SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
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 toss.240.14a-11(c) orss.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 5, 2003
To Our Stockholders:
You are cordially invited to attend the 2003 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 5, 2003, at 10:00 a.m.
local time, for the following purposes:
1. To elect one (1) Class III 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 approve the 2002 Stock Incentive Plan;
3. 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
25, 2003 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, 2003
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.
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CELLULAR TECHNICAL SERVICES COMPANY, INC.
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JUNE 5, 2003
__________________________
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 5,
2003, 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 5, 2003. 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, 2002, 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 III 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. Approval of the 2002 Stock Incentive Plan;
3. 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 25, 2003 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 18, 2003, 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 III director nominee described in this Proxy
Statement and the approval of the 2002 Stock Incentive Plan.
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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 than the previously submitted
proxy 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 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 for 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.
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. Shares subject to
abstention with respect to any other matter are considered shares entitled to,
and voted, with respect to that matter. Shares subject to broker non-votes with
respect to any other matter are not considered as shares entitled to vote with
respect to that matter.
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 the
2002 Stock Incentive Plan and of any other matter that is submitted to a vote of
the stockholders.
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PROPOSAL 1: ELECTION OF CLASS III 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 the Class III director expires at the Company's 2003 Annual Meeting of
Stockholders, and the term of office of Class I and II directors expires at the
Company's 2004 and 2005 Annual Meetings of Stockholders, respectively. Each
director elected to succeed a director whose term expires is elected to a term
of office expiring at the third Annual Meeting of Stockholders following his
election and, in each case, until his successor is elected and qualified.
One director of the Company is to be elected as a Class III director at the
Annual Meeting, to hold office for a term expiring at the Company's 2006 Annual
Meeting of Stockholders and until his successor is elected and qualified. The
Company's current Class III director, Stephen Katz, has been nominated to be
reelected as a Class III director at the Annual Meeting. Such nominee has
indicated he is willing and able to serve as a Class III director. In the event
that the 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 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 III 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.
DIRECTOR CLASS TERM EXPIRES AT
-------- ----- ---------------
Stephen Katz III 2003 Annual Meeting
Joshua J. Angel I 2004 Annual Meeting
Lawrence J. Schoenberg II 2005 Annual Meeting
Barry J. Beil II 2005 Annual Meeting
Mr. Beil was elected to the Board of Directors after the resignation of Henry B.
Ellis.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
During the year ended December 31, 2002, the Board of Directors held four
meetings. During 2002, 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. Angel (Chairman), Schoenberg and Beil.
During 2002, this committee held two meetings.
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The Board of Directors has a standing Audit Committee, whose functions are
described below. This committee currently consists of Messrs. Schoenberg
(Chairman), Beil and Angel. This committee held five meetings in 2002.
AUDIT COMMITTEE
Each member of the Audit Committee meets the independence requirements for audit
committee members under the listing standards of the NASDAQ SmallCap 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 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 prepared in accordance
with 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, 2002, the
Audit Committee:
1. Reviewed and discussed the audited financial statements for the fiscal
year ended December 31, 2002 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 LLP's independence with
Ernst & Young LLP and considered whether the provision of non-audit
services rendered by Ernst & Young LLP 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, 2002 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
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DIRECTOR COMPENSATION
Each director serving in 2002 who was not an officer or employee of the Company
received an award of restricted shares of the Company's common stock, contingent
upon stockholder approval of the 2002 Stock Incentive Plan (see Proposal 2
below) and is reimbursed for his out-of-pocket expenses incurred in connection
with attendance at Board and Committee meetings or other Company business. No
cash payments other than reimbursement of expenses were made to non-employee
directors during 2002.
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 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. Angel (Chairman), Schoenberg and Beil. None of such committee members
is or has been an officer or employee of the Company.
PROPOSAL 2: APPROVAL OF 2002 STOCK INCENTIVE PLAN
On June 5, 2002, the Board adopted the 2002 Stock Incentive Plan ("2002 Plan"),
subject to stockholder approval. The Board believes that the 2002 Plan will be
of benefit to the Company by enabling the Company to attract, retain and reward
directors, officers and executives and to strengthen the existing mutuality of
interests between such persons and the Company's stockholders. The Board
believes that this arrangement will help preserve the Company's cash balances by
compensating certain persons utilizing restricted shares of the Company's common
stock.
DESCRIPTION OF THE 2002 PLAN
Set forth below is a summary of the principal features of the 2002 Plan. This
summary, however, does not purport to be a complete description of all of the
provisions of the 2002 Plan and is qualified in its entirety by reference to the
2002 Plan, a copy of which is attached as Appendix A and incorporated herein by
this reference.
Administration. The 2002 Plan will be administered by the Compensation and Stock
Option Committee of the Board or any successor thereto (the "Committee"). The
Committee will have the authority to select eligible recipients, grant awards
and determine the terms and conditions thereof.
Shares Available. The total number of shares of Common Stock reserved and
available for issuance under the 2002 Plan shall be 195,000 shares. These
amounts are subject to adjustment as provided in the 2002 Plan. To the extent
any shares subject to award are forfeited, such shares will become available for
subsequent awards under the 2002 Plan.
Eligibility. Awards will be granted only to persons who are directors, officers
or executives of the Company or of any parent or subsidiary. On March 31, 2003,
the Company had two executives and three directors. The committee determines the
eligible recipients to whom, and the time or times at which,
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awards shall be made; the number of shares to be awarded; the price, if any, to
be paid by the participant for the acquisition of restricted stock; and the
restricted period applicable to awards.
