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________________________________________________________________________________
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 to 'SS'240.14a-11(c) or 'SS'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:
________________________________________________________________________________
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CELLULAR TECHNICAL SERVICES COMPANY, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JUNE 14, 1999
To Our Stockholders:
You are cordially invited to attend the 1999 Annual Meeting of Stockholders
of Cellular Technical Services Company, Inc., a Delaware corporation (the
'Company'), which will be held at the Best Western Executive Inn, 200 Taylor
Avenue North, Seattle, Washington, on Monday, June 14, 1999, 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 or her election and until his or her successor
is duly elected and qualified; and
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 30, 1999 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. A list of such stockholders will be open for
examination by any stockholder for any purpose germane to the meeting, during
regular business hours, for at least 10 days prior to the meeting at the
principal office of the Company, 2401 Fourth Avenue, Suite 400, Seattle,
Washington.
By Order of the Board of Directors
Kyle R. Sugamele
Vice President and Corporate
Secretary
Seattle, Washington
April 30, 1999
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.
<PAGE>
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CELLULAR TECHNICAL SERVICES COMPANY, INC.
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JUNE 14, 1999
------------------------------------
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 Best Western Executive
Inn, 200 Taylor Avenue North, Seattle, Washington, on Monday, June 14, 1999, 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
2401 Fourth Avenue, Suite 400, 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 7, 1999. 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, 1998, 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 or her election and until his or her successor
is duly elected and qualified; and
2. To transact 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 30, 1999 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 19, 1999, there were 2,281,509 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 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, 2401 Fourth
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Avenue, Suite 400, 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 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. Directors are
elected by a plurality of votes of the shares of Common Stock represented in
person or by proxy at the Annual Meeting. Thus, for the election of the Class II
director, and assuming that a quorum is present, the nominee who receives the
greatest number of votes cast with respect to that class will be elected as the
Class II director. Stockholders may vote in favor of all nominees, withhold
their votes as to all nominees, or withhold their votes as to specific nominees.
Checking the box that withholds authority to vote for a 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.
PROPOSAL 1: ELECTION OF 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 1999 Annual
Meeting of Stockholders, and the term of office of Class III and I directors
expires at the Company's 2000 and 2001 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 or her 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 2002 Annual
Meeting of Stockholders and until his or her successor is elected and qualified.
The Company's current Class II director, Lawrence Schoenberg, has been nominated
to be reelected as the Class II director at the Annual Meeting. Such nominee has
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indicated that he is willing and able to serve as a Class II 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(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.
<TABLE>
<CAPTION>
TERM
DIRECTOR CLASS EXPIRES AT
- ------------------------------------------------------------------ ----- -------------------
<S> <C> <C>
Lawrence Schoenberg............................................... II 1999 Annual Meeting
Stephen Katz...................................................... III 2000 Annual Meeting
Joyce S. Jones.................................................... I 2001 Annual Meeting
James Porter...................................................... I 2001 Annual Meeting
</TABLE>
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
During the year ended December 31, 1998, the Board of Directors held six
meetings and took certain actions on one other occasion by written consent.
During 1998, 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 or she
served on the Board; and (ii) the number of meetings of committees of the Board
of Directors held during the period he or she 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. Porter (Chairman) and
Schoenberg. During 1998, this committee held three meetings and took certain
actions on one other occasion by written consent.
The Board of Directors has a standing Audit Committee, which has various
functions including oversight and review of accounting matters. This committee
currently consists of Messrs. Schoenberg (Chairman) and Porter. This committee
held one meeting in 1998.
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 and is
reimbursed for his or her out-of-pocket expenses incurred in connection with
attendance at meetings or other Company business.
In December 1993, the Company adopted the 1993 Non-Employee Director Stock
Option Plan ('Director 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. The exercise price of
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each share of Common Stock under any option granted under the Director 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. Porter (Chairman) and Schoenberg. In March 1998, Mr. Porter
replaced Jay Goldberg as a member of this committee. None of such members of
this committee is or has been an officer or employee of the Company. No
interlocking relationship exists between the Company's Board of Directors (or
the members of the Compensation and Stock Option Committee) and the board of
directors (or compensation committee or other board committee performing
equivalent functions) of any other 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 19, 1999 (except as otherwise
indicated in footnotes 3 and 9 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
the four other most highly compensated executive officers of the Company, which
includes two former executive officers who served as such during 1998
(collectively, the 'Named Executive Officers'); and (iv) all current directors
and executive officers of the Company as a group.
