<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)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
(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):
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
(5) Total fee paid:
------------------------------------------------------------------------
[ ] 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:
------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
(3) Filing Party:
------------------------------------------------------------------------
(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 JUNE 28, 2000
------------------------
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, June 28,
2000, at 10:00 a.m., for the purpose of considering and acting upon the
following matters:
1. To elect three directors;
2. To increase the number of authorized shares of Common Stock from 20
million to 30 million;
3. To amend the 1994 Stock Option Plan; and
4. 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 May 12, 2000 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 9, 2000
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) 258-2500
------------------------
PROXY STATEMENT
FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE 28, 2000
------------------------
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 June 28, 2000 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 May 12, 2000 as the record date for
determining stockholders who are entitled to vote at the Annual Meeting. At the
close of business on May 12, 2000, there were outstanding and entitled to vote
10,556,620 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 5,278,311 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, 1999 is
being mailed to stockholders with the mailing of this Notice and Proxy Statement
on or about June 9, 2000.
MATTERS TO BE BROUGHT BEFORE THE ANNUAL MEETING
ELECTION OF DIRECTORS
(ITEM 1 ON PROXY CARD)
The Board of Directors currently consists of eight members. All of the
nominees are currently members of the Board of Directors, except for David L.
Bogue, who is nominated to serve as the ninth member of the Board of Directors
for a term to expire in 2003. The Company agreed to nominate Mr. Bogue for
election as a director in connection with the Company's entry into an employment
agreement, pursuant to which Mr. Bogue became President and Chief Operating
Officer of the Company on May 1, 2000. 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.
<PAGE> 4
BOARD NOMINEES FOR TERM TO EXPIRE IN 2003
CLASS I
<TABLE>
<CAPTION>
DIRECTOR POSITION WITH
DIRECTOR AGE SINCE COMPANY
-------- --- -------- -------------
<S> <C> <C> <C>
Nicholas E. Sinacori(2)....................... 55 1996 Director
Bruce Carswell................................ 70 1998 Director
David L. Bogue................................ 50 -- Nominee for Director; President and
Chief Operating Officer
</TABLE>
DIRECTORS WHOSE TERM EXPIRES IN 2001
CLASS II
<TABLE>
<CAPTION>
DIRECTOR POSITION WITH
DIRECTOR AGE SINCE COMPANY
-------- --- -------- -------------
<S> <C> <C> <C>
William A. DiBella(2)(3)...................... 57 1993 Director
Vincent DiVincenzo(1)......................... 50 1993 Senior Vice President, Chief
Financial Officer, Treasurer and
Director
Victor Grillo, Sr............................. 59 1999 Director
</TABLE>
DIRECTORS WHOSE TERM EXPIRES IN 2002
CLASS III
<TABLE>
<CAPTION>
DIRECTOR POSITION WITH
DIRECTOR AGE SINCE COMPANY
-------- --- -------- -------------
<S> <C> <C> <C>
Anthony D. Autorino(1)........................ 61 1989 Chairman, Chief Executive Officer
and Director
Thomas H. Decker(2)(3)........................ 59 1994 Director
Ajit G. Hutheesing(1)(3)...................... 64 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 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.
DAVID L. BOGUE is a nominee for director. On May 1, 2000, Mr. Bogue joined
the Company as its President and Chief Operating Officer. From 1973 to December,
1999, Mr. Bogue was employed by AT&T. From January, 1997 to December, 1999, held
the position of Vice President -- Retail Channel Development
2
<PAGE> 5
for AT&T. Prior to that, from May, 1996 to December, 1997, he was State Vice
President for AT&T, and from January, 1995 to April, 1996 he was
Director -- Sales Operations for AT&T. Mr. Bogue holds a B.A. degree from Iona
College and a graduate certificate from the executive program in business
administration from Columbia University, Graduate School of Business. Mr. Bogue
serves on the Connecticut Governor's Economic Advisory Board, the Board of
Directors for the Hartford Arts Council, and the Engineering Advisory Board for
the University of Connecticut.
