SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934 (Amendment No. )
Filed by the registrant X
---
Filed by a party other than the registrant ____
Check the appropriate box:
___ Preliminary proxy statement ___ Confidential, For Use of
X the Commission Only (as
--- Definitive proxy statement permitted by Rule
___ Definitive additional materials Rule 14a-6(e)(2))
___ Soliciting material pursuant to
Rule 14a-12
PRIME CELLULAR, INC.
(Name of Registrant as Specified in Its Charter)
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
X No fee required.
---
___ Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rules 14-a-6(I)(1) and 0-11 (set forth the
amount on which the filing fee is calculated and state how it was
determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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Fee paid previously with preliminary materials:
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Check box if any part of the fee is offset as provided b Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the form or schedule and the date of its filing.
(1) Amount previously paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing party:
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(4) Date filed:
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<PAGE>
PRIME CELLULAR, INC.
580 Marshall Street
Phillipsburg, New Jersey 08865
--------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To be held June 23, 2000
--------------------
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of Prime
Cellular, Inc. ("Company") will be held at the offices of counsel to the
Company, Graubard Mollen & Miller, 600 Third Avenue, 32nd Floor, New York, New
York, on Friday, June 23, 2000, at 10:30 a.m. local time, for the following
purposes:
1. To elect six directors of the Company to hold office until the next
Annual Meeting of Stockholders and until their successors are elected and
qualified;
2. To approve the 2000 Performance Equity Plan;
3. To consider and vote upon a proposal to amend the Company's Certificate
of Incorporation to change the name of the Company from "Prime Cellular, Inc."
to "Sentigen Holding Corp."; and
4. To transact such other business as may properly come before the
meeting, or any or all postponement(s) or adjournment(s) thereof.
Only stockholders of record at the close of business on May 8, 2000, will
be entitled to notice of, and to vote at, the meeting and any postponement(s) or
adjournment(s) thereof.
You are urged to read the attached Proxy Statement, which contains
information relevant to the actions to be taken at the meeting. In order to
assure the presence of a quorum, whether or not you expect to attend the meeting
in person, please sign and date the accompanying Proxy Card and mail it promptly
in the enclosed addressed, postage prepaid envelope. You may revoke your proxy
if you so desire at any time before it is voted.
By Order of the Board of Directors
Joseph K. Pagano, President
New York, New York
May 26, 2000
<PAGE>
PRIME CELLULAR, INC.
------------------
PROXY STATEMENT
------------------
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE 23, 2000
This Proxy Statement and the enclosed form of proxy are furnished in
connection with solicitation of proxies by the Board of Directors of Prime
Cellular, Inc. ("Company") to be used at the Annual Meeting of Stockholders of
the Company to be held on June 23, 2000, and any postponements or adjournments
thereof ("Annual Meeting"). The matters to be considered at the Annual Meeting
are set forth in the attached Notice of Annual Meeting.
The proxy will be voted (or withheld from voting) in accordance with any
specifications made. Where no specifications are indicated, the proxies will
vote "FOR" the nominees for directors as described below under Proposal 1, "FOR"
the approval of the 2000 Performance Equity Plan (the "2000 Plan") as described
below under Proposal 2, "FOR" the approval of the amendment to the Company's
Certificate of Incorporation as described below under Proposal 3, and, in the
discretion of the proxy holders, on any other business properly coming before
the meeting and any postponement(s) or adjournment(s) thereof. A proxy may be
revoked by giving notice to the Secretary of the Company in person, or by
written notification actually received by the Secretary, at any time prior to
its being exercised.
The Company's executive offices are located at 580 Marshall Street,
Phillisburg, New Jersey 08865. This Proxy Statement and the enclosed form of
proxy are first being sent to stockholders on or about May 26, 2000.
VOTING SECURITIES
The Board of Directors has fixed the close of business on May 8, 2000, as
the record date for the determination of stockholders entitled to notice of, and
to vote at, the Annual Meeting. Only stockholders of record at the close of
business on that date will be entitled to vote at the Annual Meeting or any and
all postponement(s) or adjournment(s) thereof. As of May 8, 2000, the Company
had issued and outstanding 6,078,700 shares of Common Stock, the Company's only
class of voting securities outstanding. Each stockholder of the Company will be
entitled to one vote for each share of Common Stock registered in his, her or
its name on the record date. The presence, in person or by proxy, of a majority
of all of the outstanding shares of Common Stock constitutes a quorum at the
Annual Meeting. Proxies that are marked "abstain" and proxies relating to
"street name" shares that are returned to the Company but marked by brokers as
"not voted" will be treated as shares present for purposes of determining the
presence of a quorum on all matters but will not be treated as shares entitled
to vote on the matter as to which authority to vote is withheld by the broker
("broker non-votes").
The election of the directors requires a plurality vote of those shares of
Common Stock voted at the Annual Meeting with respect to the election of the
directors. "Plurality" means that the individual who receives the largest number
of votes cast "FOR" is elected as a director. Consequently, any shares of Common
Stock not voted "FOR" a particular nominee (whether as a result of a direction
to withhold authority or a broker non-vote) will not be counted in such
nominee's favor.
The 2000 Plan must be approved by the affirmative vote of a majority of the
votes cast at the meeting. Abstentions from voting with respect to the approval
of the 2000 Plan are counted as "votes cast" with respect to such proposal
and, therefore, have the same effect as a vote against the proposal. Shares
deemed present at the meeting but not entitled to vote on the 2000 Plan (because
of either stockholder withholding or broker non-vote) are not deemed "votes
cast" with respect to such proposal and therefore will have no effect on such
vote.
The approval of the amendment to the Certificate of Incorporation requires
the affirmative vote of a majority of the shares of common stock outstanding.
Abstentions from voting with respect to the amendment to the Certificate of
<PAGE>
Incorporation (which are considered present and entitled to vote) and shares
deemed present but not entitled to vote on this matter (because of a broker
nonvote), will have the effect of a negative vote with respect to such proposal.
All other matters to be voted on will be decided by the affirmative vote of
a majority of the shares of Common Stock present or represented at the Annual
Meeting and entitled to vote. On any such matter, an abstention will have the
same effect as a negative vote, but because shares of Common Stock held by
brokers will not be considered entitled to vote on matters as to which the
brokers withhold authority, a broker non-vote will have no effect on the vote.
The following table sets forth certain information as of May 8, 2000, with
respect to the Common Stock ownership of (i) those persons or groups known to
beneficially own more than 5% of the Company's voting securities, (ii) each
director and director-nominee of the Company, (iii) each current executive
officer whose compensation exceeded $100,000 in 1999, and (iv) all current
directors and executive officers of the Company as a group.
<TABLE>
Amount and Nature Percent of Class
Name of Beneficial Owner of Beneficial Ownership of Voting Securities
- ------------------------ ----------------------- --------------------
<S> <C> <C>
Frederick R. Adler 704,673(1) 11.31%
Brett Fialkoff -0- *
Thomas Livelli 276,000 4.54%
Richard Malavarca 180,000 2.96%
Joseph K. Pagano 1,313,950(2) 20.87%
Samuel A. Rozzi 467,525 7.69%
Robert A. Reinhart 52,500(3) *
D.H. Blair Investment
Banking corp. 1,124,859(4) 18.50%
All directors and executive
officers as a group 2,994,648(5) 46.8%
(seven persons)
</TABLE>
- ------------------------------
(*) Less than 1%.
