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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------
Form 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended March 31, 2000
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period of __________________ to ________________
Commission file number: 0-18700
PRIME CELLULAR, INC.
-------------------------------------
(exact name of Registrant as specified in its charter)
Delaware 13-3570672
------------------------------- -------------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
580 Marshall Street, Phillipsburg, PA 08865
- ------------------------------------- -----
(Address of Principal Executive Office) (Zip Code)
Issuer's telephone number, including area code: (908) 387-1673
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding
12 months (or for 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 [_]
As of May 10, 2000 the registrant had 6,078,700 shares outstanding of its
Common Stock, $.01 par value.
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<PAGE>
PRIME CELLULAR, INC. AND SUBSIDIARY
INDEX
Page
----
PART I. FINANCIAL INFORMATION............................................... 3
Item 1. Consolidated Financial Statements
Independent Accountant Report .................................... 3
Consolidated Balance Sheets (unaudited) at March 31, 2000
and December 31, 1999......................................... 4
Consolidated Statements of Operations (unaudited) for the
three months ended March 31, 2000 and March 31, 1999.......... 6
Consolidated Statements of Cash Flows (unaudited) for
the three months ended March 31, 2000 and March 31, 1999...... 7
Notes to Consolidated Financial Statements........................ 8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations........................... 10
Item 3. Quantitative and Qualitative Disclosures About Market Risk ......... 11
PART II. OTHER INFORMATION.................................................. 12
Item 2. Changes in Securities............................................... 12
Item 6. Exhibits and Reports on Form 8-K.................................... 12
SIGNATURES.................................................................. 13
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<PAGE>
PART I
FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders
Prime Cellular, Inc. and Subsidiaries
We have reviewed the consolidated balance sheet of Prime Cellular, Inc. and
Subsidiaries at March 31, 2000 and the related consolidated statements of
operations and cash flows for the three months ended March 31, 2000 and 1999 as
set forth in the accompanying unaudited financial statements. These financial
statements are the responsibility of the Company's management.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists primarily of applying analytical procedures to financial
data and making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in accordance
with generally accepted auditing standards, the objective of which is the
expression of an opinion regarding the financial statements taken as a whole.
Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the accompanying financial statements for the three months ended
March 31, 2000 and 1999 for them to be in conformity with generally accepted
accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet at December 31, 1999 and the related
consolidated statements of operations, stockholders' equity and cash flows for
the year then ended (not presented herein); and in our report dated February
17,2000, we expressed an unqualified opinion on these consolidated financial
statements.
RAICH ENDE MALTER LERNER & Co.
East Meadow, New York
May 10, 2000
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<PAGE>
PRIME CELLULAR, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
March 31, 2000 December 31, 1999
-------------- -----------------
Assets
Current Assets
Cash $ 20,284 $ 125,954
Investment securities 5,065,659 5,008,533
Accounts receivable - less allowance
for doubtful accounts of $20,000 471,964 572,075
Unbilled services 166,156 109,809
Inventory 176,235 151,816
Prepaid expenses 11,032 14,968
----------- -----------
5,911,330 5,983,155
----------- -----------
Property, Plant and Equipment 1,855,006 1,759,290
Less: Accumulated depreciation 726,543 667,659
----------- -----------
1,128,463 1,091,631
----------- -----------
Other Assets
Investment securities 543,538 345,932
Security deposits 1,000 1,000
Deferred financing costs - net of
accumulated amortization of $681 and
$617 for 2000 and 1999, respectively 6,900 6,964
----------- -----------
551,438 353,896
----------- -----------
$ 7,591,231 $ 7,428,682
=========== ===========
See accompanying notes to consolidated financial statements
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<PAGE>
PRIME CELLULAR, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
March 31, December 31,
2000 1999
-------------- ------------
Liabilities and Stockholders' Equity
Current Liabilities
Current maturities of long-term debt $ 90,857 $ 88,761
Accounts payable and accrued expenses 451,559 315,433
Customer deposits 272,335 143,842
Unearned revenue 60,170 54,460
------------ ------------
874,921 602,496
Non-Current Liabilities
Long-term debt -net of current maturities 536,769 560,107
Stockholder loans -net of current
maturities 543,710 531,988
----------- ------------
1,955,400 1,694,591
----------- ------------
Stockholders' Equity
Common stock 60,787 60,787
Additional paid-in capital 5,832,704 5,832,704
Accumulated (deficit) (257,660) (159,400)
------------ ------------
5,635,831 5,734,091
------------ ------------
$ 7,591,231 $ 7,428,682
============ ============
See accompanying notes to consolidated financial statements
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<PAGE>
PRIME CELLULAR, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
For the Three Months Ended
--------------------------------
March 31, 2000 March 31, 1999
-------------- --------------
Revenue
Contract revenue $ 583,807 $ 542,706
Sale of goods 360,620 318,933
----------- -----------
944,427 861,639
----------- -----------
Direct Costs
Contract revenue 346,574 228,535
Sale of goods 183,509 169,758
----------- -----------
530,083 398,293
----------- -----------
Income After Direct Costs
Contract revenue 237,233 314,171
Sale of goods 177,111 149,175
---------- -----------
414,344 463,346
---------- -----------
Other Operating Expenses
Contract revenue 237,276 155,269
Sale of goods 113,440 73,068
---------- -----------
350,716 228,337
---------- -----------
Income (Loss) from Operations
Contract revenue (43) 158,902
Sale of goods 63,671 76,107
---------- -----------
63,628 235,009
---------- -----------
Corporate Activities
Selling, general and administ. exp. (200,639) (131,617)
Interest income 65,236 110,733
Interest expense (26,485) (62,591)
----------- -----------
(161,888) (83,475)
----------- -----------
Income (Loss) Before Provision for Income Taxes (98,260) 151,534
Provision for Income Taxes _ 270
----------- -----------
Net Income (Loss) $ (98,260) $ 151,264
=========== ===========
Basic and Diluted Net Income (Loss) Per Share $ (.02) $ .02
=========== ===========
Weighted Average Shares Outstanding - Basic 6,078,700 6,108,700
=========== ===========
- Diluted 6,078,700 6,291,624
=========== ===========
See accompanying notes to consolidated financial statements
-6-
<PAGE>
PRIME CELLULAR, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
For the Three Months Ended
-----------------------------
March 31, March 31,
2000 1999
--------- --------------
Cash Flows from Operating Activities
Net income (loss) $ (98,260) $ 151,264
Adjustments to reconcile net (loss)
to net cash provided by (used in)
operating activities:
Depreciation and amortization 58,948 52,626
Accrued interest on stockholder loans 11,722 12,578
Changes in assets and liabilities:
Accrued interest on investment
securities (55,607) 37,191
Accounts receivable 100,111 (144,558)
Unbilled services (56,347) (96,462)
Inventory (24,419) 11,311
Prepaid expenses 3,936 (285)
Accounts payable and accrued expenses 136,126 100,898
Customer deposits 128,493 114,453
Unearned revenue 5,710 58,247
----------- -----------
210,413 297,263
----------- -----------
Cash Flows from Investing Activities
Acquisitions of property and equipment (95,716) (141,196)
Sale (purchase) of investment securities (199,125) 5,000,000
----------- -----------
(294,841) 4,858,804
----------- -----------
Cash Flows from Financing Activities
Repayments of notes payable - (60,000)
Repayments of long term debt (21,242) (5,050)
Payment of collateralized investment loan - (5,000,000)
----------- -----------
(21,242) (5,065,050)
----------- -----------
Net Increase (Decrease) in Cash (105,670) 91,017
Cash - beginning 125,954 84,146
----------- -----------
Cash - end $ 20,284 $ 175,163
=========== ===========
Supplemental Disclosures
Cash paid (refunded)during the year:
Interest $ 14,763 $ 50,013
=========== ===========
Income taxes $ (855) $ 555
=========== ===========
See accompanying notes to consolidated financial statements
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<PAGE>
PRIME CELLULAR, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1: ORGANIZATION OF THE COMPANY AND NATURE OF ITS OPERATIONS
The Company is comprised of two separate divisions (segments) that provide goods
and services in the domestic biotechnology and pharmaceutical industries. The
Specialty Media Division ("SM") is a manufacturer and wholesaler of cell culture
media and reagents. The Molecular Cell Science Division ("MCS") provides
research services to pharmaceutical companies and other molecular and cell
biology research and development entities.
