UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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-12
CTI GROUP (HOLDINGS) INC.
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(Name of Registrant as Specified in Its Charter)
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(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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[_] 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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3) Filing Party:
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4) Date Filed:
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[graphic]
333 North Alabama St., Suite 240
Indianapolis, IN 46204
(317) 262-4666
Dear Stockholder:
You are cordially invited to attend the 2002 Annual Meeting of Stockholders
(the "Annual Meeting") of CTI Group (Holdings) Inc., a Delaware corporation
("CTIG"), which will be held on May 30, 2002, at 10:30 a.m. (U.S. Eastern
Standard Time -- Indiana Local Time) at the Market Tower Conference Center, 10
West Market Street, Indianapolis, Indiana 46204, located on the 3rd Floor, or
any adjournment or postponement of the Annual Meeting.
At the Annual Meeting, you will be asked to: (i) elect Class I and Class II
directors; (ii) approve the Amended and Restated Stock Option and Restricted
Stock Plan; (iii) ratify the appointment of PricewaterhouseCoopers LLP, as the
independent accountants of CTIG; and (iv) act upon such other matters as may
properly come before the Annual Meeting or any adjournment or postponement of
the Annual Meeting.
The official notice of the Annual Meeting, a proxy statement, a form of
proxy and CTIG's annual report are enclosed. Please give this information your
careful attention.
Whether or not you expect to attend the Annual Meeting in person, it is
important that your shares be voted at the Annual Meeting. I urge you to
specify your choices by marking the enclosed proxy and returning it promptly.
Sincerely,
Harold Garrison
Chairman of the board of directors of
CTI Group (Holdings) Inc.
Date: May 6, 2002
[graphic]
333 North Alabama St., Suite 240
Indianapolis, IN 46204
(317) 262-4666
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 30, 2002
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To the Stockholders of CTI Group (Holdings) Inc.:
NOTICE IS HEREBY GIVEN that the 2002 Annual Meeting of Stockholders (the
"Annual Meeting") of CTI Group (Holdings) Inc., a Delaware corporation
("CTIG"), will be held on May 30, 2002, at 10:30 a.m. (U.S. Eastern Standard
Time -- Indiana Local Time) at the Market Tower Conference Center, 10 West
Market Street, Indianapolis, Indiana 46204, located on the 3rd Floor, for the
following purposes:
(i) to elect Class I and Class II directors named in the accompanying
proxy statement;
(ii) to consider and act upon a proposal to amend and restate the Stock
Option and Restricted Stock Plan to, among other things, increase
the number of shares of common stock of CTIG that may be issued
under such plan by 2,000,000 shares, as described in the proxy
statement;
(iii)to consider and act upon a proposal to ratify the appointment of
PricewaterhouseCoopers LLP, as the independent accountants of CTIG;
and
(iv) to act upon such other matters as may properly come before the
Annual Meeting or any adjournment or postponement of the Annual
Meeting.
The board of directors is not aware of any other business to come before the
Annual Meeting.
By resolution of the board of directors, only stockholders of record of
CTIG's common stock at the close of business on April 5, 2002 are entitled to
the notice of and to vote at the Annual Meeting and any adjournment or
postponement of the Annual Meeting. A list of CTIG's stockholders of record at
the close of business on April 5, 2002 will be available for examination by
any stockholder, for any purpose germane to the Annual Meeting, for a period
of 10 days prior to the Annual Meeting during ordinary business hours at our
offices located at 333 North Alabama St., Suite 240, Indianapolis, IN 46204.
Such list of stockholders will also be available for examination by any
stockholder at the Annual Meeting.
YOU ARE CORDIALLY INVITED TO ATTEND THE ANNUAL MEETING IN PERSON. EVEN IF
YOU PLAN TO ATTEND THE ANNUAL MEETING IN PERSON, PLEASE DATE, SIGN AND RETURN
THE ENCLOSED PROXY, WHICH IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS, AS
SOON AS POSSIBLE IN THE ACCOMPANYING SELF-ADDRESSED ENVELOPE. NO POSTAGE IS
REQUIRED IF MAILED IN THE UNITED STATES. IF YOU DO ATTEND THE ANNUAL MEETING,
YOU MAY REVOKE YOUR PROXY AND VOTE IN PERSON.
By Order of the Board of Directors,
Manfred Hanuschek
Secretary and Chief Financial Officer
Indianapolis, Indiana
May 6, 2002
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333 North Alabama St., Suite 240
Indianapolis, IN 46204
(317) 262-4666
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PROXY STATEMENT
2002 ANNUAL MEETING OF STOCKHOLDERS
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GENERAL INFORMATION
Date, Time, Place and Purposes of Annual Meeting
The board of directors of CTI Group (Holdings) Inc. solicits your proxy for
use at the 2002 Annual Meeting of Stockholders (the "Annual Meeting") to be
held on May 30, 2002 at 10:30 a.m. (U.S. Eastern Standard
Time -- Indiana Local Time) at the Market Tower Conference Center, 10 West
Market Street, Indianapolis, Indiana 46204, located on the 3rd Floor, for the
following purposes:
(i) to elect Class I and Class II directors named in the accompanying
proxy statement;
(ii) to consider and act upon a proposal to amend and restate the Stock
Option and Restricted Stock Plan to, among other things, increase
the number of shares of common stock of CTIG that may be issued
under such plan by 2,000,000 shares, as described in the proxy
statement;
(iii)to consider and act upon a proposal to ratify the appointment of
PricewaterhouseCoopers LLP, as the independent accountants of CTIG;
and
(iv) to act upon such other matters as may properly come before the
Annual Meeting or any adjournment or postponement of the Annual
Meeting.
References in this proxy statement to "CTIG," the "Company," "we," "us," and
"our" mean CTI Group (Holdings) Inc. and its subsidiaries unless the context
of the description indicates otherwise.
The notice of the Annual Meeting, this proxy statement, the enclosed form of
proxy and the annual report are first being mailed to our stockholders on or
about May 6, 2002.
Record Date and Shares Entitled to Vote
Our board of directors fixed the close of business on April 5, 2002 as the
record date (the "Record Date") for the determination of stockholders entitled
to notice of and to vote at the Annual Meeting. Accordingly, only holders of
record of our Class A and Class B Common Stock at the close of business on the
Record Date are entitled to notice of and to vote at the Annual Meeting, as
indicated herein. At the close of business on the Record Date, (i) 26,669,456
shares of Class A Common Stock were issued and outstanding, and (ii) 2,833,334
shares of Class B Common Stock were issued and outstanding.
Quorum and Voting Rights
In order for a quorum to be present at the Annual Meeting, a majority of the
outstanding shares of our Class A and Class B Common Stock at the close of
business on the Record Date must be present in person or represented by proxy
at the Annual Meeting. All such shares that are present in person or
represented by proxy at the Annual Meeting will be counted in determining
whether a quorum is present, including abstentions and broker non-votes. A
broker non-vote occurs when shares held by a broker are not voted with respect
to the proposal because the broker does not have discretionary voting power
with respect to that proposal and has not received instructions from the
beneficial owner.
Directors comprising Class I and Class II of our board of directors are
elected (Proposal One) by a plurality of the votes of the issued and
outstanding shares of our Class B Common Stock at the close of business on the
Record Date which are present in person or represented by proxy at the Annual
Meeting. The approval of the Amended and Restated Stock Option and Restricted
Stock Plan (Proposal Two), the ratification of the appointment of
PricewaterhouseCoopers LLP as our independent accountants (Proposal Three),
and the approval of any other business matters properly brought before the
Annual Meeting, or any adjournment or postponement of the Annual Meeting, will
require the affirmative vote of the majority of the issued and outstanding
shares of our Class A and Class B Common Stock, voting as one class, at the
close of business on the Record Date that are present in person or represented
by proxy at the Annual Meeting. Each share of our Class A or Class B Common
Stock entitles its holder to one vote on each proposal that such class is
entitled to vote on. Under the Delaware General Corporation Law, an
abstention, but not the broker non-vote, on any proposal, other than the
election of directors, will have the same legal effect as an "against" vote.
Broker non-votes will not count as votes against any proposal at the Annual
Meeting.
Solicitation of Proxies
This proxy statement is furnished to you in connection with the solicitation
of proxies on behalf of our board of directors for use at the Annual Meeting.
The accompanying form of proxy has been prepared at the direction of the board
of directors and is sent to you at the request of the board of directors. Our
board of directors designated the proxies named in the form of proxy. We will
bear all costs of soliciting proxies, including the cost of printing and
mailing this proxy statement. In addition to the solicitation by mail, our
directors, officers and employees may solicit proxies from stockholders in
person or by telephone. Those directors, officers and employees will not
receive additional compensation for that solicitation but may be reimbursed
for their out-of-pocket expenses. Arrangements will be made with brokerage
houses and other custodians, nominees and fiduciaries for the solicitation of
votes from beneficial owners of shares held of record by such persons or
entities. We will reimburse those custodians, nominees and fiduciaries for
their reasonable out-of-pocket expenses.
A form of proxy is enclosed. If properly executed and received in time for
voting, and not revoked, the enclosed proxy will be voted in accordance with
its instructions. If no directions to the contrary are indicated, the persons
named in the enclosed proxy will vote all your shares of Class B Common Stock
"FOR" the election of nominees for Class I and Class II directors named in the
proxy statement. If no directions to the contrary are indicated, the persons
named in the enclosed proxy will vote all your shares of Class A and Class B
Common Stock "FOR": (i) the approval of the Amended and Restated Stock Option
and Restricted Stock Plan, (ii) the ratification of the appointment of
PricewaterhouseCoopers LLP as our independent accountants, and (iii) the
approval of any other business matters which may properly come before the
Annual Meeting or any adjournment or postponement of the Annual Meeting.
The enclosed proxy confers discretionary authority to vote with respect to
any and all of the following matters that may come before the Annual Meeting:
(i) matters to be presented at the Annual Meeting which we do not have notice
on or prior to the close of business on May 15, 2002; (ii) approval of the
minutes of a prior meeting of stockholders, if such approval does not amount
to ratification of the action taken at the annual meeting; (iii) any proposal
omitted from this proxy statement and form of proxy pursuant to Rules 14a-8 or
14a-9 under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"); and (iv) matters incident to the conduct of the Annual Meeting.
Our board of directors is not currently aware of any matters that will be
brought before the Annual Meeting (other than procedural matters) that are not
referred to in the enclosed notice of the Annual Meeting. However, if any
additional matters are properly brought before the Annual Meeting, the persons
named in the enclosed proxy will vote the proxy cards in their discretion in
accordance with their best judgment and in the manner they believe to be in
our best interests.
Revocation of Proxies
Sending in the signed proxy will not affect the stockholder's right to
deliver a subsequent proxy or attend the Annual Meeting and vote in person
because the proxy is revocable. A stockholder may revoke the proxy at any time
before it is voted by giving written notice of revocation to Manfred
Hanuschek, our Secretary and Chief
2
Financial Officer. Upon giving the written notice of revocation, a stockholder
may duly execute a later dated proxy relating to the same shares or attend the
Annual Meeting and vote in person. Attendance of the Annual Meeting will not
in itself constitute a revocation of the proxy.
Before the taking of the vote at the Annual Meeting, any written notice of
revocation or subsequent proxy should be sent to CTI Group (Holdings) Inc.,
333 North Alabama St. Suite 240, Indianapolis, IN 46204, attention: Manfred
Hanuschek, or hand delivered to Manfred Hanuschek.
CHANGE IN CONTROL
On February 12, 2001, Centillion Data Systems, Inc. ("Centillion")
consummated a merger (the "Centillion Merger") with us. Pursuant to the terms
of the Centillion Merger, all of the outstanding shares of Centillion were
exchanged for 17,698,253 shares of our Class A Common Stock and 2,833,334
shares of our Class B Common Stock. The shares of our common stock issued in
the Centillion Merger were obtained from our authorized but unissued shares.
As a result of the Centillion Merger, on February 12, 2001, the Centillion
stockholders owned 65.7% of our Class A Common Stock and 100% of our Class B
Common Stock. As a result of the Centillion Merger, Salah N. Osseiran became
the largest stockholder of our company. As of April 15, 2002, Mr. Osseiran
beneficially owned 14,856,838 shares (55.7% of the outstanding) of Class A
Common Stock and 2,371,244 shares (83.7% of the outstanding) of the Class B
Common Stock. See "Security Ownership of Certain Beneficial Owners and
Management." The Centillion Merger was accounted for as a reverse purchase
acquisition because former Centillion stockholders own a majority of the
outstanding shares of our common stock and control us as a result of the
Centillion Merger.
Simultaneous with the Centillion Merger, we merged with Celltech Information
Systems Inc. ("Celltech Merger"). Celltech stockholders received 1,234,698
shares of our Class A Common Stock and $262,599 in cash, in exchange for all
Celltech stock issued and outstanding.
