UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
(Amendment No. 6)*
TECHNICAL COMMUNICATIONS CORPORATION
(Name of Issuer)
Common Stock, $0.10 par value per share
(Title of Class of Securities)
878 409 101
(CUSIP Number)
M. Mahmud Awan, Ph. D. Paul Bork, Esq.
TechMan International Corporation Hinckley, Allen & Snyder
240 Sturbridge Road 28 State Street
Charlton City, Massachusetts 01506 Boston, Massachusetts 02109
(508) 248-3211 (617) 345-9000
(Name, Address and Telephone Number of Person Authorized to Receive
Notices and Communications)
July 2, 1998
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D and is filing this
schedule because of Rule 13d-1(b)(3) or (4), check the following box [ ].
NOTE: Schedules filed in paper format shall include a signed original and five
copies of the schedule, including all exhibits. See Rule 13d-7(b) for other
parties to whom copies are to be sent.
* The remainder of this cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities, and
for any subsequent amendment containing information which would alter
disclosures provided in a prior coverage page.
The information required on the remainder of this cover page shall not be deemed
to be "filed" for the purpose of Section 18 of the Securities Exchange Act of
1934 ("Act") or otherwise subject to the liabilities of that section of the Act
but shall be subject to all other provisions of the Act (however, see the
Notes).
<PAGE>
1. Name of Reporting Person: M. Mahmud Awan
SS or IRS Identification Number of the Above Person:
2. Check the Appropriate Box if a Member of a Group: (a) [X] (b) [ ]
3. SEC Use Only
4. Source of Funds: PF
5. Check Box if Disclosure of Legal Proceedings is Required Pursuant to Items
2(d) or 2(e): [ ]
6. Citizenship or Place of Organization: USA
7. Sole Voting Power: 138,378 shares
8. Shared Voting Power: 0 shares
9. Sole Dispositive Power: 138,378 shares
10. Shared Dispositive Power: 0 shares
11. Aggregate Amount Beneficially Owned by Each Reporting Person: 138,378
shares
12. Check Box if the Aggregate Amount in Row (11) Excludes Certain Shares: [ ]
13. Percent of Class Represented by Amount in Row (11): 10.8%
14. Type of Reporting Person: IN
<PAGE>
1. Name of Reporting Person: Philip A. Phalon
SS or IRS Identification Number of the Above Person:
2. Check the Appropriate Box if a Member of a Group: (a) [X]
(b) [ ]
3. SEC Use Only
4. Source of Funds: PF
5. Check Box if Disclosure of Legal Proceedings is Required Pursuant to Items
2(d) or 2(e): [ ]
6. Citizenship or Place of Organization: USA
7. Sole Voting Power: 2,250 shares
8. Shared Voting Power: 0 shares
9. Sole Dispositive Power: 2,250 shares
10. Shared Dispositive Power: 0 shares
11. Aggregate Amount Beneficially Owned by Each Reporting Person: 2,250 shares
12. Check Box if the Aggregate Amount in Row (11) Excludes Certain Shares: [ ]
13. Percent of Class Represented by Amount in Row (11): 0.2%
14. Type of Reporting Person: IN
<PAGE>
1. Name of Reporting Person: Robert B. Bregman
SS or IRS Identification Number of the Above Person:
2. Check the Appropriate Box if a Member of a Group: (a) [X]
(b) [ ]
3. SEC Use Only
4. Source of Funds: PF
5. Check Box if Disclosure of Legal Proceedings is Required Pursuant to Items
2(d) or 2(e): [ ]
