UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES AND EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1997
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file number 0-12807
PHOTOCOMM, INC.
Incorporated in the State of Arizona IRS No. 86-0411983
7681 East Gray Road
Scottsdale, Arizona 85260
(602)948-8003
Check whether the Registrant (1) has filed all documents and reports
required to be filed by Section 13 or 15(d) of the Exchange Act during
the past 12 months (or 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 ( )
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Class Outstanding as of 7/31/97
Common Stock, $0.10 par value 16,230,294
Transitional Small Business Disclosure Form. Yes ( ) No (X)
<PAGE>
PHOTOCOMM, INC.
INDEX
PART I Financial Information Page Number
Item 1. Financial Statements
Consolidated Balance Sheet - June 30, 1997 3
and December 31, 1996
Consolidated Statement of Operations - 4
Three and Six Months ended June 30, 1997
and 1996
Consolidated Statement of Cash Flows - 5
Six Months ended June 30, 1997 and 1996
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis 6
of Financial Condition and Results of
Operations
PART II Other Information
Item 1. Legal Proceedings 9
Item 6. Exhibits and Reports on Form 8-K 11
I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
PHOTOCOMM, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(UNAUDITED)
Assets 6/30/97 12/31/96
Current Assets:
Cash and cash equivalents $1,815,072 $ 1,377,898
Accounts receivable, net 4,477,719 4,557,102
Inventories 5,576,833 4,490,784
Other current assets 173,536 184,904
Total Current Assets 12,043,160 10,610,688
Property and equipment, net 2,555,901 2,551,616
Deferred tax asset 350,000 350,000
Other assets, net 1,721,886 1,774,457
Total Assets $16,670,947 $15,286,761
========== ==========
Liabilities and Stockholders' Equity
Current Liabilities:
Current installments of long-term debt $ 60,155 $ 556,153
Accounts payable 2,081,976 1,695,266
Other accrued expenses 1,180,139 1,341,811
Total Current Liabilities 3,322,270 3,593,230
Long-term debt, less current installments 2,211,953 134,490
Total Liabilities 5,534,223 3,727,720
Stockholders' Equity:
Preferred stock:$.001 par value,
5,000,000 shares authorized;
Series A 12% convertible preferred stock,
125,000 shares authorized; 38,972
shares issued and outstanding 39 39
Series AA 11% convertible preferred stock,
200,000 shares authorized; 44,165 and
52,565 shares issued and outstanding,
respectively 44 53
Common stock: $.10 par value, 25,000,000
shares authorized; 16,230,294 and
16,151,444 shares issued and
outstanding, respectively 1,623,029 1,615,144
Additional paid-in capital 16,133,372 15,458,405
Accumulated deficit (6,619,760) (5,514,600)
Total Stockholders' Equity 11,136,724 11,559,041
Total Liabilities and Stockholders'
Equity $16,670,947 $15,286,761
========== ==========
See accompanying notes to consolidated financial statements.
PHOTOCOMM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
Three Months Ended Six Months Ended
June 30 June 30
1997 1996 1997 1996
Net sales $7,865,304 $5,264,688 $14,235,254 $10,187,788
Cost of sales 6,511,112 3,965,596 11,520,632 7,540,275
Gross profit 1,354,192 1,299,092 2,714,622 2,647,513
Selling, general and
administrative
expenses 2,270,444 1,156,591 3,798,653 2,235,183
Income (loss) from (916,252) 142,501 (1,084,031) 412,330
operations
Other income (expense):
Interest expense (8,943) (27,936) (23,139) (46,018)
Other income, net 7,783 16,789 2,010 23,388
Income tax - - - -
Net income (loss) (917,412) 131,354 (1,105,160) 389,700
Preferred stock
dividends (13,132) (26,590) (27,651) (26,590)
Net income (loss)
applicable to common
stockholders $(930,544) $ 104,764 $(1,132,811) $ 363,110
======== ======= ========== ========
Net income (loss) per
share $ (0.06) $ 0.01 $ (.07) $ .02
======== ======== ======== =======
Weighted average
number of common
shares outstanding 16,365,764 14,854,163 16,009,644 14,756,595
========== ========== ========== ==========
See accompanying notes to consolidated financial statements.
PHOTOCOMM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
Six Months Ended
June 30
1997 1996
Cash flows from operating activities:
Net income (loss) $(1,105,160) $ 389,700
Adjustments to reconcile net income to
net cash used in operating activities:
Depreciation and amortization 243,531 176,748
Non-cash settlement charge 650,000 -
Decrease (increase) in accounts receivable 79,383 (1,082,698)
Increase in inventories (1,086,049) (313,235)
Increase (decrease) in accounts payable
and accrued expenses 225,038 (264,943)
Decrease (increase) in other current
assets 11,368 (313,314)
Net cash used in operating
activities (981,889) (1,407,742)
Cash flows from investing activities:
Purchase of property and equipment (186,677) (681,767)
Purchase of patents, trademarks and
other assets (7,988) (1,079,589)
Net cash used in investing
activities (194,665) (1,761,356)
Cash flows from financing activities:
Repayments of debt (520,785) (66,922)
Proceeds from issuance of debt 2,102,250 1,299,099
Proceeds from issuance of common stock 59,914 1,512,962
Cash dividends on preferred stock (27,651) (26,590)
Net cash provided by financing
activities 1,613,728 2,718,549
Net increase (decrease) in cash and cash
equivalents 437,174 (450,549)
Cash and cash equivalents at beginning
of year 1,377,898 485,412
Cash and cash equivalents at end of period $1,815,072 $ 34,863
========= =========
See accompanying notes to consolidated financial statements.
PHOTOCOMM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1997
NOTE 1. Fiscal Year End
On February 2, 1997 the Board of Directors elected to change the
fiscal year end of Photocomm, Inc. and its subsidiaries (the
"Company") from August 31 to December 31. As a result, the Company
now reports interim financial information on a calendar quarterly
basis.
NOTE 2. Adoption of New Statement of Financial Accounting Standard
Financial Accounting Standards No. 128, "Earnings per Share", was
issued in February 1997. The adoption of this new accounting
standard, which is required on December 31, 1997, will result in the
restatement of earnings per share for all periods presented. Based on
management's estimates, the adoption of this standard is not expected
to have a material effect on the Company's financial statements.
NOTE 3. Reclassifications
Certain reclassifications have been made in the 1996 financial
statements to conform to the classifications used in 1997.
NOTE 4. Legal Proceedings
On July 22, 1997, the Company reached a settlement of the pending
arbitration proceedings with former executives Robert Kauffman
and Thomas LaVoy.
In connection with the settlement, the Company paid severance benefits
and attorney's fees. To facilitate the settlement, two of the
Company's directors purchased all outstanding stock options from Mr.
Kauffman. The Company retired 100,000 stock options held by Mr. LaVoy.
In addition to the approximate $1.2 million reserve previously
announced for severance under the employment agreements, the settlement
agreements resulted in an aggregate one-time charge of approximately
$800,000, of which $650,000 was non-cash.
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Business Overview
The Company is engaged in the manufacturing and marketing of solar
electric systems in the United States and abroad. To facilitate a
better understanding of the Company, the three major market areas of
focus are outlined as follows:
(1.) Distribution business: The Company distributes products through
dealer networks and retail catalog sales. This business is largely
domestic, however, there is an investment opportunity for expanding
and developing international markets.
International distribution is currently centered in two regional
centers. The Central and South America markets are serviced through an
office in Florida, and on October 1, 1996 the Company opened an
Australia office through a wholly-owned subsidiary, Photocomm Pty.
Ltd. Although these offices are primarily focused on distribution
sales, the Company will also pursue future growth opportunities in
industrial applications worldwide.
Distribution sales have a steady level of base business, however,
there are seasonal swings in this largely domestic segment which
traditionally have resulted in increased levels of sales in the second
and third quarters. As international growth continues, the Company
expects the seasonality to diminish.
(2.) Industrial base business: Industrial applications sales are
focused primarily within oil and gas communications and exploration
markets, which are typically not seasonal in nature. Additionally,
the Company expects this base business market to continue to grow as
the Company develops new domestic customers and identifies
applications internationally.
(3.) Industrial telecommunications business: Through developing
relationships with local carriers and large Original Equipment
Manufacturer's ("OEM's"), the Company has participated in large
projects within the telecommunications industry. Historically it has
not been possible to predict this activity quarter to quarter.
However, as these relationships continue to develop and new OEM
customer relationships are built, the Company expects to maintain a
more consistent level of this business.
On July 2, 1997, the Company purchased certain assets and
contracts of Integrated Power Corporation, Inc. from Westinghouse
Electric Corporation for $450,000. Integrated Power Corporation
specializes in highly engineered alternative power systems
incorporating solar, wind and diesel generators. IPC has historically
focused on markets in North Africa and the Middle East. The products
of Integrated Power Corporation have largely served customers in the
industrial telecommunications business.
Results of Operations
The following discussion is for the three months ended June 30, 1997
compared to three months ended June 30, 1996 and the six months ended
June 30, 1997 compared to the six months ended June 30, 1996.
