" shall mean
termination by affirmative vote of the Board at a meeting of the Board called and
held for such purpose (after reasonable notice to Executive and an opportunity
for Executive to be heard before the Board), finding that in the good faith
opinion of the Board, the Executive has: (1) engaged in misconduct involving a
material violation of established Company rules or policies for the conduct of
its employees including, but not limited to, theft, gross negligence,
discriminatory conduct prohibited by Company policies, sexual harassment of an
employee or a subordinate, or such other similar offense or offenses that would
be grounds for discharge of an employee under Company rules or policies; (2)
financial misconduct, including illegal insider trading of the Company's stock,
embezzlement, using Company assets for unauthorized personal use resulting in a
material loss to the Company; or material misrepresentation by Executive in
reporting the financial affairs of the Company to outside authorities or to the
Board; (3) willful and continued failure to substantially perform Executive's
duties with the Company (other than due to physical or mental illness), if such
failure is materially damaging or materially detrimental to the business and
operations of the Company, provided that Executive shall have received written
notice of such failure and have a reasonable opportunity to correct the alleged
failure before termination for cause; or (4) Executive's conviction of a crime
constituting a felony.
2. "Good Reason" shall mean, without Executive's express written consent, the
occurrence of any of the following circumstances unless, in the case of
Subsections (a) or (e), such circumstances are fully corrected prior to the Date
of Termination specified in the Notice of Termination, as defined in Section
VIII, given in respect thereof:
(a) The failure of the Board of Directors of the Company to elect Executive as
Chief Executive Officer of the Company or the assignment to Executive of
any duties inconsistent with Executive's status as an executive officer of
the Company or a substantial adverse alteration in the nature or status of
Executive's responsibilities from those in effect upon the Effective Date;
(b) A reduction by the Company in Executive's annual base salary as in effect
on the date hereof or as the same may be increased from time to time except
for across-the-board salary reductions similarly affecting all executives
of the Company;
(c) The relocation of the Company's principal executive offices where Executive
is working upon the Effective Date to a location more than 50 miles
therefrom or the Company's requiring Executive to be based anywhere other
than the location of the Company's principal executive offices where
Executive was working upon the Effective Date except for required travel on
the Company's business to an extent substantially consistent with
Executive's present business travel obligations;
(d) The failure by the Company, without Executive's consent, to pay to
Executive any portion of Executive's current compensation except pursuant
to an across-the-board compensation deferral similarly affecting all
executives of the Company;
(e) The failure by the Company to continue to provide Executive with benefits
or arrangements (including, without limitation, life insurance, health,
medical, dental, accident and disability plans or programs, income tax
services, car allowances, and other fringe benefits) at least as favorable
to those enjoyed by Executive upon the Effective Date, the taking of any
action by the Company which would directly or indirectly materially reduce
any of such benefits or deprive Executive of any material fringe benefit
enjoyed by Executive upon the Effective Date, or the failure by the Company
to provide Executive with the number of paid vacation days to which
Executive is entitled on the basis of years of service with the Company in
accordance with the Company's normal vacation policy in effect upon the
Effective Date;
Upon occurrence of any of the foregoing events which Executive believes
constitutes "good reason," Executive must notify the Company in writing within
ten (10) days and give the Company thirty (30) days to cure or correct the
alleged action or failure. After the expiration of thirty (30) days, Executive
may quit for "good reason" by giving written notice within an additional thirty
(30) days.
3. "Disability" shall mean if, as a result of Executive's incapacity due to
physical or mental illness, Executive shall have been absent from the full-time
performance of Executive's duties with the Company for six consecutive months,
and within thirty days after written notice of termination is given Executive
shall not have returned to the full-time performance of Executive's duties. Any
issue concerning the existence of Executive's Disability upon which Executive and
the Company cannot agree shall be determined by a qualified physician selected
jointly by the company and Executive and, if they cannot agree, each shall
appoint a qualified physician and the two physicians shall meet and agree on a
third qualified physician to determine the issue of Disability. Such physician
shall consult with Executive and representatives of the Company designated by the
Board to determine Executive's duties and then decide whether or not Executive is
physically capable of or mentally competent to perform the essential functions of
the position which he holds at the time. The determination of such physician
made in writing to the Company and Executive shall be final and conclusive for
purposes of this Agreement.
B. Termination of Executive for Cause or by Executive Without Good
Reason. If the Company terminates Executive for Cause, or if Executive
voluntarily terminates his performance of services to the Company without Good
Reason, then the Company's obligations to make any payments or provide any
benefits to Executive, in respect of periods after such termination,
automatically shall terminate and be forfeited, provided, however, the Executive
shall be entitled to any and all vested rights under any profit sharing, pension
or other employee benefit plan of the Company in accordance with the terms and
provisions of such plans, and all deferred compensation payments previously
agreed upon by Executive and the Company, if any.
C. Termination With Good Reason or Without Cause. By action of its
Board of Directors, the Company shall have the right to terminate Executive's
employment with the Company at its sole discretion without any cause whatsoever,
provided only that Executive shall receive the severance payments and benefits
which he is entitled to under this Agreement for termination without cause
(subject to the Executive's signing a legal release as provided herein). Upon
the termination of Executive's employment if such termination is (i) by the
Company other than for Cause or Disability, or (ii) by Executive for Good Reason
by voluntary resignation, then Executive shall be entitled to the benefits
provided below:
1. The Company shall pay Executive's full base salary through the date of
termination ("Termination Date") at the rate in effect at the time Notice of
Termination is given, plus all other amounts to which Executive is entitled under
any compensation or benefit plan of the Company, at the time such payments are
due, including a lump sum cash payment for all unused vacation time which
Executive has accrued as of the Termination Date;
2. In lieu of any further salary payments to Executive for periods subsequent
to the Termination Date, the Company shall pay to Executive as severance pay a
lump sum severance payment (the "Severance Payment") equal to two and one-half
(2-1/2) times either (i) the Annual Compensation (as defined below) which was
payable to Executive by the Company for the year immediately preceding the
Termination Date, or (ii) the average of the Annual Compensation which was
payable to Executive by the Company for the three (3) years preceding the
Termination Date, whichever is greater. Annual Compensation is Executive's base
salary and any annual bonus that was paid to Executive by the Company, determined
without any reduction for any deferrals of such salary or such bonus under any
deferred compensation plan (qualified or unqualified) and without any reduction
for any salary reductions used for making contributions to any group insurance
plan of the Company or its affiliates.
The payments provided for in this subparagraph 2 shall be made not later than the
tenth (10th) day following the Termination Date, provided, however, that if the
amount of such payment cannot be finally determined on or before such day, the
Company shall pay to Executive on such day an estimate, as determined in good
faith by the Company, of the minimum amount of such payments and shall pay the
remainder of such payments as soon as the amount thereof can be determined but in
no event later than the thirtieth day after the Date of Termination. In the
event that the amount of the estimated payments exceeds the amount subsequently
determined to have been due, such excess shall constitute a loan by the Company
to Executive payable on the tenth (10th) day after demand by the Company.
3. All of Executive's stock options for the purchase of the Company's stock
not otherwise vested, or as many of the options as Executive elects, shall become
immediately vested and shall be exercisable by Executive at any time during the
term which ends thirty (30) months after the Termination Date, subject to
Executive's execution of the legal release as provided in paragraph 7 below.
4. If Executive's employment shall be terminated as above set forth, then for
a thirty-six (36) month period after such termination, the Company shall arrange
to provide Executive with life, disability, and Supplemental Medical Expense
Reimbursement substantially similar to those which Executive is receiving
immediately prior to the Notice of Termination. Benefits otherwise receivable by
Executive pursuant to the previous sentence shall be reduced to the extent
comparable benefits are actually received by Executive during the thirty-six (36)
month period following Executive's termination, and any such benefits actually
received by Executive shall be reported to the Company.
5. Executive shall not be required to mitigate the amount of any payment
provided for in this Section by seeking other employment or otherwise, nor shall
the amount of any payment or benefit provided for in this Section (other than
Subsection 4) be reduced by any compensation earned by Executive as the result of
employment by another employer, by retirement benefits, by offset against any
amount claimed to be owed by Executive to the Company, or otherwise (except as
specifically provided in this Section).
6. Notwithstanding anything contained in this Section to the contrary, in no
event shall payments or benefits be made pursuant to subparagraphs 2 through 4 in
an amount which shall result in such payments and benefits in the aggregate being
deemed an "excess parachute payment" pursuant to Section 280G of the Internal
Revenue Code of 1986, as amended. In the event such payments and benefits in the
aggregate are deemed to be an excess parachute payment by the independent
auditors of the Company for the fiscal year immediately proceeding the
Termination Date, then Executive shall have the right to identify which of such
payments or benefits (or parts thereof) are to be eliminated so that those
remaining in the aggregate do not constitute an excess parachute payment.
7. As a condition precedent of receiving any severance payments or benefits
under this Agreement in connection with a termination for good reason or without
cause, Executive shall sign an appropriate legal release agreeing not to bring
any legal claims against the Company of whatever nature or kind in connection
with his employment and separation from employment, except for benefits of
employment, such as profit-sharing, pension or other employee benefit plans that
by their terms have vested. The legal release shall surrender all of Executive's
rights to bring any legal claim against the Company, other than for such vested
rights, under any federal or state law, statute, or ordinance. Executive also
agrees that he shall not be entitled to any termination payments or benefits if
he exercises his right to revoke the legal release as provided by the Older
Workers Benefit Protection act.
SECTION VIII. TERMINATION NOTICE
Any purported termination of Executive's employment by the Company or by
Executive shall be communicated by written Notice of Termination to the other
party hereto in accordance with Section XII hereof. For purposes of this
Agreement, a "Notice of Termination" shall mean a notice which shall indicate the
specific termination provision in this Agreement relied upon and shall set forth
in reasonable detail the facts and circumstances claimed to provide a basis for
termination of Executive's employment under the provision so indicated, except if
the Agreement is terminated by the Company without cause.
SECTION IX. CONFIDENTIALITY
Executive agrees that, during the continuance of this Agreement and thereafter,
he shall not (otherwise than pursuant to his duties hereunder) disclose without
the written consent of the Company, any material or substantial, confidential or
proprietary know-how, data or information pertaining to the Company, or its
business, personnel or plans, to any person, firm, corporation or other entity,
for any reason or purpose whatsoever. Executive acknowledges and agrees that all
memoranda, notes, records and other documents made or compiled by Executive or
made available to Executive concerning the Company's business shall be the
Company's exclusive property and shall be delivered by Executive to the Company
upon expiration or termination of this Agreement or at any other time upon the
request of the Company.
The provisions of this Section IX shall survive the expiration or termination of
this Agreement or any part thereof, without regard to the reason therefor.
SECTION X. COVENANT NOT TO COMPETE
The Parties acknowledge that Executive's willingness to enter into this Agreement
and to continue as an employee of the Company constitutes a material inducement
to the Company's agreement to make payments to Executive as set forth herein
including those to be made upon termination. The Parties further acknowledge that
Executive's performance of all terms of this Agreement is necessary to protect
the Company's legitimate business interests. Executive agrees, that, during the
continuance of this Agreement and for a period of one (1) year following
termination of Executive's employment with the Company under circumstances
described in Section VII.C resulting in the payment to him of severance benefits
as provided therein, he will not, on behalf of himself, or on behalf of any other
person, company, corporation, partnership or other entity or enterprise, directly
or indirectly, as an employee, proprietor, stockholder, partner, consultant, or
otherwise, engage in any business or activity competitive with the business
activities of the Company as they are now or hereafter undertaken by the Company
during the term hereof anywhere that the Company then does business, or solicit.
recruit or hire any employee of the Company.
SECTION XI. DEDUCTIONS AND WITHHOLDING
Executive agrees that the Company and its affiliated companies shall withhold
from any and all payments required to be made to Executive in accordance with
this Agreement all federal, state, local and other taxes that the Company or any
such affiliates determine are required to be withheld in accordance with
applicable statutes and regulations from time to time in effect.
SECTION XII. NOTICES
All notices, requests, demands and other communications hereunder shall be in
writing and shall be deemed given when delivered personally or when deposited in
the U.S. Mail if sent by registered or certified mail, prepaid and return receipt
requested, to the other party hereto at his or its mailing address as set forth
on the signature page of this Agreement, and in the case of the Company, marked
to the attention of Secretary. Either party may change the address which such
communications hereunder shall be sent by sending notice of such change to the
other party as herein provided.
SECTION XIII. SEVERABILITY
If any provision of this Agreement or any part hereof is invalid, unlawful or
incapable of being enforced by reason of any rule of law or public policy, all
conditions and provisions of this Agreement which can be given effect without
such invalid, unlawful or unenforceable provision shall, nevertheless, remain in
full force and effect.
SECTION XIV. BOARD APPROVAL
By execution of this Agreement, the Company acknowledges that this Agreement has
been reviewed and adopted by a resolution approved by a majority of the members
of the Board of Directors of the Company.
SECTION XV. COMPLETE UNDERSTANDING;
PRIOR AGREEMENTS
This Agreement (which includes all employee benefit plans of Company referenced
herein) constitutes the complete understanding between the Parties with respect
to the undertaking of Executive hereunder, and no statement, representation,
warranty or covenant has been made by either party with respect thereto except as
expressly set forth herein. Unless otherwise specifically referred to herein,
this Agreement shall, from and after the Effective Date, supersede, in all
respects, all previous agreements in regard to employment between Executive and
the Company. This Agreement shall not be altered, modified, amended or
terminated except by written instrument signed by each of the Parties hereto.
SECTION XIV. GOVERNING LAW
This Employment Agreement shall be governed by, and construed and enforced in
accordance with, the laws of the State of Arizona.
SECTION XVII. SUCCESSORS; BINDING AGREEMENT
(a) The Company will require any successor (whether direct or indirect, by
purchase, merger, consolidation or otherwise) to all or substantially all of the
business and/or assets of the Company to expressly assume and agree to perform
this Agreement in the same manner and to the same extent that the Company would
be required to perform it if no such succession had taken place. Failure of the
Company to obtain such assumption and agreement prior to the effectiveness of any
such succession shall be a breach of this Agreement and shall entitle Executive
to compensation from the Company in the same amount and on the same terms as
Executive would be entitled to hereunder if Executive terminated Executive's
employment voluntarily for Good Reason, except that for purposes of implementing
the foregoing, the date on which any such succession becomes effective shall be
deemed the Date of Termination. As used in this Agreement, "Company" shall mean
the Company as hereinbefore defined and any successor to its business and/or
assets as aforesaid which assumes and agrees to perform this Agreement by
operation of law, or otherwise.
(b) This Agreement shall inure to the benefit of and be enforceable by
Executive's personal or legal representatives, executors, administrators,
successors, heirs, distributees, devises and legatees. If Executive should die
while any amount would still be payable to Executive hereunder if Executive had
continued to live, all such amounts, unless otherwise provided herein, shall be
paid in accordance with the terms of this Agreement to Executive's devisee,
legatee or other designee or, if there is no such designee, to Executive's
estate.
SECTION XVIII. ARBITRATION
All claims, disputes and other matters in question between the parties, or
between Executive and ACX, arising under this Agreement shall, unless otherwise
provided herein, be decided by arbitration in Phoenix, Arizona, in accordance
with the Model Employment Arbitration Procedures of the American Arbitration
Association (including such procedures governing selection of the specific
arbitrator or arbitrators), unless the parties mutually agree otherwise. The
Company shall pay the administrative costs of the arbitration, but each party
shall pay his and its own attorney's fees and costs. The award by the arbitrator
or arbitrators shall be final, and judgment may be entered upon it in accordance
with applicable law in any state or Federal court having jurisdiction thereof.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement effective
as of the day and year first above written.
PHOTOCOMM, INC.
an Arizona corporation
By:
__________________________________
Donald E. Anderson
Chairman of the Board
7681 E. Gray Road
Scottsdale, Arizona 85260
_____________________________________
_
ROBERT R. KAUFFMAN
13670 N. 85th Place
Scottsdale, AZ 85260
ACX Technologies, Inc. executes this Agreement only for the purpose of obligating
itself to purchase shares of common stock of the Company upon the Executive's
exercise of his Put Option pursuant to Section V of the Agreement.
ACX TECHNOLOGIES, INC.
a Colorado corporation
By: _________________________________
Its: _____________________________
EXHIBIT 10.11
EXECUTIVE COMPENSATION AGREEMENT
This Executive Compensation Agreement (this "Agreement"), is entered into
as of the ___ day of November, 1996 ("Effective Date"), between PHOTOCOMM, INC.,
an Arizona corporation (the "Company"), and THOMAS C. LAVOY ("Executive"). The
Company and Executive are collectively referred to herein as the "Parties." This
Agreement automatically shall supersede any agreement between the Company and
Executive concerning Executive's employment by the Company.
SECTION I. AGREEMENT OF THE PARTIES
The Company agrees to employ Executive and Executive agrees to serve in the
employ of Company as follows:
(a) Executive agrees to serve the Company in his present capacity as Chief
Financial Officer during the term of this Agreement. Executive further agrees to
use his best efforts, and apply his skill and experience, to the proper
performance of his duties hereunder and to the business and affairs of the
Company. Executive agrees to serve the Company faithfully, diligently and to the
best of his ability.
(b) The principal location from which Executive will serve the Company and
perform his duties hereunder shall be Scottsdale, Arizona.
The Company shall compensate Executive for his services as provided herein.
SECTION II. TERM OF EMPLOYMENT
Executive's employment shall commence under the terms of this Agreement on the
Effective Date, and shall continue hereunder until December 31, 1999, unless this
Agreement is terminated in accordance with Section VI. Notwithstanding the
foregoing, the term of this Agreement shall automatically renew and extend for
one additional year as of January 1 of each year, commencing January 1, 2000,
unless either party gives written notice to the other party at least six (6)
months prior to January 1 of any such year to the effect that this Agreement
should not be further extended, in which event the term of this Agreement shall
terminate upon the next succeeding December 31.
SECTION III. COMPENSATION; BENEFITS
A. Base Compensation. Continuing from the Effective Date, the Company shall
pay Executive a base annual salary of $97,000. Commencing upon January 1, 1997,
the Company shall pay Executive a base annual salary of $115,000. Executive's
base annual salary may be increased by the Company during the term of this
Agreement based upon the Executive's and the Company's performance.
Notwithstanding the foregoing, in the case of substantial and persistent
deterioration of the Company's performance, the Company may reduce Executive's
base annual salary consistent with similar salary reductions of other Company
officers until the Company's performance improves. Executive's base annual
salary shall be paid by the Company in semi-monthly installments commensurate
with the Company's normal employee pay days.
B. Incentive Compensation. The Company shall also provide Executive
incentive compensation as follows:
1. Annual Cash Bonus. Executive shall be awarded an annual cash bonus based
upon Company performance in an amount to be determined by the Board of
Directors of the Company pursuant to this subparagraph. Prior to or
shortly after the beginning of each fiscal year of the Company, Executive
shall submit for Board approval his current fiscal year performance goals,
including an operating plan and financial budget. Following the end of the
fiscal year the Board shall determine the extent to which said goals have
been achieved and the amount of the cash bonus based upon such performance.