Unless permitted by the Committee pursuant to the express terms of an award
agreement, awards will not be transferable for at least one year other than by
will or the laws of descent and distribution. The Committee may allow for a
lapse of such restrictions in installments and may accelerate or waive such
restrictions in whole or in part based on such factors and such circumstances as
the Committee may determine in its sole discretion.
Term and Conditions of Restricted Shares. The 2002 Plan authorizes grants of
restricted shares. Restricted shares are shares of Common Stock subject to a
restricted period of a minimum of one year, as determined by the Committee. The
term of each award will be for such period as may be determined by the
Committee. Except to the extent set forth in a particular award, a person
granted restricted shares will generally have all of the rights of a stockholder
of the Company, including the right to vote the restricted shares. However,
during any period that restricted shares are subject to restrictions imposed by
the Committee, the restricted shares may not be transferred or encumbered by an
award holder. The current form of Restricted Stock Agreement provides that, upon
termination of an award holder's employment with the Company or the cessation of
his services as a director to the Company during the restricted period, the
restricted shares will be forfeited and reacquired by the Company. The Committee
will determine the time or times at which, and the circumstances under which,
any restrictions imposed on restricted shares will lapse and may shorten or
waive a restricted period. No award may be made under the 2002 Plan after
October 6, 2012.
Amendment and Termination. The Board will have the right to amend, alter or
discontinue the 2002 Plan, but no amendment, alteration, or discontinuation
shall be made that would increase the number of shares of Common Stock available
under the Plan (other than adjustments due to a change of control,
recapitalization, merger or other event affecting the number or kind of shares
held by all stockholders (a "Recapitalization")) or change the eligibility
requirements unless stockholder approval is obtained. Additionally, no
amendment, alteration or discontinuation shall be made that would impair the
rights of a participant under any award theretofore granted without such
participant's consent.
Right of Company to Terminate Awards in Event of Change in Control. Upon the
occurrence of a change in control of the Company, the Committee may cancel any
outstanding awards in exchange for payment in cash or other property of the fair
market value of the shares covered by such awards.
Right of Company to Adjust Awards in the Event of a Recapitalization. In the
event of a Recapitalization, the Committee may, in its sole discretion, make an
equitable substitution or adjustment in the aggregate number and/or kind of
shares reserved for issuance under the 2002 Plan and in the kind and number of
shares subject to outstanding awards.
FEDERAL INCOME TAX CONSEQUENCES OF AWARDS UNDER THE 2002 PLAN
Set forth below is a brief summary of the federal income tax consequences to
award recipients (who are individuals that are United States citizens and
residents) and to the Company as a result of the grant and exercise of awards
under the 2002 Plan. This summary is based on statutory provisions, Treasury
regulations thereunder, judicial decisions, and Internal Revenue Service rulings
in effect on the date hereof. This summary does not discuss any potential
foreign, state, or local tax consequences.
Generally, a recipient of restricted shares will recognize ordinary compensation
income as a result of the receipt of restricted shares in an amount equal to the
fair market value of the shares of Common Stock when such shares first cease to
be subject to a prohibition on transfer or to a substantial risk of forfeiture
(or both). The amount of income realized will be the value of the shares at the
date the shares first
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become transferable or cease to be subject to substantial risk of forfeiture.
However, if such a recipient makes a valid election under Section 83(b) of the
Internal Revenue Code, the restricted shares will be taxable at the date of
receipt of the shares and the recipient will realize ordinary income upon the
grant of the restricted shares in an amount equal to the value of the Shares
without regard to the restrictions on transferability and the risk of
forfeiture. The Company will generally be entitled to a deduction equal to the
amount of ordinary income recognized by a participant in the year such income is
recognized. When a participant sells restricted stock, the participant will have
a capital gain or loss (long or short term, as the case may be) in an amount
equal to the difference between the amount realized upon the sale and the
participant's adjusted basis in the restricted stock.
The 2002 Plan provides for the restricted shares to be held in escrow until the
stockholders of the Company approve the 2002 Plan.
The closing market price of the shares of Common Stock on March 31, 2003 was
$0.70 per share as reported by the Nasdaq SmallCap Market System.
BENEFITS UNDER THE 2002 PLAN
The restricted share awards listed below were made to eligible persons under the
2002 Plan in lieu of cash compensation for Board service during 2002 and are
contingent upon stockholder approval of the 2002 Plan. Upon his resignation as a
director, Mr. Ellis' award was forfeited.
Participant Title Date of Award Dollar Value of Number of Shares
----------- ----- ------------- --------------- ----------------
Shares
------
Lawrence J. Schoenberg Non-employee Director October 7, 2002 $12,840 12,000
Henry B. Ellis Non-employee Director October 7, 2002 12,840 12,000
Joshua J. Angel Non-employee Director October 7, 2002 11,770 11,000
Stephen Katz Chairman April 10, 2003 49,500 45,000
------ ------
Total $85,950 80,000
------- ------
Shares Remaining Avail. 115,000
-------
EQUITY COMPENSATION PLAN INFORMATION
The following table provides information about the Company's equity compensation
plans as of December 31, 2002.
Plan Category A B C
Number of securities to Weighted average exercise Number of securities remaining
be issued upon exercise price of outstanding options, available for future issuance under
of outstanding options, warrants and rights securities equity compensation plans (excluding
warrants and rights reflected in column (A) securities reflected in column (A))
Equity compensation plans 240,009 $8.17 148,951
approved by security holders
Equity compensation plans 35,000 -- 75,000
not approved by security
holders (1)
- ------------------------------------------------------------------------------------------------------------------------------
Total 275,009 -- 223,951
(1) On June 6, 2002, the Board of Directors adopted the 2002 Plan and issued
restricted shares to its non-management directors subject to stockholder
approval. As of the date hereof, 68,000 shares were so issued to
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directors under the 2002 Plan and 127,000 shares are available for future
issuance. This Plan is being submitted for stockholder approval at this annual
meeting of stockholders.