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 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 March, 2000, Mr. Decker has been a Senior Vice President and Financial
Advisor at Morgan Stanley Dean Witter. From September, 1992 to March, 2000, Mr.
Decker was 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.
VICTOR GRILLO, SR. has been a director of the Company since July, 1999.
Since 1997, Mr. Grillo has been Chief Executive Officer of the corporate general
partner 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. Mr. Grillo is a member of Retail
Distributors, LLC, formerly Retail Distributors, Inc., which provides certain
marketing support services to the Company.
AJIT G. HUTHEESING has been a director of the Company since December, 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 1985 and held
the position of Vice Chairman from 1982 to 1985. Prior to that time, Mr.
Hutheesing spent ten years with the International Finance Corporation, a private
sector investment banking arm of the World Bank. Mr. Hutheesing serves as a
director of Officeland, Inc.
3
<PAGE> 6
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 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.
BOARD AND COMMITTEE MEETINGS
The Board of Directors established an Executive Committee, an Audit
Committee and a Compensation Committee in 1995. In 1999, 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, 1999, the Board of Directors held five
meetings. Each of the directors then in office attended at least 75% of all of
the Board meetings held during 1999, with the exception of Mr. Carswell, who
attended 60% of the meetings. Mr. Grillo attended all of the 1999 Board meetings
held after his appointment to the Board on July 7, 1999.
COMPENSATION OF DIRECTORS
Directors who are not employees of the Company or its subsidiaries 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, pursuant to the 1994 Director Option Plan, each non-employee
director receives 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 have an exercise price equal to the fair market value of the Company's
Common Stock at the time of their grant, and vest at the rate of 1/36th per
month from the date of issuance, for so long as the option holder continues to
serve as a director of the Company.
4
<PAGE> 7
PROPOSAL TO INCREASE AUTHORIZED SHARES OF COMMON STOCK
(ITEM 2 ON PROXY CARD)
The Board of Directors has adopted a resolution approving and recommending
adoption by the Company's stockholders of an amendment to the Company's Second
Restated Certificate of Incorporation (the "Certificate") to increase the
authorized shares of the Company's Common Stock, $.01 par value, from 20 million
to 30 million. 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.
As of May 24, 2000, there were 10,556,620 shares of Common Stock issued and
outstanding, with another 8,155,298 shares of Common Stock issuable upon the
conversion or exercise of all outstanding warrants, stock options, convertible
preferred stock and convertible notes.
The lack of authorized Common Stock available for issuance would
unnecessarily restrict the Company's ability to issue additional shares from
time to time for such purposes as to pursue financing, opportunities for future
acquisitions or mergers, grant stock options, and other corporate transactions
issuing.
CONSEQUENCES IF THE PROPOSAL IS NOT APPROVED
The Company currently is experiencing liquidity problems which necessitate
that the Company engage in financing efforts. These efforts probably will
include equity financing, entailing the issuance of new shares of Company stock,
either Common Stock or Preferred Stock convertible into Common Stock. Unless
this proposal is approved by the Company's shareholders, the Company may be
unable to raise sufficient operating capital to sustain the Company.
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 adoption of this proposal. Abstentions and "broker non-votes" are
effectively equivalent to votes against this proposal. Unless otherwise
instructed, properly executed proxies that are timely received and not
subsequently revoked, but not marked, will be voted in favor of the proposal.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THIS PROPOSAL.
PROPOSAL TO AMEND THE 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, and in 1999 the Company's stockholders
approved an amendment to increase the number of shares of Common Stock issuable
under the Stock Plan from 825,000 to 1,325,000.
In May 2000, 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 from 1,325,000 to an aggregate of 2,250,000, subject to approval by
the stockholders. At the Annual Meeting, the stockholders will be asked to
approve this amendment to the Stock Plan.
