EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT (this "Agreement") is made as of the 5th day of
June 1997, by and between Incomnet, Inc., a California corporation (the
"Company"), and Stephen A. Caswell, an individual ("Employee"), and is made with
respect to the following facts:
R E C I T A L S
A. The Company and the Employee wish to ensure that the Company will
receive the benefit of Employee's loyalty and service.
B. In order to help ensure that the Company receives the benefit of
Employee's loyalty and service, the parties desire to enter into this formal
Employment Agreement to provide Employee with appropriate compensation
arrangements and to assure Employee of employment stability.
C. The parties have entered into this Agreement for the purpose of
setting forth the terms of employment of the Employee by the Company.
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, THE PARTIES HERETO AGREE AS FOLLOWS:
1. EMPLOYMENT OF EMPLOYEE AND DUTIES. The Company hereby hires Employee
and Employee hereby accepts employment upon the terms and conditions described
in this Agreement. The Employee shall be the Secretary and Vice-President of
the Company with all of the duties, privileges and authorities usually attendant
upon such office, including but not limited to responsibility for the management
of the Company's books and records, the keeping of corporate minutes, the
preparation of the Company's reports under the Securities and Exchange Act of
1934, as amended, the supervision of the administration of the Company, and
assisting the President of the Company in managing its day-to-day business.
Subject to (a) the general supervision of the President and the Board of
Directors of the Company, and (b) the Employee's duty to report to the President
and the Board of Directors periodically, as specified by them from time-to-time,
Employee shall have the authority to perform his employment duties for the
Company.
2. TIME AND EFFORT. Employee agrees to devote his full working time and
attention to the management of the Company's business affairs, the
implementation of its strategic plan, as determined by the President and the
Board of Directors, and the fulfillment of his duties and responsibilities as
the Company's corporate Secretary. Expenditure of a reasonable amount of time
for personal matters and business and charitable activities shall not be deemed
to be a breach of this Agreement, provided that those activities do not
materially interfere with the services required to be rendered to the Company
under this Agreement.
3. THE COMPANY'S AUTHORITY. Employee agrees to comply with the Company's
rules and regulations as adopted by the Company's President and Board of
Directors regarding the performance of his duties, and to carry out and perform
those orders, directions and policies established by the Company with respect to
his engagement. Employee shall promptly notify the Company's President or Board
of Directors, as the case may be, of any objection he has to the
President's or the Board's directives, respectively, and the reasons for such
objection.
4. NONCOMPETITION BY EMPLOYEE. During the term of this Agreement and
during any period in which Employee is receiving severance benefits, if any, the
Employee shall not, directly or indirectly, either as an employee, employer,
consultant, agent, principal, partner, stockholder (in a private company),
corporate officer, director, or in any other individual or representative
capacity, engage or participate in any business that is in competition with the
business of the Company or its affiliates.
5. TERM OF AGREEMENT. Unless properly terminated earlier pursuant to
Section 13 of this Agreement, this Agreement shall commence to be effective on
the date first above written and shall continue until (i) six months after the
date that 100% of the Company's holdings of NTC stock are sold, conveyed,
spun-off, or otherwise distributed ("Early Termination Date", which means six
months after said sale, conveyance, spin-off or distribution) provided, that in
the event of a termination of this Agreement, as amended, pursuant to Section
2(i) herein, then (a) the Company shall pay to the Employee a lump sum payment
equal to the sum of the annual compensation and accrued but unpaid bonus (if
any, with respect to bonus) which would be payable to the Employee for one year
after the Early Termination Date pursuant to Sections 6.1 and 6.2 herein,
respectively, but not beyond December 31, 1999, (b) Employee shall be entitled
to all of the benefits under Section 7 of this Agreement, as amended, for one
additional year after the Early Termination Date, but not beyond December 31,
1999, and (c) Employee shall be entitled to exercise all vested stock options
which he owns for the entire remaining exercise period of the stock options as
set forth in Section 8 of the Company's 1996 Stock Option Plan and the Minutes
(as defined in Section 6.3 of this Agreement), no such stock options shall
terminate prior to said expiration dates, and no "severance" shall be deemed to
have occurred under the Company's 1996 Stock Option Plan or under existing Stock
Option Agreements covering said stock options, or (ii) December 31, 1999, unless
properly terminated sooner as provided in Section 13 of the Agreement, as
amended by this Amendment.