NOTE 2: UNAUDITED INTERIM STATEMENTS
The accompanying unaudited consolidated financial statements of the Company have
been prepared in accordance with the instructions to Form 10-Q and do not
include all of the information and footnotes required by generally accepted
accounting principles for complete financial statements. In the opinion of
management, all adjustments (which consist only of normal recurring adjustments)
necessary for a fair presentation have been included. All significant
intercompany transactions and balances have been eliminated. Operating results
for the three months ended March 31, 2000, are not necessarily indicative of the
results to be expected for the year ending December 31, 2000. These financial
statements and notes should be read in conjunction with the financial statements
and notes thereto included in the Company's annual report on Forms 10-K for the
year ended December 31, 1999.
NOTE 3: SEGMENT INFORMATION
The following is information pertaining to the Company's two operating segments:
SM, which manufactures and wholesales cell culture media and reagents, and MCS,
which provides research services to pharmaceutical companies and other molecular
and cell biology research and development entities.
-8-
<PAGE>
For the Three Months Ended
----------------------------
March 31, March 31,
2000 1999
------------ -------------
Revenues:
MCS - $ 610,718 $ 542,706
Intersegment Revenues (26,911) --
-------- --------
MCS - Contract Revenues from External Customers 583,807 542,706
-------- -------
SM 360,620 325,948
Intersegment Revenues -- (7,015)
-------- ---------
SM - Sales of goods to External Customers 360,620 318,933
-------- ---------
$ 944,427 $ 861,639
============ ===========
Income (Loss) before Income Taxes:
MCS $ (43) $ 158,902
SM 63,671 76,107
---------- ---------
63,628 235,009
Corporate income and expenses unallocated to
segments (161,888) (83,475)
---------- --------
$ (98,260) $ 151,534
============ ===========
Grants-
The SM division is the recipient of a NIH (National Institute of Health) Federal
Phase II Grant for $ 757,532. The work to be performed under this grant covers
the period July 1998 to June 2000. For the Three months ended March 30, 2000,
the company recognized $ 58,886 in grant revenue under this grant which was
offset by a like amount in cost.
The MCS division is the recipient of a NIH Federal Phase I Grant for $ 100,270.
The work to be performed under this grant covers the period June 1999 to May
2000. For the Three months ended March 30, 2000, the company recognized $ 13,044
in grant revenue under this grant which was offset by a like amount in cost.
NOTE 4: EARNINGS PER SHARE
Basic income (loss) per share is calculated by dividing net income (loss) by the
weighted average number of common shares outstanding for the respective periods.
Diluted income (loss) per share includes the effects of securities which are
convertible into common stock, consisting of stock options, to the extent such
conversion would be dilutive.
Potential common stock was excluded from the computation for the three months
ended March 31, 2000 because of their anti-dilutive effect. The following is a
summary of the weighted average shares outstanding.
March 31, 2000 March 31, 1999
-------------- --------------
Basic 6,078,700 6,108,700
Effect of dilutive options - 182,924
--------- ---------
Diluted weighted average shares
outstanding 6,078,700 6,291,624
============= ===============
Anti- dilutive options 738,342 260,000
============= ===============
-9-
<PAGE>
Note 5: Formation of Sentigen Corp.
During the quarter, the Company formed Sentigen Corp. as a wholly owned
subsidiary to engage in scientific research regarding the mechanisms of
chemo-sensations in medical conditions and agricultural pests. In that
connection the Company has entered into the following agreements:
On March 29, 2000 Sentigen entered into a three year employment agreement with
Dr. Kevin J. Lee for the position of executive vice president at $110,000 per
year plus annual performance-based incentive bonuses. In addition, Mr. Lee
received Options to purchase 200,000 shares of the Company's stock at $5.00 per
share, vesting 25% per year and expiring on March 29, 2005.
On April 10, 2000, Sentigen entered into a license agreement with Columbia
University for an exclusive worldwide right to Columbia's patent applications
and other proprietary rights in this area. A minimum of $1,000,000 must be
invested by Prime Cellular, Inc. in Sentigen Corp. within one year of the date
of the agreement. A minimum of $50,000 per six month period or $100,000 per
annual period must be spent on bona fide research and development of the patents
and licenses subject to the agreement from the second through the fourth years
or the Company must be involved in active negotiations to raise $1,000,000 in
additional funding. In consideration of the license, Columbia will be issued
75,000 shares of the Company's stock and will receive royalties of 1% of the net
sales of any licensed products or services.
On April 18, 2000 Sentigen received a commitment from Norwest Bank to borrow up
to $500,000 to be repaid over five years with interest at 8.75% per annum.
On May 1, 2000, Sentigen acquired a license to use laboratory space at Columbia
University in New York City for two years with the option to renew for an
additional two years. The license agreement calls for license fee commitments,
exclusive of operating expenses, as follows:
For the year ending March 31, 2001 $59,583
2002 66,788
2003 5,579
-----
Total $131,950
--------
Note 6: Stock Option Plans
The Company adopted the 2000 Performance Equity Plan (the "Performance Equity
Plan") which provides for grants and options to purchase up to 2,000,000 shares
of Common Stock. Under the Performance Equity Plan, options may be granted to
employees, directors, consultants, agents and other persons deemed valuable to
the Company or any of its subsidiaries. The Performance Equity Plan permits the
Board of Directors or the Committee of the Performance Equity Plan to issue
incentive stock options (ISO's) as defined in Section 422 of the Internal
Revenue Code (the "Code") and stock options that do not conform to the
requirements of that code section ("non-ISOs"). The exercise price of each ISO
may not be less then 100% of the fair market value of the Common Stock at the
time of grant, except that in the case of a grant to an employee who owns
(within the meaning of Code Section 422) 10% or more of the outstanding stock of
the Company or any subsidiary (a "10% stockholder"), the exercise price may not
be less then 100% of the market value of the Common Stock at the time of grant.
Under the Performance Equity Plan, the committee may award stock appreciation
rights, restricted stock, deferred stock, stock reload options and other
stock-based awards in addition to stock options. The Performance Equity Plan is
administered by the Board of Directors and may be administered by a committee
chosen by the Board of Directors. Subject to the provisions of the Performance
Equity Plan, the Board of Directors or such Committee, as applicable, have the
authority to determine the individuals to whom the stock options are to be
granted, the number shares to be covered by each option, the option price, the
type of option, the option period, the restrictions, if any, on the exercise of
the option, the terms for the payment of the option price and other terms and
conditions. Payment by option holders upon exercise of an option may be made (as
determined by the Board of Directors or the Committee) in cash, or, in certain
instances, by shares of Common Stock. Upon the Performance Equity Plan, no more
than 200,00 shares in the aggregate may be granted to any one holder in any one
calendar year.
On January 3, 2000 (the "Grant Date"), the Company granted to certain key
employees of the Company options, pursuant to the Company's 1990 Stock Option
Plan, to purchase up to an aggregate of 22,850 shares of the Company's Common
Stock, at an exercise price of $1.81. Such options vest and become exercisable
in five equal annual installments, commencing on the one (1) year anniversary of
the Grant Date.
On March 29, 2000 (the "Grant Date"), the Company granted to certain other
individuals, options, pursuant to the Company's 2000 Performance Equity Plan, to
purchase up to an aggregate of 495,000 shares of the Company's Common Stock, at
an exercise of $5.00. Such options vest and become exercisable in four equal
annual installments, commencing on the Grant date.
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<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
The Private Securities Litigation Reform Act of 1995 provides a
"safeharbor" for forward-looking statements. Certain information included in
this Report contains statements that are forward-looking, such as statements
relating to plans for future activities. Such forward-looking statements involve
known and unknown risks, uncertainties and other factors which may cause the
actual results, performance or achievements of the Company to be materially
different from any future results, performance or achievements expressed or
implied by such forward-looking statements. Such factors include, among others,
the following: the Company's history of losses; the Company's need to obtain
additional financing and the ability to obtain such financing; outstanding
indebtedness; the ability to hire and retain key personnel; successful
completion and integration of prior and any future acquisitions; relationships
with and dependence on third-party equipment manufacturers and suppliers;
uncertainties relating to business and economic conditions in markets in which
the Company operates; uncertainties relating to government and regulatory
policies and other political risks; uncertainties relating to customer
plans and commitments; cost of and availability of component materials and
inventories; effect of governmental export and import policies; the highly
competitive environment in which the Company operates; potential entry of new,
well-capitalized competitors into the Company's markets; and the uncertainty
regarding the Company's continued ability, through sales growth, to absorb the
increasing costs incurred and expected to be incurred in connection with its
business activities. The words "believe", "expect", "anticipate", "intend" and
"plan" and similar expressions identify forward-looking statements. Readers are
cautioned not to place undue reliance on these forward-looking statements, which
speak only as of the date the statement was made.
