Section 240.14a-101 Schedule 14A.
Information required in proxy statement.
Schedule 14A Information
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
(Amendment No. )
Filed by the Registrant [X]
Filed by a party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted
by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
Cellular Technical Services Company, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11
1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
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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):
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4) Proposed maximum aggregate value of transaction:
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5) Total fee paid:
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[ ] 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:
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2) Form, Schedule or Registration Statement No.:
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4) Date Filed:
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CELLULAR TECHNICAL SERVICES COMPANY, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held On July 8, 1997
To the Stockholders of Cellular Technical Services Company, Inc.:
NOTICE IS HEREBY GIVEN that the 1997 Annual Meeting of
Stockholders of Cellular Technical Services Company, Inc., a Delaware
corporation (the "Company"), will be held at 10:00 a.m., local time, on Tuesday,
July 8, 1997, at the Garden City Hotel, 45 Seventh Street, Garden City, New York
11530, 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 or
until his successor is duly elected and qualified;
2. To transact such other business as may properly come before
the Annual Meeting and any adjournments or postponements
thereof.
The Board of Directors has fixed the close of business on May
28, 1997 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 complete list of the stockholders entitled to vote will
be available for inspection by any stockholder during the meeting; in addition,
the list will be open for examination by any stockholder, for any purpose
germane to the meeting, during ordinary business hours, for a period of at least
10 days prior to the meeting at the offices of Parker Chapin Flattau & Klimpl,
LLP, 1211 Avenue of the Americas, 18th Floor, New York, New York 10036.
WHETHER OR NOT YOU EXPECT TO BE PRESENT AT THE MEETING, PLEASE
PROMPTLY MARK, SIGN AND DATE THE ENCLOSED PROXY AND RETURN IT IN THE ENCLOSED
PRE-ADDRESSED ENVELOPE. NO POSTAGE IS REQUIRED IF MAILED IN THE UNITED STATES.
By Order of the Board of Directors
Kyle R. Sugamele
Vice President and Corporate Secretary
Seattle, Washington
June 6, 1997
THIS IS AN IMPORTANT MEETING AND ALL STOCKHOLDERS ARE INVITED TO ATTEND THE
MEETING IN PERSON. THOSE STOCKHOLDERS WHO ARE UNABLE TO ATTEND ARE RESPECTFULLY
URGED TO EXECUTE AND RETURN THE ENCLOSED PROXY CARD AS PROMPTLY AS POSSIBLE.
STOCKHOLDERS WHO EXECUTE A PROXY CARD MAY NEVERTHELESS ATTEND THE MEETING,
REVOKE THEIR PROXY AND VOTE THEIR SHARES IN PERSON.
1997 ANNUAL MEETING OF STOCKHOLDERS
OF
CELLULAR TECHNICAL SERVICES COMPANY, INC.
--------------------------
PROXY STATEMENT
--------------------------
The 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 on Tuesday, July
8, 1997, or at any adjournments or postponements thereof (the "Annual Meeting"),
pursuant to the enclosed Notice of Annual Meeting.
The approximate date that this Proxy Statement and the
enclosed proxy are first being sent to stockholders is June 6, 1997.
Stockholders should review the information provided herein in conjunction with
the Company's Annual Report to Stockholders for the year ended December 31, 1996
which accompanies this Proxy Statement. The Company's principal executive
offices are located at 2401 Fourth Avenue, Suite 808, Seattle, Washington 98121,
and its telephone number is (206) 443-6400.
INFORMATION CONCERNING PROXY
The enclosed proxy is solicited on behalf of the Company's
Board of Directors. The giving of a proxy does not preclude the right to vote in
person should you so desire. Stockholders have an unconditional right to revoke
their proxy at any time prior to the exercise thereof, either in person at the
Annual Meeting or by filing with the Company's Assistant Secretary at the
Company's headquarters a written revocation or duly executed proxy bearing a
later date; however, no such revocation will be effective until written notice
of the revocation is received by the Company at or prior to the Annual Meeting.
The cost of preparing, assembling and mailing this Proxy
Statement, the Notice of Annual Meeting of Stockholders and the enclosed proxy
is to be borne by the Company. In addition to the use of mail, employees of the
Company may solicit proxies personally and by telephone. The Company's employees
will receive no compensation for soliciting proxies other than their regular
salaries. The Company 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.