<TABLE>
<CAPTION>
AMOUNT AND NATURE PERCENT OF
OF BENEFICIAL OUTSTANDING
NAME AND ADDRESS OF BENEFICIAL OWNER(1) OWNERSHIP(2) SHARES
- ------------------------------------------------------------------- ----------------- -----------
<S> <C> <C>
158,403(3) 6.9%
Harvey and Phyllis Sandler ........................................
1050 Lee Wagener Blvd.
Suite 301
Fort Lauderdale, FL 33315
110,754(4) 4.7%
Stephen Katz.......................................................
900(5) *
Joyce S. Jones.....................................................
4,400(6) *
Lawrence Schoenberg................................................
4,000(7) *
James Porter.......................................................
4,878(8) *
Kyle R. Sugamele...................................................
1,000(9) *
William C. Zollner.................................................
21,028(10) *
Michael E. McConnell...............................................
124,932(11) 5.3%
All directors and executive officers as a group (6 persons)........
</TABLE>
- ------------
* Less than 1%
(1) Pursuant to the rules of the United States Securities and Exchange
Commission ('SEC'), addresses are only given for holders of 5% or more of
the outstanding Common Stock of the Company.
(2) 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 19, 1999. 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
(footnotes continued on next page)
4
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(footnotes continued from previous page)
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.
(3) Information based solely on the Nasdaq-AMEX On-Line Reports as of April 19,
1999. To the Company's knowledge, the most recent Schedule 13D filed with
the SEC by Harvey and Phyllis Sandler was dated March 27, 1997 and
reflected beneficial ownership of 138,262 shares.
(4) Includes 66,200 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 19, 1999.
(5) Includes 800 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 19, 1999.
(6) Consists of 4,400 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 19, 1999.
(7) Includes 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 as of April 19, 1999.
(8) Includes 4,828 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 19, 1999.
(9) Information based solely on information furnished to the Company by Mr.
Zollner on or before September 14, 1998, the date that his employment with
the Company ceased.
(10) Includes 20,728 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 19, 1999.
(11) Includes an aggregate of 79,428 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 19, 1999.
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 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, 1998.
MANAGEMENT
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.
<TABLE>
<CAPTION>
NAME AGE POSITION WITH COMPANY
- ------------------------------------ --- ---------------------------------------------------------
<S> <C> <C>
Stephen Katz........................ 55 Chairman of the Board of Directors, Chief Executive
Officer and Acting President
Joyce S. Jones...................... 51 Chief Operating Officer and Director
Lawrence Schoenberg................. 66 Director
James Porter........................ 62 Director
Kyle R. Sugamele.................... 36 Vice President, General Counsel and Corporate Secretary
Bruce R. York....................... 44 Vice President and Chief Financial Officer
</TABLE>
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
5
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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. ('MCI'). 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 of Global Payment Technologies, Inc.
Joyce S. Jones joined the Company in February 1998 as Vice President of
Marketing. In September 1998, Ms. Jones was promoted to Chief Operating Officer
and Director. Prior to joining the Company, Ms. Jones was founder and President
of Creative Business Solutions, a management consulting firm specializing in
software startups. From August 1987 to April 1995, Ms. Jones held several
positions with Attachmate Corporation, a manufacturer of enterprise data
communication software and hardware. From 1993 to 1995, she was Executive Vice
President of Worldwide Products in the Office of the President where she was
responsible for product strategy, product management, product development and
product marketing. From 1991 to 1993, Ms. Jones held the position of Vice
President of System Engineering. Other positions with Attachmate Corporation
included Product Marketing, Product Management, and Technical Sales Engineer.
Lawrence Schoenberg joined the Company as a Director in September 1996. 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. Mr. Schoenberg also serves
as Director of Government Technology Services, Inc. (since December 1991),
Merisel, Inc. (since November 1989), SunGuard Data Services, Inc. (since October
1991), and Penn America Group, Inc. (from 1994 to 1997). Former directorships
include Systems Center, Inc., which was sold to Sterling Software, Inc.,
SoftSwitch, Inc., which was sold to Lotus/IBM Corp., Forecross Corporation (from
1993 to June 1996), and Image Business Systems, Inc. (from January 1992 to
August 1994).
James Porter joined the Company as a Director in July 1997. Since February
1997, Mr. Porter has served as Chairman of CCI/Triad Systems Corporation, a
provider of information management services and systems with more than 2,000
employees and nearly 15,000 corporate customers worldwide. From September 1985
to February 1997, he was President and Chief Executive Officer of Triad Systems
Corp. Mr. Porter is a board member of Silicon Valley Bank and FirstWave
Technologies, both publicly traded companies. He also serves on the Board of
Regents of Pepperdine University and is a past member of the board of directors
and executive committee of the Information Technology Association of America.