The former Centillion businesses that are not related to the billing
business were transferred prior to the Centillion Merger to a limited
liability company, CDS Holdings LLC, along with other additional assets in
exchange for a promissory note. The former Centillion stockholders own CDS
Holdings LLC. The fair value of the promissory note amounted to approximately
$10,500,000. Such promissory note is a contingent stock purchase receivable.
CDS Holdings LLC will pay principal and interest as those businesses are sold.
We will issue additional shares of our Class A Common Stock to the former
Centillion stockholders for principal payments, at a per share value of 88% of
the average market value of our Class A Common Stock at the time. If the
promissory note is not fully repaid in five years, it will be appraised, and
we will issue shares of our Class A Common Stock for the appraised value at
88% of the average market price at the time. As of April 30, 2002, no such
businesses have been sold.
Centillion's former patents, its right to enforce its patents, and its
current and future patent enforcement actions and claims, were transferred to
a limited liability company that is wholly owned by us (the "Tracking LLC").
The Tracking LLC has executed a perpetual irrevocable royalty-free license
agreement authorizing us to use the patents. As part of the Centillion Merger
consideration, in connection with the transfer to the Tracking LLC, we issued
2,833,334 shares of our Class B Common Stock to the former Centillion
stockholders. We and the holders of the Class B Common Stock have certain
rights to convert the Class B Common Stock into Class A Common Stock based on
the value of the Tracking LLC. CDS Holdings, Inc., an affiliate of
Centillion's former stockholders, committed to loan, on a non-recourse basis,
up to $2,000,000 to the Tracking LLC to pursue its patent enforcement actions
existing at the time of the Centillion Merger. Repayments of such borrowings
are contingent upon and are to be repaid from and to the extent there are
proceeds from patent enforcement activities. As of April 30, 2002, no amounts
are outstanding under such available loan. As of December 31, 2001, Tracking
LLC had net proceeds of $568,061, which were commingled with our cash and cash
equivalents to fund future enforcement activities. It is our intention to
utilize such net proceeds prior to accessing the loan facility of CDS
Holdings, Inc.
3
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information as of April 5, 2002 with respect
to the beneficial ownership of our Class A and Class B Common Stock by: (i) each
person who is known to us to be the beneficial owner of more than five percent
of our outstanding Class A or Class B Common Stock, (ii) each of our directors
and nominees for election as a director, (iii) our chief executive officer and
each other executive officers whose total annual salary and bonus for the fiscal
year 2001 exceeded $100,000; and (iv) all of our directors and executive
officers as a group. As of April 5, 2002, 26,669,456 shares of our Class A
Common Stock and 2,833,334 shares of our Class B Common Stock were outstanding.
The securities "beneficially owned" by an individual, as shown in the table
below, are determined in accordance with the definition of "beneficial
ownership" set forth in the regulations of the Securities and Exchange
Commission. Accordingly, beneficially-owned securities may include securities
owned by or for, among others, the wife and/or minor children of the
individual and any other relative who has the same home as such individual, as
well as other securities as to which the individual has or shares voting or
investment power or has the right to acquire under outstanding stock options,
warrants or convertible debentures within 60 days after April 5, 2002. Shares
subject to stock options, warrants or convertible debentures, which an
individual has the right to acquire within 60 days after April 5, 2002, are
deemed to be outstanding for the purpose of computing the percentage of
outstanding shares of the class owned only by such individual or any group
including such individual. Beneficial ownership may be disclaimed as to some
of the securities.
Name and Address** Percent Percent
------------------ Class A Shares of Class Class B Shares of Class
-------------- -------- -------------- --------
Harold D. Garrison, Chairman ............................................ 1,106,734(1)(2) 4.1% 177,178(3) 6.3%
Michael H. Leeds, Vice Chairman ......................................... -- -- -- --
Rupert D. Armitage, Director ............................................ 496,219(4) 1.9% -- --
Steve Bartkiw, Director ................................................. 110,000 * -- --
John Birbeck, Director .................................................. 30,000 * -- --
Thomas W. Grein, Director ............................................... -- -- -- --
Anthony P. Johns, Director .............................................. 1,820,956(5) 6.8% -- --
Bradley Houlberg, President and Chief
Executive Officer...................................................... -- -- -- --
Manfred Hanuschek, Secretary and Chief
Financial Officer...................................................... -- -- -- --
William Miller, Chief Operating Officer ................................. 36,800 * 5,892 *
Adrian Burt, UK Managing Director ....................................... 100,466(6) * -- --
All directors and executive officers as a group ......................... 3,701,175 13.8% 183,170 6.5%
Salah N. Osseiran ....................................................... 14,856,838(1)(7) 55.7% 2,371,244(8) 83.7%
333 North Alabama Street
Suite 240
Indianapolis, IN 46204
____________________________
* Less than 1%.
** The business address of our directors and executive officers is CTI Group
(Holdings) Inc., 333 North Alabama Street, Suite 240, Indianapolis, Indiana
46204.
(1) Assumes the release of all escrowed stock pursuant to the Centillion
Merger.
(2) Includes 591,927 shares owned by Sunset LLC, of which Mr. Garrison is the
Managing Member, and 192,782 shares owned by XCI Holdings, Inc., of which
Mr. Garrison is Chairman and Chief Executive Officer.
(3) Includes 94,762 shares owned by Sunset LLC, of which Mr. Garrison is the
Managing Member, and 30,862 shares owned by XCI Holdings, Inc., of which
Mr. Garrison is Chairman and Chief Executive Officer.
4
(4) Includes options to purchase 30,000 shares of our Class A Common Stock,
85,000 shares owned by Mr. Armitage's spouse, and 100,000 shares owned by
Ambit Research, of which Mr. Armitage is the managing director.
(5) Includes options to purchase 100,000 shares of our Class A Common Stock.
(6) Includes options to purchase 50,000 shares of our Class A Common Stock.
(7) Includes 13,204,366 shares owned by Hawazen, BVI, of which Mr. Osseiran is
the sole stockholder, 1,607,472 shares owned by Fairford Holdings, Ltd.,
of which Mr. Osseiran is the sole stockholder, and 45,000 shares owned by
Salsel Corp. Ltd., of which Mr. Osseiran is also the sole stockholder.
(8) Includes 2,113,902 shares owned by Hawazen, BVI, of which Mr. Osseiran is
the sole stockholder, and 257,342 shares owned by Fairford Holdings, Ltd.,
of which Mr. Osseiran is also the sole stockholder.
5
PROPOSAL ONE
ELECTION OF DIRECTORS
Prior to the Centillion Merger our board of directors consisted of five
members: Messrs. Armitage, Bevington, Hunnewell, Johns, and Rohn. Pursuant to
the terms of the Centillion Merger, our Certificate of Incorporation was
amended to divide our board of directors into three classes: Class I, Class
II, and Class III having staggered terms of office. Messrs. Armitage,
Bevington, and Johns and representatives of Centillion became members of our
new board of directors elected at the special meeting of stockholders held on
February 12, 2001. Representatives of Centillion were elected as Class I
directors: Messrs. Garrison and Osseiran and Class II directors: Messrs. Grein
and Leeds. Messrs. Armitage, Bevington and Johns were elected as Class III
directors. On June 15, 2001, Mr. Bevington and, on September 6, 2001, Mr.
Osseiran resigned from our board of directors. In accordance with our amended
Certificate of Incorporation, on June 15, 2001, Mr. Birbeck was unanimously
elected as a Class III director replacing Mr. Bevington by Class III directors
remaining in office, and, on September 6, 2001, Mr. Bartkiw was unanimously
elected as a Class I director replacing Mr. Osseiran by our Class I and Class
II directors remaining in office.
Directors of each class of our new board will serve for a term of three
years and until their successors have been elected and qualified, except in
the event of their earlier resignation or removal. Our amended Certificate of
Incorporation provides that for any meeting of stockholders held prior to July
1, 2003: (i) the holders of Class B Common Stock have the right to elect Class
I and Class II directors; and (ii) any vacancies with respect to Class I and
Class II directors should be filled by the remaining Class I and Class II
directors voting as a group, or with respect to a Class III director by the
remaining Class III directors. If, prior to July 1, 2003 there is any increase
or decrease in the number of directors, such directors will be assigned as
Class I, II or II so that the holders of Class B Common Stock maintain a
majority of the board of directors. After July 1, 2003, holders of Class A and
Class B Common Stock, voting as one class, have the right to elect Class I,
II, and III directors.
Position(s) Held in
Name CTIG Director Since Term Expires
- ----------------------------------------------------------------- ----------------------------- -------------- ------------
Nominees
Harold Garrison Chairman 2001 2004
Steve Bartkiw Director 2001 2004
Thomas Grein Director 2001 2005
Michael Leeds Vice Chairman 2001 2005
Directors Remaining in Office
Rupert Armitage Director 1995 2003
John Birbeck Director 2001 2003
Anthony Johns Director 1990 2003
Our board of directors nominated the nominees named above, who currently
serve as directors and have indicated their willingness to continue serving as
directors. We have no reason to believe that any of the nominees will be
disqualified or unable to serve if elected. It is not expected that any of the
nominees will be unable to serve, but, if any nominee should be unable to
serve, the shares represented by the enclosed proxy will be voted "for" a
substitute nominee selected by our board of directors. There is no family
relationship between any of our directors, nominees or executive officers.
None of our directors or executive officers is a party to any arrangement or
understanding with any other person with respect to nominations of directors.
Harold Garrison and Steve Bartkiw, if elected, will hold office until the
2004 annual meeting of stockholders and until their successors have been
elected and qualified. Michael Leeds and Tom Grein, if elected, will hold
office until 2005 annual meeting of stockholders and until their successors
have been elected and qualified.
The following table sets forth information regarding the business experience
of our current members of the board of directors during the past five years.
6
Name and Age(1) Business Experience During Past Five Years
------------------------------------------- -----------------------------------------------------------------------------------
Harold D. Garrison (53) Mr. Garrison became our director and chairman on February 12, 2001 in connection
Chairman of the Board of Directors with the Centillion Merger. Mr. Garrison served as chairman of Centillion from 1988
until the Centillion Merger in 2001. He has also been serving as the chairman and
chief executive officer of Mansur Group since 1982 and served as chairman of XILA
Communications, Inc. from 1983 to 1999. Mr. Garrison currently serves as a chairman
of XILA Communications, LLC and e.Nova, LLC.
Michael H. Leeds (55) Mr. Leeds became our director and vice-chairman on February 12, 2001 in connection
Director and Vice Chairman with the Centillion Merger. Mr. Leeds served as a member of the executive committee
of the board of directors of Centillion from 1987 until the Centillion Merger in
2001. He is the managing partner of the Boca Raton, Florida office of the law firm
of Blank Rome Comisky & McCauley LLP, which is our legal advisor.
Rupert D. Armitage (54) Mr. Armitage, a citizen of the United Kingdom, has been our director since
Director November, 1995. He is a founding member, chairman and managing director of three
software-related companies in the United Kingdom: Ambit Research Ltd. formed in
1987, Information from Data Ltd. formed in 1993, and Personal and Corporate
Training Systems Ltd. formed in 1995.
Steve Bartkiw (39) Mr. Bartkiw, a citizen of Canada, has served as our director since September, 2001.
Director Mr. Bartkiw has served as President of JAB Interactive, L.L.C. since 2000. Prior to
JAB Interactive, Mr. Bartkiw was founder and chief executive officer of AOL Canada,
Inc. from 1995 to 2000. Prior to joining AOL, Mr. Bartkiw was director of Online
Services at Rogers Cable. Previously, Mr. Bartkiw held several positions with Southam
in Electronic Information Marketing and the new Media Division. Mr. Bartkiw has held
memberships in the ABC Canada Literacy Foundation, Information Technology Association
of Canada, Senior People Resources in North Toronto, the Information Industry
Association and the Association for Interactive Media (Washington, D.C.).
John Birbeck (47) Mr. Birbeck, a citizen of the United Kingdom, has served as our director since
Director June, 2001. In 1997, Mr. Birbeck founded Network Achemy Ltd. From 1997 until 2001,
Mr. Birbeck served as a director of Network Achemy Ltd. From 2000 until 2001, Mr.
Birbeck served as a director of Avaya Communications. Since 2001, Mr. Birbeck has
been working as a consultant advising new technology start-up companies in the United
Kingdom.
7
Name and Age(1) Business Experience During Past Five Years
------------------------------------------- -----------------------------------------------------------------------------------
Thomas W. Grein (50) Mr. Grein became our director on February 12, 2001 in connection with the
Director Centillion Merger. Mr. Grein served as a director of Centillion from October, 1999
until the Centillion Merger in 2001. Mr. Grein is currently vice president and
treasurer of Eli Lilly and Company. He served as executive director of investor
relations and assistant treasurer from 1994 to 1998 and executive director of
finance from 1998 to 2000 in Eli Lilly and Company. Mr. Grein is also a member of
the board of directors of the Walther Cancer Foundation.