2. Annual Stock Option Grant. For the Company's 1996 Employee Stock Option
Award Program Executive shall be granted non-qualified stock options to
purchase 150,000 shares of the Company's common stock pursuant to the 1996
Stock Option Plan. The vesting of said option shares shall occur as
follows: 18,750 shares as of January 1, 1997, an additional 37,500 shares
as of January 1, 1998, an additional 56,250 shares as of January 1, 1999,
and the final 37,500 shares as of January 1, 2000. The number of options
for subsequent years of the term hereof shall be determined annually by the
Board of Directors giving primary consideration to the number of options
granted each prior year and Executive's contribution to Company
performance. All of the options shall be at the then existing market price
as determined by the Board, or an appropriate committee thereof, with an
exercise term of 10 years. Executive's options shall have all rights and
benefits related to stock options of the Company contemplated by the
Employee Stock Option Plan of the Company.
C. Benefits. Executive shall have the right as an employee of the Company to
participate in any profit sharing plan or any other fringe benefits offered by
the Company to its employees as set forth in the Company's employee handbook, and
compensation received by Executive hereunder shall be in addition to the
foregoing except that the severance benefits set forth in this Agreement shall be
exclusive.
SECTION IV. SALARY CONTINUATION UPON DISABILITY
In the event Executive shall, by reason of illness or other incapacity, become
unable to perform the services agreed upon herein, the Company shall continue to
compensate Executive for twelve (12) months commencing from the date of such
illness or other incapacity at his base monthly salary less any amounts actually
received by Executive from the disability insurance policies carried by the
Company for the benefit of Executive pursuant to Section III.C above.
SECTION V. CONTINUATION OF HEALTH INSURANCE BENEFITS
Coverage under the Group Health Plan shall continue during Executive's disabled
status with the Company, and shall also continue in the event Executive should
die during active or disabled status with the Company and be survived by a spouse
for the benefit of the surviving spouse and dependent children for one year
following Executive's death. In the event that Executive's, or Executive's
spouse's and children's, participation in the Group Plan is not permitted
following his disability, retirement or death under the general terms and
provisions of the Group Plan, the Company shall arrange to provide Executive, or
his spouse, with benefits substantially similar to those which would be available
under such Plan.
SECTION VI. TERMINATION
A. Definitions. For purposes of this Agreement the following terms shall
have the meanings set forth below.
1. Termination by the Company of Executive's Employment for "Cause" shall mean
termination by affirmative vote of the Board at a meeting of the Board called and
held for such purpose (after reasonable notice to Executive and an opportunity
for Executive to be heard before the Board), finding that in the good faith
opinion of the Board, the Executive has: (1) engaged in misconduct involving a
material violation of established Company rules or policies for the conduct of
its employees including, but not limited to, theft, gross negligence,
discriminatory conduct prohibited by Company policies, sexual harassment of an
employee or a subordinate, or such other similar offense or offenses that would
be grounds for discharge of an employee under Company rules or policies; (2)
financial misconduct, including illegal insider trading of the Company's stock,
embezzlement, using Company assets for unauthorized personal use resulting in a
material loss to the Company; or material misrepresentation by Executive in
reporting the financial affairs of the Company to outside authorities or to the
Board; (3) willful and continued failure to substantially perform Executive's
duties with the Company (other than due to physical or mental illness), if such
failure is materially damaging or materially detrimental to the business and
operations of the Company, provided that Executive shall have received written
notice of such failure and have a reasonable opportunity to correct the alleged
failure before termination for cause; or (4) Executive's conviction of a crime
constituting a felony.
2. "Good Reason" shall mean, without Executive's express written consent, the
occurrence of any of the following circumstances unless, in the case of
Subsections (a) or (e), such circumstances are fully corrected prior to the Date
of Termination specified in the Notice of Termination, as defined in Section VII,
given in respect thereof:
(a) The failure of the Board of Directors of the Company to elect Executive as
Chief Financial Officer of the Company or the assignment to Executive of
any duties inconsistent with Executive's status as an executive officer of
the Company or a substantial adverse alteration in the nature or status of
Executive's responsibilities from those in effect upon the Effective Date;
(b) A reduction by the Company in Executive's annual base salary as in effect
on the date hereof or as the same may be increased from time to time except
for across-the-board salary reductions similarly affecting all executives
of the Company and all executives of any person in control of the Company;
(c) The relocation of the Company's principal executive offices where Executive
is working upon the Effective Date to a location more than 50 miles
therefrom or the Company's requiring Executive to be based anywhere other
than the location of the Company's principal executive offices where
Executive was working upon the Effective Date except for required travel on
the Company's business to an extent substantially consistent with
Executive's present business travel obligations;
(d) The failure by the Company, without Executive's consent, to pay to
Executive any portion of Executive's current compensation except pursuant
to an across-the-board compensation deferral similarly affecting all
executives of the Company;
(e) The failure by the Company to continue to provide Executive with benefits
or arrangements (including, without limitation, life insurance, health,
medical, dental, accident and disability plans or programs, car allowances
and other fringe benefits) at least as favorable to those enjoyed by
Executive upon the Effective Date, the taking of any action by the Company
which would directly or indirectly materially reduce any of such benefits
or deprive Executive of any material fringe benefit enjoyed by Executive
upon the Effective Date, or the failure by the Company to provide Executive
with the number of paid vacation days to which Executive is entitled on the
basis of years of service with the Company in accordance with the Company's
normal vacation policy in effect upon the Effective Date;
Upon occurrence of any of the foregoing events which Executive believes
constitutes "good reason," Executive must notify the Company in writing within
ten (10) days and give the Company thirty (30) days to cure or correct the
alleged action or failure. After the expiration of thirty (30) days, Executive
may quit for "good reason" by giving written notice within an additional thirty
(30) days.
3. "Disability" shall mean if, as a result of Executive's incapacity due to
physical or mental illness, Executive shall have been absent from the full-time
performance of Executive's duties with the Company for six consecutive months,
and within thirty days after written notice of termination is given Executive
shall not have returned to the full-time performance of Executive's duties. Any
issue concerning the existence of Executive's Disability upon which Executive and
the Company cannot agree shall be determined by a qualified physician selected
jointly by the company and Executive and, if they cannot agree, each shall
appoint a qualified physician and the two physicians shall meet and agree on a
third qualified physician to determine the issue of Disability. Such physician
shall consult with Executive and representatives of the Company designated by the
Board to determine Executive's duties and then decide whether or not Executive is
physically capable of or mentally competent to perform the essential functions of
the position which he holds at the time. The determination of such physician
made in writing to the Company and Executive shall be final and conclusive for
purposes of this Agreement.
B. Termination of Executive for Cause or by Executive Without Good
Reason. If the Company terminates Executive for Cause, or if Executive
voluntarily terminates his performance of services to the Company without Good
Reason, then the Company's obligations to make any payments or provide any
benefits to Executive, in respect of periods after such termination,
automatically shall terminate and be forfeited, provided, however, the Executive
shall be entitled to any and all vested rights under any profit sharing, pension
or other employee benefit plan of the Company in accordance with the terms and
provisions of such plans, and all deferred compensation payments previously
agreed upon by Executive and the Company, if any.
C. Termination With Good Reason or Without Cause. By action of its
Board of Directors, the Company shall have the right to terminate Executive's
employment with the Company at its sole discretion without any cause whatsoever,
provided only that Executive shall receive the severance payments and benefits
which he is entitled to under this Agreement for termination without cause
(subject to the Executive's signing a legal release as provided herein). Upon
the termination of Executive's employment if such termination is (i) by the
Company other than for Cause or Disability, or (ii) by Executive for Good Reason
by voluntary resignation, then Executive shall be entitled to the benefits
provided below:
1. The Company shall pay Executive's full base salary through the date of
termination ("Termination Date") at the rate in effect at the time Notice of
Termination is given, plus all other amounts to which Executive is entitled under
any compensation or benefit plan of the Company, at the time such payments are
due, including a lump sum cash payment for all unused vacation time which
Executive has accrued as of the Termination Date;
2. In lieu of any further salary payments to Executive for periods subsequent
to the Termination Date, the Company shall pay to Executive as severance pay a
lump sum severance payment (the "Severance Payment") equal to two (2) times
either (i) the Annual Compensation (as defined below) which was payable to
Executive by the Company for the year immediately preceding the Termination Date,
or (ii) the average of the Annual Compensation which was payable to Executive by
the Company for the three (3) years preceding the Termination Date, whichever is
greater. Annual Compensation is Executive's base salary and any annual bonus
that was paid to Executive by the Company, determined without any reduction for
any deferrals of such salary or such bonus under any deferred compensation plan
(qualified or unqualified) and without any reduction for any salary reductions
used for making contributions to any group insurance plan of the Company or its
affiliates.
The payments provided for in this subparagraph 2, shall be made not later than
the fifth day following the Termination Date.
3. All of Executive's stock options for the purchase of the Company's stock
not otherwise vested, or as many of the options as Executive elects, shall become
immediately vested and exercisable by Executive for a period of two (2) years
following the Termination Date, subject to Executive's execution of a legal
release as provided in paragraph 7 below.
4. If Executive's employment shall be terminated as above set forth, then for
a twenty-four (24) month period after such termination, the Company shall arrange
to provide Executive with life, disability, accident and health insurance
benefits substantially similar to those which Executive is receiving immediately
prior to the Notice of Termination. Benefits otherwise receivable by Executive
pursuant to this Subsection 4 shall be reduced to the extent comparable benefits
are actually received by Executive during the twenty-four (24) month period
following Executive's termination, and any such benefits actually received by
Executive shall be reported to the Company.
5. Executive shall not be required to mitigate the amount of any payment
provided for in this Section by seeking other employment or otherwise, nor shall
the amount of any payment or benefit provided for in this Section (other than
Subsection 4) be reduced by any compensation earned by Executive as the result of
employment by another employer, by retirement benefits, by offset against any
amount claimed to be owed by Executive to the Company, or otherwise (except as
specifically provided in this Section).
6. Notwithstanding anything contained in this Section to the contrary, in no
event shall payments or benefits be made pursuant to subparagraphs 2 through 4 in
an amount which shall result in such payments and benefits in the aggregate being
deemed an "excess parachute payment" pursuant to Section 280G of the Internal
Revenue Code of 1986, as amended. In the event such payments and benefits in the
aggregate are deemed to be an excess parachute payment by the independent
auditors of the Company for the fiscal year immediately proceeding the
Termination Date, then Executive shall have the right to identify which of such
payments or benefits (or parts thereof) are to be eliminated so that those
remaining in the aggregate do not constitute an excess parachute payment.
7. As a condition precedent of receiving any severance payments or benefits
under this Agreement in connection with a termination for good reason or without
cause, Executive shall sign an appropriate legal release agreeing not to bring
any legal claims against the Company of whatever nature or kind in connection
with his employment and separation from employment, except for benefits of
employment, such as profit-sharing, pension or other employee benefit plans that
by their terms have vested. The legal release shall surrender all of Executive's
rights to bring any legal claim against the Company, other than for such vested
rights, under any federal or state law, statute, or ordinance. Executive also
agrees that he shall not be entitled to any termination payments or benefits if
he exercises his right to revoke the legal release as provided by the Older
Workers Benefit Protection act.
SECTION VII. TERMINATION NOTICE
Any purported termination of Executive's employment by the Company or by
Executive shall be communicated by written Notice of Termination to the other
party hereto in accordance with Section XII hereof. For purposes of this
Agreement, a "Notice of Termination" shall mean a notice which shall indicate the
specific termination provision in this Agreement relied upon and shall set forth
in reasonable detail the facts and circumstances claimed to provide a basis for
termination of Executive's employment under the provision so indicated, except if
the Agreement is terminated by the Company without cause.
SECTION VIII. CONFIDENTIALITY
Executive agrees that, during the continuance of this Agreement and thereafter,
he shall not (otherwise than pursuant to his duties hereunder) disclose without
the written consent of the Company, any material or substantial, confidential or
proprietary know-how, data or information pertaining to the Company, or its
business, personnel or plans, to any person, firm, corporation or other entity,
for any reason or purpose whatsoever. Executive acknowledges and agrees that all
memoranda, notes, records and other documents made or compiled by Executive or
made available to Executive concerning the Company's business shall be the
Company's exclusive property and shall be delivered by Executive to the Company
upon expiration or termination of this Agreement or at any other time upon the
request of the Company.
The provisions of this Section IX shall survive the expiration or termination of
this Agreement or any part thereof, without regard to the reason therefor.
SECTION IX. COVENANT NOT TO COMPETE
The Parties acknowledge that Executive's willingness to enter into this Agreement
and to continue as an employee of the Company constitutes a material inducement
to the Company's agreement to make payments to Executive as set forth herein
including those to be made upon termination. The Parties further acknowledge that
Executive's performance of all terms of this Agreement is necessary to protect
the Company's legitimate business interests. Executive agrees, that, during the
continuance of this Agreement and for a period of one (1) year following
termination of Executive's employment with the Company under circumstances
described in Section VI.C resulting in the payment to him of severance benefits
as provided therein, he will not, on behalf of himself, or on behalf of any other
person, company, corporation, partnership or other entity or enterprise, directly
or indirectly, as an employee, proprietor, stockholder, partner, consultant, or
otherwise, engage in any business or activity competitive with the business
activities of the Company as they are now or hereafter undertaken by the Company
during the term hereof anywhere that the Company then does business, or solicit,
recruit or hire any employee of the Company.
SECTION X. DEDUCTIONS AND WITHHOLDING
Executive agrees that the Company and its affiliated companies shall withhold
from any and all payments required to be made to Executive in accordance with
this Agreement all federal, state, local and other taxes that the Company or any
such affiliates determine are required to be withheld in accordance with
applicable statutes and regulations from time to time in effect.
SECTION XI. NOTICES
All notices, requests, demands and other communications hereunder shall be in
writing and shall be deemed given when delivered personally or when deposited in
the U.S. Mail if sent by registered or certified mail, prepaid and return receipt
requested, to the other party hereto at his or its mailing address as set forth
on the signature page of this Agreement, and in the case of the Company, marked
to the attention of Secretary. Either party may change the address which such
communications hereunder shall be sent by sending notice of such change to the
other party as herein provided.
SECTION XII. SEVERABILITY
If any provision of this Agreement or any part hereof is invalid, unlawful or
incapable of being enforced by reason of any rule of law or public policy, all
conditions and provisions of this Agreement which can be given effect without
such invalid, unlawful or unenforceable provision shall, nevertheless, remain in
full force and effect.
SECTION XIII. BOARD APPROVAL
By execution of this Agreement, the Company acknowledges that this Agreement has
been reviewed and adopted by a resolution approved by a majority of the members
of the Board of Directors of the Company.
SECTION XIV. COMPLETE UNDERSTANDING;
PRIOR AGREEMENTS
This Agreement (which includes all employee benefit plans of Company referenced
herein) constitutes the complete understanding between the Parties with respect
to the undertaking of Executive hereunder, and no statement, representation,
warranty or covenant has been made by either party with respect thereto except as
expressly set forth herein. Unless otherwise specifically referred to herein,
this Agreement shall, from and after the Effective Date, supersede, in all
respects, all previous agreements in regard to employment between Executive and
the Company. This Agreement shall not be altered, modified, amended or
terminated except by written instrument signed by each of the Parties hereto.
SECTION XV. GOVERNING LAW
This Employment Agreement shall be governed by, and construed and enforced in
accordance with, the laws of the State of Arizona.
SECTION XVI. SUCCESSORS; BINDING AGREEMENT
(a) The Company will require any successor (whether direct or indirect, by
purchase, merger, consolidation or otherwise) to all or substantially all of the
business and/or assets of the Company to expressly assume and agree to perform
this Agreement in the same manner and to the same extent that the Company would
be required to perform it if no such succession had taken place. Failure of the
Company to obtain such assumption and agreement prior to the effectiveness of any
such succession shall be a breach of this Agreement and shall entitle Executive
to compensation from the Company in the same amount and on the same terms as
Executive would be entitled to hereunder if Executive terminated Executive's
employment voluntarily for Good Reason, except that for purposes of implementing
the foregoing, the date on which any such succession becomes effective shall be
deemed the Date of Termination. As used in this Agreement, "Company" shall mean
the Company as hereinbefore defined and any successor to its business and/or
assets as aforesaid which assumes and agrees to perform this Agreement by
operation of law, or otherwise.
(b) This Agreement shall inure to the benefit of and be enforceable by
Executive's personal or legal representatives, executors, administrators,
successors, heirs, distributees, devises and legatees. If Executive should die
while any amount would still be payable to Executive hereunder if Executive had
continued to live, all such amounts, unless otherwise provided herein, shall be
paid in accordance with the terms of this Agreement to Executive's devisee,
legatee or other designee or, if there is no such designee, to Executive's
estate.
SECTION XVII. ARBITRATION
All claims, disputes and other matters in question between the parties arising
under this Agreement shall, unless otherwise provided herein, be decided by
arbitration in Phoenix, Arizona, in accordance with the Model Employment
Arbitration Procedures of the American Arbitration Association (including such
procedures governing selection of the specific arbitrator or arbitrators), unless
the parties mutually agree otherwise. The Company shall pay the administrative
costs of the arbitration, but each party shall pay his and its own attorney's
fees and costs. The award by the arbitrator or arbitrators shall be final, and
judgment may be entered upon it in accordance with applicable law in any state or
Federal court having jurisdiction thereof.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement effective
as of the day and year first above written.
PHOTOCOMM, INC.
an Arizona corporation
By:
__________________________________
Robert R. Kauffman
Chief Executive Officer
7681 E. Gray Road
Scottsdale, Arizona 85260
THOMAS C. LAVOY
29555 N. 69th Place
Cave Creek, AZ 85331
EXHIBIT 10.12
EXECUTIVE COMPENSATION AGREEMENT
This Executive Compensation Agreement (this "Agreement"), is entered into as of
the day 20th of November 1996, between PHOTOCOMM, INC., an Arizona corporation
(the "Company"), and MYRON ANDURI ("Executive"). The Company and Executive are
collectively referred to herein as the "Parties." This Agreement shall supersede
any other agreement between the Company and Executive concerning Executive's
employment by the Company, including the prior agreement between the parties
effective September 1, 1996.
SECTION I. AGREEMENT OF THE PARTIES
The Company agrees to employ Executive and Executive agrees to serve in the
employ of Company as follows:
(a) Executive agrees to serve as an officer of the Company during the term of
this Agreement. Executive further agrees to use his best efforts and apply his
skill and experience to the proper performance of his duties hereunder and to the
business and affairs of the Company. Executive agrees to serve the Company
faithfully, diligently and to the best of his ability.
(b) The principal location from which Executive will serve the Company and
perform his duties hereunder shall be Scottsdale, Arizona.