Results of Operations
Comparison of Three Months Ended March 31, 2000 to Three Months Ended March 31,
1999.
Revenue for the three months ended March 31, 2000 was $944,427 as compared
to revenue of $861,639 for the three months ended March 31, 1999. This increase
of $82,788 was as a result of a $41,687 or a 13% increase in sales of goods and
a $41,101 or a 8% increase in contract revenue. Sale of goods, through the SM
Division, continue to grow due to the introduction of new products and addition
of international distributors. Contract revenue growth, through the MCS
Division, was slower than expected due to unanticipated customer delays in
starting new contracts.
Income after direct costs for the three months ended March 31, 2000 was
$414,344 as compared to income after direct costs of $463,346 for the three
months ended March 31, 1999. This decrease in income after direct costs is the
result of a $27,936 or 19% increase from the sales of goods plus a $76,938 or
24% decrease from MCS. This increase in income after direct costs from the sales
of goods resulted from the 13% increase in revenue plus higher margins from the
new products. The MCS Division's income after direct costs for the three months
ended March 31, 2000 decrease was attributable to the inefficient utilization of
additional manpower. The additional manpower was added to service a much larger
anticipated revenue base. The revenue base was not obtainable due to
unanticipated customer delays in starting new contracts.
Other operating expenses for the three months ended March 31, 2000 was
$350,716 as compared to $228,337 for the three months ended March 31, 1999. This
$122,379 increase was a result of an administrative expansion which occurred in
the second half of 1999 and continued into the quarter ended March 31, 2000.
-11-
<PAGE>
Corporate activities of $161,888 resulted in a net expense for the three months
ended March 31, 2000 as compared to net expense of $83,475 for the three months
ended March 31, 1999. This $78,413 net increase in expense resulted from
increased selling, general and administrative expenses mainly due to activities
in connection with the start up of the Company's wholly- owned subsidiary,
Sentigen, Corp. Interest income dropped $ 45,497 for the three months ended
March 31, 2000 as compared to the three months ended March 31, 1999 as well as
interest expense dropped $ 36,106 for the three months ended March 31, 2000 as
compared to the three months ended March 31, 1999. This resulted because the
Company had approximately $4,500,000 in additional securities and a related
investment loan for the three months ended March 31, 1999 as compared to the
three months ended March 31, 2000.
Net loss for the three months ended March 31, 2000 was $(98,260) or $(.02) per
share basic and diluted, based on weighted average common shares outstanding of
6,078,700, basic and diluted, as compared to a net income of $151,264 or $.02
per share based on 6,108,700, basic and 6,291,624, diluted weighted average
shares outstanding. The decrease in net income was mainly the result of the
reduced gross margins from contract revenue, an increase in other operating
expenses as well as an increase in corporate activities.
Liquidity and Capital Resources
At March 31, 2000, the Company had approximately $20,000 in cash and working
capital of approximately $5,000,000.
Net cash provided by operating activities aggregated $210,413 and $297,263 for
the three months ended March 31, 2000 and 1999, respectively. The $86,850 net
decrease provided by operating activities was principally attributable to a
decrease in accounts receivable offset by a reduction in net income (loss) and
accrued interest on investment securities for the three months ended March 31,
2000 as compared to 1999.
Net cash used by investing activities aggregated $(294,841) for the three months
ended March 31, 2000 as compared with net cash provided by investing activities
of $4,858,804 for the three months ended March 31, 1999. This net decrease in
cash provided by investing activities was primarily attributable to the
$5,000,000 sale of investment securities for the three months ended March 31,
1999 as well as $ 199,125 purchase of investment securities for the three months
ended March 31, 2000.
Net cash used by financing activities aggregated $21,242 for the three months
ended March 31, 2000 as compared to $5,065,050 for the three months ended March
31, 1999. The decrease was due primarily to the repayment of the $5,000,000
collateralized investment loan during the three months ended March 31, 1999.
During the three months ended March 31, 2000, the Company financed its
operations primarily through working capital.
Pursuant to a License Agreement between Sentigen Corp. and Columbia University,
for an exclusive world wide right to Columbia's patent applications and other
proprietary rights in the area of the mechanisms of chemosentations in medical
conditions and agricultural pests, a minimum of $1,000,000 must be invested by
the Company by April 10, 2001. A minimum of $50,000 per six month period or
$100,000 per annual period must be spent on bona fide research and development
of the patents and licenses subject to the agreement from the second through
the fourth years or the Company must be involved in active negotiations to
raise $1,000,000 in additional funding. The Company has enough funds available
in working capital to make the required investment if it chooses not to raise
the money through debt and equity financings.
-12-
<PAGE>
Item 3. Quantitative and Qualitative Disclosure About Market Risk.
Not Applicable.
-13-
<PAGE>
PART II
OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds
On January 3, 2000 (the "Grant Date"), the Company granted to certain key
employees of the Company options, pursuant to the Company's 1990 Stock Option
Plan, to purchase up to an aggregate of 22,850 shares of the Company's Common
Stock, at an exercise price of $1.81. Such options vest and become exercisable
in five equal annual installments, commencing on the one (1) year anniversary of
the Grant Date. The Company relied upon Section 4(2) of the Securities Act for
an exemption from registration for these private transactions.
On March 29, 2000 (the "Grant Date"), the Company granted to certain other
individuals of the Company options, pursuant to the Company's 2000 Performance
Equity Plan, to purchase up to an aggregate of 495,000 shares of the Company's
Common Stock, at an exercise price of $5.00. Such options vest and become
exercisable in four equal annual installments, commencing on the Grant Date.
The Company relied upon Section 4(2) of the Securities Act for an exemption from
registration for these private transactions.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits.
Exhibit 10.15 Employment Agreement between Kevin Lee and Sentigen
Corp.
Exhibit 10.16 Option Agreement between the Company and Kevin Lee.
Exhibit 27. Financial Data Schedule.
(b) Reports on Form 8-K
None.
-14-
<PAGE>
EXHIBIT INDEX
---------------
<TABLE>
Incorporated
Exhibit By Reference from
Number Description Document No. in Document Page
- ------ ----------- -------- --------------- ----
<S> <S> <C> <C>
3.1 Certificate of Incorporation, as amended A Exhibit 3.1
3.2 By-laws of the Company A Exhibit 3.2
10.1 1990 Stock Option Plan A Exhibit 10.1
10.2 Consulting Agreement dated July 2, 1991, among B Exhibit 10.2
the Company, Prime Cellular of Florida, Inc.
and Joseph K. Pagano (the "Consulting
Agreement")
10.3 Amendment to Consulting Agreement B Exhibit 10.3
10.4 Agreement and Plan of Merger, dated as of May C Exhibit 2.1
14, 1996, by and among the Company, Prime
Cellular Acquisition Corp., Bern Associates,
Inc. and the stockholders of Bern
10.5 Registration Rights Agreement, dated June C Exhibit 10.1
10, 1996, between Registrant and the Bern
Stockholders
10.6 Escrow Agreement, dated June 10, 1996, between C Exhibit 10.2
Registrant and the Bern Stockholders
10.7 Indemnification Agreement, dated June 10, 1996 C Exhibit 10.3
between Registrant and the Bern Stockholders
10.8 Form of Amendment to Merger Agreement, dated D Exhibit 10.9
June 11, 1997
10.9 Form of Settlement Agreement, dated August 28, D Exhibit 10.10
1997
10.10 Agreement and Plan of Merger, dated as of May E Exhibit 2
29, 1998, by and among the Company, CMT
Acquisition Corp., Cell & Molecular
Technologies, Inc. and the stockholders of
Cell & Molecular Technologies, Inc.
10.11 Mortgage dated February 6, 1997, with respect to F Exhibit 10.11
premises located at 580 Marshall Street,
Phillipsburg, NJ 08865, assumed by the Company
in connection with the CMT Merger
10.12 Form of Employment Agreement dated May 22, F Exhibit 10.12
1997 between Cell & Molecular Technologies,
Inc. and Thomas Livelli
10.13 Form of Amendment to Employment Agreement dated G Exhibit 10.13
as of May 29, 1998 between Cell & Molecular
Technologies, Inc. and Thomas Livelli
10.14 Employment Agreement between Joseph K. Pagano H Exhibit 10.14
and the Company
</TABLE>
<PAGE>
<TABLE>
<S> <C>
10.15 Employment Agreement between Kevin Lee and Sentigen
Corp. Filed
Herewith
10.16 Option Agreement between the Company and Kevin Lee. Filed
Herewith
21 List of Subsidiaries H Exhibit 21
27.1 Financial Data Schedule
99 Risk Factors H Exhibit 99
</TABLE>
A. Company's Registration Statement on Form S-18 (Registration No.
33-35537-NY)
B. Company's Annual Report on Form 10-K for the fiscal year ended May 31,
1992.