PURPOSES OF THE 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 serve until the
Company's third Annual Meeting of Stockholders
following his election or until his successor is duly
elected and qualified;
(2) Such other business as may properly come before the
Annual Meeting, including any adjournments or
postponements thereof.
Unless contrary instructions are indicated on the enclosed
proxy, all shares represented by valid proxies received pursuant to this
solicitation (and which have not been revoked in accordance with the procedures
set forth above) will be voted in favor of the election of the nominee for
director named below. In the event a stockholder specifies a different choice by
means of the enclosed proxy, his shares will be voted in accordance with the
specification so made.
OUTSTANDING VOTING SECURITIES AND VOTING RIGHTS
The Board of Directors has set the close of business on May
28, 1997 as the record date (the "Record Date") for determining stockholders of
the Company entitled to notice of and to vote at the Annual Meeting. As of April
15, 1997, there were 22,644,068 shares of Common Stock issued and outstanding.
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.
The attendance, in person or by 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. Directors are elected by a
plurality of votes of the shares of Common Stock represented in person or by
proxy at the Annual Meeting. The affirmative vote of the majority of shares of
Common Stock represented in person or by proxy at the Annual Meeting will be
required for approval of any other matter that is being submitted to a vote of
the stockholders. Under applicable Delaware law, abstentions and broker
non-votes will not have the effect of votes in opposition to the election of a
director, but abstentions will be treated as votes against all other proposals.
-2-
SECURITY OWNERSHIP
The following table sets forth, as of April 15, 1997 (except
as otherwise indicated in footnotes 3, 4 and 5), 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) each of the Named Executive
Officers (as such term is herein defined) and (iv) all directors and executive
officers of the Company as a group.
AMOUNT AND NATURE PERCENT OF
NAME AND ADDRESS OF BENEFICIAL OUTSTANDING
OF BENEFICIAL OWNER(1) OWNERSHIP(2) SHARES
- ---------------------- ----------------- ------------
President and Fellows of Harvard College
c/o Harvard Management Company, Inc.
600 Atlantic Avenue
Boston, MA 02210........................................ 3,203,200(3) 14.2%
Terren S. Peizer
1999 Avenue of the Stars
Los Angeles, CA 90067................................... 1,430,000(4) 6.3%
Harvey and Phyllis Sandler
1050 Lee Wagener Blvd.
Suite 301
Fort Lauderdale, FL 33315................................ 1,135,116(5) 5.0%
Stephen Katz............................................... 967,614(6) 4.2%
Robert P. Dahut............................................ 106,200(7) *
William C. Zollner......................................... 2,000(8) *
Lawrence Schoenberg........................................ 0 0
Jay Goldberg............................................... 72,000(9) *
Michael E. McConnell....................................... 109,764(10) *
Kyle R. Sugamele........................................... 12,564(11) *
Douglas F. Anderson........................................ 14,764(12) *
All directors and executive officers
as a group (9 persons).................................. 1,285,006(13) 5.5%
* Less than 1%
(1) Pursuant to the rules of the Securities and Exchange Commission (the
"SEC"), addresses are only given for holders of 5% or more of the
outstanding Common Stock of the Company.
(footnotes continued on next page)
-3-
(footnotes continued from previous page)
(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 of April 15, 1997. 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.
(3) Represents 3,080,000 shares as to which the President and Fellows of
Harvard College have sole voting and dispositive power, 116,400 shares
as to which The Harvard University Master Trust Fund has sole voting
and dispositive power and 6,800 shares as to which the Harvard
Charitable Remainder Trust Equity Partnership has sole voting and
dispositive power. The information is based solely on a Schedule 13G as
amended and filed with the SEC on February 14, 1997, by the President
and Fellows of Harvard College, The Harvard University Master Trust
Fund and Harvard Charitable Remainder Trust Equity Partnerships.
(4) Information based solely on a Schedule 13D dated February 5, 1993, as
amended through June 27, 1994, filed with the SEC by Terren S. Peizer.
(5) Information based solely on a Schedule 13D dated March 27, 1997, filed
with the SEC by Harvey and Phyllis Sandler.
(6) Includes 422,000 shares subject to currently exercisable options.
(7) Consists of 105,000 shares subject to currently exercisable options.
Mr. Dahut's employment with the Company ceased on February 20, 1997.
(8) Mr. Zollner's employment with the Company commenced on February 19,
1997.
(9) Includes 72,000 shares subject to currently exercisable options.
(10) Includes 106,764 shares subject to currently exercisable options.
