<PAGE> 1
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:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
</TABLE>
Shared Technologies 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:
------------------------------------------------------------------------
(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 Rule 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.
[ ] Check box if any part of the fee is offset as provided by 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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(4) Date Filed:
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<PAGE> 2
SHARED TECHNOLOGIES CELLULAR, INC.
100 GREAT MEADOW ROAD
WETHERSFIELD, CONNECTICUT 06109
(860) 258-2400
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JULY 7, 1999
------------------------
The Annual Meeting of Stockholders of Shared Technologies Cellular, Inc.
(the "Company") will be held at the Company's offices, located at 100 Great
Meadow Road, Suite 104, Wethersfield, Connecticut 06109 on Wednesday, July 7,
1999, at 10:00 a.m., for the purpose of considering and acting upon the
following matters:
1. To approve an amendment to the Company's Restated Certificate of
Incorporation establishing a classified Board of Directors and to make
certain necessary conforming changes to the Company's Amended and
Restated Bylaws;
2. To elect the directors;
3. To approve an amendment to the 1994 Stock Option Plan;
4. To approve certain amendments to the 1994 Director Option Plan;
5. To approve the issuance of twenty percent (20%) or more of the
outstanding shares of the Company's Common Stock upon the conversion of
the Series C Convertible Preferred Stock of the Company and the exercise
of certain Warrants to purchase Common Stock of the Company by the
holders thereof, which approval is necessary in order to comply with the
corporate governance rules of the NASDAQ SmallCap Market;
6. To ratify the appointment of Rothstein, Kass & Company, P.C. as auditors
for the Company; and
7. To transact such other business as may properly come before the meeting
or any adjournment or postponement thereof.
Pursuant to the provisions of the Company's Restated Bylaws, the Board of
Directors has fixed the close of business on June 18, 1999 as the record date
for determining the stockholders of the Company entitled to notice of, and to
vote at, the meeting or any adjournment or postponement thereof.
Stockholders who do not expect to be present in person at the meeting are
urged to date and sign the enclosed proxy and promptly mail it in the
accompanying envelope. The proxy will not be used if you attend and vote at the
meeting in person or if you revoke the proxy prior to the meeting.
By Order of the Board of Directors
KENNETH M. DORROS
Senior Vice President, General
Counsel and Secretary
Dated: June 22, 1999
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE, DATE AND
SIGN THE ENCLOSED PROXY AND MAIL IT PROMPTLY IN THE ENCLOSED ENVELOPE IN ORDER
TO ASSURE REPRESENTATION OF YOUR SHARES AT THE ANNUAL MEETING. NO POSTAGE NEED
BE AFFIXED IF THE PROXY IS MAILED IN THE UNITED STATES.
<PAGE> 3
SHARED TECHNOLOGIES CELLULAR, INC.
100 GREAT MEADOW ROAD
WETHERSFIELD, CONNECTICUT 06109
(860) 258-2400
------------------------
PROXY STATEMENT
FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JULY 7, 1999
------------------------
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Shared Technologies Cellular, Inc., a
Delaware corporation (the "Company"), for use at the Annual Meeting of
Stockholders to be held on July 7, 1999 and at any adjournment or postponement
of that meeting (the "Annual Meeting"). All proxies will be voted in accordance
with the instructions contained therein and, if no choice is specified, the
proxies will be voted in favor of the proposals set forth in the accompanying
Notice of Annual Meeting. Any proxy may be revoked by a stockholder at any time
before it is exercised by giving written notice to that effect to the Secretary
of the Company, by submitting a properly executed proxy bearing a later date or
by voting in person at the Annual Meeting.
The Board of Directors has fixed June 18, 1999 as the record date for
determining stockholders who are entitled to vote at the Annual Meeting. At the
close of business on June 18, 1999, there were outstanding and entitled to vote
7,820,707 shares of Common Stock of the Company, $.01 par value per share (the
"Common Stock"). Each share of Common Stock is entitled to one vote.
The presence of the holders of at least one-half of the shares of Common
Stock of the Company entitled to vote is necessary to constitute a quorum at the
meeting. Therefore, holders of not less than 3,910,354 shares of Common Stock
must be present in person or by proxy for there to be a quorum. Shares of Common
Stock represented by all proxies received, including proxies that withhold
authority for the election of directors and/ or abstain from voting on the other
matters to be presented at the Annual Meeting, as well as "broker non-votes",
count toward establishing the presence of a quorum.
The Company's Annual Report for the fiscal year ended December 31, 1998 is
being mailed to stockholders with the mailing of this Notice and Proxy Statement
on or about June 23, 1999.
MATTERS TO BE BROUGHT BEFORE THE ANNUAL MEETING
PROPOSAL TO APPROVE AN AMENDMENT TO THE COMPANY'S RESTATED
CERTIFICATE OF INCORPORATION ESTABLISHING A CLASSIFIED BOARD OF
DIRECTORS AND TO MAKE CERTAIN NECESSARY CONFORMING CHANGES TO
THE COMPANY'S RESTATED BYLAWS
(ITEM 1 ON PROXY CARD)
The Board of Directors is recommending approval of a proposal to amend the
Company's Restated Certificate of Incorporation (the "Certificate") to provide
for the classification of the Board of Directors into three classes, each of
which, after a transitional period commencing on the date of the 1999 Annual
Meeting of Stockholders, will serve for three years, with one class being
elected each year. If approved by the stockholders, the amendment will become
effective upon the filing of a certificate of amendment with the Secretary of
State of Delaware, as provided by Delaware law, which filing will be made
promptly following approval by the stockholders.
The Amended and Restated Bylaws of the Company (the "Bylaws") currently
provide that all directors are to be elected annually for a term of one year.
The proposed amendment to the Certificate provides, and the corresponding
necessary amendments to the Bylaws provide, that the Board of Directors shall be
divided into three classes of directors, each class to be as nearly equal in
number as reasonably possible, and that each class
<PAGE> 4
is to serve a three-year term. If the proposed amendment is adopted, two
directors will be elected for a term expiring at the 2000 annual meeting of
stockholders, three directors will be elected for a term expiring at the 2001
annual meeting of stockholders and three directors will be elected for a term
expiring at the 2002 annual meeting of stockholders (in each case until
respective successors are duly elected and qualified). Starting with the 2000
annual meeting of stockholders and each year thereafter, one class of directors
will be elected for a three year term. In addition, the Bylaws will be amended
to provide that a director elected to fill a vacancy on the Board of Directors
will hold office for a term expiring at the annual meeting of stockholders at
which the term of office of the class to which such director has been elected
expires and until such director's successor shall have been duly elected and
qualified. Stockholders are urged to read carefully the following sections of
this Proxy Statement, which describe the classified board amendment and its
purposes and effect, and Exhibits I and II hereto, which set forth the full text
of the proposed amendments to the Company's Certificate and the Company's
Bylaws, respectively, before voting on this proposal.
If at any time the size of the Board of Directors is changed, the increase
or decrease in the number of directors would be apportioned among the three
classes as nearly equal as possible. The Board of Directors has no present
plans, arrangements, commitments or understandings with respect to increasing or
decreasing the size of the Board of Directors or any class of directors.
The classification of the Board of Directors will have the effect of making
it more difficult to alter the composition of the Board of Directors. As a
result of the amendment, it would take at least two annual stockholder meetings,
instead of one, to effectuate a change in the composition of a majority of the
Board of Directors. Although there have been no challenges to date with respect
to the continuity or stability of the Board of Directors, the Board of Directors
believes the longer time required to elect a majority of a classified Board of
Directors would promote continuity and stability of the Company's management and
policies, because a majority of the Board of Directors, at any given time, will
most likely have prior experience as members of the Board of Directors. The
classification provision will govern every election of directors, regardless of
whether a more immediate and complete change in the Board of Directors would be
beneficial to the Company or the stockholders.
To the extent that the proposed amendment would make more difficult or
discourage a proposed takeover of the Company, its adoption would increase the
possibility that the term of incumbent directors and management of the Company
would be somewhat extended. However, the proposed amendment should provide
assurance that the Board of Directors, if confronted by an unsolicited proposal
from a stockholder, will have sufficient time to review such proposal, as well
as appropriate alternatives thereto, and thereby will be in a better position to
protect the interests of the Company and its stockholders.
The proposed amendment is intended to encourage persons seeking to acquire
control of the Company to do so through arms' length negotiations with the Board
of Directors and the Company's management. If adopted, however, the proposed
amendment might also have the effect of discouraging a person from making a
tender offer or otherwise attempting to gain control of the Company, even though
such an attempt might be beneficial to the Company and its stockholders.
Additionally, because the proposed amendment may discourage the accumulation of
a large block of the Common Stock by a third party whose objective is to have
the Company repurchase such block at a premium, adoption of the proposed
amendment might dampen the temporary fluctuations in the market price of the
Common Stock which such an accumulation often causes, thereby depriving
stockholders of an opportunity to sell their shares at a potentially higher
market price.
Takeovers or changes in management of the Company that are proposed and
effectuated without prior consultation and negotiation with the Company are not
necessarily detrimental to the Company or its stockholders. The Board of
Directors believes, however, that the benefits of seeking to protect the
Company's ability to negotiate with the proponent of an unfriendly or
unsolicited proposal to take over or to restructure the Company outweigh any
disadvantages of discouraging such a proposal.
Pursuant to the Delaware General Corporation Law and the current Bylaws of
the Company, members of the Board of Directors may be removed, with or without
cause, at any time during their term of office by the holders of a majority of
the shares then entitled to vote at an election of directors, except that
directors elected by the holders of a particular class or series of stock may be
removed without cause only by the vote of the
2
<PAGE> 5
holders of a majority of the outstanding shares of such class or series. The
Delaware General Corporation Law, however, also provides that directors serving
on a classified board of directors may be removed prior to the expiration of
their terms by the holders of a majority of the shares of the Company's voting
stock only for cause, unless otherwise provided in the certificate of
incorporation. Accordingly, in the absence of a contrary provision in the
Company's Certificate, the directors serving on the Company's classified Board
of Directors could be removed only for cause.
The Delaware General Corporation Law and the current Bylaws of the Company
provide that a vacancy on the Board of Directors, including a vacancy created by
an increase in the number of directors, may be filled by the remaining directors
or by the stockholders at a special or annual meeting, and that the newly
elected director shall serve until the next annual election. If the classified
board amendments are adopted, the Bylaws will be amended to provide, among other
things, that any vacancy on the Board of Directors occurring prior to the
expiration of the term of office of the class for which such vacancy occurs,
still could be filled by the remaining directors, but not by the stockholders.
However, such Bylaw amendments will also provide that any director elected to
the Board of Directors to fill a vacancy created by removal, resignation,
expansion of the Board of Directors or otherwise would hold office for the
unexpired term of the director he replaced or, in the case of expansion of the
Board of Directors, until the next election for the class to which he was
elected; provided, that such director is subsequently approved or confirmed by
the holders of a majority of the shares of Common Stock present in person, or
represented by proxy, and entitled to vote at the next annual meeting of
stockholders. If the director elected to fill such vacancy by the Board of
Directors is not subsequently approved by the stockholders, and if another
candidate is not elected to fill such vacancy at the annual meeting in
accordance with Federal securities laws and the Company's Bylaws, then the
number of directors constituting the entire Board of Directors will
automatically be reduced and, if necessary, the number of directors serving in
each class will be reapportioned so that the number of directors serving in each
class will be as nearly equal as possible.
The classified board amendment to the Company's Certificate, together with
the related Bylaw amendments, would impede, rather than preclude, a third party
from gaining control of the Board of Directors since it would take at least two
annual stockholder meetings, instead of just one, to effectuate a change in the
composition of a majority of the Board of Directors, in the absence of the
removal of any directors for cause.
VOTE REQUIRED
Assuming the presence of a quorum, an affirmative vote of a majority of the
shares of Common Stock present in person or by proxy and voting will be required
for the creation of a staggered Board of Directors. Abstentions with respect to
voting on this matter will have the effect of a negative vote, and "broker non-
votes" with respect to voting on this matter will have no effect on the outcome
of the vote.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THIS PROPOSAL.
ELECTION OF DIRECTORS
(ITEM 2 ON PROXY CARD)
The Board of Directors currently consists of 7 members. All of the nominees
are currently members of the Board of Directors, except for Victor Grillo, Sr.,
who is nominated to serve as the eighth member of the Board of Directors for a
term to expire in 2001. The Company agreed to nominate Mr. Grillo for election
as a director in connection with negotiations by the Company to acquire a
privately held company of which Mr. Grillo is a principal. See "CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS" below. The following table and narrative
sets forth information regarding the principal occupation, other affiliations,
committee memberships and age for each of the nominees for director of the
Company. Stockholders who do not wish their shares to be voted for a particular
nominee may so indicate in the space provided on the proxy card. Management does
not contemplate that any of the nominees will be unable to serve, but in that
event, proxies solicited hereby will be voted for the election of another person
or persons to be designated by the Board of Directors.
