Section 240.14a-101 Schedule 14A.
Information required in proxy statement.
Schedule 14A Information
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
(Amendment No. )
Filed by the Registrant [X]
Filed by a party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted
by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
CELLULAR TECHNICAL SERVICES COMPANY, INC.
...................................................................
(Name of Registrant as Specified In Its Charter)
...................................................................
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11
(1) Title of each class of securities to which transaction
applies:
............................................................
(2) Aggregate number of securities to which transaction
applies:
.......................................................
(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:
.......................................................
CELLULAR TECHNICAL SERVICES COMPANY, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JUNE 6, 2002
To Our Stockholders:
You are cordially invited to attend the 2002 Annual Meeting of Stockholders
of Cellular Technical Services Company, Inc., a Delaware corporation (the
'Company'), which will be held at the offices of Angel & Frankel, P.C.,
460 Park Avenue, 8th Floor, New York, N.Y., on Thursday, June 6, 2002, at
10:00 a.m. local time, for the following purposes:
1. To elect one (1) Class II director to the Company's Board of
Directors to hold office until the Company's third Annual Meeting of
Stockholders following his election and until his successor is duly elected
and qualified;
2. To transact such other business as may properly come before the
Annual Meeting and any adjournments or postponements thereof.
The foregoing items of business are more fully described in the accompanying
Proxy Statement. The Board of Directors has set the close of business on
April 26, 2002 as the record date for determining those stockholders entitled to
notice of, and to vote at, the Annual Meeting and any adjournments or
postponements thereof.
By Order of the Board of Directors
Bruce R. York
Vice President, Chief Financial Officer
and Corporate Secretary
Seattle, Washington
May 6, 2002
IMPORTANT NOTE
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE
MARK, SIGN AND DATE THE ENCLOSED PROXY CARD AND RETURN IT AS
PROMPTLY AS POSSIBLE IN THE ENCLOSED RETURN ENVELOPE. No
postage is required if mailed in the United States. This
will ensure the presence of a quorum at the meeting and save
the Company the expense and extra work of additional
solicitation. Sending your Proxy Card will not prevent you
from attending the meeting, revoking your proxy, and voting
your stock in person.
CELLULAR TECHNICAL SERVICES COMPANY, INC.
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JUNE 6, 2002
----------------------------
PROXY STATEMENT
----------------------------
This Proxy Statement is furnished in connection with the solicitation by the
Board of Directors of Cellular Technical Services Company, Inc., a Delaware
corporation (the 'Company'), of proxies from the holders of the Company's common
stock, par value $.001 per share (the 'Common Stock'), for use at the Annual
Meeting of Stockholders of the Company to be held at the offices of Angel &
Frankel, P.C., 460 Park Avenue, 8th Floor, New York, N.Y., on Thursday, June 6,
2002, at 10:00 a.m. local time, and at any adjournments or postponements thereof
(the 'Annual Meeting'). The mailing address of the principal office of the
Company is 2815 Second Avenue, Suite 100, Seattle, Washington 98121.
This Proxy Statement and the accompanying Notice of Annual Meeting and proxy
are first being sent to stockholders on or about May 6, 2002. Stockholders are
encouraged to review the information provided herein in conjunction with the
Company's Annual Report to Stockholders for the year ended December 31, 2001, a
copy of which also accompanies this Proxy Statement.
BUSINESS AT THE ANNUAL MEETING
At the Annual Meeting, the Company's stockholders will consider and vote
upon the following matters:
1. The election of one (1) Class II director to the Company's Board of
Directors to hold office until the Company's third Annual Meeting of
Stockholders following his election and until his successor is duly elected
and qualified;
2. The transaction of such other business as may properly come before
the Annual Meeting and any adjournments or postponements thereof.
VOTING RIGHTS AND SOLICITATION OF PROXY
STOCKHOLDERS ENTITLED TO VOTE
The Board of Directors has set the close of business on April 26, 2002 as
the record date (the 'Record Date') for determining stockholders of the Company
entitled to notice of, and to vote at, the Annual Meeting. Each share of Common
Stock outstanding on the Record Date is entitled to one vote at the Annual
Meeting on each matter submitted to stockholders for approval at the Annual
Meeting. As of April 20, 2002, there were 2,291,770 shares of Common Stock
issued and outstanding.