REQUIRED VOTE AND RECOMMENDATION
Approval of the 2002 Plan requires the number of votes cast in favor of the 2002
Plan to exceed the number of votes cast in opposition to the 2002 Plan.
Abstentions and broker non-votes will not be counted as votes cast in favor of
or in opposition to the approval of the 2002 Plan. Shares represented by proxies
will be voted for the approval of the 2002 Plan unless authority to do so is
withheld.
THE BOARD RECOMMENDS A VOTE "FOR" THE APPROVAL OF THE 2002 PLAN.
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 and footnotes thereto set forth, as of April 17, 2003,
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 2002
(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................................ 186,194 (2) 8.0%
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Lawrence J. Schoenberg.................................. 20,950 (3) *
Joshua J. Angel......................................... 3,200 (4) *
Barry J. Beil........................................... ---- *
Bruce R. York........................................... 12,820 (5) *
All directors and executive officers as a group
(5 persons)............................................. 223,164 (6) 9.4%
___________________________
* 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. 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 41,273 shares held by a partnership controlled by Mr. Katz
and 3,090 shares held by a trust for the benefit of his wife. Also
includes 43,290 shares subject to currently exercisable options, none
of which are at prices lower than the market price of the Company's
Common Stock.
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3. Consists of 20,950 shares subject to currently exercisable options,
none of which are at prices lower than the market price of the
Company's Common Stock.
4. Consists of 3,200 shares subject to currently exercisable options,
none of which are at prices lower than the market price of the
Company's Common Stock.
5. Includes 12,820 shares subject to currently exercisable options, none
of which are at prices lower than the market price of the Company's
Common Stock.
6. Includes an aggregate of 83,460 shares subject to currently
exercisable options, none of which are at prices lower than the market
price of the Company's Common Stock.
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, 2002.
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 59 Chairman of the Board of Directors,
Chief Executive Officer and Acting
President
Lawrence J. Schoenberg 70 Director
Joshua J. Angel 67 Director
Barry J. Beil 56 Director
Bruce R. York 48 Vice President, Chief Financial
Officer and Secretary
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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. Mr. Katz served as Chief Executive Officer of Global
Payment Technologies, Inc. (formerly Coin Bill Validator, Inc.) from May 1996
through March 2003 and as its Chairman of the Board from September 1996 to April
2003. Global Payment Technologies is engaged in the business of currency
validation.
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.),
12
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 its Chief Executive Officer
until 1991. The company was sold to NYNEX in 1988. The micro-computer segment
subsequently became a part of Merisel, Inc.
Barry J. Beil has been a director of the Company since April 2003. From 1980 to
1998 he was President and Chief Executive Officer of Sheldon Electric Co., Inc.,
a New York City based electrical contractor. Since 1985 he has been President of
Hampton Hills Operating Corp. and Managing Partner of Hampton Hills Associates
which collectively own and operate the Hampton Hills Golf & Country Club. Since
1996 he has been the Managing Member of Rugby Recreational Group LLC which owns
and operates the Fox Hill Golf & Country Club. Since 1988 he has been Vice
President and Secretary of M&M Beach Properties, Inc., a developer and builder
of residential properties.
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 2002, 2001 and 2000.
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS(1)
---------
SECURITIES
OTHER ANNUAL UNDERLYING ALL OTHER
YEAR SALARY BONUS COMPENSATION OPTIONS COMPENSATION
---- ------ ----- ------------ ------- ------------
Stephen Katz............ 2002 $50,000 $0 $322 10,000 $ 0
Chairman of the Board of 2001 99,355 0 645 15,000 0
Directors and Chief 2000 108,458 60,000 543 70,000 0
Executive Officer (2)
Bruce R. York........... 2002 $120,000 $0 $16,666 10,000 0
Vice President, Chief 2001 116,651 18,750 14,690 15,000 0
Financial Officer and 2000 106,858 70,000 5,308 7,500 0
Corporate Secretary (3)
______________________________________
13
1. None of the Named Executive Officers received any Restricted Stock
Awards or LTIP Payouts in 2002, 2001 or 2000.
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. Other annual compensation for 2002 includes 401(k) matching
contributions by the Company of $5,641, an automobile allowance of
$10,800 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 annual
compensation for 2001 includes 401(k) matching contributions 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 annual compensation for 2000 includes 401(k) matching
contributions of $5,083 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.
GRANTS OF STOCK OPTIONS IN 2002
The following table sets forth information as to all grants of stock options to
the Named Executive Officers during 2002.
INDIVIDUAL GRANTS (1)
---------------------------------------------------------
NUMBER OF % OF TOTAL
SECURITIES OPTIONS POTENTIAL REALIZABLE VALUE
UNDERLYING GRANTED TO AT ASSUMED ANNUAL RATES OF
OPTIONS EMPLOYEES EXERCISE EXPIRATION STOCK PRICE APPRECIATION FOR
NAME GRANTED (2) IN 2002 PRICE DATE OPTION TERM (3)
---- ----------- ---------- -------- ---------- -----------------------------
AT 5% AT 10%
----- ------
Stephen Katz.............. 10,000 13.3% $0.99 9/22/12 $6,226 $15,778
Bruce R. York............ 10,000 13.3% 0.99 9/22/12 6,226 15,778
______________________________________
1. No stock appreciation rights ("SARs") were granted to any of the Named
Executive Officers during 2002.
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 2002 AND YEAR-END OPTION VALUES
The following table sets forth information with respect to the exercise of stock
options during 2002 by the Named Executive Officers and unexercised options held
by them on December 31, 2002.