3
<PAGE> 6
BOARD NOMINEES FOR TERM TO EXPIRE IN 2000
CLASS I
<TABLE>
<CAPTION>
DIRECTOR
DIRECTOR AGE SINCE POSITION WITH COMPANY
- -------- --- -------- ---------------------
<S> <C> <C> <C>
Nicholas E. Sinacori(2)................ 54 1996 Director
Bruce Carswell......................... 69 1998 Director
</TABLE>
BOARD NOMINEES FOR TERM TO EXPIRE IN 2001
CLASS II
<TABLE>
<CAPTION>
DIRECTOR
DIRECTOR AGE SINCE POSITION WITH COMPANY
- -------- --- -------- ---------------------
<S> <C> <C> <C>
William A. DiBella(2)(3)............... 56 1993 Director
Vincent DiVincenzo(1).................. 49 1993 Senior Vice President, Chief Financial
Officer, Treasurer and Director
Victor Grillo, Sr. .................... 58 -- Nominee for Director
</TABLE>
BOARD NOMINEES FOR TERM TO EXPIRE IN 2002
CLASS III
<TABLE>
<CAPTION>
DIRECTOR
DIRECTOR AGE SINCE POSITION WITH COMPANY
- -------- --- -------- ---------------------
<S> <C> <C> <C>
Anthony D. Autorino(1)................. 60 1989 Chairman, Chief Executive Officer and
Director
Thomas H. Decker(2)(3)................. 58 1994 Director
Ajit G. Hutheesing(1)(3)............... 63 1995 Director
</TABLE>
- ---------------
(1) Member of the Executive Committee.
(2) Member of the Audit Committee.
(3) Member of the Compensation Committee.
ANTHONY D. AUTORINO has been Chairman, President and Chief Executive
Officer of the Company since its formation in 1989. Mr. Autorino is a principal
of CMD Ventures LLC, a private real estate management and development company.
From January 1986 to March 1998, he was Chairman and Chief Executive Officer of
Shared Technologies Fairchild Inc. ("STFI"), the former parent of the Company,
and he was President of STFI from January 1986 to March 1996. From January 1985
to January 1986, he was Chairman and Chief Executive Officer of ShareTech, a
joint venture between United Technologies Corporation and AT&T. He was President
of United Technologies Building System Company from 1981 to 1984 and was its
Chairman and Chief Executive Officer from 1984 to 1985. Mr. Autorino joined the
Hamilton Standard Division of United Technologies in 1960, holding the positions
of Vice President, Executive Vice President and President of the Division. Mr.
Autorino was Chairman of the firearms manufacturer Colt's Manufacturing Company,
Inc. and of its parent company, CF Holding Corp. from March 1990 to March 1992.
Mr. Autorino serves on the board of directors of the Connecticut Children's
Medical Center. He also serves on the boards of trustees of The Bushnell
Memorial Theater in Hartford, Connecticut, and St. Joseph's College in West
Hartford, Connecticut. Mr. Autorino is chairman of Global Interactive
Communications Corporation, a private telecommunications services company.
BRUCE CARSWELL was appointed a director of the Company in July 1998. Mr.
Carswell has been a consultant to GTE Corporation since 1995, and has been a
principal in the Cabot Advisory Group, a human resource firm, since June 1998.
In 1995, he retired from GTE, having served in various capacities, including as
Executive Director of the Office of the Chairman, as Senior Vice President of
Human Resources and
4
<PAGE> 7
Administration, and as a member of the Board of Directors. He chaired one
joint-venture Board of GTE, continues to serve as a director of another such
Board, and provides consulting services to GTE. Mr. Carswell is a noted
authority on human resource issues and labor law, with experience that includes
congressional appointments to various commissions concerning business and labor.
Mr. Carswell received a bachelor's degree from Colby College and a law degree
from Cornell University.
THOMAS H. DECKER has been a director of the Company since September 1994.
Since September 1992, Mr. Decker has served as a Senior Vice
President -- Investments of Prudential Securities. From 1981 to September 1992,
he served as a Senior Vice President at Tucker Anthony Incorporated.
WILLIAM A. DIBELLA has been a director of the Company since September 1994.
Mr. DiBella is currently a lobbyist and is a principal of CMD Ventures LLC., a
private real estate management and development company. From 1981 to 1997, Mr.
DiBella served as a Connecticut State Senator, including serving as Senate
Majority Leader and Chairman of the Finance, Revenue and Bonding Committee. Mr.
DiBella was a member of the Hartford City Council from 1971 to 1979 and Deputy
Mayor from 1975 to 1977.
VINCENT DIVINCENZO has been Treasurer of the Company since March 1989,
Chief Financial Officer of the Company since February 1994, Senior Vice
President of the Company since March 1998, and a director of the Company since
March 1993. He is a principal of CMD Ventures LLC, a private real estate
management and development company. From 1988 to 1998, Mr. DiVincenzo served
STFI in many capacities, including as its Vice President -- Finance from 1988
until 1993, its Senior Vice President -- Administration and Finance from 1993 to
March 1998, its Treasurer and Chief Financial Officer 1988 to March 1998, and as
a director of STFI from 1992 to March 1998. From 1987 to 1988, Mr. DiVincenzo
was Controller of KCR Technology, Inc., a research and development firm. From
1982 to 1986 he was employed by Lorlin Test Systems, formerly Eaton Corporation,
last serving as Controller. Mr. DiVincenzo is a director of Global Interactive
Corporation.
VICTOR GRILLO, SR. is a nominee for director. Since 1997, Mr. Grillo has
been Chief Executive Officer of DTR Associates Limited Partnership ("DTR"), a
limited partnership engaged in the business of developing, marketing and
distributing consumer products through direct response and retail distribution
channels. From 1991 to 1997, Mr. Grillo was President of DTR.
AJIT G. HUTHEESING has been a director of the Company since December of
1995. Mr. Hutheesing is the founder, Chairman and Chief Executive Officer of
International Capital Partners, Inc. ("ICP"), a private investment management
firm. Prior to starting ICP in 1988, he was Chairman of the Board and Director
of Corporate Finance of The Sherwood Group. Before joining Sherwood, Mr.
Hutheesing was with the J. Henry Schroder Corporation from 1975 to 1987 and held
the position of Vice Chairman from 1982 to 1987. Prior to that time, Mr.
Hutheesing spent ten years with the International Finance Corporation, a private
sector investment banking arm of the World Bank. He also serves as a director of
Counsel Corporation and Officeland, Inc.
NICHOLAS E. SINACORI has been a director of the Company since August, 1996.
He has served as Managing Partner of ICP since 1990. From 1985 to 1990, Mr.
Sinacori was President of Westport Management, Inc., a private real estate
investment company. From 1974 to 1985, he was Vice President and Treasurer of
U.S. Industries, an international conglomerate. Mr. Sinacori also serves as a
director of Ralin, Inc., Cambric Corporation, Beverage Marketing Technologies,
Inc., Arrow Corporation and Tickets.com.
VOTE REQUIRED
Assuming the presence of a quorum, directors of the Company are elected by
plurality vote of the shares of Common Stock present in person or by proxy and
voting on the election of directors. Shares may be voted for or withheld from
each nominee for election as a director. Shares for which the vote is withheld
and "broker non-votes" will be excluded entirely and have no effect on the
election of directors of the Company.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR EACH NOMINEE.
5
<PAGE> 8
BOARD AND COMMITTEE MEETINGS
The Board of Directors established an Executive Committee, an Audit
Committee and a Compensation Committee in 1995. In 1998, there were no meetings
of the Executive Committee, and there were two meetings of the Compensation
Committee and one meeting of the Audit Committee. The Board does not have a
nominating committee.
The Executive Committee is authorized to act on behalf of the Board of
Directors when the Board is not in session. The Executive Committee is currently
comprised of Messrs. Autorino, DiVincenzo and Hutheesing.
The Audit Committee was established to provide for direct contact between
the Company's independent public accountants and the Board of Directors. The
Audit Committee's duties include reviewing the effectiveness of the auditors
during the annual audit, discussing the Company's internal control policies and
procedures and considering and recommending the selection of the Company's
independent accountants. The Audit Committee is currently comprised of Messrs.
Decker, DiBella and Sinacori.
The Compensation Committee was established to provide recommendations to
the Board regarding compensation programs of the Company. The Compensation
Committee is currently comprised of Messrs. Decker, DiBella and Hutheesing.
During the year ended December 31, 1998, the Board of Directors held 5
meetings. Each of the directors then in office attended at least 75% of all of
the Board meetings held during 1998, with the exception of Mr. Sinacori, who
attended 60% of the meetings. Mr. Carswell attended all of the 1998 Board
meetings held after his appointment to the Board on July 14, 1998.
COMPENSATION OF DIRECTORS
Directors who are not employees of the Company or its subsidiary receive
cash compensation of $750 per board meeting attended ($400 if attended by
teleconference) and $500 for each committee meeting attended ($400 if attended
by teleconference), plus reimbursement of out-of-pocket expenses for attendance
at each such meeting. Each non-employee director also receives an annual fee of
$10,000, payable quarterly in arrears.
In addition, if the stockholders approve Proposal 4 in this Proxy
Statement, pursuant to the 1994 Director Option Plan, each non-employee director
will receive an option, at the beginning of each three-year term to which he is
elected, to purchase 15,000 shares of the Company's Common Stock. Such options
will have an exercise price equal to the fair market value of the Company's
Common Stock at the time of their grant. Under the 1994 Director Option Plan as
currently in effect, each non-employee director receives an option, at the
beginning of each one-year term to which he is elected, to purchase 4,000 shares
of Common Stock at an exercise price equal to the fair market value of the
Common Stock at the time of the grant.
PROPOSAL TO APPROVE AMENDMENT TO 1994 STOCK OPTION PLAN
(ITEM 3 ON PROXY CARD)
In 1994, the Board of Directors authorized, and the Company's stockholders
approved, the 1994 Stock Option Plan (the "Stock Plan"), pursuant to which the
Company may grant stock options to employees, directors and consultants of the
Company, its subsidiaries and affiliates. In 1998, the Company's stockholders
approved an amendment to the Stock Plan increasing the number of shares of
Common Stock reserved for issuance upon the exercise of options granted under
the Stock Plan from 525,000 to 825,000.
In March 1999, the Board of Directors adopted a further amendment to the
Stock Plan increasing the number of shares of Common Stock issuable under the
Stock Plan by an additional 500,000 shares, to an aggregate of 1,325,000 shares,
subject to approval by the stockholders. At the Annual Meeting, the stockholders
will be asked to approve this amendment to the Stock Plan.
Following adoption of the amendment by the Board of Directors, the
Company's Compensation Committee approved, subject to stockholder approval of
the amendment, the grant of 100,000 options to
6
<PAGE> 9
Anthony D. Autorino and the grant of 50,000 options to Vincent DiVincenzo, each
an executive officer named in the Summary Compensation Table set forth below. If
the amendment to the Stock Plan is approved by the stockholders, those options
will become exercisable as to one-third of the shares subject to the options on
each of the first, second and third anniversaries of the date of grant, at an
exercise price of $9.00, $10.00 and $12.00 per share on each of those respective
anniversary dates.
Approximately 320 employees are eligible to participate under the Stock
Plan. Prior to adoption of the amendment by the Board of Directors, 86,000
shares of Common Stock remained available for future option awards under the
Stock Plan. The Board's Compensation Committee, on behalf of the Company's
management, relies on stock options and other stock awards as an essential part
of the compensation packages necessary for the Company to attract and retain
experienced officers and employees. The Board of Directors believes that the
increase in the number of shares of Common Stock available under the Stock Plan
is essential to permit the Company's management to continue to provide
long-term, equity-based incentives to present and future employees.
During 1998, options to purchase an aggregate of 180,000 shares of Common
Stock were granted to the following Named Executive Officers and groups: Mr.
Autorino (100,000 options), Mr. DiVincenzo (50,000 options), Mr. Hayes (25,000
options), Mr. Sorenson (5,000 options), all current executive officers as a
group (202,000 options) and all non-executive officers, employees and
consultants as a group (157,500 options). The exercise price of all such options
was equal to or greater than the fair market value of the Common Stock on the
date of the grant, and ranged from $4.50 to $6.50. On June 18, 1999, the closing
sale price of the Company's Common Stock as reported on the NASDAQ SmallCap
Market was $9.88.