VOTING IN PERSON OR BY PROXY
All shares of Common Stock represented by a properly executed and returned
proxy will be voted at the Annual Meeting and, when instructions are given by
the stockholder and not properly revoked, will be voted in accordance with those
instructions. If a proxy is executed and returned, but no specific instructions
are given, the shares of Common Stock represented by such proxy will be voted in
favor of the election of the Class II director nominee described in this Proxy
Statement. Executing and returning a proxy will not limit a stockholder's right
to attend the Annual Meeting, or otherwise prevent a stockholder from properly
revoking such proxy and voting the shares of Common Stock represented by such
proxy in person at the Annual Meeting.
REVOCATION OF PROXY
A stockholder giving a proxy has the power to revoke it at any time prior to
its exercise by any of the following methods: (i) by delivering a written
revocation or properly executed proxy bearing a later date to the Company's
Corporate Secretary received at the Company's principal office, 2815 Second
Avenue, Suite 100, Seattle, Washington 98121, no later than the last business
day prior to the date of the
1
Annual Meeting; or (ii) if the stockholder attends the Annual Meeting in person,
by delivering a written revocation to an inspector of election at the Annual
Meeting or voting by ballot at the Annual Meeting. Attendance at the Annual
Meeting will not, in itself, constitute revocation of a previously granted
proxy.
SOLICITATION OF PROXY
The proxy accompanying this Proxy Statement is solicited on behalf of the
Company's Board of Directors. Proxies may be solicited by officers, directors,
and employees of the Company, none of whom will receive any additional
compensation for their services. Such solicitations may be made personally or by
mail, facsimile, telephone, courier, Internet transmission, or other like
manner. The cost of preparing, assembling, and mailing this Proxy Statement and
the accompanying Notice of Annual Meeting and proxy is to be borne by the
Company. The Company also may request banks, brokers, and other custodians,
nominees, and fiduciaries to forward copies of the proxy material to their
principals and to request authority for the execution of proxies. The Company
may reimburse such persons for their expenses in so doing.
QUORUM AND VOTING REQUIREMENTS
QUORUM
The attendance, in person or by a properly executed and returned proxy, of
the holders of a majority of the outstanding shares of Common Stock entitled to
vote at the Annual Meeting is necessary to constitute a quorum for the actions
proposed at the Annual Meeting. Proxies submitted which contain abstentions or
broker 'non-votes' will be deemed present at the Annual Meeting in determining
the presence of a quorum. A broker 'non-vote' occurs when a nominee holding
shares of Common Stock for a beneficial owner does not vote on a particular
proposal in person or by proxy, usually because the nominee does not have
discretionary voting power with respect to that item and has not received timely
instructions from the beneficial owner.
VOTE REQUIRED
Each share of Common Stock entitles the holder to one vote on each proposal
submitted to a vote of the stockholders at the Annual Meeting. Shares subject to
abstention with respect to any matter are considered shares entitled to, and
voted, with respect to that matter. Shares subject to broker non-votes with
respect to any matter are not considered as shares entitled to vote with respect
to that matter.
Directors are elected by a plurality of votes of the shares of Common Stock
represented in person or by proxy at the Annual Meeting. Stockholders may vote
in favor of the nominee or withhold their votes as to the nominee. Checking the
box that withholds authority to vote for the nominee is the equivalent of
abstaining. Abstentions and broker non-votes will not have the effect of votes
in favor of or in opposition to the election of a director.
The affirmative vote of the majority of shares of Common Stock represented,
in person or by proxy, at the Annual Meeting will be required for approval of
any other matter that is submitted to a vote of the stockholders.
PROPOSAL 1: ELECTION OF CLASS II DIRECTOR
The Board of Directors of the Company is divided into three classes,
pursuant to the Company's Restated Certificate of Incorporation and Bylaws. The
term of office of Class II directors expires at the Company's 2002 Annual
Meeting of Stockholders, and the term of office of Class III and I directors
expires at the Company's 2003 and 2004 Annual Meetings of Stockholders,
respectively. Directors elected to succeed those whose terms expire are elected
to a term of office expiring at the third Annual Meeting of Stockholders
following their election and, in each case, until his successor is elected and
qualified.
One director of the Company is to be elected as a Class II director at the
Annual Meeting, to hold office for a term expiring at the Company's 2005 Annual
Meeting of Stockholders and until his
2
successor is elected and qualified. The Company's current Class II director,
Lawrence J. Schoenberg, has been nominated to be reelected as a Class II
director at the Annual Meeting. Such nominee has indicated he is willing and
able to serve as a Class II director. In the event that a nominee is unable to
accept election or if any other unforeseen contingency should arise, each
properly executed and returned proxy that does not direct otherwise will be
voted for such other person(s) as may be designated by the Board of Directors.