(c) The term of this Agreement will be for three (3) years, unless extended in
writing by the parties or terminated earlier as provided in Section IV.
SECTION II. COMPENSATION; BENEFITS
A. Base Compensation. Commencing with the 1997 calendar year, the Company shall
pay Executive a base annual salary of $90,000. Executive's base annual salary may
be increased by the Company during the term of this Agreement based upon the
Executive's and the Company's performance. Notwithstanding the foregoing, in the
case of substantial and persistent deterioration of the Company's performance,
the Company may reduce Executive's base annual salary consistent with similar
salary reductions of other Company officers until the Company's performance
improves. Executive's base annual salary shall be paid by the Company in semi-
monthly installments commensurate with the Company's normal employee pay days.
B. Incentive Compensation. The Company shall also provide Executive incentive
compensation as follows:
l. Annual Cash Bonus. Executive may also earn a bonus based upon Company
performance in an amount to be determined by the Board of Directors of the
Company pursuant to this subparagraph. Prior to or shortly after the beginning of
each fiscal year of the Company, Executive shall submit for Board approval his
fiscal year performance goals, including an operating plan and financial budget.
Following the end of the fiscal year the Board shall determine the extent to
which said goals have been achieved and the amount of the cash bonus based upon
such performance.
2. Options. Executive will be eligible to participate in all the employee Stock
Option plans adopted by the Company for which he is eligible.
C. Supplemental Benefits. Nothing contained in this Section II shall affect or in
any way limit Executive's rights as an employee of the Company to participate in
any profit sharing plan, supplemental compensation arrangements or any other
fringe benefits offered by the Company to its employees as set forth in the
Company's employee handbook, except Executive shall receive only the amount of
severance pay provided by this Agreement.
SECTION III. SALARY CONTINUATION UPON DISABILITY
In the event Executive shall, by reason of illness or other incapacity. become
unable to perform the services agreed upon herein, the Company shall continue to
compensate Executive for twelve (12) months commencing from the date of such
illness or other incapacity at his base monthly salary less any amounts actually
received by Executive from the disability insurance policies carried
by the Company for the benefit of Executive pursuant to Section II.C above.
SECTION IV. TERMINATION
A. By the Company. The Company may terminate Executive's services under this
Agreement at any time for any reason, provided only that if this Agreement is
terminated by the Company without cause, Executive shall receive severance pay in
an amount equal to his base annual salary for twenty-four (24) months.
As a condition of receiving severance pay under this Agreement, however,
Executive shall sign an appropriate legal release agreeing not to bring any legal
claims against the Company of whatever nature or kind in connection with his
employment and separation from employment, except for vested rights under any
profit sharing, pension or other employee benefit plan.
B. For Cause. Termination by the Company of Executive's employment for "cause"
shall mean termination by affirmative vote of the Board at a meeting of the Board
called and held for such purpose (after reasonable notice to Executive and an
opportunity for Executive to be heard before the Board), finding that in the good
faith opinion of the Board, the Executive has: (1) engaged in
misconduct involving a material violation of established Company rules or
policies for the conduct of its employees including, but not limited to, theft,
gross negligence, discriminatory conduct prohibited by Company policies, sexual
harassment of an employee or a subordinate, or such other
similar offense or offenses that would be grounds for discharge of an employee
under Company rules or policies; (2) financial misconduct, including illegal
insider trading of the Company's stock embezzlement, using Company assets for
unauthorized personal use resulting in a material loss to the Company; or
material misrepresentation by Executive in reporting the financial affairs of the
Company to outside authorities or to the Board; (3) willful and continued failure
to substantially perform Executive's duties with the Company (other than due to
physical or mental illness), if such failure is materially damaging or materially
detrimental to the business and operations of the
Company, provided that Executive shall have received written notice of such
failure and have a reasonable opportunity to correct the alleged failure before
termination for cause; or (4) Executive's conviction of a crime constituting a
felony.
C. By Executive. Executive may terminate this Agreement for any reason by giving
thirty (30) days advance written notice to the Company. In such event, the
Company's obligations to make any payments or provide benefits to Executive in
respect of periods after such termination automatically shall terminate and be
forfeited, except as provided in paragraph D. below.
D. Other Payments. In the event Executive's employment pursuant to this Agreement
is terminated for any reason, the Executive shall be entitled to any and all
vested rights under any profit sharing, pension or other employee benefit plan of
the Company in accordance with the terms and provisions of such plans.
E. Without Cause. In addition, the following provisions shall be effective if
this Agreement is terminated by the Company without cause:
l. All of Executive's stock options for the purchase of the Company's stock or
as many of the options as Executive elects, shall become immediately vested and
exercisable by Executive. These options must be exercised within twelve (12)
months of the date of termination.
2. If Executive's employment shall be terminated without cause, then for a
twelve (12)-month period after such termination, the Company shall arrange to
provide Executive with life, disability, accident and health insurance benefits
substantially similar to those which Executive is receiving immediately prior to
the Notice of Termination. Benefits otherwise receivable by Executive pursuant to
this subsection shall be reduced to the extent comparable benefits are actually
received by Executive during the twelve (12)-month period following Executive's
termination, and any such benefits actually received by Executive shall be
reported to the Company.
SECTION V. CONFIDENTIALITY
Executive agrees that, during the continuation of this Agreement and thereafter,
he shall not (other than pursuant to his duties hereunder) disclose without the
written consent of the Company, any material or substantial, confidential or
proprietary know-how, data or information pertaining to the Company, or its
business, personnel or plans, to any person, firm, corporation or other entity,
for any reason or purpose whatsoever. Executive acknowledges and agrees that all
memoranda, notes, records and other documents made or compiled by Executive or
made available to Executive
concerning the Company's business shall be the Company's exclusive property and
shall be delivered by Executive to the Company upon expiration or termination of
this Agreement or at any other time upon the request of the Company.
The provisions of this Section V shall survive the expiration or termination of
this Agreement or any part thereof, without regard to the reason therefor.
SECTION VI. COVENANT NOT TO COMPETE
The Parties acknowledge that Executive's willingness to enter into this Agreement
and to continue as an employee of the Company constitutes a material inducement
to the Company's agreement to make payments to Executive as set forth herein,
including those to be made upon termination. The Parties further acknowledge that
Executive's performance of all terms of this Agreement is necessary to protect
the Company's legitimate business interests. Executive agrees that during the
continuance of this Agreement and for a period of twelve (12) months thereafter,
he will not, on behalf of himself, or on behalf of any other person, company,
corporation, partnership or other entity or enterprise, directly or indirectly,
as an employee, proprietor, stockholder, partner, consultant, or otherwise,
engage in any business or activity competitive with the business activities of
the Company as they are now or hereafter undertaken by the Company.
SECTION VII. DEDUCTIONS AND WITHHOLDING
Executive agrees that the Company and its affiliated companies shall withhold
from any and all payments required to be made to Executive in accordance with
this Agreement, all federal, state, local and other taxes that the Company or any
such affiliates determine are required to be withheld in accordance with
applicable statutes and regulations from time to time in effect.
SECTION VIII. ARBITRATION
All claims, disputes ands other matters in question between the parties arising
under this Agreement shall, unless otherwise provided herein, be decided by
arbitration in Phoenix, Arizona, in accordance with the Model Employment
Arbitration Procedures of the American Arbitration Association (including such
procedures governing selection of the specific arbitrator or arbitrators), unless
the parties mutually agree otherwise. The Company shall pay the administrative
costs of any such arbitration, but each party shall pay his or its own attorneys
fees and costs incurred.
SECTION IX. NOTICES
All notices, requests, demands and other communications hereunder shall be in
writing and shall be deemed given when delivered personally or when deposited in
the U.S. Mail if sent by registered or certified mail, prepaid and return receipt
requested, to the other party hereto at his or its mailing address as set forth
on the signature page of this Agreement, and in the case of the
Company, marked to the attention of Secretary. Either party may change the
address to which such communications hereunder shall be sent by sending notice of
such change to the other party as herein provided.
SECTION X. GOVERNING LAW
This Employment Agreement shall be governed by, and construed and enforced in
accordance with, the laws of the State of Arizona.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement effective as
of the day and year first above written.
PHOTOCOMM, INC., an Arizona corporation
By:_______________________________________________ ________________________
Donald E. Anderson Myron Anduri
Chairman of the Board
7861 E. Gray Road
Scottsdale, AZ 85260
EXHIBIT 10.13
EXECUTIVE COMPENSATION AGREEMENT
This Executive Compensation Agreement (this "Agreement"), is entered into as of
the 20th day November of 1996, between PHOTOCOMM, INC., an Arizona corporation
(the "Company"), and DONALD E. ANDERSON ("Executive"). The Company and Executive
are collectively referred to herein as the "Parties." This Agreement shall
supersede any other agreement between the Company and Executive concerning
Executive's employment by the Company, including the prior agreement between the
parties effective September 1, 1996.
SECTION I. AGREEMENT OF THE PARTIES
The Company agrees to employ Executive and Executive agrees to serve in the
employ of Company as follows:
(a) Executive agrees to serve the Company as Chairman of the Board of Directors
during the term of this Agreement. Executive further agrees to use his best
efforts and apply his skill and experience to the proper performance of his
duties thereunder and to the business and affairs of the Company. Executive
agrees to serve the Company faithfully, diligently and to the best of his
ability.
(b) The principal location from which Executive will serve the Company and
perform his duties thereunder shall be Scottsdale, Arizona.
(c) The term of this Agreement will be for three (3) years, unless extended in
writing by the parties or terminated earlier as provided in Section IV.
SECTION II. COMPENSATION; BENEFITS
A. Base Compensation. Commencing with the 1997 calendar year, the Company shall
pay Executive a base annual salary of $24,000. Executive's base annual salary may
be increased by the Company during the term of this Agreement based upon the
Executive's and the Company's performance. Notwithstanding the foregoing, in the
case of substantial and persistent deterioration of the Company's performance,
the Company may reduce Executive's base annual salary consistent with similar
salary reductions of other Company officers until the Company's performance
improves. Executive's base annual salary shall be paid by the Company in semi-
monthly installments commensurate with the Company's normal employee pay days.
B. Incentive Compensation. The Company shall also provide Executive incentive
compensation as follows:
1. Annual Cash Bonus. Executive may also earn a bonus based upon Company
performance in an amount to be determined by the Board of Directors of the
Company pursuant to this subparagraph. Prior to or shortly after the beginning of
each fiscal year of the Company, Executive shall submit for Board approval his
fiscal year performance goals, including an operating plan and financial budget.
Following the end of the fiscal year the Board shall determine the extent to
which said goals have been achieved and the amount of the cash bonus based upon
such performance.
2. Options. Executive will be eligible to participate in all the employee Stock
Option plans adopted by the Company for which he is eligible.
SECTION III. SALARY CONTINUATION UPON DISABILITY
In the event Executive shall, by reason of illness or other incapacity, become
unable to perform the services agreed upon herein, the Company shall continue to
compensate Executive for twelve (12) months commencing from the date of such
illness or other incapacity at his base monthly salary less any amounts actually
received by Executive from the disability insurance policies carried
by the Company for the benefit of Executive pursuant to Section II.C above.
SECTION IV. TERMINATION
A. By the Company. The Company may terminate Executive's services under this
Agreement at any time for any reason, provided only that if this Agreement is
terminated by the Company without cause, Executive shall receive severance pay in
an amount equal to his base annual salary for twenty-four (24) months.
As a condition of receiving severance pay under this Agreement, however,
Executive shall sign an appropriate legal release agreeing not to bring any legal
claims against the Company of whatever nature or kind in connection with his
employment and separation from employment, except for vested rights under any
profit sharing, pension or other employee benefit plan.
B. For Cause. Termination by the Company of Executive's employment for "cause"
shall mean termination by affirmative vote of the Board at a meeting of the Board
called and held for such purpose (after reasonable notice to Executive and an
opportunity for Executive to be heard before the Board), finding that in the good
faith opinion of the Board, the Executive has: (1) engaged in
misconduct involving a material violation of established Company rules or
policies for the conduct of its employees including, but not limited to, theft,
gross negligence, discriminatory conduct prohibited by Company policies, sexual
harassment of an employee or a subordinate, or such other
similar offense or offenses that would be grounds for discharge of an employee
under Company rules or policies; (2) financial misconduct, including illegal
insider trading of the Company's stock embezzlement, using Company assets for
unauthorized personal use resulting in a material loss to the Company; or
material misrepresentation by Executive in reporting the financial affairs of the
Company to outside authorities or to the Board; (3) willful and continued failure
to substantially perform Executive's duties with the Company (other than due to
physical or mental illness), if such failure is materially damaging or materially
detrimental to the business and operations of the
Company, provided that Executive shall have received written notice of such
failure and have a reasonable opportunity to correct the alleged failure before
termination for cause; or (4) Executive's conviction of a crime constituting a
felony.
C. By Executive. Executive may terminate this Agreement for any reason by giving
thirty (30) days advance written notice to the Company. In such event, the
Company's obligations to make any payments or provide benefits to Executive in
respect of periods after such termination automatically shall terminate and be
forfeited, except as provided in paragraph D. below.
D. Other Payments. In the event Executive's employment pursuant to this Agreement
is terminated for any reason, the Executive shall be entitled to any and all
vested rights under any profit sharing, pension or other employee benefit plan of
the Company in accordance with the terms and provisions of such plans.
E. Without Cause. In addition, the following provisions shall be effective if
this Agreement is terminated by the Company without cause:
l. All of Executive's stock options for the purchase of the Company's stock or
as many of the options as Executive elects, shall become immediately vested and
exercisable by Executive. These options must be exercised within twelve
(12)months of the date of termination.
SECTION V. CONFIDENTIALITY
Executive agrees that, during the continuation of this Agreement and thereafter,
he shall not (other than pursuant to his duties hereunder) disclose without the
written consent of the Company, any material or substantial, confidential or
proprietary know-how, data or information pertaining to the Company, or its
business, personnel or plans, to any person, firm, corporation or other entity,
for any reason or purpose whatsoever. Executive acknowledges and agrees that all
memoranda, notes, records and other documents made or compiled by Executive or
made available to Executive
concerning the Company's business shall be the Company's exclusive property and
shall be delivered by Executive to the Company upon expiration or termination of
this Agreement or at any other time upon the request of the Company. The
provisions of this Section V shall survive the expiration or termination of this
Agreement or any part thereof, without regard to the reason therefor.
SECTION VI. COVENANT NOT TO COMPETE
The Parties acknowledge that Executive's willingness to enter into this Agreement
and to continue as an employee of the Company constitutes a material inducement
to the Company's agreement to make payments to Executive as set forth herein,
including those to be made upon termination. The Parties further acknowledge that
Executive's performance of all terms of this Agreement is necessary to protect
the Company's legitimate business interests. Executive agrees that during the
continuance of this Agreement and for a period of twelve (12) months thereafter,
he will not, on behalf of himself, or on behalf of any other person, company,
corporation, partnership or other entity or enterprise, directly or indirectly,
as an employee, proprietor, stockholder, partner, consultant, or otherwise,
engage in any business or activity competitive with the business activities of
the Company as they are now or hereafter undertaken by the Company.
SECTION VII. DEDUCTIONS AND WITHHOLDING
Executive agrees that the Company and its affiliated companies shall withhold
from any and all payments required to be made to Executive in accordance with
this Agreement, all federal, state, local and other taxes that the Company or any
such affiliates determine are required to be withheld in accordance with
applicable statutes and regulations from time to time in effect.
SECTION VIII. ARBITRATION
All claims, disputes ands other matters in question between the parties arising
under this Agreement shall, unless otherwise provided herein, be decided by
arbitration in Phoenix, Arizona, in accordance with the Model Employment
Arbitration Procedures of the American Arbitration Association (including such
procedures governing selection of the specific arbitrator or arbitrators), unless
the parties mutually agree otherwise. The Company shall pay the administrative
costs of any such arbitration, but each party shall pay his or its own attorneys
fees and costs incurred.
SECTION IX. NOTICES
All notices, requests, demands and other communications hereunder shall be in
writing and shall be deemed given when delivered personally or when deposited in
the U.S. Mail if sent by registered or certified mail, prepaid and return receipt
requested, to the other party hereto at his or its mailing address as set forth
on the signature page of this Agreement. and in the case of the
Company, marked to the attention of Secretary. Either party may change the
address to which such communications hereunder shall be sent by sending notice of
such change to the other party as herein provided.
SECTION X. GOVERNING LAW
This Employment Agreement shall be governed by, and construed and enforced in
accordance with, the laws of the State of Arizona.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement effective as
of the day and year first above written.
PHOTOCOMM, INC., an Arizona corporation
By:_____________________________________
Donald E. Anderson
7861 E. Gray Road
Scottsdale, AZ 85260
EXHIBIT 10.14
EXECUTIVE COMPENSATION AGREEMENT
This Executive Compensation Agreement (this "Agreement"), is entered into as of
the 20th day of November 1996, between PHOTOCOMM, INC., an Arizona corporation
(the "Company"), and ROBERT SPOTTS ("Executive"). The Company and Executive are
collectively referred to herein as the "Parties." This Agreement shall supersede
any other agreement between the Company and Executive concerning Executive's
employment by the Company, including the prior agreement between the parties
effective September 1, 1996.
SECTION I. AGREEMENT OF THE PARTIES
The Company agrees to employ Executive and Executive agrees to serve in the
employ of Company as follows:
(a)Executive agrees to serve as an officer of the Company during the term of this
Agreement. Executive further agrees to use his best efforts and apply his skill
and experience to the proper performance of his duties hereunder and to the
business and affairs of the Company. Executive agrees to serve the Company
faithfully, diligently and to the best of his ability.
(b)The principal location from which Executive will serve the Company and perform
his duties hereunder shall be Scottsdale, Arizona.
(c)The term of this Agreement will be for two (2) years, unless extended in
writing by the parties or terminated earlier as provided in Section IV.
SECTION II. COMPENSATION; BENEFITS
A. Base Compensation. Commencing with the 1997 calendar year, the Company shall
pay Executive a base annual salary of $78,000. Executive's base annual salary may
be increased by the Company during the term of this Agreement based upon the
Executive's and the Company's performance. Notwithstanding the foregoing, in the
case of substantial and persistent deterioration of the Company's performance,
the Company may reduce Executive's base annual salary consistent with similar
salary reductions of other Company officers until the Company's performance
improves. Executive's base annual salary shall be paid by the Company in semi-
monthly installments commensurate with the Company's normal employee pay days.
B. Incentive Compensation. The Company shall also provide Executive incentive
compensation as follows:
l. Annual Cash Bonus. Executive may also earn a bonus based upon Company
performance in an amount to be determined by the Board of Directors of the
Company pursuant to this subparagraph. Prior to or shortly after the beginning of
each fiscal year of the Company, Executive shall submit for Board approval his
fiscal year performance goals, including an operating plan and financial budget.