Sales: Net sales for the second quarter of 1997 were $7,865,304, a
49% increase over sales of $5,264,688 for the second quarter of 1996.
Net sales for the six months in 1997 were $14,235,254, a 40% increase
over 1996 net sales of $10,187,788.
The second quarter sales growth resulted from increases in industrial
telecommunication which grew over $1.6 million and distribution
business sales growth of 54%. The distribution business net sales
increased equally among domestic and international markets. These
increases were offset somewhat by a 32% decline in the industrial base
business caused by customer delayed shipments. Orders currently in
place for the industrial base business are expected to more than
compensate for the second quarter delay.
The six month sales growth was from the distribution base business of
over 55%, growth in the industrial telecommunications market of 37%,
and growth in the base business of 11%.
The sales mix between distribution/industrial markets was 54%/46% in
the second quarter of 1997 compared to 50% for each market in the
second quarter of 1996. The six month comparison was 57%/43% in 1997
compared to 51%/49% in 1996.
Gross margin (gross profit divided by net sales): Gross margin
declined to 17% in 1997 from 25% in 1996 for the second quarter and to
19% in 1997 from 26% in 1996 for the six months. The decrease in
gross margin for the second quarter was principally from the decline
in sales for the industrial base business. The decline in this
business resulted in fewer costs being capitalized to products and
inefficiencies in the manufacturing operations. The product mix
discussed above also contributed to the margin decline in the second
quarter and for the six months because gross margins are typically
higher for the industrial markets when compared to the distribution
markets. Additionally, the international distribution operations have
experienced lower gross margins relative to the other distribution
business. As the international operation continues to grow, management
expects the gross margins to be comparable to the domestic base
business.
Selling, General and Administrative Expenses (SG&A): SG&A expenses
were $2,270,444 for the quarter and $3,798,653 for the six months
ended June 30, 1997 compared to $1,156,591 and $2,235,183, a 96% and
70% increase from the same periods in 1996. This increase is largely
attributed to a compensation charge of approximately $800,000
associated with the severance agreements with former executives of the
Company. These agreements are discussed more extensively in Part II,
Item 1 of this Quarterly Report.
Excluding the charge, SG&A expenses would have been $1,470,444 and
$2,998,653 for the second quarter and six months ended June 30, 1997,
a 27% and 34% increase from the same 1996 periods. The increase is
primarily attributed to staffing increases in sales and marketing
personnel, and marketing related activities which are supporting the
continued growth for both domestic and international markets.
Net of the severance charges, SG&A expenses as a percentage of sales
declined to 19% in the second quarter of 1997 as compared to 22% for
the same period in 1996, and declined to 21% for six months ended June
30, 1997 compared to 22% for the same period in 1996.
Other Income (Expense): The Company's non-operating income and
expense is primarily comprised of interest expense and consulting
income.
Income Tax: The Company has not recognized any income tax benefit for
the three and six month period ended June 30, 1997. Realization of the
net operating losses generated during 1997, and the remaining
operating losses generated in prior periods of $1,350,000, is
dependent on generation of future taxable income and is limited by
ownership changes. At this time management has not determined that it
is more likely than not that the entire deferred tax asset will be
realized and has provided a valuation allowance of $1,900,000 against
the Company's deferred tax asset. The realizability of the deferred
tax asset will be monitored on a quarterly basis.
No income tax expense was provided for during the three and six month
periods ended June 30, 1996 due to existence of net operating loss
carryforwards.
Liquidity and Capital Resources: The Company s working capital
position has increased in the second quarter of 1997. Working capital
increased to $8,720,890 at June 30, 1997 from $7,017,458 at December
31, 1996. The current ratio is 3.6 at June 30, 1997 versus 3.0 at
December 31, 1996. Accrued expenses of approximately $1,180,000 at
June 30, 1997 represent severance expenses with former Company
executives. See "Legal Proceedings".
Net cash used in operating activities for the first two quarters of
1997 was $981,889. The Company's operating cash uses included net
losses of $1,105,160, offset by a non-cash settlement charge of
$650,000, and increases in inventories of $1,086,049. This was offset
by changes in accounts receivable and accounts payables of $304,421.
Cash used for purchases of equipment for six months ending June 30,
1997 was $186,677. These capital expenditures were for upgrading
equipment in the manufacturing and engineering operations of the
Company.
Cash generated in financing activities of $ 1,613,728 was comprised of
proceeds from a line of credit provided by majority shareholder ACX
Technologies, Inc. of $2,000,000. Currently, the Company has drawn on
100% of this line of credit. The significant terms of this agreement
include an interest rate of 1% less than the monthly prime rate, a
three year term, and interest to be paid quarterly. The proceeds from
employee stock options being exercised and the repayment of debt of
$45,250 and $520,785, respectively, represent the other significant
financing activities for the six month period ended June 30, 1997.
Although no assurances are possible, the Company believes that its
future operating cash flows and available line of credit from the
majority shareholder, ACX Technologies, will provide adequate funding
for current obligations, projected operations and planned expansion
for the next twelve months and for the foreseeable future.
These statements should be read in conjunction with the financial
statements and notes thereto included in the Company's Form 10-KSB for
the year ended August 31, 1996. The accompanying financial statements
have not been examined by independent accountants in accordance with
generally accepted auditing standards, but in the opinion of the
management of Photocomm, such financial statements include all
adjustments necessary to summarize fairly the Company's interim
financial position and results of operations. All adjustments made to
the interim financial statements presented are of a normal recurring
nature. The results of operations for the three month and six month
periods ended June 30, 1997 may not be indicative of results that may
be expected for the year ending December 31, 1997.
Forward-Looking Statements
The statements made in this report that are not historical facts
contain forward-looking information that involve 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 international operations including currency
fluctuations, litigation, seasonality, claims to which the Company may
be a party, availability of critical materials or supply, the
Company's ability to manage planned expansion of its business and to
integrate acquisitions of other businesses, 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.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
On July 22, 1997, the Company reached a settlement of the pending
arbitration proceedings with former executives Robert Kauffman and
Thomas LaVoy.
In connection with the settlement, the Company paid severance,
benefits and attorney s fees. To facilitate the settlement, two of
the Company s directors purchased all outstanding stock options from
Mr. Kauffman. The Company retired 100,000 stock options held by
Mr. LaVoy. In addition to the approximate $1,200,000 reserve
previously announced for severance under the employment agreements,
the settlement agreements resulted in an additional aggregate
one-time charge of approximately $800,000, of which $650,000 was
non-cash. As an additional provision of the agreement, Mr. Kauffman
resigned as a director of the Company.
As previously provided in the employment agreement, the Company s
majority shareholder, ACX Technologies, Inc. (NYSE:ACX) purchased
500,000 shares of common stock and common stock equivalents from Mr.
Kauffman. ACX also made a $2,000,000 non-recourse loan to Mr.
Kauffman, secured by his remaining 1 million shares of common stock of
the Company.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
The following Exhibits are filed as part of this Report:
Page or
Exhibit No. Description Method of Filing
10.1 Settlement Agreement with Robert Kauffman 12
10.2 Settlement Agreement with Thomas LaVoy 27
27 Financial Data Schedule 39
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the quarter ended
June 30, 1997.
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, thereunto duly authorized.
Date: August 13, 1997
PHOTOCOMM, INC.
By: /s/John K. Coors By: /s/ Jeffrey C. Brines
John K. Coors Jeffrey C. Brines
Chief Executive Officer Chief Financial Officer
Exhibit 10.1
SETTLEMENT AGREEMENT
AND MUTUAL RELEASE
THIS SETTLEMENT AGREEMENT AND MUTUAL RELEASE ("Agreement")
is made and entered into as of the Effective Date (defined in
Section 1 below), by and among Robert R. Kauffman, a married man,
dealing with his sole and separate property ("Executive"), ACX
Technologies, Inc., a Colorado corporation ("ACX"), Golden
Technologies Company, Inc., a Colorado corporation ("Golden"),
and Photocomm, Inc., an Arizona corporation ("Photocomm")
(collectively ACX, Golden and Photocomm shall be referred to as
"Companies" and individually as a "Company").
RECITALS
A. Executive was advised that on January 31, 1997 his
employment with Photocomm was terminated ("Termination Date").
B. Executive has asserted claims against the Companies
arising out of his employment relationship with Photocomm and the
circumstances under which ACX and Golden acquired their interest
in Photocomm.
C. The parties wish to memorialize the terms and
conditions of the termination of Executive's employment with
Photocomm and the settlement of all other claims between
Executive on the one hand and the Companies on the other hand,
and in connection therewith the parties wish to exchange mutual
releases as set forth herein.
AGREEMENT
NOW THEREFORE, in consideration of the acts, payments,
covenants and mutual agreements herein described and agreed to be
performed, Executive and the Companies agree as follows:
1. Effective Date. As used in this Agreement, "Effective
Date" means the date on which all of the following conditions are
satisfied: (a) all parties hereto shall have executed this
Agreement and delivered it to the other parties hereto, (b) the
revocation period set forth in Section 17 below shall have
expired, and (c) Executive shall have delivered to Photocomm the
written confirmation contemplated by Section 6.2 below.