6. COMPENSATION. During the term of this Agreement, the Company shall
pay the following compensation to Employee:
6.1 ANNUAL COMPENSATION. Employee shall be paid a fixed salary of
$115,000 per year, payable in two installments per month of $4,791.66 each on
the 15th and last day of each month, commencing for the period from June 5, 1997
to June 15, 1997 and ending for the period from December 15, 1999 to December
31, 1999.
6.2 ADDITIONAL COMPENSATION. In addition to the compensation set
forth in Sections 6.1 and 6.3 of this Agreement, Employee may be paid a bonus or
bonuses during each year, as determined at the sole discretion of the Company's
Board of Directors based on the Board's evaluation of the Employee's definable
efforts, accomplishments and similar contributions.
6.3 STOCK INCENTIVES. The Company and the Employee hereby reconfirm
the terms and conditions of the stock options granted to the Employee by the
Company to date as set forth in Section 8 of the Company's 1996 Stock Option
Plan, and the stock options to purchase
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40,000 shares of the Company's common stock pursuant to the terms and conditions
set forth in the minutes of the meeting of the Company's Board of Directors,
dated January 21, 1997 and January 22, 1997 (collectively, the "Minutes").
7. FRINGE BENEFITS. Employee shall be entitled to all fringe benefits
which the Company or its subsidiaries may make available from time-to-time for
persons with comparable positions and responsibilities. Without limitation,
such benefits shall include participation in any life and disability insurance
programs, profit incentive plans, pension or retirement plans, and bonus plans
as are maintained or adopted from time-to-time by the Company. The Company
shall also provide Employee with medical group insurance coverage or equivalent
coverage for Employee and his dependents.
8. OFFICE AND STAFF. In order to enable Employee to discharge his
obligations and duties pursuant to this Agreement, the Company agrees that it
shall provide suitable office space for Employee in the Los Angeles Metropolitan
Area, together with all necessary and appropriate supporting staff and
secretarial assistance, equipment, stationery, books and supplies. Employee
agrees that the supporting staff presently in place is suitable for the purposes
of this Agreement. The Company agrees to provide at its expense parking for one
vehicle by the Employee at the Company's executive offices.
9. REIMBURSEMENT OF EXPENSES. The Company shall reimburse Employee for
all reasonable travel, mobile telephone, promotional and entertainment expenses
incurred in connection with the performance of Employee's duties hereunder.
Employee's reimbursable expenses shall be paid promptly by the Company upon
presentment by Employee of an itemized list of invoices describing such
expenses. All compensation provided in Sections 6, 7 and 9 of this Agreement
shall be subject to customary withholding tax and other employment taxes, to the
extent required by law.
10. VACATION. Employee shall be entitled to three weeks of paid vacation
per year or pro rata portion of each year of service by Employee under this
Agreement. The Employee shall be entitled to the holidays provided in the
Company's established corporate policy for employees with comparable duties and
responsibilities.
11. RIGHTS IN AND TO INVENTIONS AND PATENTS.
11.1 DESCRIPTION OF PARTIES' RIGHTS. The Employee agrees that with
respect to any inventions made by him or the Company during the term of this
Agreement, solely or jointly with others, (i) which are made with the Company's
equipment, supplies, facilities, trade secrets or time, or (ii) which relate to
the business of the Company or the Company's actual or demonstrably anticipated
research or development, or (iii) which result from any work performed by the
Employee for the Company, such inventions shall belong to the Company. The
Employee also agrees that the Company shall have the right to keep such
inventions as trade secretes, if the Company chooses.