Following the end of the fiscal year the Board shall determine the extent to
which said goals have been achieved and the amount of the cash bonus based upon
such performance.
2. Options. Executive will be eligible to participate in all the employee Stock
Option plans adopted by the Company for which he is eligible.
C. Supplemental Benefits. Nothing contained in this Section II shall affect or in
any way limit Executive's rights as an employee of the Company to participate in
any profit sharing plan, supplemental compensation arrangements or any other
fringe benefits offered by the Company to its employees as set forth in the
Company's employee handbook, except Executive shall receive only the amount of
severance pay provided by this Agreement.
SECTION III. SALARY CONTINUATION UPON DISABILITY
In the event Executive shall, by reason of illness or other incapacity, become
unable to perform the services agreed upon herein, the Company shall continue to
compensate Executive for twelve (12) months commencing from the date of such
illness or other incapacity at his base monthly salary less any amounts actually
received by Executive from the disability insurance policies carried by the
Company for the benefit of Executive pursuant to Section II.C above.
SECTION IV. TERMINATION
A. By the Company. The Company may terminate Executive's services under this
Agreement at any time for any reason, provided only that if this Agreement is
terminated by the Company without cause, Executive shall receive severance pay in
an amount equal to his base annual salary for twelve (12) months.
As a condition of receiving severance pay under this Agreement, however,
Executive shall sign an appropriate legal release agreeing not to bring any legal
claims against the Company of whatever nature or kind in connection with his
employment and separation from employment. Except for vested rights under any
profit sharing, pension or other employee benefit plan.
B. For Cause. Termination by the Company of Executive's employment for "cause"
shall mean termination by affirmative vote of the Board at a meeting of the Board
called and held for such purpose (after reasonable notice to Executive and an
opportunity for Executive to be heard before the Board), finding that in the good
faith opinion of the Board, the Executive has: (1) engaged in misconduct
involving a material violation of established Company rules or policies for the
conduct of its employees including, but not limited to, theft, gross negligence,
discriminatory conduct prohibited by Company policies, sexual harassment of an
employee or a subordinate, or such other
similar offense or offenses that would be grounds for discharge of an employee
under Company rules or policies; (2) financial misconduct, including illegal
insider trading of the Company's stock embezzlement, using Company assets for
unauthorized personal use resulting in a material loss to the Company; or
material misrepresentation by Executive in reporting the financial affairs of the
Company to outside authorities or to the Board; (3) willful and continued failure
to substantially perform Executive's duties with the Company (other than due to
physical or mental illness), if such failure is materially damaging or materially
detrimental to the business and operations of the Company, provided that
Executive shall have received written notice of such failure and have a
reasonable opportunity to correct the alleged failure before termination for
cause; or (4) Executive's conviction of a crime constituting a felony.
C. By Executive. Executive may terminate this Agreement for any reason by giving
thirty (30) days advance written notice to the Company. In such event, the
Company's obligations to make any payments or provide benefits to Executive in
respect of periods after such termination automatically shall terminate and be
forfeited, except as provided in paragraph D. below.
D. Other Payments. In the event Executive's employment pursuant to this Agreement
is terminated for any reason, the Executive shall be entitled to any and all
vested rights under any profit sharing, pension or other employee benefit plan of
the Company in accordance with the terms and provisions of such plans.
E. Without Cause. In addition, the following provisions shall be effective if
this Agreement is terminated by the Company without cause:
l. All of Executive's stock options for the purchase of the Company's stock or as
many of the options as Executive elects, shall become immediately vested and
exercisable by Executive. These options must be exercised within twelve (12)
months of the date of termination.
2. If Executive's employment shall be terminated without cause, then for a twelve
(12)-month period after such termination, the Company shall arrange to provide
Executive with life, disability, accident and health insurance benefits
substantially similar to those which Executive is receiving immediately prior to
the Notice of Termination. Benefits otherwise receivable by Executive pursuant to
this subsection shall be reduced to the extent comparable benefits are actually
received by Executive during the twelve (12)-month period following Executive's
termination, and any such benefits actually received by Executive shall be
reported to the Company.
SECTION V. CONFIDENTIALITY
Executive agrees that, during the continuation of this Agreement and thereafter,
he shall not (other than pursuant to his duties hereunder) disclose without the
written consent of the Company, any material or substantial, confidential or
proprietary know-how, data or information pertaining to the Company, or its
business, personnel or plans, to any person, firm, corporation or other entity,
for any reason or purpose whatsoever. Executive acknowledges and agrees that all
memoranda,
notes, records and other documents made or compiled by Executive or made
available to Executive concerning the Company's business shall be the Company's
exclusive property and shall be delivered by Executive to the Company upon
expiration or termination of this Agreement or at any other time upon the request
of the Company.
The provisions of this Section V shall survive the expiration or termination of
this Agreement or any part thereof, without regard to the reason therefor.
SECTION VI. COVENANT NOT TO COMPETE
The Parties acknowledge that Executive's willingness to enter into this Agreement
and to continue as an employee of the Company constitutes a material inducement
to the Company's agreement to make payments to Executive as set forth herein,
including those to be made upon termination. The Parties further acknowledge that
Executive's performance of all terms of this Agreement is necessary to protect
the Company's legitimate business interests. Executive agrees that during the
continuance of this Agreement and for a period of six (6) months thereafter, he
will not, on behalf of himself, or on behalf of any other person, company,
corporation, partnership or other entity or enterprise, directly or indirectly,
as an employee, proprietor, stockholder, partner, consultant, or otherwise,
engage in any business or activity competitive with the business activities of
the Company as they are now or hereafter undertaken by the Company.
SECTION VII. DEDUCTIONS AND WITHHOLDING
Executive agrees that the Company and its affiliated companies shall withhold
from any and all payments required to be made to Executive in accordance with
this Agreement. all federal, state, local and other taxes that the Company or any
such affiliates determine are required to be withheld in accordance with
applicable statutes and regulations from time to time in effect.
SECTION VIII. ARBITRATION
All claims, disputes ands other matters in question between the parties arising
under this Agreement shall, unless otherwise provided herein, be decided by
arbitration in Phoenix, Arizona, in accordance with the Model Employment
Arbitration Procedures of the American Arbitration Association (including such
procedures governing selection of the specific arbitrator or arbitrators), unless
the parties mutually agree otherwise. The Company shall pay the administrative
costs of any such arbitration, but each party shall pay his or its own attorneys
fees and costs incurred.
SECTION IX. NOTICES
All notices, requests, demands and other communications hereunder shall be in
writing and shall be deemed given when delivered personally or when deposited in
the U.S. Mail if sent by registered or certified mail, prepaid and return receipt
requested, to the other party hereto at his or its mailing address as set forth
on the signature page of this Agreement, and in the case of the
Company, marked to the attention of Secretary. Either party may change the
address to which such communications hereunder shall be sent by sending notice of
such change to the other party as herein provided.
SECTION X. GOVERNING LAW
This Employment Agreement shall be governed by, and construed and enforced in
accordance with, the laws of the State of Arizona.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement effective as
of the day and year first above written.
PHOTOCOMM, INC., an Arizona corporation
By:_______________________________________ _______________________
Donald E. Anderson Robert Spotts
Chairman of the Board
7861 E. Gray Road
Scottsdale, AZ 85260
EXHIBIT 10.15
EXECUTIVE COMPENSATION AGREEMENT
This Executive Compensation Agreement (this "Agreement"), is entered into as of
the 20th day of November 1996, between PHOTOCOMM, INC., an Arizona corporation
(the "Company"), and RONALD KENEDI ("Executive"). The Company and Executive are
collectively referred to herein as the "Parties." This Agreement shall supersede
any other agreement between the Company and Executive concerning Executive's
employment by the Company, including the prior agreement between the parties
effective September 1, 1996.
SECTION I. AGREEMENT OF THE PARTIES
The Company agrees to employ Executive and Executive agrees to serve in the
employ of Company as follows:
(a)Executive agrees to serve as an officer of the Company during the term of this
Agreement. Executive further agrees to use his best efforts and apply his skill
and experience to the proper performance of his duties hereunder and to the
business and affairs of the Company. Executive agrees to serve the Company
faithfully, diligently and to the best of his ability.
(b)The principal location from which Executive will serve the Company and perform
his duties hereunder shall be Scottsdale, Arizona.
(c)The term of this Agreement will be for two (2) years, unless extended in
writing by the parties or terminated earlier as provided in Section IV
SECTION II. COMPENSATION; BENEFITS
A. Base Compensation. Commencing with the 1997 calendar year. the Company shall
pay Executive a base annual salary of $78,000. Executive's base annual salary may
be increased by the Company during the term of this Agreement based upon the
Executive's and the Company's performance. Notwithstanding the foregoing, in the
case of substantial and persistent deterioration of the Company's performance,
the Company may reduce Executive's base annual salary consistent with similar
salary reductions of other Company officers until the Company 's performance
improves. Executive's base annual salary shall be paid by the Company in semi-
monthly installments commensurate with the Company's normal employee pay days.
B. Incentive Compensation. The Company shall also provide Executive incentive
compensation as follows:
l. Annual Cash Bonus. Executive may also earn a bonus based upon Company
performance in an amount to be determined by the Board of Directors of the
Company pursuant to this subparagraph. Prior to or shortly after the beginning of
each fiscal year of the Company, Executive shall submit for Board approval his
fiscal year performance goals, including an operating plan and financial budget.
Following the end of the fiscal year the Board shall determine the extent to
which said goals have been achieved and the amount of the cash bonus based upon
such performance.
2. Options. Executive will be eligible to participate in all the employee Stock
Option plans adopted by the Company for which he is eligible.
C. Supplemental Benefits. Nothing contained in this Section II shall affect or in
any way limit Executive's rights as an employee of the Company to participate in
any profit sharing plan, supplemental compensation arrangements or any other
fringe benefits offered by the Company to its employees as set forth in the
Company's employee handbook, except Executive shall receive only the amount of
severance pay provided by this Agreement.
SECTION III. SALARY CONTINUATION UPON DISABILITY
In the event Executive shall, by reason of illness or other incapacity, become
unable to perform the services agreed upon herein, the Company shall continue to
compensate Executive for twelve (12) months commencing from the date of such
illness or other incapacity at his base monthly salary less any amounts actually
received by Executive from the disability insurance policies carried
by the Company for the benefit of Executive pursuant to Section II.C above.
SECTION IV. TERMINATION
A. By the Company. The Company may terminate Executive's services under this
Agreement at any time for any reason, provided only that if this Agreement is
terminated by the Company without cause, Executive shall receive severance pay in
an amount equal to his base annual salary for twelve (12) months.
As a condition of receiving severance pay under this Agreement, however,
Executive shall sign an appropriate legal release agreeing not to bring any legal
claims against the Company of whatever nature or kind in connection with his
employment and separation from employment, except for vested rights under any
profit sharing, pension or other employee benefit plan.
B. For Cause. Termination by the Company of Executive's employment for "cause"
shall mean termination by affirmative vote of the Board at a meeting of the Board
called and held for such purpose (after reasonable notice to Executive and an
opportunity for Executive e to be heard before the Board), finding that in the
good faith opinion of the Board, the Executive e has: (1) engaged in
misconduct involving a material violation of established Company rules or
policies for the conduct of its employees including, but not limited to, theft,
gross negligence, discriminatory conduct prohibited by Company policies, sexual
harassment of an employee or a subordinate, or such other similar offense or
offenses that would be grounds for discharge of an employee under Company rules
or policies; (2) financial misconduct, including illegal insider trading of the
Company's stock embezzlement, using Company assets for unauthorized personal use
resulting in a material loss to the Company; or material misrepresentation by
Executive in reporting the financial affairs of the Company to outside
authorities or to the Board; (3) willful and continued failure to substantially
perform Executive's duties with the Company (other than due to physical or mental
illness), if such failure is materially damaging or materially detrimental to the
business and operations of the Company, provided that Executive shall have
received written notice of such failure and have a reasonable opportunity to
correct the alleged failure before termination for cause; or (4) Executive's
conviction of a crime constituting a felony.
C. By Executive. Executive may terminate this Agreement for any reason by giving
thirty (30) days advance written notice to the Company. In such event, the
Company's obligations to make any payments or provide benefits to executive in
respect of periods after such termination automatically shall terminate and be
forfeited, except as provided in paragraph D. below.
D. Other Payments. In the event Executive's employment pursuant to this Agreement
is terminated for any reason, the Executive shall be entitled to any and all
vested rights under any profit sharing, pension or other employee benefit plan of
the Company in accordance with the terms and provisions of such plans.
E. Without Cause. In addition, the following provisions shall be effective if
this Agreement is terminated by the Company without cause:
l. All of Executive's stock options for the purchase of the Company's stock or
as many of the options as Executive elects, shall become immediately vested and
exercisable by Executive. These options must be exercised within twelve
(12)months of the date of termination.
2. If Executive's employment shall be terminated without cause, then for a
twelve (12)-month period after such termination, the Company shall arrange to
provide Executive with life, disability, accident and health insurance benefits
substantially similar to those which Executive is receiving immediately prior to
the Notice of Termination. Benefits otherwise receivable by Executive pursuant to
this subsection shall be reduced to the extent comparable benefits are actually
received by Executive during the twelve (12)-month period following Executive's
termination, and any such benefits actually received by Executive shall be
reported to the Company.
SECTION V. CONFIDENTIALITY
Executive agrees that, during the continuation of this Agreement and thereafter,
he shall not (other than pursuant to his duties hereunder) disclose without the
written consent of the Company, any material or substantial, confidential or
proprietary know-how, data or information pertaining to the Company, or its
business, personnel or plans, to any person, firm, corporation or other entity,
for any reason or purpose whatsoever. Executive acknowledges and agrees that all
memoranda, notes, records and other documents made or compiled by Executive or
made available to Executive concerning the Company's business shall be the
Company's exclusive property and shall be delivered by Executive to the Company
upon expiration or termination of this Agreement or at any other time upon the
request of the Company.
The provisions of this Section V shall survive the expiration or termination of
this Agreement or any part thereof, without regard to the reason therefor.
SECTION VI. COVENANT NOT TO COMPETE
The Parties acknowledge that Executive's willingness to enter into this Agreement
and to continue as an employee of the Company constitutes a material inducement
to the Company's agreement to make payments to Executive as set forth herein,
including those to be made upon termination. The Parties further acknowledge that
Executive's performance of all terms of this Agreement is necessary to protect
the Company's legitimate business interests. Executive agrees that during the
continuance of this Agreement and for a period of six (6) months thereafter, he
will not, on behalf of himself, or on behalf of any other person, company,
corporation, partnership or other entity or enterprise, directly or indirectly,
as an employee, proprietor, stockholder, partner, consultant, or otherwise,
engage in any business or activity competitive with the business activities of
the Company as they are now or hereafter undertaken by the Company.
SECTION VII. DEDUCTIONS AND WITHHOLDING
Executive agrees that the Company and its affiliated companies shall withhold
from any and all payments required to be made to Executive in accordance with
this Agreement, all federal, state, local and other taxes that the Company or any
such affiliates determine are required to be withheld in accordance with
applicable statutes and regulations from time to time in effect.
SECTION VIII. ARBITRATION
All claims, disputes ands other matters in question between the parties arising
under this Agreement shall, unless otherwise provided herein, be decided by
arbitration in Phoenix, Arizona, in accordance with the Model Employment
Arbitration Procedures of the American Arbitration Association (including such
procedures governing selection of the specific arbitrator or arbitrators). Unless
the parties mutually agree otherwise. The Company shall pay the administrative
costs of any such arbitration, but each party shall pay his or its own attorneys
fees and costs incurred.
SECTION IX. NOTICES
All notices, requests, demands and other communications hereunder shall be in
writing and shall be deemed given when delivered personally or when deposited in
the U.S. Mail if sent by registered or certified mail, prepaid and return receipt
requested, to the other party hereto at his or its mailing address as set forth
on the signature page of this Agreement, and in the case of the
Company, marked to the attention of Secretary. Either party may change the
address to which such communications hereunder shall be sent by sending notice of
such change to the other party as herein provided.
SECTION X. GOVERNING LAW
This Employment Agreement shall be governed by, and construed and enforced in
accordance with, the laws of the State of Arizona.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement effective as
of the day and year first above written.
PHOTOCOMM, INC., an Arizona corporation
By:__________________________________ ___________________________
Donald E. Anderson Ronald Kenedi
Chairman of the Board
7861 E. Gray Road
Scottsdale, AZ 85260
EXHIBIT 10.16
STOCK PURCHASE AGREEMENT
Stock Purchase Agreement (the "Agreement") dated November 15, 1996, among Golden
Technologies Company, Inc., a Colorado corporation ("GTC"), The New World Power
Corporation, a Delaware corporation ("NWP"), and Photocomm, Inc., an Arizona
corporation (the "Company").
RECITALS
A. NWP owns 6,612,447 shares of the outstanding common stock $.10 par value
(the "NWP Stock") of the Company. NWP desires to sell and GTC desires to
purchase the NWP Stock upon and subject to the terms and conditions set forth
herein.
B. The Company desires to grant to GTC the right to purchase 2,000,000 shares
of common stock (the "Company Stock") of the Company from the Company and, at its
election, from certain shareholders of the Company, upon and subject to the terms
and conditions set forth herein. The Company acknowledges that it would benefit
from having GTC as a significant shareholder of the Company.
C. NWP and GTC entered into a Stock Purchase Agreement dated as of August 16,
1996. This Agreement supersedes that agreement in its entirety, and the August
26 agreement, the conditions to closing under which were not satisfied, is
terminated.
D. NWP, GTC and the Company are involved in litigation (the "Litigation")
concerning certain actions of the Company's Board of Directors on September 16,
1996. All the parties desire to settle and dismiss the Litigation at the time of
closing the transactions described in this Agreement.
E. The shares of NWP Stock and Company Stock are referred to in this
Agreement as the "Stock."
AGREEMENT
In consideration of and subject to the mutual agreements, terms and conditions
herein contained, the parties agree as follows:
ARTICLE I
PURCHASE AND SALE OF STOCK
1.1 Purchase and Sale, Closing - By the Company. At the Closing (as defined
below), the Company will issue to GTC Company Stock at a price per Share of $2.75
(the "Per Share Price"). The Company may, at its election, proportionately
reduce its obligation to issue and sell Company Stock by substituting up to an
aggregate of 1,000,000 shares of common stock owned by senior executives of the
Company and Programmed Land, Inc. (collectively the "Shareholders"), provided the
Shareholders enter into appropriate agreements with GTC providing the warranties
set forth in Section 2.3, 2.4 and 2.5 below as to themselves and as to the Stock
being sold by them. Upon such substitution of shares owned by Shareholders, the
substituted shares of common stock shall be deemed to be included in the term
"Company Stock." At Closing the aggregate Per Share Price shall be paid in
immediately available funds to the Company and the Shareholders, as applicable.