MATERIAL FEATURES OF THE PLAN
The Compensation Committee administers the Stock Plan, which provides that
such committee has the authority to award non-qualified stock options and to fix
all terms of any award or awards granted. Under the Stock Plan, the Compensation
Committee may grant awards to employees, officers, directors and consultants of
the Company or any subsidiary or affiliate.
Option Price and Duration. The exercise price per share in connection with
an option granted under the Stock Plan cannot be less than seventy percent (70%)
of the fair market value of the Common Stock subject to the option on the date
such option is granted. The Stock Plan provides that each option shall expire on
the date specified by the Compensation Committee, but the expiration date may
not be more than ten years from the date of grant.
Exercise of Options. Each option granted under the Stock Plan may either
be fully exercisable at the time of grant or may become exercisable in such
installments as the Compensation Committee may specify. Each option may be
exercised from time to time, in whole or in part, up to the total number of
shares of Common Stock with respect to which it is then exercisable. The
Compensation Committee has the right to accelerate the date of exercise of any
installment of any option.
The option exercise price is payable in cash or previously-owned shares of
Common Stock having a fair market value equal to the exercise price, or a
combination of both, at the election of the option holder. The option holder is
responsible for the payment of any required tax withholding payments. During the
life of the option holder, the option is non-transferable and is exercisable
only by the option holder. Upon termination of employment, other than by the
Company for cause, the option holder may exercise any option exercisable upon
termination within three months of termination. Upon termination due to death,
disability or retirement, the option may be exercised, to the extent exercisable
at termination, within six months of termination.
Changes in Capitalization and Other Matters. Option holders are protected
against dilution in the event of a stock dividend, recapitalization, stock
split, merger or similar transaction. The Compensation Committee may from time
to time adopt amendments to the Stock Plan (certain of which are subject to
stockholder approval) and may terminate the Stock Plan at any time. A
termination of the Stock Plan by the Compensation Committee shall not affect
options previously granted. If an option granted pursuant to the Stock Plan is,
for any reason, unexercised at the time of its expiration or termination, any
shares of Common
7
<PAGE> 10
Stock subject to such option will be available for future option grants. Unless
terminated sooner, the Stock Plan will terminate ten years from the date of its
adoption, and options may be granted under the Stock Plan at any time prior to
such termination.
In the event of a Change of Control (defined below) of the Company, subject
to certain restrictions described below, all restrictions and conditions
applicable to options granted under the Stock Plan then outstanding will be
deemed satisfied, and the options will be deemed to be fully vested, as of the
date of the Change of Control. For purposes of the Stock Plan, a "Change in
Control" will be deemed to occur if the persons who were directors of the
Company cease to constitute a majority of the Board of Directors of the Company
in connection with any of the following transactions: (A) the acquisition by a
third person, including a "person" as defined in Section 13(d)(3) of the
Exchange Act, of beneficial ownership (as defined in Rule 13d-3 under the
Exchange Act) directly or indirectly, of securities of the Company representing
twenty-five percent (25%) or more of the total number of votes that may be cast
for the election of the directors of the Company; or (B) as the result of, or in
connection with, any tender or exchange offer, merger, consolidation or other
business combination, sale of assets, or any combination of the foregoing
transactions. An option granted under the Stock Plan will only receive the
benefit of the removal of restrictions and accelerated vesting upon a Change of
Control if it is held by an employee of the Company and such employee s
employment with the Company s terminates, for any reason, following the Change
of Control. The Stock Plan provides that termination includes any reduction in
compensation, geographic relocation of an employee, or any material diminution
in job status or responsibilities.
Federal Tax Considerations. The following general rules are applicable,
under current federal income tax law, to non-qualified options granted under the
Stock Plan:
1. The optionee generally does not realize any taxable income upon the
grant of an option, and the Company is not allowed a business expense
deduction by reason of such grant.
2. The optionee generally will recognize ordinary compensation income
at the time of exercise of the option 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.
3. When the optionee sells the shares, he or she generally will
recognize a capital gain or loss in an amount equal to the difference
between the amount realized upon the sale of the shares and his or her
basis in the stock (generally, the exercise price plus the amount taxed to
the optionee as compensation income). If the optionee's holding period for
the shares exceeds one year, such gain or loss will be a long-term capital
gain or loss.
4. The Company generally will be entitled to a tax deduction when and
in the amount that compensation income is recognized by the optionee. The
Company will not be entitled to a tax deduction with respect to capital
gain recognized by the optionee.
5. If an optionee exercises a non-qualified option by delivering
shares of Common Stock to the Company in payment of the exercise price,
special rules will apply.
This description of the Stock Plan is subject to and qualified by the
complete text of the Stock Plan, a copy of which is available upon request to
the Company's Legal Department at the Company's address appearing on the front
page of this Proxy Statement.
INTERESTS OF CERTAIN PERSONS
Approval of the amendment to the Stock Plan will benefit Messrs. Autorino
and DiVincenzo as the options granted to such executive officers in March 1999
are contingent upon approval of the amendment by the stockholders, and may
benefit the executive officers of the Company in the future as all executive
officers are eligible to receive options under the Stock Plan.
8
<PAGE> 11
VOTE REQUIRED
Assuming the presence of a quorum, an affirmative vote of a majority of the
shares of Common Stock present in person or by proxy and voting will be required
for the approval of the amendment to the 1994 Stock Option Plan. Abstentions
with respect to voting on this matter will have the effect of a negative vote,
and "broker non-votes" with respect to voting on this matter will have no effect
on the outcome of the vote.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THIS PROPOSAL.
PROPOSAL TO APPROVE AMENDMENTS TO 1994 DIRECTOR OPTION PLAN
(ITEM 4 ON PROXY CARD)
In 1994, the Board of Directors authorized, and the Company's stockholders
approved, the 1994 Director Option Plan (the "Director Plan"), pursuant to which
the Company grants stock options to directors of the Company who are not
employees of the Company, its subsidiaries or affiliates (each a "non-employee
director"). In 1998, the Company's stockholders approved an amendment to the
Director Plan increasing the number of shares of Common Stock reserved for
issuance upon the exercise of options granted under the Director Plan from
33,333 to 100,000.
At the Annual Meeting, the Company's stockholders will be asked to approve
a further amendment to the Director Plan to increase the number of shares of
Common Stock issuable under the Director Plan by an additional 100,000 shares,
such that the aggregate number of shares of Common Stock issuable upon the
exercise of options granted under the Director Plan, as amended, would be
200,000.
In 1998, the stockholders also approved an amendment to the Director Plan
to increase from 2,000 to 4,000 (i) the number of shares of Common Stock subject
to the option each non-employee director automatically receives upon being
elected as a non-employee director and (ii) the number of shares of Common Stock
subject to the option each non-employee director automatically receives upon
commencement of each subsequent year of service as a non-employee director. If
the stockholders approve Proposal 1 in this Proxy Statement to establish a
classified Board of Directors, the stockholders will be asked at the Annual
Meeting to approve a further amendment to the Director Plan pursuant to which
each non-employee director would automatically receive an option to purchase
15,000 shares of Common Stock at the beginning of each three-year term to which
he is elected to the Board of Directors. During the phase-in period of the
classified Board, these options would be pro-rated such that those directors in
Class I who would be initially elected to a one-year term would receive an
option to purchase 5,000 shares upon their election and those directors in Class
II who would be initially elected to a two-year term would receive an option to
purchase 10,000 shares upon their election. In the event that the stockholders
do not approve Proposal 1 in this Proxy Statement to establish a classified
Board of Directors, the stockholders will still be asked at the Annual Meeting
to approve the amendment to the Director Plan to increase the aggregate number
of shares issuable thereunder, but they will not be asked to approve the latter
amendment to the Director Plan.
All options granted under the Director Plan currently become exercisable at
the rate of one-twelfth ( 1/12) per full month of service as a director from the
date of grant. If the stockholders approve the amendment to increase the number
of shares subject to each option to 15,000 for each three-year term, such
options will become exercisable at the rate of one thirty-sixth ( 1/36) per full
month of service from the date of grant (as approximately adjusted during the
phase-in period for the classified Board). In the even of a Change of Control of
the Company (as defined above in Proposal 3 to this Proxy Statement), subject to
certain restrictions described in the next succeeding sentence, all restrictions
and conditions applicable to options granted under the Director Plan will be
deemed satisfied, and the options will be deemed vested, as of the date of the
Change of Control. An option granted under the Director Plan will only receive
the benefit of the removal of restrictions and accelerated vesting upon a Change
of Control if it is held by the director of the Company and such director's
service on the Board of Directors terminates, for any reason, following such
Change of Control. All options are granted at an exercise price equal to the
then fair market value of the Common Stock.
9
<PAGE> 12
Currently, five of the seven members of the Company's Board of Directors
are non-employee directors who are eligible to participate under the Director
Plan. Prior to the approval of the proposed amendments, there were 54,000 shares
available for future option awards under the Director Plan. The Company views
such options to be an essential part of compensation necessary to attract and
retain qualified non-employee directors. The Company believes that the proposed
increases in the number of shares of Common Stock available under the Director
Plan and the number of shares subject to each option granted under the Director
Plan are important to provide long-term, equity-based incentives to present and
future non-employee directors. In 1998, options under the Director Plan were
automatically granted to five non-employee directors to purchase 20,000 shares
of Common Stock. The exercise price of each such option was the fair market
value of the Common Stock on the date of the grant.
This description of the Director Plan is subject to and qualified by the
complete text of the Director Plan, a copy of which is available upon request to
the Company's Legal Department at the Company's address appearing on the front
page of this Proxy Statement.
INTERESTS OF CERTAIN PERSONS
Approval of the amendments to the Director Plan will benefit the
non-employee directors of the Company as they will receive options thereunder in
accordance with the terms of the amendments.
VOTE REQUIRED
Assuming the presence of a quorum, an affirmative vote of a majority of the
shares of Common Stock present in person or by proxy and voting will be required
for the approval of the amendments to the 1994 Director Option Plan. Abstentions
with respect to voting on this matter will have the effect of a negative vote,
and "broker non-votes" with respect to voting on this matter will have no effect
on the outcome of the vote.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THIS PROPOSAL.
PROPOSAL TO APPROVE THE ISSUANCE OF TWENTY PERCENT (20%) OR MORE OF THE
OUTSTANDING SHARES OF THE COMPANY'S COMMON STOCK UPON CONVERSION OF THE SERIES C
CONVERTIBLE PREFERRED STOCK OF THE COMPANY AND THE EXERCISE OF CERTAIN WARRANTS
TO PURCHASE COMMON STOCK OF THE COMPANY BY THE HOLDERS THEREOF, WHICH APPROVAL
IS NECESSARY IN ORDER TO COMPLY WITH THE CORPORATE GOVERNANCE RULES OF THE
NASDAQ SMALLCAP MARKET
(ITEM 5 ON PROXY CARD)
GENERAL
Effective February 5, 1999, the Company closed a $15 million private
placement of equity with 20 investors, led by Marshall Capital Management, Inc.,
an affiliate of Credit Suisse First Boston, and a number of European-based
institutional investors. Pursuant to a Securities Purchase Agreement entered
into between the Company and the investors (the "Securities Purchase
Agreement"), the Company issued an aggregate of 15,000 shares of a new Series C
Convertible Preferred Stock, $.01 per share, and warrants (the "Warrants") to
purchase an aggregate of 300,000 shares of the Company's Common Stock. Each
share of Series C Convertible Preferred Stock is convertible into Common Stock
in accordance with the formula described below. The Company used and intends to
continue to use the proceeds from the offering to repay approximately $5.5
million of indebtedness and for general corporate purposes.
The Certificate of Designations, Preferences and Rights of the Series C
Convertible Preferred Stock (the "Certificate of Designation") provides that,
until the Company obtains the approval of the holders of a majority of the
Company's Common Stock, the number of shares of Common Stock issued upon
conversion of the Series C Convertible Preferred Stock or exercise of the
Warrants may not exceed 19.99% of the number of shares outstanding on February
5, 1999, or 1,512,661 shares (the "20% Limit"). But for this limitation
contained in the Certificate of Designation, as of the date of this Proxy
Statement, the 15,000 shares of
10
<PAGE> 13
Series C Convertible Preferred Stock would be convertible into approximately
2,187,241 shares of Common Stock, or 22% of the total number of shares issued
and outstanding on February 5, 1999. Further, the total number of shares of
Common Stock issuable upon conversion of the Series C Convertible Preferred
Stock and exercise of the Warrants as of the date of this Proxy Statement, but
for the aforementioned limitation, would be approximately 2,487,241 shares, or
24% of the total number of shares issued and outstanding on February 5, 1999.