11.2 DISCLOSURE REQUIREMENTS. For purposes of this Agreement, an
invention is deemed to have been made during the term of this Agreement if,
during such period, the
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invention was conceived or first actually reduced to practice. The Employee
agrees that any patent application filed within one year after termination of
his employment shall be presumed to relate to an invention made during the term
of this Agreement unless he can provide evidence to the contrary. In order to
permit the Company to claim rights to which it may be entitled, the Employee
agrees to disclose to the Company in confidence all inventions which the
Employee makes during the term of this Agreement and all patent applications
filed by the Employee within one year after termination of this Agreement.
12. ARBITRATION. Any disputes arising under this Agreement will be
resolved in accordance with the rules of the American Arbitration Association as
they apply in the County of Los Angeles, State of California. The decision of
the arbitrator shall be binding on all parties to this Agreement.
13. TERMINATION. This Agreement may be terminated in the following manner
and not otherwise:
13.1 MUTUAL AGREEMENT. This Agreement may be terminated by the
mutual written agreement of the Company and Employee to terminate.
13.2 TERMINATION BY EMPLOYEE FOR BREACH. Employee may at his option
and in his sole discretion terminate this Agreement for the material breach by
the Company of the terms of this Agreement. In the event of such termination,
Employee shall give the Company 30 days' prior written notice.
13.3 TERMINATION BY THE COMPANY FOR BREACH. The Company may at its
option immediately terminate this Agreement in the event Employee commits gross
negligence in the performance of his duties under this Agreement, or breaches
his fiduciary duty to the Company, to the Board of Directors or to the Company's
shareholders; provided, however, that the Company shall give the Employee
written notice of specific instances for the basis of any termination of this
Agreement by the Company pursuant to Section 13.3 of this Agreement. Employee
shall have a period of 30 days after said notice in which to cease the alleged
violations before the Company may terminate this Agreement. If Employee ceases
to commit the alleged violations within said 30 day period, the Company may not
terminate this Agreement pursuant to this Section. If Employee continues to
commit the alleged violations after said 30 day period, the Company may
terminate this Agreement immediately upon written notification to Employee.
13.4 TERMINATION UPON DEATH. This Agreement shall terminate upon
the death of the Employee.
13.5 TERMINATION UPON THE DISABILITY OF THE EMPLOYEE. This
Agreement shall terminate upon the disability of the Employee. As used in the
previous sentence, the term "disability" shall mean the complete disability to
discharge Employee's duties and responsibilities for a continuous period of not
less than six months during any calendar year.
Any physical or mental disability which does not prevent Employee from
discharging his duties and
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responsibilities in accordance with usual standards of conduct as determined by
the Company in its reasonable opinion shall not constitute a disability under
this Agreement.
14. IMPROPER TERMINATION. If this Agreement is terminated by Employee
pursuant to Section 13.2 herein or by the Company in any manner except as
specifically provided in Section 13 herein, then (i) the Company shall
immediately pay to the Employee a lump sum payment equal to the sum of (a) the
Employee's entire annual compensation and accrued but unpaid bonus (if any, with
respect to bonus) payable through December 31, 1999 pursuant to Sections 6.1 and
6.2 herein, respectively, and (b) the annual compensation and accrued but unpaid
bonus (if any, with respect to bonus) which would be payable to the Employee for
15 additional months pursuant to Sections 6.1 and 6.2 herein, respectively, (ii)
Employee shall be entitled to all of the benefits under Section 7 of this
Agreement, through March 31, 2001, and (iii) Employee shall be entitled to
exercise all vested stock options which he owns for the entire remaining
exercise period of the stock options as set forth in Section 8 of the Company's
1996 Stock Option Plan and the Minutes, no such stock options shall terminate
prior to said expiration dates, and no "severance" shall be deemed to have
occurred under the Company's 1996 Stock Option Plan or under existing Stock
Option Agreements covering said stock options. It is specifically agreed that
in such event Employee shall have no duty to mitigate his damages by seeking
comparable, inferior, or different employment.
