SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): February 25, 1997
PHOTOCOMM, INC.
(Exact name of registrant as specified in its charter)
Arizona 0-12807 86-0411983
(State or other (Commission File (I.R.S. Employer
jurisdiction of Number) Identification No.)
incorporation)
(602) 948-8003
(Registrant's telephone number, including area code)
Item 5. Other Events
On February 25, 1997, Photocomm, Inc. (the "Company")
instituted arbitration proceedings before the American
Arbitration Association ("AAA") in Phoenix, Arizona to enforce
its agreements with its former chief executive officer, Robert R.
Kauffman, and chief financial officer, Thomas LaVoy, and to
resolve certain disputes primarily concerning the severance
provisions of those agreements ("Arbitration Proceedings"). As
previously announced, Mr. Kauffman's and Mr. LaVoy's employment
was terminated by the Company's Board of Directors on January 31,
1997. Mr. Kauffman continues to serve as a director of the
Company.
As previously disclosed, the Company entered into Executive
Compensation Agreements with Messrs. Kauffman and LaVoy in
November 1996 (the "Agreements"). Under the terms of the
Agreements, which were filed as exhibits to the Company's Form 10-
KSB for the year ended August 31, 1996, the Company is obligated
to provide certain severance benefits in the event of a
termination of the executive's employment without cause. The
severance benefits include a lump sum cash severance payment,
accelerated vesting of all outstanding stock options and the
continuation of certain other benefits specified in the
Agreements. The Agreements provide that the severance payments
and benefits shall not be made in an amount that results in
payments and benefits in the aggregate being deemed an "excess
parachute payment" pursuant to Section 280G of the Internal
Revenue Code. The Agreements further provide that as a condition
precedent to receiving any severance payments or benefits, each
executive shall sign an appropriate legal release on the terms
specified in the Agreements. The Agreements provide for
mandatory arbitration of claims, disputes and other matters in
question arising under the Agreements. The descriptions set
forth in this Report of the Agreements are summaries and are
qualified in their entirety by reference to the Agreements,
copies of which are incorporated herein by reference as Exhibits
99.1 and 99.2
Mr. Kauffman and Mr. LaVoy have asserted various claims
against the Company, including demands for compensation and
benefits in addition to those provided by the Agreements, treble
damages and demands that their Company Common Stock and options
to purchase Company Common Stock be purchased by ACX
Technologies, Inc., a major shareholder of the Company. Mr.
Kauffman and Mr. LaVoy also have disputed that they are obligated
under the Agreements to deliver legal releases of all legal
claims as a condition to their receipt of severance and other
benefits under the Agreements. On February 25, 1997, the Company
filed a Demand for Arbitration and Statement of the Nature of the
Dispute ("Arbitration Demand") with the AAA in order that the
claims and allegations of Mr. Kauffman and Mr. LaVoy may be
resolved through arbitration as required by the Agreements. The
descriptions set forth in this Report of the Arbitration
Proceedings and the matters subject thereto are summaries and are
qualified in their entirety by reference to the Arbitration
Demand, a copy of which is filed herewith as Exhibit 99.3, and
incorporated herein by this reference. The Arbitration
Proceedings are in their initial stages, no response has been
filed by Mr. Kauffman or Mr. LaVoy and accordingly, the Company
is unable to predict the timing or ultimate resolution of the
Arbitration Proceedings.
Special Note on Forward Looking Statements
The statements made in this Report that are not historical
facts contain forward-looking information that involves risks and
uncertainties. Important factors that may cause actual results
to differ from such forward looking statements include, but are
not limited to, market demand and acceptance of the Company's
products, the impact of competitive technologies, products and
services, risks associated with technology development and
commercialization, risks associated with the pending Arbitration
Proceedings and any other litigation and claims to which the
Company may be a party, availability of capital resources, the
effect of economic and business conditions and other risks
detailed from time to time in the Company's filings with the
Securities and Exchange Commission.
Item 7. Financial Statements and Exhibits
Exhibit
Number Document Description
99.1 Executive Compensation Agreement between the
Company, ACX Technologies, Inc. and Robert R. Kauffman
dated November 20, 1996 (filed as Exhibit 10.10 to the
Company's Annual Report on Form 10-KSB for the year
ended August 31, 1996 and incorporated by reference
herein).