The number of shares of Common Stock issuable upon conversion of the Series C
Convertible Preferred Stock may fluctuate from time to time and be greater than
the aforementioned figure due to a variable conversion price feature of the
Series C Convertible Preferred Stock and to an accrued "Premium" which may be
payable at the option of the Company in Common Stock or cash, as further
described below.
NASDAQ REQUIREMENTS
The 20% Limit is contained in the Certificate of Designation due to a
requirement of the NASDAQ Stock Market. The Company's Common Stock is listed on
the NASDAQ SmallCap Market, and NASDAQ's corporate governance rules require
stockholder approval if the Company issues Common Stock or securities
convertible into or exercisable for Common Stock equal to 20% or more of the
Common Stock outstanding before the issuance for less than the market value of
the Common Stock. As the Series C Convertible Preferred Stock was convertible
into more than 20% of the outstanding Common Stock on the date of issuance and
as the conversion price of the Series C Convertible Preferred Stock on the date
of issuance ($7.00 per share) was less than the market value of the Common Stock
on such date (the closing sale price of the Common Stock on February 5, 1999 as
reported by NASDAQ was $9.00), and may be less than the market value of the
Common Stock when and if the Series C Convertible Preferred Stock is converted
to Common Stock, stockholder approval is required in order for the number of
shares of Common Stock issuable upon conversion of the Series C Convertible
Preferred Stock and exercise of the Warrants to exceed the 20% Limit.
THE TRANSACTION
The following is a summary of selected information relating to the issuance
of the Company's Series C Convertible Preferred Stock and the Warrants (the
"Transaction"). Copies of the Securities Purchase Agreement, the Certificate of
Designation, the Form of Warrant and the Registration Rights Agreement between
the Company and the investors (collectively the "Transaction Documents") are
available upon request to the Company's Legal Department at the Company's
address appearing on the front page of this Proxy Statement. The summary of the
Transaction in this Proxy Statement is qualified in its entirety by reference to
the Transaction Documents.
THE SERIES C CONVERTIBLE PREFERRED STOCK
Conversion. Each share of Series C Convertible Preferred Stock is
convertible into shares of Common Stock of the Company in accordance with the
following formula:
<TABLE>
<S> <C> <C>
Number of Shares of Stated Value plus accrued Premium
Common Stock Issuable = ---------------------------------
Conversion Price
</TABLE>
The "Stated Value" is equal to $1,000 per share. The "Premium" is equal to
6% per annum of the Stated Value, accruing from the date of issuance of the
Series C Convertible Preferred Stock through and including the date of
conversion, and is payable in Common Stock or cash, at the Company's option
(subject to certain conditions), upon conversion. The "Conversion Price" is
equal to the lesser of $7.00 and the Variable Conversion Price. The "Variable
Conversion Price" is equal to the average of the lowest Closing Bid Prices (as
defined in the Certificate of Designation) for the Common Stock of the Company
on any five (5) consecutive trading days during the period of fifteen (15)
trading days immediately prior to the conversion date. If the Company's Common
Stock trades above $11.00 per share (subject to adjustment upon the occurrence
of certain events, including but not limited to a stock split or dividend or a
merger or consolidation of the Company) for ten (10) consecutive days, and if at
all times during such period, certain conditions set forth in the Certificate of
Designation are satisfied, the Conversion Price will be equal to $7.00
thereafter.
11
<PAGE> 14
If, following conversion, the Company fails to deliver shares of its Common
Stock to an investor in accordance with the Certificate of Designation, it may
incur monetary and other penalties (including, in certain circumstances,
mandatory redemption of the Series C Convertible Preferred Stock).
On February 5, 2004, all shares of Series C Convertible Preferred Stock
then outstanding will be automatically converted into shares of Common Stock at
the then-prevailing Conversion Price.
As mentioned above, subject to compliance by the Company with certain
conditions set forth in the Certificate of Designation such as maintaining the
listing of its Common Stock on NASDAQ or a national securities exchange and
other conditions, upon conversion of the Series C Convertible Preferred Stock
the Company has the option to pay the accrued Premium in cash or shares of
Common Stock. In deciding whether to pay the accrued Premium in cash or Common
Stock, the Company would consider the Conversion Price at the time of the
conversion in relation to the market price of the Common Stock at that time and
the dilutive effect to the holders of the outstanding Common Stock if the
Premium was to be paid in shares of Common Stock, as well as the Company's cash
availability at the time of the conversion and its other needs for cash at that
time.
Conversion Limitations. The number of shares of Common Stock issued upon
conversion of all outstanding shares of Series C Convertible Preferred Stock may
not exceed the following amounts during the periods specified (each, a
"Conversion Limit Amount"), and the Conversion Limit Amount is subject to
adjustment in accordance with the terms of the Certificate of Designation:
<TABLE>
<CAPTION>
CONVERSION
PERIOD LIMIT AMOUNT
- ------ ------------
<S> <C>
During the 1st Year Following the Issue Date................ 3,975,000
During the 2nd Year Following the Issue Date................ 4,200,000
During the 3rd Year Following the Issue Date................ 4,425,000
During the 4th Year Following the Issue Date................ 4,650,000
Following the 4th Anniversary of the Issue Date............. 4,875,000
</TABLE>
No purchaser of the Series C Convertible Preferred Stock may be issued,
upon conversion of such stock, shares of Common Stock in an amount greater than
the product of (i) the applicable Conversion Limit Amount times (ii) a fraction,
the numerator of which is the number of shares of Series C Convertible Preferred
Stock issued to such purchaser pursuant to the Securities Purchase Agreement and
the denominator of which is the aggregate amount of all of the shares of Series
C Convertible Preferred Stock issued to the purchasers pursuant to the
Securities Purchase Agreement, subject to certain adjustments set forth in the
Certificate of Designation (the "Conversion Limit Allocation Amount").
The 20% Issuance. As discussed above, until the Company obtains the
approval of the holders of a majority of the Company's Common Stock, the number
of shares of Common Stock issued upon conversion of Series C Convertible
Preferred Stock or exercise of the Warrants may not exceed 19.99% of the number
of shares of Common Stock outstanding on February 5, 1999, or 1,512,661 shares.
At the Annual Meeting, the stockholders will be asked to approve the issuance of
all of the shares of Common Stock which are subject to issuance upon conversion
of the Series C Convertible Preferred Stock and exercise of the Warrants, in
order to permit the Series C Convertible Preferred Stock and the Warrants to be
converted and exercised in full in accordance with their terms, which issuance
would result in the Company's issuing more than 20% of the issued and
outstanding Common Stock on February 5, 1999 (the "20% Issuance").
Mandatory Conversion. The Company has the right to require conversion of
all of the outstanding shares of Series C Convertible Preferred Stock at any
time after February 5, 2000 if the Closing Bid Price for the Company's Common
Stock is greater than $15.00 for fifteen (15) consecutive trading days, subject
to satisfaction of certain conditions set forth in the Certificate of
Designation.
Mandatory Redemption. Each purchaser of Series C Convertible Preferred
Stock will have the right, upon the occurrence of a Mandatory Redemption Event
(as such term is defined in the Certificate of Designation, which term includes,
among other things, failure to receive timely stockholder approval of the 20%
Issuance), to require the Company to redeem all or any part of such purchaser's
Series C Convertible Preferred Stock for a price (the "Mandatory Redemption
Price") equal to the greater of (a) the Liquidation
12
<PAGE> 15
Preference of the shares being redeemed multiplied by 115% and (b) an amount
calculated on the basis of the applicable Conversion Price and the price at
which the Common Stock of the Company is then trading.
If the Corporation fails to pay the Mandatory Redemption Price within ten
(10) business days of the mandatory redemption date, the holder of Series C
Convertible Preferred Stock shall have the right to regain its rights as such a
holder and, upon written notice to such effect from the holder, the Company
shall return to such holder the certificates representing the Series C
Convertible Preferred Stock delivered to the Company in connection with the
mandatory redemption. In such event, the Conversion Price otherwise applicable
to future conversions of the Series C Convertible Preferred Stock shall be
reduced by one percent for each day beyond such tenth business day in which the
failure to pay continued, until the date of such notice, but the maximum
reduction of the Conversion Price shall be fifty percent.
Optional Redemption. The Company will have the right, upon the
satisfaction of certain Optional Redemption Conditions (as defined in the
Certificate of Designation), to redeem any Series C Convertible Preferred Stock
submitted for conversion at a Conversion Price that is less than $7.00 (subject
to adjustment upon the occurrence of certain events set forth in the Certificate
of Designation) for a price equal to an amount representing an annualized return
of 110% on the Stated Value of the Series C Convertible Preferred Stock being
redeemed, plus accrued Premium.
Voting. The holders of shares of Series C Convertible Preferred Stock are
not entitled to vote with respect to the business, management or affairs of the
Company. For so long as any shares of Series C Convertible Preferred Stock are
outstanding, the following matters, however, will require the approval of the
holders of at least two-thirds of the then-outstanding shares of Series C
Convertible Preferred Stock:
(i) altering, changing, modifying or amending the terms of the Series
C Convertible Preferred Stock or the terms of any other stock of the
Company so as to adversely affect the Series C Convertible Preferred Stock;
(ii) creating any new class or series of capital stock having a
preference over or ranking pari passu with the Series C Convertible
Preferred Stock as to redemption or distribution of assets upon a
Liquidation Event (as defined in the Certificate of Designation) or any
other liquidation, dissolution or winding up of the Company;
(iii) increasing the authorized number of shares of Series C
Convertible Preferred Stock;
(iv) reissuing any shares of Series C Convertible Preferred Stock
which have been converted or redeemed in accordance with the terms of the
Certificate of Designation;
(v) issuing any Pari Passu Securities or Senior Securities (each as
defined in the Certificate of Designation) (other than non-convertible debt
securities or debt securities which are convertible into or exchangeable
for Common Stock of the Company or any other equity or convertible security
of the Company junior to the Series C Convertible Preferred Stock);
(vi) redeeming, declaring, paying or making any provision for any
dividend or distribution with respect to the Common Stock of the Company or
any other capital stock of the Company ranking junior to the Series C
Convertible Preferred Stock as to the distribution of assets upon
liquidation, dissolution or winding up of the Company; and
(vii) issuing any Series C Convertible Preferred Stock except pursuant
to the terms of the Securities Purchase Agreement.
Dividends. The Series C Convertible Preferred Stock will not bear
dividends.
Liquidation. Upon the liquidation, dissolution or winding up of the
Company, the holders of Series C Convertible Preferred Stock, before any
distribution to the holders of Junior Securities (as defined in the Certificate
of Designation) but after payment to holders of Senior Securities, will be
entitled to receive an amount equal to the Stated Value (defined below) plus the
Premium (defined below) accrued on its Series C Convertible Preferred Stock in
accordance with the terms of the Certificate of Designation (the "Liquidation
Preference").
13
<PAGE> 16
Preemptive Rights. Pursuant to the Securities Purchase Agreement, until
February 5, 2000, each purchaser of the Series C Convertible Preferred Stock
will have the right, upon the issuance of certain equity securities by the
Company, to either purchase a pro rata share of such securities or, at the
option of such purchaser, to exchange all or any part of such purchaser's shares
of Series C Convertible Preferred Stock for an equal amount of such securities.
THE WARRANTS
Pursuant to the Securities Purchase Agreement, each investor received a
Warrant for the purchase of 20,000 shares of Common Stock of the Company for
each $1 million of Series C Convertible Preferred Stock issued. The Warrants are
exercisable at $9.00 per share (subject to adjustment upon the occurrence of
certain events set forth in the Warrants). The Warrants will expire five (5)
years after the date of issuance, and are subject to mandatory exercise, subject
to certain conditions set forth therein, if the Company's Common Stock trades at
or above $18 per share (subject to adjustment upon the occurrence of certain
events set forth in the Warrants) for five (5) consecutive trading days.
Cashless exercise is permitted under the terms of the Warrants and is required
for any exercise after February 5, 2001.
If, following exercise of the Warrants, the Company fails to deliver shares
of its Common Stock to an investor in accordance with the terms of the Warrants,
it may incur monetary and other penalties.