C. Company's Report on Form 8-K dated June 11, 1996.
D. Company's Annual Report on Form 10-K for the fiscal year ended May 31,
1997.
E. Company's Report on Form 8-K for the event dated May 29, 1998.
F. Company's Report on Form 10-K for the fiscal year ended December 31, 1998.
G. Company's Report on Form 10-K/A for the fiscal year ended December 31,
1998.
H. Company's Report on Form 10-K for the fiscal year ended December 31, 1999.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
May 10, 2000 PRIME CELLULAR, INC.
By: /s/ ROBERT A. REINHART
--------------------------------
Robert A. Reinhart,
Chief Financial Officer and
principal accounting officer
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EMPLOYMENT AGREEMENT
AGREEMENT dated as of March 29, 2000 between KEVIN J. LEE, residing at 601
West 113th Street, New York, New York 10025 ("Executive"), and SENTIGEN CORP., a
Delaware corporation having its principal office at 434 East Cooper Avenue,
Suite 201, Aspen, Colorado 81611 ("Company").
WHEREAS, Executive possesses expertise in the areas of molecular and neuro
biology;
WHEREAS, the Company desires to avail itself of Executive's expertise;
WHEREAS, the Company desires to employ Executive, and Executive desires to
be employed by Company, commencing April 1, 2000 (the "Start Date"), on the
terms set forth in this Agreement; and
WHEREAS, the Company is a wholly-owned subsidiary of Prime Cellular, Inc.,
a Delaware Corporation.
IT IS AGREED:
1. Employment, Duties and Acceptance.
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1.1 The Company shall employ Executive as its Executive Vice
President ("EVP"). All of Executive's powers and authority in any capacity shall
at all times be subject to the direction and control of the Company's Board of
Directors and Chief Executive Officer ("CEO"). Executive shall report directly
to the CEO. Executive shall also be a member of the Board of Directors of the
Company during the period in which he serves as Executive Vice President. At the
request of the Board of Directors, Executive shall sign a letter resigning from
the Board of Directors of the Company at the termination of his employment with
the Company.
1.2 The Board of Directors and the CEO may assign to Executive
such general management and supervisory responsibilities and executive duties
for the Company or any subsidiary of the Company as are consistent with
Executive's status as EVP. The Company and Executive acknowledge that
Executive's primary functions and duties as EVP shall be the general supervision
of, and oversight over all scientific activities of the Company.
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1.3 Executive accepts such employment and agrees to devote
substantially all of his business time, energy and attention to the performance
of his duties hereunder beginning on the Start Date. Nothing herein shall be
construed as preventing Executive from making and supervising personal
investments during the term of this Agreement, provided they will not (a)
require any substantial services on his part in the operation of the affairs of
the companies in which such investments are made, (b) interfere with the
performance of Executive's duties hereunder or (c) violate the provisions of
paragraph 5.4 hereof.
2. Compensation and Benefits.
--------------------------
2.1 The Company shall pay to Executive a salary at the annual
rate of $110,000. Executive's compensation shall be paid in equal, bi-weekly
installments.
2.2 As additional compensation for services to be rendered by
Executive hereunder:
(a) Simultaneously herewith, the Company is issuing to
Executive options ("Options") to purchase 200,000 shares of Prime Cellular,
Inc.'scommon stock ("Common Stock") at a price per share of $5.00. The Options
are evidenced by a Stock Option Agreement, dated as of March 29, 2000, between
Prime Cellular, Inc. and Executive ("Stock Option Agreement"). The Options shall
vest in 4 equal, annual installments commencing on April 1, 2000.
(b) The Company also shall pay Executive an annual
performance-based bonus as determined in the sole discretion of the Board of
Directors.
2.3 Executive shall be entitled to such medical, life, disability
and other benefits as are generally afforded to the senior executives of Prime
Cellular, Inc., subject to applicable waiting periods and other conditions.
2.4 Executive shall be entitled to three weeks of vacation in
each calendar year and to a reasonable number of other days off for religious
and personal reasons.
2.5 The Company will pay or reimburse Executive for all
transportation, hotel and other expenses reasonably incurred by Executive on
business trips and for all other ordinary and reasonable out-of- pocket expenses
actually incurred by him in the conduct of the business of the Company against
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itemized vouchers submitted with respect to any such expenses and approved in
accordance with customary procedures.
2.6 Executive acknowledges that he will be obligated to render
services hereunder wherever such services are reasonably required by the
Company, which will necessitate substantial travel by Executive, primarily in
North America. In no case shall such travel be greater than an aggregate of
three months in any one year period
3. Term and Termination.
----------------------
3.1 The term of Executive's employment hereunder shall commence
on the Start Date and shall continue until March 31, 2003, unless sooner
terminated as herein provided.
3.2 Executive's employment hereunder shall terminate on the date
of his death, in which case the Company shall pay to the legal representative of
Executive's estate (i) the base salary due Executive pursuant to paragraph 2.1
hereof through the date of Executive's death, (ii) all earned and previously
approved but unpaid bonuses, (iii) all valid expense reimbursements through the
date of the termination of this Agreement and (iv) all accrued but unused
vacation pay.
3.3 The Company, by notice to Executive, may terminate Executive's
employment hereunder if Executive shall fail because of illness or incapacity to
render, for six consecutive months, services of the character contemplated by
this Agreement. Notwithstanding such termination, the Company shall pay to
Executive (i) the base salary due Executive pursuant to paragraph 2.1 hereof
through the date of such notice, less any amount Executive receives for such
period from any Company-sponsored or Company-paid source of insurance,
disability compensation or government program, (ii) all earned and previously
approved but unpaid bonuses, (iii) all valid expense reimbursements through the
date of the termination of this Agreement and (iv) all accrued but unused
vacation pay.
3.4 The Company, by notice to Executive, may terminate
Executive's employment hereunder for "Cause" (as defined herein). As used
herein, "Cause" shall mean: (a) the refusal or failure by Executive to carry out
specific directions of the Board or the CEO which are of a material nature and
consistent with his status as EVP, or the refusal or failure by Executive to
perform a material part of Executive's duties hereunder; (b) the commission by
Executive of a material breach of any of the provisions of this Agreement;
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(c) fraud or dishonest action by Executive in his relations with the Company or
any of its subsidiaries or affiliates, or with any customer or business contact
of the Company or any of its subsidiaries or affiliates ("dishonest" for these
purposes shall mean Executive's knowingly or recklessly making of a material
misstatement or omission for his personal benefit); or (d) the conviction of
Executive of any felony or crime involving an act of fraud or dishonesty.
Notwithstanding the foregoing, no "Cause" for termination shall be deemed to
exist with respect to Executive's acts described in clauses (a) or (b) above,
unless the Company shall have given written notice to Executive specifying the
"Cause" with reasonable particularity and, within thirty calendar days after
such notice, Executive shall not have cured or eliminated the problem or thing
giving rise to such "Cause;" provided, however, that a repeated breach after
notice and cure of any provision of clauses (a) or (b) above involving the same
or substantially similar actions or conduct, shall be grounds for termination
for "Cause" without any additional notice from the Company. Notwithstanding such
termination, the Company shall pay to Executive (i) the base salary due
Executive pursuant to paragraph 2.1 hereof through the date of such notice, (ii)
all earned and previously approved but unpaid bonuses, (iii) all valid expense
reimbursements through the date of the termination of this Agreement and (iv)
all accrued but unused vacation pay.
3.5 The Executive, by notice to the Company, may terminate
Executive's employment hereunder if a "Good Reason" exists. For purposes of this
Agreement, "Good Reason" shall mean the occurrence of any of the following
circumstances without the Executive's prior express written consent: (a) a
significant change in Executive's title, duties or responsibilities with the
Company that represents a demotion from his title, duties or responsibilities as
in effect immediately prior to such change; (b) the consummation of any merger,
consolidation or other form of reorganization in which holders of the
outstanding voting securities of the Company before the transaction do not hold
at least 51% of the outstanding voting securities after the transaction, or upon
the sale of all or substantially all of the Company's assets; (c) the commission
by the Company of a material breach of any of the provisions of this Agreement;
and (d) the movement by the Company of Executive's principal office to a
location more than 50 miles from New York City, without Executive's consent.