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS AT
SHARES OPTIONS AT DECEMBER 31, 2002
ACQUIRED VALUE DECEMBER 31, 2002 EXERCISABLE/
NAME ON EXERCISE REALIZED EXERCISABLE/UNEXERCISABLE (1) UNEXERCISABLE (2)
- ------------------------ ----------- -------- ----------------------------- -----------------
Stephen Katz.............. 0 $0 43,290/55,110 $0/$0
Bruce R. York............. 0 0 11,820/27,880 $0/$0
______________________________________
1. There were no SAR exercises during 2002 and no SARs were outstanding
at December 31, 2002.
14
2. The closing price for the Company's Common Stock as reported on the
NASDAQ SmallCap Market on December 31, 2002 was $0.69 per share. Value
is calculated by multiplying: (i) the difference between $0.69 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 Exchange
Act, 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. Joshua J. Angel,
Lawrence J. Schoenberg, and Barry J. Beil, 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 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: Joshua J. Angel
Lawrence J. Schoenberg
Barry J. Beil
15
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, 1997, with
the NASDAQ Stock Market Index (U.S.) and the NASDAQ Telecommunications Stocks
Index. The graph assumes that $100 was invested on December 31, 1997 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 OMITTED]
[GRAPHIC OMITTED]
12-31-97 12-31-98 12-31-99 12-31-00 12-31-01 12-31-02
Cellular Technical Services Company, Inc. 100.0 12.1 24.3 9.7 8.0 2.3
NASDAQ Stock Market Index (U.S.) 100.0 141.0 261.5 157.4 124.9 86.3
NASDAQ Telecommunications Stocks 100.0 164.9 295.0 125.5 84.2 38.8
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, 2002. 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 he 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 years ended
December 31, 2001 and 2002 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 $209,000.
16
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 years
ended December 31, 2001 and 2002.
TAX FEES: Tax fees billed to the Company by Ernst & Young LLP for the year ended
December 31, 2001 totaled $25,000. No tax fees were billed to the Company for
the year ended December 31, 2002.
ALL OTHER FEES: The Company did not engage Ernst & Young, LLP to provide any
other non-audit services to the Company during 2001 or 2002.
In connection with the revised standards for independence of the Company's
independent public accountants promulgated by the SEC, the Audit Committee
considers whether the provision of such services would be compatible with
maintaining the independence of Ernst & Young, LLP. There were no such services
provided in 2002. The Audit Committee has approved the audit fees of Ernst &
Young, LLP for 2002.
ANNUAL REPORT AND FORM 10-K
The Company's Annual Report to Stockholders for the fiscal year ended December
31, 2002 was mailed to stockholders with this Proxy Statement. The Company's
Annual Report on Form 10-K for the fiscal year ended December 31, 2002 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 2004 ANNUAL MEETING
Stockholders who intend to have a proposal considered for inclusion in the
Company's proxy materials for the Company's 2004 Annual Meeting of Stockholders
must submit the proposal to the Company no later than January 5, 2004. 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 23, 2004.
By Order Of The Board of Directors
Bruce R. York
Vice President, Chief Financial Officer and
Corporate Secretary
Seattle, Washington
May 7, 2003
[GRAPHIC OMITTED]
Cellular Technical Services Company Inc.
2815 Second Avenue, Suite 100, Seattle WA 98121
(206) 443-6400 http://www.cellulartech.com
17
APPENDIX A
----------
CELLULAR TECHNICAL SERVICES COMPANY, INC.
2002 STOCK INCENTIVE PLAN
SECTION 1. PURPOSE OF PLAN.
The name of this plan is the Cellular Technical Services Company, Inc. 2002
Stock Incentive Plan (the "Plan"). The Plan was adopted by the Board (as
hereinafter defined) on June 6, 2002 and amended on April 10, 2003. The purpose
of the Plan is to enable the Company and its Subsidiaries (as hereinafter
defined) to attract, retain and reward directors, officers and executives and to
strengthen the existing mutuality of interests between such persons and the
Company's stockholders. To accomplish the foregoing, the Plan provides that the
Company may grant Restricted Stock to those directors, officers and executives
the Board deems appropriate.
SECTION 2. DEFINITIONS.
For purposes of the Plan, the following terms shall be defined as set forth
below:
(a) "Award" means an award of Restricted Stock pursuant to the Plan.
(b) "Award Agreement" means, with respect to each Award, the written
agreement between the Company and the Participant setting forth the terms and
conditions of the Award.
(c) "Board" means the board of directors of the Company.
(d) "Change in Capitalization" means any increase, reduction, or change or
exchange of Shares for a different number or kind of shares or other securities,
cash or property by reason of a reclassification, recapitalization, merger,
consolidation, reorganization, stock dividend, stock split or reverse stock
split, combination or exchange of shares, repurchase of shares, change in
corporate structure or otherwise; or any other corporate action, such as
declaration of a special dividend, that affects the capitalization of the
Company.
(e) "Change in Control" means the occurrence of any event where (i) any
"person" (as such term is used in Section 13(d) and 14(d) of the Exchange Act)
is or becomes the "beneficial owner" (as defined in Rules 13d-3 and 13d-5 under
the Exchange Act, except that a person shall be deemed to have "beneficial
ownership" of all shares that any such person has the right to acquire whether
such right is exercisable immediately or only after the passage of time),
directly or indirectly, of 50% or more of the outstanding shares of Common Stock
of the Company or securities representing 50% or more of the combined voting
power of the Company's voting stock, (ii) the Company consolidates with, or
merges into, another person or conveys, transfers, sells or leases all or
substantially all of its assets to any person, or any person consolidates with,
or merges into, the Company, in either event pursuant to a transaction in which
the outstanding voting stock of the Company is changed into or exchanged for,
cash, securities or other property, other than any such transaction between the
Company and its Subsidiaries, with the effect that any "person" becomes the
"beneficial owner," directly or indirectly, of 50% or more of the outstanding
shares of Common Stock of the Company or securities representing 50% or more of
the combined voting power of the Company's voting stock, or (iii) during any
consecutive two-year period, individuals who at the beginning of such period
constituted the Board (together with any new directors whose election by the
Board, or whose nomination for election by the Company's stockholders, was
approved by a vote of at least a majority of the directors then still in office
who were either directors at the beginning of such period or whose election or
nomination for election was previously so approved) cease for any reason to
constitute a majority of the directors then in office.