Anthony P. Johns (53) Mr. Johns, a citizen of the United Kingdom, served as our chairman of the board
Director from October 1996 until February 12, 2001. Mr. Johns served as our president and
chief executive officer from March, 1990 until November, 2001. Mr. Johns has served
as our director since 1990. He was chairman of the board of directors of Britannic
Group Holdings Ltd., Britannic Telecom Company Ltd. and Britannic Telecare Ltd. from
December, 1989 to May, 1995. Mr. Johns is presently engaged in the pursuit of
entrepreneurial activities.
_____________________
(1) As of the Record Date.
OUR BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" THE NOMINEES
FOR DIRECTOR.
8
BOARD OF DIRECTORS AND COMMITTEES OF THE BOARD
Currently, our board of directors has an executive committee and an audit
committee. In fiscal year 2001, our board of directors held four meetings, the
executive committee held five meetings and the audit committee held three
meetings. No director attended fewer than 75% of the aggregate of the total
number of the board meetings and the total number of meetings held by all
committees of the board on which the director served, except for Mr. Grein and
Mr. Birbeck, whose absences were excused by the board. There are no material
proceedings to which any of our directors, officers, affiliates or five
percent holders of our common stock is a party adverse to us or has a material
interest adverse to us.
The following is a description of the committees of our board of directors.
Executive Committee
The executive committee consists of Harold Garrison, Michael Leeds, and
Rupert Armitage. The executive committee is authorized to exercise all the
powers and authority of our board of directors in the management of our
business and affairs to the fullest extent permitted under the Delaware
General Corporate Law. The executive committee determines the compensation and
terms of employment of our executive officers and makes initial determinations
and recommendations for the issuance of options to our directors and
employees.
Audit Committee
The audit committee currently consists of three directors: Rupert Armitage,
Thomas Grein, and Michael Leeds. All members of the audit committee are
independent, as that term is defined in Nasdaq Rule 4200(a)(14), except for
Michael Leeds due to his position in the law firm that provides legal services
to us. Mr. Leeds intends to resign from the audit committee following the
Annual Meeting and the board of directors will consider replacing him with
Steve Bartkiw. Pursuant to our Bylaws, the audit committee is authorized to:
(i) hire our independent accountants, (ii) review our systems of accounting,
(iii) discuss with our accountants the results of the audit, (iv) conduct
independent reviews of our systems of accounting, and (v) make reports to the
board with respect to its findings. On April 29, 2002, the board of directors
adopted the audit committee charter, a copy of which is attached as Appendix I.
Audit Committee Report
The audit committee meets with management and the independent accountants
throughout the year. The audit committee meets with the independent
accountants to discuss their observations and findings in connection with the
review of our quarterly financial statements and audit of the year end
financial statements. On March 22, 2002, the audit committee met with
management to review and discuss the 2001 audited financial statements. The
audit committee also conducted discussions with the independent accountants,
PricewaterhouseCoopers LLP, regarding the matters required by the Statement on
Auditing Standards No. 61. As required by Independence Standards Board
Standard No. 1, "Independence Discussions with Audit Committees," the audit
committee discussed with and received the required written disclosures and
confirming letter from PricewaterhouseCoopers LLP regarding its independence
and discussed with PricewaterhouseCoopers LLP its independence. Based upon the
review and discussions referred to above, the audit committee recommended to
the board of directors that the audited financial statements be included in
the annual report on Form 10-KSB for the fiscal year ended
December 31, 2001.
9
This audit committee report shall not be deemed incorporated by reference in
any document previously or subsequently filed with the Securities and Exchange
Commission that incorporates by reference all or any portion of this proxy
statement except to the extent that CTIG specifically requests that this
Report be specifically incorporated by reference.
Date: March 22, 2002
The Audit Committee:
Rupert Armitage
Thomas Grein
Michael Leeds
Compensation of Directors
After the Centillion Merger and the Celltech Merger, the compensation paid
to non-employee members of the board of directors is as follows:
(i) $5,000 plus reasonable expenses for attendance at annual meetings;
(ii) $3,000 plus reasonable expenses for attendance at quarterly
meetings;
(iii)$1,500 plus reasonable expenses for attendance at special meetings;
and
(iv) $2,500 plus reasonable expenses for attendance at executive
committee meetings.
No attendance fee was paid for audit committee meetings.
In addition, the chairman of the board receives $5,000 per month plus
reasonable expenses and the vice-chairman receives $4,000 per month plus
reasonable expenses.
During the fiscal year ended December 31, 2001, Messrs. Garrison, Leeds,
Armitage, Bartkiw, Birbeck, Grein, and Osseiran earned non-employee director
fees for their services on the board of directors of approximately $75,500,
$65,000, $23,000, $11,000, $6,000, $0 and $10,500, respectively, plus
expenses. Mr. Johns received payroll compensation during 2001 and did not
receive any non-employee director fees.
After the Centillion Merger and the Celltech Merger, non-employee members of
the board of directors are entitled to receive the following options to
purchase shares of our Class A Common Stock:
(i) the chairman of the board receives options to purchase 20,000 shares
of Class A Common Stock per year;
(ii) the vice-chairman of the board receives options to purchase 15,000
shares of Class A Common Stock per year;
(iii)each executive committee member receives options to purchase 10,000
shares of Class A Common Stock per year; and
(iv) each board member receives options to purchase 10,000 shares of
Class A Common Stock per year.
If any individual serves in more than one of the above capacities he or she
receives options for each position, and these options are cumulative.
No options were granted to board members during 2001.
In 2001, we paid $3,495 to Mr. Birbeck for the consulting services provided
to CTI Data Solutions Ltd., our subsidiary. In 2001, we paid $5,000 to Mr.
Grein for prior director services with Centillion. In 2001, we paid $6,508 to
Mr. Bevington, our former director, for the director services to us prior to
the Centillion Merger.
10
EXECUTIVE OFFICERS
The following table sets forth information regarding the business experience
of our executive officers during the past five years:
Business Experience During
Name and Position Age(1) Past Five Years
-----------------
-------- -----------------------------------------------------------------------
Bradley Houlberg 42 Mr. Houlberg was Executive Vice President for Alltel Information
President and Chief Executive Officer Services from 1997 to 2001. Mr. Houlberg was with Convergys from 1989
to 1997 with his last position as Managing Director. In January, 2002,
Mr. Houlberg became our President and Chief Executive Officer.
Manfred Hanuschek 41 Mr. Hanuschek was Chief Financial Officer with ICC Technologies, Inc.
Secretary and Chief Financial Officer from 1994 to 1998. From April, 1999 to July, 1999, Mr. Hanuschek was
employed by us. Mr. Hanuschek was Senior Vice President and Chief
Financial Officer of IGI, Inc. from July, 1999 to June, 2000. In June,
2000, Mr. Hanuschek became our Chief Financial Officer. In February,
2002, Mr. Hanuschek was appointed our Secretary.
William Miller 44 Mr. Miller is the Chief Operating Officer of CTI Billing Solutions,
Chief Operating Officer Inc., our subsidiary. Since 1996, Mr. Miller had been Sr. Vice
President and General Manager of the Communications Division of
Centillion, which merged with us on February 12, 2001.
Adrian Burt 32 Mr. Burt has been the Managing Director of CTI Data Solutions, Ltd., our
UK Managing Director subsidiary, since 1998. From 1995 until 1997, Mr. Burt was the Marketing
Manager for Vocalis Group plc, where he directed the marketing function.
From 1997 to 1998, Mr. Burt worked at Databit Limited/Siemens plc.
- ---------------
(1) As of the Record Date.
11
Executive Compensation
The following table sets forth information regarding compensation paid to or
accrued for our chief executive officer and other executive officers whose
total annual salary and bonus for the fiscal year ended December 31, 2001
exceeded $100,000.
Summary Compensation Table
Annual Long-Term
Compensation Compensation
------------ ------------
Name and Securities
Principal Position Underlying All Other
------------------- Year Salary Bonus Options Compensation
---- ------------ -------- ------------ ------------ ---
Anthony P. Johns .......................................... 2001 $233,125 $ 23,644 -- $609,502(3)(4)
former President and 2000 $175,000 -- -- $ 32,434(3)
Chief Executive Officer(1) 1999 $175,000 -- 300,000(2) $ 32,762(3)
Manfred Hanuschek ......................................... 2001 $175,000 $ 68,750(6) -- $ 10,000(7)
Secretary and 2000 $ 94,972 -- -- $ 3,500(7)
Chief Financial Officer(5) 1999 $ 25,958 -- -- $ 2,000(7)
William Miller ............................................ 2001 $175,000 $128,750(6) -- $ 9,273(7)
Chief Operating Officer(8) 2000 $139,809 $ 36,741 -- $ 7,983(7)
1999 $121,940 $ 25,900 -- $ 9,021(7)
Adrian Burt ............................................... 2001 $135,334 $ 32,850(6) -- $ 17,495(7)
UK Managing Director 2000 $ 79,750 -- -- $ 10,730(7)
1999 $ 74,917 -- -- $ 10,313(7)
- ---------------
(1) Mr. Johns resigned as our President and Chief Executive Officer in
September, 2001. Mr. Johns continued to serve as our President and Chief
Executive Officer until November 16, 2001 and as our employee until the
appointment of Bradley Houlberg as our President and Chief Executive
Officer as of January 28, 2002.
(2) In December 1999, Mr. Johns was granted options to purchase 300,000 shares
of our common stock at the exercise price of $1.09 per share. In October
2000, options to purchase 200,000 shares of our common stock were
cancelled. As of April 5, 2002, Mr. Johns owned the remaining options to
purchase 100,000 shares of our common stock. These options to purchase
100,000 shares expired on April 30, 2002.
(3) Includes in 2001, $47,137 reimbursement of moving costs, $11,100 annual
automobile allowance, $979 of employer matching contribution under the
applicable defined contribution pension plan, $16,250 of living expense
payments, and $23,155 in deferred compensation arrangement. Includes in
2000 and 1999, an $11,100 annual automobile allowance and $15,600 of living
expense payments and insurance premiums paid by us.
(4) We entered into a letter agreement with Mr. Johns in September, 2001,
pursuant to which he was entitled to a $500,000 severance payment, and
$8,502 of relocation expenses and reimbursement of expenses for the early
termination of the lease, which we paid to him in 2002.
(5) Mr. Hanuschek was employed as our Chief Financial Officer as of June 12,
2000.
(6) Includes year 2001 performance bonus paid in April 2002 of $68,750 paid to
Mr. Hanuschek and Mr. Miller and $32,850 paid to Mr. Burt.
(7) Includes annual automobile allowance and employer matching contribution
under the applicable defined contribution pension plan. In fiscal year
2001, we paid the following amounts as automobile allowance and employer
matching contribution to Messrs. Hanuschek, Miller and Burt: Mr. Hanuschek
$6,000 and $4,000, respectively; Mr. Miller - $5,500 and $3,773,
respectively, and Mr. Burt - $12,083 and $5,413, respectively.
(8) Mr. Miller's compensation includes amounts earned as an employee of
Centillion.
12
No options were granted and no stock awards were made to executive officers
named in the Summary Compensation Table during fiscal year 2001.
The following table sets forth certain information regarding stock options
exercised during fiscal year 2001 by each of the executive officers named in
the Summary Compensation Table:
Aggregated Option Exercises in Fiscal Year 2001
and Fiscal Year-End Option Values
Number of Securities Value of Unexercised
Underlying Unexercised in-the-Money Options at
Shares Options at FY-End FY-End
Name Acquired Value Exercisable/ Exercisable/
---- on Exercise Realized Unexercisable Unexercisable
----------- -------- ---------------------- -----------------------
Anthony P. Johns .................................... -- -- 100,000/0 $0/$0
former President and
Chief Executive Officer(1)
Manfred Hanuschek ................................... -- -- 0/0 $0/$0
Secretary and Chief Financial Officer
William Miller ...................................... 30,800 $40,978 0/0 $0/$0
Chief Operating Officer
Adrian Burt ......................................... -- -- 50,000/0 $5,000/$0
UK Managing Director
- ---------------
(1) Mr. Johns resigned as our President and Chief Executive Officer in
September, 2001. Mr. Johns continued to serve as our President and Chief
Executive Officer until November 16, 2001 and as our employee until the
appointment of Bradley Houlberg as our President and Chief Executive
Officer as of January 28, 2002.
(2) Calculation based upon the closing market price of $0.44 on December 31,
2001.