6. Citizenship or Place of Organization: USA
7. Sole Voting Power: 2,700 shares
8. Shared Voting Power: 0 shares
9. Sole Dispositive Power: 2,700 shares
10. Shared Dispositive Power: 0 shares
11. Aggregate Amount Beneficially Owned by Each Reporting Person: 2,700 shares
12. Check Box if the Aggregate Amount in Row (11) Excludes Certain Shares: [ ]
13. Percent of Class Represented by Amount in Row (11): 0.2%
14. Type of Reporting Person: IN
<PAGE>
1. Name of Reporting Person: William C. Martindale, Jr.
SS or IRS Identification Number of the Above Person:
2. Check the Appropriate Box if a Member of a Group: (a) [X]
(b) [ ]
3. SEC Use Only
4. Source of Funds: PF
5. Check Box if Disclosure of Legal Proceedings is Required Pursuant to Items
2(d) or 2(e): [ ]
6. Citizenship or Place of Organization: USA
7. Sole Voting Power: 10,000 shares
8. Shared Voting Power: 67,000 shares
9. Sole Dispositive Power: 10,000 shares
10. Shared Dispositive Power: 67,000 shares
11. Aggregate Amount Beneficially Owned by Each Reporting Person: 77,000 shares
12. Check Box if the Aggregate Amount in Row (11) Excludes Certain Shares: [X]
13. Percent of Class Represented by Amount in Row (11): 6.0%
14. Type of Reporting Person: IN
<PAGE>
Item 1. Security and Issuer
The Statement of M. Mahmud Awan, Philip A. Phalon, Robert B. Bregman and
William C. Martindale, Jr. (the "Purchasing Group") on Schedule 13D dated April
3, 1998, as amended and supplemented by Amendment No. 1 dated May 15, 1998,
Amendment No. 2 dated May 22, 1998, Amendment No. 3 dated June 9, 1998,
Amendment No. 4 dated June 15, 1998, and Amendment No. 5 dated June 19, 1998, in
respect of the common stock, $0.10 par value ("Common Stock"), of Technical
Communications Corporation (the "Issuer") whose principal executive offices are
located at 100 Domino Drive, Concord, Massachusetts 01742, is hereby amended and
supplemented as follows:
Item 4. Purpose of Transaction
Item 4(d) is hereby amended and supplemented by the addition of the following
paragraphs:
"On June 12, 1998, the Issuer and individual Defendants (except Arnold
McCalmont) answered the Complaint and counterclaimed against Mr. Phalon and Dr.
Awan alleging breach of fiduciary duty, violation of Rule 13d-1,
misappropriation and conversion. Arnold McCalmont answered and counterclaimed
alleging breach of fiduciary duty and defamation. Mr. Phalon and Dr. Awan have
replied and denied any liability under the counterclaims.
On June 24, 1998, the Issuer purported to adopt a staggered scheme for its
Board of Directors by classifying the Board into three classes. On June 29,
1998, Mr. Phalon and Dr. Awan filed a complaint for civil contempt in
Massachusetts Superior Court, Middlesex County, against the Issuer and each of
its directors (other than Mr. Phalon) in respect of their conduct in attempting
to adopt a classified Board scheme on June 24, 1998, which the Purchasing Group
believes to be invalid and in violation of the June 9, 1998 Order of the
Superior Court. A copy of the civil contempt Complaint is filed herewith as
Exhibit 5 and is incorporated herein by reference. On June 26, 1998, the Issuer
and its directors filed Motions for Clarification and Reconsideration of the
Order of the Superior Court dated June 9, 1998. On July 2, 1998, a hearing was
held before the Court with respect to the Motions for Clarification and
Reconsideration. The Court has not yet ruled on the motions or scheduled a
hearing on the civil contempt Complaint."
Item 7. Material to be Filed as Exhibits
Item 7 is hereby amended and restated to read as follows:
Schedule of Exhibits
Exhibit 1 Group Agreement dated April 3, 1998 among M. Mahmud
Awan, Philip A. Phalon, Robert B. Bregman and
William C. Martindale, Jr. (previously filed).
Exhibit 2 Verified Complaint filed May 22, 1998 commencing
the litigation in the Massachusetts Superior Court,
Middlesex County, entitled Philip A. Phalon, and M.
Mahmud Awan v. Technical Communications Corporation,
Arnold McCalmont, Herbert A. Lerner, Robert T.