1.2 Purchase and Sale, Closing - By NWP. At the Closing (as defined below),
NWP will sell and deliver all and not less than all of the NWP Stock to GTC by
the delivery of certificates evidencing such shares, in good delivery form and
duly endorsed for transfer or accompanied by duly signed stock powers with
signature guarantees in exchange for a payment of $11,292,500 for the NWP Stock
in immediately available funds. At the Closing, GTC will also pay or reimburse
NWP for the reasonable expenses of its counsel incurred in the Litigation.
1.3 Closing. The closing ("Closing") of the sale and purchase of the Stock
(the "Transactions") shall take place at the offices of Holme Roberts & Owen LLP,
1700 Lincoln Street, Suite 4100, Denver, Colorado at 10:00 a.m. (Denver time) on
November 21, 1996, or the earliest practicable date thereafter after the
conditions set forth in Article IX are satisfied or waived, or at such other
place, time and date as the parties hereto may agree upon (the "Closing Date").
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to GTC as follows:
2.1 Organization and Qualification. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Arizona with corporate power and authority to own, operate and lease its
properties and to carry on its business as now conducted.
2.2 Authorized Shares. The Company's authorized capital consists of
25,000,000 shares of common stock, $.10 par value, of which 14,272,759 shares are
issued and outstanding and 4,024,673 of which are reserved for issuance in
connection with existing options and other obligations to issue shares, and
5,000,000 shares of preferred stock, $.001 par value, of which 109,972 shares of
Series A are outstanding and of which 60,965 shares of Series AA are outstanding.
2.3 Title. The sale of the Company Stock and the delivery of the
certificates representing the Company Stock pursuant to this Agreement will
transfer to GTC good and marketable title to such Company Stock free and clear of
all liens, claims, charges, encumbrances or rights or interests of others
whatsoever.
2.4 Authority. The Company has the full right, power and authority to enter
into this Agreement and a waiver of certain rights of first refusal with respect
to the purchase of the NWP Stock (the "Waiver") and this Agreement and the Waiver
constitute valid and binding obligations on the Company's part enforceable
against the Company in accordance with their terms, except as such enforcement
may be limited by bankruptcy, insolvency or similar laws affecting the rights of
creditors generally or by general equitable principles.
2.5 Noncontravention. The execution, delivery and performance of this
Agreement will not, with or without the giving of notice or the passage of time
(i) violate any judgment, injunction or order of any court, arbitrator or
governmental agency or law applicable to the Company, or (ii) conflict with,
result in the breach of any provision of constitute a default under or result in
rights under any agreement or instrument to which the Company is a party or by
which the Company may be bound, assuming due compliance with that Stock Purchase
Agreement dated as of October 1993 among NWP, the Company, Westinghouse Electric
Corporation, Programmed Land, Inc. and Robert R. Kauffman (the "Pcomm Stock
Agreement") if required.
2.6 Control Shares and Business Combination Statutes Not Applicable. The
Company has duly taken any and all necessary action such that the Company is not
subject to or governed by Arizona Revised Statutes ("ARS") 10-2721 through 2727
("CS/BC Provisions"), and a Company board of directors committee properly formed
and constituted pursuant to ARS 10-2741(D) has duly approved (or, prior to the
Closing Date, will have duly approved) ACX Technologies, Inc., a Colorado
corporation ("ACX") and parent of GTC, GTC and any other "subsidiary" of ACX
hereafter acquiring shares of Company capital stock as "interested shareholders"
of the Company such that ARS 10-2741 and 2742 (also "CS/BC Provisions") do not
govern or apply to any transaction involving any such "interested shareholder"
and constituting a "business combination." Terms appearing in quotation marks in
the preceding sentence have the definitions prescribed by ARS 10-2701.
2.7 Articles and Bylaws. The Company's current Articles of Incorporation and
Bylaws are attached hereto as Exhibit 2.7.
2.8 Conduct of Business. Since May 31, 1996, except for matters disclosed in
writing to GTC or ACX, the business of the Company has been conducted in the
ordinary course. Without limiting the generality of the preceding sentence,
since May 31, 1996, none of the Company or any subsidiary of the Company has (i)
declared or paid any dividend, (ii) issued any equity security or rights to
acquire any equity security, (iii) suffered any material adverse change in its
business or prospects (financial or otherwise), (iv) entered into any material
transaction that was not in the ordinary course, (v) changed the compensation of
any executive, except as disclosed to GTC, (vi) become aware of any claim against
the Company or a subsidiary, which if decided adversely to the Company or such
subsidiary would have a material adverse effect on the Company on a consolidated
basis, or (vii) entered into any material contract.
2.9 Financial Statements. The unaudited consolidated balance sheet of the
Company as at May 31, 1996, (the "Balance Sheet Date"), and the related
consolidated statements of income, stockholders' equity and changes in financial
position of the Company for the period then ended fairly present (i) the
consolidated financial position of the Company as of the respective date of such
balance sheets and (ii) the results of the consolidated operations of the Company
for the fiscal periods ended on such dates, all in conformity with generally
accepted accounting principles applied on a consistent basis.
2.10 Disclosure. All filings by the Company with the Securities and Exchange
Commission pursuant to the Securities Exchange Act of 1934 (including all
exhibits and schedules thereto and documents incorporated by reference therein)
("Company Filings") have been and will be timely filed and did not and will not
prior to Closing contain any untrue statement of a material fact or omit to state
a material fact required to be stated therein or necessary in order to make the
statements made, in light of the circumstances under which they were made, not
misleading. All information and documents provided prior to the date of this
Agreement and all information and documents subsequently provided by the Company,
its agents, officers, directors and employees, to GTC or its representatives, by
or on behalf of the Company are or contain or will be (or will contain as to
subsequently provided information or documents) true, accurate and complete
information with respect to the subject matter thereof and are, or will be as to
subsequently provided information or documents, fully responsive to any specific
request made by or on behalf of GTC or its representatives.
2.11 No Other Agreements. The Company has no agreements with respect to its
equity securities except the Pcomm Stock Agreement, this Agreement, certain
employee stock option agreements and a waiver of certain rights under the Pcomm
Stock Agreement.
2.12 No Brokers. The Company has not entered into any agreement with any
person, firm or corporation for the payment of any commission, brokerage or
"finders fee" in connection with the transactions contemplated hereunder.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF NWP
NWP represents and warrants to GTC as follows:
3.1 Organization and Qualification. NWP is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware
with corporate power and authority to own, operate and lease its properties and
to carry on its business as now conducted.
3.2 Authorization of Agreement - No Violation - No Consents. Except as
provided in this Section 3.2, NWP has full power and authority to sell the NWP
Stock and has the capacity and authority to enter into this agreement and to make
the representations, warranties, covenants and agreements made herein. Neither
the execution or delivery of this Agreement nor the consummation of the
transactions contemplated herein will conflict with or result in a breach,
default or violation of any agreement, document, instrument, judgment, decree,
order, governmental permit, certificate, license, law, statute, rule or
regulation by which NWP is bound or affected. Except for compliance with such
agreements and necessary filings under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976 (the "Hart-Scott Act"), no consent, notice, action,
approval or authorization of, or registration, declaration or filing with, any
governmental department, commission, agency or other instrumentality or any other
person or entity is required to authorize, or its otherwise required in
connection with the execution and delivery of this Agreement by NWP or its
performance of the terms of this Agreement by NWP or the validity or
enforceability of this Agreement against NWP.
3.3 Brokerage Agreements. NWP has not entered (directly or indirectly) into
any agreement with any person, firm or corporation for the payment of any
commission, brokerage or "finder's fee" in connection with the transactions
contemplated herein that could under any circumstances be the obligation of GTC
or any of its affiliated companies.
3.4 No Default. Neither the execution nor delivery of this Agreement nor the
consummation of the transactions contemplated herein will (a) conflict with or
result in a breach, default or violation of (i) any of the terms, provisions or
conditions of the Certificate of Incorporation or Bylaws of NWP or (ii) any
agreement, document, instrument, judgment, decree, order, governmental permit,
certificate, license, law, statute, rule or regulation to which NWP is a party or
to which it is subject, or (b) result in the creation of any lien, charge or
other encumbrance on any property or assets of NWP, or (c) require NWP to obtain
the consent of any private non-governmental third party, or (d) be subject to any
right of first refusal, first offer or other right except under the Pcomm Stock
Agreement (which rights have been validly waived subject only to the payment of
sums, if any, described in such waiver). Notwithstanding the preceding
provisions of this Section 3.4, consents of certain of NWP's lenders are required
to consummate the transactions.
3.5 Company Filings. To the knowledge of NWP, the Company Filings (including
all exhibits and schedules thereto and documents incorporated by reference
therein) did not contain any untrue statement of a material fact or omit to state
a material fact required to be stated therein or necessary in order to make the
statements made, in light of the circumstances under which they were made, not
misleading.
3.6 Title. The sale of the NWP Stock and the delivery of the certificates
representing the NWP Stock pursuant to this Agreement will transfer to GTC good
and marketable title to the NWP Stock free and clear of all liens, claims,
charges, encumbrances as rights or interests of others whatsoever.
3.7 Disclosure. All information and documents provided prior to the date of
this Agreement and all information and documents subsequently provided by NWP,
its agents, officers, directors and employees, to GTC or its representatives, by
or on behalf of NWP, are or contain or will be or will contain as to subsequently
provided information or documents, true, accurate and complete information with
respect to the subject matter thereof and are, or will be as to subsequently
provided information or documents, fully responsive to any specific request made
by or on behalf of GTC or its representatives.
3.8 Compliance with Stock Agreements. Appropriate agreements have been
received with respect to the Pcomm Stock Agreement, the effect of which will be,
upon payment of sums described therein, to waive all requirements in the Pcomm
Stock Agreement as to any right of first refusal or other right of any party
thereto to acquire all or any portion of the NWP Stock, and GTC will acquire the
NWP Stock free from any claim by any party to the Pcomm Stock Agreement, and NWP
has waived its rights to acquire any of the Company Stock pursuant to the Pcomm
Stock Agreement.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF GTC
GTC represents and warrants to NWP and the Company as follows:
4.1 Organization and Good Standing. GTC is a corporation duly organized,
validly existing and in good standing under the laws of the State of Colorado
with corporate power to own, operate and lease its properties and to carry on its
business as now conducted.
4.2 Investment Purpose. GTC is acquiring the Stock for its own account and
not with a view to a sale or distribution of the Stock in violation of any
securities law, and it has no present intention of selling or distributing any
Stock in violation of any securities laws.
4.3 Authorization of Agreement. GTC has the corporate power to enter into
this Agreement and to carry out its obligations hereunder. The execution and
delivery of this Agreement and the consummation of the transactions contemplated
hereby will not conflict with, or result in a breach of the terms, conditions or
provisions of, or constitute a default under the Articles of Incorporation or
Bylaws of GTC or any agreement or instrument by which it is bound or affected,
which conflict or breach would prevent it from performing its obligations under
this Agreement.
4.4 No Consent. Except for filings under the Hart-Scott Act, no consent,
action, approval or authorization of, or registration, declaration or filing
with, any governmental department, commission, agency or other instrumentality or
any other person or entity is required to authorize, or is otherwise required in
connection with, the execution and delivery of this Agreement by GTC or its
performance of the terms of this Agreement or the validity or enforceability of
this Agreement which, if not obtained or made, would prevent GTC from performing
its obligations under this Agreement.
4.5 Brokerage Agreements. GTC has not entered (directly or indirectly) into
any agreement with any person, firm or corporation for the payment of any
commission, brokerage or "finder's fee" in connection with the transactions
contemplated herein that will under any circumstances be the obligation of NWP or
the Company.
4.6 GTC Financial Ability. GTC has, or has access from its shareholder to,
sufficient funds to purchase the Stock.
ARTICLE V
COVENANTS OF THE COMPANY
The Company hereby covenants and agrees with GTC, for the benefit of GTC only,
that without the prior consent of GTC from the date hereof until the Closing:
5.1 Noninterference. The Company will not enter into any transaction, take
any action or, to the extent reasonably practicable by inaction permit any event
to occur, that would result in any of the representations or warranties of the
Company contained herein not being true and correct or each covenant of the
Company not to have been performed or observed. The Company will use all
reasonable efforts to obtain and to assist GTC in obtaining all consents,
authorizations and approvals and making all filings necessary for the
consummation of the transactions contemplated by this Agreement.
5.2 Best Efforts. The Company shall use its best efforts to cause each of
the conditions to the obligation of GTC set forth in Sections 9.1 and 9.2 of this
Agreement to be fulfilled promptly.
5.3 Reservation. The Company will at all times reserve out of its authorized
but unissued stock a number of shares equal to the Shares.
5.4 Access. The Company shall afford to the officers, employees, advisors
and agents of GTC complete access at all reasonable times to its respective
officers, employees, agents, properties, books, records and contracts, and shall
furnish GTC with such operations and other data and information as it may
reasonably request. The information so obtained will be held on the terms of the
Confidentiality Agreement of even date between GTC and the Company.
5.5 Notice. The Company will promptly notify GTC of any material event with
respect to the Company that might constitute a breach of this Agreement or affect
the Company's ability to carry out its obligations hereunder.
5.6 Stockholder Agreement. The Company agrees to terminate the Pcomm Stock
Agreement as of Closing.
5.7 Board Membership. Upon the Closing as to the NWP Stock and resignation
of the three designees of NWP on the Company's Board of Directors, the three
vacancies shall be filled by three designees of GTC. At the same time, one
additional director of the Company shall resign and the Board of Directors of the
Company shall have only six members until the Annual Meeting of Shareholders
described in Section 5.8 below. Any director who resigns or otherwise ceases to
serve prior to the Annual Meeting shall be replaced by the Board with a nominee
selected in the same manner as was the person who is no longer a director. Until
the Annual Meeting (defined in Section 5.8) the Board of Directors of the Company
will meet only if all directors are present in person or by telephone.
5.8 Annual Meeting.
(i) The Company shall promptly take all action necessary in accordance
with Arizona law and its Articles of Incorporation and Bylaws to convene an
annual meeting (the "Annual Meeting") of the shareholders of the Company on a
date no later than January 31, 1997, to consider and vote upon the election of
directors and for no other purpose. The Company shall nominate for election at
the Annual Meeting three directors selected by directors of the Company not
affiliated with GTC ("Management Directors"), and three directors selected by
GTC. In addition, the Company shall nominate one and only one additional
director which shall be selected by Management Directors from a proposed slate of
three directors proposed by GTC, all of whom shall be "disinterested" as defined
in A.R.S. 10-2741 D. and none of whom shall have a direct material financial
relationship with GTC or its affiliates or be an immediate relative of an
executive officer or director of GTC or ACX, which list will be provided to the
Company in sufficient time for information concerning the director to be included
in the information or proxy statement.
(ii) In connection with the Annual Meeting, the Company, as promptly as
practicable, shall prepare and file an information or proxy statement with the
Securities and Exchange Commission (the "Commission"), shall notify GTC promptly
of any comments from the Commission or its staff or any requests by the
Commission or its staff for amendments or supplements to the information or proxy
statement or for additional information with respect to the information or proxy
statement, and will supply to GTC copies of all correspondence between the
Company and the Commission and its staff with respect to the Annual Meeting. The
Company will promptly prepare and file any amendment or supplement to the
information or proxy statement as necessary to assure that the information or
proxy statement at all times complies with applicable law and will not distribute
or file the information or proxy statement or any amendments or supplements
thereto to which GTC reasonably objects. The information or proxy statement and
each amendment or supplement thereto shall be reviewed before filing by counsel
for GTC.
(iii) At the Annual Meeting all proxies as to which no direction is made
by the shareholder shall be voted for the election of the seven nominees and no
other persons and the Company agrees to cumulate votes as to which it has
discretion in such a manner that the slate of seven persons is elected.
(iv) The Chairman of the Annual Meeting will agree with GTC as to the
agenda, the voting procedures and other matters within his discretion and shall
conduct the meeting in such a manner that GTC's rights to vote and otherwise
participate in the meeting will not be impaired.
(v) Immediately following the Annual Meeting, the Company's Board of
Directors shall hold an organizational meeting.
5.9 Repeal of Certain Actions. The Company shall, on or prior to November
18, 1996, duly and validly take the following actions with respect to certain
matters approved at its September 16, 1996, Board of Directors' meeting (the
"September Meeting"):
(i) all Rights heretofore issued pursuant to the Company's Stockholder
Right's Plan shall be effectively redeemed and the Rights Plan shall be duly
terminated;
(ii) each of the Executive Compensation Agreements approved at the
September Meeting shall be duly and validly rescinded and appropriate consents to
termination shall be obtained from any employee who has signed or has beneficial
rights under any such agreement; and such agreements may be replaced by
agreements in the form attached hereto;
(iii) all grants of options pursuant to the Photocomm, Inc. 1996 Stock
Option Plan adopted at the September Meeting, shall be canceled and all grantees
of options pursuant to that plan shall validly surrender any right to options
pursuant to such plan, provided that options may be granted at fair market value
on the terms set forth on Schedule 6.9(iii);
(iv) all determinations of the Board of Directors with respect to
certain acquisitions approved at the September Meeting shall be rescinded;
(v) Section 3.02 of the Company's Bylaws shall be reinstated to its form
prior to the September Meeting; and
(vi) all authorized shares of Series E Preferred Stock shall be canceled
and the creation of such series rescinded.
5.10 Ordinary Course. Except as expressly permitted hereunder, the Company
will conduct its business in the ordinary course, will not buy or sell any assets
except in the ordinary course and will not issue any shares of equity or
documents convertible into or carrying the right to purchase equity securities of
the Company. The Company may grant normal salary increases.
5.11 Articles and Bylaws. The Company shall not amend its Articles or Bylaws
except as provided in Schedule 9.2.
5.12 Litigation Expenses. The Company will pay the reasonable fees and
expenses of counsel to the Company in the Litigation based on prevailing rates in
the Phoenix, Arizona area.
ARTICLE VI
COVENANTS OF NWP
NWP hereby covenants and agrees with GTC, for the benefit of GTC only, that
without the prior consent of GTC from the date hereof until the Closing:
6.1 Further Assurances. NWP agrees to use all reasonable efforts to take, or
cause to be taken, all actions and to do, or cause to be done, all things
necessary, proper or advisable to consummate and make effective as promptly as
practicable the purchase and sale of the NWP Stock, and to cooperate with GTC in
connection with the foregoing, including, but not limited to using reasonable
efforts (a) to obtain promptly all necessary waivers, consents and approvals from
other parties, (b) to obtain promptly all necessary consents, approvals and
authorizations as are required to be obtained under any federal, state or foreign
law or regulations, (c) to defend all lawsuits or other legal proceedings
challenging this Agreement or the purchase and sale of the NWP Stock, (d) to lift
or rescind any injunction or restraining order or other order adversely affecting
the ability of the parties to consummate the purchase and sale of the NWP Stock,
(e) to effect promptly all necessary filings, including, but not limited to,
filings with the Commission, filings under the Hart-Scott Act and filings that
are required under the rules or regulations of any other governmental
authorities, and (f) to fulfill promptly all conditions to the obligations of GTC
under Sections 9.1 and 9.3 of this Agreement and to keep GTC reasonably apprised
of the status of all such efforts.
