UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
FORM 8-K
Pursuant to Section 13 OR 15(D) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): June 7, 1996
INCOMNET, INC.
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(Exact name of registrant as specified in its charter)
CALIFORNIA
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(State or other jurisdiction of incorporation)
0-12386 95-2871296
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(Commission File Number) (I.R.S. Employer
Identification No.)
21031 Ventura Boulevard, Suite 1100, Woodland Hills, California 91364
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (818) 887-3400
NOT APPLICABLE
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(Former name, former address and former fiscal year,
if changed since last report)
Total number of pages in this document: 20
TABLE OF CONTENTS
ITEM 5. OTHER EVENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
EXHIBITS
Settlement Agreement Between Incomnet, Inc.
and Joel W Greenberg, dated as of May 9, 1996 . . . . . . . . . . . . . . . . A
Settlement Agreement Between Incomnet, Inc.
and Sam D. Schwartz, dated June 7, 1996 . . . . . . . . . . . . . . . . . . . B
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ITEM 5.OTHER EVENTS
On June 7, 1996, Incomnet, Inc. (the "Company") entered into an
agreement with Joel W. Greenberg pursuant to which Mr. Greenberg resigned
from the Boards of Directors of the Company, National Telephone &
Communications, Inc. and Rapid Cast, Inc., effective May 9, 1996. Mr.
Greenberg also paid short-swing profits of $44,424 to the Company, released
it from all claims and agreed not to solicit proxies or attempt to assert
control of the Company for a period of eight years. In consideration for Mr.
Greenberg's covenants, the Company granted options to Mr. Greenberg to
purchase 75,000 shares of its common stock for a price of $5.37 per share,
exercisable until May 9, 2001, warrants to purchase 100,000 shares of the
Company's common stock at an exercise price of $6.00 per share, exercisable
until May 9, 2001, subject to certain conditions and warrants to purchase
50,000 shares of the Company's common stock at an exercise price of $7.00 per
share, exercisable until May 9, 2001 subject to certain conditions. The
Company also agreed to dismiss its lawsuit to collect short-swing profits
from Mr. Greenberg and to indemnify him to the extent permitted under the
California Corporations Code for claims which may be made for events
occurring while he was a director of the Company. A copy of the complete
agreement is attached hereto as Exhibit A. The disclosures regarding this
agreement are qualified in their entirety by the actual contents of the
agreement.
On June 11, 1996, the Company's Board of Directors elected Gerald Katell
to replace Mr. Greenberg on the Company's Board of Directors. The Board
previously nominated Mr. Katell to stand for election to the Board at the
Company's Annual Meeting, which is rescheduled for July 29, 1996. The meeting
was previously scheduled for June 14, 1996.
On June 7, 1996, the Company entered into a settlement agreement with Sam
D. Schwartz, the former President and Chairman of the Board of Directors of the
Company, pursuant to which Mr. Schwartz agreed to pay short-swing profits of
$2,128,424 plus interest at 8.25% per annum until June 7, 1996, and thereafter
at the prime rate of interest quoted from time to time by the Bank of America in
Los Angeles, California, in accordance with Section 16(b) of the Securities and
Exchange Act of 1934, as amended. The settlement agreement will be effective
upon its approval by the plaintiff and by the federal district court in the
pending derivative lawsuit known as MORALES VS. INCOMNET, INC. AND SAM D.
SCHWARTZ, CV 96-0225, filed in the Southern District of New York. There is no
assurance that the plaintiff will agree to the settlement or that the court will
approve it, or whether or when the settlement agreement will be effective.
The settlement agreement applies only to transactions in the Company's
stock engaged in by Mr. Schwartz from December 27, 1993 until September 1, 1995
which have been disclosed by Mr. Schwartz in Form 4 and Form 5 filings. Any
short-swing profits earned on transactions not disclosed in such public filings
are still subject to collection by the Company outside of the scope of the
settlement agreement. After the settlement agreement was executed, the Company
was notified by the plaintiff that there was evidence of additional transactions
in the Company's common stock by Mr. Schwartz which appear not to have been
reported on Form 4 or Form 5 filings. Consequently, the plaintiff is moving for
additional discovery from Mr. Schwartz in the derivative lawsuit and for either
(a) a freeze of Mr. Schwartz's shares pending resolution of the lawsuit and
payment of the short-swing profits, or (b) the voluntary deposit by Mr. Schwartz
of 800,000 shares of his stock as security for the obligation until it is paid
to the Company. It is uncertain at this time how the court will rule on the
motions, how Mr. Schwartz will respond to the requests, and how the proceedings
will effect the status of the existing settlement agreement. The Company is not
objecting to the plaintiff's motions and requests.
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The settlement agreement provides that the payment of short-swing profits
plus interest will be made according to the following schedule: 20% on the
effective date of the settlement agreement, 10% 90 days after the effective
date, 10% 180 days after the effective date, 10% 270 days after the effective
date, 10% 360 days after the effective date, 10% 450 days after the effective
date, 10% 540 days after the effective date, and the balance 630 days after the
effective date. The Company or Mr. Schwartz have the option to either have
sufficient shares redeemed from Mr. Schwartz by the Company to pay the
installments of short-swing profits plus interest, based on the average last
sale price of the Company's common stock quoted on the NASDAQ market during the
five trading days immediately preceding the payment date, or to have Mr.
Schwartz sell shares in the open market or otherwise pay the installment in
cash.
On the effective date of the agreement, Mr. Schwartz has agreed to (i) pay
the initial 20% installment and (2) deposit into an escrow account, in which the
Company will have a perfected security interest, the number of his shares of the
Company's common stock having an aggregate value equal to 120% of the
outstanding balance of short-swing profits plus interest due (after the 20%
downpayment), based on the average last sale price of the Company's common stock
quoted on the NASDAQ market during the five trading days immediately preceding
the day before the effective date. The Company will draw payments due pursuant
to the settlement agreement from this escrow account. If the aggregate value of
the shares in the escrow account is below the outstanding balance due on Mr.
Schwartz's short-swing profit obligation to the Company for 15 consecutive
trading days, then Mr. Schwartz is obligated to deposit additional shares into
the escrow account to eliminate any deficiency. In any event, if for any reason
the Company does not receive full payment of the short-swing profits plus
interest by a date 630 days after the effective date of the agreement, then Mr.
Schwartz is obligated to pay the balance to the Company.
Pursuant to the settlement agreement, the Company reversed the redemption
of 250,000 stock options tendered by Mr. Schwartz on August 18, 1995 and
September 1, 1995. As a result, Mr. Schwartz owns those stock options in their
original form. The stock options vest once National Telephone & Communications,
Inc. earns an aggregate of $15,000,000 in pre-tax profits in any four
consecutive fiscal quarters until December 31, 1997. The exercise price is
$11.00 per share and they are exercisable for a period of three years after they
vest. The Company has agreed to file a registration statement under the
Securities Act of 1933, as amended, covering the shares issued upon the exercise
of the stock options within 90 days after all of the options are exercised, if
they are exercised.
A copy of the complete agreement is attached hereto as Exhibit B. The
disclosures regarding this agreement are qualified in their entirety by the
actual contents of the agreement.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
INCOMNET, INC.
(Registrant)
Date: June 7, 1996 By: /s/ Melvyn Reznick
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Melvyn Reznick, President and Chief
Executive Officer
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