Employment Agreements
Anthony Johns
On February 12, 2001, Mr. Johns and we entered into an employment agreement,
pursuant to which Mr. Johns agreed to serve as our President and Chief
Executive Officer for a period of three years following the completion of the
Centillion Merger at an annual base salary of $250,000. Under the agreement,
Mr. Johns could also receive an annual cash bonus in the sole discretion of
our board of directors, based on performance, profitability, or other factors.
Under the agreement, Mr. Johns was entitled to reimbursement of specified
expenses related, among other matters, to accommodations and transportation,
as well as participation in any savings, 401(k), pension, group medical and
other similar plans which we may adopt.
The agreement prohibits Mr. Johns from divulging confidential information
regarding our business without the prior written consent of our board. Under
the agreement, Mr. Johns cannot during the term of the agreement and for a
period of two years after the termination of the agreement, engage in any
business or perform any actions in competition with our company, except with
our prior written consent.
On September 6, 2001, we entered into a letter agreement with Mr. Johns
acknowledging his resignation as our President and Chief Executive Officer.
Mr. Johns agreed to assist us in the recruitment of a suitable replacement and
orderly transition of his responsibilities until January 31, 2002. According
to the letter agreement, Mr. Johns was entitled to all compensation under the
terms of his employment agreement up to January 31, 2002, which was paid to
him.
The letter agreement provided for the severance payment of $500,000 to Mr.
Johns, reimbursement of his expenses incurred in connection with the early
termination of Mr. Johns' lease in Indianapolis, and reimbursement of up to
$5,000 of his relocation expenses.
13
Bradley Houlberg
We entered into an employment agreement with Bradley Houlberg as of January
28, 2002. Pursuant to the agreement, Mr. Houlberg agreed to serve as our
President and Chief Executive Officer for an initial period of three years,
unless sooner terminated in accordance with the agreement, at the end of which
the agreement will automatically renew for successive periods of one year. Mr.
Houlberg's annual salary should be not less than $275,000. Our board of
directors will review Mr. Houlberg's salary at least annually to determine if
an increase is appropriate, which increase will be in the sole discretion of
the board. For each calendar year of Mr. Houlberg's employment during which he
meets the targets pursuant to our annual incentive plan, we will pay Mr.
Houlberg a bonus of between 22.5% ("Threshold Bonus") and 90% of his salary.
Such bonus will be in lieu of any cash bonuses provided by us to our employees
and senior executives. A bonus of 45% of Mr. Houlberg's salary constitutes a
"Target Bonus." Under the agreement, Mr. Houlberg is entitled to (i)
reimbursement of specified expenses related, among other matters, to the move
of his family to Indianapolis, Indiana and transportation as well as (ii) all
normal and usual benefits provided by us to our senior executives.
We are obligated to grant to Mr. Houlberg no later than the earlier of (i)
30 days after the commencement of his employment or (ii) on the adoption by
the board of the incentive plan, a stock option to purchase shares of our
Class A Common Stock equal to 2% of our outstanding common stock on a fully-
diluted basis on the date of grant (the "Original Grant Date") pursuant to our
Stock Option and Restricted Stock Plan (the "Plan"). At the end of each year
commencing after December 31, 2002 and ending on December 31, 2004 that Mr.
Houlberg continues to be employed as our Chief Executive Officer and
President, we will grant to Mr. Houlberg an additional stock option to
purchase shares of our Class A Common Stock equal to 1% of our outstanding
common stock on a fully diluted basis on the Original Grant Date pursuant to
the Plan. Each option will expire on the tenth anniversary of its date of
grant and will vest annually over 4 years (1/4 per year on yearly
anniversaries) from its date of grant. The exercise price per share for each
option will be the fair market value of our common stock on the date of grant.
Each Option will otherwise be subject to all of the terms and conditions set
forth in the Plan.
The agreement prohibits Mr. Houlberg from divulging confidential information
regarding our business, except as his duties may require or as authorized by our
board or executive committee. Under the agreement, Mr. Houlberg cannot, during
the term of the agreement and for a period of one year after the termination of
the agreement, engage in any business or perform any actions in competition with
our company worldwide.
If Mr. Houlberg's employment terminates for any reason, we will pay him as
severance pay all accrued and unpaid salary and benefits through the date of
termination of his employment ("Termination Date") and unpaid business
expenses. If Mr. Houlberg's employment terminates upon his death or disability
or upon a change of control, we will pay Mr. Houlberg as additional severance
pay (i) an amount equal to his annual salary payable over twelve months plus
(ii) a Target Bonus payable pursuant to the incentive plan for such year, and
we will pay for the cost to continue Mr. Houlberg's participation in our
health and hospitalization plans for twelve months after the Termination Date.
If Mr. Houlberg's employment terminates pursuant to the majority vote of our
board or executive committee or pursuant to Mr. Houlberg's decision to
terminate the agreement due to a decrease in his salary, a material decrease
in his benefits or a material change in his responsibilities that causes Mr.
Houlberg to be of reduced stature, we will pay Mr. Houlberg as additional
severance pay (i) an amount equal to his annual salary payable over twelve
months plus (ii) a Threshold Bonus payable pursuant to the incentive plan for
such year, and we will pay for the cost to continue Mr. Houlberg's
participation in our health and hospitalization plans for twelve months after
the Termination Date.
If Mr. Houlberg's employment terminates because Mr. Houlberg's performance
of his duties is unsatisfactory or we become aware that Mr. Houlberg was
subject to certain disqualifications prior to the effective date of the
agreement, we will pay Mr. Houlberg as additional severance pay an amount
equal to his annual salary over twelve months.
We can also terminate Mr. Houlberg's employment for cause. Pursuant to the
agreement, the term "cause" means Mr. Houlberg's material failure to observe
any of the terms or provisions of the agreement or a breach of his
representations in the agreement; dishonesty; fraudulent misrepresentation; an
act of moral turpitude; continued neglect, willful misconduct or gross
negligence in connection with the performance of his duties;
14
Mr. Houlberg's willful failure to follow the reasonable directions of our
board or executive committee, which failure, if curable, is not cured within
30 days after notice to Mr. Houlberg, or which failure, if cured, recurs;
Mr. Houlberg's conduct that may adversely affect our business, goodwill or
good name; conviction of a crime; misappropriation of funds; or deliberate and
premeditated acts against our interests.
If Mr. Houlberg's employment terminates (i) upon the majority vote of our
board or executive committee, (ii) upon Mr. Houlberg's death or disability,
(iii) upon a change of control, (iv) upon a decrease in Mr. Houlberg's salary,
a material decrease in his benefits or a material change in his
responsibilities that causes Mr. Houlberg to be of reduced stature, or (v)
pursuant to notice of termination given by either party under the agreement,
Mr. Houlberg will have 90 days following the Termination Date to exercise all
vested options.
If Mr. Houlberg's employment terminates (i) pursuant to Mr. Houlberg's
voluntary resignation, (ii) for cause, (iii) due to Mr. Houlberg's
disqualifications that occurred prior to the effective date of the agreement,
or (iv) because Mr. Houlberg's performance of his duties is unsatisfactory,
all his vested options terminate on the Termination Date.
If Mr. Houlberg's employment terminates upon a change of control, all his
unvested options will immediately vest on the Termination Date. If Mr.
Houlberg's employment terminates for any reason other than upon the change of
control, all his unvested options will terminate on the Termination Date.
Manfred Hanuschek
We entered into an employment agreement with Manfred Hanuschek as of May 30,
2000, which was amended as of January 18, 2002. The following is the
description of the terms and conditions of the amended agreement. Pursuant to
the agreement, Mr. Hanuschek agreed to serve as our Chief Financial Officer
for an initial period of three years, commencing on January 18, 2002, unless
sooner terminated in accordance with the agreement, at the end of which the
agreement will automatically renew for successive periods of one year. Mr.
Hanuschek's annual base salary should be not less than $175,000. In addition
to the salary, Mr. Hanuschek may receive cash bonuses, as determined by our
president or board, in his or its sole discretion. Under the agreement, Mr.
Hanuschek is entitled to reimbursement of specified expenses and to
participation in any savings, 401(k), pension, group medical and other similar
plans which we may adopt.
If the agreement terminates upon a six months notice of termination sent by
either party to the agreement prior to the end of the initial three year term
or successive one year terms, Mr. Hanuschek will be entitled to a severance
payment equal to half of his then current annual salary, continued group
medical and dental benefits, and automobile allowance for a six month period
after the termination date.
Mr. Hanuschek can terminate the agreement in the event of a change of
control or change of management and is entitled to (i) a severance payment
equal to his then current annual salary, payable over a twelve month period
after the termination date and (ii) continued group medical and dental
benefits over the twelve
month period.
We can terminate Mr. Hanuschek's employment for cause at any time. Pursuant
to the agreement, the term "cause" means that Mr. Hanuschek (i) materially
fails to perform his duties under the agreement (other than the failure due to
Mr. Hanuschek's physical or mental illness), (ii) commits an act of dishonesty
or breach of trust, or acts in a manner which is inimical or injurious to our
business or interests, (iii) violates or breaches any of the provisions of the
agreement and fails to cure such breach within 30 days after the receipt of
written notice identifying the breach, (iv) intentionally acts or fails to
act, which results directly in gain to or personal enrichment of Mr. Hanuschek
and injury to us, or (v) is indicted for or convicted of a felony or any crime
involving larceny, embezzlement or moral turpitude.
The agreement prohibits Mr. Hanuschek from divulging confidential
information regarding our business except with our prior written consent or
except in the proper course of his employment. During Mr. Hanuschek's
employment and for a period of six months after the termination of the
agreement and, so long as the required severance payment continues to be made,
Mr. Hanuschek cannot, except with our prior written consent, engage in any
business or perform any actions in competition with our company.
15
William Miller
CTI Data Solutions (USA) Inc., our subsidiary ("CTI"), entered into an
employment agreement with William Miller as of February 12, 2001. Pursuant to
the agreement, Mr. Miller agreed to serve as Chief Operating Officer for an
initial period of three years, unless sooner terminated in accordance with the
agreement, at the end of which the agreement will automatically renew for
successive periods of one year. Mr. Miller's annual base salary should be not
less than $175,000. In addition to his salary, Mr. Miller may also receive
cash bonuses in the sole discretion of CTI's president or board. Under the
agreement, Mr. Miller is entitled to reimbursement of specified expenses and
to participation in any savings, 401(k), pension, group medical and other
similar plans, which CTI may adopt.
If the agreement terminates upon a six months notice of termination sent by
either party to the agreement prior to the end of the initial three year term
or successive one year terms, Mr. Miller will be entitled to a severance
payment equal to half of his then current annual salary payable over a six
month period after the termination date. Mr. Miller can terminate the
agreement in the event of our change of control and is entitled to a severance
payment equal to his then current annual salary, payable over a twelve month
period after the termination date.
CTI can terminate Mr. Miller's employment for cause at any time. Pursuant to
the agreement, the term "cause" means that Mr. Miller (i) fails to diligently
perform his duties under the agreement (other than the failure due to Mr.
Miller's physical or mental illness), (ii) commits an act of dishonesty or
breach of trust, or acts in a manner which is inimical or injurious to our
business or interests, (iii) violates or breaches any of the provisions of the
agreement and fails to cure such breach within 30 days after the receipt of
written notice identifying the breach, (iv) intentionally acts or fails to
act, which results directly in gain to or personal enrichment of Mr. Miller
and injury to CTI, or (v) is indicted for or convicted of a felony or any
crime involving larceny, embezzlement or moral turpitude.
The agreement prohibits Mr. Miller from divulging confidential information
regarding CTI's business, except with CTI's prior written consent or except in
the proper course of his employment. During Mr. Miller's employment and for a
period of six months after the termination of the agreement, Mr. Miller
cannot, except with CTI's prior written consent, engage in any business in
competition with CTI and, for a period of one year after the termination of
his employment, Mr. Miller cannot solicit any person in competition with CTI's
business.
Adrian Burt
CTI Data Solutions Limited, our United Kingdom subsidiary ("CTI Ltd."),
entered into an executive service agreement with Adrian Burt as of February 1,
2001, pursuant to which Mr. Burt agreed to serve as managing director. Mr.
Burt's employment commenced in February 1998. Previous service with Databit
Limited/Siemens plc from August 1, 1997 counts as part of Mr. Burt's
continuous service with CTI Ltd.
CTI Ltd. will pay Mr. Burt an annual salary of 90,000 pounds. The salary
will be reviewed annually in the light of CTI Ltd.'s performance and Mr.
Burt's contribution to it. CTI Ltd. will pay Mr. Burt guaranteed commission of
10,000 pounds per annum. Mr. Burt will be eligible to participate in such
management bonus programs of the holding company as may be agreed with CTI
Ltd. from time to time. Mr. Burt will also be entitled to reimbursement of
specified expenses and to membership of such private medical care or pension
scheme as CTI Ltd. may from time to time provide.