(11) Includes 12,164 shares subject to currently exercisable options.
(12) Consists of 14,764 shares subject to currently exercisable options.
(13) Represents an aggregate of 732,692 shares subject to currently
exercisable options.
-4-
Pursuant to Section 16 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 filing requirements applicable to them with
respect to the Company's fiscal year ended December 31, 1996, except that Kyle
R. Sugamele, an officer of the Company, filed an Initial Statement of Beneficial
Ownership of Securities on Form 3 (dated August 4, 1995) which understated Mr.
Sugamele's ownership of the Company's common stock by 200 shares. Such Form 3
and Mr. Sugamele's most recent Statement of Changes in Beneficial Ownership on
Form 4 (dated February 6, 1997) and Annual Statement on Form 5 (dated February
5, 1997) were amended on April 25, 1997.
-5-
ELECTION OF DIRECTOR; NOMINEE
The Company's 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.
Pursuant to the Company's Certificate of Incorporation and
Bylaws, the Board of Directors is divided into three classes. The term of office
of Class I and II Directors expire at the Company's 1998 and 1999 Annual
Meetings of Stockholders, respectively. Directors elected to succeed those whose
terms expire shall be elected to a term of office expiring at the third Annual
Meeting of Stockholders following their election. The current directors of the
Company and their respective Classes and terms of office are as follows:
TERM
DIRECTOR CLASS EXPIRES AT
-------- ----- ----------
Stephen Katz III 1997 Annual Meeting
Jay Goldberg II 1999 Annual Meeting
Lawrence Schoenberg II 1999 Annual Meeting
William C. Zollner I 1998 Annual Meeting
Accordingly, one Class III director is to be elected at the
Annual Meeting, for a term expiring at the Company's 2000 Annual Meeting of
Stockholders. The Company's current Class III director, Mr. Katz, has been
nominated to be reelected as the Class III director at the Annual Meeting.
The Board of Directors has no reason to believe that the
nominee will refuse to act or be unable to accept election; however, in the
event that he is unable to accept election or if any other unforeseen
contingencies should arise, each proxy that does not direct otherwise will be
voted for such other person as may be designated by the Board of Directors.
-6-
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
NAME AGE POSITION WITH COMPANY
---- --- ---------------------
Stephen Katz............................... 53 Chairman of the Board of Directors and
Chief Executive Officer
William C. Zollner......................... 50 President, Chief Operating Officer and
Director
Michael E. McConnell....................... 46 Vice President and Chief Financial Officer
Kyle R. Sugamele........................... 34 Vice President, General Counsel and
Corporate Secretary
Stephen F. Elston.......................... 39 Vice President, Engineering
Douglas F. Anderson........................ 43 Vice President, Sales
Jay Goldberg............................... 56 Director
Lawrence Schoenberg........................ 64 Director
Stephen Katz has been Chairman of the Board of Directors 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. Mr. Katz was Acting Chief Executive Officer and Acting President from
November 1992 until February 1994, at which time he became Chief Executive
Officer. 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 Communication
Corp. ("MCI"). In May 1995, Mr. Katz was appointed Vice-Chairman of the Board
and Chief Executive Officer of Coin Bill Validator, Inc. whose business is
currency and coin authentication.
William C. Zollner was named President and Chief Operating
Officer and a Director of the Company in February 1997. From August 1996 to
January 1997, Mr. Zollner provided management consulting to software and systems
companies. From July 1991 to July 1996, Mr. Zollner served as Chief Operating
Officer of Serena Software International, a company
-7-
specializing in systems and application change management and productivity
products. Mr. Zollner served eight years with Sterling Software, Inc., a company
specializing in software applications serving several markets. While with
Sterling, he served as Senior Vice President of its Systems Software Marketing
Division, and President of its International Division.
Jay Goldberg has served as Director of the Company since
August 1991. He is currently Chairman and CEO of Opcenter, LLC, as well as
Lexstra International, a UK-based firm. Mr. Goldberg is also a director of Coin
Bill Validator Inc. Mr. Goldberg was Chairman of the Board since November 1990
and President and Chief Executive Officer from August 1990 until January 1994,
of Image Business Systems, Inc., a software company previously engaged in work
flow and image processing, inactive since August 1994. In June of 1989, Mr.