If a proxy is executed and returned, but no specific instructions are given, the
shares of Common Stock represented by such proxy will be voted in favor of the
Class II director nominee identified above.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS
A VOTE 'FOR' THE NOMINEE IDENTIFIED ABOVE
CURRENT MEMBERS OF THE BOARD OF DIRECTORS
The Company's Restated Certificate of Incorporation provides that the number
of directors constituting the Company's Board of Directors shall be not less
than three nor more than fifteen, as determined by the Company's Bylaws. The
Company's Bylaws provide that the number of directors shall be fixed from time
to time by the Board of Directors or the Company's stockholders. The Board of
Directors has fixed at four the number of directors that will constitute the
Board for the ensuing year.
The current directors of the Company and their respective classes and terms
of office are as set forth below. Biographical information for the directors is
provided elsewhere in this Proxy Statement.
TERM
DIRECTOR CLASS EXPIRES AT
-------- ----- ----------
Lawrence J. Schoenberg............................... II 2002 Annual Meeting
Stephen Katz......................................... III 2003 Annual Meeting
Henry B. Ellis....................................... I 2004 Annual Meeting
Joshua J. Angel...................................... I 2004 Annual Meeting
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
During the year ended December 31, 2001, the Board of Directors held four
meetings. During 2001, no director attended fewer than 75% of the aggregate of:
(i) the number of meetings of the Board of Directors held during the period he
served on the Board; and (ii) the number of meetings of committees of the Board
of Directors held during the period he served on such committees.
The Board of Directors has a standing Compensation and Stock Option
Committee. This committee reviews and approves the compensation, bonus, and
stock option grants of all officers of the Company, reviews guidelines for
compensation, bonus, and stock option grants for non-officer employees and has
authority and control over the administration of the Company's stock option
plans. This committee currently consists of Messrs. Ellis (Chairman), Schoenberg
and Angel. During 2001, this committee held two meetings.
The Board of Directors has a standing Audit Committee, whose functions are
described below. This committee currently consists of Messrs. Schoenberg
(Chairman), Ellis and Angel. This committee held four meetings in 2001.
AUDIT COMMITTEE
Each member of the Audit Committee meets the independence requirements for
audit committee members under the listing standards of the NASDAQ National
Market, on which the Company's Common Stock is listed. The Committee provides
assistance to the Company's directors in fulfilling the Board's oversight
responsibility as to the Company's accounting, auditing and financial reporting
practices and as to the quality and integrity of the financial reports of the
Company. The specific functions and responsibilities of the Audit Committee are
set forth in the written charter of the Audit Committee adopted by the Board of
Directors. The Audit Committee reviews and reassesses the
3
Charter annually and recommends any changes to the Board for approval. A report
of the Audit Committee appears under the caption 'Audit Committee Report,'
below.
AUDIT COMMITTEE REPORT
Management has the primary responsibility for the Company's financial
reporting process, including its financial statements, while the Board is
responsible for overseeing the Company's accounting, auditing and financial
reporting practices and the Company's independent public accountants have the
responsibility for the examination of the Company's annual financial statements,
accounting principles generally accepted in the United States and issuing a
report thereon. In assisting the Board in fulfilling its oversight
responsibility with respect to the Company's year ended December 31, 2001, the
Audit Committee:
1. Reviewed and discussed the audited financial statements for the
fiscal year ended December 31, 2001 with management and Ernst & Young LLP,
the Company's independent public accountants.
2. Discussed with Ernst & Young LLP the matters required to be discussed
by Statement on Auditing Standards No. 61, 'Communications with Audit
Committees', as amended, relating to the conduct of the audit.
3. Received the written disclosures and the letter from Ernst & Young
LLP regarding its independence as required by Independence Standards Board
Standard No. 1, 'Independence Discussions with Audit Committees'. The Audit
Committee also discussed Ernst & Young's independence with Ernst & Young and
considered whether the provision of non-audit services rendered by Ernst &
Young was compatible with maintaining its independence under Securities and
Exchange Commission rules governing the independence of a company's outside
auditors.
4. Reviewed quarterly financial results with members of management and
with the independent auditors prior to public release.
Based on the foregoing review and discussions, the Audit Committee recommended
to the Board that the Company's audited financial statements for the year ended
December 31, 2001 be included in the Company's Annual Report on Form 10-K filed
with the Securities and Exchange Commission for that year.