THE REGISTRATION RIGHTS AGREEMENT
In accordance with the Securities Purchase Agreement, the Company entered
into a Registration Rights Agreement with the investors, pursuant to which the
Company was required to file with the Securities and Exchange Commission (the
"SEC") a registration statement on Form S-3 covering the resale of the Common
Stock issuable upon conversion of the Series C Convertible Preferred Stock and
exercise of the Warrants. The Company has filed such Form S-3 Registration
Statement with the SEC and as of the date of this Proxy Statement was awaiting
comments from the SEC on the Form S-3. The Company may incur monetary and other
penalties (including in certain circumstances mandatory redemption of the Series
C Convertible Preferred Stock) in the event that such registration statement is
not declared effective in accordance with the terms of the Registration Rights
Agreement, or if such registration statement becomes unavailable for the resale
of shares of Common Stock of the Company and such unavailability continues for a
period set forth in the Registration Rights Agreement.
HOLDERS OF THE SERIES C CONVERTIBLE PREFERRED STOCK AND WARRANTS
The following table sets forth (i) the name of each holder of the Series C
Convertible Preferred Stock and Warrants (ii) the number and percentage of
shares of Common Stock issuable to each holder upon conversion of the Series C
Convertible Preferred Stock as of June 8, 1999 (assuming stockholder approval of
this proposal and election by the Company to issue Common Stock in lieu of cash
in payment of the accrued Premium), (iii) the maximum number and percentage of
shares that could be issuable to each holder upon conversion of the Series C
Convertible Preferred Stock following the fourth anniversary of the issue date
of the Series C Convertible Preferred Stock (with the same assumptions as in
clause (ii) above), (iv) the number and percentage of shares issuable to each
holder upon exercise of the Warrants and (v) aggregate number and percentage of
shares issuable to each holder when combining the scenarios in clauses (ii),
(iii) and (iv) above.
14
<PAGE> 17
<TABLE>
<CAPTION>
NO. OF SHARES
OF SERIES C NO. OF SHARES OF COMMON STOCK
CONVERTIBLE UNDERLYING SERIES C
PREFERRED -----------------------------------------
HOLDER (THE SERIES C) CURRENT(1) %(2) MAXIMUM(3) %(2) WARRANTS(4)
- ------ -------------- ---------- ------ ---------- ------ -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Marcuard Cook & Cie S.A. .......... 1,700 247,887 2.48% 552,500 4.35% 34,000 0.42%
Eagle & Dominion Euro American
Growth Fund Ltd. ................. 220 32,080 0.32% 71,500 0.56% 4,400 0.05%
Eagle & Dominion Euro American
Growth Fund L.P. ................. 60 8,749 0.09% 19,500 0.15% 1,200 0.01%
Meinl Bank AG...................... 1,050 153,107 1.53% 341,250 2.69% 21,000 0.26%
Trower FT Fund..................... 50 7,291 0.07% 16,250 0.13% 1,000 0.01%
AAGC ABN AMRO Bank N.V. ........... 1,000 145,816 1.46% 325,000 2.56% 20,000 0.25%
Lupton Estates Ltd. ............... 1,108 161,564 1.61% 360,100 2.84% 22,160 0.27%
Dulville Limited................... 1,108 161,564 1.61% 360,100 2.84% 22,160 0.27%
Rea Brothers (Guernsey) Limited.... 420 61,243 0.61% 136,500 1.08% 8,400 0.10%
NCL Investments Ltd. .............. 250 36,454 0.36% 81,250 0.64% 5,000 0.06%
Thornhill Investment Management
Limited........................... 200 29,163 0.29% 65,000 0.51% 4,000 0.05%
Oakes Fitzwilliams Executive Death
Benefits & Retirement Scheme...... 25 3,645 0.04% 8,125 0.06% 500 0.01%
Trident North Atlantic Fund........ 70 10,207 0.10% 22,750 0.18% 1,400 0.02%
Bellhaven Investments Ltd. ........ 28 4,083 0.04% 9,100 0.07% 560 0.01%
Eagle & Dominion Asset Management
Ltd. ............................. 20 2,916 0.03% 6,500 0.05% 400 0.00%
Pequot Scout Fund, LP.............. 1,441 210,121 2.10% 468,325 3.69% 28,820 0.36%
International Capital Partners,
Inc. Profit Sharing Trust......... 250 36,454 0.36% 81,250 0.64% 5,000 0.06%
Ardara Investments, Inc............ 1,000 145,816 1.46% 325,000 2.56% 20,000 0.25%
Marshall Capital Management,
Inc............................... 5,000 729,080 7.29% 1,625,000 12.80% 100,000 1.23%
------ ---------- ------ ---------- ------ --------- ------
15,000 2,187,241 21.86% 4,875,000 38.41% 300,000 3.70%
Outstanding Common Stock........... 7,817,207 78.14% 7,817,207 61.59% 7,817,207 96.30%
---------- ---------- ---------
Total.............................. 10,004,448 100% 12,692,207 100% 8,117,207 100%
========== ========== =========
<CAPTION>
NO. OF SHARES OF COMMON STOCK
UNDERLYING SERIES C AND WARRANTS
-----------------------------------------
HOLDER CURRENT %(5) MAXIMUM %(5)
- ------ ---------- ------ ---------- ------
<S> <C> <C> <C> <C>
Marcuard Cook & Cie S.A. .......... 281,887 2.74% 586,500 4.51%
Eagle & Dominion Euro American
Growth Fund Ltd. ................. 36,480 0.35% 75,900 0.58%
Eagle & Dominion Euro American
Growth Fund L.P. ................. 9,949 0.10% 20,700 0.16%
Meinl Bank AG...................... 174,107 1.69% 362,250 2.79%
Trower FT Fund..................... 8,291 0.08% 17,250 0.13%
AAGC ABN AMRO Bank N.V. ........... 165,816 1.61% 345,000 2.66%
Lupton Estates Ltd. ............... 183,724 1.78% 382,260 2.94%
Dulville Limited................... 183,724 1.78% 382,260 2.94%
Rea Brothers (Guernsey) Limited.... 69,643 0.68% 144,900 1.12%
NCL Investments Ltd. .............. 41,454 0.40% 86,250 0.66%
Thornhill Investment Management
Limited........................... 33,163 0.32% 69,000 0.53%
Oakes Fitzwilliams Executive Death
Benefits & Retirement Scheme...... 4,145 0.04% 8,625 0.07%
Trident North Atlantic Fund........ 11,607 0.11% 24,150 0.19%
Bellhaven Investments Ltd. ........ 4,643 0.05% 9,660 0.07%
Eagle & Dominion Asset Management
Ltd. ............................. 3,316 0.03% 6,900 0.05%
Pequot Scout Fund, LP.............. 238,941 2.32% 497,145 3.83%
International Capital Partners,
Inc. Profit Sharing Trust......... 41,454 0.40% 86,250 0.66%
Ardara Investments, Inc............ 165,816 1.61% 345,000 2.66%
Marshall Capital Management,
Inc............................... 829,080 8.05% 1,725,000 13.28%
---------- ------ ---------- ------
2,487,241 24.14% 5,175,000 39.83%
Outstanding Common Stock........... 7,817,207 75.86% 7,817,207 60.17%
---------- ----------
Total.............................. 10,304,448 100% 12,992,207 100%
========== ==========
</TABLE>
- ---------------
(1) Represents the number of shares of Common Stock issuable to each holder of
Series C Convertible Preferred Stock (the "Series C Shares") as of June 8,
1999, using the Conversion Price in effect as of that date, $7.00, plus the
accrued Premium of 6% per year on the Stated Value of each Series C Share as
of that date. The Premium may be paid in cash or in shares of Common Stock,
under certain conditions, at the option of the Company. The number of shares
of Common Stock indicated herein does not give effect to a provision in the
terms of the Series C Shares and the Warrants applicable to certain holders
which limits such holder to not greater than 4.99% of the outstanding shares
of Common Stock. Assumes stockholder approval has been obtained for this
proposal.
(2) Percentages of the Company's Common Stock owned by holders assuming
conversion of all Series C Shares as of June 8, 1999.
(3) Represents the maximum number of shares of Common Stock issuable to holders
of Series C Shares, including the maximum accrued Premium payable in shares
of Common Stock. The Series C Shares are subject to a conversion limitation,
and the maximum number of shares issuable upon conversion increases over a
four-year period to reflect an increase due to the accrual of the 6%
Premium. This column sets forth the maximum number of shares of Common Stock
issuable after the elapse of such four-year period. The number of shares of
Common Stock indicated herein does not give effect to a provision in the
terms of the Series C Shares and the Warrants applicable to certain holders
which limits such holder to not greater than 4.99% of the outstanding shares
of Common Stock. Assumes stockholder approval has been obtained for this
proposal.
(4) Represents the number of shares of Common Stock currently issuable upon
exercise of all outstanding Warrants.
(5) Percentages of the Company's Common Stock owned by the holder assuming
conversion of all Series C Shares and Warrants as of June 8, 1999, and
including all other assumptions described in footnotes (1) and (3).
15
<PAGE> 18
BOARD OF DIRECTORS' RECOMMENDATIONS
The Board of Directors unanimously approved the Transaction, including the
20% Issuance, and unanimously recommends that the stockholders vote for approval
of the 20% Issuance.
CERTAIN CONSIDERATIONS
While the Board of Directors is of the opinion that the 20% Issuance is
advisable and in the best interests of the Company and its stockholders,
stockholders should consider the following possible effects, as well as the
other information contained in this Proxy Statement, in evaluating the 20%
Issuance.
Possible Dilutive Effects. To the extent that the market value of the
Common Stock at the time of the conversion of the Series C Convertible Preferred
Stock, or exercise of the Warrants, is greater than the Conversion Price then in
effect, or the exercise price of the Warrants, then the holders of Common Stock
may suffer dilution in the value of their equity as a result of the conversion
of the Series C Convertible Preferred Stock or exercise of the Warrants.
As discussed above under the caption "The Series C Convertible Preferred
Stock -- Conversion", the Conversion Price of the Series C Convertible Preferred
Stock is equal to the lesser of $7.00 and the Variable Conversion Price, which
is determined based upon the market price of the Common Stock during a specified
period immediately prior to the conversion date. As a result of this Variable
Conversion Price feature, the lower the market price of the Common Stock below
$7.00 at the time of the conversion, the more shares of Common Stock that are
issuable to the holder of the Series C Convertible Preferred Stock upon such
conversion, subject to the Conversion Limitation Allocation Amount described
above under the caption "The Series C Convertible Preferred Stock -- Conversion
Limitations".
An additional provision of the Series C Convertible Preferred Stock would,
if satisfied, eliminate the Variable Conversion Price feature and fix the
Conversion Price at $7.00 at all times thereafter. If (i) the closing bid price
for the Common Stock is greater than $11.00 for ten consecutive trading days,
and (ii) at all times during such period (x) the Registration Statement on Form
S-3 covering the resale of the shares of Common Stock issuable upon conversion
of the Series C Convertible Preferred Stock and exercise of the Warrants is
effective and available to the holders of the Series C Convertible Preferred
Stock and Warrants for the sale of all of the shares of Common Stock into which
the Series C Convertible Preferred Stock and Warrants then outstanding are
convertible or exercisable, or such shares may then be sold under Rule 144(k)
promulgated by the Securities and Exchange Commission, (y) the Common Stock is
then listed on the NASDAQ SmallCap Market, the NASDAQ National Market System or
the New York Stock Exchange, and (iii) trading in the Common Stock has not been
suspended by the principal market on which the Common Stock is traded, then the
Conversion Price thereafter will be fixed at $7.00 per share (subject to
antidilution adjustments in the event of a stock split, stock dividend and
similar events).
Dilution of Voting Power. The issuance of the maximum number of shares of
Common Stock upon conversion of the Series C Convertible Preferred Stock and
exercise of the Warrants (assuming election by the Company to pay the accrued
Premium in shares of Common Stock in lieu of cash), as illustrated in the table
above under the caption "Holders of the Series C Convertible Preferred Stock and
Warrants", would substantially dilute the voting power of the existing holders
of the Common Stock. The Company can give no assurance as to whether the holders
of the Common Stock issued upon conversion of the Series C Convertible Preferred
Stock or exercise of the Warrants would exercise their voting rights in a manner
consistent with the current holders of the outstanding Common Stock.