A-1
(f) "Committee" means the committee established by the Board to administer
the Plan, or in the absence of such a committee, the Board.
(g) "Common Stock" means the common stock, par value $0.001 per share, of
the Company.
(h) "Company" means Cellular Technical Services Company, Inc., a Delaware
corporation (or any successor corporation).
(i) "Eligible Recipient" means a director, officer or executive of the
Company or of any Parent or Subsidiary.
(j) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended from time to time.
(k) "Fair Market Value" as of a particular date shall mean the fair market
value of a Share as determined by the Committee in its sole discretion, provided
that (i) if the Shares are admitted to trading on a national securities
exchange, fair market value of a Share on any date shall be the closing sale
price reported for such Share on such securities exchange on the last date
preceding such date on which a sale was reported, (ii) if the Shares are
admitted to quotation on the National Association of Securities Dealers
Automated Quotation ("Nasdaq") System or other comparable quotation system and
have been designated as a National Market System ("NMS") security, fair market
value of a Share on any date shall be the closing sale price reported for such
Share on such system on the last date preceding such date on which a sale was
reported, or (iii) if the Shares are admitted to (a) quotation on the Nasdaq
System and not designated an NMS security or (b) the OTC Bulletin Board, fair
market value of a Share on any date shall be the average of the highest bid and
lowest asked prices of such Share on such system on the last date preceding such
date on which both bid and ask prices were reported.
(l) "Parent" means any entity (other than the Company) in an unbroken chain
of corporations ending with the Company, if each of the entities in the chain
(other than the Company) owns equity possessing 50% or more of the combined
voting power of all classes of equity in one of the other entities in the chain.
(m) "Participant" means any Eligible Recipient selected by the Committee,
pursuant to the Committee's authority in Section 3 hereof, to receive an Award.
(n) "Plan" means this Cellular Technical Services Company, Inc. 2002 Stock
Incentive Plan.
(o) "Restricted Stock" means Shares subject to certain restrictions granted
pursuant to Section 7 hereof.
(p) "Securities Act" means the Securities Act of 1933, as amended from time
to time.
(q) "Shares" means shares of Common Stock and any successor security.
(r) "Subsidiary" means any entity (other than the Company) in an unbroken
chain of entities beginning with the Company, if each of the entities (other
than the last entity) in the unbroken chain owns 50% or more of the total
combined voting power in one of the other entities in the chain.
(s) "Ten Percent Owner" means an Eligible Recipient who owns more than ten
percent of the total combined voting power of the Company or its Parent or
Subsidiary entities.
(t) "Termination" means a Participant's cessation of employment with, or
service as a director to, the Company or a Parent or Subsidiary. A Termination
shall not occur so long as a Participant remains employed with, or continues to
provide service as a director to, any of the Company, a Parent or a Subsidiary.
A-2
SECTION 3. ADMINISTRATION.
(a) The Plan shall be administered by the Committee, which shall serve at
the pleasure of the Board. Pursuant to the terms of the Plan, the Committee
shall have the power and authority, without limitation:
(i) to select those Eligible Recipients who shall be Participants;
(ii) to determine whether and to what extent Awards are to be
granted hereunder to Participants;
(iii) to determine the number of Shares to be covered by each Award
granted hereunder;
(iv) to determine the terms and conditions, not inconsistent with
the terms of the Plan, of each Award granted hereunder;
(v) to determine the terms and conditions, not inconsistent with
the terms of the Plan, which shall govern all written
instruments evidencing Awards;
(vi) to adopt, alter and repeal such administrative rules,
guidelines and practices governing the Plan as it shall from
time to time deem advisable; and
(vii) to interpret the terms and provisions of the Plan and any
Award (and any Award Agreement relating thereto) in its sole
discretion and to otherwise supervise the administration of
the Plan.
(b) The Committee may, in its absolute discretion, without amendment to
the Plan, accelerate the lapse of restrictions, or waive any condition imposed
hereunder, with respect to any Award or otherwise adjust any of the terms
applicable to any such Award; provided that no action under this Section 3(b)
shall adversely affect any outstanding Award without the consent of the holder
thereof.
(c) All decisions made by the Committee pursuant to the provisions of the
Plan shall be final, conclusive and binding on all persons, including the
Company and the Participants. No member of the Board or the Committee, nor any
officer or employee of the Company acting on behalf of the Board or the
Committee, shall be personally liable for any action, determination, or
interpretation taken or made in good faith with respect to the Plan, and all
members of the Board or the Committee and each and any officer or employee of
the Company acting on their behalf shall, to the extent permitted by law, be
fully indemnified and protected by the Company in respect of any such action,
determination or interpretation.
SECTION 4. SHARES RESERVED FOR ISSUANCE UNDER THE PLAN.
(a) The total number of Shares reserved and available for issuance under
the Plan shall be 195,000 Shares. Such Shares may consist, in whole or in part,
of authorized and unissued Shares or treasury Shares.
(b) To the extent that any Shares subject to any Award are forfeited, such
Shares shall again be available for issuance in connection with future Awards.