2. Executive Consideration. In exchange for the
consideration set forth herein, Photocomm agrees to provide the
following benefits to Executive.
2.1 Severance Pay. Within three (3) business days
after the Effective Date, Photocomm shall pay Executive a lump
sum severance payment in the amount of $394,505.00 (less ordinary
payroll deductions required by law in the amounts set forth in
Exhibit A attached hereto).
2.2 Benefits. In lieu of life, disability, and
Supplemental Medical Expense Reimbursement benefits Photocomm
shall pay to Executive a lump sum payment of $37,399.00, payable
within three (3) business days after the Effective Date (less
ordinary payroll deductions required by law in the amounts set
forth in Exhibit A attached hereto). Executive agrees to pay any
and all taxes associated with the items set forth in this
Section 2.2.
2.3 Personal Expenses. Within three (3) business days
after the Effective Date, Photocomm shall pay Executive a lump
sum payment of $21,551.00 in lieu of personal financial, legal,
and tax services (less ordinary payroll deductions required by
law in the amounts set forth in Exhibit A attached hereto).
2.4 Allowance. Within three (3) business days after
the Effective Date, Photocomm shall pay to Executive the
following lump sum payments:
(A) $3,448.00 in lieu of membership in the
Scottsdale Princess Health Club (less ordinary
payroll deductions required by law in the amounts
set forth in Exhibit A attached hereto).
(B) $16,800.00 in lieu of a monthly car
allowance (less ordinary payroll deductions
required by law in the amounts set forth in
Exhibit A attached hereto).
(C) $2,155.00 in lieu of reimbursement of
the subscription price for certain publications
(less ordinary payroll deductions required by law
in the amounts set forth in Exhibit A attached
hereto).
(D) $15,132.00 in lieu of reimbursement for
COBRA premiums (less ordinary payroll deductions
required by law in the amounts set forth in
Exhibit A attached hereto). Executive shall be
responsible for complying with all notice, filing
and payment requirements in connection with COBRA
coverage.
Executive agrees to pay any and all taxes associated with the
items set forth in this Section 2.4.
2.5 Benefits Prior to Termination. Within three (3)
business days after the Effective Date, Photocomm shall pay to
Executive $12,145.00 for unused vacation benefits he claims
accrued prior to the Termination Date (less ordinary payroll
deductions required by law in the amounts set forth in Exhibit A
attached hereto). Photocomm shall cooperate with Executive to
administer any rollover of assets requested by Executive from the
401k Plan account of Executive administered by Photocomm, in
accordance with the terms and conditions of such plan.
2.6 Settlement Payment. As additional consideration
for the agreements of Executive set forth herein, within three
(3) business days after the Effective Date, Photocomm shall pay
to Executive a lump sum settlement payment in the amount of
$135,000 (less ordinary payroll deductions required by law in the
amounts set forth in Exhibit A attached hereto).
3. Transactions with Respect to Executive's Stock.
(A) Purchase of Put Shares. Within three
(3) business days after the Effective Date, ACX
shall purchase from Executive and Executive shall
sell to ACX all right, title, and interest in and
to 35,763 shares of Photocomm Series A Convertible
Preferred Stock, 40,000 shares of Photocomm Series
AA Convertible Preferred Stock and 197,000 shares
of Photocomm common stock (collectively "Put
Shares"), for the aggregate purchase price of
$1,375,000.00, payable in immediately available
funds, upon Executive delivering to ACX the
original stock certificates representing the Put
Shares together with stock powers executed in
blank with respect thereto.
(B) Nonrecourse Loan Secured by Executive's
Stock. Within three (3) business days after the
Effective Date, ACX shall loan to Executive
$2,000,000 (the "Executive Loan") on the terms and
conditions set forth in the Promissory Note ("ACX
Note") and Pledge Agreement ("Pledge Agreement")
attached hereto as Exhibit B. The Executive Loan
shall be nonrecourse, secured by 1,000,000 shares
of Photocomm common stock (collectively, the
"Pledged Shares"). The Executive Loan shall bear
interest at the three-year Treasury rate, reset
annually, in effect from time to time and all
principal and accrued interest shall be due and
payable on the third anniversary of the Effective
Date.
4. Modification of Stock Options; Consent to Transfer.
Executive holds options to purchase Photocomm common stock as set
forth on Exhibit C attached hereto (the "Executive Options"),
pursuant to Non-Statutory Stock Option Agreements dated
December 1, 1993, December 1, 1994 and December 1, 1995 (the "Pre-
1996 Agreements") and as of January 1, 1997 (the "1997
Agreement"), copies of which are attached hereto as part of
Exhibit C (collectively, the "Option Agreements"). The Executive
Options and Option Agreements shall remain in full force and
effect following the Effective Date, subject to the following
amendments:
4.1 Amendment of Pre-1996 Agreements. The Pre-1996
Agreements shall be amended, effective as of the Effective Date,
as set forth in Exhibit D attached hereto.
4.2 Amendment of 1997 Agreement. The 1997 Agreement
shall be amended, effective as of the Effective Date, as set
forth in Exhibit E attached hereto.
4.3 Consent to Transfer. The Company hereby consents
to the transfer of the Executive Options as set forth in Exhibit
D and Exhibit E.
5. Representations and Warranties.
5.1 Companies Representations. Each of the Companies
hereby represents and warrants to Executive, which
representations and warranties shall survive consummation of the
transactions contemplated by this Agreement, as follows:
(A) That the execution, delivery and
performance of this Agreement and of any other
documents contemplated by this Agreement to which
it is a party, and the consummation of the
transactions contemplated hereby and thereby, have
been duly authorized by its respective Board of
Directors, and each of and all such agreements
have been duly executed and when delivered by it,
will constitute the valid and binding obligations
of such Company.
(B) Neither the execution, delivery or
performance of this Agreement nor the consummation
of the transactions contemplated hereby will
violate, conflict with or require any notice or
consent under, any applicable law or statute or
any agreement or obligation by which such Company
is bound.
5.2 Executive Representations. Effective on the date
Executive executes this Agreement and the date Executive delivers
the written confirmation contemplated by Section 6.2 below,
Executive represents and warrants to the Companies, which
representations and warranties shall survive consummation of the
transactions contemplated by this Agreement, as follows:
(A) That he is the registered holder and
beneficial owner of the Put Shares and the Pledged
Shares and has good, clear and indefeasible record
title to the Put Shares and the Pledged Shares;
that the Put Shares, the Pledged Shares and the
Common Stock subject to the Executive Options
represent all of the shares of capital stock of
Photocomm owned beneficially or of record by
Executive and his affiliates; that he has not
granted any options or rights with respect to the
Put Shares or the Pledged Shares to third parties
and that he has not pledged or encumbered the Put
Shares or the Pledged Shares; that he owns the Put
Shares and the Pledged Shares free and clear of
any liens, charges, encumbrances, voting
agreements, or equitable rights of others and has
absolute authority to pledge or convey ownership
of the Put Shares and the Pledged Shares; that
upon payment by ACX of the consideration described
in Section 3 above, ACX will receive good, clear,
and indefeasible title to the Put Shares, free and
clear of all liens, charges, encumbrances or
equitable rights of others whatsoever and a legal,
valid and enforceable first-priority lien on the
Pledged Shares to secure the Executive Loan; and
that each share of Series A Convertible Preferred
Stock and Series AA Convertible Preferred Stock of
Photocomm is convertible into four (4) shares of
Common Stock of Photocomm.
(B) That he is the registered holder and
beneficial owner of the Executive Options and has
good, clear and indefeasible record title to the
Executive Options; that the Executive Options
represent all rights to acquire capital stock of
Photocomm currently held by Executive; that he has
not granted any options or rights with respect to
the Executive Options to third parties and that he
has not pledged or encumbered the Executive
Options; that none of the Executive Options have
been exercised; that he owns the Executive Options
free and clear of any liens, charges, encumbrances
or equitable rights of others and that he has
absolute authority to modify the Executive Options
as provided herein.
(C) That this Agreement and any other
documents or instruments contemplated to be
executed and delivered by him pursuant to this
Agreement have been duly authorized and executed
by Executive, and when delivered by him, will
constitute the valid and binding obligations of
Executive.
(D) Neither the execution, delivery or
performance of this Agreement nor the consummation
of the transactions contemplated hereby will
violate, conflict with or require any notice or
consent under, any applicable law or statute or
any agreement or obligation by which Executive is
bound.
(E) To Executive's knowledge, there are no
claims, actions, suits, hearings, arbitrations,
disputes, proceedings (public or private) or
governmental investigations pending or threatened,
against or affecting Executive, any of the
Companies, their respective affiliates, directors,
officers, shareholders, owners, employees, or
agents or their respective assets or business, at
law or in equity, before or by any federal, state
or municipal or other governmental or non-
governmental department, commission, board,
bureau, agency, court or other instrumentality, or
by any private person or entity, there is no basis
for any such action, suit or proceeding, and there
are no existing or threatened, orders, judgments
or decrees of any court or governmental agency
affecting Executive, any of the Companies, their
respective affiliates, directors, officers,
shareholders, owners, employees, or agents or any
of their respective assets or businesses.