Lessard, Carl H. Guild, Mitchell B. Briskin, Donald
Lake and Thomas B. Peoples, Civil Action No.
98-2553 ("Phalon v. TCC") (previously filed).
Exhibit 3 Memorandum of Decision and Order dated June 9, 1998
in Phalon v. TCC (previously filed).
Exhibit 4 Order dated June 18, 1998 of the Massachusetts
Appeals Court, No. 98-J-436, denying Issuer's
Appeal of Memorandum of Decision and Order in
Phalon v. TCC (previously filed).
Exhibit 5 Complaint for Civil Contempt dated June 29, 1998, in
the Massachusetts Superior Court, Middlesex County,
entitled Philip A. Phalon, and M. Mahmud Awan v.
Technical Communications Corporation, Arnold
McCalmont, Herbert A. Lerner, Robert T. Lessard,
Carl H. Guild, Mitchell B. Briskin, Donald Lake and
Thomas B. Peoples, Civil Action No. 98-2553,
attached hereto and incorporated herein.
<PAGE>
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
Dated: July 6, 1998 /s/ *
__________________________________
M. Mahmud Awan
/s/ Philip A. Phalon
__________________________________
Philip A. Phalon
/s/ *
__________________________________
Robert B. Bregman
/s/ *
__________________________________
William C. Martindale, Jr.
*/s/ Philip A. Phalon
__________________________________
Philip A. Phalon
Attorney - in - Fact
<PAGE>
Exhibit 5
COMMONWEALTH OF MASSACHUSETTS
MIDDLESEX, ss. Superior Court
Civil Action No. 98-2553
____________________________________________
)
PHILIP A. PHALON, and )
M. MAHMUD AWAN, )
)
Plaintiffs, )
)
v. )
)
TECHNICAL COMMUNICATIONS )
CORPORATION, ARNOLD MCCALMONT, )
HERBERT A. LERNER, ROBERT T. )
LESSARD CARL H. GUILD, )
MITCHELL B. BRISKIN, DONALD )
LAKE, and THOMAS B. PEOPLES, )
)
Defendants. )
____________________________________________)
COMPLAINT FOR CIVIL CONTEMPT
(EMERGENCY ACTION BEFORE JUSTICE QUINLAN REQUESTED)
I. INTRODUCTION
1. Pursuant to Mass. R. Civ. Proc. 65.3, the Plaintiffs, Philip A. Phalon
and M. Mahmud Awan ("Plaintiffs") bring this Complaint for Civil Contempt for
enforcement of the Temporary Injunction (the "Injunction"), entered in this
action against the Defendants, on June 10, 1998 by Judge Quinlan. The Injunction
enjoined the Defendants "from implementing the votes taken at the meeting [of
the Board of Directors of Technical Communications Corporation ("TCC")] held on
April 30, 1998, adopting the provisions of G.L. c. 156B, ss.50A and
restructuring the terms of the Board of Directors to staggered terms".1 The
unambiguous terms of the Injunction notwithstanding, the Defendants, on June 24,
1998, deliberately and intentionally convened a special meeting of the Board of
Directors of TCC (the "Special Meeting"), and voted to amend TCC's By-Laws and
adopt the provisions of Chapter 156B, ss.50A, thereby staggering the terms of
TCC's Board of Directors.2 These actions taken by the Defendants unambiguously
violated the terms of the Injunction, and constitute civil contempt. Prior to
June 24, 1998, the Defendants had acted in contempt of the rights of TCC's
stockholders and recognized principals of corporate democracy. Now they are in
contempt of this Court as well.
2. As set forth more fully herein, the Plaintiffs request that the Court
(a) enforce its Injunction; (b) sanction the Defendants;(c) incarcerate the
Defendants Guild, Briskin, Lake and Peoples until TCC's Annual Stockholders
Meeting, currently scheduled for July 17, 1998 has taken place; and (d) award
the Plaintiffs' their costs.