SECTION 5. EQUITABLE ADJUSTMENTS; CHANGE IN CONTROL
(a) In the event of any Change in Capitalization, an equitable
substitution or adjustment may be made in (i) the aggregate number and/or kind
of Shares reserved for issuance under the Plan, and (ii) the kind and
A-3
number of Shares subject to outstanding Awards, in each case as may be
determined by the Committee, in its sole discretion.
(b) In the event of any Change of Control, the Committee may provide, in
its sole discretion, for the cancellation of any outstanding Awards in exchange
for payment in cash or other property of the Fair Market Value of the Shares
covered by such Awards.
SECTION 6. PARTICIPATION.
The Participants under the Plan shall be selected from time to time by the
Committee, in its sole discretion, from among Eligible Recipients. The Committee
shall have the authority to grant Awards to any Eligible Recipient.
SECTION 7. RESTRICTED STOCK.
(a) General. Awards shall be evidenced by an Award Agreement. The Committee
shall determine the Eligible Recipients to whom, and the time or times at which,
Awards shall be made; the number of Shares to be awarded; the price, if any, to
be paid by the Participant for the acquisition of Restricted Stock; and the
Restricted Period (as defined in Section 7(c) applicable to Awards. The
provisions of the Award Agreements need not be the same with respect to each
Participant.
(b) Awards and Certificates. The prospective recipient of an Award shall
not have any rights with respect to any such Award unless and until such
recipient has executed an Award Agreement evidencing the Award and delivered a
fully executed copy thereof to the Company, within such period as the Committee
may specify after the award date. Each Participant who is granted an Award shall
be issued a stock certificate in respect of such shares of Restricted Stock,
which certificate shall be registered in the name of the Participant and shall
bear an appropriate legend referring to the terms, conditions, and restrictions
applicable to any such Award; provided that the Company may require that the
stock certificates evidencing Restricted Stock granted hereunder be held in the
custody of the Company until the restrictions thereon shall have lapsed, and
that, as a condition of any Award, the Participant shall have delivered a stock
power, endorsed in blank, relating to the Shares covered by such Award.
(c) Nontransferability. The Awards granted pursuant to this Section 7 shall
be subject to the restrictions on transferability set forth in this Section
7(c). During such period as may be set by the Committee in the Award Agreement
(the "Restricted Period"), but in no case for less than one year, the
Participant shall not be permitted to sell, transfer, pledge, hypothecate or
assign shares of Restricted Stock awarded under the Plan except by will or the
laws of descent and distribution; provided that the Committee may, in its sole
discretion, provide for the lapse of such restrictions in installments and may
accelerate or waive such restrictions in whole or in part based on such factors
and such circumstances as the Committee may determine in its sole discretion.
The Committee may also impose such other restrictions and conditions on awarded
Restricted Stock as it deems appropriate. Any attempt to dispose of any
Restricted Shares in contravention of any such restrictions shall be null and
void and without effect.
(d) Rights as a Stockholder. Except as provided in Sections 7(b), 7(c) and
10(c) or as otherwise provided in an Award Agreement, the Participant shall
possess all incidents of ownership with respect to Shares of Restricted Stock
during the Restricted Period, including the right to receive or reinvest
dividends with respect to such Shares and to vote such Shares. Certificates for
unrestricted Shares shall be delivered to the Participant promptly after, and
only after, the Restricted Period shall expire without forfeiture in respect of
such Awards except as the Committee, in its sole discretion, shall otherwise
determine, except that such certificates shall bear such Securities Act legends
as the Company shall deem necessary.
A-4
(e) Termination of Employment. The rights of Participants upon Termination
for any reason during the Restricted Period shall be set forth in the Award
Agreement governing such Awards.
SECTION 8. AMENDMENT AND TERMINATION.
The Board may amend, alter or discontinue the Plan, but no amendment,
alteration, or discontinuation shall be made that would (i) except as
contemplated in Section 5, increase the number of shares of Common Stock
available under the Plan unless stockholder approval is obtained, (ii) change
the eligibility requirements for Eligible Recipients unless stockholder approval
is obtained, or (iii) impair the rights of a Participant under any Award
theretofore granted without such Participant's consent. The Board shall obtain
approval of the Company's stockholders for any amendment that would require such
approval in order to satisfy the requirements of securities exchange rules or
other applicable law.
SECTION 9. GENERAL PROVISIONS.
(a) Shares shall not be issued pursuant to any Award granted hereunder
unless such Award and the issuance and delivery of such Shares pursuant thereto
shall comply with all relevant provisions of law, including, without limitation,
the Securities Act, the Exchange Act and the requirements of any securities
exchange upon which the Common Stock may then be listed.
(b) The Committee may require each person acquiring Shares to represent to
and agree with the Company in writing that such person is acquiring the Shares
without a view to distribution thereof. The certificates for such Shares may
include any legend that the Committee deems appropriate to reflect any
restrictions on transfer.
(c) All certificates for Shares delivered under the Plan shall be subject
to such stock-transfer orders and other restrictions as the Committee may deem
advisable under the rules, regulations, and other requirements of the Securities
and Exchange Commission, any securities exchange upon which the Common Stock may
then be listed, and any applicable federal or state securities law. The
Committee may cause a legend or legends to be placed on any such certificates to
make appropriate reference to such restrictions.
(d) Nothing contained in the Plan shall prevent the Board from adopting
other or additional compensation arrangements, subject to stockholder approval,
if such approval is required. Neither the adoption of the Plan nor the granting
of any Award to an Eligible Recipient shall confer upon any Eligible Recipient
any right to continued employment or service with the Company or any Parent or
Subsidiary, as the case may be, nor shall it interfere in any way with the right
of the Company or any Parent or Subsidiary to terminate the employment or
service of any of its Eligible Recipients at any time. The granting of one Award
to an Eligible Recipient shall not entitle the Eligible Recipient to any
additional grants of Awards thereafter.