6.2 No Solicitation.
(a) NWP and its respective directors, officers, and agents shall not,
and shall not authorize or direct any other person to, directly or indirectly,
(i) solicit from or encourage or (ii) participate in discussions or negotiations
with or provide any confidential information regarding the Company to any person
for the purpose of soliciting, encouraging, or enabling another person to propose
an acquisition of the NWP Stock (collectively, an "Acquisition Proposal").
(b) If NWP receives an Acquisition Proposal or any communication with
respect thereto from another person or if NWP takes any action described in
Section 6.2(a), NWP shall immediately give to GTC written notice of the substance
of such Acquisition Proposal or communication, or the nature and substance of the
information furnished or the action taken, as the case may be, and thereafter
keep GTC fully informed with respect thereto.
6.3 Notification of Certain Matters. NWP shall give prompt notice to GTC of
(a) the occurrence, or failure to occur, of any event which occurrence or failure
would be likely to cause any representation or warranty contained in this
Agreement to be untrue or inaccurate in any material respect at any time from the
date hereof to the Closing Date, (b) any material failure of NWP or any of its
respective affiliates, as the case may be, or of any of its respective officers,
directors, employees or agents, to comply with or satisfy any covenant, condition
or agreement to be complied with or satisfied by it under this Agreement, (c) any
material claims, actions, proceedings or investigations commenced or, to the best
of its knowledge, threatened involving or affecting NWP or the Company or any of
their properties or assets, or, to the best of its knowledge, against any
employee, consultant, director, officer or stockholder of the Company, in his,
her or its capacity as such, (d) any material adverse change in the condition
(financial or otherwise), business or prospects of NWP or the Company, or the
occurrence of an event known to NWP which, so far as reasonably can be foreseen
at the time of its occurrence, would result in any such change; provided,
however, that no such notification shall affect the representations or warranties
of NWP or the conditions to the obligations of GTC hereunder, and (e) any matter
being submitted to a vote of the shareholders of the Company.
6.4 Obtaining Consents. NWP will use all reasonable efforts to obtain and to
assist GTC in obtaining all consents, authorizations and approvals and making all
filings necessary for the consummation of the transactions contemplated by this
Agreement.
6.5 Hart-Scott Act Compliance. NWP will use all reasonable efforts to assist
in filings with the Department of Justice and the Federal Trade Commission the
premerger notifications required by the Hart-Scott Act with respect to the
transactions contemplated by this Agreement.
6.6 Compliance with Stock Agreements. NWP shall comply in all respects with
the terms of the Pcomm Stock Agreement and shall take any additional action to
assure compliance with such agreement as GTC may reasonably request (but any such
request by GTC shall not affect NWP's obligations hereunder). NWP shall obtain
or assist GTC in obtaining a prompt waiver of the rights of first refusal
contained in the Pcomm Stock Agreement if deemed necessary by GTC. NWP shall pay
all sums required by the agreements with parties to the Pcomm Stock Agreement to
obtain their waivers of all rights to acquire the NWP Stock.
6.7 Selection of Directors. At the request of GTC, at the time of Closing,
the directors of the Company selected by NWP shall resign and NWP shall select
designees of GTC to be promptly elected to the board of NWP pursuant to the Pcomm
Stock Agreement.
ARTICLE VII
ADDITIONAL COVENANTS OF THE COMPANY
7.1 CS/BC, Etc. The Company will not take or recommend or permit to be taken
any action that would cause the Stock or any other shares of the Companys common
stock owned by GTC or its affiliates to be subject to the CS/BC Provisions, or
adopt any shareholder right's plan or similar plan or take or recommend to its
shareholders any other action that would impose limitations on the legal rights
of GTC or its affiliates in their capacity as a security holder of the Company,
including without limitation, any action that would impose restrictions based
upon the size of security holdings, the acquisition of additional security
holdings, or any other consideration that would apply to GTC and its affiliates
and not to security holders generally, or that would include or result in the
issuance of or proposal to issue any class of equity securities having voting
power disproportionately greater than the equity investment in the Company
represented by the common stock of the Company.
7.2 Preemptive Right. GTC shall have the preemptive right (effective as of
Closing) to subscribe for a proportionate part of all equity offerings of the
Company after the date of this Agreement including, without limitation, offerings
of securities convertible into or exercisable for equity securities, so long as
ACX and its subsidiaries own at least 20% of the issued and outstanding stock of
the Company, or 6,000,000 shares (as adjusted pursuant to Article VIII) if less.
ARTICLE VIII
ADJUSTMENTS
The respective numbers of Shares to be sold by NWP or the Shareholders or issued
and sold by the Company to GTC pursuant to this Agreement shall in each case be
adjusted in the event of any change in the Company's capital stock on or before
the Closing by reason of the issuance by the Company of any equity securities,
the declaration or payment of stock or other non-cash dividends or extraordinary
cash dividends or the declaration or conclusion of split-ups, mergers,
recapitalizations, combinations, subdivisions, conversions, exchanges of shares
or the like after the date of this Agreement, such that, in each case GTC shall
receive on the Closing the number and class of shares or other securities or
property that would have been received in respect of a share if the Closing had
occurred immediately prior to such event, or the record date therefor, as
applicable.
ARTICLE IX
CONDITIONS TO CLOSING
9.1 Conditions to Obligations of All Parties. The respective obligations all
parties to proceed with Closing shall be subject to the satisfaction of the
following conditions prior to the Closing:
(i) any waiting periods under any applicable laws shall have expired or
been terminated and any required governmental approvals shall have been obtained;
(ii) no order, statute, rule, regulation, executive order, stay, decree,
judgment or injunction shall have been enacted, entered, issued, promulgated or
enforced by any court or governmental authority, subsequent to the date of this
Agreement, which prohibits or restricts the effectuation of any of the
transactions contemplated by this Agreement; and
(iii) the Litigation shall have been dismissed with prejudice and the
parties shall have exchanged mutual general releases except as to obligations
under this Agreement as of the time of completion of the Closings, each party to
bear its own costs, except as provided herein.
9.2 Additional Conditions to GTC's Closing Obligations with the Company. In
addition to the conditions specified in Section 9.1, the obligations of GTC to
proceed with Closing as to the Company shall also be subject to the satisfaction
of the following conditions at the time of such Closing (except to the extent
waived by GTC, in its sole discretion):
(i) the Company shall have performed and complied in all material
respects with the covenants, agreements and obligations contained in this
Agreement that are required to be performed and complied with by the Company at
or prior to the date of the Closing;
(ii) the representations and warranties of the Company contained in this
Agreement shall be true and correct in all material respects as of the date
hereof, and shall be deemed to have been made again at and as of the Closing and
shall then be true and correct in all material respects, and GTC shall have
received an officer's certificate to that effect;
(iii) no litigation shall be pending or overtly threatened to restrain
or prohibit the transactions contemplated by this Agreement or that would limit
in any manner the rights of GTC or its affiliates with respect to any or all of
the Stock or to own or operate any part of the business of the Company and its
subsidiaries;
(iv) there shall have been no material adverse change in the Company's
financial condition or its prospects;
(v) GTC shall have received opinions of one or more counsel (A) as to
the corporate authorizations set forth in Section 2.6, (B) that the Company duly
adopted Section 2.03 of its Bylaws, (C) as to the matters in Section 2.1 through
2.5 of this Agreement, (D) as to the validity of certain actions required to be
taken pursuant to Section 5.9 and (E) such other matters as GTC may reasonably
request;
(vi) all rights of first refusal under the Pcomm Stock Agreement to
acquire Stock shall have been waived and the Pcomm Stock Agreement shall have
terminated effective as of Closing with no remaining claims thereunder that could
affect the ownership by GTC of the Stock;
(vii) GTC shall have closed the acquisition of shares of NWP Stock from
NWP;
(viii) the Company and GTC shall have entered into a registration rights
agreement covering the Shares and all other shares of the Company that GTC or its
affiliates may own, granting two demand registrations and unlimited piggyback
registration rights, provided GTC shall pay one half of the costs of any demand
registration; and
(ix) the Company's Bylaws shall have been amended as set forth in
Schedule 9.2.
9.3 Additional Conditions to GTC's Closing Obligations with NWP. In addition
to the conditions specified in Section 9.1, the obligation of GTC to proceed with
Closing as to NWP shall also be subject to the satisfaction of the following
conditions at the time of such Closing (except to the extent waived by it in its
sole discretion).
(a) Representations and Warranties of NWP to Be True. Except as
contemplated by this Agreement, (i) the representations and warranties of NWP
hereunder shall be made again at and as of the Closing and shall be true in all
material respects as of the Closing, (ii) NWP shall have performed in all
material respects all covenants required of it by this Agreement as of the
Closing and (iii) NWP shall have furnished GTC at the Closing a certificate of an
officer to such effect.
(b) Third Party Consents. NWP and GTC shall have obtained consents or
waivers to the transactions contemplated by this Agreement from the parties to
contracts, agreements, understandings, franchise permissions and commitments.
(c) Representations of the Company. The representations of the Company
as provided in Sections 2.1, 2.2, 2.4, 2.5, 2.6, 2.8 and 2.9 shall be true in all
material respects as of the Closing.
(d) Requirements; Litigation. All statutory requirements for the valid
consummation of the transactions contemplated herein shall have been fulfilled
and all necessary governmental consents, approvals or authorizations shall have
been obtained, and there shall not be any actual or threatened litigation
(including any investigation by any governmental agency) to restrain or
invalidate the transactions contemplated herein, the defense of which would, in
the judgment of GTC, made in good faith and based upon the advice of counsel,
involve expense or lapse of time that would be materially adverse to the
interests of GTC.
(e) Opinion of Counsel. GTC shall have received from Olshan Grundman
Frome & Rosenzweig LLP, counsel to NWP, an opinion dated the Closing Date, in
form and substance satisfactory to GTC and its counsel. In giving the foregoing
opinion, such counsel shall be entitled to rely upon certificates of public
officials and officers of NWP with respect to the accuracy of factual matters
that are not independently established. GTC shall also have received opinions
satisfactory to GTC and its counsel from counsel licensed in Arizona and
acceptable to GTC to the effect of the corporate authorizations set forth in
Section 2.6.
(f) Resignations. All designees of NWP on the board of directors of
Pcomm shall resign and shall have been replaced by designees of GTC and all of
them shall have waived any right to compensation for past services.
(g) Shareholder Agreement. The parties to the Pcomm Stock Agreement
shall have consented to its termination as of the Closing shall have waived all
rights to acquire any of the Stock thereunder and there shall be no claims
thereunder by NWP or persons claiming through NWP or that would affect GTC's
ownership of the Stock.
(h) Simultaneous Closing. The Closing of the purchase of the Company
Shares shall occur simultaneously with the Closing of the purchase of the NWP
Shares.
9.4 Additional Conditions to Company's Closing Obligations. In addition to
the conditions specified in Section 9.1, the obligations of the Company to
proceed with a Closing shall also be subject to the satisfaction of the following
conditions (except to the extent waived by the Company, in its sole discretion):
(i) GTC shall have performed and complied in all material respects with
the covenants, agreements and obligations contained in this Agreement that are
required to be performed and complied with by it at or prior to the date of the
Closing;
(ii) the representations and warranties of GTC contained in this
Agreement shall be true and correct in all material respects as of the date
hereof, and shall be deemed to have been made again at and as of the Closing and
shall then be true and correct in all material respects, and GTC shall have
furnished an officer's certificate to that effect; and
(iii) the fees payable pursuant to certain waiver agreement dated August
16, 1996, with respect to the Pcomm Stock Agreement among NWP, Robert R.
Kauffman, Programmed Land, Inc. and the Company shall have been paid.
9.5 Additional Conditions to the Obligation of NWP. In addition to the
conditions specified in Section 9.1, the obligation of NWP to proceed with the
Closing shall also be subject to the satisfaction of the following conditions
(except to the extent that they are waived by NWP in its sole discretion):
(a) Representations and Warranties of GTC to Be True. Except as
contemplated in this Agreement, (i) the representations and warranties of GTC
hereunder shall be made again at the Closing and shall be true in all material
respects as of the Closing Date, (ii) GTC shall have performed in all material
respects all covenants required of it by this Agreement as of the Closing Date
and (iii) GTC shall have furnished NWP at the Closing a certificate of an officer
to such effect.
(b) Statutory Requirements; Litigation. All statutory requirements for
the valid consummation of the transactions contemplated herein shall have been
fulfilled and all necessary governmental consents, approvals or authorizations
shall have been obtained and there shall not be any actual or threatened
litigation (including any investigation by any governmental agency) to restrain
or invalidate the transactions contemplated herein, the defense of which would,
in the judgment of NWP, made in good faith and based upon the advice of counsel,
involve expense or lapse of time that would be materially adverse to the
interests of NWP.
(c) Opinion of Counsel to GTC. NWP shall have received from Holme
Roberts & Owen LLP an opinion dated the Closing, in form and substance
satisfactory to NWP and its counsel. In giving the foregoing opinion, such
counsel shall be entitled to rely upon certificates of public officials and of
officers of GTC with respect to the accuracy of factual matters that are not
independently established.
ARTICLE X
TERMINATION, AMENDMENT AND WAIVER
10.1 Termination. This Agreement may be terminated at any time prior to the
Closing:
(a) By consent of the Boards of Directors of NWP and GTC as to the
purchase of the NWP Stock;
(b) By consent of the Boards of Directors and the Company and ACX as to
the purchase of the Company Stock; or
(c) By any party if (i) the Closing shall not have occurred on or before
[January 30, 1997], or (ii) any of the conditions to the obligation of the
terminating party set forth hereof shall not be met at the Closing Date;
provided, however, that the right to terminate this Agreement under this Section
10.1(c) shall not be available to any party whose failure to fulfill any
obligation under this Agreement has been the cause of, or resulted in, the
failure of the Closing to occur on or before such date.
(d) By NWP as to the purchase of the NWP Stock:
(i) If GTC fails to perform in any material respect any of its
obligations under this Agreement;
(ii) If the representations and warranties of GTC set forth in this
Agreement are not true and correct in any material respect at any time prior to
the Closing; or
(e) By the Company as to the purchase of the Company Stock:
(i) If GTC fails to perform in any material respect any of its
obligations under this Agreement;
(ii) If the representations and warranties of GTC set forth in this
Agreement are not true and correct in any material respect at any time prior to
the Closing;
(f) By GTC:
(i) As to the purchase of NWP Stock, if NWP fails to perform in any
material respect any of its obligations under this Agreement;
(ii) As to the purchase of NWP Stock, if the representations and
warranties of NWP set forth in this Agreement are not true and correct in any
material respect at any time prior to the Closing;
(iii) As to the purchase of the Company Stock, if the Company fails
to perform in any material respect any of its obligations under this Agreement;
(iv) As to the purchase of Company Stock, if the representations
and warranties of the Company set forth in this Agreement are not true and
correct in any material respect at any time prior to the Closing;
(v) If there occurs, or NWP enters into or publicly announces its
intention to enter into an agreement with another person with respect to an
Acquisition Proposal;
(vi) If the Note and Warrant Agreement, as amended, between NWP and
certain of NWP's lenders shall be materially breached and not cured or rescinded
within 15 days or shall be terminated; or
(vii) If there shall be commenced any proceedings under the
Bankruptcy Code or other laws for the relief of debtors by or against NWP.
10.2 Effect of Termination. In the event of the termination of this
Agreement as provided in Section 10.1, this Agreement shall forthwith become void
as to the purchase specified and there shall be no liability or obligation on the
part of the parties except (i) as set forth in Section 12.3, and (ii) that a
party shall be liable for willful defaults of its obligations hereunder.
ARTICLE XI
SURVIVAL OF REPRESENTATIONS AND
WARRANTIES; INDEMNIFICATION
11.1 Survival of Representations and Warranties. All statements contained in
any certificate, schedule, exhibit, financial statement or other document or
instrument delivered by or on behalf of NWP pursuant to or in connection with
this Agreement for the purposes of this Agreement shall be deemed to be
representations and warranties hereunder. The representations and warranties
contained in Sections 3.1, 3.2, 3.3, 3.4, 3.6, 3.7 and 3.8 and claims for breach
of the covenants by NWP in Article V shall survive the Closing Date and any
investigation of any of the parties with respect thereto. All other
representations and warranties shall terminate as of the Closing Date.
11.2 Indemnification. NWP agrees to defend, indemnify and hold harmless GTC
its successors and assigns ("Indemnified Party") from and against any and all
claims, demands, causes of action, liabilities, losses, damages, costs and
expenses, including litigation costs and reasonable attorneys' and experts' fees,
(all of the foregoing are hereinafter referred to as "losses") which losses may
accrue to or be sustained by each Indemnified Party by, or arising out of, or as
a result of, any of NWP's representations or warranties in Sections 3.1, 3.2,
3.3, 3.4, 3.6, 3.7 and 3.8 (but only with respect to 3.7 if NWP had knowledge of
the falsity of the representations in Section 3.7) and 3.8 or the covenants or
agreements contained in or related to this Agreement being incorrect, untrue, or
breached. Any Indemnified Party will, promptly after receipt of notice of the
commencement of any action against any of them in respect of which indemnity may
be sought hereunder, notify NWP in writing of the commencement thereof. The
failure of any Indemnified Party to so notify NWP shall not relieve NWP of its
obligation to indemnify in respect to such action under this Section 11.2 and
shall not relieve NWP of any other liability that it may have to any Indemnified
Party. In the event of the commencement of any such action as to which any
Indemnified Party notifies NWP as aforesaid, NWP will be entitled to participate
therein and assume the defense thereof at NWP's expense with counsel satisfactory
to NWP and to each Indemnified Party; provided NWP shall promptly notify each
Indemnified Party of its election so to assume the defense thereof and
acknowledge its indemnification obligations pursuant to this Agreement in writing
to each Indemnified Party and further provided that no settlement of any such
action be reached without the consent of any Indemnified Party. Notwithstanding
anything to the contrary herein, no amount shall be payable to an Indemnified
Party in indemnification under this Section 11.2 unless the aggregate amount of
losses to the Indemnified Party exceeds $100,000. In the event that such
aggregate amount of losses exceeds $100,000, NWP shall be liable for
indemnification for all such losses, and not only the amount of any such excess,
and its aggregate liability shall not exceed the purchase price for the Stock.
ARTICLE XII
GENERAL PROVISIONS
12.1 Public Statements. No party will issue any press release or make any
public announcements as to the transactions contemplated by this Agreement except
as are required to satisfy its legal obligation as a public company. NWP will
confer with GTC as to any announcement that it intends to make, the Company will
confer with GTC as to any announcement that it intends to make, and GTC will
confer with NWP and the Company as to any announcement it intends to make prior
to issuing any press release or public announcement with respect to this
Agreement or the transactions contemplated hereby. Each shall use all reasonable
efforts to give to the other party sufficient opportunity to review any such
press release or other public announcement in advance of release.