(1) Includes options to purchase up to 150,000 shares of the Company's Common
Stock.
(2) Includes options to purchase up to 217,000 shares of the Company's Common
Stock.
(3) Represents options to purchase up to 52,500 shares of the Company's Common
Stock. Excludes options to purchase 12,500 shares of Common Stock which are
not presently exercisable.
(4) J. Morton Davis is an investment banker and sol stockholder of D.H. Blair
Investment Banking Corp. ("Blair"). The amount reported includes 8,500
shares owned by Mr. Davis' wife of which Mr. Davis disclaims beneficial
ownership. The information with respect to D.H. Blair Investment Banking
Corp. ("Blair") and J. Morton Davis is based upon Amendment No. 7, dated
May 1, 1996, to the Schedule 13D, dated January 31, 1992, filed by such
persons with the Securities and Exchange Commission. The Schedule 13D
states that Blair shares voting and investment power over 1,124,859 shares,
and Mr. Davis has sole voting and investment power over such 1,124,859
shares.
(5) Includes options to purchase up to an aggregate of 419,500 shares of the
Company's Common Stock. Excludes options to purchase 12,500 shares of
Common Stock which are not presently exercisable.
2
<PAGE>
PROPOSAL 1: ELECTION OF DIRECTORS
At this year's Annual Meeting of Stockholders, six (6) directors will be
elected to hold office for a term expiring at the next Annual Meeting of
Stockholders. Each director will be elected to serve until a successor is
elected and qualified or until the director's earlier resignation or removal.
At this year's Annual Meeting of Stockholders, the proxies granted by
stockholders will be voted individually for the election, as directors of the
Company, of the persons listed below, unless a Proxy specifies that it is not to
be voted in favor of a nominee for director. In the event any of the nominees
listed below shall be unable to serve, it is intended that the Proxy will be
voted for such other nominees as are designated by the Board of Directors. Each
of the persons named below has indicated to the Board of Directors of the
Company that he will be available to serve.
Name Age Position
- ---- --- --------
Joseph K. Pagano 54 President and Chairman of the Board
Thomas Livelli 47 Director and President and Chief Executive
Officer of CMT
Richard Malavarca 47 Director and Vice President of CMT
Frederick R. Adler 73 Director
Brett Fialkoff 33 Director
Samuel A. Rozzi 54 Director
Information About Nominees
Joseph K. Pagano has served as President of the Company since June 1994.
Mr. Pagano has also served as a director since 1991 and as Chairman of the Board
since June 1996 and as Chief Financial Officer from June 1994 until
July 1996. From 1991 until April 1999, he was engaged as a consultant to the
Company, commencing an employment relationship thereafter. Mr. Pagano has been a
private investor for more than the past five years.
Thomas Livelli has been a director of the Company since June 1998. He has
been the President and Chief Executive Officer of Cell & Mollecular
Technologies, Inc. ("CMT"), one of the Company's wholly-owned subsidiaries,
since 1997. He was also President of CMT's predecessor companies from 1987 until
1997. From January 1986 until July 1997, Mr. Livelli was a Laboratory Manager at
the Howard Hughes Medical Institute at Columbia University. Prior to 1986, Mr.
Livelli worked at Merck Research Laboratories ("Merck") and Cistron
Biotechnology ("Cistron"), directing their respective gene expression programs.
While at Cistron, Mr. Livelli was a Visiting Scholar at Columbia University. Mr.
Livelli maintains a part-time faculty appointment at Columbia University College
of Physicians & Surgeons in the Department of Neurobiology and Behavior.
Richard Malavarca has been a director of the Company since June 1998. He
has been Vice President of CMT and its predecessor companies since 1987 and
Chief Operating Officer of CMT since January 2000. Prior to May, 1987, Mr.
Malavarca worked at the Harvard Medical School, The Roche Institute for
Molecular Biology, Merck Research Laboratories and Cistron in basic research
involving developmental biology, molecular and cell biology.
3
<PAGE>
Frederick R. Adler has been a director of the Company since May 1996. Mr.
Adler is Managing Director of Adler & Company, a venture capital management firm
he organized in 1968, and a general partner of its related investment funds.
Since January 1, 1996, Mr. Adler has been of counsel to the law firm of
Fulbright & Jaworski L.L.P. and, for more than five years prior thereto, was a
senior partner in the firm. Mr. Adler is also Chairman of the Executive
Committee and a director of Data General Corporation, Chairman and director of
Shells Seafood Restaurants, Inc., and a director of USA Detergents, Inc., as
well as a director of various private companies. Mr. Adler is the Chairman of
Intercoastal Health Systems, Inc. (Palm Beach, FL) and a member of the Board of
Managers of Memorial Sloan-Kettering Cancer Center (New York, NY). Mr. Adler is
also a member of the Dean's Advisory Board of the Harvard Law School (Cambridge,
MA).
Brett Fialkoff has been a director of the Company since February 2000.
Since 1993, Mr. Fialkoff has been associated with Performance Capital, LP, a
broker-dealer, and certain of its affiliates.
Samuel A. Rozzi has been a director of the Company, most recently since
January 1997. He previously served as a director of the Company from 1991 until
June 1996. Mr. Rozzi has been the President of Corporate National Realty, Inc.,
a corporate real estate brokerage and services firm, since September 1988.
Other Executive Officer
Robert A. Reinhart has served as Chief Financial Officer and Vice President
- - Finance of the Company since July 1996, and as Treasurer/Secretary since May
1997. Mr. Reinhart served as Vice President, Finance and Chief Executive Officer
for Bern Communications, Inc. from July 1996 until its dissolution in 1998.
Prior thereto, Mr. Reinhart served as the Chief Operating Officer and Chief
Financial Officer of DeBoles Nutritional Foods, Inc. from 1992 until 1996. Prior
to being engaged by De Boles Nutritional Foods, Inc. in 1992, Mr. Reinhart was a
senior manager/engagement executive with a certified public accounting firm.
Mr. Reinhart is a certified public accountant.
Board of Directors' Meetings and Committees
During 1999, the Board of Directors did not meet in person in 1999, but
acted by unanimous written consent five times.
The audit committee was established in April 2000 and is currently
comprised of Frederick R. Adler, Samuel A. Rozzi and Brett Fialkoff. The
responsibilities of the audit committee include, in addition to other duties
specified in their Charter and as the Board may specify, (i) reviewing and
reassessing the adequacy of their Charter annually and recommending any proposed
changes to the Board for approval; (ii) reviewing the annual audited financial
statements with management, including major issues regarding accounting and
auditing principles and practices as well as the adequacy of internal controls
that could significantly affect the Company's financial statements; (iii)
reviewing an analysis prepared by management and the independent auditor of
significant financial reporting issues and judgments made in connection with the
preparation of the Company's financial statements; (iv) meeting periodically
with management to review the Company's major financial risk exposures and the
steps management has taken to monitor and control such exposures; (v) reviewing
major changes to the Company's auditing and accounting principles and practices
as suggested by the independent auditor, internal auditors or management; (vi)
recommending to the Board the appointment of the independent auditor; and (vii)
reviewing all related party transactions on an ongoing basis for potential
conflict of interest situations.
The Company does not have a standing nominating or compensation committee.