Approximately 350 employees are eligible to participate under the Stock
Plan. Prior to adoption of the amendment by the Board of Directors, 60,000
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
5
<PAGE> 8
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 1999, options to purchase an aggregate of 529,000 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 (30,000
options), Mr. Dorros (10,000 options), all current executive officers as a group
(218,000 options) and all non-executive officers, employees and consultants as a
group (311,500 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 $6.125 to $12.00. On May 22, 2000, the closing sale price of the
Company's Common Stock as reported on the Nasdaq National Market was $2.44.
In order to permit the Company to issue 300,000 options under the Stock
Plan to David L. Bogue in connection with the employment agreement pursuant to
which Mr. Bogue was hired as President and Chief Operating Officer effective May
1, 2000, Messrs. Autorino and DiVincenzo surrendered 100,000 and 50,000 options,
respectively, with an average exercise price of $10.33, which had been issued in
1999. The Stock Plan would otherwise have lacked sufficient capacity for the
issuance of Mr. Bogue's option grant.
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 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
6
<PAGE> 9
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.
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.
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 by the Board of Directors and serve at the discretion of the Board.
7
<PAGE> 10
<TABLE>
<CAPTION>
OFFICER AGE POSITION WITH COMPANY
------- --- ---------------------
<S> <C> <C>
Kenneth M. Dorros....................... 40 Senior Vice President, General Counsel and Secretary
Sean P. Hayes........................... 35 Executive Vice President
John Lovkay............................. 62 Vice President -- Debit Division Operations
Ismael G. Pinho......................... 41 Vice President and Controller
</TABLE>
KENNETH M. DORROS has been Senior Vice President, General Counsel and
Secretary of the Company since June, 1998. Previously, he served the Company as
Counsel from October, 1997 to June, 1998. From March, 1989 to October, 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 Vice President -- Operations of the Company's Debit
Division since December, 1999. From February, 1999 to December, 1999 he had been
President of the Debit Division. Prior to that, he served as Senior Vice
President -- Corporate Operations from October, 1996 to February, 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 a M.S.
from the University of Connecticut.
ISMAEL G. PINHO joined the Company as its Controller in May, 1995. Since
December, 1999 he has held the position of Vice President and Controller. 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.
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 intended to motivate,
8
<PAGE> 11
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 is 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. 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 toward 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.
In establishing compensation for the Chief Executive Officer for 1999, the
Compensation Committee employed the same criteria as it used to set compensation
for other executive officers. The Compensation Committee believes that Mr.
Autorino's compensation is competitive with salary levels for chief executive
officers with similar experience and ability and recognizes Mr. Autorino's
individual performance and contributions to the Company's development, including
his leadership in positioning the Company as a more significant competitor
within the prepaid wireless market.
Respectfully submitted,
THOMAS H. DECKER
WILLIAM A. DIBELLA
AJIT G. HUTHEESING
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
9
<PAGE> 12
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
10
<PAGE> 13
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 1999 (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
COMPENSATIONS
ANNUAL AWARDS
COMPENSATION SECURITIES UNDERLYING
----------------- --------------------- ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS OPTIONS (#) COMPENSATION
--------------------------- ---- -------- ------ --------------------- ------------
<S> <C> <C> <C> <C> <C>
Anthony D. Autorino
Chairman and Chief Executive
Officer............................ 1999 $312,500 $8,500 100,000 $54,890(a)
1998 $156,250 -- 150,000 $55,020(b)
1997 (c) -- --
Vincent DiVincenzo...................... 1999 $162,500 $8,500 50,000 $ 9,900(d)
Senior Vice President, Treasurer and
Chief Financial Officer
Sean P. Hayes........................... 1999 $125,000 $5,000 30,000 $ 3,654(e)
Executive Vice President 1998 $106,458 -- 25,000 $ 3,644(f)
1997 $102,084 -- -- $ 3,207(g)
Kenneth M. Dorros....................... 1999 $105,000 $4,000 10,000 $ 1,535(h)
Senior Vice President, General Counsel
and Secretary
</TABLE>
---------------
(a) Includes life insurance premiums of $47,844 and disability insurance
premiums of $7,046.