6. Conditions. Executive will be entitled to receive the
payments and other consideration described in Sections 2, 3, and
4 above and the other consideration set forth in this Agreement
only after all of the following conditions are satisfied:
6.1 Executive has not revoked this Agreement within
the revocation period described in Section 17 below.
6.2 The Company has received written confirmation from
Executive, in the form attached hereto as Exhibit F, dated not
earlier than the day after the expiration of the revocation
period described in Section 17 below (e.g., eight (8) days after
Executive executes this Agreement), that Executive has not
revoked and will not revoke this Agreement.
6.3 Executive's spouse shall have executed the spousal
consent below.
6.4 Executive delivers the resignation contemplated by
Section 21.4 hereof.
6.5 The parties have mutually agreed on the form of
press release contemplated by Section 21.1 hereof.
6.6 With respect to the obligations of ACX under
Section 3(b) hereof only, the parties have executed and delivered
the ACX Note, the Pledge Agreement and the Direction (as defined
therein) and the Broker (as defined in the Pledge Agreement) has
executed and delivered the Acknowledgment of Acceptance of the
Direction contemplated therein.
The parties shall use their mutual best efforts and
cooperate in good faith to cause the satisfaction of the
conditions set forth in Section 6.5 and 6.6 hereof on or before
the third business day after the Effective Date.
7. Mutual Releases and Covenants Not to Sue.
7.1 Executive's Release. Executive hereby forever
releases, discharges, cancels, waives, and acquits for himself,
his spouse and his heirs, executors, administrators and assigns,
each of the Companies and any and all of their respective
affiliates, subsidiaries, corporate parents, agents, directors,
officers, shareholders, owners, employees, agents, attorneys,
successors and assigns, of and from all of Executive's existing
rights to relief of any kind from any of the foregoing, including
without limitation any and all rights, claims, demands, causes of
action, obligations, damages, penalties, fees, costs, expenses,
and liability of any nature whatsoever, whether in law or equity,
which Executive has, had or may hereafter have against them, or
any of them arising out of, or by reason of, any cause, matter,
or thing whatsoever existing as of the date of execution of this
Agreement, WHETHER KNOWN TO THE PARTIES AT THE TIME OF EXECUTION
OF THIS AGREEMENT OR NOT, liquidated or unliquidated, other than
for the obligations expressly set forth in (i) this Agreement,
the Option Agreements (as modified in Section 4 hereof), any
Photocomm Invention and Non-Disclosure Agreement signed by
Executive ("Invention Agreement"), or any of the documents
executed in connection with the transactions contemplated herein
and (ii) the 401k Plan administered by Photocomm.
This FULL WAIVER OF ALL CLAIMS includes, without limitation,
attorney's fees, any claims, demands, or causes of action arising
out of, or relating in any manner whatsoever to, the employment
and/or termination of the employment of Executive by Photocomm,
and the purchase, sale, ownership or right to acquire equity
securities of Photocomm, such as, BUT NOT LIMITED TO, proceedings
before the American Arbitration Association captioned Photocomm,
Inc. and Robert R. Kauffman and Thomas C. LaVoy, No. 76-160-0056-
97, any charge, claim, lawsuit or other proceeding arising under
or relating to the Civil Rights Act of 1866, 1964, and 1991,
Title VII as amended by the Civil Rights Act of 1991, the
Americans with Disabilities Act, the Labor Management Relations
Act (LMRA), the Age Discrimination in Employment Act (ADEA), the
Employee Retirement Income Security Act (ERISA), the Consolidated
Omnibus Budget Reconciliation Act, the Fair Labor Standards Act
(FLSA), the Equal Pay Act, the Rehabilitation Act of 1973, the
Arizona Civil Rights Act, the Family and Medical Leave Act of
1993, any fiduciary duties owed to Executive, and any other
federal, state, or local statute, and any contract, agreement,
plan or policy, including, without limitation, the Articles of
Incorporation or Bylaws of Photocomm, that certain Executive
Compensation Agreement entered into in September 1996, that
certain Executive Compensation Agreement entered into in November
1996, that certain Registration Rights Agreement dated as of
November 21, 1996, any and all stock option plans and agreements
(other than the Option Agreements, as modified pursuant to
Section 4 hereof) and that certain purported Series C Junior
Participating Preferred Shares Rights Agreement dated as of
September 16, 1996. Executive further covenants and agrees not
to institute, nor cause to be instituted, any legal proceeding,
including filing any claim or complaint with any government
agency alleging any violation of law or public policy against
Photocomm and/or the Companies and any and all of their
affiliates, subsidiaries, corporate parents, directors, agents,
officers, shareholders, owners, employees, agents, successors and
assignees premised upon any legal theory or claim whatsoever
relating to the matters released in this Section 7.1, including
without limitation, contract, tort, wrongful discharge, personal
injury, interference with contract, breach of contract,
defamation, negligence, infliction of emotional distress, fraud,
or deceit, except to enforce the terms of this Agreement or the
documents executed in connection with the transactions
contemplated herein.
Executive acknowledges that the considerations afforded him
under this Agreement, including the payments and considerations
described in Sections 2, 3, and 4 above, are in full and complete
satisfaction of any claims Executive may have, or may have had
relating to the Companies, including any arising out of his
employment with Photocomm, the termination thereof, and his
purchase, sale, and ownership of, or his right to acquire, equity
securities of Photocomm.
7.2 The Companies' Release. The Companies on behalf
of themselves and any and all of their affiliates, subsidiaries,
corporate parents, agents, directors, officers, owners,
employees, attorneys, successors and assigns, hereby forever
release, discharge, cancel, waive, and acquit any and all rights,
claims, demands, causes of action, obligations, damages,
penalties, fees, costs, expenses, and liability of any nature
whatsoever, whether in law or equity, which the Companies have,
had or may hereafter have against Executive, his spouse or his
heirs, executors, administrators and assigns arising out of, or
by reason of, any cause, matter, or thing whatsoever existing as
of the date of execution of this Agreement, WHETHER KNOWN TO THE
PARTIES AT THE TIME OF EXECUTION OF THIS AGREEMENT OR NOT, other
than for the obligations expressly set forth in (i) this
Agreement, the Option Agreements (as modified pursuant to Section
4 hereof), any Invention Agreement or any of the documents
executed in connection with the transactions contemplated herein
and (ii) the 401k Plan administered by Photocomm.
The Companies further covenant and agree not to institute,
nor cause to be instituted, any legal proceeding against
Executive, his spouse or his heirs, executors, administrators and
assigns premised upon any legal theory or claim whatsoever
relating to the matters released in this Section 7.2, except to
enforce the terms of this Agreement and the documents executed in
connection with the transactions contemplated in this Agreement.
8. Tail Coverage. Photocomm agrees to obtain on
Executive's behalf, at its expense, directors and officers tail
coverage, for a period of five (5) years, on the terms and
conditions set forth in Exhibit G.
9. Standstill Agreement. Executive agrees that for a
period of five (5) years following the date of this Agreement, he
will not (i) directly or indirectly purchase or sell any shares
of capital stock or other securities of any of the Companies, or
any right or option to acquire or dispose of capital stock or
other securities of any of the Companies (other than the Pledged
Shares in accordance with the terms and conditions of the
Executive Loan and transfer of Executive Options as contemplated
pursuant to Section 4) (collectively, "Company Securities");
(ii) directly or indirectly assist or perform services for, or
engage or participate as principal, agent, employee, employer,
consultant or in any other individual or representative capacity
for, or have the right or option to acquire any direct or
indirect interest in, any person or entity that purchases or
sells Company Securities at a time when the aggregate Company
Securities beneficially held by such person or entity, together
with any "group" within the meaning of Rule 13d-5 under the
Securities Exchange Act of 1934 to which such person or entity
belongs, shall equal or exceed one percent (1%) of the then
outstanding Company Securities; or (iii) take any action in
preparation to do any of the foregoing.
10. Covenant Not to Compete. Executive agrees that for a
period of eighteen (18) months following the Termination Date, 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 Photocomm
and its subsidiaries as of the Termination Date, anywhere that
Photocomm and its subsidiaries do business, or solicit, recruit
or hire any employee of Photocomm and its subsidiaries.
10.1 Injunctive Relief. In the event Executive
violates the foregoing covenant not to compete then, in addition
to any other rights, damages, and remedies available, Photocomm
shall have the right and remedy to have the applicable covenant
specifically enforced by any court of competent jurisdiction by
way of an injunction or other legal equitable relief, it being
agreed that any breach of the applicable covenant would cause
irreparable injury to Photocomm. Therefore, the parties agree
that, in the event of any such breach of the covenant, Photocomm
will have the right to seek and obtain injunctive, declaratory or
other equitable relief.