12.2 Notices. All notices and other communications hereunder shall be in
writing, shall be delivered personally or sent by U.S. mail, fax, or overnight
delivery service, to the parties at the following addresses or at such other
addresses as shall be specified by the parties by like notice, and shall be
deemed given when received by the party for whom intended:
(a) If to GTC:
Golden Technologies Company, Inc.
16000 Table Mountain Parkway
Golden, Colorado 80403
Attention: Jed J. Burnham
FAX: (303) 271-7174
and
ACX Technologies, Inc.
16000 Table Mountain Parkway
Golden, CO 80403
Attention: Jill B.W. Sisson, Esq.
FAX: (303) 271-7055
with a copy to:
Holme Roberts & Owen LLP
1700 Lincoln, Suite 4100
Denver, Colorado 80203
Attention: W. Dean Salter, Esq.
FAX: (303) 866-0200
(b) If to NWP:
The New World Power Corporation
558 Lime Rock Road
Lime Rock, Connecticut 06039
Attention: Vitold Jordan
FAX: (860) 435-0505
with a copy to:
Olshan Grundman Frome & Rosenzweig LLP
505 Park Avenue
New York, New York 10022
Attention: Ilan Reich, Esq.
FAX: (212) 755-1467
(c) If to the Company:
Photocomm, Inc.
7681 East Road
Scottsdale, Arizona 85260
Attention: Robert R. Kauffman
FAX: (602) 483-6431
with a copy to:
Oman, Schulenburg & Politan, P.L.C.
4801 E. Greenway Road
Scottsdale, Arizona 85254
Attention: Steven P. Oman
FAX: (602) 953-2900
The sending party shall have the burden of proving receipt.
12.3 Fees and Expenses.
(a) Except as provided in Section 12.3(b), all costs and expenses
incurred in connection with this Agreement and the transactions contemplated
hereby shall be paid by the party incurring such expenses.
(b) If (i) this Agreement is terminated (except by reason of the
exercise of rights of first refusal in the Pcomm Stock Agreement) by GTC pursuant
to Section 10.1(f)(v), and (ii) within one year from the date of termination of
this Agreement, any corporation, partnership, person, entity or "group" (as that
term is used in Section 13(d)(3) of the Exchange Act), including NWP but
excluding GTC or any of its affiliates and excluding any group of which GTC or
any of its affiliates is a member, and also excluding any lender with a security
interest in the Stock as of the date of this Agreement who forecloses upon such
Stock or acquires such Stock in lieu of foreclosure, shall have acquired or
agreed to acquire all or a substantial portion of the Stock, NWP shall, within
five business days after consummation of the transaction referred to in this
clause (ii), pay to GTC (by transfer of same-day funds to an account designated
by GTC for such purpose) an amount equal to $750,000. The preceding shall be the
only remedy in the event GTC terminates this Agreement pursuant to Section
10.1(f)(v).
12.4 Right of First Refusal in Favor of the Company.
(a) The Company will have, and GTC hereby grants to the Company, until
January 1, 2001, a right of first refusal to purchase all of the Company Stock
that GTC and subsidiaries may from time to time propose to sell to a party not
affiliated with GTC. Transfers to affiliates of GTC shall not be subject to this
section provided that any transferee agrees to be bound by the provisions of this
section. No other shares of the Company owned by GTC or its affiliates shall be
subject to this provision. If GTC receives a bona fide offer ("Offer") to sell
any of the Company Stock and it wants to accept the Offer, it shall deliver to
the Company a written notice setting forth the terms of the Offer. Such notice
shall constitute an irrevocable offer to sell the Company Stock proposed to be
sold to the Company on the terms of the Offer. The Company shall have 20 days
after its receipt of an Offer with which to notify GTC in writing of the
Company's election to purchase all, but not less than all of the Company Stock
subject to the Offer. The Company may assign the right to purchase the Company
Stock subject to the Offer, provided the assignee agrees to be bound by the terms
of this Section and the Company remains liable to purchase all Company Stock
subject to the Offer. The Company's election to purchase shall be irrevocable
and shall be binding upon GTC. Directors of the Company affiliated with GTC
shall not participate in the decision of the Company to exercise or assign the
option.
(b) Within 20 days of receiving the election, GTC shall deliver to the
Company, against receipt from the Company of a certified or bank cashier's check
in the amount of the purchase price therefor, a certificate or certificates or
other instruments representing the Company Stock, properly endorsed for transfer
and with all necessary transfer and documentary stamps, if any, affixed or stock
transfer taxes, if any, paid.
(c) In the event that the Company fails to exercise its right of first
refusal within said period, GTC shall have 120 days thereafter to sell the
Company Stock upon the terms of the Offer. If GTC has not sold the Company Stock
to the designated offeree on the terms of the Offer within said 120-day period,
GTC shall not thereafter sell the Company Stock without first offering them to
the Company in the manner provided above.
12.5 Specific Performance. The parties hereto agree that irreparable harm
would occur if any of the provisions of this Agreement were not performed by the
Company or NWP in accordance with their specific terms or conditions or were
otherwise breached and that money damages are an inadequate remedy for breach of
this Agreement because of the difficulty of ascertaining the amount of damage
that will be suffered by GTC in the event that this Agreement is not performed in
accordance with its terms or conditions or is otherwise breached. It is
accordingly agreed that GTC shall be entitled to an injunction or injunctions to
prevent breaches of this Agreement by the Company or NWP and to enforce
specifically the terms and provisions hereof in any federal court of the United
States having jurisdiction or any other court that it may select, this being in
addition to any other remedy to which GTC is entitled at law or in equity.
12.6 Headings, Counterparts. The descriptive headings of the several
Articles and Sections of this Agreement are inserted for convenience only and do
not constitute a part of the Agreement. This Agreement may be signed in
counterparts all of which will constitute one agreement.
12.7 Prior Agreements. This Agreement shall supersede all prior agreements,
documents or other instruments with respect to the matters covered hereby.
12.8 Waiver. At any time prior to the Closing, any party hereto may (i)
extend the time for the performance of any of the obligations or other acts of
any other party hereto or (ii) waive compliance with any of the agreements of any
other party or with any conditions to its own obligations. Any agreement on the
part of a party hereto to any such extension or waiver shall be valid if set
forth in an instrument in writing signed on behalf of such party. Except as
provided in Section 11.1, the consummation of the transactions contemplated
hereby shall not be deemed a waiver of the right any party may have hereunder
with respect to any other parties, representations, warranties, covenants or
agreements contained in or related to this Agreement being incorrect, untrue or
breached.
12.9 Amendment, Counterparts. This Agreement may not be amended except by an
instrument in writing signed by the party charged with such amendment.
12.10 Assignment. This Agreement and all of the provisions hereof shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and assigns, but neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned without the prior written
consent of the other party except that GTC may assign their rights to purchase
Stock to and direct or indirect subsidiary of ACX, but that assignment shall not
relieve any party of its other obligations hereunder. Nothing in this Agreement,
express or implied, is intended to confer upon any person other than the parties
hereto and their respective successors and assigns, any rights, remedies or
obligations under or by reason of this Agreement.
12.11 Independent Covenants. The covenants contained herein are independent
and separate, and in the event that any provision contained herein is declared
invalid or illegal, the other provisions hereof shall not be affected or impaired
thereby and shall remain valid and enforceable.
12.12 Governing Law. This Agreement shall be governed by Colorado law
without regard to the conflicts of laws provisions thereof.
Signed as of the date written in the Preamble.
GOLDEN TECHNOLOGIES COMPANY, INC.
By: _________________________________________
John K. Coors
Title: Vice President
THE NEW WORLD POWER CORPORATION
By: _________________________________________
Vitold Jordan
Title: _________________________
PHOTOCOMM, INC.
By: _________________________________________
Robert R. Kauffman
Title: President, CEO
The Shareholders join this Agreement for the purpose of affirming, to the best of
their knowledge, the representations and warranties of the Company, and making,
severally, as to themselves and the Company Stock sold by them, the
representations in Sections 2.3, 2.4 and 2.5 below. Programmed Land, Inc. and
Robert R. Kauffman also reaffirm the waiver agreement dated August 16, 1996 with
respect to the Pcomm Stock Agreement.
________________________________________________
Myron Anduri
________________________________________________
Thomas C. LaVoy
________________________________________________
Robert R. Kauffman
PROGRAMMED LAND, INC.
By: ____________________________________________
Donald E. Anderson
Title: President
EXHIBIT 10.17
PHOTOCOMM, INC.
1996 STOCK OPTION PLAN
1. Purposes of the Plan. The purposes of this Stock Option Plan are to attract
and retain the best available personnel for positions of substantial
responsibility to provide successful management of the Company's business, to
provide additional incentive to the Employees of the Company, and to promote the
success of the Company's business through the grant of options to purchase shares
of the Company's Common Stock.
Options granted here-under will be "Nonstatutory Stock Options" which are not
incentive stock options that qualify under Section 423 of the Code, as reflected
in the terms of the written option agreement.
2. Definitions. As used herein, the following definitions shall apply:
(a)"Board" shall mean the Board of Directors of the Company or the Committee, if
one has been appointed.
(b)"Code" shall mean the Internal Revenue Code of 1986, as amended, and the rules
and regulations promulgated thereunder.
(c)"Common Stock" shall mean the common stock of the Company described in the
Company's Certificate of Incorporation, as amended.
(d)"Company" shall mean Photocomm, Inc., an Arizona corporation, and shall
include any parent or subsidiary corporation of the Company as defined in
Sections 424(e) and (f), respectively, of the Code.
(e)"Committee" shall mean the Committee appointed by the Board in accordance with
paragraph (a) of Section 4 of the Plan, if one is appointed.
(f)"Director" shall mean a member of the Board.
(g)"Employee" shall mean any person, including officers and directors,
employed by the Company. The payment of a director's fee by the Company shall
not be sufficient to constitute "employment" by the Company.
(h)"Exchange Act" shall mean the Securities and Exchange Act of 1934, as amended.
(i)"Fair Market Value" means, as of any date, the value of the Common Stock
determined as follows:
(1) If the Common Stock is listed on any established stock exchange or a
national market system, including without limitation the NASDAQ National Market
operated by The NASDAQ Stock Market, Inc., the Fair Market Value of a Share of
Common Stock shall be the closing sale price for such stock (or the closing bid,
if no sales were reported) as quoted on such system or exchange (or the exchange
with the greatest volume of trading in Common Stock) on the last market trading
day prior to the day of determination, as reported in the Wall Street Journal or
such other source as the Board deems reliable;
(2) If the Common Stock is quoted on the NASDAQ SmallCap Market operated by The
NASDAQ Stock Market, Inc. (but not on the NASDAQ National Market thereof) or is
regularly quoted by a recognized securities dealer but selling prices are not
reported, the Fair Market Value of a Share of Common Stock shall be the mean
between the closing bid and asked prices for the Common Stock on the last market
trading day prior to the day of determination, as reported in the Wall Street
Journal or such other source as the Board deems reliable;
(3) In the absence of an established market for the Common Stock, the Fair
Market Value shall be determined in good faith by the Board.
(j)"Nonstatutory Option" or Option" shall mean a stock option granted
under the Plan.
(k)"Optioned Stock" shall mean the Common Stock subject to an Option.
(1)"Optionee" shall mean an Employee or Director of the Company who has been
granted one or more Options.
(m)"Parent" shall mean a "parent corporation," whether now or hereafter existing,
as defined in Section 424(e) of the Code.
(n)"Plan" shall mean this 1996 Stock Option Plan.
(o)"Share" shall mean a share of the Common Stock, as adjusted in accordance with
Section 11 of the Plan.
(p)"Subsidiary" shall mean a "subsidiary corporation," whether now or hereafter
existing, as defined in Section 424(f) of the Code.
(q)"Tax Date" shall mean the date an Optionee is required to pay the Company an
amount with respect to tax withholding obligations in connection with the
exercise of an Option.
3. Common Stock Subject to the Plan . Subject to the provisions of Section 11 of
the Plan, the maximum aggregate number of Shares which may be optioned and sold
under the Plan shall be 1,100,000 shares of Common Stock. The Shares may be
authorized, but unissued, or previously issued Shares acquired or to be acquired
by the Company and held in treasury.
If an Option should expire or become unexercisable for any reason without having
been exercised in full, the unpurchased Shares covered by such Option shall,
unless the Plan shall have been terminated, be available for future grants of
Options.
4. Administration of the Plan.
(a) Procedure.
(i)The Board shall administer the Plan in accordance with Securities and Exchange
Commission Rule 16b-3 ("Rule 16b-3"); provided, however, that the Board may
appoint a Committee to administer the Plan on behalf of the Board, in accordance
with Rule 16b-3.
(ii) Once appointed, the Committee shall continue to serve until otherwise
directed by the Board. From time to time the Board may increase the size of the
Committee and appoint additional members thereof, remove members (with or without
cause), and appoint new members in substitution therefor or fill vacancies
however caused; provided, however, that at no time may any person serve on the
Committee if that person's membership would cause the Committee not to satisfy
the requirements of Rule 16b-3.
Any reference herein to the Board shall, where appropriate, encompass a Committee
appointed to administer the Plan in accordance with this Section 4.
(b)Powers of the Board. Subject to the provisions of the Plan, the Board
shall have the authority, in its discretion: (i) to grant Nonstatutory Stock
Options; (ii) to determine, upon review of relevant information and in accordance
with Section 2(i) of the Plan, the Fair Market Value of the Common Stock; (iii)
to determine the exercise price per Share of Options to be granted, which
exercise price shall be determined in accordance with Section 8(a) of the Plan;
(iv) to determine the Directors and Employees to whom, and the time or times at
which, Options shall be granted and the number of Shares to be represented by
each Option; (v) to interpret the Plan; (vi) to
prescribe, amend and rescind rules and regulations relating to the Plan; (vii) to
determine the terms and provisions of each Option granted (which need not be
identical) and, with the consent of the Optionee thereof, modify or amend each
Option; (viii) to accelerate or defer (with the consent of the
Optionee) the exercise date of any Option; (ix) to authorize any person to
execute on behalf of the Company any instrument required to effectuate the grant
of an Option previously granted by the Board; (x) to accept or reject the
election made by an Optionee pursuant to Section 17 of the Plan;
and (xi) to make all other determinations deemed necessary or advisable for the
administration of the Plan.
(c)Effect of Board's Decision. - A-11 decisions, determinations and -
interpretations of the Board shall be final and binding on all Optionees and any
other holders of any Options granted under the Plan.
5. Eligibility.
(a) Consistent with the Plan's purposes, Options may be granted only to
Directors and key Employees of the Company as determined by the Board. An
Optionee who has been granted an Option may, if he is otherwise eligible, be
granted an additional Option or Options.
(b) The Plan shall not confer upon any Optionee any right with respect to
continuation of employment with the Company, nor shall it interfere in any way
with his right or the Company's right to terminate his employment at any time.
6. Board Approval and Effective Date. The Plan shall take effect on September
16, 1996, the date on which the Board approved the Plan. No Option may be granted
after September 16, 2006 (ten (10) years from the effective date of the Plan);
provided, however, that the Plan and all outstanding Options shall remain in
effect until such Options have expired or until such Options are canceled.
7. Term of Option. Unless otherwise provided in the Stock Option Agreement, the
term of each Option shall be ten (10) years from the date of grant thereof.
8. Exercise Price and Payment.
(a) Exercise Price. The per Share exercise price for the Shares to be issued
pursuant to exercise of an Option shall be determined by the Board.
(b) Payment. The price of an exercised Option and any taxes attributable to the
delivery of Common Stock under the Plan, or portion thereof, shall be paid:
(i) In United States dollars in cash or by check, bank draft or money order
payable to the order of the Company; or
(ii) At the discretion of the Board, through the delivery of shares of Common
Stock, with an aggregate Fair Market Value, equal to the option price; or
(iii) By a combination of (i) and (ii) above; or
(iv) In the manner provided in subsection (c) below.
The Board shall determine acceptable methods for tendering Common Stock as
payment upon exercise of an Option and may impose such limitations and
prohibitions on the use of Common Stock to exercise an Option as it deems
appropriate. At the election of the
Optionee pursuant to Section 17, the Company may satisfy its withholding
obligations by retaining such number of shares of Common Stock subject to the
exercised Option which have an aggregate Fair Market Value on the exercise date
equal to the Company's aggregate federal, state, local and foreign tax
withholding and FICA and FUTA obligations with respect to income generated by the
exercise of the Option by Optionee.
(c) Financial Assistance to Optionees. The Board may assist Optionees in paying
the exercise price of Options granted under this Plan in the following manner:
(i) The extension of a loan to the Optionee by the Company; or
(ii) A guaranty by the Company of a loan obtained by the Optionee from a third
party.
The terms of any loans, installment payments or guarantees, including the
interest rate and terms of repayment, and collateral requirements, if any, shall
be determined by the Board, in its sole discretion. Subject to applicable margin
requirements, any loans, installment payments or guarantees authorized by the
Board pursuant to the Plan may be granted without security, but the maximum
credit available shall not exceed the exercise price for the Shares for which the
Option is to be exercised, plus any federal and state income tax liability
incurred in connection with the exercise of the Option.
9. Exercise of Option; Rights as a Shareholder. Any Option granted hereunder
shall be exercisable at such times and under such conditions as determined by the
Board, including performance criteria with respect to the Company and/or the
Optionee, and as shall be permissible under the terms of the Plan. Unless
otherwise determined by the Board at the time of grant, an Option may be
exercised in whole or in part. An Option may not be exercised for a fraction of a
Share.
An Option shall be deemed to be exercised when written notice of such exercise
has been given to the Company in accordance with the terms of the Option by the
person entitled to exercise the Option and full payment for the Shares with
respect to which the Option is exercised has been received by the Company, Full
payment may, as authorized by the Board, consist of any consideration and method
of payment allowable under Section 8(b) of the Plan. Until the issuance (as
evidenced by the appropriate entry on the books of the Company or of a duly
authorized transfer agent of the Company) of the stock certificate evidencing
such Shares, no right to vote or receive dividends or any other rights as a
shareholder shall exist with respect to the Optioned Stock, notwithstanding the
exercise of the Option. No adjustment will be made for a dividend or other right
for which the record date is prior to the date the stock certificate is issued,
except as provided in Section 11 of the Plan.
Exercise of an Option in any manner shall result in a decrease in the number of
Shares which thereafter may be available, both for purposes of the Plan and for
sale under the Option, by the number of Shares as to which the Option is
exercised.
10. Transferability of Options. An Option may be sold, pledged, assigned,
hypothecated, transferred, or disposed of only if permitted by the Board of
Directors or in accordance with the terms of the written option agreement by the
Optionee.