(b) Includes life insurance premiums of $47,974 and disability insurance
premiums of $7,046.
(c) 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.
(d) Includes life insurance premiums of $4,460, disability insurance premiums of
$1,815 and automobile expense allowance of $3,625. 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.
(e) Includes life insurance premiums of $1,573, disability insurance premiums of
$423 and automobile expense allocation of $1,658.
(f) Includes life insurance premiums of $1,579, disability insurance premiums of
$407 and automobile expense allowance $1,658.
(g) Includes life insurance premiums of $1,579, disability insurance premiums of
$392 and automobile expense allowance of $1,236.
(h) Includes life insurance premiums of $865 and disability insurance premiums
of $670.
11
<PAGE> 14
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth information on options granted during the
fiscal year ended December 31, 1999 to the Named Executive Officers.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
------------------------------------------------- POTENTIAL REALIZED VALUE
% OF TOTAL AT ASSUMED RATES OF
OPTIONS EXERCISE STOCK PRICE APPRECIATION
GRANTED TO OR BASE FOR OPTION TERM
OPTIONS EMPLOYEES IN PRICE EXPIRATION -----------------------------------
NAME GRANTED(#) 1999 ($/SH) DATE 5%($) 10%($)
---- ---------- ------------ -------- ---------- -------- ------------------------
<S> <C> <C> <C> <C> <C> <C>
Anthony D. Autorino...... 100,000 18.9% (1) 3/20/09 $607,931 $1,540,618
Vincent DiVincenzo....... 50,000 9.4% (1) 3/20/09 $303,966 $ 770,309
Sean P. Hayes............ 20,000 3.8% $6.125 1/04/09 $ 77,040 $ 195,233
10,000 1.9% (1) 3/20/09 $ 60,793 $ 154,062
Kenneth M. Dorros........ 10,000 1.9% (1) 3/20/09 $ 60,793 $ 154,062
</TABLE>
---------------
(1) One-third exercisable at $9.00, $10.00 and $12.00 per share, respectively.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION VALUES
The following table sets forth information concerning outstanding options
to purchase the Company's Common Stock as of December 31, 1999. No stock options
were exercised during the fiscal year ended December 31, 1999 by the Named
Executive Officers.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS AT FISCAL OPTIONS AT FISCAL
YEAR END(#) YEAR END($)
EXERCISABLE/ EXERCISABLE/
UNEXERCISABLE UNEXERCISABLE
---------------------- --------------------
<S> <C> <C>
Anthony D. Autorino............................ 158,333/100,000 $463,665/91,667
Vincent DiVincenzo............................. 71,667/50,000 $193,435/45,833
Sean P. Hayes.................................. 61,666/36,667 $238,707/70,350
Kenneth M. Dorros.............................. 31,166/6,667 $139,732/0
</TABLE>
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
ARRANGEMENTS
The Company has employment agreements currently in effect with 11 of its
employees, including each of the Named Executive Officers.
As of October 1, 1999, the Company entered into employment agreements with
certain members of management, including each of the Named Executive Officers.
In addition, David L. Bogue became President and Chief Operating Officer of the
Company pursuant to an employment agreement effective May 1, 2000. Each
agreement has a term of one year, and is automatically renewable for successive
one-year terms, subject to termination provisions. The agreements provide for
base salaries for Messrs. Autorino, Bogue, DiVincenzo, Hayes and Dorros of
$375,000, 200,000, 175,000, 130,000 and $110,000, respectively. Each agreement
contains certain termination and change-of-control payments, payable under
certain circumstances. In the case of Messrs. Autorino, Bogue, DiVincenzo and
Hayes, in the event of termination of employment without cause or in the event
of non-renewal by the Company, each would receive a severance payment equal to
one year's base salary plus one year's target bonus (which is 50% for Messrs.