10.2 Reasonableness of Covenant Not to Compete.
Executive and Photocomm agree that the covenants set forth herein
are appropriate and reasonable when considered in light of the
nature and extent of the business conducted by Photocomm and its
subsidiaries. Executive acknowledges that (i) Photocomm has a
legitimate interest in protecting the businesses conducted by the
Company and its subsidiaries, (ii) the covenants set forth herein
are not oppressive to Executive and contain reasonable
limitations as to time, scope, geographical area and activity,
(iii) the covenants do not harm in any manner whatsoever the
public interest, (iv) Executive has received and will receive
substantial consideration for agreeing to such covenants,
(v) Executive is agreeing to such covenants in order, among other
things, to induce the Companies to enter into this Agreement and
(vi) Executive will derive substantial benefits from the
consummation of the transactions contemplated by this Agreement,
including, but not limited to, the payment of consideration set
forth in this Agreement.
10.3 Severability of Covenant Not to Compete. It is
understood and agreed by the parties hereto that each of the
provisions of Section 10 of this Agreement are independent of and
severable from each other and the invalidity of Section 10 or any
provision thereof shall not affect the validity or hinder the
enforceability of the remaining provisions of this Agreement.
The parties expressly agree and declare that the time limitation
and geographic scope set forth in Section 10 hereof are
reasonable and are properly required for the adequate protection
of the business of Photocomm. If the provisions of Section 10
are ever adjudicated to exceed the limitations on time or
geographic scope permitted by applicable law, then such
provisions shall be deemed reformed to the maximum time or
geographic scope permitted by applicable law. The parties hereby
agree that such reformation shall be accomplished as follows:
(a) in the case of duration, the length of the covenant in
Section 10 shall be reduced in increments of one (1) month until
it is of the greatest duration as may be enforceable under
applicable law, and (b) in the case of geographic scope, the
geographic area of such covenant shall be reduced until it is of
the greatest geographic scope as may be enforceable under
applicable law, which reduction shall be effected first by
eliminating foreign countries, and then by eliminating states of
the United States, in the inverse order of the magnitude of
revenues derived by Photocomm therein, until the geographic scope
of such covenant is of maximum enforceable size under applicable
law.
11. Binding Effect. This Agreement shall be binding on and
inure to the benefit of the successors, heirs, representatives,
or assigns of the parties hereto. This Agreement shall not be
assignable by any party hereto without the prior written consent
of all other parties.
12. No Admission of Wrongdoing. This Agreement does not
constitute an admission that any person or entity violated any
local, state, or federal ordinance, regulation, ruling, statute,
rule of decision, or principle of common law, or that any person
or entity engaged in any improper or unlawful conduct or
wrongdoing. By entering into this Agreement, neither party
admits any liability or wrongdoing to the other nor shall this
Agreement be considered as an admission of liability.
13. Confidentiality. With the exception of Section 8
hereof, Executive and the Companies agree to maintain in
confidence the terms of this Agreement and the discussions that
led to its creation and execution, with the exception that each
party hereto may disclose this Agreement and its terms to the
extent required or appropriate in connection with their
businesses and under applicable securities or other laws and
accounting principles, and either party may disclose such matters
to any attorney who is providing advice to such party, to any
accountant or federal or state tax agency for purposes of
complying with any tax laws, or as otherwise required by law.
Additionally, Executive acknowledges that by reason of
Executive's employment with Photocomm, Executive came into
possession of confidential information regarding the business and
operations of Photocomm and its customers, including, without
limitation, trade secrets and other intellectual property,
financial information, employee, supplier and customer lists and
information, pricing data, and marketing plans ("Confidential
Business Information"). Confidential Business Information does
not include any information that is either: (1) publicly and
openly known and/or in the public domain, (2) becomes publicly
and openly known and/or in the public domain through no fault of
Executive, (3) in the Executive's possession prior to employment
with Photocomm and not conveyed by Executive to Photocomm
pursuant to an Invention Agreement, and (4) lawfully obtained by
Executive from a source other than from Photocomm. Executive
acknowledges that unauthorized use or disclosure of Confidential
Business Information would irreparably damage Photocomm.
Executive therefore agrees that Executive will forever keep
confidential all Confidential Business Information of which
Executive learned or came into possession while an employee of
Photocomm, and Executive will not disclose or use the same
without the prior written permission of Photocomm. Photocomm may
seek and obtain injunctive relief against the breach or
threatened breach of Executive's obligations under this
paragraph, in addition to any other legal remedies which may be
available. Further, Executive acknowledges that he has returned
to the Companies and has not retained in his possession any
confidential or proprietary information or any copy or embodiment
thereof.
14. Severability. The parties have fully negotiated all of
the provisions of this Agreement. In the event there is
litigation involving this Agreement and the court concludes that
provisions in this Agreement are unenforceable for whatever
reason, the court shall have the authority to modify the
provisions to make said provisions enforceable, if possible, as
set forth in this Agreement or otherwise. Further, the
unenforceability or invalidity of any provision shall not affect
the enforceability of the other provisions.
15. Voluntary and Knowing Agreement. Executive
acknowledges that the Company has advised Executive to consult
with Executive's own attorney prior to executing this Agreement.
The parties enter into this negotiated agreement freely and
voluntarily with full and complete knowledge of the meaning and
legal significance of the terms of this Agreement. The parties
have had an opportunity to discuss each provision of this
Agreement with independent legal counsel and the terms are fully
understood and voluntarily accepted by each of them.
16. Time To Consider Agreement. Executive understands that
Executive may take twenty-one (21) calendar days to decide
whether to sign this Agreement.
17. Right To Revoke. Executive understands that Executive
has the right to revoke this Agreement for any reason within
seven (7) calendar days after Executive signs it. Executive
understands that this Agreement will not become effective or
enforceable unless and until Executive has not revoked it and the
applicable revocation period has expired.
18. Notice. 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 below. Notices shall be addressed
as follows:
If to Companies: John K. Coors
Photocomm, Inc.
7681 East Gray Road
Scottsdale, Arizona 85260
with a copy to: Scott W. Rodgers, Esq.
Osborn Maledon
2929 North Central Avenue, 21st Floor
Phoenix, Arizona 85012-2794
If to Executive: Robert R. Kauffman
13670 North 85th Place
Scottsdale, Arizona 85260
with a copy to: Ronald Cohen, Esq.
Cohen and Cotton, P.C.
400 East Van Buren, Suite 400
Phoenix, Arizona 85004-2232
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.
19. Expenses. Each party shall pay its own expenses
incurred in connection with the negotiation and drafting of this
Agreement and the transactions contemplated hereby; provided,
that Photocomm shall pay $45,000 to Cohen and Cotton, P.C. and
$20,000 to Snell & Wilmer,
L.L.P., within three (3) business days after the Effective Date
for attorneys' fees incurred by Executive in connection
therewith.
20. Arbitration. Except as expressly set forth in this
Agreement, all claims, disputes and other matters in question
between the parties, arising under this Agreement shall 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. Photocomm shall pay the
administrative costs of the arbitration, but each party shall pay
his and its own attorneys' 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.
21. Miscellaneous.
21.1 Mutually Agreed Upon Press Release. The Companies
and Executive shall use their best efforts and negotiate in good
faith to agree upon and cause to be issued a mutually agreed upon
press release with respect to this Agreement. The press release
shall be issued to the same media organizations to which
Photocomm issued its February 3, 1997 press release, and others
in the sole discretion of either of the parties hereto.
21.2 Expense Reimbursement. Executive acknowledges
that Photocomm has reimbursed Executive for all expenses incurred
by Executive while employed by Photocomm.
21.3 Cooperation. The Companies shall reasonably
cooperate with Executive in connection with Executive's
obligations to any regulatory agency, including, but not limited
to, the Securities and Exchange Commission and the Internal
Revenue Service. Executive shall reasonably cooperate with
Photocomm in connection with Company matters which legitimately
require Executive's assistance. Requests for such cooperation,
however, shall be reasonable and shall not require any party to
expend any of his or its funds, nor shall Executive be required
to take time from his other business responsibilities.
21.4 Resignation. Executive shall deliver a
resignation as an officer and director of Photocomm and all of
Photocomm's subsidiaries and affiliates in the form of Exhibit H,
before Photocomm's delivery of the consideration contemplated by
Sections 2, 3 and 4 hereof. Executive acknowledges and agrees
that Item 6 of Form 8-K does not apply to his resignation and
Executive is not resigning because of a disagreement with the
Company on any matter relating to the Company's operations,
policies or practices.
22. Entire Agreement. This Agreement represents and
contains the entire Agreement and understanding between the
parties with respect to the subject matter hereof and supersedes
any and all prior and oral and written agreements and
understandings, including, without limitation, that certain
Executive Compensation Agreement entered into in September 1996,
that certain Executive Compensation Agreement entered into in
November 1996, that certain Registration Rights Agreement dated
as of November 21, 1996, any and all stock option plans and
agreements (other than the Option Agreements as modified by
Section 4 hereof) and that certain purported Series C Junior
Participating Preferred Shares Rights Agreement dated as of
September 16, 1996, but not including any Invention Agreement.
No inducement, representation, warranty, condition, understanding
or agreement of any kind with respect to the subject matter
hereof shall be relied upon by the parties unless expressly set
forth herein. This Agreement may not be amended or modified
except by an agreement in writing signed by the party against
whom the enforcement of such modification is sought.