11. Adjustments upon Changes in Capitalization or Merger. Subject to any
required action by the shareholders of the Company, the number of Shares covered
by each outstanding Option, and the number of Shares which have been authorized
for issuance under the Plan but as to which no Options have yet been granted or
which have been returned to the Plan upon cancellation or expiration of an
Option, as well as the price per Share covered by each such outstanding Option,
shall be proportionately adjusted for any increase or decrease in the number of
issued Shares resulting from a stock split, reverse stock split, stock dividend,
combination or reclassification of the Common Stock, or any other increase or
decrease in the number of issued shares of Common Stock effected without receipt
of consideration by the Company; provided, however, that conversion of any
convertible securities of the Company shall not be deemed to have been "effected
without receipt of consideration." Such adjustment shall be made by the Board,
whose determination in that respect shall be final, binding and conclusive.
Except as expressly provided herein, no issuance by the Company of shares of
stock of any class, or securities convertible into shares of stock of any class,
shall affect, and no adjustment by reason thereof, shall be made with respect to
the number or price of Shares subject to an Option.
In the event of the proposed dissolution or liquidation of the Company, the
Option will terminate immediately prior to the consummation of such proposed
action, unless otherwise provided by the Board. The Board may, in the exercise of
its sole discretion in such instances, declare that any Option shall terminate as
of a date fixed by the Board and give each Optionee the right to exercise his
Option as to all or any part of the Optioned Stock, including Shares as to which
the Option would not otherwise be exercisable. In the event of a proposed sale of
all or substantially all of the assets of the Company, or the merger of the
Company with or into another corporation, the Option shall be assumed or an
equivalent option shall be substituted by such successor corporation or a parent
or subsidiary of such successor corporation, unless the Board determines, in the
exercise of its sole discretion and in lieu of such assumption or substitution,
that the Optionee shall have the right to exercise the Option as to all of the
Optioned Stock, including Shares as to which the Option would not otherwise be
exercisable. If the Board makes an Option fully exercisable in lieu of assumption
or substitution in the event of a merger or sale of assets, the Board shall
notify the Optionee that the Option shall be fully exercisable for a period of
thirty (30) days from the date of such notice (but not later than the expiration
of the term of the Option under the Option Agreement), and the Option will
terminate upon the expiration of such period.
12. Time of Granting Options. The date of grant of an Option shall, for all
purposes, be the date on which the Board makes the determination granting such
Option. Notice of the determination shall be given to each Employee to whom an
Option is so granted within a reasonable time after the date of such grant.
13. Amendment and Termination of the Plan.
(a) Amendment and Termination. The Board may amend or terminate the Plan from
time to time in such respects as the Board may deem advisable; provided, however,
that any amendment requiring shareholder approval in order to comply with Rule
16b-3 or any other rule or regulation under the Exchange Act shall be contingent
upon obtaining such approval.
(b) Effect of Amendment or Termination. Any such amendment or termination of the
Plan shall not affect Options already granted and such Options shall remain in
full force and effect as if this Plan had not been amended or terminated, unless
mutually agreed otherwise between the Optionee and the Board, which agreement
must be in writing and signed by the Optionee and the Company.
14. Conditions Upon Issuance of Shares. Shares shall not be issued pursuant to
the exercise of an Option unless the exercise of such Option and the issuance and
delivery of such Shares pursuant thereto shall comply with all relevant
provisions of law, including, without limitation, the Securities Act of 1933, as
amended, the Exchange Act, the rules and regulations promulgated thereunder, and
the requirements of any stock exchange upon which the Shares may then be listed,
and shall be further subject to the approval of counsel for the Company with
respect to such compliance.
As a condition to the exercise of an Option, the Company may require the person
exercising such Option to represent and warrant at the time of any such exercise
that the Shares are being purchased only for investment and without any present
intention to sell or distribute such Shares if, in the opinion of counsel for the
Company, such a representation is required by any of the aforementioned relevant
provisions of law.
15. Reservation of Shares. The Company, during the term of this Plan, will at
all times reserve and keep available such number of Shares as shall be sufficient
to satisfy the requirements of the Plan.
Inability of the Company to obtain authority from any regulatory body having
jurisdiction, which authority is deemed by the Company's counsel to be necessary
to the lawful issuance and sale of any Shares hereunder, shall relieve the
Company of any liability in respect of the failure to issue or sell such Shares
as to which such requisite authority shall not have been
obtained.
16. Option Agreement. Options shall be evidenced by written Stock Option
Agreements in such form as the Board shall approve.
17. Withholding Taxes. Subject to Section 2(q) of the Plan and prior to the Tax
Date, the Optionee may make an irrevocable election to have the Company withhold
from those Shares that would otherwise be received upon the exercise of any
Nonstatutory Stock Option, a number of Shares having a Fair Market Value equal to
the minimum amount necessary to satisfy the Company's federal, state, local and
foreign tax withholding obligations and FlCA. and FUTA obligations with respect
to the exercise of such Option by the Optionee.
18. Miscellaneous Provisions.
(a) Plan Expense. Any expenses of administering this Plan shall be borne
by the Company.
(b) Use of Exercise Proceeds. The payment received from Optionees from the
exercise of Options shall be used for the general corporate purposes of the
Company.
(c) Construction of Plan. The validity, construction, interpretation,
administration and effect of the Plan and of its rules and regulations, and
rights relating to the Plan, shall be determined in accordance with the laws of
the State of Arizona and where applicable, in accordance with the Code.
(d) Taxes. The Company shall be entitled if necessary or desirable to pay
or withhold the amount of any tax attributable to the delivery of Common Stock
under the Plan from other amounts payable to the Employee after giving the person
entitled to receive such Common Stock notice as far in advance as practical, and
the Company may defer making delivery of such Common Stock if any such tax may be
pending unless and until indemnified to its satisfaction.
(e) Indemnification. In addition to such other rights of indemnification as they
may have as members of the Board, the members of the Board shall be indemnified
by the Company against all costs and expenses reasonably incurred by them in
connection with any action, suit or proceeding to which they or any of them may
be party by reason of any action taken or failure to act under or in connection
with the Plan or any Option, and against all amounts paid by them in settlement
thereof (provided such settlement is approved by independent legal counsel
selected by the Company) or paid by them in satisfaction of a judgment in any
such action, suit or proceeding, except a judgment based upon a finding of bad
faith; provided that upon the institution of any such action, suit or proceeding
a Board member shall, in writing, give the Company notice thereof and an
opportunity, at its own expense, to handle and defend the same before such Board
member undertakes to handle and defend it on her or his own behalf.
(f) Gender. For purposes of this Plan, words used in the masculine gender
shall include the feminine and neuter, and the singular shall include the plural
and vice versa, as appropriate.
NON-STATUTORY STOCK OPTION AGREEMENT
BY THIS STOCK OPTION AGREEMENT ("Agreement") made and entered into this 1st day
of January, 1996 ("Grant Date"), PHOTOCOMM, INC., an Arizona corporation (the
"Company"), and a key employee or director of the Company (the "Optionee")
hereby state, confirm, represent, warrant and agree as follows:
I. RECITALS
1.1 The Company, through its Board of Directors (the "Board"), has determined
that in order to attract and retain the best available personnel for positions of
substantial responsibility to provide successful management of the Company's
business, it must offer a compensation package that provides key employees and
directors of the Company a change to participate financially in the success of
the Company by developing an equity interest in it.
1.2 The Company adopted the 1996 Stock Option Plan (the "Plan") on September 16,
1996.
1.3 By this Agreement, the Company and the Optionee desire to establish the terms
upon which the Company is willing to grant to the Optionee, and upon which the
Optionee is willing to accept from the Company, an option to purchase shares of
common stock of the Company ("Common Stock").
II AGREEMENTS
2.1 Grant of Non-Statutory Stock Option. Subject to the terms and conditions
hereinafter set forth and those provisions set forth in the Plan, the Company
grants to the Optionee the right and option (the "Option") to purchase from the
Company all or any part of an aggregate number of ( ) shares of Common
Stock, authorized but unissued or, at the option of the Company, treasury stock
if available (the "Optioned Shares").
2.2 Exercise of Option. Subject to the terms and conditions of this Agreement
and those of the Plan, the Option may be exercised only by completing and signing
a written notice to the Company who shall confirm that the exercise is valid, in
substantially the following form:
I hereby exercise the Option granted to me by Photocomm, Inc. and elect to
purchase shares of $.10 par value Common Stock of Photocomm, Inc. for [the
purchase price set forth in Paragraph 2.3 of this Stock Option Agreement].
2.3 Purchase Price. The price to be paid for the Optioned Shares (the "Purchase
Price") shall be $ per share.
2.4 Payment of Purchase Price. Payment of the Purchase Price may be made as
follows:
(a) In United States dollars in cash or by check, bank draft or money order
payable to the Company; or
(b) At the discretion of the Board, through the delivery of shares of Common
Stock with an aggregate fair market value at the date of such delivery, equal to
the Purchase Price; or
(c) By a combination of both (a) and (b) above.
The Board shall determine acceptable methods for tendering Common Stock as
payment upon exercise of an Option and may impose such limitations and conditions
on the use of Common Stock to exercise an Option as it deems appropriate. At the
election of the Optionee pursuant to Section 16 of the Plan, and subject to the
acceptance of such election by the Board, to satisfy the Company's withholding
obligations, it may retain such number of shares of Common Stock subject to the
exercised Option which have an aggregate Fair Market Value (as defined in the
Plan) on the date of exercise equal to the Company's aggregate federal, state,
local and foreign tax withholding and FICA and FUTA obligations with respect to
the exercise of the Option by the Optionee.
2.5 Exercisability of Option. The Option shall become exercisable in increments
if the Optionee is continuously employed from the Grant Date through the
following vesting dates.
The Optioned Shares shall be divided into two halves with the first half vesting
in accordance with one schedule and the second half vesting on a delayed
schedule. To that end, except as otherwise provided in Paragraph 2.6 and 2.8, the
Option may be exercised by the Optionee, in whole or in part from time to time,
for such number of shares as is equal to the percentage of the
Optioned Shares indicated below ("Vested Shares"):
Date Percentage of Optioned Shares Vested
First Half Second Half Of Total Cumulative Total
1/1/1997 25 12.5 12.5
1/1/1998 25 25 25 37.5
1/1/1999 50 25 37.5 75
1/1/2000 50 25 100
2.6 Termination of Option. The Option shall not be exercisable as to any shares
and will automatically terminate if the continuous employment requirement is not
satisfied regardless of the circumstances under which the Optionee's employment
by the Company is terminated. Vested Shares, to the extend not exercised, shall
terminate upon the first to occur of the following dates:
(a) The tenth (10th) anniversary of the Grant date (the "Option Term"); or
(b) The date on which the Optionee's employment is terminated for criminal
activity or for purposely or recklessly failing to perform the Optionee's duties
with the Company; or
(c) The date 36 months from the date the Optionee retires from employment by the
Company or that the Optionee becomes disabled and unable to continue employment;
or
(d) The date 15 months from the date the Optionee dies; or
(e) The date 3 months from the date the Optionee's employment is terminated for
other than (b), (c), or (d).
[In the case of Mr. Kauffman substitute 30 months for 3 months in (e) and in the
case of Mr. LaVoy 24 months.]
2.7 Adjustments. In the event of any stock split, reverse stock
split, stock dividend, combination or reclassification of shares of Common Stock
or any other increase or decrease in the number of issued shares of Common Stock
effected without receipt of consideration by the Company, the number and kind of
Optioned Shares (including any Option outstanding after termination of employment
or death) and the Purchase Price per share shall be proportionately and
appropriately, adjusted without any change in the aggregate Purchase Price to be
paid therefor upon exercise of the Option. The determination by the Board as to
the terms of any of the foregoing adjustments shall be conclusive and binding.
2.8 Liquidation, Sale of Assets or Merger. In the event of a proposed dissolution
or liquidation of the Company, the Option will terminate immediately prior to the
consummation of such proposed action, unless otherwise provided by the Board. In
the event of a proposed sale of all or substantially all of the assets of the
Company, or the merger of the Company with or into another corporation, the
option shall be assumed or an equivalent option shall be substituted by such
successor corporation, unless the Board determines that the Optionee shall have
the right to exercise the Option as to all of the Common Stock subject to the
Option, including shares as to which the Option would not otherwise be
exercisable. If the Board makes an Option fully exercisable, the Board shall
notify the Optionee that the Option shall be fully exercisable for a period of
thirty(30) days from the date of such notice (but not later than the expiration
of the Option term under paragraph 2.6), and the Option will terminate upon the
expiration of such period. In the event the thirtieth (30th) day referred to in
this paragraph shall fall on a day that is not a business day, then the thirtieth
(30th) day shall be the next following business day.
2.9 Notices. Any notice to be given under the terms of the Agreement ("Notice")
shall be addressed to the Company in care of its Secretary at Photocomm, Inc.,
7681 East Gray Road, Scottsdale, Arizona 85260, or at its then current corporate
headquarters. Notice to be given to the Optionee shall be addressed to him or her
at his or her then current residential address as appearing on the payroll
records of the Company. Notice shall be deemed duly given when enclosed in a
properly sealed envelope and deposited by certified mail, return receipt
requested, in a post office or branch post office regularly maintained by the
United States Government.
2.10 Transferability of Option. The Option shall not be transferable by the
optionee otherwise than by the will or the laws of descent and distribution and
may be exercised during the life of the Optionee only by the Optionee.
2.11 Optionee Not a Shareholder. The Optionee shall not be deemed for any
purposes to be a shareholder of the Company with respect to any of the Optioned
Shares except to the extent that the Option herein granted shall have been
exercised with respect thereto and a stock certificate issued therefor.
2.12 Not a Contract of Employment. Nothing contained in the Plan or in any Option
Agreement executed pursuant to the Plan shall be deemed to confer upon any
individual to whom an Option may be granted here-under any right to remain in the
employ or service of the Company or a parent or subsidiary corporation of the
Company.
2.13 Disputes or Disagreements. As a condition of the granting of the Option
herein granted, the Optionee agrees, for himself and his personal
representatives, that any disputes or disagreement which may arise under or as a
result of or pursuant to this agreement shall be determined by the Board in its
sole discretion, and that any interpretation by the Board of the terms
of this Agreement shall be final, binding and conclusive.
IN WITNESS WHEREOF, the Company has caused this instrument to be executed by its
duly authorized officer, and the Optionee has hereunto affixed his or her
signature.
PHOTOCOMM, INC.
an Arizona corporation
By:
Its:
OPTIONEE:
</TABLE>
EXHIBIT 11
PHOTOCOMM, INC., COMPUTATION OF NET INCOME PER COMMON SHARE
(In thousands, except per share amounts)
Year Ended August 31, 1996
Primary Fully Diluted
Net income $1,147,327 $1,147,327
Preferred stock
dividends declared (92,022) N/A
Reduction of
interest expense N/A N/A
Interest revenue on
assumed purchase of
U.S. government
securities N/A N/A
--- ---
Net income applicable to
common stockholders $1,055,305 $1,147,327
========= =========
Weighted average shares:
Common shares
outstanding 13,917,490 13,917,490
Common equivalent shares
issuable upon exercise of
stock options (1) 574,790 574,790
Shares issuable upon
conversion of
preferred stock (2) N/A 682,233
--- -------
Total weighted average
shares, as adjusted 14,492,280 15,174,513
========== ==========
Earnings per share $ .07 $ .08
===== =====
(1) Amount calculated using the treasury stock method under the 20%
rule.
(2) Amount calculated using the if-converted method assuming the
conversion took place at the later of the beginning of the fiscal
year or issue date of the securities.
EXHIBIT 11
PHOTOCOMM, INC., COMPUTATION OF NET INCOME PER COMMON SHARE
(In thousands, except per share amounts)
Year Ended August 31, 1995
Primary Fully Diluted
Net income $ 903,974 $ 903,974
Preferred stock
dividends declared (123,291) N/A
Reduction of
interest expense N/A N/A
Interest revenue on
assumed purchase of
U.S. government
securities N/A N/A
--- ---
Net income applicable to
common stockholders $780,683 $903,974
======= =======
Weighted average shares:
Common shares
outstanding 12,342,442 12,342,442
Common equivalent shares
issuable upon exercise of
stock options (1) 530,248 802,127
Shares issuable upon
conversion of
preferred stock (2) N/A 859,435
--- -------
Total weighted average
shares, as adjusted 12,872,690 14,004,004
========== ==========
Earnings per share $ .06 $ .06
===== =====
(1) Amount calculated using the treasury stock method under the 20%
rule.
(2) Amount calculated using the if-converted method assuming the
conversion took place at the later of the beginning of the fiscal
year or issue date of the securities.
EXHIBIT 22
PHOTOCOMM, INC.
LIST OF SUBSIDIARIES
Balance of Systems Specialists, Inc., incorporated under the laws
of the State of Arizona. The subsidiary sometimes does
business as "BOSS".
Photocomm Credit Corporation, incorporated under the laws of the
State of Arizona.
Photocomm of Texas, Inc., incorporated under the laws of the State
of Texas.
EXHIBIT 23
ACCOUNTANTS' CONSENT
The Board of Directors
Photocomm, Inc.:
We consent to incorporation by reference in the Registration
Statements No. 33-40097, 33-62392 and 33-01801 on Form S-8 of
Photocomm, Inc. of our report dated October 18, 1996, relating to
the consolidated balance sheets of Photocomm, Inc. and subsidiaries
as of August 31, 1996 and 1995, and the related consolidated
statements of operations, stockholders' equity and cash flows for
each of the years in the three-year period ended August 31, 1996,
which report appears in the August 31, 1996 annual report on Form
10-KSB of Photocomm, Inc.
KPMG Peat Marwick LLP
Phoenix, Arizona
November 27, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from
the Consolidated Balance Sheets at August 31, 1996 and the
Consolidated Statement of Operations for the Twelve Months Ended
August 31, 1996, and is qualified in its entirety by reference to
such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> Year
<FISCAL-YEAR-END> Aug-31-1996
<PERIOD-START> Sep-1-1995
<PERIOD-END> Aug-31-1996
<CASH> 200,105
<SECURITIES> 0
<RECEIVABLES> 5,625,356
<ALLOWANCES> 26,000
<INVENTORY> 4,754,878
<CURRENT-ASSETS> 10,933,851
<PP&E> 3,814,543
<DEPRECIATION> 1,296,737
<TOTAL-ASSETS> 15,585,975
<CURRENT-LIABILITIES> 5,214,294
<BONDS> 0
<COMMON> 1,430,744
0
163
<OTHER-SE> 8,302,549
<TOTAL-LIABILITY-AND-EQUITY> 15,585,975
<SALES> 22,995,264
<TOTAL-REVENUES> 22,995,264
<CGS> 17,236,095
<TOTAL-COSTS> 22,144,653
<OTHER-EXPENSES> (48,132)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 101,416
<INCOME-PRETAX> 797,327
<INCOME-TAX> (350,000)
<INCOME-CONTINUING> 1,147,327
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,147,327
<EPS-PRIMARY> .07
<EPS-DILUTED> $ .08
</TABLE>