Notwithstanding the foregoing, no Good Reason shall be deemed to exist with
respect to the Company's acts described in clauses (a) or (b) above, unless the
Executive shall have given written notice to the Company specifying the Good
Reason with reasonable particularity and, within thirty calendar days after such
notice, the Company shall not have cured or eliminated the problem or thing
giving rise to such Good Reason; provided, however, that a repeated breach after
notice and cure of any provision of clauses (a) or (b) above involving the same
or substantially similar actions or conduct, shall be grounds for termination
for Good Reason without any additional notice from the Executive.
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3.6 In the event that Executive terminates his employment
hereunder for Good Reason, pursuant to the provisions of paragraph 3.5, or the
Company terminates his employment hereunder without "Cause," as defined in
paragraph 3.4, the Company shall continue to pay to Executive (or in the case of
his death, the legal representative of Executive's estate or such other person
or persons as Executive shall have designated by written notice to the Company)
all payments, compensation and benefits required under paragraphs 2.1 and 2.3
hereof through the earlier of the three-year anniversary of the Start Date and
the one-year anniversary of the termination of employment; provided, however,
that (a) Executive's insurance coverage shall terminate upon the Executive
becoming covered under a similar program by reason of employment elsewhere; and
(b) the cash payments owed to Executive hereunder during any period in which
Executive is employed elsewhere shall be reduced by any compensation earned by
Executive for his services from such other employer.
4. Executive Indemnity
--------------------
4.1 To the maximum extent permitted by law, the Company agrees to
indemnify and defend Executive and hold Executive harmless against all claims,
causes of action, costs, expenses (including, without limitation, reasonable
attorneys' fees) and liabilities (other than settlements to which the Company
does not consent, which consent shall not be unreasonably withheld)
(collectively, "Losses") reasonably incurred by Executive in connection with any
claim, action, proceeding or investigation brought against or involving
Executive with respect to, arising out of or in any way relating to Executive's
employment with the Company or Executive's service as a director of the Company;
provided, however, that the Company shall not be required to indemnify Executive
for Losses incurred as a result of Executive's intentional misconduct or gross
negligence. Executive shall promptly notify the Company of any claim, action,
proceeding or investigation under this paragraph and the Company shall be
entitled to participate in the defense of any such claim, action, proceeding or
investigation and, if it so chooses, to assume the defense with counsel selected
by the Company; provided that Executive shall have the right to employ counsel
to represent him (at the Company's expense) if Company counsel would have a
"conflict of interest" in representing both the Company and Executive. The
Company shall not settle or compromise any claim, action, proceeding or
investigation without Executive's consent, which consent shall not be
unreasonably withheld; provided, however, that such consent shall not be
required if the settlement entails only the payment of money and the Company
fully indemnifies Executive in connection therewith and obtains a general
release with respect to Executive. The Company further agrees to advance any and
all expenses (including, without limitation, the fees and expenses of counsel)
reasonably incurred by the Executive in connection with any such claim, action,
proceeding or investigation, provided Executive first enters into an appropriate
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agreement for repayment of such advances if indemnification is found not to have
been available. The Company shall, upon the settlement of a claim, action,
proceeding or investigation, grant Executive a release of liability if the
Company has obtained a release and if Executive was lawfully entitled to
indemnity. This Section 4 survives the termination of this Agreement for any
reason.
5. Protection of Confidential Information; Non-Competition.
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5.1 (a) The Company will suffer substantial damage which will
be difficult to compute if, during the term of this Agreement or thereafter,
Executive should enter a business competitive with the Company, or divulge
Confidential Information, or breach his obligations under Section 6.
(b) The provisions of this Agreement are reasonable and
necessary for the protection of the business of the Company.
5.2 Executive acknowledges that:
(a) As a result of Executive's employment with the
Company, he has obtained and will obtain secret and confidential information
concerning the business of the Company and its subsidiaries and affiliates
(referred to collectively in this Section 5 and in Section 6 as the "Company"),
including, without limitation, financial information, designs and other
proprietary rights, trade secrets and "know-how," customers and sources
("Confidential Information"). The obligations herein imposed shall not extend to
Confidential Information: (i) which is or lawfully becomes available to the
public without restriction and without breach of this Agreement by Executive; or
(ii) which is previously known to Executive or which is independently developed
by Executive without reference to any Confidential Information and in either
case, is so evidenced by written material in his possession.
(b) Executive agrees that he will not at any time, either
during the term of this Agreement or thereafter, divulge to any person or entity
any Confidential Information obtained or learned by him as a result of his
employment with the Company, except (i) in the course of performing his duties
hereunder, (ii) with the Company's express written consent; (iii) to the extent
that any such information is in the public domain other than as a result of
Executive's breach of any of his obligations hereunder; or (iv) where required
to be disclosed by court order, subpoena or other government process. If
Executive shall be required to make disclosure pursuant to the provisions of
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clause (iv) of the preceding sentence, Executive promptly, but in no event more
than 72 hours after learning of such subpoena, court order, or other government
process, shall notify, by personal delivery or by electronic means, confirmed by
mail, the Company and, at the Company's expense, Executive shall: (a) take all
reasonably necessary and lawful steps required by the Company to defend against
the enforcement of such subpoena, court order or other government process, and
(b) not object to the Company's intervention and participation with counsel of
its choice in any proceeding relating to the enforcement thereof.
5.3 Upon termination of his employment with the Company, Executive
will promptly deliver to the Company all memoranda, notes, records, reports,
manuals, drawings, blueprints and other documents (and all copies thereof)
relating to the business of the Company and all property associated therewith,
which he may then possess or have under his control; provided, however, that
Executive shall be entitled to retain copies of such documents reasonably
necessary to document his financial relationship (both past and future) with the
Company.
5.4 During the period commencing on the date hereof and ending on
the second anniversary of the date Executive's employment hereunder is
terminated (provided, however, that if Executive's employment is terminated with
"Cause" or Executive terminates his employment without "Good Reason," such
period shall terminate on the third-year anniversary of the Start Date),
Executive, without the prior written permission of the Company, shall not,
anywhere in the world, (i) be employed by, or render any services to, any
person, firm or corporation engaged in any business which is in competition with
either (a) the business conducted by the Company on the effective date of
termination or (b) a business which the Company is involved in as of the
effective date of termination ("Competitive Business"); (ii) engage in any
Competitive Business for his or its own account; (iii) be associated with or
interested in any Competitive Business as an individual, partner, shareholder,
creditor, director, officer, principal, agent, employee, trustee, consultant,
advisor or in any other relationship or capacity; (iv) employ or retain, or have
or cause any other person or entity to employ or retain, any person who was
employed or retained by the Company at any time during the last six months while
Executive was employed by the Company; or (v) solicit, interfere with, or
endeavor to entice away from the Company, for the benefit of a Competitive
Business, any of its customers or other persons with whom the Company has a
contractual relationship. Notwithstanding the foregoing, this provision shall
not preclude Executive from investing his personal assets in the securities of
any corporation or other business entity which is engaged in a Competitive
Business if such ownership is in compliance with the requirements set forth in
clauses (a) and (b) of the last sentence of paragraph 1.3 hereof and if such
investment does not result in his beneficially owning, at any time, more than 1%
of the publicly traded equity securities of such Competitive Business.
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5.5 If Executive commits a breach, or threatens to commit a
breach, of any of the provisions of paragraphs 5.2 or 5.4, or of any of the
provisions of Section 6, the Company shall have the right and remedy to have the
provisions of this Agreement specifically enforced by any court having equity
jurisdiction, it being acknowledged and agreed by Executive that the services
being rendered hereunder to the Company are of a special, unique and
extraordinary character and that any such breach or threatened breach will cause
irreparable injury to the Company and that money damages will not provide an
adequate remedy to the Company.
Each of the rights and remedies enumerated in this paragraph
5.5 shall be independent of the other, and shall be severally enforceable, and
such rights and remedies shall be in addition to, and not in lieu of, any other
rights and remedies available to the Company under law or equity.
In connection with any legal action or proceeding arising out of or relating to
this Agreement, the prevailing party in such action or proceeding shall be
entitled to be reimbursed by the other party for the reasonable attorneys' fees
and costs incurred by the prevailing party.
5.6 If Executive violates any covenant contained in paragraph 5.4,
the duration of such covenant so violated shall be automatically extended for a
period of time equal to the period of such violation.
5.7 If any provision of paragraphs 5.2 or 5.4 is held to be
unenforceable because of the scope, duration or area of its applicability, the
tribunal making such determination shall have the power to modify such scope,
duration, or area, or all of them, and such provision or provisions shall then
be applicable in such modified form.
5.8 The provisions of this Section 5 shall survive the termination
of this Agreement for any reason.