Possible Effect on Market Price of the Common Stock. To the extent the
holders of the Series C Convertible Preferred Stock convert such stock and then
sell the shares of Common Stock issued to them upon the conversion, the
additional shares of Common Stock in the market may have the effect of
decreasing the market price for the Common Stock. If the market price of the
Common Stock was less than $7.00 per share at the time of the conversion, any
further decrease in the market price of the Common Stock could enable the
holders of the Series C Convertible Preferred Stock to convert such stock into a
greater number of shares of Common Stock due to the Variable Conversion Price
feature of the Series C Convertible Preferred
16
<PAGE> 19
Stock, the sales of which in the market could have the effect of further
depressing the market price of the Common Stock. Any such downward pressure on
the market price of the Common Stock due to the conversion of the Series C
Convertible Preferred Stock and sale of the Common Stock issued upon such
conversion could encourage short sales by the holders of the Series C
Convertible Preferred Stock or others. Any such short sales could place further
downward pressure on the market price of the Common Stock.
Interest of Certain Persons in the 20% Issuance. Messrs. Ajit G.
Hutheesing and Nicholas E. Sinacori, nominees for election to the Company's
Board of Directors pursuant to Proposal 1 in this Proxy Statement, also serve as
principals of International Capital Partners, Inc., whose profit sharing plan is
one of the investors in the Transaction described in this Proposal.
CONSEQUENCES IF THE PROPOSAL IS NOT APPROVED
If stockholder approval is not obtained for the 20% Issuance, the Series C
Convertible Preferred Stock issued at the closing of the Transaction will be
redeemable for cash at a premium, at the option of the holders at any time. If
the Company does not receive stockholder approval, there can be no assurance
that the Company would have or be able to obtain adequate sources of additional
capital to so redeem the Series C Convertible Preferred Stock. An obligation to
redeem a significant number of shares of Series C Convertible Preferred Stock
would likely have an adverse effect on the Company and its prospects. In
addition, pursuant to the Certificate of Designation, certain holders of the
Series C Convertible Preferred Stock could require the Company to institute
proceedings and take all other action necessary to delist the Common Stock from
the NASDAQ SmallCap Market, in which case the 20% Limit would not apply at any
time following the delisting.
VOTE REQUIRED
Assuming the presence of a quorum, an affirmative vote of a majority of the
shares of Common Stock present in person or by proxy and voting will be required
for the approval of the 20% Issuance, which approval is necessary in order to
comply with the corporate governance rules of the NASDAQ SmallCap Market.
Abstentions with respect to voting on this matter will have the effect of a
negative vote, and "broker non-votes" with respect to voting on this matter will
have no effect on the outcome of the vote.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THIS PROPOSAL.
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
(ITEM 6 ON PROXY CARD)
The Board of Directors has appointed Rothstein, Kass & Company, P.C.,
independent auditors, to audit the books, records and accounts of the Company
for the 1999 fiscal year. This appointment is being presented to the
stockholders for ratification at the Annual Meeting.
Rothstein, Kass & Company, P.C. has no direct or indirect material
financial interest in the Company or its subsidiaries. Representatives of
Rothstein, Kass & Company, P.C. are not expected to be present at the Annual
Meeting.
VOTE REQUIRED
Proxies solicited by the Board of Directors will be voted for ratification
unless stockholders specify otherwise. Ratification by the stockholders is not
required. If the stockholders do not approve the proposal, the Board of
Directors will not change the appointment for fiscal year 1999, but will
consider the stockholder vote in appointing auditors for fiscal year 2000.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THIS PROPOSAL.
17
<PAGE> 20
EXECUTIVE OFFICERS
The following table sets forth certain information concerning the executive
officers of the Company who are not also directors. The executive officers are
elected annually by the Board of Directors following the Annual Meeting and
serve at the discretion of the Board.
<TABLE>
<CAPTION>
OFFICER AGE POSITION WITH COMPANY
- ------- --- ---------------------
<S> <C> <C>
Kenneth M. Dorros.................... 39 Senior Vice President, General Counsel and Secretary
Sean P. Hayes........................ 34 Executive Vice President
John Lovkay.......................... 61 President -- Debit Division
Ismael G. Pinho...................... 40 Controller
Jon F. Sorenson...................... 36 President -- Rental Division
</TABLE>
KENNETH M. DORROS has been Senior Vice President, General Counsel and
Secretary of the Company since June of 1998. Previously, he served the Company
as Counsel from October, 1997 to June, 1998. From March of 1989 to October of
1997, Mr. Dorros served as Vice President, General Counsel and Secretary of the
Company. Mr. Dorros served as General Counsel and Secretary of Shared
Technologies Fairchild Inc. ("STFI") from June, 1986 to March, 1998, where he
was also a Senior Vice President from April, 1996 to March, 1998. Mr. Dorros
received a bachelor's degree from Lehigh University and a Juris doctor from the
Fordham University School of Law.
SEAN P. HAYES has been an Executive Vice President of the Company since
March, 1993. Between December, 1992 and March, 1993, he served as the Company's
Director of Operations. From March, 1993 to August, 1996, Mr. Hayes served on
the Company's Board of Directors. Prior to joining the Company, Mr. Hayes was
employed by STFI, serving as Director of STFI's Data Division from 1990 to 1992
and as a Regional Business Manager from 1988 to 1990. He received a B.A. degree
in business administration and computer information systems from New Hampshire
College.
JOHN LOVKAY has been President of the Company's Debit Division since
February of 1999, and he served as Senior Vice President -- Corporate Operations
from October of 1996 to February of 1999. From April, 1995 to October, 1996, Mr.
Lovkay held the position of Vice President -- Operations Support. Prior to
joining the Company, Mr. Lovkay was employed by STFI in the position of Senior
Vice President -- Operations Analysis from August, 1994 to April, 1995. From
December of 1992 to August of 1994, he was a software consultant, which position
included work for Integrated Management Systems and DeSai Consulting Group. Mr.
Lovkay was Executive Vice President and Chief Operating Officer of STFI from
January of 1987 to December of 1992. He also served as President of the Hamilton
Standard Division of United Technologies Corporation from 1984 to 1986. Mr.
Lovkay holds a B.S. in electrical engineering from the Massachusetts Institute
of Technology and an M.S. from the University of Connecticut.
ISMAEL G. PINHO joined the Company as its Controller in May of 1995. From
October, 1990 to May, 1995, he was Controller of F.L. Roberts & Company, Inc. a
retailer and distributor of petroleum products. Mr. Pinho was Controller of
Shapiro Equipment, Inc., a construction equipment company, from 1986 to 1990.
Mr. Pinho holds a B.A. degree in accounting from the University of Connecticut.
JON F. SORENSON has been President of the Company's Rental Division since
November, 1995. From March, 1994 to November, 1995, Mr. Sorenson served as Chief
Operating Officer of PTC Cellular, Inc. ("PTC"). The Company acquired
substantially all of the assets of PTC in November of 1995. Prior to that, from
December, 1992 to March, 1994, Mr. Sorenson was a Vice President of the S&S
Companies, a national office beverage distribution and real estate company. From
July, 1991 to December, 1992, he served as Executive Vice President of
Cafeccino, Inc., a nationwide provider of office beverage services. Mr. Sorenson
holds a B.A. degree in economics from the University of Maine.
18
<PAGE> 21
EXECUTIVE COMPENSATION
1. REPORT OF THE COMPENSATION COMMITTEE
The Compensation Committee of the Board of Directors is responsible for
establishing the compensation, including bonus and incentive arrangements, of
the Company's Chief Executive Officer and for reviewing the compensation of
other executive officers of the Company, as established by the Chief Executive
Officer. Until April of 1998, the Chief Executive Officer received no cash
compensation from the Company, but was instead paid by Shared Technologies
Fairchild Inc. ("STFI"), which was acquired by Intermedia Communications, Inc.
in March of 1998. Previously, STFI provided certain management services to the
Company pursuant to a management agreement that expired in 1997.
The Compensation Committee makes appropriate recommendations concerning
executive compensation, and it reports to the Company's Board of Directors.
Under the supervision, approval and review of the Compensation Committee, the
Company's compensation policies and programs are designed to motivate, retain
and attract management with incentives linked to the financial performance of
the Company and the value that is delivered to its stockholders. Specifically,
the Company's policies and programs endeavor to (i) link executive compensation
to sustainable increases in the financial performance of the Company, where
possible, and where not possible, preservation or realization of stockholder
value; (ii) provide rewards contingent upon Company performance; (iii)
differentiate compensation based upon individual contributions; (iv) promote
teamwork among executives and other Company employees; and (v) encourage the
retention of a sound management team.
Cash compensation at the Company consists of two components: (i) a base
salary that is competitive with that of other companies paying at the median
level of the market, and (ii) an annual incentive opportunity that is variable
and is reflective of the financial performance of the Company and the individual
performance of the executive officer. When high levels of performance are
achieved, the level of cash compensation may exceed the median of the market.
Conversely, when the Company or the individual falls short of the predetermined
goals, the level of cash compensation may be substantially below the market
median. The objective of this mix is to deliver total annual cash compensation
competitive with compensation offered at other companies facing similar
challenges for similar positions, while simultaneously linking the payment of
the annual cash incentive to the achievement of specific objectives in the
Company's annual operating plan as approved by the Board of Directors.
The award and size of any performance bonus are based upon (i) the
executive officer's performance against individual goals, and (ii) the
performance of the Company against Company goals. Goals vary from year to year
and, with regard to individual goals of executive officers, usually include both
quantitative and qualitative factors. The Compensation Committee also
occasionally awards special bonuses in connection with extraordinary
transactions by the Company. The bonuses generally are awarded to individuals
who make significant contributions towards consummation of the transactions.
The Compensation Committee believes that stock option grants serve as a
desirable, long-term method of compensation because they closely ally the
interests of management with the preservation, enhancement and realization of
stockholder value and serve as an additional incentive to promote the success of
the Company.
The Compensation Committee believes that the total compensation program for
executives of the Company is on a level with the compensation programs provided
by other companies facing similar challenges.
Respectfully submitted,
THOMAS H. DECKER
WILLIAM A. DIBELLA
AJIT G. HUTHEESING
19
<PAGE> 22
2. RECOMMENDATIONS OF THE CHIEF EXECUTIVE OFFICER
The Chief Executive Officer recommends to the Compensation Committee the
proposed compensation (other than his own) of each executive officer of the
Company.
In evaluating the performance of an executive officer and in formulating
his recommendation to the Compensation Committee, the Chief Executive Officer
adheres generally to the criteria and principles enunciated in the Compensation
Committee's report set forth above, yet he relies most heavily on the following
criteria employed by the Compensation Committee:
(a) the executive officer's influence on the performance of the
Company through his or her management skills;
(b) the executive officer's skill in long range planning for the
Company's future growth and activities; and
(c) the manner in which the executive officer positions the Company to
succeed in the future.
Respectfully submitted,
ANTHONY D. AUTORINO
Chairman and Chief Executive Officer
20
<PAGE> 23
SUMMARY COMPENSATION TABLE
The following table sets forth the annual and long-term compensation
awarded or paid to or earned by the Company's Chief Executive Officer, as well
as to each of the Company's other most highly paid executive officers who
received compensation in excess of $100,000 for the fiscal year ended 1998 (of
which there were only three such other executive officers). Collectively, the
Chief Executive Officer and such other executive officers are referred to herein
as the "Named Executive Officers."
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
------------
AWARDS
ANNUAL ------------
COMPENSATION SECURITIES
------------ UNDERLYING ALL OTHER
NAME & PRINCIPAL POSITION YEAR SALARY($) OPTIONS(#) COMPENSATION($)
- ------------------------- ---- ------------ ------------ ---------------
<S> <C> <C> <C> <C>
Anthony D. Autorino....................... 1998 $163,822 150,000 $47,448(a)
Chairman and Chief 1997 (b) -- (b)
Executive Officer 1996 (b) -- (b)
Vincent DiVincenzo........................ 1998 $100,609(c) 50,000 (c)
Senior Vice President, Treasurer and
Chief Financial Officer
Sean P. Hayes............................. 1998 $115,102 25,000 --
Executive Vice President 1997 $102,084 -- --
Jon F. Sorenson........................... 1998 $105,584 5,000 --
President -- Rental Division 1997 $102,300 -- --
</TABLE>
- ---------------
(a) Paid as reimbursement for life insurance premiums.
(b) Until April 1998, the Chief Executive Officer, Anthony D. Autorino, was paid
by Shared Technologies Fairchild Inc., of which Mr. Autorino was Chairman
and Chief Executive Officer, in accordance with a Management Agreement that
is no longer in effect. In 1996, Mr. Autorino received from STFI a warrant
to purchase 480,000 shares of the Company's Common Stock owned by STFI at an
exercise price of $1.72 per share.