Autorino, Bogue and DiVincenzo, and 40% for Mr. Hayes), plus 20% to account for
the loss of benefits. Under such circumstances, Mr. Dorros' agreement provides
for severance of six month's base salary and target bonus (25%), plus a 20%
fringe factor.
In the event of a change of control of the Company, Messrs. Autorino,
Bogue, DiVincenzo and Hayes would receive an additional payment in an amount
equal to 18 months' base salary and target bonus. Such payment for Mr. Dorros
would be in an amount equal to six months' base salary and target bonus.
12
<PAGE> 15
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 1999, which are described in greater detail below under the caption
(See Item 13, "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 22, 2000 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
COMMON
NAME AND ADDRESS (1) NUMBER OF SHARES STOCK
DIRECTORS AND EXECUTIVE OFFICERS BENEFICIALLY OWNED (2) OUTSTANDING
-------------------------------- ---------------------- -------------
<S> <C> <C>
Anthony D. Autorino................................. 1,257,6121(a) 11.7%
Chief Executive Officer and Director
Bruce Carswell...................................... 9,300(b) *
Director
Thomas H. Decker.................................... 140,566(c) 1.3%
Director
William A. DiBella.................................. 246,666(d) 2.3%
Director
Vincent DiVincenzo.................................. 297,834(e) 2.8%
Senior Vice President, Chief Financial Officer,
Treasurer and Director
Victor Grillo, Sr................................... 255,000(f) 2.4%
Director
Sean P. Hayes....................................... 81,018(g) 0.8%
Executive Vice President
Ajit G. Hutheesing.................................. 998,568(h) 8.8%
Director
Nicholas E. Sinacori................................ 988,568(i) 8.7%
Director
Kenneth M. Dorros................................... 108,197(j) 1.0%
Senior Vice President, General Counsel
and Secretary
All directors and officers as a group (13
persons).......................................... 3,508,691(k) 28.8%
FIVE PERCENT STOCKHOLDERS
George W. Mauerman.................................. 838,541(l) 7.9%
6585 S. Yale, Suite 500
Tulsa, OK 74136
George S. Mauerman.................................. 593,166(m) 5.6%
6585 S. Yale, Suite 500
Tulsa, OK 74136
The Fairchild Corporation and Banner Aerospace,
Inc............................................... 750,519(n) 8.5%
45025 Aviation Drive, Suite 400
Dulles, VA 20177
</TABLE>
13
<PAGE> 16
<TABLE>
<CAPTION>
PERCENTAGE OF
COMMON
NAME AND ADDRESS (1) NUMBER OF SHARES STOCK
DIRECTORS AND EXECUTIVE OFFICERS BENEFICIALLY OWNED (2) OUTSTANDING
-------------------------------- ---------------------- -------------
<S> <C> <C>
International Capital Partners, Inc................. 988,568(o) 8.7%
300 First Stamford Place
Stamford, CT 06902
Zesiger Capital Group LLC........................... 1,607,242(p) 14.2%
320 Park Avenue
New York, NY 10022
Dulville Limited.................................... 546,423(q) 5.1%
9 Avenue d'Ostende
MC-98000, Monaco
SIB Investment Holdings Limited..................... 585,977(r) 5.3%
380 Madison Avenue
New York, NY 10017
Rayflex Limited
PO Box 3136....................................... 833,333(s) 7.3%
Road Town, Tortola
British Virgin Islands
</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 125,000 shares currently issuable upon exercise of options by
Mr. Autorino. Also includes 134,666 shares 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 warrants held by Mr. Autorino, and 1,507 shares
beneficially owned through the Company's Savings and Retirement Plan.
(b) Includes 9,000 shares issuable upon exercise of options by Mr.
Carswell.
(c) Includes 15,000 shares currently issuable upon exercise of options by
Mr. Decker. Also includes 33,333 shares issuable upon exercise of
warrants.
