-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, S297K5lrZN58PzbFURQBqFwBXoJx2Adm1iYmqLeLL3cLV8eOkBNiyGbzORrFGDAr 9RVITRSYObAguNyS6dytyA== /in/edgar/work/20000609/0000914039-00-000295/0000914039-00-000295.txt : 20000919 0000914039-00-000295.hdr.sgml : 20000919 ACCESSION NUMBER: 0000914039-00-000295 CONFORMED SUBMISSION TYPE: DEF 14A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20000628 FILED AS OF DATE: 20000609 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SHARED TECHNOLOGIES CELLULAR INC CENTRAL INDEX KEY: 0000933583 STANDARD INDUSTRIAL CLASSIFICATION: [7385 ] IRS NUMBER: 061386411 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: DEF 14A SEC ACT: SEC FILE NUMBER: 001-13558 FILM NUMBER: 651865 BUSINESS ADDRESS: STREET 1: 100 GREAT MEADOW RD STREET 2: SUITE 102 CITY: WETHERSFIELD STATE: CT ZIP: 06109 BUSINESS PHONE: 8602582500 MAIL ADDRESS: STREET 1: C/O SHARED TECHNOLOGIES CELLULAR INC STREET 2: 100 GREAT MEADOW ROAD SUITE 102 CITY: WETHERSFIELD STATE: CT ZIP: 06109 DEF 14A 1 0001.txt NOTICE & PROXY STATEMENT 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: [ ] 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
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: ------------------------------------------------------------------------ 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. 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. 4 BOARD NOMINEES FOR TERM TO EXPIRE IN 2003 CLASS I
DIRECTOR POSITION WITH DIRECTOR AGE SINCE COMPANY - -------- --- -------- ------------- Nicholas E. Sinacori(2)....................... 55 1996 Director Bruce Carswell................................ 70 1998 Director David L. Bogue................................ 50 -- Nominee for Director; President and Chief Operating Officer
DIRECTORS WHOSE TERM EXPIRES IN 2001 CLASS II
DIRECTOR POSITION WITH DIRECTOR AGE SINCE COMPANY - -------- --- -------- ------------- 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
DIRECTORS WHOSE TERM EXPIRES IN 2002 CLASS III
DIRECTOR POSITION WITH DIRECTOR AGE SINCE COMPANY - -------- --- -------- ------------- 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
- --------------- (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 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 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 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 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 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 10
OFFICER AGE POSITION WITH COMPANY - ------- --- --------------------- 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
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 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 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 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."
LONG-TERM COMPENSATIONS ANNUAL AWARDS COMPENSATION SECURITIES UNDERLYING ----------------- --------------------- ALL OTHER NAME AND PRINCIPAL POSITION YEAR SALARY BONUS OPTIONS (#) COMPENSATION - --------------------------- ---- -------- ------ --------------------- ------------ 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
- --------------- (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 $670. 11 14 OPTION GRANTS IN LAST FISCAL YEAR The following table sets forth information on options granted during the fiscal year ended December 31, 1999 to the Named Executive Officers.
INDIVIDUAL GRANTS ------------------------------------------------- POTENTIAL REALIZED VALUE % OF TOTAL AT ASSUMED RATES OF OPTIONS EXERCISE STOCK PRICE APPRECIATION GRANTED TO OR BASE FOR OPTION TERM OPTIONS EMPLOYEES IN PRICE EXPIRATION ----------------------------------- NAME GRANTED(#) 1999 ($/SH) DATE 5%($) 10%($) - ---- ---------- ------------ -------- ---------- -------- ------------------------ 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
- --------------- (1) One-third exercisable at $9.00, $10.00 and $12.00 per share, respectively. AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR END OPTION VALUES The following table sets forth information concerning outstanding options to purchase the Company's Common Stock as of December 31, 1999. No stock options were exercised during the fiscal year ended December 31, 1999 by the Named Executive Officers.
NUMBER OF SECURITIES VALUE OF UNEXERCISED UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS AT FISCAL OPTIONS AT FISCAL YEAR END(#) YEAR END($) EXERCISABLE/ EXERCISABLE/ UNEXERCISABLE UNEXERCISABLE ---------------------- -------------------- 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
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 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.
PERCENTAGE OF COMMON NAME AND ADDRESS (1) NUMBER OF SHARES STOCK DIRECTORS AND EXECUTIVE OFFICERS BENEFICIALLY OWNED (2) OUTSTANDING -------------------------------- ---------------------- ------------- 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
13 16
PERCENTAGE OF COMMON NAME AND ADDRESS (1) NUMBER OF SHARES STOCK DIRECTORS AND EXECUTIVE OFFICERS BENEFICIALLY OWNED (2) OUTSTANDING -------------------------------- ---------------------- ------------- 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
- --------------- * 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 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 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]
SHARED TECHNOLOGIES CELLULAR NASDAQ SIC CODE INDEX ------------------- ------ -------------- 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
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 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 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 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) 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. -----END PRIVACY-ENHANCED MESSAGE-----