99.2 Executive Compensation Agreement between the
Company and Thomas LaVoy dated November 20, 1996 (filed
as Exhibit 10.11 to the Company's Annual Report on Form
10-KSB for the year ended August 31, 1996 and
incorporated by reference herein).
99.3 Demand for Arbitration and Statement of the Nature
of the Dispute.
Signatures
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned hereunto duly authorized.
PHOTOCOMM, INC.
Date: February 27, 1997 By /s/ Jeffrey C. Brines
Vice President, Secretary and
Chief Financial Officer
EXHIBIT INDEX
Exhibit
Number Document Description
99.1 Executive Compensation Agreement between the
Company, ACX Technologies, Inc. and Robert R. Kauffman
dated November 20, 1996 (filed as Exhibit 10.10 to the
Company's Annual Report on Form 10-KSB for the year
ended August 31, 1996 and incorporated by reference
herein).
99.2 Executive Compensation Agreement between the
Company and Thomas LaVoy dated November 20, 1996 (filed
as Exhibit 10.11 to the Company's Annual Report on Form
10-KSB for the year ended August 31, 1996 and
incorporated by reference herein).
99.3 Demand for Arbitration and Statement of the Nature
of the Dispute
Exhibit 99.3
William J. Maledon
Scott W. Rodgers
OSBORN MALEDON, P.A.
2929 North Central Avenue
Suite 2100
Phoenix, Arizona 85012-2794
(602) 207-1288
Attorneys for Claimant Photocomm, Inc.
BEFORE THE AMERICAN ARBITRATION ASSOCIATION
PHOTOCOMM, INC., an )
Arizona corporation, ) Case No._______________
)
Claimant, )
)
vs. ) DEMAND FOR
) ARBITRATION AND
ROBERT R. KAUFFMAN and THOMAS ) STATEMENT OF THE
C. LAVOY, individuals, ) NATURE OF THE DISPUTE
)
Respondents. )
)
In support of its Demand for Arbitration, Photocomm, Inc.
states as follows:
1. Photocomm, Inc. is an Arizona corporation,
headquartered in Scottsdale. It manufactures and markets
solar electric (photovoltaic) systems and products for
wireless power applications.
2. Respondent Robert R. Kauffman ("Kauffman") is the
former President and Chief Executive Officer of Photocomm.
Respondent Thomas C. LaVoy ("LaVoy") is the former Chief
Financial Officer of Photocomm.
3. On or about November 21, 1996, Photocomm entered into
separate Employment Agreements with Kauffman and LaVoy. The
Kauffman Employment Agreement is attached hereto as Exhibit
A; the LaVoy Employment Agreement is Exhibit B hereto.
4. Both the Kauffman and LaVoy Employment Agreements
contain arbitration provisions. (See Exhibit A Sec. XVIII;
Exhibit B Sec. XVII.)
5. Pursuant to the Employment Agreements, Photocomm had
the right to terminate the employment of Kauffman and LaVoy
without cause. (See Exhibit A Sec. VII (C); Exhibit B Sec.
VI(C).) On January 31, 1997, the Photocomm Board of
Directors terminated the employment of Kauffman and LaVoy
without cause.
6. Section VII(C) of the Kauffman Employment Agreement and
Section VI(C) of the LaVoy Employment Agreement specify
certain severance benefits that Kauffman and LaVoy are
entitled to receive upon the satisfaction of certain
conditions (the "Severance Payments").
7. Importantly, the Employment Agreements obligate
Kauffman and LaVoy to execute an "appropriate legal release"
before they are entitled to receive the Severance Payments.
(See Exhibit A Sec. VII(C)(7); Exhibit B Sec. VI(C)(7).) The
Employment Agreements state that this requirement is a
"condition precedent" of Kauffman and LaVoy receiving "any"
Severance Payments.