(d) Includes 15,000 shares currently issuable upon exercise of options by
Mr. DiBella. Also includes 173,333 shares and 58,333 shares issuable
upon exercise of warrants, all of which shares and warrants are
beneficially owned by Mr. DiBella's spouse, as to which he disclaims
beneficial ownership.
(e) Includes 55,000 shares currently issuable upon exercise of options by
Mr. DiVincenzo. Also includes 16,667 shares issuable upon exercise of
warrants and 1,119 shares beneficially owned through the Company's
Savings and Retirement Plan.
(f) Includes 5,000 shares currently issuable upon exercise of options by
Mr. Grillo. Also includes 250,000 shares currently issuable upon
exercise of warrants held by Retail Distributors, LLC, of which Mr.
Grillo is a member.
(g) Includes 63,333 shares currently issuable upon exercise of options by
Mr. Hayes. Also includes 6,667 shares issuable upon exercise of
warrants, and 4,351 shares owned through the Company's Savings and
Retirement Plan.
14
<PAGE> 17
(h) Includes 131,667 shares owned by International Capital Partners, Inc.
("ICP"), of which Mr. Hutheesing is Chairman, Chief Executive Officer
and a stockholder, and 73,901 shares owned by the ICP Profit Sharing
Trust. Also includes 28,000 shares currently issuable upon exercise of
options by ICP, 710,000 shares issuable upon exercise of warrants held
by ICP, 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 131,667 shares owned by ICP, of which Mr. Sinacori is
Managing Director and 73,901 shares owned by the ICP Profit Sharing
Trust. Also includes 28,000 shares currently issuable upon exercise of
options by ICP, 710,000 shares issuable upon exercise of warrants held
by ICP, 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.
(j) Includes 31,166 shares currently issuable upon exercise of options by
Mr. Dorros. Also includes 5,000 shares issuable upon exercise of
warrants, and 926 shares owned through the Company's Savings and
Retirement Plan.
(k) Includes a total of 399,333 shares currently issuable upon exercise of
options by the Company's directors and executive officers. Also
includes a total of 1,195,000 shares currently issuable upon exercise
of warrants by such directors and executive officers, 14,999 shares
owned through the Company's Savings and Retirement Plan, and 40,000
shares issuable upon conversion of a convertible promissory note
beneficially owned by certain of such directors.
(l) Includes 25,000 shares currently issuable upon exercise of warrants by
George W. Mauerman. Also includes the shares and warrants reported by
George S. Mauerman, discussed in note (m) below.
(m) Includes 58,333 shares currently issuable upon exercise of warrants by
George S. Mauerman.
(n) Owned by Banner Aerospace, Inc. a wholly-owned subsidiary of The
Fairchild Corporation.
(o) Includes 28,000 shares currently issuable upon exercise of options
held by ICP. Includes 73,901 shares owned by the ICP Profit Sharing
Trust. Also includes 710,000 shares issuable upon exercise of warrants
held by ICP, and 5,000 shares issuable upon exercise of warrants held
by the ICP Profit Sharing Trust, 40,000 shares issuable upon
conversion of a convertible promissory note held by the ICP Profit
Sharing Trust and 10,000 shares owned by Mr. Hutheesing. (See notes
(h) and (i) with respect to beneficial ownership attributable to
Messrs. Hutheesing and Sinacori.)
(p) Includes 735,000 shares currently issuable upon exercise of warrants
owned beneficially by Zesiger Capital Group.
(q) Includes 92,729 shares currently issuable upon conversion of Series C
Convertible Stock and 16,000 shares issuable upon exercise of warrants
by Dulville Limited.
(r) Includes 585,977 shares issuable upon conversion of Series D
Convertible Preferred Stock by SIB Investment Holdings Limited.
(s) Includes 833,333 shares currently issuable upon exercise of warrants
by Rayflex Limited.