Mr. Burt's employment will continue until terminated in accordance with the
agreement. If the employment is terminated pursuant to a notice of termination
delivered by either party, CTI Ltd. will pay Mr. Burt an amount equivalent to
an additional six months' salary and six months' guaranteed commission. Mr.
Burt's employment will in any event terminate without further notice on his
65th birthday.
CTI Ltd. can terminate Mr. Burt's employment, without any further payment or
compensation, if Mr. Burt: (i) commits an act of gross misconduct, including
without limitation dishonesty, (ii) commits any material breach of any term of
the agreement, which is either not capable of remedy or is not remedied within
30 days after notice specifying the breach, (iii) is adjudged bankrupt or
makes any arrangement or composition with his creditors generally, (iv) is
convicted of any criminal offence; (v) becomes of unsound mind or otherwise
unable to perform his duties due to problems of mental health; (vi) is
disqualified from acting as a director in any company or
16
otherwise than with the consent of CTI Ltd., resigns as a director of CTI Ltd.
and/or any group company, (vii) is, in the reasonable opinion of the board,
incapable of properly performing his duties under the agreement, or (viii)
without reasonable cause, willfully neglects or refuses to discharge his
duties.
Under the agreement, Mr. Burt is prohibited from disclosing the confidential
information of CTI Ltd. during the term of the agreement and after the
termination of the agreement. Mr. Burt cannot, during the term of the
agreement and for a period of six months after the termination of the
agreement, engage in a business or perform any actions in competition with CTI
Ltd.
17
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During the fiscal year ended March 31, 2000, Mr. Bevington, our former
director, received 30,000 stock options pursuant to the Stock Option and
Restricted Stock Plan upon his appointment to the board of directors, and Mr.
Hunnewell, our former director, received 10,000 shares of our stock in
recognition of advisory services that he provided to us in connection with the
Centillion Merger.
As part of the Centillion Merger, Anthony Johns, our director and former
President and Chief Executive Officer, received options to purchase 300,000
shares at an exercise price of $1.09 each, 200,000 of which Mr. Johns
subsequently agreed to cancel. The remaining options to purchase 100,000
shares vested and became exercisable in November 2000. These options were
issued to compensate Mr. Johns for his forfeiture of funds under a profit-
sharing agreement with us. In addition, prior to the Centillion Merger, a
number of our former officers and directors also had options to purchase an
aggregate of 200,000 shares of our common stock, which accelerated and vested
as a result of the Centillion Merger.
Mr. Johns was provided with reimbursement for housing in Indianapolis. We
rented a house for our visiting employees, one of whom was Mr. Johns, from an
entity affiliated with Mr. Garrison, our chairman, and such costs amounted to
approximately $15,000 in 2001.
We made certain severance payments to Mr. Johns, upon his resignation as our
President and Chief Executive Officer. See "Executive Officers -- Employment
Agreements."
As part of the Centillion Merger, we entered into certain transactions with
entities affiliated with former Centillion stockholders who now serve as our
directors. See "Change in Control."
We are currently leasing 20,003 square feet of office space at 333 North
Alabama Street, Indianapolis, Indiana. The landlord is an affiliate of Harold
Garrison, our chairman, and Salah Osseiran, a beneficial owner of 55.7% of our
Class A Common Stock and 83.7% of our Class B Common Stock. We incurred
$362,594 and $445,324 in rent expense for the years ended December 31, 2001
and 2000. We also paid $237,155 in leasehold improvements to the same landlord
in connection with the relocation to new office space in 2001. We believe the
lease and leasehold improvements are representative of current market values.
We incurred legal expenses of $3,089,026 and $780,958 during 2001 and 2000,
respectively, to a law firm of which Mr. Leeds, our Vice Chairman, is a
partner. Such expenses relate primarily to fees and expenses associated with
patent enforcement activities and general corporate issues.
We incurred $191,000 in fees and $55,000 in expenses associated with our
board of directors activities in 2001.
We provided certain administrative services to our former subsidiaries
during the fiscal years ended December 31, 2001 and 2000, which amounted to
approximately $59,000 and $160,000, respectively. At December 31, 2001 and
2000, we had a receivable from these entities of approximately $21,000 and
$527,000, respectively.
At December 31, 2000, we had an outstanding note receivable from former CTI
Group of $562,911. This note was secured by the accounts receivable of the
former CTI Group payable upon the effective date of the Centillion Merger. On
February 12, 2001, this obligation was repaid in connection with the
Centillion Merger.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires our directors, executive officers
and persons who own more than 10% of our Class A Common Stock (collectively,
"Insiders") to file reports of ownership and changes in their ownership of our
Class A Common Stock with the Securities and Exchange Commission. The
regulations of the Securities and Exchange Commission require Insiders to
furnish us with copies of all Section 16(a) forms they file. Based solely on
our review of the copies of such forms received by us, we believe that the
Insiders complied with all applicable Section 16(a) filing requirements for
fiscal year 2001.
18
PROPOSAL TWO
APPROVAL OF AMENDED AND RESTATED STOCK OPTION
AND RESTRICTED STOCK PLAN
General
In 1995, we adopted the Stock Option and Restricted Stock Plan (the "Plan")
with 600,000 shares of our common stock available for issuance under the Plan.
On February 12, 2001, our stockholders amended the Plan to authorize
additional 2,000,000 shares of our common stock to be issued under the Plan.
On February 28, 2002, our board of directors approved the amended and restated
Plan (the "Amended and Restated Plan") to increase the number of shares
issuable under it by additional 2,000,000 shares and to make certain other
changes discussed below, subject to the approval of our stockholders. Approval
of this Proposal Two will constitute approval of these changes. The principal
purpose of the Amended and Restated Plan is to attract and retain officers,
other employees, directors, contractors and consultants for our company and
our subsidiaries through the granting of options and restricted stock, thereby
encouraging them to acquire or increase a proprietary interest in our company.
We believe that the Amended and Restated Plan will cause its participants to
contribute to our growth thereby benefiting our stockholders.
Summary of Amended and Restated Plan
Set forth below is a summary of certain provisions of the Amended and
Restated Plan, attached to this proxy statement as Appendix II. This summary
is qualified in its entirety by the detailed provisions of the Amended and
Restated Plan.
New Provisions of Amended and Restated Plan
Our board of directors has approved, subject to the stockholders' approval,
the following amendments that are now part of the Amended and Restated Plan,
as described in the Summary of the Amended and Restated Plan:
o an increase of the number of shares issuable under the Amended and
Restated Plan by 2,000,000 shares to the total of 4,600,000 shares
o a change of the definition of who may serve on the Committee, as defined
below, administering the Amended and Restated Plan and other conforming
changes to comply with the amended regulations of the Securities and
Exchange Commission promulgated pursuant to Section 16 of the Exchange Act
o a change of the administration of the Director's Grant, as defined below,
to eliminate the automatic award of the Director's Grant and to provide
that such grant can be awarded only in the sole discretion of our board of
directors
o an increase of the maximum number of shares of our common stock subject to
Grants, as defined below, that can be awarded to any eligible participant
from 600,000 shares to 4,000,000 shares
o a change of the termination and effective date provisions, as described in
section "Termination and Effective Date" below
Eligible Participants
Eligible participants of the Amended and Restated Plan include:
(i) designated officers and other employees of our company and our
subsidiaries;
(ii) members of our board of directors; and
(iii) independent contractors and consultants who perform services for us.
At present, we have seven directors and approximately 120 employees,
including four executive officers.
19
Grants
Grants under the Amended and Restated Plan include: (i) an incentive stock
option ("ISO"), (ii) a nonqualified stock option ("NQSO"), and (iii) a
restricted stock grant ("Restricted Stock Grant") (ISO, NQSO and Restricted
Stock Grant individually, a "Grant" and, collectively, "Grants").
The Amended and Restated Plan also provides for a special grant of NQSOs to
purchase up to 30,000 shares over a three year period to be made only to
members of the board of directors who are not our employees and who serve on
the committee of the board of directors administering the Amended and Restated
Plan ("Director's Grant") only if approved by the board of directors. Under
the terms of the Plan prior to the amendment and restatement, the Director's
Grant was automatic and not subject to the discretion of the board of
directors. Only officers or other employees of our company or our subsidiaries
are eligible to receive ISOs. All eligible participants may receive NQSOs and
Restricted Stock Grants.
The aggregate number of shares of our common stock that may be issued under
the Amended and Restricted Plan is 4,600,000, including 2,000,000 shares
subject to the approval of our stockholders at the Annual Meeting. The maximum
number of shares of our common stock subject to Grants awarded to any eligible
participant cannot exceed 4,000,000 shares, except in the case of a Director's
Grant that cannot exceed NQSOs to purchase 30,000 shares during a three-year
period.
Administration
Generally, our board of directors or a committee of the board comprised of
at least 2 members (collectively, the "Committee") may administer and
interpret the Amended and Restated Plan. Prior to the amendment and
restatement of the Plan, the Plan required each Committee member to be an
"outside director" within the meaning of Section 162(m) of the Internal
Revenue Code and a "disinterested person" as defined in Rule 16b-3 under the
Exchange Act. If a committee is utilized to administer this plan, the Amended
and Restated Plan states that both of the committee members should be "non-
employee directors", as defined in Rule 16b-3(b)(3) under the Exchange Act due
to the changes in the regulations promulgated by the Securities and Exchange
Commission pursuant to Section 16 of the Exchange Act. Pursuant to Rule 16b-
3(b)(3), a non-employee director means a director who: (i) is not currently
employed by us or any of our subsidiaries; (ii) does not receive compensation,
either directly or indirectly, from us or our subsidiaries, for services
rendered as a consultant or in any capacity other than as a director, except
for an amount that does not exceed $60,000; and (iii) does not have interest
in any transaction and is not engaged in a business relationship which should
be disclosed under "Certain Relationships and Related Transactions." A
committee will be established with board members that meet these criteria or
the full board will make grant determinations.
The Committee has full authority to determine the persons eligible to
receive Grants, the type, size, and terms of Grants, the time when Grants will
be made, the duration of any exercise or restriction period and any
restrictions on resale applicable to the shares to be issued or transferred
pursuant to the Grants.
Amendments
The Committee has full authority to amend the Amended and Restated Plan.
Stockholder approval, however, is required to:
(i) materially increase the benefits accruing to eligible participants;
(ii) increase the number of shares available under the Amended and
Restricted Plan;
(iii)modify the eligibility requirements for participation in the Amended
and Restricted Plan; or
(iv) modify provisions for determining the fair market value of our
common stock under the Amended and Restricted Plan.
Incentive Stock Options and Non-Qualified Stock Options
The exercise price of an ISO is the higher of the fair market value or the
book value of our common stock on the date of the grant. If a grantee of an
ISO owns common stock representing more than 10% of the total combined voting
power of all classes of our stock, the option price per share in the case of
an ISO will not be less than 110% of the fair market value of a share of
common stock on the date of the grant and such option is not
20
exercisable after the expiration of five years from the date of the grant. The
exercise price of a stock option is payable in cash, shares of our common
stock already owned by the grantee, or a combination of cash and shares.
The Committee determines the option exercise period of each stock option.
The holder of stock options, other than the holder of 10% of the total
combined voting power of our stock, may exercise such options at a date no
later than ten years from the date of the grant. An exercise period may
terminate earlier because the grantee dies or becomes disabled, or because we
terminate the grantee's employment or relationship with us.
The aggregate fair market value of the common stock, determined as of the
date of the grant, with respect to which ISOs under the Amended and Restricted
Plan on any other stock option plan of our company are exercisable for the
first time by a grantee during any calendar year cannot exceed $100,000.
Committee Member Grants
A non-employee director who serves on the Committee may receive the
Director's Grant -- a grant of NQSOs to purchase 30,000 shares of our common
stock at the commencement of and in consideration for their service to us as a
Committee member. The Plan provided for an automatic grant of NQSOs to
purchase 30,000 shares to a Committee member, and the board of directors was
given limited power to administer such Director's Grants. In the Amended and
Restated Plan, provisions regarding the automatic Director's Grant are deleted
and such grants may be awarded only in the sole discretion of the board of
directors.
NQSOs to purchase 15,000 shares of common stock of a Director's Grant vest
on the first anniversary of the date of such grant, and NQSOs to purchase
7,500 shares of common stock vest on each of the second and third
anniversaries of the date of such grant, provided such non-employee director
is then serving as a director. At the end of each successive three-year
period, such non-employee director receives an additional grant of NQSOs to
purchase 30,000 shares of common stock. This additional Director's Grant is
subject to the same vesting schedule, provided the non-employee director has
continuously served as a director during each such three-year period. If a
Committee member is not serving as a director on the first, second or third
anniversary of the date of such grant, then any such Director's Grant
terminates as to all shares covered by the Director's Grant which have not
vested. Director's Grants are exercisable for a period of ten years from the
date of grant. Upon a change of control, or a sale or exchange of our assets,
or our dissolution, liquidation, merger or consolidation, in which we are not
the surviving corporation, vesting restrictions imposed under any Director's
Grant will immediately lapse.