II. PARTIES
3. The Plaintiff-in-Civil-Contempt, Philip A. Phalon, is an individual
whose business address is 40 Salem Street, Lynnfield, Essex County,
Massachusetts.
4. The Plaintiff-in-Civil-Contempt, M. Mahmud Awan, is an individual whose
business address is 240 Sturbridge Road, Charlton City, Worcester County,
Massachusetts.
5. The Defendant-in-Civil-Contempt, Technical Communications Corporation,
is a Massachusetts Corporation with a principal place of business at 100 Domino
Drive, Concord, Middlesex County, Massachusetts.
6. The Defendant-in-Civil-Contempt, Arnold McCalmont, whose business
address is 100 Domino Drive, Concord, Middlesex County, Massachusetts, is a
Director and Stockholder of TCC.
7. The Defendant-in-Civil-Contempt, Herbert A. Lerner, whose business
address is 100 Domino Drive, Concord, Middlesex County, Massachusetts, is a
Director, Chief Financial Officer, the Treasurer and a Stockholder of TCC.
8. The Defendant-in-Civil-Contempt, Robert T. Lessard, whose business
address is 100 Domino Drive, Concord, Middlesex County, Massachusetts, is a
Director of TCC.
9. The Defendant-in-Civil-Contempt, Carl H. Guild, whose business address
is 100 Domino Drive, Concord, Middlesex County, Massachusetts, is a Director,
Chairman of the Board and Chief Executive Officer of TCC.
10. The Defendant-in-Civil-Contempt, Mitchell B. Briskin, whose business
address is 100 Domino Drive, Concord, Middlesex County, Massachusetts, is a
Director of TCC.
11. The Defendant-in-Civil-Contempt, Donald Lake, whose business address is
100 Domino Drive, Concord, Middlesex County, Massachusetts, is a Director of
TCC.
12. The Defendant-in-Civil-Contempt, Thomas E. Peoples, whose business
address is 100 Domino Drive, Concord, Middlesex County, Massachusetts, is a
Director of TCC.
III. FACTS
13. In this action, the Plaintiffs sought injunctive relief to put an end
to the unlawful conduct of the Defendants in (1) breaching their fiduciary
duties to the Stockholders of the Defendant, Technical Communications
Corporation, by engaging in self-dealing transactions; (2) engaging in a cover
up of wrongful and possibly fraudulent or criminal conduct of certain of TCC's
officers and directors; (3) intentionally obstructing the Plaintiff's efforts to
communicate with other TCC stockholders regarding the affairs of TCC; and (4)
illegally acting to entrench themselves in TCC's Board of Directors.
14. On May 22, 1998, the Plaintiffs filed the Verified Complaint, and a
Motion for Preliminary Injunction and supporting papers. The Plaintiffs sought,
inter alia, an Order rescinding, invalidating or otherwise enjoining certain
actions taken by the Defendants, McCalmont, Guild, Lessard and Lerner (the
"McCalmont Group"), a majority of TCC's Board of Directors at a meeting held on
April 30, 1998 (the "April 30th Meeting").3
15. Following a hearing on the Plaintiffs' motion for Preliminary
Injunction, the Superior Court, Quinlan, J., issued a Memorandum of Decision and
Order (the "Memorandum of Decision"), finding that "[F]aced with a dissenting
director and rumblings of a shareholder proxy challenge, the majority of the
board sought refuge in a staggered board on April [30], 1998. The context
compromises the validity of the vote ... That context does not disappear because
the statute authorized the votes taken." (Memo. of Dec. at 10.) Judge Quinlan
further found that "[T]he Plaintiffs have demonstrated a reasonable likelihood
of success on their claim that the By-Law change voted on April [30], 1998 was a
`manipulative device' designed to prevent a meaningful proxy contest by
dissenting shareholders in willful disregard of the rights of other
shareholders." Id. at 11-12.4
16. On June 10, 1998, an Injunction issued, enjoining the Defendants from
implementing the votes taken at the April 30th meeting adopting the provisions
of Chapter 156B, ss.50A and prohibiting the Defendants from restructuring the
terms of the Board of Directors to staggered terms.5
17. On June 12, 1998, Defendants, TCC, Guild, Lerner, Lake and Peoples,
appealed Judge Quinlan's ruling enjoining them from adopting the provisions of
M.G.L. c. 156B, ss.50A, to the Single Justice of the Massachusetts Appeals
Court.6 The Plaintiffs opposed this Petition, and following oral argument,
Justice Perretta of the Massachusetts Appeals Court upheld Judge Quinlan's
issuance of the Injunction.7 Justice Perretta found that the Injunction "was
granted on the basis of a showing of circumstances which give rise to serious
question concerning the validity of the vote by which the petitioners
[Defendants] sought to bring themselves within the provisions of ss.50A(a)."