Directors receive no cash compensation for serving on the Board of
Directors or for attending Board or Committee meetings.
4
<PAGE>
Executive Compensation
The following table discloses the compensation awarded by the Company to
(i) each of the President and Chief Financial Officer of the Company for the
twelve (12) month period ended December 31, 1999, for the period from June 1,
1998 until December 31, 1998 (the "Stub Period") and for the twelve (12) month
period ended May 31 in each of the two fiscal years May 31, 1998 and 1997, and
(ii) the President and Vice President of CMT (with the President and Chief
Financial Officer of the Company, hereinafter collectively referred to as the
"Named Executives") for the twelve (12) month period ended December 31 in each
of the three fiscal years ended December 31, 1999, 1998 and 1997. During the
most recent twelve (12) month period ended December 31, 1999, no other executive
officer of the Company received a total salary and bonus that exceeded $100,000
during such twelve (12) month period.
SUMMARY COMPENSATION TABLE
<TABLE>
Long-Term and
Name and Principal Position Year Salary Bonus Other Compensation
- --------------------------------- --------------- --------------- ---------------- --------------------------------
<S> <C> <C> <C> <C>
Joseph K. Pagano 1999 $ 51,495(1) - $ 29,638(1)
President and Chairman Stub Period - - 43,750(2)
of the Board 1998 - - 75,000
1997 - - 75,000
Robert A. Reinhart 1999 $128,887 - -
Chief Financial Officer, Stub Period 70,369(2) - -
Vice President, Treasurer 1998 125,000 - Options(3)
and Secretary 1997 86,000(4) $25,000 Options(5)
Thomas Livelli 1999(6) $151,885 - -
President and Chief 1998(6) 138,462(7) - -
Executive Officer of CMT 1997(6) 63,462 $181,000 -
Richard Malavarca 1999(6) $101,769 - -
Vice President and 1998(6) 88,961 - -
Chief Operating Officer of CMT 1997(6) 80,444 - -
</TABLE>
- ---------------------------
(1) Mr. Pagano became President of the Company on June 15, 1994. Mr. Pagano
received a consulting fee of $75,000 per annum until May 1999, at which
time he became an employee of the Company at a salary of $85,000 per annum.
(2) Reflects the respective compensation or consulting fee, as the case may be,
of the Named Executive, prorated for the seven-month Stub Period. Following
the merger with CMT ("CMT Merger"), the Company adopted the calendar fiscal
year of CMT. The Company previously operated under a fiscal year ended May
31st.
(3) On April 20, 1998, the Company granted Mr. Reinhart incentive stock options
to purchase up to 25,000 shares of the Common Stock of the Company at $2.25
per share, which options vested in two equal installments on each of April
20, 1999 and April 20, 2000.
(4) Reflects Mr. Reinhart's salary rate of $100,000 for the year ended May 31,
1997, prorated from July 22, 1996, when he was elected Chief Financial
Officer of the Company.
(5) On October 25, 1996, the Company granted Mr. Reinhart incentive stock
options to purchase up to 40,000 shares of the Common Stock of the Company
at $2.50 per share, which options became immediately exercisable on the
date of grant. Such options were subsequently re-priced on January 16,
1998, to an exercise price of $0.75 (the fair market value of the Common
Stock at such time).
5
<PAGE>
(6) Reflects salary paid for the calendar years ended December 31, 1998 and
1997. Because the Company adopted as its fiscal year CMT's calendar year at
the time of the CMT Merger, no Stub Period calculation is required when
disclosing the compensation paid to CMT's executive officers.
(7) Reflects Mr. Livelli's (i) effective salary rate of $135,000 (as amended at
May 29, 1998 following the CMT Merger) for the year ended December 31,
1998, prorated from May 29, 1998, when he was elected President of CMT in
conjunction with the CMT Merger, and (ii) effective salary rate of $150,000
for the year ended December 31, 1998, prorated for the five months ended
May 29, 1998.
Compensation Arrangements for Current Executive Officers
In conjunction with the CMT Merger, the Company assumed the employment
agreement with Thomas J. Livelli, pursuant to which Mr. Livelli served as
President and Chief Executive Officer of CMT through May 22, 2000. Mr. Livelli
is currently serving under an automatic renewal provision of his employment
agreement until May 22, 2001. The employment agreement provides for an annual
base compensation of $135,000. The employment agreement provides for Mr.
Livelli's employment on a full-time basis and contains a provision that the
employee will not compete with the Company during the term of the employment
agreement and for a period of one year thereafter.
On May 24, 1999, the Company entered into an employment agreement with
Joseph K. Pagano to serve as the President of the Company, replacing the
consulting agreement that the Company had with Mr. Pagano. The agreement was for
an initial term of one year. Mr. Pagano is currently serving under an automatic
renewal provision in his employment agreement, which provides for one year
extensions upon the expiration of each one year term if no notice is given by
the Company or Mr. Pagano that such party desires not to extend the employment
agreement. The employment agreement provides for an annual base compensation of
$85,000. In connection with the employment agreement, the termination date of
217,000 options previously granted to Mr. Pagano under the 1990 Plan were
extended an additional three years to May 24, 2004. Mr. Pagano's employment is
not on a full-time basis.
6
<PAGE>
Option Grants
The following table summarizes the number of exercisable and unexercisable
options held by the Named Executives at December 31, 1999 and their value at
that date if such options were in-the-money:
AGGREGATED FISCAL YEAR END OPTION VALUES
<TABLE>
Number of Securities
Name Underlying Unexercised Dollar Value of Unexercised in-the-
Options at December 31, 1999 Money Options at December 31, 1999(1)
--------------------------------- ------------------------------------
Name Exercisable (#) Unexerciable (#) Exercisable ($) Unexercisable($)
- ------------------------- --------------- --------------- -------------- -----------------
<S> <C> <C> <C> <C>
Joseph K. Pagano 217,000(2) -0- 81,375 -0-
Robert A. Reinhart 52,500(3) 12,500(4) 50,000 -0-
</TABLE>
- -----------------------------
(1) Year-end values for unexercised in-the-money options represent the positive
spread between the exercise price of such options and the fiscal year-end
market value of the common stock. An option is "in-the-money" if the
fiscal year-end fair market value of the Common Stock exceeds the option
exercise price. At December 31, 1999, the closing price per share of the
Common Stock as reported by the OTC Bulletin Board was $2.00.
(2) Stock options granted by the board of directors as of May 14, 1996 under
the Company's 1990 Plan having an exercise price of $1.625 per share,
which options became immediately vested and exercisable from the date of
grant and, as amended, expire May 14, 2004.
(3) Incentive stock options granted pursuant to agreements dated October 25,
1996 and April 20, 1998 of which 40,000 options have an exercise price of
$2.50 per share and 12,500 of which are exercisable at $2.25 per share.
Options to purchase 40,000 shares of common stock became immediately vested
and exercisable from the date of grant and expire October 25, 2001. Such
options were subsequently re-priced on January 16, 1998, to $0.75 per share
(the fair market value of the Common Stock at such time). The remaining
12,500 options became exercisable one year from the grant date and expire
five (5) years after the grant date.
(4) Incentive stock options granted pursuant to agreement dated April 20, 1998,
having an exercise price of $2.25 per share, which options vest on April
20, 2000 and expire five (5) years after the date of grant.