Goldberg formed Zeitech, Inc., a computer software firm for which he served as
Chairman of the Board until the company was sold to Career Horizons in January
1996. From May 1986 until February 1990, Mr. Goldberg was Chief Executive
Officer of Money Management Systems, Inc., a company also engaged in the
computer software business which was sold to SunGuard Data Systems, Inc. in
1989.
Lawrence Schoenberg joined the Company as a Director in
September 1996. Mr. Schoenberg founded ABS Computers, Inc. in 1967 and served as
CEO 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 a 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. (since January 1994). 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 1993 to
August 1994).
Michael E. McConnell has been Vice President and Chief
Financial Officer of the Company since January 1992. Prior to joining the
Company, from April 1991 to December 1991, Mr. McConnell engaged in personal
investments. From 1986 to March 1991, Mr. McConnell was the Chief Financial
Officer of Delphi Information Systems, Inc., a public company engaged in the
development of software systems for the insurance field. Mr. McConnell is a
certified public accountant.
Kyle R. Sugamele joined the Company in June 1995 as Vice
President and General Counsel, and was named Corporate Secretary in June 1996.
Prior to joining the Company, Mr. Sugamele was associated with the law firm of
Mundt, MacGregor, Happel, Falconer, Zulauf & Hall 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.
Stephen F. Elston, Ph.D., joined the Company in July 1996 as
Vice President of Engineering. From January 1993 until joining the Company, he
held several positions with
-8-
MathSoft, Inc., a software development company. From July 1995 to June 1996, as
Senior Director of Product Development in their Data Analysis Products Division,
he managed development and releases for two software product lines. From January
1995 to July 1995, he was Acting Director of Product Development. He was also
Acting Product Manager from January 1985 to September 1995, and Director of
Research from January 1993 to December 1995, in MathSoft's StatSci Division.
From June 1990 to January 1993, Mr. Elston was a Research Geophysicist with
Mobil Research and Development Company. Prior to 1990, for more than five years,
Mr. Elston was also involved with the development of packet switched TDMA and
CDMA mobile radio systems with BDM Corporation.
Douglas F. Anderson has been with the Company since July 1,
1994 and was named Vice President, Sales on August 1, 1984. From 1991 to July
1994, Mr. Anderson has been Director of North American Operations of Saros
Corporation, a company engaged in the business of developing systems software.
For five years prior thereto Mr. Anderson had been Director of North American
Sales for Lotus Development Corporation.
The Company's officers are elected annually and serve at the
discretion of the Board of Directors for one year subject to any rights provided
by the employment agreements described below under "Executive Compensation -
Employment Agreements."
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
During the year ended December 31, 1996, the Board of
Directors held six meetings and took certain actions on two other occasions by
written consent. During 1996, no director attended fewer than 75 percent 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 Compensation and Stock Option Committee, composed of
Messrs. Goldberg and Schoenberg, has authority over officer compensation and the
administration of the Company's stock option plans. The Committee met two times
in 1996. The Audit Committee, which met once in 1996, has various functions
including oversight and review of accounting matters. The Audit Committee is
composed of Messrs. Goldberg and Schoenberg.
DIRECTORS' 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 out-of-pocket expenses incurred in connection
with attendance at meetings or other Company business.
-9-
In December 1993 the Board of Directors 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 20,000 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 12,000 shares of Common Stock. The exercise price of 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.
-10-
EXECUTIVE COMPENSATION
The following table sets forth information concerning annual
and long-term compensation, paid or accrued, for the Chief Executive Officer and
the four other most highly compensated executive officers of the Company
including the Company's prior President and Chief Operating Officer (the "Named
Executive Officers") for services in all capacities to the Company during the
last three fiscal years.
SUMMARY COMPENSATION TABLE (1)
Long-Term
Annual Compensation Compensation
-------------------------------------------------- ------------
Awards
------
Other
Name and Annual Securities
Principal Compen- Underlying All Other
Position Year Salary Bonus sation Options Compensation(2)
- -------- ---- ------ ----- ------ --------- ---------------
Stephen Katz 1996 $ 0 $100,000 $ 0 0 0
Chairman of the Board of 1995 0 0 0 0 0
Directors and Chief 1994 0 100,000 0 212,000 0
Executive Officer
Robert P. Dahut 1996 150,000 0 0 0 15,699
President and 1995 150,000 0 0 0 16,392
Chief Operating Officer 1994 132,403 110,000 76,267(3) 600,000 13,343
Michael E. McConnell 1996 122,500 25,000 0 30,000 5,524
Vice President 1995 115,500 0 0 3,820 6,160
and Chief Financial 1994 110,000 55,000 0 40,000 4,094
Officer
Douglas F. Anderson 1996 125,000 50,000 0 50,000 4,183
Vice President, Sales (4) 1995 115,000 0 0 3,820 1,150
1994 52,340(4) 56,338 0 70,000 N/A
Kyle R. Sugamele 1996 95,000 15,000 0 25,000 2,545
Vice President, 1995 37,832(5) 0 0 60,820 0
General Counsel and 1994 N/A N/A N/A N/A N/A
Corporate Secretary
- --------------------------------
(1) None of the Named Executive Officers received any Restricted Stock
Awards or LTIP Payouts in 1994, 1995 or 1996.
