Opinion ID: 783603
Heading Depth: 3
Heading Rank: 5

Heading: Phansalkar's Departure from AW

Text: 52 In early June 2000, Phansalkar told Andersen that Phansalkar had been offered the position of Chairman and CEO of Osicom. Andersen responded positively. Phansalkar informed Andersen that he believed that his work at Osicom, which would be to oversee the sale of Osicom's assets and/or the merger of Osicom with another entity, would take approximately 18 to 24 months. Andersen encouraged Phansalkar to return to AW afterwards. 53 On June 6, 2000, Phansalkar orally accepted the offer to become Chairman and CEO of Osicom. He signed an employment agreement on June 9, 2000, under which he was to receive (1) a $250,000 annual salary, (2) options to purchase 450,000 shares of Osicom common stock, and (3) a cash fee if Osicom merged with another entity or was acquired in a deal that closed within six months. 54 Soon thereafter, Phansalkar and Andersen attempted to memorialize in writing Phansalkar's interests in various AW transactions. Andersen drafted a memorandum to file on or about June 19, 2000. Andersen's secretary typed the memorandum, dated it June 19, 2000, and gave a copy to Phansalkar. Phansalkar made several handwritten comments on his copy and gave it back to Andersen's secretary, who incorporated those comments. After Phansalkar provided his initial comments, several other draft memoranda dated June 19, 2000 were generated, and were apparently exchanged between Phansalkar and Andersen. Most of those draft memoranda contain different handwritten comments by Phansalkar. 55 Every one of the draft memoranda states that Andersen and Weinroth had sold Phansalkar 637,902 shares of MCEL for $60,000, and that the shares were to be distributed following MCEL's IPO. Each draft also notes that Phansalkar held 100,000 Sorrento Options, as a result of his service on the Sorrento Advisory Board. None of the drafts mentions any of the Directors' Compensation Phansalkar received by virtue of sitting on the Zip and Osicom boards. Phansalkar and Andersen never finalized a memorandum or agreed on Phansalkar's interests. 56 The relationship between Phansalkar and AW began to deteriorate in late June 2000. In May or June 2000, Phansalkar learned that the board of directors of Meret, Sorrento's parent company, had decided to remove Andersen from the Sorrento Board. Phansalkar did not inform Andersen of this decision at the time, but did inform him of it in a telephone conversation in late June, in response to Andersen's general inquiry about changes on the Sorrento Board. Phansalkar also told Andersen that Phansalkar had been chosen to replace another director (not Andersen) on the Sorrento Board. Andersen was angered by this news and accused Phansalkar of trying to replace him. 57 In June or July 2000, Weinroth instructed another AW employee to transfer back to Andersen and Weinroth the 637,902 shares that were attributed to Phansalkar on the May 2000 MCEL Ownership Schedule and for which Phansalkar had paid $60,000. This transfer was made and was reflected in a revised Ownership Schedule. 58 In a letter to Phansalkar dated September 6, 2000, Andersen stated: As we have previously discussed and as [Weinroth] reiterated in your recent conversation, you are aware that you do not have a position in Millennium Cell. Joint Appendix at A 2781. The district court found that this September 6, 2000 letter was the first notice Phansalkar received of the transfer of his MCEL Shares back to Andersen and Weinroth. See Phansalkar II, at , 2001 WL 1524479 at . In the letter, Andersen also informed Phansalkar that AW would use the $60,000 paid by Phansalkar for the MCEL Shares as an offset against AW's $100,000 personal loan to Phansalkar. 59 AW learned sometime between June 2000 and September 2000 that Phansalkar had received the Zip Options, the Zip Shares, the 35,000 Osicom Options, and the Osicom Directors' Fees as Directors' Compensation. At that time, Phansalkar had not exercised any of the options, and he had not sold the Zip Shares.