No options were granted to the Named Executives during the fiscal year
ended December 31, 1999.
Stock Plans
The Company has two stock option plans: the 1990 Plan and the 2000 Plan
(the "Plans"). The 1990 Plan provides for grants of options to purchase up to
1,000,000 shares of Common Stock and the 2000 Plan provides for grants of
options to purchase up to 2,000,000 shares of Common Stock. Under the Plans,
options may be granted to employees, directors, consultants, agents and other
persons deemed valuable to the Company or any of its subsidiaries. The Plans
permit the Board of Directors or the Committee to issue incentive stock options
("ISOs"), 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 than 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 or any subsidiary (a "10% Stockholder"),
the exercise price may not be less than 110% of such fair market value. The
exercise price of each non-ISO also may not be less than 100% of the fair market
value of the Common Stock at the time of grant.
Under the 1990 Plan, options may not be exercised prior to the first
anniversary, or on or after the tenth anniversary (fifth anniversary in the case
of an ISO granted to a 10% Stockholder) of their grant. Options may not be
transferred during the lifetime of the option holder. No stock options may be
granted under the 1990 Plan after May 25, 2000.
7
<PAGE>
Under the 2000 Plan, the Board of Directors may award stock appreciation
rights, restricted stock, deferred stock, stock reload options and other
stock-based awards in addition to stock options. The Plans are 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 Plans, the Board of
Directors or such Committee have the authority to determine the individuals to
whom the stock options are to be granted, the number of 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. Under the 2000 Plan, no more
than 200,000 shares in the aggregate may be granted to any one holder in any one
calendar year. For more details regarding the 2000 Plan see the description
of the 2000 Plan set forth under Proposal 2.
The 2000 Plan is being submitted to the Stockholders of the Company for
approval pursuant to this proxy statement. If the 2000 Plan is not approved by
the stockholders as required under Sections 422 and 162(m) of the Code, the 2000
Plan shall be deemed amended to eliminate any potential flexibility or benefits
which the Company and the participants might have had under such sections.
At December 31, 1999, options to purchase an aggregate of 384,630 shares of
the Company's Common Stock were outstanding under the 1990 Plan. The 2000 Plan
was not adopted by the Board of Directors until April 25, 2000. Accordingly, no
options were outstanding under the 2000 Plan at December 31, 1999.
The Company from time to time has also granted non-plan options to certain
officers, employees and consultants. Non-plan options to purchase an aggregate
of 308,000 shares of the Company's Common Stock were outstanding at December 31,
1999.
REPORT ON EXECUTIVE COMPENSATION
Report of the Board of Directors Concerning Compensation of Executive Officers
As noted above, the Company did not have a Compensation Committee of the
Board of Directors during the 1999 fiscal year. Compensation of the Company's
executive officers for the fiscal year ended December 31, 1999 was determined by
the Board of Directors. There is no formal compensation policy for the Company's
executive officers.
Joseph K. Pagano, who served as the Company's President during the year
ended December 31, 1999, was paid as a consultant, at an annual rate of $75,000,
until May 24, 1999. On May 24, 1999, the Consulting Agreement was terminated and
Mr. Pagano entered into an employment agreement with the Company, providing for
a base salary of $85,000 per annum.
8
<PAGE>
Total compensation for executive officers consist of a combination of
salaries and stock option awards. Base salary of executive officers who do not
have employment agreements is based on the Company's financial performance and
the executive's individual performance and level of responsibility. Bonus
compensation, if any, to executive officers is based generally upon the
Company's financial performance and the availability of resources as well as the
executive officer's individual performance and level of responsibility. The
Company did not pay any bonus compensation during the year ended December 31,
1999.
Stock option awards under the Company's 1990 Plan and the 2000 Plan are
intended to attract and retain the best available talent and encourage the
highest level of performance by affording key employees an opportunity to
acquire proprietary interests in the Company. No stock options were granted to
executive officers of the Company during the fiscal year ended December 31,
1999.
Joseph K. Pagano
Frederick R. Adler
Thomas Livelli
Richard Malavarca
Samuel A. Rozzi
Brett Fialkoff
Compensation Committee Interlocks and Insider Participation
The Company did not have a Compensation Committee of its Board of Directors
during fiscal 1999. Decisions as to compensation during fiscal 1999 were made by
the Company's Board of Directors. Mr. Pagano, who is an officer of the Company,
and Messrs. Livelli and Malavarca, who are officers of CMT, served as members of
the Board of Directors during fiscal 1999. No other executive officer of the
Company served as a member of the Compensation Committee of any other entity
during fiscal 1999.
Stock Price Performance Graph
The graph below compares the cumulative total return of the Company's
Common Stock from May 28, 1994 (the last trading day before the beginning of the
Company's fifth preceding fiscal year) through May 31, 1998, the subsequent
seven (7) month stub period ended December 31, 1998 (reflecting the adoption by
the Company of a calendar fiscal year in connection with the CMT Merger) and
from January 1, 1999 through December 31, 1999 with the cumulative total
return of companies comprising the Nasdaq Market Index and a Market
Capitalization Peer Group Index. The graph plots the growth in value of an
initial $100 investment over the indicated time periods, and assuming
reinvestment of all dividends, if any, paid on such securities. The Company has
not paid any cash dividends and, therefore, the cumulative total return
calculation for the Company is based solely upon stock price appreciation and
not upon reinvestment of cash dividends. The stock price performance shown on
the graph is not necessarily indicative of future price performance.
Market Capitalization Peer Group Index represents companies with market
capitalization similar to the Company's and consists of the following companies:
ASTA Funding Inc., Disc, Inc., Guardian Technologies International, Inc., Harvey
Electronics, Inc., J2 Communications, Kyzen Corporation Class A, MPSI Systems
Inc., Olympic Cascade Financial Corporation, Premier Concepts Inc. and
Thermacell Technologies, Inc. Management believes that a comparison to a peer
group of companies on any published industry or line-of-business bases would be
inaccurate and misleading in light of the CMT Merger and the diversity of the
Company's business operations over the past five years. Hollywood Productions
Inc., was included as part of the Company's peer group for the Company's 1999
Proxy Statement, however, such Company has changed the focus of its business and
is not included in the peer group for purposes of this graph.
<TABLE>
Cumulative Total Return
5/94 5/95 5/96 5/97 5/98 12/98 12/99
--------- ---------- ---------- ---------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
PRIME CELLULAR, INC. 100.00 107.14 678.57 150.00 153.57 57.14 114.29
PEER GROUP 100.00 95.45 73.31 35.63 24.22 14.96 36.67
NASDAQ STOCK MARKET (U.S.) 100.00 118.92 172.84 194.74 247.03 309.91 574.46
</TABLE>
9
<PAGE>
Certain Transactions
In October 1998, the Company entered into a 180-day note payable agreement
with a bank for a maximum of $200,000, which note is collateralized by a
$200,000 certificate of deposit as well as a personal guarantee of Joseph K.
Pagano, the President and Chairman of the Board of the Company. In December
1998, the bank advanced the Company $160,000 under this agreement. The note was
completely repaid during 1999.