Restricted Stock Grants
The Committee may issue restricted stock to eligible participants pursuant
to an incentive or long range compensation plan, program or contract approved
by the Committee. The Committee may issue such shares of common stock in
consideration for cash or services rendered having a value, as determined by
the board, at least equal to the par value of the common stock. The Committee
determines the number of shares of common stock that will be granted in each
Restricted Stock Grant.
If we terminate the recipient's relationship with us before the restrictions
lapse, all shares issued pursuant to the Grant under which restrictions have
not lapsed yet, will immediately revert to us, unless the Committee determines
otherwise.
Assignability
A grantee may not assign or otherwise transfer the Grant except by will and
by the Committee and its sole discretion, or the laws of descent and
distribution. However, an eligible participant may assign the Grant, other
than ISOs, to the extent permitted under Rule 16b-3 under the Exchange Act and
by the Committee in its sole discretion, pursuant to a qualified domestic
relations order as defined under the Internal Revenue Code or Title I of
ERISA, and to a trust for the benefit of a member of the grantee's immediate
family.
Certain Corporate Changes
In the event of a change of control, grantees may immediately exercise all
outstanding stock options and all restrictions on any restricted stock will
immediately lapse. Upon a sale or exchange of all or substantially all of our
assets or upon our dissolution, liquidation, merger or consolidation where we
are not the surviving corporation, each such grantee has the right to exercise
in full any Grants, including Director's Grant, not previously exercised,
within ten days after we send a written notice of such event. Any Grants not
so exercised
21
will lapse. Upon a merger or consolidation where we survive, the Committee, in
its sole discretion, may elect to give grantees notice of such event. If
notice is given, the grantee has the right to exercise the Grant, including
the Director's Grant, within ten days after such written notice is sent. Any
Grants not so exercised will lapse.
Adjustments
If any change is made to our common stock as a result of a merger,
consolidation, reorganization, recapitalization, stock dividend, stock split,
combination of shares, or exchange of shares, or any other change in capital
structure made without receipt of consideration, then unless such event
results in the termination of all outstanding Grants the Committee will
preserve the value of the outstanding Grants and Director's Grants by
adjusting the maximum number and class of shares issuable under the Amended
and Restated Plan and by making adjustments to the number and class of shares,
or the exercise price of options.
Termination and Effective Date
Prior to its amendment and restatement, the Plan stated that it would
terminate on January 11, 2005. This provision was deleted in the Amended and
Restated Plan, and the Amended and Restated Plan now states that ISOs should
not be granted after the expiration of 10 years from January 11, 1995.
Prior to its amendment and restatement, the Plan provided that it would be
effective as of January 11, 1995, subject to the approval of our stockholders
within 12 months after January 11, 1995. The Amended and Restated Plan now
provides that the Plan was effective as of January 11, 1995 with respect to
600,000 shares of our common stock. The Plan was amended on February 12, 2001
to increase the number of shares of common stock issuable under the Plan to
2,600,000. The Amended and Restated Plan will be effective as of February 28,
2002 with respect to additional 2,000,000 shares of common stock issuable
under the Amended and Restated Plan, subject to the approval of our
stockholders within 12 months after February 28, 2002.
Federal Income Tax Consequences
THE FOLLOWING INFORMATION IS NOT INTENDED TO BE A COMPLETE DISCUSSION OF THE
FEDERAL INCOME TAX CONSEQUENCES OF PARTICIPATION IN THE AMENDED AND RESTATED
PLAN AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE INTERNAL REVENUE
CODE, AND THE REGULATIONS ADOPTED PURSUANT THERETO. THE PROVISIONS OF THE
INTERNAL REVENUE CODE DESCRIBED IN THIS SECTION INCLUDE CURRENT TAX LAW ONLY
AND DO NOT REFLECT ANY PROPOSALS TO REVISE CURRENT TAX LAW.
Incentive Stock Options
Generally, under the Internal Revenue Code, an optionee will not realize
taxable income by reason of the grant or the exercise of an ISO (see, however,
discussion of alternative minimum tax below) granted pursuant to the Amended
and Restated Plan. If an optionee exercises an ISO and does not dispose of the
shares until the later of (i) two years from the date the option was granted
and (ii) one year from the date of exercise, the entire gain, if any, realized
upon disposition of such shares will be taxable to the optionee as long-term
capital gain, and we will not be entitled to any deduction. If an optionee
disposes of the shares within the period of two years from the date of grant
or one year from the date of exercise (a "disqualifying disposition"), the
optionee generally will realize ordinary income in the year of disposition and
we will receive a corresponding deduction, in an amount equal to the excess of
(1) the lesser of (a) the amount, if any, realized on the disposition and (b)
the fair market value of the shares on the date the option was exercised over
(2) the option price. Any additional gain realized on the disposition will be
long-term or short-term capital gain and any loss will be long-term or short-
term capital loss. The optionee will be considered to have disposed of a share
if he sells, exchanges, makes a gift of or transfers legal title to the share
(except transfers, among others, by pledge, on death or to a spouse). If the
disposition is by sale or exchange, the optionee's tax basis will equal the
amount paid for the share plus any ordinary income realized as a result of the
disqualifying disposition.
The exercise of an ISO may subject the optionee to the alternative minimum
tax. The amount by which the fair market value of the shares purchased at the
time of the exercise exceeds the option exercise price is an adjustment for
purposes of computing the so-called alternative minimum tax. In the event of a
disqualifying disposition of the shares in the same taxable year as exercise
of the ISO, no adjustment is then required for
22
purposes of the alternative minimum tax, but regular income tax, as described
above, may result from such disqualifying disposition.
An optionee who surrenders shares as payment of the exercise price of his
ISO generally will not recognize gain or loss on his surrender of such shares.
The surrender of shares previously acquired upon exercise of an ISO in payment
of the exercise price of another ISO, is, however, a "disposition" of such
stock. If the incentive stock option holding period requirements described
above have not been satisfied with respect to such stock, such disposition
will be a disqualifying disposition that may cause the optionee to recognize
ordinary income as discussed above.
Under the Internal Revenue Code, all of the shares received by an optionee
upon exercise of an ISO by surrendering shares will be subject to the ISO
holding period requirements. Of those shares, a number of shares (the
"Exchange Shares") equal to the number of shares surrendered by the optionee
will have the same tax basis for capital gains purposes (increased by any
ordinary income recognized as a result of a disqualifying disposition of the
surrendered shares if they were ISO shares) and the same capital gains holding
period as the shares surrendered. For purposes of determining ordinary income
upon a subsequent disqualifying disposition of the Exchange Shares, the amount
paid for such shares will be deemed to be the fair market value of the shares
surrendered. The balance of the shares received by the optionee will have a
tax basis (and a deemed purchase price) of zero and a capital gains holding
period beginning on the date of exercise. The ISO holding period for all
shares will be the same as if the option had been exercised for cash.
Non-Qualified Stock Options
Generally, there will be no federal income tax consequences to either the
optionee or us on the grant of NQSOs pursuant to the Amended and Restated
Plan. On the exercise of a NQSO, the optionee has taxable ordinary income
equal to the excess of the fair market value of the shares acquired on the
exercise date over the option price of the shares. We will be entitled to a
federal income tax deduction (subject to the limitations contained in Section
162(m) of the Internal Revenue Code) in an amount equal to such excess,
provided that we comply with applicable reporting rules.
Upon the sale of stock acquired by exercise of a NQSO, optionees will
realize long-term or short-term capital gain or loss depending upon their
holding period for such stock. Capital losses are deductible only to the
extent of capital gains for the year plus $3,000 for individuals.
An optionee who surrenders shares in payment of the exercise price of a NQSO
will not recognize gain or loss with respect to the shares so delivered unless
such shares were acquired pursuant to the exercise of an ISO and the delivery
of such shares is a disqualifying disposition. See "Incentive Stock Options."
The optionee will recognize ordinary income on the exercise of the NQSO as
described above. Of the shares received in such an exchange, that number of
shares equal to the number of shares surrendered have the same tax basis and
capital gains holding period as the shares surrendered. The balance of shares
received will have a tax basis equal to their fair market value on the date of
exercise and the capital gains holding period will begin on the date of
exercise.
In the event of a permitted transfer by gift of a NQSO, the transferor will
remain taxable on the ordinary income realized as and when such NQSO is
exercised by the transferee. All other tax consequences described above will
be applicable to the transferee of the NQSO. A permitted transfer by gift of a
NQSO may result in federal transfer taxes (gift tax) to the transferor at such
time as the option is transferred, as well as such later time or times as the
NQSO vests, if not fully vested on the date of the initial transfer.
Limitation on Our Deduction
Section 162(m) of the Internal Revenue Code will generally limit our federal
income tax deduction for compensation paid in any year to our chief executive
officer and our four highest paid executive officers to $1,000,000, to the
extent that such compensation is not "performance based." Under Treasury
regulations, a stock option will, in general, qualify as "performance based"
compensation if it (i) has an exercise price of not less than the fair market
value of the underlying stock on the date of grant, (ii) is granted under a
plan that limits the number of shares for which options may be granted to an
employee during a specified period, which plan is approved by a majority of
the stockholders entitled to vote thereon, and (iii) is granted and
administered by a compensation committee consisting solely of at least two
outside directors (as defined in Section 162(m) of the
23
Internal Revenue Code). If a stock option to an executive referred to above is
not "performance based", the amount that would otherwise be deductible by us
in respect of such stock option will be disallowed to the extent that the
executive's aggregate non-performance based compensation paid in the relevant
year exceeds $1,000,000.
Restricted Stock Grant
The Restricted Stock Grant will not, by itself, result in the recognition of
taxable income to the participant nor entitle us to a deduction at the time of
such grant.
In the case of participants who are subject to Section 16(b) of the Exchange
Act, which provides that any profit realized by an officer, director or 10%
beneficial owner of our Class A Common Stock, referred to as Section 16
insider, from any purchase and sale or sale and purchase of stock within any
period of six months is recoverable by us, Section 83 of the Internal Revenue
Code may postpone the recognition of income.
Holders of restricted shares will recognize ordinary income on the date that
the restricted shares are no longer subject to a substantial risk of
forfeiture, in an amount equal to the fair market value of the shares on that
date. A holder of restricted shares, including a Section 16 insider, may
generally elect under Section 83(b) of the Internal Revenue Code to recognize
ordinary income in the amount of the fair market value of the restricted
shares on the date of the grant of the restricted shares. The election under
Section 83(b) must be made by the participant holding restricted shares within
30 days of the grant of the restricted shares. Provided that we meet our
federal reporting obligations with respect to the restricted shares, we will
be entitled to a tax deduction equal to the amount of ordinary income
recognized by the holder. Holders of restricted shares will also recognize
ordinary income equal to any dividend or dividend-equivalent payments when
such payments are received. If the holder of the restricted shares makes a
Section 83(b) election and subsequently forfeits the restricted shares, the
holder will not be entitled to a deduction for the amount previously included
in income.
Grants Under the Amended and Restated Plan
The following table sets forth information regarding the grants awarded
under the Amended and Restated Plan as of the Record Date:
Number of
Name and Position Number Restricted
----------------- of Options Shares
---------- ----------
Bradley Houlberg, President and Chief Executive
Officer............................................ 560,000 --
Anthony Johns, former President and Chief Executive
Officer............................................ --(1) --
Manfred Hanuschek, Secretary and Chief Financial
Officer............................................ 50,000 --
William Miller, Chief Operating Officer ............. 50,000 --
Adrian Burt, UK Managing Director ................... 50,000 --
All current executive officers as a group ........... 710,000 --
All current directors who are not executive officers
as a group......................................... 30,000 --
Harold Garrison, nominee for election as a director . -- --
Steve Bartkiw, nominee for election as a director ... -- --
Michael Leeds, nominee for election as a director ... -- --
Tom Grein, nominee for election as a director ....... -- --
Each other person who received 5% of options or
restricted stock................................... -- --
All employees, including all current officers who
are not executive officers, as a group............. 770,000 --
- ---------------
(1) As of the Record Date, Mr. Johns owned options to purchase 100,000 shares
of our common stock granted to him outside of the Plan. These options
expired on April 30, 2002.
There were no option grants to directors or officers during 2001.
Market Value of Shares of Class A Common Stock
The closing price of our Class A Common Stock, as quoted on the Over-the-
Counter Bulletin Board for April 15, 2002, was $0.53.
OUR BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" THE APPROVAL
OF THE AMENDED AND RESTATED PLAN.