6. Inventions, Patents and Copyrights.
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6.1 All inventions and other creative works, including any patent,
copyright, trade secret, trademark or other intellectual property rights,
developed or produced by Executive either alone or jointly with others and
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which relate to the Company's business or technology (collectively,
"Intellectual Property") shall be considered to have been prepared for the
Company as a part, and in the course, of Executive's employment with the
Company. Any such Intellectual Property shall be owned by the Company regardless
of whether it would otherwise be considered a work made for hire. Such
Intellectual Property shall include, among other things, software and
documentation therefor.
6.2 The Company shall have full ownership of the Intellectual
Property, with no rights of ownership vested in Executive. Executive agrees
that, in the event any Intellectual Property is determined by a court of
competent jurisdiction not to be a work for hire under the federal copyright
laws, this Agreement shall operate as an irrevocable assignment by him to the
Company of the copyright in the works, including all rights thereunder in
perpetuity. Under this irrevocable assignment, Executive hereby assigns to the
Company the sole and exclusive right, title, and interest in and to the
Intellectual Property, without further consideration, and agrees to assist the
Company in registering and from time to time enforcing all copyrights and other
rights and protections relating to the Intellectual Property in any and all
countries. Executive agrees that in the event of any dispute arising out of or
concerning this Section 6, no actions by the Executive undertaken for the
purpose of securing, maintaining, or preserving the copyright in the works shall
be considered by any finder of fact or determiner of law in determining the
character of the work as work made for hire, unless expressly authorized by the
Company.
6.3 Executive agrees to divulge to the Company promptly and fully
in writing, in such format as the Company may deem appropriate, all Intellectual
Property and to assign to the Company all Intellectual Property.
6.4 Executive shall make and maintain adequate permanent records
of all Intellectual Property, in the form of memoranda, notebook entries,
drawings, printouts, or reports relating thereto, in keeping with then current
Company procedures. Executive agrees that these records, as well as the
Intellectual Property, shall be and remain the property of the Company at all
times.
6.5 Executive shall cooperate with and assist the Company and its
nominees, at their sole expense, during the term of this Agreement and
thereafter, in securing and protecting patent, copyright or other similar rights
in the United States and foreign countries in the Intellectual Property. In this
connection, Executive specifically agrees to execute all papers which the
Company deems necessary to protect its interests including the execution of
assignments of invention and copyrights and to give evidence and testimony,
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as may be necessary, to secure and enforce the Company's rights in the
Intellectual Property. Executive hereby appoints the Company as his agent and
attorney-in-fact to act for and in his behalf and stead to execute, register,
and file any applications, and to do all other lawfully permitted acts to
further the registration, prosecution, issuance, renewals, and extensions of
patents, copyrights or other protections with the same legal force and effect as
if personally executed by Executive. The Company agrees that, to the extent (i)
allowable by law and (ii) it does not affect the Company's rights in any way, it
will include Executive's name as an "author" on all patents to which he has
substantially contributed.
6.6 The provisions of this Section 6 shall survive termination of
this Agreement for any reason.
7. Miscellaneous Provisions.
------------------------
7.1 All notices provided for in this Agreement shall be in
writing, and shall be (i) delivered personally to the party to receive the same,
(ii) given by facsimile transmission, or (iii) mailed first class postage
prepaid, by certified mail, return receipt requested, addressed to the party to
receive the same at his or its address set forth below, or such other address as
the party to receive the same shall have specified by written notice given in
the manner provided for in this paragraph 7.1. All notices shall be deemed to
have been given as of the date of personal delivery, faxing (if evidence of
successful transmission is obtained by the sender) or mailing thereof.
If to Executive:
Kevin Lee
601 West 113th Street
New York, New York 10025
With a copy to:
David Dretzin, Esq.
1251 Avenue of the Americas, 42nd Floor
New York, New York 10020-1182
Facsimile No.: (212) 278-1733
If to the Company:
Sentigen Corp.
434 East Cooper Avenue, Suite 201
Aspen, Colorado 81611
Attn.: Joseph K. Pagano, Chief Executive Officer
Facsimile No.: (970) 920-7931
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With a copy to:
Graubard Mollen & Miller
600 Third Avenue
New York, New York 10016
Attn.: David Alan Miller, Esq.
Facsimile No.: (212) 818-8881
7.2 This Agreement sets forth the entire agreement of the parties
relating to the employment of Executive and is intended to supersede all prior
negotiations, understandings and agreements. No provisions of this Agreement may
be waived or changed except by a writing by the party against whom such waiver
or change is sought to be enforced. The failure of any party to require
performance of any provision hereof or thereof shall in no manner affect the
right at a later time to enforce such provision.
7.3 This Agreement shall be governed by and construed under the
law of the State of New York, disregarding any principles of conflicts of law
that would otherwise provide for the application of the substantive law of
another jurisdiction. Each of the parties (i) agrees that any legal suit, action
or proceeding arising out of or relating to this Agreement shall be instituted
exclusively in New York State Supreme Court, County of New York, or in the
United States District Court for the Southern District of New York, (ii) waives
any objection to the venue of any such suit, action or proceeding and the right
to assert that such forum is not a convenient forum, and (iii) irrevocably
consents to the jurisdiction of the New York State Supreme Court, County of New
York, and the United States District Court for the Southern District of New York
in any such suit, action or proceeding. Each of the parties further agrees to
accept and acknowledge service of any and all process which may be served in any
such suit, action or proceeding in the New York State Supreme Court, County of
New York, or in the United States District Court for the Southern District of
New York and agrees that service of process upon it mailed by certified mail to
its address shall be deemed in every respect effective service of process upon
it in any such suit, action or proceeding.
7.4 This Agreement shall inure to the benefit of and be binding
upon the successors and assigns of the Company. This Agreement shall not be
assignable by Executive, but shall inure to the benefit of and be binding upon
Executive's heirs and legal representatives.
7.5 Should any provision of this Agreement become legally
unenforceable, no other provision of this Agreement shall be affected, and this
Agreement shall continue as if the Agreement had been executed absent the
unenforceable provision.
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7.6 Executive represents that he is not prohibited or limited in
any way, pursuant to the terms of any employment, non-competition or similar
agreement, or otherwise, from entering into this Agreement and performing his
obligations hereunder.
IN WITNESS WHEREOF, the parties have executed this Agreement on the date
first above written.
SENTIGEN CORP.
/s/ Joseph K. Pagano
---------------------------------------------
By: Joseph K. Pagano, Chief Executive Officer
/s/ Kevin Lee
---------------------------------------------
KEVIN LEE
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STOCK OPTION AGREEMENT
[Employee Incentive Stock Option Agreement Under Plan]
AGREEMENT, dated March 29, 2000 by and between PRIME CELLULAR, INC. a
Delaware corporation (the "Company"), and Kevin J. Lee (the "Employee" or
"Holder").
WHEREAS, simultaneously herewith, Sentigen Corp., a wholly-owned subsidiary
of the Company, has entered into an Employment Agreement ("Employment
Agreement"), with Employee pursuant to which Employee is entitled to the grant
of an option to purchase an aggregate of 200,000 shares of the authorized but
unissued Common Stock of the Company, $.01 par value (the "Common Stock")
pursuant to the terms and conditions of the Company's 2000 Performance Equity
Plan (the "Plan") (capitalized terms used herein and not otherwise defined shall
have the meanings set forth in the Plan);
WHEREAS, pursuant to the terms and conditions of the Plan, the Board of
Directors of the Company or the Committee authorized the grant to the Employee
of the Option, conditioned upon the Employee's acceptance thereof upon the terms
and conditions set forth in this Agreement; and
WHEREAS, the Employee desires to acquire the Option on the terms and
conditions set forth in this Agreement;
IT IS AGREED:
1. Grant of Stock Option. The Company hereby grants Employee the Option to
purchase all or any part of an aggregate of 200,000 shares of Common Stock (the
"Option Shares") on the terms and conditions set forth herein and subject to the
provisions of the Plan.
2. Incentive Stock Option. Options to purchase up to 20,000 shares of
Common Stock in any one year period are intended to be Options that qualify as
"Incentive Stock Options" under Section 422 of the Internal Revenue Code of
1986, as amended (the "Code"), such amount being the maximum amount permitted by
such section.
3. Exercise Price. The exercise price of the Option shall be $5.00 per
share, subject to adjustment as hereinafter provided.
4. Exercisability. This Option shall vest and become exercisable in four
(4) equal annual installments, commencing on March 29, 2000, subject to the
terms and conditions of the Plan and this Agreement. After a portion of the
Option becomes exercisable, it shall remain exercisable except as otherwise
provided herein, until the close of business on March 29, 2005 ("Exercise
Period").