On May 29, 1998, the Company consummated the CMT Merger pursuant to which a
wholly-owned subsidiary of Prime merged with and into CMT. Under the terms of
the CMT Merger, all of the outstanding shares of capital stock of CMT were
converted into an aggregate of 1,611,000 shares of the Company's Common Stock
representing approximately 26.4% (after consummation of the CMT Merger) of the
Company's issued and outstanding Common Stock. Of the shares issued pursuant to
the CMT Merger, 393,000 and 202,500 shares of the Company's Common Stock were
issued to Joseph K. Pagano, the President and Chairman of the Board of the
Company, and Frederick R. Adler, a director of the Company, respectively, each
of whom was a stockholder of CMT at the time of the CMT Merger.
At the time of the CMT Merger, there were loans outstanding from CMT to six
of its shareholders, in the aggregate principal amount of $500,000, as evidenced
by promissory notes from CMT to each such shareholder. Messrs. Pagano and Adler
were among these shareholders and, at the time of the CMT Merger, held
promissory notes in the principal amounts of $218,333 and $112,500,
respectively. These notes currently bear interest at a rate of 5% and mature May
1, 2001.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's officers, directors and persons who beneficially own more than ten
percent of a registered class of the Company's equity securities ("ten-percent
stockholders") to file reports of ownership and changes in ownership with the
Securities and Exchange Commission. Officers, directors and ten-percent
stockholders also are required to furnish the Company with copies of all Section
16(a) forms they file. Based solely on its review of the copies of such forms
furnished to it, and written representations that no other reports were
required, the Company believes that during the Company's fiscal year ended
December 31, 1999, all its officers, directors and ten-percent stockholders
complied with the Section 16(a) reporting requirements, except that Mr. Pagano,
a director and officer of the Company, filed a Form 4 late.
PROPOSAL 2: TO APPROVE THE
2000 PERFORMANCE EQUITY PLAN
On April 25, 2000, the Board of Directors adopted the 2000 Plan. The 2000
Plan is being submitted to the stockholders of the Company for approval;
provided that, if the 2000 Plan is not approved by the stockholders as required
under Sections 422 and 162(m) of the Code, the Plan shall be deemed amended to
eliminate any potential flexibility or benefits which the Company and
participants might have had under such sections. The Board of Directors believes
that in order to continue to attract and retain directors, officers, employees
and consultants of the highest caliber, provide increased incentive and to
continue to promote the well-being of the Company, it is in the best interest of
the Company and its stockholders to provide directors, officers, employees and
consultants of the Company an opportunity to acquire a proprietary interest in
the Company.
Summary of the 2000 Plan
Administration
The 2000 Plan is administered by the Board or, at its discretion, by the
Company's Stock Option Committee or such other committee as may be designated by
the Board (the "Committee"). All references herein to "Committee" shall mean the
Committee or the Board. The Committee has full authority, subject to the
provisions of the 2000 Plan, to award (i) Stock Options, (ii) Stock Appreciation
Rights, (iii) Restricted Stock, (iv) Deferred Stock, (v) Stock Reload Options
and/or (vi) Other Stock-Based Awards (collectively, "Awards"). Subject to the
provisions of the 2000 Plan, the Committee determines, among other things, the
persons to whom from time to time Awards may be granted ("Holders"), the
specific type of Awards to be granted (e.g., Stock Options, Restricted Stock),
the number of shares subject to each Award, share prices, any restrictions or
limitations on such Awards (e.g., the "Deferral Period" in the grant of Deferred
Stock and the "Restriction Period" when Restricted Stock is subject to
forfeiture), and any vesting, exchange, deferral, surrender, cancellation,
acceleration, termination, exercise or forfeiture provisions related to such
Awards.
10
<PAGE>
Stock Subject to the 2000 Plan
The 2000 Plan authorizes the granting of Awards whose exercise would allow
up to an aggregate of 2,000,000 shares of Common Stock to be acquired by the
Holders of such Awards. In order to prevent the dilution or enlargement of the
rights of Holders under the 2000 Plan, the Committee, in its sole discretion,
may adjust the terms of any Award or the number of shares of Common Stock
authorized by the 2000 Plan, in the event of any increase or decrease in the
number of shares of outstanding Common Stock resulting from a stock split of
Common Stock, reverse stock split of Common Stock, stock dividend payable on
shares of Common Stock, combination or exchange of Common Stock, or other
extraordinary or unusual event relating to the Common Stock occurring after the
grant of an Award which results in a change in the shares of Common Stock as a
whole. If any Award granted under the 2000 Plan is forfeited or terminated prior
to exercise, the shares of Common Stock that were available pursuant to such
Award shall again be available for distribution in connection with Awards
subsequently granted under the 2000 Plan. Notwithstanding any other provision
of the 2000 Plan, the Committee will not grant to any one Holder in any one
calendar year awards for more than 200,000 shares of Common Stock in the
aggregate.
Eligibility
Subject to the provisions of the 2000 Plan, Awards may be granted to key
employees, officers, directors and consultants who are deemed to have rendered
or to be able to render significant services to the Company and who are deemed
to have contributed or to have the potential to contribute to the success of the
Company. Incentive Stock Options, as hereinafter defined, may be awarded only to
persons who, at the time of grant of such awards, are employees of the Company.
Types of Awards
Options. The 2000 Plan provides both for "Incentive" stock options
("Incentive Stock Options") as defined in Section 422 of the Internal Revenue
Code of 1986, as amended (the "Code"), and for options not qualifying as
Incentive Options ("Non-Qualified Stock Options"), both of which may be granted
with any other stock-based award under the 2000 Plan. The Committee determines
the exercise price per share of Common Stock purchasable under an Incentive or
Non-Qualified Stock Option (collectively, "Stock Options"). The exercise price
of Stock Options may not be less than 100% of the fair market value on the day
of the grant (or, in the case of an Incentive Stock Option granted to a person
possessing more than 10% of the total combined voting power of all classes of
stock of the Company, not less than 110% of such fair market value). In the case
of an Incentive Stock Option, the aggregate fair market value (on the date of
grant of the Stock Option) with respect to which Incentive Stock Options become
exercisable for the first time by a Holder during any calendar year shall not
exceed $100,000. An Incentive Stock Option may only be granted within a ten-year
period from the date the 2000 Plan is adopted and approved and may only be
exercised within ten years from the date of the grant (or within five years in
the case of an Incentive Stock Option granted to a person who, at the time of
the grant, owns Common Stock possessing more than 10% of the total combined
voting power of all classes of stock of the Company). Subject to any limitations
or conditions the Committee may impose, Stock Options may be exercised, in whole
or in part, at any time during the term of the Stock Option by giving written
notice of exercise to the Company specifying the number of shares of Common
Stock to be purchased. Such notice must be accompanied by payment in full of the
purchase price, either in cash or, if provided in the agreement, in securities
of the Company, or in combination thereof.
Stock Options granted under the 2000 Plan may not be transferred other than
by will or by the laws of descent and distribution and all Stock Options shall
be exercisable during the Holder's lifetime, only by the Holder (or in the event
of legal incapacity or incompetency, the Holder's guardian or legal
representative).
Generally, if the Holder is an employee, no Stock Options, or any portion
thereof, granted under the 2000 Plan may be exercised by the Holder unless he or
she is employed by the Company or a subsidiary at the time of the exercise and
has been so employed continuously from the time the Stock Options were granted.
However, in the event the Holder's employment with the Company is terminated due
to disability, the Holder may still exercise his or her vested Stock Options for
a period of one year (or such other greater or lesser period as the Committee
may specify at the time of grant) from the date of such termination or until the
expiration of the stated term of the Stock Option, whichever period is shorter.