24
PROPOSAL THREE
RATIFICATION OF APPOINTMENT OF PRICEWATERHOUSECOOPERS LLP
AS INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP currently serves as our principal accountants and
independent accountants and conducted the audit of our accounts for the fiscal
year 2001. Subject to stockholder ratification, the board of directors, upon
recommendation of the audit committee, appointed PricewaterhouseCoopers LLP to
serve as our principal accountants and independent accountants for the fiscal
year 2002.
Selection of a company's independent accountants is not required to be
submitted to a vote of the stockholders for ratification. However, the board
of directors is submitting this matter to the stockholders as a matter of good
corporate practice. If the stockholders fail to ratify the selection, the
audit committee and the board of directors will reconsider whether to retain
PricewaterhouseCoopers LLP, and may retain that firm or another without re-
submitting the matter to our stockholders. Even if the appointment is
ratified, the audit committee and the board of directors may, in their
discretion, direct the appointment of different independent accountants at any
time during the year if they determine that such change would be in our best
interests and in the best interests of our stockholders.
Representatives of PricewaterhouseCoopers LLP are expected to attend the
Annual Meeting. Therefore, representatives of PricewaterhouseCoopers LLP will
be available to make a statement and to respond to questions at the Annual
Meeting.
Change in Accountants
The independent auditing firm of Deloitte & Touche LLP audited our financial
statements for the fiscal years ended March 31, 2000 and 1999. Because
Centillion is the successor company of the Centillion Merger for accounting
purposes, Centillion's accountants, Olive LLP, replaced Deloitte & Touche LLP as
of April 27, 2001. Our decision to change accountants was the result of the
Centillion Merger and it was approved by our board of directors.
Deloitte & Touche LLP's reports on our financial statements for the fiscal
years ended March 31, 2000 and 1999 did not contain an adverse opinion or a
disclaimer of opinion and were not modified as to uncertainty, audit scope or
accounting principles, except that such reports included an explanatory
paragraph identifying certain matters that raised substantial doubt about our
ability to continue as a going concern.
During our fiscal years ended March 31, 2000 and 1999 and subsequent interim
period preceding Deloitte & Touche LLP's dismissal, there were no
disagreements on any matter of accounting principles or practices, financial
statement disclosure, or auditing scope or procedure as well as no reportable
events as described in the rules of the Securities and Exchange Commission.
Olive LLP was not consulted on our behalf regarding the application of
accounting principles to a specific transaction or the type of audit opinion
that might be rendered on our financial statements.
On May 7, 2001, we engaged PricewaterhouseCoopers LLP as our independent
accountants to replace BKD LLP (formerly Olive LLP). Our audit committee
approved this decision to change accountants. Due to the Centillion Merger,
our board of directors adopted December 31, as our fiscal year which was
Centillion's fiscal year. PricewaterhouseCoopers LLP audited our financial
statements for the fiscal year ended December 31, 2001. BKD LLP's report for
the fiscal year 2000 stated that BKD LLP audited the financial statements of
"CTI Group (Holdings) Inc., formerly Centillion Data Systems, Inc." BKD LLP's
report on our financial statements as a successor to Centillion for the fiscal
year ended December 31, 2000 did not contain an adverse opinion or a
disclaimer of opinion and was not modified as to uncertainty, audit scope or
accounting principles.
During the period of BKD LLP's engagement, there were no disagreements with
BKD LLP on any matter of accounting principles or practices, financial
statement disclosure, or auditing scope or procedure as well as no reportable
events as described in the rules of the Securities and Exchange Commission.
25
PricewaterhouseCoopers LLP was not consulted on our behalf regarding the
application of accounting principles to a specific transaction or the type of
audit opinion that might be rendered on our financial statements.
Audit Fees
The aggregate fees billed by PricewaterhouseCoopers LLP for professional
services rendered for the audit of our financial statements for the fiscal
year ended December 31, 2001 and the reviews of the financial statements
included in our Forms 10-QSB for that fiscal year were $173,000.
The aggregate fees billed by Deloitte & Touche LLP for professional services
rendered for the reviews of our financial statements included in our Forms 10-
QSB in the fiscal year ended December 31, 2001 were $0.
The aggregate fees billed by BKD LLP for professional services rendered for
the reviews of our financial statements included in our Forms 10-QSB in the
fiscal year ended December 31, 2001 were $0.
Financial Information Systems Design and Implementation Fees
The aggregate fees billed by PricewaterhouseCoopers LLP for professional
services rendered by it with respect to financial information on systems
design and implementation for the fiscal year ended December 31, 2001 totaled
$0.
The aggregate fees billed by Deloitte & Touche LLP for professional services
rendered by it with respect to financial information on systems design and
implementation for the fiscal year ended December 31, 2001 totaled $0.
The aggregate fees billed by BKD LLP for professional services rendered by
it with respect to financial information on systems design and implementation
for the fiscal year ended December 31, 2001 totaled $0.
All Other Fees
The aggregate fees billed for services rendered by PricewaterhouseCoopers
LLP, other than for services covered under "Audit Fees" and "Financial
Information Systems Design and Implementation Fees", totaled $85,000 for the
fiscal year ended December 31, 2001.
The aggregate fees billed for services rendered by Deloitte & Touch LLP,
other than for services covered under "Audit Fees" and "Financial Information
Systems Design and Implementation Fees", totaled $0 for the fiscal year ended
December 31, 2001.
The aggregate fees billed for services rendered by BKD LLP, other than for
services covered under "Audit Fees" and "Financial Information Systems Design
and Implementation Fees", totaled $142,693 for the fiscal year ended December
31, 2001.
Our audit committee considered the services provided by
PricewaterhouseCoopers LLP, Deloitte & Touche LLP and BKD LLP in addition to
the services rendered by them in exchange for audit fees, as discussed above,
and determined that the provision of such additional services is compatible
with PricewaterhouseCoopers LLP, Deloitte & Touche LLP and BKD LLP maintaining
their independence.
OUR BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" THE
RATIFICATION OF THE APPOINTMENT OF PRICEWATERHOUSECOOPERS LLP AS OUR
INDEPENDENT ACCOUNTANTS.
26
OTHER MATTERS
As of the date of this proxy statement, our board of directors does not know
of any matters that will be presented for consideration at the Annual Meeting
other than as described in this proxy statement. If any other matters should
properly come before the Annual Meeting or any adjournment or postponement of
the Annual Meeting and be voted upon, the persons named as proxies in the
accompanying proxy will vote the proxy cards in their discretion in accordance
with their best judgment and in the manner they believe to be in our best
interests.
STOCKHOLDER PROPOSALS
The deadline for providing us timely notice of any stockholder proposal to
be submitted outside of the Rule 14a-8 process for consideration at our 2003
Annual Meeting of Stockholders (the "2003 Meeting") will be March 22, 2003. As
to all such matters which we do not have notice on or prior to March 22, 2003
discretionary authority will be granted to the persons designated in our proxy
related to the 2003 Meeting to vote on such proposal.
In addition, Rule 14a-8 requirements applicable to inclusion of stockholder
proposals in our proxy materials related to the 2003 Meeting require that a
stockholder proposal regarding the 2003 Meeting must be submitted to us at our
office located at CTI Group (Holdings) Inc., 333 North Alabama St., Suite 240,
Indianapolis, IN 46204, by or on January 6, 2003 to receive consideration for
inclusion in our proxy materials for the 2003 Meeting. Any such proposal must
also comply with the proxy rules, including Rule 14a-8.
ANNUAL REPORT
THIS PROXY STATEMENT IS ACCOMPANIED BY OUR ANNUAL REPORT FOR THE FISCAL YEAR
ENDED DECEMBER 31, 2001. EACH PERSON SOLICITED UNDER THIS PROXY STATEMENT CAN
OBTAIN A COPY OF OUR ANNUAL REPORT ON FORM 10-KSB FOR THE FISCAL YEAR ENDED
DECEMBER 31, 2001 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION,
WITHOUT CHARGE, EXCEPT FOR THE EXHIBITS TO THE REPORT, BY SENDING A WRITTEN
REQUEST TO CTI GROUP (HOLDINGS) INC., 333 NORTH ALABAMA ST., SUITE 240,
INDIANAPOLIS, IN 46204, ATTN.: MANFRED HANUSCHEK, SECRETARY AND CHIEF
FINANCIAL OFFICER.
By Order of the Board of Directors
Manfred Hanuschek
Secretary and Chief Financial Officer
27
APPENDIX I
CTI GROUP (HOLDINGS) INC.
AUDIT COMMITTEE CHARTER
Composition
There shall be a committee of the board of directors (the "Board") to be
known as the audit committee.
Each member of the audit committee shall be able to read and understand
fundamental financial statements, including the company's balance sheet,
income statement, cash flow statement, or will become able to do so within a
reasonable period of time after his or her appointment to the audit committee.
In addition, at least one member of the audit committee shall have past
employment experience in finance or accounting, requisite professional
certification in accounting or any other comparable experience or background
which results in the individual's financial sophistication, including being or
having been a chief executive officer, chief financial officer or other senior
officer with financial oversight responsibilities.
The Board shall elect or appoint a chairman of the audit committee who will
have the authority to act on behalf of the audit committee between meetings.
Responsibilities
The responsibilities of the audit committee are as follows:
o Ensure its receipt from the outside accountants of a formal written
statement delineating all relationships between the outside auditor and
the company consistent with the Independence Standards Board
Standard 1.
o Actively engage in a dialogue with the outside auditor with respect to any
disclosed relationships or services that may impact the objectivity and
independence of the outside auditor and be responsible for taking, or
recommending that the board of directors take appropriate action to
oversee the independence of the outside auditor.
o In view of the outside auditor's ultimate accountability to the Board and
the audit committee, as representatives of the shareholders, the audit
committee, acting together with the Board, has the ultimate authority and
responsibility to select, evaluate, and, where appropriate, replace the
outside auditor (or nominate an outside auditor for shareholder approval
in any proxy statement).
o Review with the outside auditor, and financial and accounting personnel,
the adequacy and effectiveness of the accounting and financial controls of
the company, and elicit any recommendations for the improvement of such
internal control procedures or particular areas where new or more detailed
controls or procedures are desirable.
o Consider, in consultation with the outside auditor and management of the
company, the audit scope and procedures.
o Review the financial statements contained in the annual report to
shareholders with management and the outside auditor to determine that the
outside auditor is satisfied with the disclosure and content of the
financial statements to be presented to the shareholders.
o Meet with the internal auditor, outside auditor or the management
privately to discuss any matters that the audit committee, the internal
auditor, the outside auditor or the management believe should be discussed
privately with the audit committee.
o Review and reassess the adequacy of the committee's charter annually.
o Make such other recommendations to the Board on such matters, within the
scope of its functions, as may come to its attention and which in its
discretion warrant consideration by the Board.
Limitations
The audit committee is responsible for the duties set forth in this charter
but is not responsible for either the preparation of the financial statements
or the auditing of the financial statements. Management has the responsibility
for preparing the financial statements and implementing internal controls and
the independent accountants have the responsibility for auditing the financial
statements and monitoring the effectiveness of the internal controls. The
review of the financial statements by the audit committee is not of the same
quality as the audit performed by the independent accountants. In carrying out
its responsibilities, the audit committee believes its policies and procedures
should remain flexible in order to best react to a changing environment.
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APPENDIX II
CTI GROUP (HOLDINGS) INC.
AMENDED AND RESTATED STOCK OPTION AND RESTRICTED
STOCK PLAN
The purpose of the Stock Option and Restricted Stock Plan (the "Plan") of
CTI Group (Holdings), Inc. (the "Company") is to promote the interests of the
Company by providing incentives to (i) designated officers and other employees
of the Company or a Subsidiary Corporation (as defined herein), (ii) members
of the Company's Board of Directors (the "Board") and (iii) independent
contractors and consultants (who may be individuals or entities) who perform
services for the Company to enable the Company to attract and retain them and
to encourage them to acquire a proprietary interest, or to increase their
proprietary interest, in the Company. The Company believes that the Plan will
cause participants to contribute materially to the growth of the Company,
thereby benefiting the Company's shareholders. For purposes of the Plan, the
terms "Parent Corporation" and "Subsidiary Corporation" shall have the
meanings ascribed to those terms when contained in Section 422(b) of the
Internal Revenue Code of 1986, as amended (the "Code").