Exh. D.
18. On June 22, 1998, TCC forwarded to Phalon, a self-styled Notice of
Special Meeting of the Board of Directors (the "Notice"), scheduling a Special
Meeting of the Board of Directors for Wednesday, June 24, 1998 at 5:30 p.m. for
the following purposes: (1) "to consider the company's status pursuant to G.L.
c. 156B & ss.50A, and any other actions necessary in relation to such statute.
For purposes of this meeting the following Directors will abstain from any vote;
Carl Guild, Herbert Lerner, Robert Lessard, Arnold McCalmont; and (2) to
transact any other business as may properly come before the meeting or any
adjournments thereof"(the "Special Meeting")8.
19. At the Special Meeting, the Defendants, once again and in arrogant
disregard of Judge Quinlan's Order and Injunction, voted to amend TCC's By-Laws
to opt in to the provisions of Chapter 156B ss. 50A, render TCC subject to those
provisions, and to thereby create staggered terms for its Board of Directors.9
The Defendants also voted to create three classes of directors, eligible for
election at two year intervals, and to designate TCC's incumbent directors into
each class. The resolutions proposed and passed at the Special Meeting were
identical in all respects to the resolutions proposed and votes taken relative
to the provisions of Chapter 156B ss. 50A at the April 30th Meeting.10
IV. CLAIMS FOR CONTEMPT
A. The Defendants' Conduct on June 24, 1998 Violates the Express Terms of
Judge Quinlan's Order and Injunction.
20. Judge Quinlan's Order and the Injunction are clear and unequivocal.
They prohibited the Defendants "from implementing the votes taken at the April
30th Meeting adopting the provisions of G.L. c. 156B ss.50A and restructuring
the terms of the Board of Directors to staggered terms". (emphasis supplied)
21. Massachusetts courts will uphold a finding of civil contempt even where
the court order, "although subject to some legal interpretation, has nonetheless
placed the party bound by the order on notice that certain actions could
constitute the basis for contempt." Demoulas v.Demoulas Super Markets, Inc., 424
Mass. 501, 567 (1997).
22. When a corporation is charged with civil contempt because of the acts
of its representatives, it is not necessary to show willful disobedience or
intention to violate the order. United Factory Outlet, Inc. v. Jay's Stores,
Inc., 361 Mass. 35, 37 (1972). It is enough to establish that persons acting for
the corporation were responsible for acts or inaction which in fact constituted
a violation. Id.
23. It is patently clear that the Defendants, by convening the Special
Meeting and voting to do exactly what they did at the April 30th Meeting - to
subject TCC to the provisions of Chapter 156B ss. 50A, stagger the terms of
TCC's Board, divide the Board into three classes of directors, and appoint the
same individuals into the same director classes as they did on April 30th
deliberately and intentionally violated Judge Quinlan's clear and unequivocal
order. Not only does the Injunction prohibit the implementation of the votes
taken at the April 30th Meeting, but it also prohibits the restructuring of the
terms of TCC's Board to staggered terms.