15. INDEMNIFICATION OF EMPLOYEE. Pursuant to the provisions and subject
to the limitations of the California Corporations Code, and in particular
Sections 204 and 317 therein, the Company shall indemnify and hold Employee
harmless as provided in Sections 15.1, 15.2 and 15.3 of this Agreement. The
Company shall, upon the request of Employee, assume the defense and directly
bear all of the expense of any action or proceedings which may arise for which
Employee is entitled to indemnification pursuant to this Section.
15.1 INDEMNIFICATION OF EMPLOYEE FOR ACTIONS BY THIRD PARTIES. The
Company hereby agrees to indemnify and hold Employee harmless from any
liability, claims, fines, damages, losses, expenses, judgments or settlements
actually incurred by him, including but not limited to reasonable attorneys'
fees and costs actually incurred by him as they are incurred, as a result of
Employee being made at any time a party to, or being threatened to be made a
party to, any proceeding (other than an action by or in the right of the
Company, which is addressed in Section 15.2 of this Agreement), relating to
actions Employee takes within the scope of his employment as the Secretary and
Vice-President of the Company or in his role as a director of the Company,
provided that Employee acted in good faith and in a manner he reasonably
believed to be in the best interest of the Company and, in the case of a
criminal proceeding, had no reasonable cause to believe his conduct was
unlawful.
15.2 INDEMNIFICATION OF EMPLOYEE FOR ACTIONS IN THE RIGHT OF THE
COMPANY. The Company hereby agrees to indemnify and hold Employee harmless from
any liability, claims, damages, losses, expenses, judgments or settlements
actually incurred by him, including but not limited to reasonable attorneys'
fees and costs actually incurred by him as they are incurred, as a result of
Employee being made a party to, or being threatened to be made a party to, any
proceeding by or in the right of the Company to procure a judgment in its favor
by reason of any action taken by Employee as an officer, director or agent of
the Company, provided that Employee acted in good faith in a manner he
reasonably believed to be in the best interests of the Company and its
shareholders, and provided further, that no indemnification by the Company shall
be required pursuant to this Section 15.2 (i) for acts or omissions that involve
intentional misconduct or a knowing and culpable violation of law, (ii) for acts
or omissions that Employee believed to be
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contrary to the best interests of the Company or its shareholders or that
involve the absence of good faith on the part of Employee, (iii) for any
transaction from which Employee derived an improper personal benefit, (iv) for
acts or omissions that show a reckless disregard by Employee of his duties to
the Company or its shareholders in circumstances in which Employee was aware, or
should have been aware, in the ordinary course of performing his duties, of a
risk of serious injury to the Company or its shareholders, (v) for acts or
omissions that constitute an unexcused pattern of inattention that amounts to an
abdication of Employee's duties to the Company or its shareholders, (vi) for any
violation by Employee of Section 310 of the California Corporations Code or
(vii) for any violation by Employee of Section 316 of the California
Corporations Code. Furthermore, the Company has no obligation to indemnify
Employee pursuant to this Section 15.2 in any of the following circumstances:
A. In respect of any claim, issue, or matter as to which Employee is
adjudged to be liable to the Company in the performance of his duties to the
Company and its shareholders, unless and only to the extent that the court in
which such action was brought determines upon application that, in view of all
the circumstances of the case, he is fairly and reasonably entitled to indemnity
for the expenses and then only in the amount that the court shall determine.
B. For amounts paid in settling or otherwise disposing of a threatened or
pending action without court approval.
C. For expenses incurred in defending a threatened or pending action
which is settled or otherwise disposed of without court approval.
15.3 REIMBURSEMENT. In the event that it is determined that
Employee is not entitled to indemnification by the Company pursuant to Sections
15.1 or 15.2 of this Agreement, then Employee is obligated to reimburse the
Company for all amounts paid by the Company on behalf of Employee pursuant to
the indemnification provisions of this Agreement. In the event that Employee is
successful on the merits in the defense of any proceeding referred to in
Sections 15.1 or 15.2 of this Agreement, or any related claim, issue or matter,
then the Company will indemnify and hold Employee harmless from all fees, costs
and expenses actually incurred by him in connection with the defense of any such
proceeding, claim, issue or matter.