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, 1999 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
15
<PAGE> 18
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.
[LINE 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 59.80 194.30 193.10
12/31/98 107.67 274.00 340.30
12/31/99 147.80 507.10 559.00
</TABLE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Effective December 1, 1999, the Company entered into a consulting agreement
with CMD Ventures, LLC ("CMD") for certain financial analysis and advisory
services. The agreement, which is on a month-to-month basis, provides for a
monthly fee to CMD of $10,000, provided however that no such fees shall be
payable until such time as the Company generates positive cash flow of at least
$50,000 per month. Until such time, the Company will accrue, but not pay, such
fees. Members of CMD include Anthony D. Autorino, the Company's Chairman and
Chief Executive Officer; Vincent DiVincenzo, the Company's Senior Vice
President, Chief Financial Officer and Treasurer; and William A. DiBella, who is
a director of the Company.
The Company subleased certain office space to CMD on the first floor of the
Company's corporate offices in Wethersfield, CT from April 1, 1998 to January 6,
2000 at a monthly rate of $4,003. Since January 7, 2000, the Company has
subleased space to CMD on the fourth floor of the Company's Wethersfield
location. This sublease, which expires December 31, 2004, is at a monthly rate
of $10,874. In addition to rent, CMD is obligated to pay all operating expenses,
property taxes, rent escalations and other surcharges or increases applicable to
such subleaseholds.
Since December 1, 1998, CMD has leased to the Company substantially all of
the furniture used by the Company at its call center located at Constitution
Plaza, Hartford, CT at a rate of $21,062 per month. Such
16
<PAGE> 19
agreement will expire November 30, 2001, at which time the Company shall have
the right to acquire all such furniture at a cost of $1.00.
On November 2, 1999 the Company purchased $2,000,000 of debit cellular
phones and accessories from DTR Associates Limited Partnership ("DTR") which
assets had been purchased by DTR from the bankruptcy estate of SmarTalk
TeleServices, Inc. Due to the financing constraints, the Company was unable to
directly bid on these assets. DTR realized a profit of $197,969 in the resale of
such assets to the Company. Victor Grillo, Sr., a director of the Company, is
CEO of the general partner of DTR.
On July 1, 1998, the Company entered into a month-to-month agreement to
sublease a portion of its Wethersfield offices to NRG Solutions, LLC ("NRG") at
a rate of $1,325 per month. CMD has a minority ownership interest in NRG.
In July 1999, the Company entered into certain transactions with Retail
Distributors, Inc. ("RDI"), of which Victor Grillo, Sr., a director of the
Company, was chief executive officer and a principal stockholder. RDI is now
Retail Distributors, LLC, of which Mr. Grillo is a member. The transactions
included the Company's entry into an agreement, expiring March 31, 2001, to
retain the services of RDI to bolster the Company's capabilities with respect to
the marketing and distribution of its prepaid programs, pursuant to which the
Company paid RDI approximately $843,000 and issued to RDI 118,194 shares of
Common Stock. The agreement also required the Company to pay RDI a monthly fee
of $90,000 from February 8, 1999 to September 30, 1999; $65,000 from October 1,
1999 to December 31, 1999; and $40,000 from January 1, 2000 to December 31,
2000. Additional performance-based compensation, exclusive of expenses, was
provided for through the conditional issuance of Common Stock purchase warrants,
of which warrants to purchase 250,000 shares of Common Stock had been issued as
of March 27, 2000. Concurrently the Company acquired from RDI all of the
outstanding capital stock of Retail Cellular, Inc. ("RCI"), in connection with
which the Company issued 150,000 shares of Common Stock to RDI. In addition, RCI
entered into an agreement, expiring March 31, 2001, to obtain certain sales and
marketing services from RDI, for a monthly fee of $10,000. In connection with
and in anticipation of such transactions, 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 had a maturity date of September 30, 1999.