Respectfully,
Lawrence J. Schoenberg
Henry B. Ellis
Joshua J. Angel
DIRECTOR COMPENSATION
Each director who is not an officer or employee of the Company receives
$1,000 per board meeting attended and $500 per committee meeting attended, with
minimum compensation equal to $8,500 per year, and is reimbursed for his
out-of-pocket expenses incurred in connection with attendance at meetings or
other Company business. In addition, beginning in 2000, each director is
eligible to participate in the Company's company-wide bonus program, which is
based on Company performance and goals. During 2001 the Company paid bonuses of
$5,500 to each of its two non-employee directors who served during 2000.
In December 1993, the Company adopted the 1993 Non-Employee Director Stock
Option Plan ('1993 Plan') pursuant to which each person who is not a salaried
employee of the Company who first becomes a director after December 29, 1993
shall be granted on the date he first becomes a director an option to purchase
2,000 shares of Common Stock and on January 2 of each year beginning with
January 2, 1994, each person who is not a salaried employee of the Company and
is then a director shall be granted an option to purchase an additional 1,200
shares of Common Stock. In addition, the 1993
4
Plan authorizes the Board of Directors to approve additional stock option grants
to such non-employee directors. The per share exercise price of each option
granted under the 1993 Plan shall be equal to the fair market value of a share
of Common Stock on the date the option is granted.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation and Stock Option Committee of the Board of Directors
consists of Messrs. Ellis (Chairman), Schoenberg and Angel. None of such
committee members is or has been an officer or employee of the Company.
OTHER BUSINESS AT ANNUAL MEETING
As of the date of this Proxy Statement, the Company's management knows of no
other business to be brought before the Annual Meeting. If, however, any other
business should properly come before the Annual Meeting, the persons named in
the accompanying proxy will vote proxies as in their discretion they may deem
appropriate, unless they are directed by a proxy to do otherwise.
SECURITY OWNERSHIP
The following table sets forth, as of April 15, 2002 (except as otherwise
indicated in the footnotes below), information with respect to the beneficial
ownership of the Company's Common Stock by: (i) each person known by the Company
to beneficially own more than 5% of the outstanding shares of Common Stock;
(ii) each director of the Company; (iii) the Chief Executive Officer and each of
the other executive officers of the Company who received salary and bonus in
excess of $100,000 during 2001 (collectively, the 'Named Executive Officers');
and (iv) all current directors and executive officers of the Company as a group.
AMOUNT AND NATURE PERCENT OF
OF BENEFICIAL OUTSTANDING
NAME OF BENEFICIAL OWNER OWNERSHIP(1) SHARES
------------------------ ------------ ------
Stephen Katz
20 E. Sunrise Highway, Suite 200
Valley Stream, NY 11581............................... 129,044(2) 5.4%
Lawrence J. Schoenberg................................ 18,625(3) *
Henry B. Ellis........................................ 2,000(4) *
Joshua J. Angel....................................... 2,000(4) *
Bruce R. York......................................... 11,195(5) *
All directors and executive officers as a group
(5 persons)......................................... 162,834(6) 6.8%
- ---------
* Less than 1%
(1) Unless otherwise indicated, each person or group has sole voting and
investment power with respect to such shares. For purposes of this table, a
person or group of persons is deemed to have 'beneficial ownership' of any
shares which such person or group has the right to acquire within 60 days
after April 15, 2002. For purposes of computing the percent of outstanding
shares held by each person or group named above as of a given date, any
shares which such person or group has the right to so acquire are deemed to
be outstanding, but are not deemed to be outstanding for the purpose of
computing the percentage owned by any other person or group.
(2) Includes 84,490 shares subject to currently exercisable options, none of
which are at prices lower than the market price of the Company's Common
Stock as of April 15, 2002.
(3) Consists of 18,625 shares subject to currently exercisable options, 4,500 of
which are at prices lower than the market price of the Company's Common
Stock as of April 15, 2002.
(4) Consists of 2,000 shares subject to currently exercisable options, none of
which are at prices lower than the market price of the Company's Common
Stock as of April 15, 2002.
(footnotes continued on next page)
5
(footnotes continued from previous page)
(5) Includes 6,195 shares subject to currently exercisable options, 3,000 of
which are at prices lower than the market price of the Company's Common
Stock as of April 15, 2002.
(6) Includes an aggregate of 113,310 shares subject to currently exercisable
options, 7,500 of which are at prices lower than the market price of the
Company's Common Stock as of April 15, 2002.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Pursuant to Section 16(a) of the Securities Exchange Act of 1934, as amended
(the 'Exchange Act'), officers, directors and holders of more than 10% of the
outstanding shares of the Company's Common Stock are required to file periodic
reports of their ownership of, and transactions involving, the Company's Common
Stock with the United States Securities and Exchange Commission ('SEC') . The
Company believes that its reporting persons complied with all Section 16(a)
filing requirements applicable to them with respect to the Company's fiscal year
ended December 31, 2001.