Kyle R. Sugamele joined the Company in July 1995 as Vice President and
General Counsel, and was named Corporate Secretary in June 1996. Prior to
joining the Company, Mr. Sugamele practiced law from March 1991 to July 1995 at
the law firm of Mundt, MacGregor, Happel, Falconer, Zulauf & Hall in Seattle.
Prior to that time, Mr. Sugamele practiced law at the law firm of Graham & Dunn
in Seattle. His practice has involved a wide range of commercial, corporate,
banking and general business matters, with particular emphasis in the protection
and licensing of intellectual property and trade secrets, commercial finance and
business transactions.
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. These positions included Director of Business Planning,
Director of Finance -- Europe, Director of Finance and Corporate Controller, and
Manager of Tax and Assets. From September 1978 to April 1987, Mr. York held
several positions with Price Waterhouse. Mr. York is a certified public
accountant.
The Company's officers are elected annually and serve at the discretion of
the Board of Directors subject to any rights provided by employment agreements,
such as those described under 'Executive Compensation and Related Information'
below.
6
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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 1998, 1997, and 1996.
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
ANNUAL COMPENSATION ------------
-------------------------------------- SECURITIES
OTHER ANNUAL UNDERLYING ALL OTHER
YEAR SALARY BONUS COMPENSATION(2) OPTIONS COMPENSATION
---- -------- ------- --------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Stephen Katz .................... 1998 $ 76,000 $ 0 $ 0 0 $ 0
Chairman of the Board of 1997 0 0 0 0 0
Directors and 1996 0 100,000 0 0 0
Chief Executive Officer
Joyce S. Jones .................. 1998 107,300 10,000 6,239 26,500 0
Chief Operating Officer(3)
Kyle R. Sugamele ................ 1998 104,405 14,187 2,870 4,500 0
Vice President, General Counsel 1997 95,000 0 2,698 900 0
and 1996 95,000 15,000 2,680 2,500 0
Corporate Secretary
Michael E. McConnell ............ 1998 126,000 4,797 5,463 2,000 0
Former Vice President and Chief 1997 126,000 0 5,203 1,500 0
Financial Officer 1996 122,500 25,000 5,959 3,000 0
William C. Zollner .............. 1998 115,350 0 3,450 0 59,681
Former President and Chief 1997 140,340 0 2,790 300,000 19,217
Operating Officer(4)
</TABLE>
- ------------
(1) None of the Named Executive Officers received any Restricted Stock Awards or
LTIP Payouts in 1996, 1997 or 1998.
(2) Primarily represents contributions by the Company to the Named Executive
Officers' accounts under a 401K plan, and to a lesser extent, taxable income
originating from term life insurance premiums paid on behalf of the Named
Executive Officers under the Company's standard employee group benefits
plan.
(3) Represents compensation paid to Ms. Jones from February 2, 1998, the date
that her employment with the Company commenced as Vice President of
Marketing. Ms Jones was promoted to Chief Operating Officer on September 18,
1998. In connection with her promotion, Ms. Jones received certain
additional benefits, including a salary increase and an automobile
allowance.
(4) Represents compensation paid to Mr. Zollner during his employment with the
Company as President and Chief Operating Officer from February 19, 1997
through September 14, 1998, the date that his employment with the Company
ceased. In connection with his termination of employment, Mr. Zollner
received additional compensation in the amount of $59,681. During 1997, the
Company made payments to Mr. Zollner or on his behalf totaling $81,526 for
certain management consulting services he performed prior to his employment
and certain relocation expenses incurred by him in connection with his
employment, of which $19,217 constituted compensation as an employee of the
Company.
7
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GRANTS OF STOCK OPTIONS IN 1998
The following table sets forth information as to all grants of stock
options to the Named Executive Officers during 1998.
<TABLE>
<CAPTION>
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 1998 PRICE DATE AT 5% AT 10%
- -------------------------------- ---------- ---------------- -------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Stephen Katz.................... 0 0.0% $ 0 -- $ 0 $ 0
Joyce S. Jones.................. 26,500 29.8 7.45 9/18/08 84,356 217,047
Kyle R. Sugamele................ 4,500 5.1 5.00 8/25/08 14,150 35,859
Michael E. McConnell............ 2,000 2.2 5.00 8/25/08 6,289 15,937
William C. Zollner.............. 0 0.0 0 -- 0 0
</TABLE>
- ------------
(1) No stock appreciation rights ('SARs') were granted to any of the Named
Executive Officers during 1998.