(2) Represents contributions by the Company to the Named Executive
Officers' accounts under a 401(k) plan and includes for Mr. Dahut life
insurance premiums paid by the Company on his behalf in the amount of
$2,075 in 1996, $2,075 in 1995 and $1,556 in 1994 and automobile
allowances given him in the amount of $8,619 in 1996, $8,157 in 1995
and $6,454 in 1994.
-11-
(3) On January 31, 1994, Mr. Dahut joined the Company as President and
Chief Operating Officer. In connection with his employment, the Company
made payments to Mr. Dahut or on his behalf related to his relocation,
which were deemed to be compensation in the amount of $44,959 and for
the payment of related taxes in the amount of $31,308. In addition, the
Company made payments to Mr. Dahut or on his behalf related to his
relocation which were not deemed to be compensation in the amount of
$20,123. Other than Mr. Dahut, none of the Named Executive Officers
received perquisites or other personal benefits in excess of the lesser
of $50,000 or 10% of the total of his salary and bonus for 1994, 1995
or 1996 as reported in the above table. Mr. Dahut ceased to be employed
by the Company on February 20, 1997.
(4) Represents compensation paid to Mr. Anderson from July 1, 1994 when he
became employed by the Company. Such compensation includes salary of
$52,340 and performance incentives of $56,338 which, effective December
31, 1994, were discontinued.
(5) Represents compensation paid to Mr. Sugamele from July 28, 1995, when
he became employed by the Company.
-12-
STOCK OPTIONS
The following table sets forth information as to all grants of
stock options to the Named Executive Officers during 1996.
OPTION GRANTS IN 1996(1)
Potential Realizable
Value at Assumed
Annual Rates of
Stock Price
Appreciation for
Individual Grants Option Term (3)
----------------------------------------------------------- ------------------------
Number of % of Total
Securities Options
Underlying Granted to
Options Employees Exercise Expiration
Name Granted(2) in 1996 Price Date At 5% At 10%
---- ---------- ------- ----- ---- ----- ------
Stephen Katz 0 0% $ 0 - $ 0 $ 0
Robert P. Dahut 0 0 0 - 0 0
Michael E. McConnell 30,000 15.2672 17.875 6/20/06 337,245 854,644
Douglas F. Anderson 50,000 25.4453 17.875 6/20/06 562,075 1,424,407
Kyle R. Sugamele 25,000 12.7226 17.875 6/20/06 281,037 712,204
- --------------------------------------
(1) No stock appreciation rights ("SARs") were granted to any of the Named
Executive Officers during 1996.
(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 $29.12 and
$46.36, respectively.
-13-
The following table sets forth information with respect to the
exercise of stock options during 1996 by the Named Executive Officers and
unexercised options held by them on December 31, 1996.
AGGREGATED OPTION EXERCISES IN 1996
AND DECEMBER 31, 1996 OPTION VALUES(1)
Number of
Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Options at Options at
Shares December 31, 1996 December 31, 1996
Acquired Value Exercisable/ Exercisable/
Name on Exercise Realized Unexercisable Unexercisable(2)
- ---- ----------- -------- ------------- ----------------
Stephen Katz 130,000 $1,763,125 422,000/280,000 $6,121,000/$3,680,000
Robert Dahut 150,000 1,406,250 30,000/360,000 408,750/4,905,000
Michael E. McConnell 60,000 746,250 106,764/125,056 1,283,170/1,962,306
Douglas F. Anderson 14,000 112,250 14,764/95,056 194,233/683,181
Kyle R. Sugamele 0 0 12,164/73,656 90,808/410,106
- -----------------
(1) There were no SAR exercises during 1995 and no SARs were outstanding at
December 31, 1996.