23. Choice of Law. This Agreement and the rights and
obligations of the parties hereunder shall be governed by and
construed in accordance with the laws of the State of Arizona.
24. No Disparagement. Executive agrees that as part of the
consideration for this Agreement, he will not make disparaging or
derogatory remarks, whether oral or written, about the Companies
and their subsidiaries, affiliates, officers, directors,
employees, and agents. The Companies agree that their officers
and directors will not make disparaging or derogatory remarks,
whether oral or written, about Executive.
25. Headings. The descriptive headings of the paragraphs
and subparagraphs of this Agreement are intended for convenience
only, and do not constitute parts of this Agreement.
26. Counterparts. This Agreement may be executed
simultaneously in two or more counterparts, each of which will be
deemed an original, but all of which together will constitute one
and the same instrument.
27. Personnel Record. Photocomm shall reflect in
Executive's personnel file the fact that Executive was terminated
without cause and that other than Photocomm's right to terminate
Executive without cause, no other grounds for termination have
been asserted or are known to exist.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement on July ___, 1997, to be effective as of the Effective
Date.
PHOTOCOMM, INC.
By:
Its:
ACX TECHNOLOGIES, INC.
By:
Its:
GOLDEN TECHNOLOGIES COMPANY, INC.
By:
Its:
ROBERT R. KAUFFMAN
SPOUSAL CONSENT
The undersigned, Elizabeth W. Kauffman, hereby confirms that
she has read and understands the foregoing Settlement Agreement
and Mutual Release and consents and agrees to the terms to the
extent that she may have any interest therein and agrees that her
spousal and community property interest, as well as her sole and
separate property, is irrevocably bound by the Agreement,
including, without limitation, the waiver and release of claims
contained in Section 7.1 of the Agreement.
DATED as of July ___, 1997.
ELIZABETH W. KAUFFMAN
Exhibit 10.2
SETTLEMENT AGREEMENT
AND MUTUAL RELEASE
THIS SETTLEMENT AGREEMENT AND MUTUAL RELEASE ("Agreement")
is made and entered into as of the Effective Date (defined in
Section 1 below), by and among Thomas C. LaVoy, a married man,
dealing with his sole and separate property ("Executive"), ACX
Technologies, Inc., a Colorado corporation ("ACX"), Golden
Technologies Company, Inc., a Colorado corporation ("Golden"),
and Photocomm, Inc., an Arizona corporation ("Photocomm")
(collectively ACX, Golden and Photocomm shall be referred to as
"Companies" and individually as a "Company").
RECITALS
A. Executive was advised that on January 31, 1997 his
employment with Photocomm was terminated ("Termination Date").
B. Executive has asserted claims against the Companies
arising out of his employment relationship with Photocomm and the
circumstances under which ACX and Golden acquired their interest
in Photocomm.
C. The parties wish to memorialize the terms and
conditions of the termination of Executive's employment with
Photocomm and the settlement of all other claims between
Executive on the one hand and the Companies on the other hand,
and in connection therewith the parties wish to exchange mutual
releases as set forth herein.
AGREEMENT
NOW THEREFORE, in consideration of the acts, payments,
covenants and mutual agreements herein described and agreed to be
performed, Executive and the Companies agree as follows:
1. Effective Date. As used in this Agreement, "Effective
Date" means the date on which all parties hereto shall have
executed this Agreement and delivered it to the other parties
hereto.
2. Executive Consideration. In exchange for the
consideration set forth herein, Photocomm agrees to provide the
following benefits to Executive.
2.1 Severance Pay. Within three (3) business days
after the Effective Date, Photocomm shall pay Executive a lump
sum severance payment in the amount of $226,492.00 (less ordinary
payroll deductions required by law in the amounts set forth in
Exhibit A attached hereto).
2.2 Benefits. In lieu of life, disability, health and
accident insurance benefits, Photocomm shall pay to Executive a
lump sum payment of $11,320.00, payable within three (3) business
days after the Effective Date (less ordinary payroll deductions
required by law in the amounts set forth in Exhibit A attached
hereto). Executive agrees to pay any and all taxes associated
with the items set forth in this Section 2.2.
2.3 Allowance. Within three (3) business days after
the Effective Date, Photocomm shall pay to Executive the
following lump sum payments:
(A) $2,522.00 in lieu of membership in the
Scottsdale Princess Health Club (less ordinary
payroll deductions required by law in the amounts
set forth in Exhibit A attached hereto).
(B) $9,000.00 in lieu of a monthly car
allowance (less ordinary payroll deductions
required by law in the amounts set forth in
Exhibit A attached hereto).
Executive agrees to pay any and all taxes associated with the
items set forth in this Section 2.3.
2.4 Benefits Prior to Termination. Within three (3)
business days after the Effective Date, Photocomm shall pay to
Executive $3,764.23 for unused vacation benefits he claims
accrued prior to the Termination Date (less ordinary payroll
deductions required by law in the amounts set forth in Exhibit A
attached hereto). Photocomm shall cooperate with Executive to
administer any rollover of assets requested by Executive from the
401K Plan account of Executive administered by Photocomm, in
accordance with the terms and conditions of such plan.
3. Cancellation of Certain Stock Options; Modification of
Remaining Options.
3.1 Within three (3) business days after the Effective
Date, Photocomm shall pay to Executive an amount equal to
$100,000.00 (less applicable withholding required by law in the
amounts set forth in Exhibit A attached hereto), payable in
immediately available funds, to cancel the stock options and any
other rights to acquire equity securities of Photocomm or
compensation on account thereof set forth on Exhibit B attached
hereto ("Cancelled Options"), whereupon such Cancelled Options
shall be canceled without further action and shall thereafter be
of no further force or effect.
3.2 The stock options described on Exhibit C attached
hereto (the "Continuing Options") shall continue in full force
and effect following the Effective Date in accordance with the
terms and conditions of the Non-Statutory Stock Option Agreements
dated December 1, 1994, December 1, 1995 and as of January 1,
1997, copies of which are attached hereto as part of Exhibit C
(the "Continuing Option Agreements"); provided, that
notwithstanding any provision of the Continuing Option Agreements
to the contrary (a) any unvested Continuing Options shall become
immediately vested and (b) such Continuing Options shall be
exercisable by Executive until the respective termination dates
set forth in Exhibit C.
4. Representations and Warranties.
4.1 Companies Representations. Each of the Companies
hereby represents and warrants to Executive, which
representations and warranties shall survive consummation of the
transactions contemplated by this Agreement, as follows:
(A) That the execution, delivery and
performance of this Agreement and of any other
documents to which it is a party of even date
herewith, and the consummation of the transactions
contemplated hereby and thereby, have been duly
authorized by its respective Board of Directors,
and each of and all such agreements have been duly
executed and when delivered by it, will constitute
the valid and binding obligations of such Company.
(B) Neither the execution, delivery or
performance of this Agreement nor the consummation
of the transactions contemplated hereby will
violate, conflict with or require any notice or
consent under, any applicable law or statute or
any agreement or obligation by which such Company
is bound.
4.2 Executive Representations. Executive hereby
represents and warrants to the Companies, which representations
and warranties shall survive consummation of the transactions
contemplated by this Agreement, as follows:
(A) That he is the registered holder and
beneficial owner of the Cancelled Options and has
good, clear and indefeasible record title to the
Cancelled Options; that the Cancelled Options and
the Continuing Options represent all rights to
acquire capital stock of Photocomm currently held
by Executive; that he has not granted any options
or rights with respect to the Cancelled Options to
third parties and that he has not pledged or
encumbered the Cancelled Options; that none of the
Cancelled Options have been exercised; that he
owns the Cancelled Options free and clear of any
liens, charges, encumbrances or equitable rights
of others and that he has absolute authority to
convey ownership and/or cancel the Cancelled
Options.
(B) That this Agreement and any other
documents to which he is a party of even date
herewith have been duly authorized and executed by
Executive, and when delivered by him, will
constitute the valid and binding obligations of
Executive.
(C) Neither the execution, delivery or
performance of this Agreement nor the consummation
of the transactions contemplated hereby will
violate, conflict with or require any notice or
consent under, any applicable law or statute or
any agreement or obligation by which Executive is
bound.
(D) To Executive's knowledge, there are no
claims, actions, suits, hearings, arbitrations,
disputes, proceedings (public or private) or
governmental investigations pending or threatened,
against or affecting Executive, any of the
Companies, their respective affiliates, directors,
officers, shareholders, owners, employees, or
agents or their respective assets or business, at
law or in equity, before or by any federal, state
or municipal or other governmental or non-
governmental department, commission, board,
bureau, agency, court or other instrumentality, or
by any private person or entity, there is no basis
for any such action, suit or proceeding, and there
are no existing or threatened, orders, judgments
or decrees of any court or governmental agency
affecting Executive, any of the Companies, their
respective affiliates, directors, officers,
shareholders, owners, employees, or agents or any
of their respective assets or businesses.