24. The Board's prior attempt to adopt the identical resolutions was
clearly rejected by Judge Quinlan because of the context in which those actions
were taken. That context did not disappear at the Special Meeting. On the
contrary, the circumstances in which the Special Meeting occurred, in
contravention of both the letter and spirit of the Injunction, with improper
notice, no quorum present, and the proffer and acceptance of resolutions
identical to those voted on at the April 30th Meeting - even after Phalon
informed the Board that he believed those actions if taken would constitute
contempt - can lead only to the conclusion that the actions taken at the Special
Meeting were motivated and designed by the Defendants to accomplish the
identical purpose which the Court has already enjoined, and that the Defendants
deliberately intended to take action violative of the Injunction.
25. A claim that the Defendants' did not intend to violate the Injunction
is of no avail, because "[T]he absence of willfulness does not relieve from
civil contempt ... Since the purpose (of civil contempt) is remedial, it matters
not with what intent the defendant did the prohibited act." Id. at 37.
26. Nor should the Defendants be permitted to play semantics with this
Court, or to shelter in a hyper technical interpretation of the Injunction which
strips from the language its plain meaning. An interpretation that the
Injunction prohibited merely the implementation of the votes taken at the April
30th Meeting, but not the implementation of the an identical vote taken 14 days
after the Injunction issued is sophistry which should be disregarded by this
Court. It is well settled that "[C]ourts will not permit defendants to evade
responsibility for violating an injunction, by doing through subterfuge a thing
which is not in terms a violation, yet produces the same effect by accomplishing
substantially that which they were enjoined from doing." Stodder v. Rosen
Talking Mach. Co., 241 Mass. 60, 68 (1923); Judge Rotenberg Education Center,
Inc. v. Commn'r of the Dept. of Mental Retardation, 424 Mass. 430, 449-450
(1997)("To allow such behavior would undermine the efficacy of court decrees and
allow anyone to flout the judicial branch").
27. As Judge Quinlan's Memorandum of Decision makes clear, the Plaintiffs
have established a substantial likelihood of success on the merits as the their
claims that the Defendants, including Messrs. Briskin, Lake, and Peoples, have
invoked Chapter 156B ss.50A to shelter their own wrongdoing, and for the purpose
of rendering a meaningful proxy contest impossible. The Court specifically found
that the Defendants have attempted to use facially legal corporate mechanisms to
accomplish illegal purposes, and acted to specifically enjoin them from doing so
in connection with staggering TCC's Board of Directors and TCC's Annual Meeting
of Stockholders scheduled for July 17, 1998.
28. Nor should the court consider any belated requests by the Defendants
for clarification. It is the law in this state that "[W]here an injunction is in
effect, the party bound by the order is responsible for ascertaining whether any
proposed actions are among the proscribed activities. It is not the plaintiff's
obligation to police the decree, but the defendant's obligation to make certain
he does not violate it. Thus if the defendant saw the decree as ambiguous on the
point in question, he could have sought clarification from the court before he
engaged in the questionable conduct." Demoulas, 424 Mass. 501, 569
(1997)(emphasis supplied).
B. Notice of the Special Meeting was Improper.
29. TCC's By-Laws require that a Special Meeting of the Board of Directors
be called by TCC's President, its Treasurer, or two or more directors.11 The
Notice on its face indicated that it was called "by the order of the Chairman"
and was signed by Chairman Guild. At the commencement of the Special Meeting,
Phalon objected to the Notice as improper and described its defects. The
Defendants proceeded with the meeting despite the obvious procedural defect
which Phalon had called to their attention. The Notice was consequently
improper, insufficient for the purpose of calling a Special Meeting of the Board
of Directors, and renders the Special Meeting a nullity.
C. There was no Valid Quorum for the Special Meeting.
30. TCC's Board of Directors presently consists of eight members. The
company By-Laws require a majority of the Board, in this case five directors, to
constitute a quorum.12 Consequently, the only way in which a quorum could be
obtained for the Special Meeting, was by utilization of at least one of the four
directors, who the Notice indicated would abstain from any vote (Directors
Guild, Lerner, Lessard and McCalmont). It was those same directors whose votes
were deemed by the Court to be improper at the April 30th Meeting.13 Without
their participation, at least for quorum purposes, the Board was powerless to
enact any resolutions at the Special Meeting. Phalon called these defects to the
attention of Board at the Special Meeting, and objected to the meeting on those
grounds.