(2) The closing price for the Company's Common Stock as reported on the
NASDAQ National Market on December 31, 1996 was $19.75 per share. Value
is calculated by multiplying (a) the difference between $19.75 and the
option exercise price by (b) the number of shares of Common Stock
underlying the option.
EMPLOYMENT AGREEMENTS
Effective January 31, 1994, the Company entered into an
employment agreement with Robert P. Dahut to serve as President and Chief
Operating Officer of the Company. The agreement expired on December 31, 1996,
and Mr. Dahut's employment with the Company ceased on February 19, 1997. Mr.
Dahut's annual base salary was $150,000. Under the terms of the agreement, Mr.
Dahut was entitled to the use of an automobile to be provided by the Company, a
$500,000 term life insurance policy and an accidental death and travel insurance
policy.
Effective January 1, 1993, the Company entered into an
employment agreement with Michael E. McConnell to serve as Vice President and
Chief Financial Officer of the
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Company. The agreement expires on December 31, 1997. Mr. McConnell's annual base
salary is currently $122,500 and he is further eligible to receive, at the
discretion of the Company, an annual bonus in an aggregate amount of up to fifty
percent (50%) of his annual base salary based upon the Company meeting certain
operating goals and objectives, including financial performance, as established
from time to time by the Company. In the event of a "Change of Control" of the
Company, Mr. McConnell will be entitled to a lump sum severance payment equal to
the sum of (i) his annual base salary and highest annual bonus paid during the
term of the agreement and (ii) the sum of his unpaid base salary through the
date of termination and a pro rata portion of the highest annual bonus awarded
him during the term of the employment agreement. A "Change in Control" is deemed
to occur upon (i) the acquisition of 20% or more of the outstanding Common Stock
or voting power of the Company (by other than Mr. McConnell or a Company
employee benefit plan or pursuant to a purchase directly from the Company), (ii)
the Incumbent Directors, as defined, becoming less than a majority of the Board
of Directors, or (iii) a reorganization, merger, consolidation, liquidation or
dissolution of the Company or a sale of substantially all of its assets unless,
among other things, at least 60% of the shares of the successor in said
reorganization, merger or consolidation or transferee of such assets are owned
by the owners of the Company's Common Stock prior to such transaction.
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 June 29, 1997, subject
to a month-to-month continuation provision as set forth in the agreement. Mr.
Sugamele's annual base salary is currently $95,000 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 in accordance with the terms of the Company's Management
Incentive Plan. In the event of a "Change Of Control" of the Company (or in the
event of a termination by the Company "Without Cause", or by Mr. Sugamele for
"Good Reason", as such 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 the 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
termination occurs during the first year of his aggregate employment with the
Company, one and one-half times such highest compensation if termination occurs
during the second year of his aggregate employment with the Company, two times
such highest compensation if termination occurs during the third year of his
aggregate employment with the Company, and two and 99/100ths times such highest
compensation if termination occurs at any time after the third year of his
aggregate employment with the Company; (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 hereunder 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). A "Change in
Control" shall mean and be deemed to exist if any of the following events occur:
(A) the approval by the Company's shareholders of any merger, consolidation, or
business combination involving the Company in which the Company is not the
surviving corporation or pursuant to which shares of the Company's existing
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voting common stock would be converted into cash, securities, or other property;
(B) the approval by the Company's shareholders of any sale, lease, exchange, or
other transfer of all, or substantially all, of the assets of the Company; (C)
the approval by the shareholders of the Company of any plan or proposal for
liquidation or dissolution of the Company; (D) any person, as defined in the
agreement, shall become the beneficial owner of 20% or more of the Company's
then-outstanding voting common stock or then-outstanding voting securities of
the Company entitled to vote generally in the election of directors; (E)
individuals who, as of June 29, 1995, constituted the entire Board of Directors
shall cease for any reason to constitute a majority thereof subject to certain
terms set forth in the agreement, or (F) any change "in the ownership or
effective control" or "in the ownership of a substantial portion of the assets"
of the Company, as defined in the agreement.
CERTAIN TRANSACTIONS
The Company did not engage in related transactions in its 1996
fiscal year.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During the fiscal year ended December 31, 1996, the
Compensation and Stock Option Committee of the Board of Directors of the Company
(the "Committee") consisted of Jay Goldberg (all year), Lawrence Howard (until
his resignation in July 1996) and Lawrence Schoenfeld (from September, 1996).