MANAGEMENT AND DIRECTORS
The name, age, position with the Company, and biographical information with
respect to each of the Company's current directors and executive officers are
provided below.
NAME AGE POSITION WITH COMPANY
---- --- ---------------------
Stephen Katz......................... 58 Chairman of the Board of Directors, Chief
Executive Officer and Acting President
Lawrence J. Schoenberg............... 69 Director
Henry B. Ellis....................... 52 Director
Joshua J. Angel...................... 66 Director
Bruce R. York........................ 47 Vice President, Chief Financial Officer and
Secretary
Stephen Katz, Chairman of the Board of Directors, was Acting Chief Executive
Officer and Acting President from November 1992 until February 1994, at which
time he became Chief Executive Officer. Mr. Katz was re-appointed as Acting
President in September 1998. Mr. Katz has been Chairman of the Board and a
director of the Company since its inception and a member of the Management
Committee of the predecessor partnership during the entire period of its
existence. From September 1984 until September 1995, Mr. Katz was Chairman of
the Board, Chief Executive Officer and until September 1993, President of
Nationwide Cellular Service, Inc., which was the Company's majority stockholder
until May 1992 and its largest stockholder, owning 34% of its outstanding
shares, until September 1995. At that time such shares were distributed to
Nationwide's stockholders, immediately prior to Nationwide's merger with MCI
Communications Corp. In May 1996, Mr. Katz was appointed Vice-Chairman of the
Board and Chief Executive Officer of Global Payment Technologies, Inc. (formerly
Coin Bill Validator, Inc.) whose business is currency validation. In September
1996, Mr. Katz was appointed Chairman of the Board and Chief Executive Officer
of Global Payment Technologies, Inc.
Lawrence J. Schoenberg joined the Company as a director in September 1996.
Mr. Schoenberg also serves as Director of Government Technology Services, Inc.,
Merisel, Inc., and Sunguard Data Services, Inc. Former directorships include
Systems Center, Inc. (which was sold to Sterling Software, Inc.), SoftSwitch,
Inc. (which was sold to Lotus/IBM Corp.), Forecross Corporation, Image Business
Systems, Inc., and Penn America Group, Inc. Mr. Schoenberg founded AGS
Computers, Inc. in 1967 and served as Chief Executive Officer until 1991. The
company was sold to NYNEX in 1988. The micro-computer segment subsequently
became a part of Merisel, Inc.
Henry B. Ellis has been a director of the Company since February 2001. Since
1992 Mr. Ellis has been President and Chief Executive Officer of Bassett
California Company, a family-owned real estate holding company located in El
Paso, Texas. From June 1992 to February 1994 Mr. Ellis served as Chairman of the
Board and Chief Executive Officer of Grayson County State Bank, located in
6
Sherman, Texas. Since 1992 Mr. Ellis has served as a member of the Board of
Directors of Bluebonnet Savings Bank, a savings and loan institution located in
Dallas Texas. Mr. Ellis is also a director of Global Payment Technologies, Inc.
Joshua J. Angel has been a director of the Company since June 6, 2001. Mr.
Angel is Founder and Senior Managing Shareholder of Angel & Frankel, P.C., a New
York based law firm specializing in commercial insolvency and creditors' rights.
Mr. Angel serves as a director of Dynacore Holdings Corporation. Mr. Angel has a
B.S. from N.Y.U. and an L.L.B. from Columbia University.
Bruce R. York joined the Company in April 1999 as Vice President and Chief
Financial Officer. Prior to joining the Company, Mr. York was the Director of
Finance of Cell Therapeutics, Inc., a biopharmaceutical company, from February
1998 to February 1999. From May 1987 to January 1998, Mr. York held various
positions with Physio Control International Corporation, a manufacturer of
external defibrillators, in Seattle and London, including Director of Business
Planning, Director of Finance -- Europe, Director of Finance and Corporate
Controller, and Finance Manager. From September 1978 to April 1987, Mr. York
held several positions with Price Waterhouse in Seattle and New York, including
Senior Tax Manager. Mr. York is a C.P.A. and has an A.B. and an M.B.A. from
Dartmouth College.
The Company's officers are elected annually and serve at the discretion of
the Board of Directors.