<PAGE>
Nevertheless, the Defendants elected to proceed with the Special Meeting, even
in the absence of a legal quorum, and therefore any actions taken by the Board
at that meeting are a nullity.
D. The Illegal Vote at the Special Meeting Cannot Stand, Because It Will
Have The Effect Of Delaying The July 17, 1998 Annual Meeting Of
Stockholders.
31. The actions taken by at the Special Meeting, if allowed to stand, would
require revision of TCC's proxy materials, and SEC approval for those revisions.
This process would require additional time, and would no doubt serve as the
basis for request by TCC to postpone the Annual Meeting, currently scheduled for
July 17, 1998. It is clear that the Defendants' conduct at the Special Meeting
was a manipulative device, designed not only to adopt a staggered board in
contravention of the Injunction, but also to impermissibly and unconscionably
delay to July 17, 1998 Annual Meeting.
V. CONCLUSION
32. The actions taken by the Defendants at the Special Meeting, directly
contravene both the letter and the spirit of Judge Quinlan's Order, the
Injunction, and Judge Peretta's Order. The Court has spoken not once, but twice
on this issue, yet the Defendants persist in their attempts to obstruct the
Plaintiffs' proxy efforts. The record before this Court clearly indicates that
the Defendants conduct constitutes civil contempt, which requires an immediate
and unambiguous response from this Court.
REQUEST FOR EXPEDITED ACTION BEFORE JUDGE QUINLAN
The time sensitive nature of the issues raised by the Defendants' contempt
of the Injunction requires emergency action by the Court. The Plaintiffs request
that Judge Quinlan issue a summons and schedule a hearing on the Plaintiffs'
Complaint for Civil Contempt for said hearing to occur on Wednesday, July 1,
1998.
WHEREFORE, the Plaintiffs, respectfully request that the Court:
(a) Issue a Summons to the Defendants in accordance with Mass. R. Civ.
Proc. 65.3(d), and schedule a hearing on the merits of this matter for Thursday,
July 2, 1998 at 2:30 p.m.;
(b) Incarcerate the Defendants McCalmont, Lerner, Lessard, Guild, Briskin,
Lake, and Peoples until the July 17, 1998 Annual Meeting has occurred, or in the
alternative order them to pay to the clerk of courts, no later than July 7,
1998, the sum of Ten Thousand dollars ($10,000.00) each, to be retained by the
clerk until such time as the Court resolves this matter on the merits, and
further providing that in the event any individual defendant violates the terms
of the Injunction, or any other order or injunction issued by the Court, all
monies paid by said defendant shall be immediately and irrevocably payable to
the Plaintiffs;
(c) Enter an Order enjoining the Defendants from taking any further action
whatsoever: (i) to effect, interfere with, obstruct, or otherwise impact the
mailing of the Plaintiffs' proxy materials; to effect, interfere with, obstruct,
modify, reschedule, or otherwise impact the July 17, 1998 date for TCC's Annual
Meeting of Stockholders; and (iii) other than actions reasonably necessary to
conduct the day to day business affairs of the Company;
(d) Order the Defendants to pay all attorney's fees incurred by the
Plaintiffs in connection with their Complaint for Civil Contempt;
(e) Order the Defendants to perform such other acts as the Court may deem
appropriate. In further support of this Complaint for Civil Contempt, the
Plaintiffs submit and incorporate herein by reference the Affidavit of Philip A.
Phalon which is appended hereto as Exhibit "F" and the Affidavit of Mark S.
Resnick filed contemporaneously herewith.