11
<PAGE>
Similarly, should a Holder die while in the employment of the Company or a
subsidiary, his or her legal representative or legatee under his or her will may
exercise the decedent Holder's vested Stock Options for a period of one year
from the date of his or her death (or such other greater or lesser period as the
Committee specifies at the time of grant) or until the expiration of the stated
term of the Stock Option, whichever period is shorter. If the Holder's
employment is terminated for any reason other than death or disability, the
Stock Option shall automatically terminate, except that if the Holder's
employment is terminated by the Company without cause or due to normal
retirement (upon attaining the age of 65), then the portion of any Stock Option
that has vested on the date of termination may be exercised for the lesser of
three months after termination or the balance of the Stock Option's term.
Stock Appreciation Rights. The Committee may grant Stock Appreciation
Rights ("SARs" or singularly "SAR") to Participants who have been, or are being,
granted Stock Options under the 2000 Plan as a means of allowing such
Participants to exercise their Stock Options without the need to pay the
exercise price in cash. In conjunction with Non-Qualified Stock Options, SARs
may be granted either at or after the time of the grant of such Non-Qualified
Stock Options. In conjunction with Incentive Stock Options, SARs may be granted
only at the time of the grant of such Incentive Stock Options. An SAR entitles
the Holder to receive a number of shares of common stock having a fair market
value equal to the excess fair market value of one share of common stock over
the exercise price of the related Stock Option, multiplied by the number of
shares subject to the SAR. The granting of an SAR will not affect the number of
shares of Common Stock available for awards under the 2000 Plan. The number of
shares available for awards under the 2000 Plan will, however, be reduced by the
number of shares of Common Stock acquirable upon exercise of the Stock Option to
which the SAR relates.
Restricted Stock. The Committee may award shares of restricted stock
("Restricted Stock") either alone or in addition to other Awards granted under
the 2000 Plan. The Committee determines the persons to whom grants of Restricted
Stock are made, the number of shares to be awarded, the price (if any) to be
paid for the Restricted Stock by the person receiving such stock from the
Company, the time or times within which awards of Restricted Stock may be
subject to forfeiture (the "Restriction Period"), the vesting schedule and
rights to acceleration thereof, and all other terms and conditions of the
Restricted Stock awards.
Restricted Stock awarded under the 2000 Plan may not be sold, exchanged,
assigned, transferred, pledged, encumbered or otherwise disposed of other than
to the Company during the applicable Restriction Period. Other than regular cash
dividends and other cash equivalent distributions as the Committee may
designate, pay or distribute, the Company will retain custody of all
distributions ("Retained Distributions") made or declared with respect to the
Restricted Stock during the Restriction Period. A breach of any restriction
regarding the Restricted Stock will cause a forfeiture of such Restricted Stock
and any Retained Distributions with respect thereto. Except for the foregoing
restrictions, the Holder shall, even during the Restriction Period, have all of
the rights of a shareholder, including the right to receive and retain all
regular cash dividends and other cash equivalent distributions as the Committee
may designate, pay or distribute on such Restricted Stock and the right to vote
such shares.
In order to enforce the foregoing restrictions, the 2000 Plan requires that
all shares of Restricted Stock awarded to the Holder remain in the physical
custody of the Company until the restrictions on such shares have terminated and
all vesting requirements with respect to the Restricted Stock have been
fulfilled.
Deferred Stock. The Committee may award shares of deferred stock ("Deferred
Stock") either alone or in addition to other Awards granted under the 2000 Plan.
The Committee determines the eligible persons to whom, and the time or times at
which, Deferred Stock will be awarded, the number of shares of Deferred Stock to
be awarded to any person, the duration of the period (the "Deferral Period")
during which, and the conditions under which, receipt of the stock will be
deferred, and all the other terms and conditions of such Deferred Stock Awards.
Deferred Stock awards granted under the 2000 Plan may not be sold,
exchanged, assigned, transferred, pledged, encumbered or otherwise disposed of
other than to the Company during the applicable Deferral Period. The Holder
shall not have any rights of a shareholder until the expiration of the
applicable Deferral Period and the issuance and delivery of the certificates
representing such Common Stock. The Holder may request to defer the receipt of a
Deferred Stock award for an additional specified period or until a specified
event. Such request must generally be made at least one year prior to the
expiration of the Deferral Period for such Deferred Stock award.
Stock Reload Options. The Committee may grant Stock Reload Options to a
Holder who tenders shares of Common Stock to pay the exercise price of a Stock
Option ("Underlying Option") or arranges to have a portion of the shares
otherwise issuable upon exercise withheld to pay the applicable withholding
taxes. A Stock Reload Option permits a Holder, who exercises a Stock Option by
delivering stock owned by the Holder for a minimum of six months, to receive
back from the Company a new Stock Option or pay withholding taxes for the
same number of shares delivered to exercise the Option. The Committee determines
the terms, conditions, restrictions and limitations of the Stock Reload Options.
12
<PAGE>
The exercise price of Stock Reload Options shall be the fair market value as of
the date of exercise of the Underlying Option. Unless the Committee determines
otherwise, a Stock Reload Option may be exercised commencing one year after it
is granted and expires on the expiration date of the Underlying Option.
Stock Reload Options. The Committee may grant Stock Reload Options to a
Holder who tenders shares of Common Stock to pay the exercise price of a Stock
Option ("Underlying Option") or arranges to have a portion of the shares
otherwise issuable upon exercise withheld to pay the applicable withholding
taxes. A Stock Reload Option permits a Holder, who exercises a Stock Option by
delivering stock owned by the Holder for a minimum of six months, to receive
back from the Company a new Stock Option for the same number of shares delivered
to exercise the Option or pay withholding taxes. The Committee determines the
terms, conditions, restrictions and limitations of the Stock Reload Options. The
exercise price of Stock Reload Options shall be the fair market value as of the
date of exercise of the Underlying Option. Unless the Committee determines
otherwise, a Stock Reload Option may be exercised commencing one year after it
is granted and expires on the expiration date of the Underlying Option.
Other Stock-Based Awards. The Committee may grant Other Stock-Based Awards,
subject to limitations under applicable law, that are denominated or payable in,
valued in whole or in part by reference to, or otherwise based on, or related
to, shares of Common Stock, as deemed by the Committee to be consistent with the
purposes of the 2000 Plan, including purchase rights, shares of Common Stock
awarded which are not subject to any restrictions or conditions, convertible or
exchangeable debentures or other rights convertible into shares of Common Stock
and awards valued by reference to the value of securities of or the performance
of specified subsidiaries. Subject to the terms of the 2000 Plan, the Committee
has complete discretion to determine the terms and conditions applicable to
Other Stock-Based Awards. Other Stock-Based Awards may be awarded either alone
or in addition to or in tandem with any other awards under the 2000 Plan or any
other plan of the Company.
Competition with the Company
If a Holder's employment with the Company or a subsidiary is terminated for
any reason whatsoever, and within 18 months after the date thereof such Holder
accepts employment with any competitor of, or otherwise engages in competition
with, the Company, the Committee, in its sole discretion, may require such
Holder to return to the Company the economic value of any award that was
realized or obtained by such Holder at any time during the period beginning on
that date that is six months prior to the date such Holder's employment with the
Company is terminated.