(2) The options become exercisable in cumulative annual installments of 20% per
year on each of the first five 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 which would determine with reasonable accuracy a
present value based upon future unknown factors. In order to realize the
potential values set forth under the columns headed 'At 5%' and 'At 10%',
the price per share of the Company's Common Stock at the end of the ten-year
option term would be $10.63 and $15.64, respectively, for Ms. Jones, $8.14
and $12.97, respectively, for Messrs. Sugamele and McConnell.
AGGREGATED OPTION EXERCISES IN 1998 AND YEAR-END OPTION VALUES
The following table sets forth information with respect to the exercise of
stock options during 1998 by the Named Executive Officers and unexercised
options held by them on December 31, 1998.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
SHARES OPTIONS AT IN-THE-MONEY OPTIONS AT
ACQUIRED ON DECEMBER 31, 1998 DECEMBER 31, 1998
NAME EXERCISE VALUE REALIZED EXERCISABLE/UNEXERCISABLE(1) EXERCISABLE/UNEXERCISABLE(2)
- ------------------------------- ----------- -------------- ---------------------------- ----------------------------
<S> <C> <C> <C> <C>
Stephen Katz................... 0 $0 66,200/4,000 $0/0
Joyce S. Jones................. 0 0 0/26,500 0/0
Kyle R. Sugamele............... 0 0 4,828/9,154 0/0
Michael E. McConnell........... 0 0 20,728/5,954 0/0
William C. Zollner............. 0 0 0/0 0/0
</TABLE>
- ------------
(1) There were no SAR exercises during 1998 and no SARs were outstanding at
December 31, 1998.
(2) The closing price for the Company's Common Stock as reported on the NASDAQ
National Market on December 31, 1998 was $3.59 per share. Value is
calculated by multiplying: (i) the difference between $3.59 and the option
exercise price; by (ii) the number of shares of Common Stock underlying the
option.
EMPLOYMENT, TERMINATION, AND CHANGE OF CONTROL AGREEMENTS
Effective September 18, 1998, the Company entered into an employment
agreement with Joyce S. Jones to serve as Chief Operating Officer of the
Company. The agreement expires on September 18, 1999, subject to annual renewal
as set forth in the agreement. Ms. Jones' annual base salary is currently
8
<PAGE>
<PAGE>
$135,000 and she is further eligible to receive an annual bonus, pursuant to the
terms of an executive incentive plan. In the event of a termination by the
Company without 'Cause', or a termination by Ms. Jones for 'Good Reason' (as
such quoted terms are defined in the agreement), then: (A) the Company shall
make a lump sum payment equal to one times the highest annual compensation
received by Ms. Jones from Company during any of the most recent two years
ending on or prior to the date on which the termination occurs; (B) all stock
options granted to Ms. Jones shall become fully vested and exercisable at her
election; and (C) all employee benefit plans, practices, policies, and programs
applicable to Ms. Jones under the agreement and in existence prior to
termination shall continue for an additional one year after termination. In
addition, in the event of a 'Change of Control' of the Company (as such quoted
term is defined in the agreement), then all stock options granted to Ms. Jones
shall become fully vested and exercisable at her election. Under the terms of
the agreement, if any payments or benefits made by the Company under the
agreement otherwise would be subject to the excise tax or taxes imposed by
Section 4999 of the Internal Revenue Code of 1986, as amended ('Code'), then the
agreement provides in certain circumstances for a reduction of the affected
payments or benefits so that Ms. Jones will be entitled to receive a net amount
with a 'present value' (as determined for purposes of Section 280G of the Code)
of not more in the aggregate than two and 99/100ths times her applicable 'base
amount' under Section 280G of the Code.