(e) The definitions set forth in this Plan are solely for the purposes of
the operation of this Plan, and such definitions shall not be used for any
purposes unrelated to this Plan.
SECTION 10. STOCKHOLDER APPROVAL; EFFECTIVE DATE OF PLAN.
(a) The grant of any Award hereunder shall be contingent upon stockholder
approval of the Plan being obtained within twelve (12) months before or after
the date the Board adopts the Plan.
(b) Subject to the approval of the Plan by the stockholders of the Company
within twelve (12) months before or after the date the Plan is adopted by the
Board, the Plan shall be effective as of October 7, 2002 (the "Effective Date").
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(c) No Participant shall possess any rights or incidents of ownership with
respect to the Shares of Restricted Stock as described in Section 7(d) hereof
until the Plan has been approved by the stockholders of the Company. Until such
time as the Plan is approved by the stockholders of the Company, any Award shall
be held in escrow by Jenkens & Gilchrist Parker Chapin LLP, the Company's
counsel, and each stockholder shall sign an escrow agreement in the form
attached hereto as Exhibit A.
SECTION 11. TERM OF PLAN.
No Award shall be granted pursuant to the Plan on or after the tenth
anniversary of the Effective Date, but Awards theretofore granted may extend
beyond that date.
SECTION 12. GOVERNING LAW.
The Plan and all determinations made and actions taken pursuant hereto
shall be governed by the laws of the State of New York, without giving effect to
the conflict of laws principles thereof.
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EXHIBIT A
---------
FORM OF ESCROW AGREEMENT
ESCROW AGREEMENT
----------------
The parties to this ESCROW AGREEMENT (this "Agreement"), dated as of
_______ __, 2002, are CELLULAR TECHNICAL SERVICES COMPANY, INC., a Delaware
corporation (the "Company"), _________________, an individual (the "Restricted
Stockholder"), and JENKENS & GILCHRIST PARKER CHAPIN LLP, as escrow agent (the
"Escrow Agent").
W I T N E S S E T H:
WHEREAS, pursuant to a Stock Award Agreement, dated as of ________, ____,
between the Company and the Restricted Stockholder (the "Award Agreement") and
the Company's 2002 Restricted Stock Incentive Plan (the "Plan") that governs the
Award Agreement, the Company and the Restricted Stockholder desire to place the
____________ shares of the Company's common stock, par value $0.01 per share
(the "Common Stock"), awarded to the Restricted Stockholder under the Award
Agreement (the "Shares"), in escrow until the stockholders of the Company vote
to approve or reject the Plan; and
WHEREAS, the Escrow Agent is willing, under the terms and conditions
contained in this Agreement, to act as escrow agent for the Shares;
NOW, THEREFORE, in consideration of the mutual covenants herein contained,
and other good and valuable consideration, the receipt and sufficiency of which
is hereby acknowledged, the parties hereby agree as follows:
1. On or prior to the execution hereof, the Company shall have delivered
the Shares to the Escrow Agent. The escrow period (the "Escrow
Period") shall begin on the date the Shares were delivered to the
Escrow Agent and shall continue until the earlier of (i) ten days
after the stockholders of the Company vote to approve or reject the
Plan or (ii) all of the certificates representing the Shares are
distributed according to the terms of this Agreement; provided,
however, that if the Escrow Agent is notified of a dispute or conflict
between the Company and the Restricted Stockholder with respect to any
of the Shares, the Escrow Period shall continue until the Escrow Agent
is no longer in possession of the Shares pursuant to the procedures
provided in this Agreement.
2. Upon the joint written direction (the "Direction") of the Company and
the Restricted Stockholder, the Escrow Agent shall cause the release
of the Shares to the Restricted Stockholder or to the Company, as
directed by the Direction. If the Escrow Agent possesses any Shares at
the end of the Escrow Period without receiving a Direction, the Escrow
Agent shall deliver such Shares to the Company unless otherwise
directed by a final order, decree or judgment issued by a court of
competent jurisdiction.
3. During the Escrow Period, none of the Shares shall become the property
of the Restricted Stockholder or any other person or be subject to the
debts of the Restricted Stockholder or any other person, and the
Escrow Agent shall neither make nor permit any disbursements or
deliveries of Shares except as expressly provided herein.
A-7
4. The Escrow Agent's duties hereunder may be altered, amended, modified
or revoked only by a writing signed by the Company, the Restricted
Stockholder and the Escrow Agent. The Escrow Agent shall be obligated
only for the performance of such duties as are specifically set forth
herein and may rely on, and shall be protected in relying on or
refraining from acting pursuant to, any instrument reasonably believed
by the Escrow Agent to be genuine and to have been signed or presented
by the proper party or parties. The Escrow Agent shall not be
personally liable for any act the Escrow Agent may do or omit to do
hereunder as the Escrow Agent while acting in good faith, provided
that such acts do not constitute gross negligence or willful
misconduct on the part of the Escrow Agent.
5. The Escrow Agent and its designees, and their respective directors,
officers, partners, employees, attorneys and agents, shall be
indemnified, reimbursed, held harmless and, at the request of the
Escrow Agent, defended, by the Company and the Restricted Stockholder
from and against any and all claims, liabilities, losses and expenses
(including, without limitation, the disbursements, expenses and
reasonable fees of their respective attorneys) that may be imposed
upon, incurred by, or asserted against any of them, arising out of or
related directly or indirectly to this Agreement or the Shares, except
such as are occasioned by the Escrow Agent's own acts or omissions
amounting to gross negligence or willful misconduct as determined by a
final order, decree or judgment of a court of competent jurisdiction
after the time for appeal has expired and no appeal has been
perfected.