Withholding Taxes
Upon the exercise of any Award granted under the 2000 Plan, the Holder may
be required to remit to the Company an amount sufficient to satisfy all federal,
state and local withholding tax requirements prior to delivery of any
certificate or certificates for shares of Common Stock. Subject to certain
stringent limitations under the 2000 Plan and at the discretion of the Company,
the Holder may satisfy these requirements by electing to have the Company
withhold a portion of the shares to be received upon the exercise of the Award
having a value equal to the amount of the withholding tax due under applicable
federal, state and local laws.
Agreements
Stock Options, Restricted Stock, Deferred Stock, Stock Reload Options,
Other Stock-Based Awards and SARs granted under the 2000 Plan will be evidenced
by agreements consistent with the 2000 Plan in such form as the Committee may
prescribe. Neither the 2000 Plan nor agreements thereunder confer any right to
continued employment upon any Holder of a Stock Option, Restricted Stock,
Deferred Stock, Stock Reload Options, Other Stock-Based Award or SAR.
Term and Amendments
Unless terminated by the Board, the 2000 Plan shall continue to remain
effective until such time as no further Awards may be granted and all Awards
granted under the 2000 Plan are no longer outstanding. Notwithstanding the
foregoing, grants of Incentive Stock Options may be made only during the ten
year period following the date the 2000 Plan becomes effective. The Board may at
any time, and from time to time, amend the 2000 Plan, provided that no amendment
shall be made which would impair the rights of a Holder under any agreement
entered into pursuant to the 2000 Plan without the Holder's consent.
13
<PAGE>
Change in Control
The 2000 Plan contains certain change in control provisions which could
cause Stock Options and other Awards to become immediately exercisable and
restrictions and deferral limitations applicable to other awards to lapse in the
event any "person," as such term is used in Sections 13(d) and 14(d) of the
Exchange Act, including a "group" as defined in Section 13(d), acquires
beneficial ownership of more than 25% of the Company's outstanding shares of
Common Stock.
Federal Income Tax Consequences
The following discussion of the federal income tax consequences of
participation in the 2000 Plan is only a summary of the general rules applicable
to the grant and exercise of Stock Options and other Awards and does not give
specific details or cover, among other things, state, local and foreign tax
treatment of participation in the 2000 Plan. The information contained in this
section is based on present law and regulations, which are subject to being
changed prospectively or retroactively.
Incentive Stock Options
The Holder will recognize no taxable income upon the grant of an Incentive
Stock Option. The Company will not qualify for any deduction in connection with
the grant or exercise of Incentive Stock Options. The Holder will realize no
taxable income when the Incentive Stock Option is exercised if the Holder has
been an employee of the Company or its subsidiaries at all times from the date
of grant until three months before the date of exercise. Upon a disposition of
the shares after the later of two years from the date of grant or one year after
the transfer of the shares to the Holder, the Holder will recognize the
difference, if any, between the amount realized and the exercise price as
long-term capital gain or long-term capital loss (as the case may be) if the
shares are capital assets. The excess, if any, of the fair market value of the
shares on the date of exercise of an Incentive Stock Option over the exercise
price will be treated as an item of adjustment for a Holder's taxable year in
which the exercise occurs and may result in an alternative minimum tax liability
for the Holder.
If Common Stock acquired upon the exercise of an Incentive Stock Option is
disposed of prior to the expiration of the holding periods described above, (i)
the Holder will recognize ordinary compensation income in the taxable year of
disposition in an amount equal to the excess, if any, of the lesser of the fair
market value of the shares on the date of exercise or the amount realized on the
disposition of the shares, over the exercise price paid for such shares and (ii)
the Company will qualify for a deduction equal to any such amount recognized,
subject to the limitation that the compensation be reasonable. In the case of a
disposition of shares earlier than two years from the date of the grant or in
the same taxable year as the exercise, where the amount realized on the
disposition is less than the fair market value of the shares on the date of
exercise, there will be no adjustment since the amount treated as an item of
adjustment, for alternative minimum tax purposes, is limited to the excess of
the amount realized on such disposition over the exercise price, which is the
same amount included in regular taxable income.
Non-Qualified Stock Options
With respect to Non-Qualified Stock Options (i) upon grant of the Stock
Option, the Holder will recognize no income, (ii) upon exercise of the Stock
Option (if the shares of Common Stock are not subject to a substantial risk of
forfeiture), the Holder will recognize ordinary compensation income in an amount
equal to the excess, if any, of the fair market value of the shares on the date
of exercise over the exercise price, and the Company will qualify for a
deduction in the same amount, subject to the requirement that the compensation
be reasonable and (iii) the Company will be required to comply with applicable
federal income tax withholding requirements with respect to the amount of
ordinary compensation income recognized by the Holder. On a disposition of the
shares, the Holder will recognize gain or loss equal to the difference between
the amount realized and the sum of the exercise price and the ordinary
compensation income recognized. Such gain or loss will be treated as capital
gain or loss if the shares are capital assets and as short-term or long-term
capital gain or loss, depending upon the length of time that the Holder held the
shares.
14
<PAGE>
If the shares acquired upon exercise of a Non-Qualified Stock Option are
subject to a substantial risk of forfeiture, the Holder will recognize ordinary
income at the time when the substantial risk of forfeiture is removed, unless
such Holder timely files under Code Section 83(b) to elect to be taxed on the
receipt of shares, and the Company will qualify for a corresponding deduction at
such time. The amount of ordinary income will be equal to the excess of the fair
market value of the shares at the time the income is recognized over the amount
(if any) paid for the shares.
Stock Appreciation Rights
Upon the grant of a SAR, the Holder recognizes no taxable income and the
Company receives no deduction. The Holder recognizes ordinary income and the
Company receives a deduction at the time of exercise equal to the cash and fair
market value of Common Stock payable upon such exercise.
Restricted Stock
A Holder who receives Restricted Stock will recognize no income on the
grant of the Restricted Stock and the Company will not qualify for any
deduction. At the time the Restricted Stock is no longer subject to a
substantial risk of forfeiture, a Holder will recognize ordinary compensation
income in an amount equal to the excess, if any, of the fair market value of the
Restricted Stock at the time the restriction lapses over the consideration paid
for the Restricted Stock. A Holder's shares are treated as being subject to a
substantial risk of forfeiture so long as his or her sale of the shares at a
profit could subject him or her to a suit under Section 16 (b) of the Exchange
Act. The holding period to determine whether the Holder has long-term or
short-term capital gain or loss begins when the Restriction Period expires, and
the tax basis for the shares will generally be the fair market value of the
shares on such date.
A Holder may elect, under Section 83(b) of the Code, within 30 days of the
transfer of the Restricted Stock, to recognize ordinary compensation income on
the date of transfer in an amount equal to the excess, if any, of the fair
market value on the date of such transfer of the shares of Restricted Stock
(determined without regard to the restrictions) over the consideration paid for
the Restricted Stock. If a Holder makes such election and thereafter forfeits
the shares, no ordinary loss deduction will be allowed. Such forfeiture will be
treated as a sale or exchange upon which there is realized loss equal to the
excess, if any, of the consideration paid for the shares over the amount
realized on such forfeiture. Such loss will be a capital loss if the shares are
capital assets. If a Holder makes an election under Section 83(b), the holding
period will commence on the day after the date of transfer and the tax basis
will equal the fair market value of shares (determined without regard to the
restrictions) on the date of transfer.