Effective June 29, 1995, the Company entered into an employment agreement
with Kyle R. Sugamele to serve as Vice President and General Counsel of the
Company. The agreement expires on September 1, 1999, subject to annual renewal
as set forth in the agreement. Mr. Sugamele's annual base salary is currently
$110,000 and he is further eligible to receive an annual bonus in an aggregate
amount of up to fifty percent (50%) of his annual base salary, pursuant to the
terms of an executive incentive plan. In the event of a 'Change of Control' of
the Company, a termination by the Company without 'Cause', or a termination by
Mr. Sugamele for 'Good Reason' (as such quoted terms are defined in the
agreement), then: (A) the Company shall make a lump sum payment equal to a
multiple of the highest annual compensation received by Mr. Sugamele from
Company during any of the most recent two years ending on or prior to the date
on which the termination occurs, which multiple shall be equal to one times such
highest compensation if the per-share price of the Company's common stock is
less than $3.00 per share as of the close of business on the date that
termination occurs, two times such highest compensation if the price of the
Company's common stock is between $3.00 per share and $4.50 per share as of the
close of business on the date that termination occurs, and two and 99/100ths
times such highest compensation if the price of the Company's common stock is
more than $4.50 per share as of the close of business on the date that
termination occurs; (B) all stock options granted to Mr. Sugamele shall become
fully vested and exercisable at his election; and (C) all employee benefit
plans, practices, policies, and programs applicable to Mr. Sugamele under the
agreement and in existence prior to termination (or, if applicable, prior to the
Change of Control) shall continue for an additional one year after termination
(or, if applicable, after the Change of Control). Under the terms of the
agreement, if any payments or benefits made by the Company under the agreement
otherwise would be subject to the excise tax or taxes imposed by Section 4999 of
the Code, then the agreement provides in certain circumstances for a reduction
of the affected payments or benefits so that Mr. Sugamele will be entitled to
receive a net amount with a 'present value' (as determined for purposes of
Section 280G of the Code) of not more in the aggregate than two and 99/100ths
times his applicable 'base amount' under Section 280G of the Code.
9
<PAGE>
<PAGE>
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 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. James Porter and
Lawrence Schoenberg, both 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 which 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. No bonus
was granted to Mr. Katz during fiscal year 1998.
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
James Porter
Lawrence Schoenberg
10
<PAGE>
<PAGE>
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, 1993, with
the NASDAQ Stock Market Index (U.S.) and the NASDAQ Computer & Data Processing
Index. The graph assumes that $100 was invested on December 31, 1993 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.
COMPARISON OF CUMULATIVE TOTAL RETURN
[PERFORMANCE GRAPH]
<TABLE>
<CAPTION>
12-31-93 12-31-94 12-31-95 12-31-96 12-31-97 12-31-98
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Cellular Technical Services Company, Inc. 100.0 114.3 181.6 322.4 48.5 5.9
NASDAQ Stock Market Index (U.S.) 100.0 97.8 138.3 170.0 208.6 293.2
NASDAQ Computer & Data Processing Index 100.0 121.4 184.9 228.2 280.4 501.8
</TABLE>
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,
1998. One or more representatives of that firm are expected to be present at the
Annual Meeting to respond to appropriate questions from stockholders and to make
a statement if they desire to do so.
ANNUAL REPORT AND FORM 10-K
The Company's Annual Report to Stockholders for the fiscal year ended
December 31, 1998 was mailed to stockholders with this Proxy Statement. The
Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1998
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 200, 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
11
<PAGE>
<PAGE>
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 2000 ANNUAL MEETING
Stockholders who intend to have a proposal considered for inclusion in the
Company's proxy materials for the Company's 2000 Annual Meeting of Stockholders
must submit the proposal to the Company no later than January 15, 2000. All such
submissions must be provided to Cellular Technical Services Company, Inc., 2401
Fourth Avenue, Suite 400, Seattle, Washington 98121, Attention: Corporate
Secretary.
By Order of the Board of Directors
Kyle R. Sugamele
Vice President and Corporate Secretary
Seattle, Washington
April 30, 1999
12
<PAGE>
<PAGE>
[Logo]
Cellular Technical Services Company Inc.
2401 Fourth Avenue, Suite 400
Seattle WA 98121
(206) 443-6400
http://www.cellulartech.com
<PAGE>
<PAGE>
APPENDIX 1
CELLULAR TECHNICAL SERVICES COMPANY, INC.
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON JUNE 14, 1999
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 JOYCE S. JONES, 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 1999 Annual
Meeting of Stockholders of the Company, to be held at the Best Western Executive
Inn, 200 Taylor Avenue North, Seattle, Washington, on Monday, June 14, 1999, at
10:00 a.m., local time, and at any adjournments or postponements thereof.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE 'FOR' THE ELECTION OF
THE NOMINEE FOR ELECTION AS A CLASS II DIRECTOR LISTED BELOW.
1. Election of Lawrence Schoenberg as 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 any
adjournments or postponements thereof.
(see reverse side)
<PAGE>
<PAGE>
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' THE ELECTION OF THE CLASS II DIRECTOR NOMINEE LISTED ABOVE.
The undersigned hereby acknowledges receipt of (i) the Notice of Annual
Meeting, (ii) the Proxy Statement, and (iii) the Company's 1998 Annual Report.
Dated: ........................... , 1999
..........................................
(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.
STATEMENT OF DIFFERENCES
MOST COMMONLY USED SYMBOLS
The section symbol shall be expressed as .................................. 'SS'