EXECUTIVE COMPENSATION AND RELATED INFORMATION
SUMMARY COMPENSATION TABLE
The following table sets forth information concerning annual and long-term
compensation, paid or accrued, for the Named Executive Officers for services in
all capacities to the Company during fiscal years 2001, 2000 and 1999.
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS(1)
----------------------------------- ------------
SECURITIES
OTHER ANNUAL UNDERLYING ALL OTHER
YEAR SALARY BONUS COMPENSATION OPTIONS COMPENSATION
---- ------ ----- ------------ ------- ------------
Stephen Katz ................ 2001 $ 99,355 $ 0 $ 645 15,000 $0
Chairman of the Board of 2000 108,458 60,000 543 70,000 0
Directors and Chief 1999 89,310 60,000 190 3,400 0
Executive Officer(2)
Bruce R. York ............... 2001 116,651 18,750 14,690 15,000 0
Vice President, Chief 2000 106,858 70,000 5,308 7,500 0
Financial Officer and 1999 69,967(3) 20,000 2,203 7,200 0
Corporate Secretary(4)
- ---------
(1) None of the Named Executive Officers received any Restricted Stock Awards or
LTIP Payouts in 1999, 2000 or 2001.
(2) Other annual compensation represents taxable income originating from term
life insurance premiums paid on behalf of the Named Executive Officer under
the Company's standard employee group benefits plan.
(3) Represents compensation paid to Mr. York from April 19, 1999, the date that
his employment with the Company commenced as Vice President and Chief
Financial Officer.
(4) Other annual compensation for 2001 includes 401(k) matching contributions by
the Company of $6,817, an automobile allowance of $7,650 and taxable income
originating from term life insurance premiums paid on behalf of the Named
Executive Officer under the Company's standard employee group benefits plan.
Other income for 2000 and 1999 include 401(k) matching contributions of
$5,083 and $2,000, respectively, and taxable income originating from term
life insurance premiums paid on behalf of the Named Executive Officer under
the Company's standard employee group benefits plan.
7
GRANTS OF STOCK OPTIONS IN 2001
The following table sets forth information as to all grants of stock options
to the Named Executive Officers during 2001.
INDIVIDUAL GRANTS(1) POTENTIAL REALIZABLE VALUE
----------------------------------------------------- AT ASSUMED ANNUAL RATES
NUMBER OF % OF TOTAL OF STOCK PRICE
SECURITIES OPTIONS APPRECIATION FOR
UNDERLYING GRANTED TO OPTION TERM(3)
OPTIONS EMPLOYEES EXERCISE EXPIRATION ---------------------------
NAME GRANTED(2) IN 2001 PRICE DATE AT 5% AT 10%
- ---- ---------- ---------------- -------- ---------- ------------ ------------
Stephen Katz............. 15,000 16.8% $2.75 9/10/11 $25,595 $65,622
Bruce R. York............ 15,000 16.8 2.75 9/10/11 25,895 65,622
- ---------
(1) No stock appreciation rights ('SARs') were granted to any of the Named
Executive Officers during 2001.
(2) The options become exercisable in cumulative annual installments of 25% per
year on each of the first four anniversaries of the grant date. The options
are exercisable over a ten-year period.
(3) The dollar amounts set forth under these columns are the result of
calculations at the 5% and 10% rates established by the SEC and are not
intended to forecast future appreciation of the Company's stock price. The
Company did not use an alternative formula for a grant date valuation as it
is unaware of any formula that would determine with reasonable accuracy a
present value based upon future unknown factors.
AGGREGATED OPTION EXERCISES IN 2001 AND YEAR-END OPTION VALUES
The following table sets forth information with respect to the exercise of
stock options during 2001 by the Named Executive Officers and unexercised
options held by them on December 31, 2001.
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
SHARES OPTIONS AT IN-THE-MONEY OPTIONS AT
ACQUIRED ON VALUE DECEMBER 31, 2001 DECEMBER 31, 2001
NAME EXERCISE REALIZED EXERCISABLE/UNEXERCISABLE(1) EXERCISABLE/UNEXERCISABLE(2)
- ---- ----------- -------- ---------------------------- ----------------------------
Stephen Katz.................. 0 $0 81,310/68,290 $0/$0
Bruce R. York................. 0 0 4,755/24,945 $2,815/$1,151
- ---------
(1) There were no SAR exercises during 2001 and no SARs were outstanding at
December 31, 2001.
(2) The closing price for the Company's Common Stock as reported on the NASDAQ
National Market on December 31, 2001 was $2.29 per share. Value is
calculated by multiplying: (i) the difference between $2.29 and the option
exercise price, by (ii) the number of shares of Common Stock underlying the
option.