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 page 19 shall not be incorporated by
reference to any such filings.
COMPENSATION AND STOCK OPTION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Committee is currently comprised of Messrs. Jay Goldberg
and Lawrence Schoenberg, both outside directors of the Company. The Committee
approves all decisions relating to the compensation of the executive officers of
the Company.
It is the philosophy of the Committee that compensation of
executive 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
-16-
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.
In evaluating the compensation of the chief executive officer,
the Committee examined the same factors that it examined with respect to the
other executive officers.
During its fiscal year ended December 31, 1996, the Company
granted a bonus to Stephen Katz (who does not receive an annual salary), and
bonuses and stock options to its executive officers (other than its President),
in consideration of their ongoing efforts during fiscal years 1995 and 1996
which led to the execution of significant letters of intent and contracts that
enhanced the Company's strategic market position and that are expected to
generate revenues for the Company in 1997 and beyond.
EXECUTIVE PAY DEDUCTION LIMITATION
The Committee has not yet 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
Jay Goldberg
Lawrence Schoenberg
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,
1991, 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, 1991
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.
-17-
Comparison of Cumulative Total Return
12/31/91 12/31/92 12/31/93 12/31/94 12/31/95 12/31/96
Cellular Technical
Services Company, Inc. (1) 100.00 87.3 384.3 439.3 698.0 1,239.2
NASDAQ Stock Market
Index (U.S.) 100.00 116.4 133.6 130.6 184.7 227.2
NASDAQ Computer &
Data Processing Index 100.00 107.6 113.9 138.2 210.5 260.0
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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, 1996. 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.
OTHER BUSINESS
The Board 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.
INFORMATION CONCERNING STOCKHOLDER PROPOSALS
Stockholder proposals intended for inclusion in the proxy
statement for the Company's 1998 Annual Meeting of Stockholders must be received
by the Company's General Counsel no later than January 7, 1998.
FORM 10-K EXHIBITS
The Company will furnish, upon payment of a reasonable fee to
cover reproduction and mailing expenses, a copy of any exhibit to the Company's
Annual Report on Form 10-K requested by any person solicited hereunder.
By Order Of The Board of Directors
Kyle R. Sugamele
Vice President and Corporate Secretary
Seattle, Washington
June 6, 1997
-19-
APPENDIX 1 -- PROXY CARD
CELLULAR TECHNICAL SERVICES COMPANY, INC.
2401 FOURTH AVENUE
SUITE 808
SEATTLE, WASHINGTON 98121
THIS PROXY IS SOLICITED BY THE
COMPANY'S BOARD OF DIRECTORS FOR
THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON TUESDAY, JULY 8, 1997
The undersigned holder of Common Stock of Cellular Technical
Services Company, Inc., a Delaware corporation (the "Company"), hereby appoints
Stephen Katz and William C. Zollner, 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 1997 Annual Meeting of Stockholders of the Company, to be held on Tuesday,
July 8, 1997, at 10:00 a.m., local time, at the Garden City Hotel, 45 Seventh
Street, Garden City, New York 11530 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 III director listed below.
(1) Election of Stephen Katz, as a Class III director.
[ ] VOTE FOR nominee as listed above.
--------------------------------------------------------------
[ ] VOTE WITHHELD from the above-referenced nominee.
(2) Upon such other matters as may properly come before the Annual Meeting
and any adjournments thereof. In their discretion, the proxies are
authorized to vote upon such other business as may properly come before
the Annual Meeting and any adjournments or postponements thereof.
(see reverse side)
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE
MANNER DIRECTED HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE,
THIS PROXY WILL BE VOTED "FOR" THE ELECTION OF THE CLASS III 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 1996 Annual
Report.
Dated ______________, 1997
---------------------------------------
(Signature)
---------------------------------------
(Signature if held jointly)
IMPORTANT: Please sign exactly as your name
appears hereon and mail it promptly even though
you now plan to attend the meeting. When shares
are held by joint tenants, both should sign. When
signing as attorney, executor, administrator,
trustee or guardian, please give full title as such. If
a corporation, please sign in full corporate name by
president or other authorized officer. If a
partnership, please sign in partnership name by
authorized person.
PLEASE MARK, SIGN AND DATE THIS PROXY
CARD AND PROMPTLY RETURN IT IN THE ENVELOPE PROVIDED.
NO POSTAGE NECESSARY IF MAILED IN THE UNITED STATES.