5. Mutual Releases and Covenants Not to Sue.
5.1 Executive's Release. Executive hereby forever
releases, discharges, cancels, waives, and acquits for himself,
his spouse and his heirs, executors, administrators and assigns,
each of the Companies and any and all of their respective
affiliates, subsidiaries, corporate parents, agents, directors,
officers, shareholders, owners, employees, agents, attorneys,
successors and assigns, of and from all of Executive's existing
rights to relief of any kind from any of the foregoing, including
without limitation any and all rights, claims, demands, causes of
action, obligations, damages, penalties, fees, costs, expenses,
and liability of any nature whatsoever, whether in law or equity,
which Executive has, had or may hereafter have against them, or
any of them arising out of, or by reason of, any cause, matter,
or thing whatsoever existing as of the date of execution of this
Agreement, WHETHER KNOWN TO THE PARTIES AT THE TIME OF EXECUTION
OF THIS AGREEMENT OR NOT, liquidated or unliquidated, other than
for the obligations expressly set forth in (i) this Agreement,
the Continuing Option Agreements (as modified in Section 3
hereof), any Photocomm Invention and Non-Disclosure Agreement
signed by Executive ("Invention Agreement"), or any of the
documents executed of even date in connection with the
transactions contemplated herein and (ii) the 401k Plan
administered by Photocomm.
This FULL WAIVER OF ALL CLAIMS includes, without limitation,
attorney's fees, any claims, demands, or causes of action arising
out of, or relating in any manner whatsoever to, the employment
and/or termination of the employment of Executive by Photocomm,
and the purchase, sale, ownership or right to acquire equity
securities of Photocomm, such as, BUT NOT LIMITED TO, proceedings
before the American Arbitration Association captioned Photocomm,
Inc. and Robert R. Kauffman and Thomas C. LaVoy, No. 76-160-0056-
97, any charge, claim, lawsuit or other proceeding arising under
or relating to the Civil Rights Act of 1866, 1964, and 1991,
Title VII as amended by the Civil Rights Act of 1991, the
Americans with Disabilities Act, the Labor Management Relations
Act (LMRA), the Employee Retirement Income Security Act (ERISA),
the Consolidated Omnibus Budget Reconciliation Act, the Fair
Labor Standards Act (FLSA), the Equal Pay Act, the Rehabilitation
Act of 1973, the Arizona Civil Rights Act, the Family and Medical
Leave Act of 1993, and any other federal, state, or local
statute, and any contract, agreement, plan or policy, including,
without limitation, the Articles of Incorporation or Bylaws of
Photocomm, that certain Executive Compensation Agreement entered
into in September 1996, that certain Executive Compensation
Agreement entered into in November 1996, any and all stock option
plans and agreements (other than the Continuing Option Agreements
(as modified in Section 3 hereof)), and that certain purported
Series C Junior Participating Preferred Shares Rights Agreement
dated as of September 16, 1996. Executive further covenants and
agrees not to institute, nor cause to be instituted, any legal
proceeding, including filing any claim or complaint with any
government agency alleging any violation of law or public policy
against Photocomm and/or the Companies and any and all of their
affiliates, subsidiaries, corporate parents, directors, agents,
officers, shareholders, owners, employees, agents, successors and
assignees premised upon any legal theory or claim whatsoever
relating to the matters released in this Section 5.1, including
without limitation, contract, tort, wrongful discharge, personal
injury, interference with contract, breach of contract,
defamation, negligence, infliction of emotional distress, fraud,
or deceit, except to enforce the terms of this Agreement or the
documents executed of even date in connection with the
transactions contemplated herein.
Executive acknowledges that the considerations afforded him
under this Agreement, including the payments and considerations
described in Sections 2 and 3 above, are in full and complete
satisfaction of any claims Executive may have, or may have had
relating to the Companies, including any arising out of his
employment with Photocomm, the termination thereof, and the
purchase, sale, and ownership of, or his right to acquire, equity
securities of Photocomm.
5.2 The Companies' Release. The Companies on behalf
of themselves and any and all of their affiliates, subsidiaries,
corporate parents, agents, directors, officers, owners,
employees, attorneys, successors and assigns, hereby forever
release, discharge, cancel, waive, and acquit any and all rights,
claims, demands, causes of action, obligations, damages,
penalties, fees, costs, expenses, and liability of any nature
whatsoever, whether in law or equity, which the Companies have,
had or may hereafter have against Executive, his spouse or his
heirs, executors, administrators and assigns arising out of, or
by reason of, any cause, matter, or thing whatsoever existing as
of the date of execution of this Agreement, WHETHER KNOWN TO THE
PARTIES AT THE TIME OF EXECUTION OF THIS AGREEMENT OR NOT, other
than for the obligations expressly set forth in (i) this
Agreement, the Continuing Option Agreements (as modified in
Section 3 hereof), any Invention Agreement, or any of the
documents executed of even date in connection with the
transactions contemplated herein and (ii) the 401k Plan
administered by Photocomm.
The Companies further covenant and agree not to institute,
nor cause to be instituted, any legal proceeding against
Executive, his spouse or his heirs, executors, administrators and
assigns premised upon any legal theory or claim whatsoever
relating to the matters released in this Section 5.2, except to
enforce the terms of this Agreement and the documents executed of
even date in connection with the transactions contemplated in
this Agreement.
6. Tail Coverage. Photocomm agrees to obtain on
Executive's behalf, at its expense, directors and officers tail
coverage, for a period of five (5) years, on the terms and
conditions set forth in Exhibit D.
7. Standstill Agreement. Executive agrees that for a
period of five (5) years following the date of this Agreement, he
will not (i) directly or indirectly purchase or sell any shares
of capital stock or other securities of any of the Companies, or
any right or option to acquire or dispose of capital stock or
other securities of any of the Companies (other than capital
stock subject to the Continuing Option Agreements) (collectively,
"Company Securities"); (ii) directly or indirectly assist or
perform services for, or engage or participate as principal,
agent, employee, employer, consultant or in any other individual
or representative capacity for, or have the right or option to
acquire any direct or indirect interest in, any person or entity
that purchases or sells Company Securities at a time when the
aggregate Company Securities beneficially held by such person or
entity, together with any "group" within the meaning of Rule 13d-
5 under the Securities Exchange Act of 1934 to which such person
or entity belongs, shall equal or exceed one percent (1%) of the
then outstanding Company Securities; or (iii) take any action in
preparation to do any of the foregoing.
8. Covenant Not to Compete. Executive agrees that for a
period of one (1) year following June 15, 1997, 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 Photocomm and its
subsidiaries as of the Termination Date, anywhere that Photocomm
and its subsidiaries do business, or solicit, recruit or hire any
employee of Photocomm and its subsidiaries.
8.1 Injunctive Relief. In the event Executive
violates the foregoing covenant not to compete then, in addition
to any other rights, damages, and remedies available, Photocomm
shall have the right and remedy to have the applicable covenant
specifically enforced by any court of competent jurisdiction by
way of an injunction or other legal equitable relief, it being
agreed that any breach of the applicable covenant would cause
irreparable injury to Photocomm. Therefore, the parties agree
that, in the event of any such breach of the covenant, Photocomm
will have the right to seek and obtain injunctive, declaratory or
other equitable relief.
8.2 Reasonableness of Covenant Not to Compete.
Executive and Photocomm agree that the covenants set forth herein
are appropriate and reasonable when considered in light of the
nature and extent of the business conducted by Photocomm and its
subsidiaries. Executive acknowledges that (i) Photocomm has a
legitimate interest in protecting the businesses conducted by the
Company and its subsidiaries, (ii) the covenants set forth herein
are not oppressive to Executive and contain reasonable
limitations as to time, scope, geographical area and activity,
(iii) the covenants do not harm in any manner whatsoever the
public interest, (iv) Executive has received and will receive
substantial consideration for agreeing to such covenants,
(v) Executive is agreeing to such covenants in order, among other
things, to induce the Companies to enter into this Agreement and
(vi) Executive will derive substantial benefits from the
consummation of the transactions contemplated by this Agreement,
including, but not limited to, the payment of consideration for
the cancellation of the Cancelled Options.
8.3 Severability of Covenant Not to Compete. It is
understood and agreed by the parties hereto that each of the
provisions of Section 8 of this Agreement are independent of and
severable from each other and the invalidity of Section 8 or any
provision thereof shall not affect the validity or hinder the
enforceability of the remaining provisions of this Agreement.
The parties expressly agree and declare that the time limitation
set forth in Section 8 hereof is reasonable and properly required
for the adequate protection of the business of Photocomm. If the
provisions of Section 8 are ever adjudicated to exceed the
limitations on time or geographic scope permitted by applicable
law, then such provisions shall be deemed reformed to the maximum
time or geographic scope permitted by applicable law. The
parties hereby agree that such reformation shall be accomplished
as follows: (a) in the case of duration, the length of the
covenant in Section 8 shall be reduced in increments of one (1)
month until it is of the greatest duration as may be enforceable
under applicable law, and (b) in the case of geographic scope,
the geographic area of such covenant shall be reduced until it is
of the greatest geographic scope as may be enforceable under
applicable law, which reduction shall be effected first by
eliminating foreign countries, and then by eliminating states of
the United States, in the inverse order of the magnitude of
revenues derived by Photocomm therein, until the geographic scope
of such covenant is of maximum enforceable size under applicable
law.