(c) Until April 1998, the Senior Vice President, Treasurer and Chief Financial
Officer, Vincent DiVincenzo, was paid by Shared Technologies Fairchild Inc.,
of which he was Senior Vice President, Treasurer and Chief Financial
Officer, in accordance with a Management Agreement that is no longer in
effect. In 1996, Mr. DiVincenzo received from STFI a warrant to purchase
144,000 shares of the Company's Common Stock owned by STFI at an exercise
price of $1.72 per share.
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth information on options granted during the
fiscal year ended December 31, 1998 to the Named Executive Officers.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
----------------------------------------------------- POTENTIAL REALIZED VALUE
% OF TOTAL AT ASSUMED RATES OF
OPTIONS EXERCISE STOCK PRICE APPRECIATION
GRANTED TO OR BASE FOR OPTION TERM
OPTIONS EMPLOYEES IN PRICE EXPIRATION ------------------------
NAME GRANTED(#) 1998 ($/SH) DATE 5%($) 10%($)
- ---- ----------- ------------ -------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Anthony D. Autorino.... 100,000 28% $5.50 3/26/08 $345,892 $876,558
Vincent DiVincenzo..... 50,000 14% $5.50 3/26/08 $172,946 $438,279
Sean P. Hayes.......... 25,000 7% $5.73 10/27/08 $ 90,089 $228,304
John F. Sorenson....... 5,000 1% $5.50 3/26/08 $ 17,295 $ 43,828
</TABLE>
21
<PAGE> 24
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION VALUES
The following table sets forth information concerning outstanding options
to purchase the Company's Common Stock. No stock options were exercised during
the fiscal year ended December 31, 1998 by the Named Executive Officers.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF IN-THE-MONEY
OPTIONS AT FISCAL OPTIONS AT FISCAL
YEAR END(#) YEAR END($)
EXERCISABLE/ EXERCISABLE/
UNEXERCISABLE UNEXERCISABLE
---------------------- ----------------------
<S> <C> <C>
Anthony D. Autorino.................. 91,666/66,667 $360,540/$175,000
Vincent DiVincenzo................... 38,334/33,333 $142,810/$ 87,500
Sean P. Hayes........................ 45,000/43,333 $201,449/$ 99,067
John F. Sorenson..................... 20,000/10,000 $104,769/$ 44,583
</TABLE>
EMPLOYMENT AGREEMENTS
The Company has no employment agreements currently in effect with any of
its employees.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The current members of the Compensation Committee of the Board of Directors
are Messrs. Decker, DiBella and Hutheesing. Messrs. Autorino and DiVincenzo,
executive officers of the Company, and Mr. DiBella are each managing directors
of CMD Ventures LLC, a private real estate management and development company.
Mr. Hutheesing is a director and executive officer of International Capital
Partners, Inc. and a trustee of International Capital Partners Profit Sharing
Trust, each of which participated in financing transactions with the Company in
1998 and in February 1999, which are described in greater detail below under the
caption "Certain Relationships and Related Transactions".
SECURITY OWNERSHIP
The following table sets forth certain information regarding the beneficial
ownership of the Company's Common Stock as of May 25, 1999 by (i) each of the
Company's directors and nominees, (ii) the Named Executive Officers, (iii) all
directors and Executive Officers of the Company as a group, and (iv) each person
known by the Company to own beneficially more than five percent of the
outstanding shares of the Company's Common Stock.
<TABLE>
<CAPTION>
PERCENTAGE OF
NUMBER OF SHARES COMMON STOCK
NAMES AND ADDRESS(1) BENEFICIALLY OWNED(2) OUTSTANDING
- -------------------- --------------------- -------------
<S> <C> <C>
DIRECTORS, NOMINEES AND EXECUTIVE OFFICERS
Anthony D. Autorino......................... 969,661(a) 12.2%
Chief Executive Officer and Director
Bruce Carswell.............................. 4,300(b) *
Director
Thomas H. Decker............................ 131,333(c) 1.7%
Director
William A. DiBella.......................... 236,666(d) 3.0%
Director
Vincent DiVincenzo.......................... 280,328(e) 3.6%
Senior Vice President, Chief Financial
Officer, Treasurer and Director
</TABLE>
22
<PAGE> 25
<TABLE>
<CAPTION>
PERCENTAGE OF
NUMBER OF SHARES COMMON STOCK
NAMES AND ADDRESS(1) BENEFICIALLY OWNED(2) OUTSTANDING
- -------------------- --------------------- -------------
<S> <C> <C>
Victor Grillo, Sr........................... 0 *
Nominee for Director
150 East Palmetto Park Road
Boca Raton, FL 33432
Sean P. Hayes............................... 125,979(f) 1.6%
Executive Vice President
Ajit G. Hutheesing.......................... 831,039(g) 9.9%
Director
Nicholas E. Sinacori........................ 821,039(h) 9.8%
Director
John F. Sorenson............................ 21,195(i) *
President -- Rental Division
All directors and executive officers as a
group (11 persons)........................ 2,797,572(j) 31.2%
FIVE PERCENT STOCKHOLDERS
George W. Mauerman.......................... 665,841(k) 8.5%
6585 S. Yale, Suite 500
Tulsa, OK 74136
The Fairchild Corporation and............... 750,519(l) 9.7%
Banner Aerospace, Inc.
45025 Aviation Drive, Suite 400
Dulles, VA 20177
International Capital Partners, Inc. ....... 821,039(m) 9.8%
300 First Stamford Place
Stamford, CT 06902
Zesiger Capital Group LLC................... 1,922,742(n) 22.7%
320 Park Avenue
New York, NY 10022
Dulville Limited............................ 498,421(o) 6.3%
9 Avenue d'Ostende
MC-98000, Monaco
</TABLE>
- ---------------
* Less than 1%
(1) The mailing address of each of the Company's directors and executive
officers is c/o the Company, 100 Great Meadow Road, Wethersfield, CT 06109.
(2) Except as otherwise specifically noted, the number of shares stated as being
owned beneficially includes shares held beneficially by spouses and minor
children. The inclusion herein of any shares deemed beneficially owned does
not constitute an admission of beneficial ownership of those shares. Each
stockholder possesses sole voting and investment power with respect to the
shares listed opposite such stockholder's name, except as otherwise
indicated.
(a) Includes 91,666 shares currently issuable upon exercise of options by
Mr. Autorino. Also includes 76,333 shares and 58,333 shares issuable
upon the exercise of warrants that are owned beneficially by the
estate of Mr. Autorino's late spouse, as to which Mr. Autorino
disclaims beneficial ownership. Also includes 100,000 shares issuable
upon exercise of other warrants held by Mr. Autorino, and 465 shares
beneficially owned through the Company's Savings and Retirement Plan.
(b) Includes 4,000 shares issuable upon exercise of options by Mr.
Carswell.
(c) Includes 10,000 shares currently issuable upon exercise of options by
Mr. Decker. Also includes 33,333 shares issuable upon exercise of
warrants.
23
<PAGE> 26
(d) Includes 10,000 shares currently issuable upon exercise of options by
Mr. DiBella. Also includes 168,333 shares and 58,333 shares issuable
upon exercise of warrants, all of which shares and warrants are
beneficially owned by Mr. DiBella's wife, as to which he disclaims
beneficial ownership.
(e) Includes 38,334 shares currently issuable upon exercise of options by
Mr. DiVincenzo. Also includes 16,667 shares issuable upon exercise of
warrants and 279 shares beneficially owned through the Company's
Savings and Retirement Plan.
(f) Includes 46,666 shares currently issuable upon exercise of options by
Mr. Hayes. Also includes 6,667 shares issuable upon exercise of
warrants, and 3,598 shares owned through the Company's Savings and
Retirement Plan.
(g) Includes 131,667 shares owned by International Capital Partners, Inc.
("ICP"), of which Mr. Hutheesing is the Chairman, Chief Executive
Officer and a stockholder. Also includes 18,000 shares currently
issuable upon exercise of options by ICP, 590,000 shares issuable upon
exercise of warrants held by ICP, 36,372 shares issuable upon
conversion of Series C Convertible Preferred Stock held by the ICP
Profit Sharing Plan and 5,000 shares issuable upon exercise of
warrants held by the ICP Profit Sharing Trust. Also includes 40,000
shares issuable upon conversion of a convertible promissory note held
by ICP Profit Sharing Trust.
(h) Includes 131,667 shares owned by ICP, of which Mr. Sinacori is
Managing Director. Also includes 18,000 shares currently issuable upon
exercise of options by ICP, 590,000 shares issuable upon exercise of
warrants held by ICP, 36,372 shares issuable upon conversion of Series
C Convertible Preferred Stock held by the ICP Profit Sharing plan and
5,000 shares issuable upon exercise of warrants held by the ICP Profit
Sharing Trust. Also includes 40,000 shares issuable upon conversion of
a convertible promissory note held by ICP Profit Sharing Trust.
(i) Includes 15,000 shares currently issuable upon exercise of options by
Mr. Sorenson. Also includes 1,667 shares issuable upon exercise of
warrants, and 420 shares owned through the Company's Savings and
Retirement Plan.
(j) Includes a total of 295,166 shares currently issuable upon exercise
of options by the Company's directors and executive officers. Also
includes a total of 884,667 shares currently issuable upon exercise
of warrants by such directors and executive officers, 10,869 shares
owned through the Company's Savings and Retirement Plan and 36,372
shares issuable upon conversion of Series C Convertible Preferred
Stock and 40,000 shares issuable upon conversion of a convertible
promissory note beneficially owned by certain of such directors.
(k) Includes 83,333 shares issuable upon exercise of warrants by Mr.
Mauerman. Also includes shares beneficially owned by George S.
Mauerman, individually and as Trustee of the Adrien W. Mauerman
Testamentary Trust.
(l) Owned by Banner Aerospace, Inc. a wholly-owned subsidiary of The
Fairchild Corporation.
(m) Includes 18,000 shares currently issuable upon exercise of options held
by ICP. Also includes 590,000 shares issuable upon exercise of warrants
held by ICP, 36,372 shares issuable upon conversion of Series C
Convertible Preferred Stock held by the ICP Profit Sharing Trust and
5,000 shares issuable upon exercise of warrants held by the ICP Profit
Sharing Trust and 40,000 shares issuable upon conversion of a
convertible promissory note held by the ICP Profit Sharing Trust. (See
notes (g) and (h) with respect to beneficial ownership attributable to
Messrs. Hutheesing and Sinacori.)
(n) Includes 735,000 shares issuable upon exercise of warrants owned
beneficially by Zesiger Capital Group.
(o) Includes 161,200 shares currently issuable upon conversion of Series C
Convertible Stock and 16,000 shares issuable upon exercise of warrants
by Dulville Limited.
24
<PAGE> 27
CUMULATIVE STOCKHOLDER RETURN
The following graph and chart compare the cumulative annual stockholder
return on the Company's Common Stock over the period commencing April 21, 1995
(the date of the Company's initial public offering and the date that the
Company's Common Stock commenced trading on NASDAQ) through December 31, 1998 to
that of the total return Index for the NASDAQ Stock Market ("NASDAQ") and the
total return Index for the Standard Industrial Classification Codes 4810-4819
Telephone Communications ("SIC Code Index") assuming the investment of $100 on
April 21, 1995. The total return Index for the Company and the SIC Code Index
were computed using the Compustat database. The first partial year of the NASDAQ
total return Index was computed using Bloomberg, and the subsequent years were
calculated based upon the Center for Research of Securities Prices Total Return
Indices data. In calculating total annual return, reinvestment of dividends is
assumed. The stock performance graph and chart below are not necessarily
indicative of future price performance.
[SHARED TECHNOLOGIES PERFORMANCE GRAPH]
<TABLE>
<CAPTION>
SHARED TECHNOLOGIES
CELLULAR NASDAQ SIC CODE INDEX
------------------- ------ --------------
<S> <C> <C> <C>
4/21/95 100.00 100.00 100.00
12/31/95 33.70 128.90 123.90
12/31/96 30.40 158.60 145.20
12/31/97 59.80 194.60 194.10
12/31/98 107.67 272.68 245.45
</TABLE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In April, 1998, the Company and Summit Assurance, Inc. and certain of its
affiliates (the "Summit Entities"), the beneficial owner of more than 5% of the
Company's outstanding Common Stock, and Craig A. Marlar, who is an executive
officer and director of the Summit Entities and was a director of the Company
until his resignation in April, 1998, entered into a settlement of litigation
arising out of the acquisition of assets from certain of the Summit Entities in
April, 1996. The terms of the settlement are more fully described in footnote 4
to the Company's financial statements included in the Company's 1998 Annual
Report.