Notwithstanding anything to the contrary set forth in any of the Company's
previous filings under the Securities Act of 1933, as amended, and the
Securities Exchange Act of 1934, as amended, that might incorporate future
filings, including this Proxy Statement, in whole or in part, the following
report and the performance graph on the following page, and the Audit Committee
Report on page six shall not be incorporated by reference to any such filings.
REPORT OF THE COMPENSATION AND STOCK OPTION COMMITTEE
CELLULAR TECHNICAL SERVICES COMPANY, INC.
The Compensation and Stock Option Committee of the Board of Directors of the
Company (the 'Committee') is currently comprised of Messrs. Henry B. Ellis,
Lawrence J. Schoenberg, and Joshua J. Angel, each outside directors of the
Company. The Committee reviews and approves all decisions relating to the
compensation, bonus, and stock option grants for the officers of the Company.
The Committee also reviews guidelines for compensation, bonus, and stock option
grants for non-officer
8
employees, and maintains authority and control over the administration of the
Company's stock option plans.
It is the philosophy of the Committee that officers of the Company are paid
base salaries in line with their responsibilities, and that other compensation
of officers should be closely aligned with the financial performance of the
Company. Therefore, benefits are provided to management through stock option
incentives and bonuses that are generally consistent with the goal of closely
coordinating the rewards to management with the maximization of stockholder
return. In reviewing Company performance, consideration is given to sales and
earnings and an evaluation is made of strategic planning and the Company's
progress in that regard. Also taken into consideration are external economic
factors that affect results of operations. An attempt is also made to maintain
compensation within the market range. Although review of individual performance
is primarily tied to the performance of the Company, it is also, to a lesser
extent, subjective.
The Committee annually reviews and evaluates the compensation of Stephen
Katz, the Chief Executive Officer. The Committee generally examines the same
factors for Mr. Katz as it examines with respect to the other officers.
The Committee has not developed a policy with respect to amending pay
policies or asking stockholders to vote on 'pay for performance' plans in order
to qualify compensation in excess of $1 million a year which might be paid to
the five highest paid executives for federal tax deductibility. The Committee
intends to continue to monitor this matter and will balance the interests of the
Company in maintaining flexible incentive plans against the possible loss of a
tax deduction should taxable compensation for any of the five highest-paid
executives exceed $1 million in future years.
The foregoing report is approved by all members of the Committee.
Compensation and Stock Option
Committee:
Henry B. Ellis
Lawrence J. Schoenberg
Joshua J. Angel
9
PERFORMANCE GRAPH
Set forth below is a graph comparing the yearly change in the cumulative
stockholder return on the Company's Common Stock since December 31, 1996, with
the NASDAQ Stock Market Index (U.S.) and the NASDAQ Telecommunications Stocks
Index. The graph assumes that $100 was invested on December 31, 1996 in the
Company's Common Stock and each of the indices and that all dividends on the
stocks included in the NASDAQ indices were reinvested. No cash dividends were
paid on the Company's Common Stock. The stockholder return shown on the graph
below is not necessarily indicative of future performance.
[GRAPHIC]
12-31-96 12-31-97 12-31-98 12-31-99 12-31-00 12-31-01
-------- -------- -------- -------- -------- --------
Cellular Technical Services Company, Inc. 100.0 15.0 1.8 3.7 1.5 1.2
NASDAQ Stock Market Index (U.S.) 100.0 122.5 172.7 320.9 193.0 153.2
NASDAQ Telecommunications Stocks 100.0 146.0 241.6 431.0 183.6 122.9
RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS
The firm of Ernst & Young, LLP, independent public accountants, served as
the Company's independent public accountants for the year ended December 31,
2001. A representative of that firm is expected to be available via telephone
during the Annual Meeting to respond to appropriate questions from stockholders
and to make a statement should they desire to do so.
AUDIT FEES
Audit fees billed to the Company by Ernst & Young, LLP for its audit of the
Company's consolidated annual financial statements for the year ended December
31, 2001 and for its review of the financial statements included in the
Company's Quarterly Reports on Form 10-Q filed with the SEC for that year
totaled $112,000.
FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION FEES
The Company did not engage Ernst & Young, LLP to provide advice to the
Company regarding financial information system systems design and implementation
during the year ended December 31, 2001.
10
ALL OTHER FEES
Fees billed to the Company by Ernst & Young, LLP during the year ended
December 31, 2001 for all other non-audit services rendered to the Company,
including tax related services, totaled $25,000.