Respectfully submitted,
PHILIP A. PHALON, and
M. MAHMUD AWAN
By their attorneys,
/*/Paul Bork
________________________________________
Robert Sylvia (BBO# 491060)
Paul Bork (BBO# 541815)
Mark S. Resnick (BBO# 559885)
HINCKLEY, ALLEN & SNYDER
28 State Street
Boston, MA 02109
(617) 345-9000
Dated: June 29, 1998
__________________________________
1 A true and accurate copy of the Injunction is attached hereto as Exhibit "A".
2 The Defendants McCalmont, Lerner, Lessard and Guild, abstained from voting at
the Special Meeting. McCalmont, Lerner, and Lessard did not attend the Special
Meeting.
3 At the April 30th Meeting, the McCalmont Group, a group of directors
controlled by the Defendant, Arnold McCalmont, filled three vacancies on TCC's
Board with the Defendants, Briskin, Lake and Peoples. These positions were
filled, contrary to TCC's prior practice, without submitting information
regarding Briskin, Lake or Peoples to the individual members of the Board of
Directors, or providing the Board of Directors with an opportunity to interview
these director candidates. The April 30th Meeting lasted 15 minutes, and Phalon
was at no time consulted relative to the appointment Peoples, Lake and Briskin.
Phalon has since testified at his deposition that based in part on the manner in
which Briskin, Lake and Peoples were selected and appointed to their positions,
that they are also beholden to, and controlled by, Arnold McCalmont.
4 A true and accurate copy of Judge Quinlan's Memorandum of Decision and Order
is attached hereto as Exhibit "B".
5 The injunction also required TCC to mail a copy of the Plaintiffs' Proxy
Statement to each and every stockholder of the corporation on or before June 17,
1998, to maintain a full and complete list of all Shareholders to whom the Proxy
Statement has been sent and to file an Affidavit of Compliance with that Order
on or before July 3, 1998.
6 It should be noted that on June 12, 1998, Defendant Arnold McCalmont moved for
reconsideration of the allowance of Plaintiffs' Emergency Motion for Permission
to Disclose the Memorandum of Decision to the SEC. Later that day, Judge Neel,
sitting as Emergency Justice, issued a ruling on McCalmont's Motion, in which he
found that "[T]he appropriate response to a proposed disclosure of information
to investors is counter-disclosure, not preemption." A copy of Judge Neel's
ruling is attached hereto as Exhibit "C"
7 A copy of Judge Perretta's ruling is attached hereto as Exhibit "D".
8 A true and accurate copy of this Notice of Special Meeting is attached hereto
as Exhibit "E".
9 Phalon was the only director in attendance who was elected by the TCC's
stockholders. Guild, Briskin, Lake, and Peoples had all been appointed with the
blessings of the McCalmont Group. The McCalmont Group's pretense of relying on
its newly appointed deputies to do indirectly that which the Court had directly
enjoined, is evidence of a monumental arrogance which must be tolerated. To do
otherwise would undermine the authority of this Court.
10 See Affidavit of Philip Phalon annexed as Exhibit "F".
11 A true and accurate copy of relevant portions of TCC's By-Laws are attached
hereto as Exhibit "G".
12 A true and accurate copy of the relevant portions of TCC's By-Laws are
attached hereto as Exhibit "H".
13 TCC's Articles of Organization and By-Laws are silent as to whether an
interested director may count for quorum purposes. That silence notwithstanding,
the Supreme Judicial Court in Gram v. McCrail, 370 Mass. 133, 138 (1976) stated
"[W]e do not think [an interested director] can be counted in order to make up
quorum." See also, RICHARD W. SOUTHGATE & DONALD W. GLAZER, MASSACHUSETTS
CORPORATION LAW & PRACTICE, SECTION 8.2[D] (1992). In this case, Guild was
clearly an interested Director. He is a Defendant in this action. He was
selected by Arnold McCalmont to serve on TCC's Board, and he was also found by
this Court to have been one of the Defendants who perpetrated the McCalmont
Group's attempt on April 30, 1998, to use Chapter 156B ss.50A as a manipulative
device to disadvantage the Plaintiffs. It was his attendance which brought the
number of directors present to five.