8. The Employment Agreements are clear that Kauffman and
LaVoy must agree in the legal release both: (a) "not to
bring any legal claims against [Photocomm] of whatever
nature or kind in connection with [their] employment and
separation from employment, except for benefits of
employment . . ."; and (b) to "surrender all of [their]
rights to bring any legal claim against [Photocomm], other
than for such vested rights, under any federal or state law,
statute, or ordinance." (Id. (emphasis added).) Thus, the
Employment Agreements obligate Kauffman and LaVoy to execute
broad, complete releases in favor of Photocomm.
9. The Severance Payments also are contingent on Photocomm
receiving a report from KPMG Peat Marwick, Photocomm's 1996
auditors, as to whether any portion of the Severance
Payments are an "excess parachute payment" pursuant to
Section 280G of the Internal Revenue Code ("Section 280G").
The Employment Agreements specify that Kauffman and LaVoy
are not entitled to receive any Severance Payments above the
limits set forth in Section 280G. Photocomm currently is
waiting for KPMG Peat Marwick to complete its analysis.
10. On January 31, 1997, Kauffman and LaVoy were given
draft Severance Agreements containing legal releases. The
draft Severance Agreements did not contain all actual dollar
amounts Kauffman and LaVoy were to receive because Photocomm
did not have all necessary information available to it,
including the required information from KPMG Peat Marwick.
And, of course, Photocomm did not request KPMG Peat Marwick
to begin its analysis until after the Board voted to
terminate the employment of Kauffman and LaVoy.
11. Since January 31, 1997, Photocomm representatives have
attempted to contact Kauffman and LaVoy to discuss the draft
Severance Agreements. Kauffman and LaVoy did not return
repeated phone calls or otherwise contact Photocomm.
Eventually, a Photocomm representative reached Kauffman, who
refused to discuss the matter except to say that Photocomm
would be hearing from his attorney. Additionally, Photocomm
has recently learned that Kauffman and his attorneys have
contacted KPMG Peat Marwick, and such contact may have
delayed KPMG Peat Marwick from completing its Section 280G
analysis for Photocomm.
12. Recently, Kauffman and LaVoy, through counsel, have
informed Photocomm that they will not comply with the
release provisions of the Employment Agreements. Despite
the clear language of the Employment Agreements specifying
that Kauffman and LaVoy must execute a legal release in
which they agree to "surrender all of [their] rights to
bring any legal claim against [Photocomm]", Kauffman and
LaVoy have taken the position that they are not required to
sign complete, broad releases.
13. Photocomm bargained for the right to complete, broad
releases from Kauffman and LaVoy. Kauffman and LaVoy are in
breach of the terms of the Employment Agreements for failing
to provide such releases. A dispute exists between the
parties as to the scope of the releases Kauffman and LaVoy
must execute under the Employment Agreements.
14. Through counsel, Kauffman and LaVoy have also asserted,
prematurely, that the Severance Payments do not constitute
an "excess parachute payment" under Section 280G and have
demanded payment of amounts in excess of the Severance
Payments. Thus, a dispute exists as to the amounts
Photocomm is obligated to pay Kauffman and LaVoy.
15. To be sure, Photocomm does not dispute that it must pay
Kauffman and LaVoy the Severance Payments described in the
Employment Agreement at the appropriate time. Photocomm
remains ready, willing, and able to pay the Severance
Payments once the conditions precedent in the Employment
Agreement are fully satisfied.
16. Photocomm is unable to calculate with precision the
amount in controversy at this time.
WHEREFORE, Photocomm requests the following relief in this
Arbitration:
A. An order requiring Kauffman and LaVoy to execute
complete, broad releases in accordance with the provisions of the
Employment Agreement; and
B. A declaration that Photocomm, upon payment to Kauffman
and LaVoy of the Severance Payments (after receipt of appropriate
releases and the report from KPMG Peat Marwick), has satisfied
all obligations owed to Kauffman and LaVoy; and
C. A declaration that Kauffman and LaVoy are not entitled
to treble damages pursuant to the Arizona Wage Act; and
D. Such other relief as is appropriate.
Respectfully submitted this 25th day of February, 1997.
OSBORN MALEDON, P.A.
By /s/ Scott W. Rodgers
William J. Maledon
Scott W. Rodgers
2929 North Central Avenue
Suite 2100
Phoenix, Arizona 85012-2794
Attorneys for Claimant