6. The Escrow Agent shall not be liable in any respect on account of the
identity, authorities or rights of the parties executing or
delivering, or purporting to execute or deliver, the Award Agreement
or any documents or papers deposited or called for hereunder.
7. The Company shall pay the Escrow Agent for its escrow services, and
expenses related to such escrow services, pursuant to this Agreement,
but not in connection with a dispute or conflict except as described
below. In connection with any dispute or conflict that arises between
the Company and the Restricted Stockholder pursuant to this Agreement,
the Escrow Agent shall be entitled to employ such legal counsel and
other experts as the Escrow Agent may deem necessary to advise the
Escrow Agent in connection with the Escrow Agent's duties hereunder,
may rely upon the written advice of such counsel, and may pay such
counsel reasonable compensation therefore, which compensation shall be
equally reimbursed by the Company and the Restricted Stockholder.
8. It is understood and agreed that should any dispute arise between the
Company and the Restricted Stockholder with respect to the delivery,
ownership or right of possession of the Shares held by the Escrow
Agent hereunder, the Escrow Agent shall retain the Shares held by it
for a period of thirty (30) days so that the Company and the
Restricted Stockholder may settle such dispute by mutual written
agreement. If no mutual written agreement is reached during such
thirty (30) day period, the Escrow Agent is authorized and directed in
the Escrow Agent's sole discretion (a) to retain the Shares in the
Escrow Agent's possession without liability to anyone until such
disputes have been settled either by mutual written agreement of the
Company and the Restricted Stockholder or by a final order, decree or
judgment of a court of competent jurisdiction after the time for
appeal has expired and no appeal has been perfected, provided,
however, that the Escrow Agent shall be under no duty whatsoever to
institute or defend any such proceedings or (b) to cause the Shares to
be delivered, on behalf of the Escrow Agent, to a state or federal
court having competent subject matter jurisdiction in accordance with
the applicable procedures therefore.
A-8
9. The Escrow Agent's responsibilities as escrow agent hereunder shall
terminate if the Escrow Agent shall resign by providing written notice
to the Company and the Restricted Stockholder, effective when the
Shares in the control of the Escrow Agent are delivered or transferred
to a successor escrow agent selected by the Company and the Restricted
Stockholder. In the event of any such resignation, the Company and the
Restricted Stockholder shall appoint a mutually agreeable successor
escrow agent.
10. Any notice, demand, request, waiver or other communication required or
permitted to be given hereunder shall be in writing and shall be
effective (a) upon hand delivery or facsimile delivery at the address
or number designated below if delivered on a business day during
normal business hours where such notice is to be received, or the
first business day following such delivery if delivered other than on
a business day during normal business hours where such notice is to be
received or (b) on the second business day following the date of
mailing by express courier service providing for next day delivery,
fully prepaid, addressed to such address, or upon actual receipt of
such mailing, whichever shall first occur. The Escrow Agent shall be
sent a copy of all notices, demands, requests, waivers or other
communications sent from one party to another relating to the Shares
or this Agreement. Any notice to the Escrow Agent shall be addressed
to Jenkens & Gilchrist Parker Chapin LLP, Chrysler Building, 405
Lexington Avenue, New York, NY 10174, Attention: Michael J. Shef, Esq.
(Fax: (212) 704-6288). Contact information for the Company and the
Restricted Stockholder is contained on their respective signature
pages at the end of this Agreement
11. By signing this Agreement, the Escrow Agent becomes a party hereto
only for the purpose of this Agreement and the Escrow Agent does not
become a party to the Award Agreement or the Plan.
12. This instrument shall be binding upon and inure to the benefit of the
parties hereto, and their respective successors and permitted assigns
and shall be governed by the laws of the State of New York without
giving effect to principles governing the conflicts of laws.
13. The rights and obligations of any party hereto are not assignable
without the written consent of the other parties hereto. This
Agreement constitutes the entire agreement amongst the parties with
respect to the subject matter hereof.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
A-9
IN WITNESS WHEREOF, the parties hereto have caused this Escrow Agreement to
be executed by the undersigned, thereunto duly authorized, as of the date first
set forth above.
CELLULAR TECHNICAL SERVICES COMPANY, INC.
By:
---------------------------------------
Name: Bruce R. York
Title: Vice President, Chief Financial
Officer and Secretary
Address and facsimile for notices or correspondence:
Cellular Technical Services Company, Inc.
2815 Second Avenue, Suite 100
Seattle, WA 98121
Attn: Bruce R. York
(206) 269-1404
Escrow Agent:
JENKENS & GILCHRIST PARKER CHAPIN LLP
By:_________________________________
Name: Michael J. Shef
Title: Partner
Restricted Stockholder:
____________________________________
Name:
Address and facsimile for notices
or correspondence:
A-10
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 JOSHUA J.
ANGEL 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 2003 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 5,
2003 at 10:00 a.m. local time, and at any adjournments or postponements thereof.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" ITEMS 1 AND 2
LISTED BELOW.
1. Election of Stephen Katz as a Class III director.
[ ] VOTE FOR the nominee listed above.
[ ] AGAINST the nominee listed above.
[ ] VOTE WITHHELD from the nominee listed above.
2. Approval of the 2002 Stock Incentive Plan.
[ ] VOTE FOR
[ ] AGAINST
[ ] ABSTAIN.
3. 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" ITEMS 1 AND 2 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 2002 Annual Report.
Dated:____________________________, 2003
--------------------------------------------
(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.