16. ASSIGNABILITY OF BENEFITS. Except to the extent that this provision
may be contrary to law, no assignment, pledge, collateralization or attachment
of any of the benefits under this Agreement shall be valid or recognized by the
Company. Payment provided for by this Agreement shall not be subject to seizure
for payment of any debts or judgments against the Employee, nor shall the
Employee have any right to transfer, modify, anticipate or encumber any rights
or benefits hereunder; provided that any stock issued by the Company to the
Employee pursuant to this Agreement shall not be subject to Section 16 of this
Agreement.
17. DIRECTORS' AND OFFICERS' LIABILITY INSURANCE. The Company will review
in good faith the prospect of purchasing directors' and officers' liability
insurance for the officers and directors of the Company, which would include the
same coverage for Employee, provided, that any decision was to whether or not
the Company purchases such insurance coverage will be in the sole discretion of
the Company's Board of Directors.
18. NOTICE. Except as otherwise specifically provided, any notices to be
given hereunder shall be deemed given upon personal delivery, air courier or
mailing thereof, if mailed by certified
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mail, return receipt requested, to the following addresses (or to such other
address or addresses as shall be specified in any notice given):
IN CASE OF THE COMPANY:
Incomnet, Inc.
21031 Ventura Boulevard, Suite 1100
Woodland Hills, California 91364
Attention: Melvyn Reznick, President and
Chairman of the Board of Directors
IN CASE OF THE EMPLOYEE:
Stephen A. Caswell
The address listed below Mr. Reznick's
signature to this Agreement.
19. ATTORNEYS' FEES. In the event that any of the parties must resort to
legal action in order to enforce the provisions of this Agreement or to defend
such suit, the prevailing party shall be entitled to receive reimbursement from
the nonprevailing party for all reasonable attorneys' fees and all other costs
incurred in commencing or defending such suit.
20. ENTIRE AGREEMENT. This Agreement embodies the entire understanding
among the parties and merges all prior discussions or communications among them,
and no party shall be bound by any definitions, conditions, warranties, or
representations other than as expressly stated in this Agreement or as
subsequently set forth in a writing signed by the duly authorized
representatives of all of the parties hereto.
21. NO ORAL CHANGE; AMENDMENT. This Agreement may only be changed or
modified and any provision hereof may only be waived by a writing signed by the
party against whom enforcement of any waiver, change or modification is sought.
This Agreement may be amended only in writing by mutual consent of the parties.
22. SEVERABILITY. In the event that any provision of this Agreement shall
be void or unenforceable for any reason whatsoever, then such provision shall be
stricken and of no force and effect. The remaining provisions of this Agreement
shall, however, continue in full force and effect, and to the extent required,
shall be modified to preserve their validity.
23. APPLICABLE LAW. This Agreement shall be construed as a whole and in
accordance with its fair meaning. This Agreement shall be interpreted in
accordance with the laws of the State of California, and venue for any action or
proceedings brought with respect to this Agreement shall be in the County of Los
Angeles in the State of California.
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24. SUCCESSORS AND ASSIGNS. Each covenant and condition of this Agreement
shall inure to the benefit of and be binding upon the parties hereto, their
respective heirs, personal representatives, assigns and successors in interest.
Without limiting the generality of the foregoing sentence, this Agreement shall
be binding upon any successor to the Company whether by merger, reorganization
or otherwise.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
date first above written.
COMPANY: INCOMNET, INC.,
a California corporation
Attest: By:
----------------------------
Melvyn Reznick, President and
Chairman of the Board of Directors
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Nancy Zivitz, Director
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Albert Milstein, Director
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Howard Silverman
EMPLOYEE: ---------------------------
Stephen A. Caswell
21031 Ventura Boulevard, Suite 1100
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Street Address
Woodland Hills, California 91364
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City, State and Zip Code
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