In April 1998, the Company completed a debt financing in the amount of $4
million from four lenders, including Mr. Autorino, the Company's Chairman and
Chief Executive Officer, and International Capital Partners, Inc. ("ICP"), of
which directors Ajit G. Hutheesing and Nicholas E. Sinacori are principals. Such
debt was issued pursuant to credit agreements with each of the lenders,
providing for a floating interest rate of
25
<PAGE> 28
2.5% above a rate comparable to the prime rate. Mr. Autorino and ICP loaned
$1,000,000 and $500,000, respectively, to the Company, pursuant to such credit
agreements. In connection therewith, Mr. Autorino received a warrant for the
purchase of 100,000 shares of Common Stock, and ICP received a warrant for the
purchase of 50,000 shares of Common Stock. Such warrants have an exercise price
of $5.00 per share. All such debt was repaid in February 1999 from the proceeds
of the Company's sale of Series C Convertible Preferred Stock.
In May 1998, the Company issued to nine investors $2.4 million of 5%
convertible notes (the "Notes") through a private placement. Purchasers of the
Notes included an affiliate of ICP, International Capital Partners Profit
Sharing Trust, which purchased a Note in the amount of $200,000. The Notes have
a term of seven years and are convertible at any time at the option of the
noteholder into shares of the Company's Common Stock at a rate of $5.00 per
share, subject to certain antidilution adjustments.
In May 1998, the Company issued a promissory note in the principal amount
of $1,693,560 to Shared Technologies Fairchild Inc. ("STFI"), the former parent
of the Company which beneficially owned approximately 23% of the Company's
Common Stock at that time, to memorialize indebtedness of the Company to STFI
for certain administrative services and prior funding of the Company's
operations. The note bore interest at the prime rate plus two percent, the
interest was payable quarterly in arrears, and the note was scheduled to mature
in November 1999. In February 1999, the Company prepaid such indebtedness from
the proceeds of the sale of the Company's Series C Convertible Preferred Stock.
In February 1999, the Company closed the Transaction described in Proposal
5 in this Proxy Statement, pursuant to which it issued 15,000 shares of Series C
Convertible Preferred Stock and Warrants to purchase 300,000 shares of Common
Stock for an aggregate consideration of $15,000,000. International Capital
Partners, Inc. Profit Sharing Trust purchased 250 shares of Series C Convertible
Preferred Stock and received Warrants to purchase 5,000 shares of Common Stock
in the Transaction for an aggregate consideration of $250,000. In addition, ICP
received a commission in the amount of $50,000 in connection with the
Transaction as a finder's fee. Messrs. Ajit G. Hutheesing and Nicholas E.
Sinacori, directors of the Company and nominees for election to the Board of
Directors pursuant to Proposal 2 in this Proxy Statement, also serve as
principals of International Capital Partners, Inc. and trustees of the ICP
Profit Sharing Trust.
Victor Grillo, Sr., a nominee for director, is a principal owner of Retail
Distributors, Inc. ("RDI"), which owns all of the outstanding shares of capital
stock of Retail Cellular, Inc. ("RCI"). The Company is in the final stages of
negotiations to acquire RCI, which provides sales support services that would be
utilized by the Company in connection with its Debit Division. In addition, the
Company contemplates entering into a services agreement with RDI, pursuant to
which the Company would obtain similar services from RDI. In anticipation of
entering into such agreements, in February 1999 the Company provided a loan to
RDI in the principal amount of $500,000, which accrues interest at the rate of
prime plus one percent, and matures in September 1999. The loan was intended as
a prepayment of expense reimbursement for RDI, as RDI commenced providing
substantial services for the Company at such time.
OTHER MATTERS
The Board of Directors does not know of any other matters which may come
before the Annual Meeting. However, if any other matters are properly presented
at the Annual Meeting, it is the intention of the persons named in the
accompanying proxy to vote, or otherwise act, in accordance with their judgment
on such matters.
All costs of solicitations of proxies will be borne by the Company. In
addition to solicitations by mail, the Company's directors, officers and regular
employees, without additional remuneration, may solicit proxies by telephone,
telegraph and personal interviews. Brokers, custodians and fiduciaries will be
requested to forward proxy soliciting material to the owners of stock held in
their names, and the Company will reimburse them for out-of-pocket expenses
thereby incurred.
26
<PAGE> 29
STOCKHOLDER PROPOSALS
Any stockholder desiring to present a proposal for consideration at the
Company's next annual meeting of stockholders must submit the proposal to the
Company so that it is received at the principal executive offices of the
Company, 100 Great Meadow Road, Wethersfield, Connecticut 06109, on or before
February 24, 2000. Any stockholder desiring to submit a proposal should consult
applicable regulations of the SEC.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Company's executive officers and directors, and
persons who own more than 10% of the Company's outstanding shares of Common
Stock, to file reports of ownership and changes in ownership with the SEC and
NASDAQ. Executive officers, directors and persons holding greater than ten
percent of the Company's outstanding shares of Common Stock are required by SEC
regulations to furnish the Company with copies of all Section 16(a) forms they
file.
The Company knows of no delinquent filings under Section 16(a) of the
Exchange Act during the fiscal year ended December 31, 1998.
A COPY OF THE COMPANY'S FORM 10-K AS FILED WITH THE SEC WILL BE FURNISHED
WITHOUT CHARGE TO ANY STOCKHOLDER AS OF THE RECORD DATE UPON WRITTEN REQUEST TO
THE SECRETARY OF SHARED TECHNOLOGIES CELLULAR, INC., 100 GREAT MEADOW ROAD,
WETHERSFIELD, CONNECTICUT 06109.
27
<PAGE> 30
EXHIBIT I
AMENDMENT PROVIDING FOR CLASSIFIED BOARD OF DIRECTORS
An Article ELEVENTH shall be added to the Company's Restated Certificate of
Incorporation and shall read in its entirety as follows:
The number of directors constituting the entire Board of Directors shall be
as set forth in or pursuant to the Bylaws of the Corporation. The Board of
Directors shall be divided into three classes, designated Classes I, II and III,
which shall be as nearly equal in number as possible. Initially, directors of
Class I shall be elected to hold office for a term expiring at the annual
meeting of stockholders in 2000, directors of Class II shall be elected to hold
office for a term expiring at the annual meeting of stockholders in 2001 and
directors of Class III shall be elected to hold office for a term expiring at
the annual meeting of stockholders in 2002. At each annual meeting of
stockholders following such initial classification and election, the respective
successors of each class shall be elected for three-year terms.
<PAGE> 31
EXHIBIT II
AMENDMENTS TO THE COMPANY'S AMENDED AND RESTATED BYLAWS
PROVIDING FOR CLASSIFIED BOARD OF DIRECTORS AND OTHER MATTERS
Sections 2.1 and 2.2 of Article 2 to the Company's Amended and Restated
Bylaws shall be amended and restated in their entirety to read as follows:
ARTICLE 2 -- DIRECTORS
2.1 General Powers. The business and affairs of the corporation shall be
managed by the Board of Directors. The Board of Directors shall be divided into
three classes, designated Classes I, II and III, which shall be as nearly equal
in number as possible. The initial directors of Class I shall be elected to hold
office for a term expiring at the annual meeting of stockholders in 2000, the
initial directors of Class II shall be elected to hold office for a term
expiring at the annual meeting of stockholders in 2001, and the initial
directors of Class III shall be elected to hold office for a term expiring at
the annual meeting of stockholders in 2002. At each annual meeting of
stockholders following such initial classification and election, the respective
successors of each class shall be elected for three-year terms.
2.2 Number, Election and Term of Office. The number of directors shall be
fixed from time to time by resolution of the Board of Directors, but shall not
be less than three (3) nor more than eleven (11). In case of any increase in the
number of directors in advance of an annual meeting of stockholders, each
additional director shall be elected by the directors then in office, although
less than a quorum, to hold office until the next election of the class for
which such director shall have been chosen, and until his successor shall have
been duly elected and qualified (subject to Section 2.3 of this Article 2). No
decrease in the number of directors shall shorten the term of any incumbent
director. Any newly-created or eliminated directorships resulting from an
increase or decrease shall be apportioned by the Board of Directors among the
three classes of directors so as to maintain such classes as nearly equal as
possible. It shall not be a qualification of office that the directors be
residents of the State of Delaware or stockholders of the corporation.
Sections 2.3 (Enlargement of the Board) and 2.4 (Tenure) will be deleted in
their entirety.
2.3 Vacancies. In case of any vacancy in the Board of Directors through
death, resignation, retirement, removal, disqualification or other cause, the
remaining directors, by vote of a majority thereof, shall elect a successor to
hold office for the unexpired portion of the term of office of the class for
which such vacancy occurs, and until the election of his successor. Any director
elected by the remaining Board of Directors to fill a vacancy created by any of
the foregoing reasons or by an increase in the number of directors constituting
the entire Board of Directors must subsequently be approved or confirmed by the
holders of a majority of the shares of Common Stock of the corporation present
in person, or represented by proxy, and entitled to vote at the next annual
meeting of stockholders. If the director elected to fill such vacancy by the
Board of Directors is not subsequently approved by the stockholders, and if
another candidate is not elected at the annual meeting of stockholders in
accordance with federal securities laws and these bylaws, then the number of
directors constituting the entire Board of Directors will automatically be
reduced and, if necessary, the number of directors serving in each class will be
reapportioned so that the number of directors serving in each class will be as
nearly equal as possible.
Section 2.5 (Vacancies) will be deleted in its entirety.
Section 2.6 to 2.13 will be re-numbered to 2.4 to 2.11, respectively.
Section 2.14 (Removal) will be deleted in its entirety, and Sections 2.15
and 2.16 will be re-numbered 2.12 and 2.13, respectively.
<PAGE> 32
PROXY
SHARED TECHNOLOGIES CELLULAR, INC.
100 Great Meadow Road
Wethersfield, Connecticut 06109
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS
May 20, 1999
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
The undersigned hereby appoints Anthony D. Autorino and Vincent
DiVincenzo, or either of them, as Proxies, each with the power to appoint his
substitute, and hereby authorizes them to represent and to vote, as designated
below, all shares of Common Stock of Shared Technologies Cellular, Inc. held of
record by the undersigned on April 26, 1999 at the Annual Meeting of
Stockholders to be held on May 20, 1999, or any adjournment or postponement
thereof.
/X/ Please mark your votes as this
Item 1 To approve an amendment to the Company's Restated Certificate of
Incorporation establishing a classified Board of Directors and to make certain
necessary conforming changes to the Company's Restated Bylaws.
/ / FOR / / AGAINST / / ABSTAIN
Item 2 To elect the directors.
Nominees: Anthony D. Autorino (3 year term), Bruce Carswell (1 year term),
Thomas H. Decker (3 year term), William A. DiBella (2 year term), Vincent
DiVincenzo (2 year term), Victor Grillo, Sr. (2 year term), Ajit G. Hutheesing
(3 year term) and Nicholas E. Sinacori (1 year term)
/ / FOR all nominees. / / WITHHELD from all nominees.
/ / FOR, except vote withheld from the following nominees(s): ________________
Item 3 To approve the amendment to the 1994 Stock Option Plan.
/ / FOR / / AGAINST / / ABSTAIN
Item 4 To approve the amendments to the 1994 Director Option Plan.
/ / FOR / / AGAINST / / ABSTAIN
(Continued and to be signed and dated on reverse side)
<PAGE> 33
Item 5 To approve the issuance of twenty percent (20%) or more of the
outstanding shares of the Company's Common Stock upon the conversion
of the Series C Convertible Preferred Stock of the Company and the
exercise of certain Warrants to purchase Common Stock of the Company
by the holders thereof, which approval is necessary in order to comply
with the corporate governance requirements of the NASDAQ SmallCap
Market.
/ / FOR / / AGAINST / / ABSTAIN
Item 6 To ratify the appointment of Rothstein, Kaas and Company, P.C. as
auditors for the Company
/ / FOR / / AGAINST / / ABSTAIN
In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting or any adjournment or
postponement thereof.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED BY THE
UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED
"FOR" PROPOSALS 1, 2, 3, 4, 5 AND 6.
COMMENT/ADDRESS If you plan to attend the Annual Meeting,
CHANGE: please check this box [ ]
COMMENTS/ADDRESS CHANGE
Please mark this box if you have written comments/
address change at left. [ ]
Receipt is hereby acknowledged of the Notice of
Annual Meeting and Proxy Statement of Shared
Technologies Cellular, Inc.
Signature(s) Date
Please sign proxy exactly as name appears at left and date and return it
in the enclosed envelope. When shares are held by joint tenants, both should
sign. When signing as attorney, executor, administrator, trustee or guardian,
please give full title of 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 general partner or other authorized person.