The loan was intended as a prepayment of expense reimbursement for RDI, as RDI
had started to provide significant services for the Company at such time. As of
May 22, 2000, the Company had not made a demand for repayment of the loan, but
rather had deferred such demand in view of RDI's expense requirements. However,
interest has continued to accrue on the loan, which is subject to call at any
time.
In February 1999, the Company completed a private placement of 15,000
shares of Series C Convertible Preferred Stock ("Series C Shares") 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 Shares and received Warrants to purchase 5,000 shares of
Common Stock 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, also serve as principals of ICP and trustees
of the ICP Profit Sharing Trust.
In February 1999, the Company used a portion of the proceeds from the
Series C Shares to repay the $4,000,000 debt financing secured in April 1998, of
which $1,000,000 was borrowed from Anthony D. Autorino, the Company's Chairman
and Chief Executive Officer, and $500,000 which was borrowed from ICP. Messrs.
Ajit G. Hutheesing and Nicholas E. Sinacori, directors of the Company, also
serve as principals of ICP. The Company also used a portion of the Series C
Shares to prepay $1,411,000, the outstanding balance of a promissory note, to
STFI, the former parent of the Company which beneficially owned approximately
23% of the Company's Common Stock at the time.
In October 1999, the Company completed a private placement of 6,100 shares
of Series D Convertible Preferred Stock ("Series D Shares") for an aggregate
consideration of $6,100,000. In consideration for their placement services, ICP
received a cash commission in the amount of $300,000 and a five-year warrant to
purchase 120,000 shares of the Company's Common Stock at an exercise price of
$11.09 per share, which
17
<PAGE> 20
price was 25% greater than the Conversion Price of the Series D Shares. Messrs.
Ajit G. Hutheesing and Nicholas E. Sinacori, directors of the Company, also
serve as principals of ICP.
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.
STOCKHOLDER PROPOSALS
If you want to submit a proposal for possible inclusion in our proxy
statement for the 2001 annual meeting of stockholders, you musts ensure that
your proposal is received by us on or before February 10, 2001. Proposals should
be delivered to the Company's principal executive offices at 100 Great Meadow
Road, Wethersfield, CT 06109, and should be addressed to the Company's Legal
Department.
If you intend to present a proposal at our 2001 annual meeting and do not
request timely inclusion of the proposal in our proxy statement, then we must
receive notice of such proposal no later than April 24, 2001. If we do not
receive notice by that date, no discussion of your proposal is required to be
included in our 2001 proxy statement and we may use our discretionary authority
to vote on the proposal if you do present it at our annual meeting.
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, 1999.
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.
18
<PAGE> 21
PROXY SHARED TECHNOLOGIES CELLULAR, INC. PROXY
100 GREAT MEADOW ROAD * WETHERSFIELD, CONNECTICUT 06109
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS -- JUNE 28, 2000
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 May 12, 2000 at the Annual Meeting of Stockholders to be held on
June 28, 2000, or any adjournment or postponement thereof.
Please mark your votes as this X
Item 1 To elect three directors.
Nominees: Bruce Carswell, Nicholas E. Sinacori; and David L. Bogue.
FOR ALL NOMINEES ____ WITHHELD FROM ALL NOMINEES ____ FOR, EXCEPT VOTE
WITHHELD FROM THE FOLLOWING NOMINEE(S):
Item 2 To increase the number of authorized shares of Common Stock from 20
million to 30 million.
FOR ____ AGAINST ____ ABSTAIN ____
Item 3 To amend the 1994 Stock Option Plan.
FOR ____ AGAINST ____ ABSTAIN ____
(CONTINUED AND TO BE SIGNED AND DATED ON REVERSE SIDE)
<PAGE> 22
In their discretion, the Proxies are authorized to vote upon such other business
as many 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 AND 3.
COMMENTS/ADDRESS CHANGE:
If you plan to attend the
Annual Meeting please check
this box. [ ]
Please mark this box if you
have written comments/address
changes 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
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.