In connection with the revised standards for independence of the Company's
independent public accountants promulgated by the SEC, the Audit Committee has
considered whether the provision of such services is compatible with maintaining
the independence of Ernst & Young, LLP.
ANNUAL REPORT AND FORM 10-K
The Company's Annual Report to Stockholders for the fiscal year ended
December 31, 2001 was mailed to stockholders with this Proxy Statement. The
Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2001
was filed with the SEC. Stockholders may obtain a copy of such Annual Report on
Form 10-K, including the financial statements, schedules, and list of exhibits
thereto, without charge, by writing to Cellular Technical Services Company,
Inc., 20 East Sunrise Highway, Suite 201, Valley Stream, New York 11581-1260,
Attention: Investor Relations. If specified in such request, and upon payment of
a reasonable fee for reproduction and mailing expenses, the Company will also
furnish stockholders with a copy of any exhibit to the Annual Report on
Form 10-K. In addition, the Company's Annual Report on Form 10-K is available
over the Internet at the Company's website, http://www.cellulartech.com, or at
the SEC's website, http://www.sec.gov.
STOCKHOLDER PROPOSALS FOR 2003 ANNUAL MEETING
Stockholders who intend to have a proposal considered for inclusion in the
Company's proxy materials for the Company's 2003 Annual Meeting of Stockholders
must submit the proposal to the Company no later than January 6, 2003. All such
submissions must be provided to Cellular Technical Services Company, Inc., 2815
Second Avenue, Suite 100, Seattle, Washington 98121, Attention: Corporate
Secretary. Notices of stockholder proposals submitted outside the processes of
Rule 14a-8 of the Securities Exchange Act of 1934 (relating to proposals to be
presented at the meeting but not included in the Company's proxy statement and
form of proxy), will be considered untimely, and thus the Company's proxy may
confer discretionary voting authority on the persons named in the proxy with
regard to such proposals, if received after March 22, 2003.
By Order of the Board of Directors
Bruce R. York
Vice President, Chief Financial
Officer and Corporate Secretary
Seattle, Washington
May 6, 2002
11
[Logo]
Cellular Technical Services Company Inc.
2815 Second Avenue, Suite 100
Seattle WA 98121
(206) 443-6400
http://www.cellulartech.com
APPENDIX 1
CELLULAR TECHNICAL SERVICES COMPANY, INC.
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON JUNE 6, 2002
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned holder of Common Stock of Cellular Technical Services
Company, Inc., a Delaware corporation (the 'Company'), hereby appoints STEPHEN
KATZ and BRUCE R. YORK, and each of them, as proxies for the undersigned, each
with full power of substitution, for and in the name of the undersigned to act
for the undersigned and to vote, as designated below, all of the shares of stock
of the Company that the undersigned is entitled to vote at the 2002 Annual
Meeting of Stockholders of the Company, to be held at the offices of Angel &
Frankel, P.C., 460 Park Avenue, 8th Floor, New York, N.Y., on Thursday, June 6,
2002 at 10:00 a.m. local time, and at any adjournments or postponements thereof.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE 'FOR' ITEM 1 LISTED
BELOW.
1. Election of Lawrence J. Schoenberg as a Class II director.
[ ] VOTE FOR the nominee listed above.
[ ] VOTE WITHHELD from the nominee listed above.
2. Upon such other matters as may properly come before the Annual Meeting and
any adjournments thereof. In their discretion, the proxies are authorized to
vote upon such other business as may properly come before the Annual Meeting and
any adjournments or postponements thereof.
(see reverse side)
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL
BE VOTED 'FOR' ITEM 1 LISTED ON THE REVERSE SIDE.
The undersigned hereby acknowledges receipt of (i) the Notice of Annual
Meeting, (ii) the Proxy Statement, and (iii) the Company's 2001 Annual Report.
Dated: .................. , 2002
.................................
(Signature of Stockholder)
.................................
(Signature of Stockholder -- if
held jointly)
IMPORTANT NOTE: Please sign
exactly as your name appears
hereon and mail it promptly even
if you plan to attend the
meeting. For jointly owned
shares, each owner should sign.
If signing as attorney, executor,
administrator, trustee or
guardian, please indicate the
capacity in which you are acting.
If signing as a corporation,
please sign in full corporate
name by a duly authorized
officer. If signing as a
partnership, please sign in
partnership name by a duly
authorized person.
PLEASE MARK, SIGN AND DATE THIS
PROXY CARD AND PROMPTLY MAIL IT
IN THE ENVELOPE PROVIDED. NO
POSTAGE IS NECESSARY IF MAILED IN
THE UNITED STATES.