5. Withholding Tax. Not later than the date as of which an amount first
must be included in the gross income of Employee for Federal income tax purposes
with respect to the Option, Employee may be required to pay to the Company, or
make arrangements satisfactory to the Company regarding the payment of any
Federal, state and local taxes of any kind required by law to be withheld or
paid with respect to such amount. The obligations of the Company under the Plan
and pursuant to this Agreement shall be conditional upon such payments or
arrangements with the Company, if such payments or arrangements are required,
and the Company shall, to the extent permitted by law, have the right to deduct
any such taxes from any payment of any kind otherwise due to Employee from the
Company.
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6. Adjustments.
(a) In the event of a stock split, stock dividend, combination of
shares, or any other similar change in the Common Stock of the Company as a
whole, the Board of Directors of the Company shall make equitable, proportionate
adjustments in the number and kind of shares covered by the Option and in the
option price hereunder.
(b) In the event of any reclassification or reorganization of the
outstanding shares of Common Stock other than a change covered by subsection (a)
hereof or that solely affects the par value of such shares of Common Stock, or
in the case of any merger or consolidation of the Company with or into another
corporation (other than a consolidation or merger in which the Company is the
continuing corporation and that does not result in any reclassification or
reorganization of the outstanding shares of Common Stock), the Holder shall have
the right thereafter (until the expiration of the right of exercise of this
Option) to receive upon the exercise hereof after such event, for the same
aggregate Exercise Price payable hereunder immediately prior to such
reclassification, reorganization, merger or consolidation the amount and kind of
consideration receivable by a holder of the number of shares of Common Stock of
the Company obtainable upon exercise of this Option immediately prior to such
event. The provisions of this subsection (b) shall similarly apply to successive
reclassifications, reorganizations, mergers or consolidations, sales or other
transfers.
7. Effect of Termination of Employment.
(a) Termination Due to Death. If Employee's employment by the Company
terminates by reason of death, the portion of the Option, if any, that was
exercisable as of the date of death may thereafter be exercised by the legal
representative of the estate or by the legatee of the Employee under the will of
the Employee, for a period of one year from the date of such death or until the
expiration of the Exercise Period, whichever period is shorter. The portion of
the Option, if any, that was not exercisable as of the date of death shall
immediately expire.
(b) Termination Due to Disability. If Employee's employment by the
Company terminates by reason of disability (as such term is defined in the
Plan), the portion of the Option, if any, that was exercisable as of the date of
disability may thereafter be exercised by the Employee for a period of one year
from the date of such termination or until the expiration of the Exercise
Period, whichever period is shorter. The portion of the Option, if any, that was
not exercisable as of the date of termination shall immediately expire.
(c) Termination by the Company Without Cause and/or Due to Retirement.
If Employee's employment is terminated by the Company without "Cause" (as such
term is defined in the Employment Agreement) or due to the normal retirement of
Employee after his 65th birthday, then the portion of the Option that has vested
by the date of termination of employment may be exercised for a period of three
months from termination of employment or until the expiration of the Exercise
Period, whichever is shorter. The portion of the Option, if any, that was not
exercisable as of the date of termination of employment shall immediately
expire.
2
<PAGE>
8. Other Termination.
(a) If Employee's employment is terminated for any reason other than
(i) death, (ii) disability, or (iii) without "Cause" (as such term is defined in
the Employment Agreement) by the Company, the Option, whether or not then
exercisable, shall expire on the date of termination of employment.
(b) The Board of Directors of the Company or the Committee, in the
event the Employee's employment is terminated for "Cause" (as such term is
defined in the Employment Agreement), may require the Employee to return to the
Company the economic benefit of any Option Shares purchased hereunder by the
Employee within the six month period prior to the date of termination. In such
event, the Employee hereby agrees to remit to the Company, in cash, an amount
equal to the difference between the Fair Market Value (on the date of
termination) of the Option Shares so purchased by Employee (or the sales price
of such Option Shares if the Option Shares were sold during such six month
period) and the Exercise Price.
(c) Competing With the Company. In the event that after the term of
his employment with the Company, Employee engages in activities that violate the
prohibitions set forth in Section 5.4 of the Employment Agreement (even if such
provisions are deemed unenforceable by a court of law), the Committee, in its
sole discretion, may require such Employee to return to the Company the economic
value of any Option Shares purchased hereunder by the Employee within the
six-month period prior to the date of termination. In such event, Employee
agrees to remit the economic value to the Company in accordance with Section
8(b).
9. Method of Exercise.
(a) Notice to the Company. The Option may be exercised in whole or in
part by written notice in the form attached hereto as Exhibit A directed to the
Company at its principal place of business accompanied by full payment as
hereinafter provided of the exercise price for the number of Option Shares
specified in the notice.
(b) Delivery of Option Shares. The Company shall deliver a certificate
for the Option Shares to the Employee as soon as practicable after payment
therefor.
10. Payment of Purchase Price.
(a) Cash Payment. The Employee shall make cash payments by wire
transfer, certified or bank check or personal check, in each case payable to the
order of the Company. The Company shall not be required to deliver certificates
for Option Shares until the Company has confirmed the receipt of good and
available funds in payment of the purchase price thereof.
(b) Cashless Payment. The Company, in its sole discretion, may allow
Employee to use Common Stock of the Company owned by him to pay the purchase
price for the Option Shares by delivery of stock certificates in negotiable form
that are effective to transfer good and valid title thereto to the Company, free
of any liens or encumbrances. Shares of Common Stock used for this purpose shall
be valued at the Fair Market Value on the last trading day preceding the date of
exercise.
3
<PAGE>
(c) Payment of Withholding Tax. Any required withholding tax may be
paid in cash or with Common Stock in accordance with Sections 5, 10(a) and
10(b).
(d) Exchange Act Compliance. Notwithstanding the foregoing, the
Company shall have the right to reject payment in the form of Common Stock if in
the opinion of counsel for the Company, (i) it could result in an event of
"recapture" under Section 16(b) of the Securities Exchange Act of 1934, as
amended ("Exchange Act"); (ii) such shares of Common Stock may not be sold or
transferred to the Company; or (iii) such transfer could create legal
difficulties for the Company.
11. Nonassignability. The Option shall not be assignable or transferable,
without the consent of the Company, except by will or by the laws of descent and
distribution in the event of the death of the Employee. No transfer of the
Option by the Employee by will or by the laws of descent and distribution shall
be effective to bind the Company unless the Company shall have been furnished
with written notice thereof and a copy of the will and/or such other evidence as
the Company may deem necessary to establish the validity of the transfer and the
acceptance by the transferee or transferees of the terms and conditions of the
Option.
12. Company Representations. The Company hereby represents and warrants to
the Employee that:
(a) the Company, by appropriate and all required action, is duly
authorized to enter into this Agreement and consummate all of the transactions
contemplated hereunder; and
(b) the Option Shares, when issued and delivered by the Company to the
Employee in accordance with the terms and conditions hereof, will be duly and
validly issued and fully paid and non-assessable.
13. Employee Representations. The Employee hereby represents and warrants
to the Company that:
(a) he or she is acquiring the Option and shall acquire the Option
Shares for his or her own account and not with a view towards the distribution
thereof;
(b) he or she has received a copy of the Plan as in effect as of the
date of this Agreement;
(c) he or she has received a copy of all reports and documents
required to be filed by the Company with the Securities and Exchange Commission
pursuant to the Exchange Act within the last 24 months and all reports issued by
the Company to its stockholders;
(d) he or she understands that he or she must bear the economic risk
of the investment in the Option Shares, which cannot be sold by him unless they
are registered under the Securities Act of 1933, as amended (the "Securities
Act") or an exemption therefrom is available thereunder and that the Company is
under no obligation to register the Option Shares for sale under the Securities
Act;
(e) in his or her position with the Company, he or she has had both
the opportunity to ask questions and receive answers from the officers and
4
<PAGE>
directors of the Company and all persons acting on its behalf concerning the
terms and conditions of the offer made hereunder and to obtain any additional
information to the extent the Company possesses or may possess such information
or can acquire it without unreasonable effort or expense necessary to verify the
accuracy of the information obtained pursuant to clause (iii) above;
(f) he or she is aware that the Company shall place stop transfer
orders with its transfer agent against the transfer of the Option Shares in the
absence of registration under the Securities Act or an exemption therefrom as
provided herein; and
(g) the certificates evidencing the Option Shares shall bear the
following legends:
"The shares represented by this certificate have been acquired for
investment and have not been registered under the Securities Act of
1933. The shares may not be sold or transferred in the absence of such
registration or an exemption therefrom under said Act."