9. Binding Effect. This Agreement shall be binding on and
inure to the benefit of the successors, heirs, representatives,
or assigns of the parties hereto. This Agreement shall not be
assignable by any party hereto without the prior written consent
of all other parties.
10. No Admission of Wrongdoing. This Agreement does not
constitute an admission that any person or entity violated any
local, state, or federal ordinance, regulation, ruling, statute,
rule of decision, or principle of common law, or that any person
or entity engaged in any improper or unlawful conduct or
wrongdoing. By entering into this Agreement, neither party
admits any liability or wrongdoing to the other nor shall this
Agreement be considered as an admission of liability.
11. Confidentiality. With the exception of paragraph 8
hereof, Executive and the Companies agree to maintain in
confidence the terms of this Agreement and the discussions that
led to its creation and execution, with the exception that each
party hereto may disclose this Agreement and its terms to the
extent required or appropriate in connection with their
businesses and under applicable securities or other laws and
accounting principles, and either party may disclose such matters
to any attorney who is providing advice to such party, to any
accountant or federal or state tax agency for purposes of
complying with any tax laws, or as otherwise required by law.
Additionally, Executive acknowledges that by reason of
Executive's employment with Photocomm, Executive came into
possession of confidential information regarding the business and
operations of Photocomm and its customers, including, without
limitation, trade secrets and other intellectual property,
financial information, employee, supplier and customer lists and
information, pricing data, and marketing plans ("Confidential
Business Information"). Confidential Business Information does
not include any information that is either: (i) publicly and
openly known and/or in the public domain, (ii) becomes publicly
and openly known and/or in the public domain through no fault of
Executive, (iii) in the Executive's possession prior to
employment with Photocomm and not conveyed by Executive to
Photocomm pursuant to an Invention Agreement, and (iv) lawfully
obtained by Executive from a source other than from Photocomm.
Executive acknowledges that unauthorized use or disclosure of
Confidential Business Information would irreparably damage
Photocomm. Executive therefore agrees that Executive will
forever keep confidential all Confidential Business Information
of which Executive learned or came into possession while an
employee of Photocomm, and Executive will not disclose or use the
same without the prior written permission of Photocomm.
Photocomm may seek and obtain injunctive relief against the
breach or threatened breach of Executive's obligations under this
paragraph, in addition to any other legal remedies which may be
available. Further, Executive acknowledges that he has returned
to the Companies and has not retained in his possession any
confidential or proprietary information or any copy or embodiment
thereof.
12. Severability. The parties have fully negotiated all of
the provisions of this Agreement. In the event there is
litigation involving this Agreement and the court concludes that
provisions in this Agreement are unenforceable for whatever
reason, the court shall have the authority to modify the
provisions to make said provisions enforceable, if possible, as
set forth in this Agreement or otherwise. Further, the
unenforceability or invalidity of any provision shall not affect
the enforceability of the other provisions.
13. Voluntary and Knowing Agreement. The parties enter
into this negotiated agreement freely and voluntarily with full
and complete knowledge of the meaning and legal significance of
the terms of this Agreement. The parties have had an opportunity
to discuss each provision of this Agreement with independent
legal counsel and the terms are fully understood and voluntarily
accepted by each of them.
14. Notice. 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. Notices shall be addressed as follows:
If to Companies: John K. Coors
Photocomm, Inc.
7681 East Gray Road
Scottsdale, Arizona 85260
with a copy to: Scott W. Rodgers, Esq.
Osborn Maledon
2929 North Central Avenue, 21st Floor
Phoenix, Arizona 85012-2794
If to Executive: Thomas C. LaVoy
29555 North 69th Place
Cave Creek, Arizona 85331
with a copy to: Ronald Cohen, Esq.
Cohen and Cotton, P.C.
400 East Van Buren, Suite 400
Phoenix, Arizona 85004-2232
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.
15. Expenses. Each party shall pay its own expenses
incurred in connection with the negotiation and drafting of this
Agreement and the transactions contemplated hereby.
16. Arbitration. Except as expressly set forth in this
Agreement, all claims, disputes and other matters in question
between the parties, arising under this Agreement shall 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. Photocomm shall pay the
administrative costs of the arbitration, but each party shall pay
his and its own attorneys' 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.
17. Miscellaneous.
17.1 Mutually Agreed Upon Press Release. The Companies
and Executive shall cooperate after the Effective Date to cause
to be issued a mutually agreed upon press release. The press
release shall be issued to the same media organizations to which
Photocomm issued its February 3, 1997 press release, and others
in the sole discretion of either of the parties hereto.
17.2 Expense Reimbursement. Concurrent with the
execution of this Agreement , Photocomm shall reimburse Executive
all expenses incurred by Executive while employed by Photocomm,
in the total amount of $425.00.
17.3 Cooperation. The Companies shall reasonably
cooperate with Executive in connection with Executive's
obligations to any regulatory agency, including, but not limited
to, the Securities and Exchange Commission and the Internal
Revenue Service. Executive shall reasonably cooperate with
Photocomm in connection with Company matters which legitimately
require Executive's assistance. Requests for such cooperation,
however, shall be reasonable and shall not require any party to
expend any of his or its funds, nor shall Executive be required
to take time from his other business responsibilities.
17.4 Resignation as Officer. Executive shall deliver a
resignation as an officer of Photocomm and all of Photocomm's
subsidiaries and affiliates, in the form of Exhibit E, before
Photocomm's delivery of the consideration contemplated by
Sections 2 and 3.
18. Entire Agreement. This Agreement represents and
contains the entire Agreement and understanding between the
parties with respect to the subject matter hereof and supersedes
any and all prior and oral and written agreements and
understandings, including, without limitation, that certain
Executive Compensation Agreement entered into in September 1996,
that certain Executive Compensation Agreement entered into in
November 1996, any and all stock option plans and agreements
(other than the Continuing Option Agreements (as modified in
Section 3 hereof)) and that certain purported Series C Junior
Participating Preferred Shares Rights Agreement dated as of
September 16, 1996, but not including any Invention Agreement.
No inducement, representation, warranty, condition, understanding
or agreement of any kind with respect to the subject matter
hereof shall be relied upon by the parties unless expressly set
forth herein. This Agreement may not be amended or modified
except by an agreement in writing signed by the party against
whom the enforcement of such modification is sought.
19. Choice of Law. This Agreement and the rights and
obligations of the parties hereunder shall be governed by and
construed in accordance with the laws of the State of Arizona.
20. No Disparagement. Executive agrees that as part of the
consideration for this Agreement, he will not make disparaging or
derogatory remarks, whether oral or written, about the Companies
and their subsidiaries, affiliates, officers, directors,
employees, and agents. The Companies agree that their officers
and directors will not make disparaging or derogatory remarks,
whether oral or written, about Executive.
21. Personnel Record. Photocomm shall reflect in
Executive's personnel file the fact that Executive was terminated
without cause and that other than Photocomm's right to terminate
Executive without cause, no other grounds for termination have
been asserted or are known to exist.
22. Headings. The descriptive headings of the paragraphs
and subparagraphs of this Agreement are intended for convenience
only, and do not constitute parts of this Agreement.
23. Counterparts. This Agreement may be executed
simultaneously in two or more counterparts, each of which will be
deemed an original, but all of which together will constitute one
and the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the Effective Date.
PHOTOCOMM, INC.
By:
Its:
Date:
ACX TECHNOLOGIES, INC.
By:
Its:
Date:
GOLDEN TECHNOLOGIES COMPANY, INC.
By:
Its:
Date:
THOMAS C. LAVOY
Date:
SPOUSAL CONSENT
The undersigned, Nancy LaVoy, hereby confirms that she has
read and understands the foregoing Settlement Agreement and
Mutual Release and consents and agrees to the terms to the extent
that she may have any interest therein and agrees that her
spousal and community property interest, as well as her sole and
separate property, is irrevocably bound by the Agreement,
including, without limitation, the waiver and release of claims
contained in Section 5 of the Agreement.
NANCY LAVOY
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from
the Consolidated Balance Sheet at June 30, 1997 (Unaudited) and the
Consolidated Statement of Operations for the Six Months ended June 30,
1997 (Unaudited) and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 1,815,072
<SECURITIES> 0
<RECEIVABLES> 4,477,719
<ALLOWANCES> 0
<INVENTORY> 5,576,833
<CURRENT-ASSETS> 12,043,160
<PP&E> 4,156,639
<DEPRECIATION> 1,600,738
<TOTAL-ASSETS> 16,670,947
<CURRENT-LIABILITIES> 3,322,270
<BONDS> 0
<COMMON> 1,623,029
0
83
<OTHER-SE> 9,513,612
<TOTAL-LIABILITY-AND-EQUITY> 16,670,947
<SALES> 14,235,254
<TOTAL-REVENUES> 14,235,254
<CGS> 11,520,632
<TOTAL-COSTS> 11,520,632
<OTHER-EXPENSES> 3,798,653
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 23,139
<INCOME-PRETAX> (1,105,160)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,105,160)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,105,160)
<EPS-PRIMARY> (.07)
<EPS-DILUTED> (.07)
</TABLE>