On a disposition of the shares, a Holder will recognize gain or loss equal
to the difference between the amount realized and the tax basis for the shares.
Whether or not the Holder makes an election under Section 83(b), the
Company generally will qualify for a deduction (subject to the reasonableness of
compensation limitation) equal to the amount that is taxable as ordinary income
to the Holder, in its taxable year in which such income is included in the
Holder's gross income. The income recognized by the Holder will be subject to
applicable withholding tax requirements.
Dividends paid on Restricted Stock which is subject to a substantial risk
of forfeiture generally will be treated as compensation that is taxable as
ordinary compensation income to the Holder and will be deductible by the Company
subject to the reasonableness limitation. If, however, the Holder makes a
Section 83(b) election, the dividends will be treated as dividends and taxable
as ordinary income to the Holder, but will not be deductible by the Company.
15
<PAGE>
Deferred Stock
A Holder who receives an award of Deferred Stock will recognize no income
on the grant of such award. However, he or she will recognize ordinary
compensation income on the transfer of the Deferred Stock (or the later lapse of
a substantial risk of forfeiture to which the Deferred Stock is subject, if the
Holder does not make a Section 83(b) election), in accordance with the same
rules as discussed above under the caption "Restricted Stock."
Other Stock-Based Awards
The federal income tax treatment of Other Stock-Based Awards will depend on
the nature of any such award and the restrictions applicable to such award.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A
VOTE "FOR" THE APPROVAL OF THE PROPOSAL TO APPROVE THE 2000 PLAN
PROPOSAL 3: TO APPROVE THE AMENDMENT TO THE CERTIFICATE OF
INCORPORATION TO CHANGE THE NAME OF THE COMPANY
The Board of Directors has unanimously approved a change of the Company's
name from "Prime Cellular, Inc." to "Sentigen Holding Corp." In the judgment of
the Board of Directors, the change of corporate name is desirable to better
reflect the growing importance of the Company's newly-formed subsidiary,
Sentigen Corp., to the overall business of the Company.
Accordingly, the Board of Directors recommends to the Company's
stockholders that the Company's Certificate of Incorporation be amended to
change the name of the Company from "Prime Cellular, Inc." to "Sentigen Holding
Corp."
The affirmative vote of the holders of a majority of all outstanding shares
of common stock is required for adoption of this proposal. If the proposal is
approved, Article First of the Certificate of Incorporation will be amended to
change the name of the Company to "Sentigen Holding Corp."
Stockholders will not be required to exchange outstanding stock
certificates for new certificates if the amendment is adopted.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR"
THE APPROVAL OF THE PROPOSAL TO AMEND THE COMPANY'S
CERTIFICATE OF INCORPORATION TO CHANGE THE
NAME OF THE COMPANY
INDEPENDENT AUDITORS
The Company anticipates that it will select Raich Ende Malter Lerner & Co.,
CPA's, as its independent auditors for the year ending December 31, 2000,
although no formal recommendation has been made to the Company's Board of
Directors by its audit committee as of the date of this Proxy Statement. A
representative of Raich Ende Moller Lerner & Co., CPA's, the auditors of the
Company for the year ended December 31, 1999, is expected to be present at the
meeting with an opportunity to make a statement if the representative desires to
do so and is expected to be available to respond to appropriate questions from
stockholders.
16
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SOLICITATION OF PROXIES
The solicitation of proxies in the enclosed form is made on behalf of the
Company and the cost of this solicitation is being paid by the Company. In
addition to the use of the mails, proxies may be solicited personally or by
telephone or telegraph using the services of directors, officers and regular
employees of the Company at nominal cost. Banks, brokerage firms and other
custodians, nominees and fiduciaries will be reimbursed by the Company for
expenses incurred in sending proxy material to beneficial owners of the Common
Stock. Additional solicitation of proxies may be made by an independent proxy
solicitation firm or other entity possessing the facilities to engage in such
solicitation. If an independent entity is used for such solicitation, the
Company will be required to pay such firm reasonable fees and reimburse expenses
incurred by such firm in rendering of such solicitation services.
2001 ANNUAL MEETING STOCKHOLDER PROPOSALS
In order for any stockholder proposal to be presented at the Annual Meeting
of Stockholders to be held in 2001 or to be eligible for inclusion in the
Company's Proxy Statement for such meeting, it must be received by the Company
at its principal executive offices in New York, New York, by January 26, 2001.
Pursuant to Rule 14a-4 promulgated by the Securities and Exchange Commission,
stockholders are advised that the Company's management shall be permitted to
exercise discretionary voting authority under proxies it solicits and obtains
for the Company's 2001 Annual Meeting of Stockholders with respect to any
proposal presented by a stockholder at such meeting, without any discussion of
the proposal in the Company's proxy statement for such meeting, unless the
Company receives notice of such proposal at its principal office in New York,
New York, not later than April 11
, 2001.
OTHER MATTERS
The Board of Directors knows of no matter which will be presented for
consideration at the Annual Meeting other than the matters referred to in this
Proxy Statement. Should any other matter properly come before the Annual
Meeting, it is the intention of the persons named in the accompanying proxy to
vote such proxy in accordance with their best judgment.
By Order of the Board of Directors
Joseph K. Pagano, President
New York, New York
May 26, 2000
17
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PRIME CELLULAR, INC. - PROXY
Solicited by the Board of Directors
for Annual Meeting to be held on June 23, 2000
The undersigned Stockholder(s) of PRIME CELLULAR, INC., a Delaware
corporation ("Company"), hereby appoints Joseph K. Pagano and Robert A.
P Rienhart, or either of them, with full power of substitution and to act
without the other, as the agents, attorneys and proxies of the undersigned,
to vote the shares standing in the name of the undersigned at the Annual
Meeting of Stockholders of the Company to be held on June 23, 2000 and at
all adjournments thereof. This proxy will be voted in accordance with the
instructions given below. If no instructions are given, this proxy will be
voted FOR all of the following proposals.
R 1. Election of the following Directors:
FOR all nominees listed below, WITHHOLD AUTHORITY to vote
except as marked to the for all nominees listed
O contrary below |_| below |_|
Joseph K. Pagano, Thomas Livelli, Richard Malavarca,
Frederick R. Adler, Brett Fialkoff and Samuel A. Rozzi
X INSTRUCTIONS: To withhold authority to vote for any individual
nominee, write that nominee's name in the space below.
-------------------------------------
Y 2. To approve the 2000 Performance Equity Plan.
FOR |_| AGAINST |_| ABSTAIN |_|
3. To approve the Amendment to the Certificate of Incorporation to change
the name of the Company.
FOR |_| AGAINST |_| ABSTAIN |_|
4. In their discretion, the proxies are authorized to vote upon such
other business as may come before the meeting or any adjournment
thereof.
|_| I plan to attend the Annual Meeting.
Date , 2000
-----------------------------
Signature
-----------------------------
Signature if held jointly
Please sign exactly as name appears above. When
shares are held by joint tenants, both should
sign. When signing as attorney, executor,
administrator, trustee or guardian, Please give
full title as such. If a corporation, please
sign in full corporate name by President or
other authorized officer. If a partnership,
please sign in partnership name by authorized
person.