"The shares represented by this certificate have been acquired
pursuant to a Stock Option Agreement, dated as of March 29, 2000, a
copy of which is on file with the Company, and may not be transferred,
pledged or disposed of except in accordance with the terms and
conditions thereof."
14. Restriction on Transfer of Option Shares.
(a) Anything in this Agreement to the contrary notwithstanding,
Employee hereby agrees that he shall not sell, transfer by any means or
otherwise dispose of the Option Shares acquired by him without registration
under the Securities Act, or in the event that they are not so registered,
unless (i) an exemption from the Securities Act registration requirements is
available thereunder, and (ii) the Employee has furnished the Company with
notice of such proposed transfer and the Company's legal counsel, in its
reasonable opinion, shall deem such proposed transfer to be so exempt.
(b) Anything in this Agreement to the contrary notwithstanding,
Employee hereby agrees that he shall not sell, transfer by any means or
otherwise dispose of the Option Shares acquired by him except in accordance with
the Company's policy, if any, regarding the regarding the sale and disposition
of securities owned by employees and/or directors of the Company.
15. Miscellaneous.
(a) Notices. All notices, requests, deliveries, payments, demands and
other communications that are required or permitted to be given under this
Agreement shall be in writing and shall be either delivered personally or sent
by registered or certified mail, or by private courier, return receipt
requested, to the parties at their respective addresses set forth herein, or to
such other address as either shall have specified by notice in writing to the
other. Notice shall be deemed duly given hereunder when delivered or mailed as
provided herein.
(b) Plan Paramount; Conflicts with Plan. This Agreement and the Option
shall, in all respects, be subject to the terms and conditions of the Plan,
whether or not stated herein. In the event of a conflict between the provisions
5
<PAGE>
of the Plan and the provisions of this Agreement, the provisions of the Plan
shall in all respects be controlling.
(c) Employee and Stockholder Rights. Employee shall not have any of
the rights of a stockholder with respect to the Option Shares until such shares
have been issued after the due exercise of the Option. Nothing contained in this
Agreement shall be deemed to confer upon Employee any right to continued
employment with the Company or any subsidiary thereof, nor shall it interfere in
any way with the right of the Company or any subsidiary thereof to terminate
Employee in accordance with the provisions regarding such termination set forth
in Employee's written employment agreement, or if there exists no such
agreement, to terminate Employee at will.
(d) Waiver. The waiver by any party hereto of a breach of any
provision of this Agreement shall not operate or be construed as a waiver
of any other or subsequent breach.
(e) Entire Agreement. This Agreement constitutes the entire agreement
between the parties with respect to the subject matter hereof. This Agreement
may not be amended except by writing executed by the Employee and the Company.
(f) Binding Effect; Successors. This Agreement shall inure to the
benefit of and be binding upon the parties hereto and, to the extent not
prohibited herein, their respective heirs, successors, assigns and
representatives. Nothing in this Agreement, expressed or implied, is intended to
confer on any person other than the parties hereto and as provided above, their
respective heirs, successors, assigns and representatives, any rights, remedies,
obligations or liabilities.
(g) Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of New York (without regard to choice
of law provisions); provided, however, that all matters relating to or involving
corporate law shall be governed by the Delaware General Corporation Law.
(h) Headings. The headings contained herein are for the sole purpose
of convenience of reference and shall not in any way limit or affect the meaning
or interpretation of any of the terms or provisions of this Agreement.
THE NEXT PAGE IS THE SIGNATURE PAGE
6
<PAGE>
IN WITNESS WHEREOF, the parties hereto have signed this Agreement as of the
day and year first above written:
PRIME CELLULAR, INC. Address: 580 Marshall Street
Phillipsburg, New Jersey 08865
/s/ Joseph K. Pagano
By: ___________________________
Joseph K. Pagano
Chairman of the Board
and President
EMPLOYEE: Address: 601 West 113th Street
New York, New York 10025
/s/ Kevin Lee
______________________________
Kevin Lee
7
<PAGE>
EXHIBIT A
FORM OF NOTICE OF EXERCISE OF OPTION
- ----------------------------
DATE
PRIME CELLULAR, INC.
580 Marshall Street
Phillipsburg, New Jersey 08865
Attention: Stock Option Committee of
the Board of Directors
Re: Purchase of Option Shares
Gentlemen:
In accordance with my Stock Option Agreement dated as of March 29, 2000
("Agreement") with Prime Cellular, Inc. (the "Company"), I hereby irrevocably
elect to exercise the right to purchase _________ shares of the Company's common
stock, par value $.01 per share ("Common Stock"), which are being purchased for
investment and not resale.
As payment for my shares, enclosed is (check and complete applicable
box[es]):
|_| a [personal check] [certified check] [bank check] payable to the order
of the Company in the sum of $_________;
|_| confirmation of wire transfer in the amount of $_____________; and/or
|_| with the consent of the Company, a certificate for __________ shares
of the Company's Common Stock, free and clear of any encumbrances,
duly endorsed, having a Fair Market Value (as such term is defined in
the Company's 2000 Performance Equity Plan) of $_________.
I hereby represent and warrant to, and agree with, the Company that:
(i) I am acquiring the shares of Common Stock ("Option Shares") for my
own account, for investment, and not with a view towards the distribution
thereof;
(ii) I have received a copy of the Plan and all reports and documents
required to be filed by the Company with the Commission pursuant to the
Securities Exchange Act of 1934, as amended within the last 24 months and all
reports issued by the Company to its stockholders;
(iii) I understand that I must bear the economic risk of the
investment in the Option Shares, which cannot be sold by me unless they are
registered under the Securities Act of 1933, as amended (the "Securities Act")
or an exemption therefrom is available thereunder and that the Company is under
no obligation to register the Option Shares for sale under the Securities Act;
<PAGE>
(iv) I agree that I will not sell, transfer by any means or otherwise
dispose of the Option Shares acquired by me hereby except in accordance with
Company's policy, if any, regarding the sale and disposition of securities owned
by employees and/or directors of the Company;
(v) in my position with the Company, I have had both the opportunity
to ask questions and receive answers from the officers and directors of the
Company and all persons acting on its behalf concerning the terms and conditions
of the offer made hereunder and to obtain any additional information to the
extent the Company possesses or may possess such information or can acquire it
without unreasonable effort or expense necessary to verify the accuracy of the
information obtained pursuant to clause (ii) above;
(vi) I am aware that the Company shall place stop transfer orders with
its transfer agent against the transfer of the Option Shares in the absence
of registration under the Securities Act or an exemption therefrom as
provided herein;
(vii) my rights with respect to the Option Shares shall, in all
respects, be subject to the terms and conditions of the Company's 2000
Performance Equity Plan and this Agreement; and
(viii) the certificates evidencing the Option Shares shall bear the
following legends:
"The shares represented by this certificate have been acquired
for investment and have not been registered under the Securities
Act of 1933. The shares may not be sold or transferred in the
absence of such registration or an exemption therefrom under said
Act."
"The shares represented by this certificate have been acquired
pursuant to a Stock Option Agreement, dated as of March 29, 2000,
a copy of which is on file with the Company, and may not be
transferred, pledged or disposed of except in accordance with the
terms and conditions thereof."
Kindly forward to me my certificate at your earliest convenience.
Very truly yours,
- --------------------------------- -----------------------------------
(Signature) (Address)
- ---------------------------------- -----------------------------------
(Print Name)
-----------------------------------
(Social Security Number)
2
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY CONSOLIDATED FINANCIAL INFORMATION EXTRACTED FROM
FORM 10 Q AT MARCH 31, 2000 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH CONSOLIDATED FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-END> MAR-31-2000
<CASH> 20,284
<SECURITIES> 5,065,659
<RECEIVABLES> 491,964
<ALLOWANCES> 20,000
<INVENTORY> 176,235
<CURRENT-ASSETS> 5,911,330
<PP&E> 1,855,006
<DEPRECIATION> 726,543
<TOTAL-ASSETS> 7,591,231
<CURRENT-LIABILITIES> 874,921
<BONDS> 0
0
0
<COMMON> 60,787
<OTHER-SE> 5,575,044
<TOTAL-LIABILITY-AND-EQUITY> 7,591,231
<SALES> 944,427
<TOTAL-REVENUES> 944,427
<CGS> 530,083
<TOTAL-COSTS> 530,083
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 26,485
<INCOME-PRETAX> (98,260)
<INCOME-TAX> 0
<INCOME-CONTINUING> (98,260)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (98,260)
<EPS-BASIC> (.02)
<EPS-DILUTED> (.02)
</TABLE>