1. Administration
a. The Plan shall be administered and interpreted by the Board or a
committee of the Board (the "Committee") consisting of not less than two
persons, each of whom shall be a "Non-Employee Director" as defined in Rule
16b-3(b)(3) promulgated under the Securities Exchange Act of 1934, as amended,
or any future corresponding rule. The term "Committee" as used in this Plan
and the options granted hereunder refers to either the Board or the Committee,
whichever is administering the Plan. With respect to Eligible Participants (as
hereinafter defined), the Committee shall have the sole authority to determine
(i) who is eligible to receive Grants (as defined in Section 2 below) under
the Plan, (ii) the type, size and terms of each Grant under the Plan (subject
to Section 4 below), (iii) the time when each Grant will be made and the
duration of any exercise or restriction period; (iv) any restrictions on
resale applicable to the shares to be issued or transferred pursuant to the
Grant; and (v) any other matters arising under the Plan. The Committee may, if
it so desires, base any of the foregoing determinations upon the
recommendations of management of the Company. The Committee shall have full
power and authority to administer and interpret the Plan with respect to
Eligible Participants and to adopt or amend such rules, regulations,
agreements and instruments as it may deem appropriate for the proper
administration of the Plan. The Committee's interpretations of the Plan and
all determinations made by the Committee pursuant to the powers vested in it
hereunder shall be conclusive and binding on all Eligible Participants having
any interests in the Plan or in any Grants under the Plan. No person acting
under this subsection shall be held liable for any action or determination
made in good faith with respect to the Plan or any Grant under the Plan.
i.Each member of the Committee shall be indemnified and held harmless by
the Company against any cost or expense (including counsel fees) reasonably
incurred by him or her, or liability (including any sum paid in settlement of
a claim with the approval of the Company) arising out of any act or omission
to act in connection with the Plan, unless arising out of such member's own
fraud or bad faith, to the extent permitted by applicable law. Such
indemnification shall be in addition to any rights of indemnification the
members may have as directors or otherwise under the Articles of Incorporation
or By-Laws of the Company, any agreement of shareholders or disinterested
directors or otherwise.
2. Grants
a. Grants to Eligible Participants. With respect to Eligible Participants,
Incentives under the Plan shall consist of Incentive Stock Options (as defined
in Section 5(b) below), Nonqualified Stock Options (as defined in Section 5(b)
below) and Restricted Stock Grants (as defined in Section 6 below),
(hereinafter sometimes collectively referred to as "Grants"). All Grants shall
be subject to the terms and conditions set forth herein and to such other
terms and conditions of any nature as long as they are not inconsistent with
the Plan as the Committee deems appropriate and specifies in writing to the
participant (the "Grant Letter"). The Committee shall approve the form and
provisions of each Grant Letter. Grants under any section of the Plan need not
be uniform as among the participants receiving the same type of Grant, and
Grants under two or more sections of the Plan may be combined in one Grant
Letter.
b. Committee Member Grants. In the sole discretion of the Board, a member of
the Board of the Company who is not an employee of the Company or a Subsidiary
Corporation and who serves as a member of the committee interpreting and
administering the Plan (a "Committee Member") may be entitled to receive a
Director's Grant in accordance with this Section 2(b).
i. Committee Members shall receive a Nonqualified Stock Option to
purchase Thirty Thousand (30,000) shares of Common Stock (as hereinafter
defined) of the Company at an exercise price equal to the higher of the fair
market value (as defined herein) or the book value of a share of Common Stock
on the date of grant, subject to adjustment as provided in Section 3(b) of
this Plan, at the commencement of and in consideration for their service to
the Company as a director (a "Director's Grant"). One-half of such Director's
Grant shall vest on the first anniversary of the date of grant and one-quarter
shall vest on each of the second and third anniversaries of the date of grant,
provided such Committee Member is then serving as a director (the "Initial
Vesting Period"). If a Committee Member is not serving as a director on the
first, second or third anniversary of the date of such grant, then any such
Director's Grant shall terminate as to all shares covered by the Director's
Grant which have not vested. Director's Grants shall be exercisable for a
period of ten years from the date of grant.
ii. Upon the expiration of the Initial Vesting Period, and at the
commencement of each succeeding three year period, Committee Members shall be
eligible to receive an additional Director's Grant, which grants shall vest in
accordance with the schedule set forth in Section 2(b)(i) hereof.
iii. Upon the occurrence of (a) a Change In Control (as defined in
Section 8 hereof or (b) a sale or exchange of assets of the Company or (c)
dissolution, liquidation, merger or consolidation of the Company (in which the
Company is not the surviving corporation), all vesting restrictions imposed
under any Director's Grant shall immediately lapse.
iv. Each Committee Member who receives a Director's Grant pursuant to
this Section 2(b) shall receive a written agreement setting forth the terms
and conditions of such grant including, but not limited to, the restrictions
set forth in this Section 2(b) (the "Director's Grant Letter").
v. Except as otherwise provided in this Section 2(b), Director Grants
shall be subject to the provisions of this Plan applicable to Non-Qualified
Stock Options granted to other persons.
3. Shares Subject to the Plan
a. The aggregate number of shares of the Common Stock, par value $.01
("Common Stock"), of the Company that may be issued or transferred under the
Plan is 4,600,000, subject to adjustment pursuant to Section 3(b) below. Such
shares may be authorized but unissued shares or reacquired shares. If and to
the extent that options granted under the Plan terminate, expire or are
canceled without having been exercised (including shares cancelled as part of
an exchange of Grants), or if any shares of restricted stock are forfeited,
the shares subject to such Grant or of such restricted stock shall again be
available for subsequent Grants under the Plan.
b. If any change is made to the Common Stock (whether by reason of merger,
consolidation, reorganization, recapitalization, stock dividend, stock split,
combination of shares, or exchange of shares or any other change in capital
structure made without receipt of consideration), then unless such event or
change results in the termination of all outstanding Grants and Director's
Grants under the Plan, the Committee shall preserve the value of the
outstanding Grants and Director's Grants by adjusting the maximum number and
class of shares issuable under the Plan to reflect the effect of such event or
change in the Company's capital structure, and by making appropriate
adjustments to the number and class of shares, the exercise price of each
outstanding option and otherwise, except that any fractional shares resulting
from such adjustments shall be eliminated by rounding any portion of a share
equal to .500 or greater up, and any portion of a share equal to less than
...500 down, in each case to the nearest whole number.
4. Eligibility for Participation
Members of the Board, officers and other employees of the Company or a
Subsidiary Corporation and independent contractors and consultants who perform
services for the Company (hereinafter referred to individually as an "Eligible
Participant" and collectively as "Eligible Participants") shall be eligible to
participate in the Plan. Only Eligible Participants who are officers or other
employees of the Company or a
2
Subsidiary Corporation shall be eligible to receive Incentive Stock Options.
All Eligible Participants shall be eligible to receive Nonqualified Stock
Options and Restricted Stock Grants. The Committee shall select from among the
Eligible Participants those who will receive Grants (such Eligible
Participants and Committee Members who receive Director's Grants pursuant to
Section 2(b) hereof are hereinafter sometimes collectively referred to as the
"Grantees") and, except in the case of a Director's Grant made pursuant to
Section 2(b) hereof, the Committee shall determine the number of shares of
Common Stock subject to each Grant; provided, however, that the maximum number
of shares of Common Stock which may be subject to Grants awarded to any
Grantee shall not exceed 4,000,000. The Committee may, if it so desires, base
any such selections or determinations upon the recommendations of management
of the Company. Nothing contained in the Plan shall be construed to limit in
any manner whatsoever the right of the Company to grant rights or options to
acquire Common Stock or awards of Common Stock otherwise than pursuant to the
Plan.
5. Stock Options to Eligible Participants
a. Number of Shares. The Committee, in its sole discretion, shall determine
the number of shares of Common Stock that will be subject to each option.
b. Type of Option and Option Price.
(1)The Committee may grant options qualifying as incentive stock options
within the meaning of Section 422 of the Code ("Incentive Stock Options") and
other stock options ("Nonqualified Stock Options"), in accordance with the
terms and conditions set forth herein, or may grant any combination of
Incentive Stock Options and Nonqualified Stock Options (hereinafter referred
to collectively as "Stock Options"). The option price per share of an
Incentive Stock Option shall be the higher of the Fair Market Value or the
book value of a share of Common Stock on the date of grant. If the Grantee of
an Incentive Stock Option owns Common Stock (as determined under section
424(d) of the Code) possessing more than 10% of the total combined voting
power of all classes of stock of the Company or a Parent Corporation or
Subsidiary Corporation, the option price per share in the case of an Incentive
Stock Option shall not be less than 110% of the fair market value of a share
of Common Stock on the date of grant and such option by its terms is not
exercisable after the expiration of five (5) years from the date of grant.
(2)For all valuation purposes under the Plan, the fair market value of a
share of Common Stock shall be determined in accordance with the following
provisions:
(A) If the Common Stock is not at the time listed or admitted to
trading on any stock exchange but is traded in the over-the-counter market
(but not on the Nasdaq National Market segment of The Nasdaq Stock Market),
the fair market value shall be the mean between the last reported bid and
asked prices of one share of Common Stock on the date in question in the over-
the-counter market, as such prices are reported by the National Association of
Securities Dealers through its Nasdaq system or any successor system. If there
are no reported bid and asked prices on the date in question, then the mean
between the last reported bid and asked prices on the next preceding date for
which such quotations exist shall be determinative of fair market value. If
the Common Stock is traded over-the-counter on the Nasdaq National Market
segment of The Nasdaq Stock Market, the fair market value shall be the closing
selling price of one share of Common Stock on the date in question as such
price is reported by the National Association of Securities Dealers, Inc.
through such system or any successor system. If there is no reported closing
selling price for the Common Stock on the date in question, then the closing
selling price on the next preceding date for which such quotation exists shall
be determinative of fair market value.
(B) If the Common Stock is at the time listed or admitted to trading on
any stock exchange, then the fair market value shall be the closing selling
price of one share of Common Stock on the date in question on the stock
exchange determined by the Committee to be the primary market for the Common
Stock, as such prices are officially quoted on such exchange. If there is no
reported closing selling price of Common Stock on such exchange on the date in
question, then the fair market value shall be the closing selling price on the
next preceding date for which such quotation exists.
(C) If the Common Stock is at the time neither listed nor admitted to
trading on any stock exchange nor traded in the over-the-counter market (or,
the Committee determines that the value as determined
3
pursuant to Section 5(b)(2)(A) or (B) above does not reflect fair market
value), then the Committee shall determine fair market value after taking into
account such factors as it deems appropriate.
c. Exercise Period. The Committee shall determine the option exercise period
of each Stock Option. The exercise period shall not exceed ten years from the
date of grant. Notwithstanding any determinations by the Committee regarding
the exercise period of any Stock Option, all outstanding Stock Options shall
be immediately exercisable upon a Change of Control of the Company (as defined
in Section 8 below).
d. Vesting of Options and Restrictions on Shares. The vesting period for
Stock Options shall commence on the date of grant and shall end on the date or
dates, determined by the Committee, that shall be specified in the Grant
Letter. The Committee may impose upon the shares of Common Stock issuable upon
the exercise of a Stock Option such restrictions as it deems appropriate and
specifies in the Grant Letter. During any period in which such restrictions
apply a Grantee may not sell, assign, transfer, pledge or otherwise dispose of
the shares of Common Stock issued upon exercise of such stock options except
to a successor Grantee pursuant to Section 7 hereof and the Committee, in such
circumstances as it deems equitable, may determine that all such restrictions
shall lapse. Notwithstanding any other provision of the Plan, all outstanding
Stock Options shall become immediately exercisable upon a Change of Control of
the Company (as, defined in Section 8 below).
e. Manner of Exercise. A Grantee may exercise a Stock Option by delivering a
duly completed notice of exercise to the Committee, together with payment of
the option price. Such notice may include instructions authorizing the Company
to deliver the certificates representing the shares of Common Stock issuable
upon the exercise of such Stock Option to any designated registered broker or
dealer ("Designated Broker"). Such instructions shall designate the account
into which the shares are to be deposited. The Grantee may tender such notice
of exercise, which has been properly executed by the Grantee, and the
aforementioned delivery instructions to any Designated Broker.
f. Termination of Employment, Disability or Death.
(1)If a Grantee who is an employee ceases to be an employee (in the case
of an Incentive Stock Option) or ceases to be an Eligible Participant (in the
case of a Nonqualified Stock Option) for any reason (other than, in the case
of an individual, the death of such individual) any Stock Option which is
otherwise exercisable by the Grantee shall terminate unless exercised within
three months after the date on which the Grantee ceases to be an employee or
an Eligible Participant, as the case may be (or in the case of Non-Qualified
Stock Options within such other period of time, which may be longer or shorter
than three months, as may be specified in the Grant Letter), but in any event
no later than the date of expiration of the option exercise period, except
that in the case of an individual Grantee who is disabled within the meaning
of Section 22(e)(3) of the Code, such period shall be one year rather than
three months (or in the case of Non-Qualified Stock Options within such other
period of time, which may be longer or shorter than three months, as may be
specified in the Grant Letter).
(2)In the event of the death of an individual Grantee while he or she is
an Eligible Participant or within not more than three months after the date on
which the Grantee ceases to be an Eligible Participant (or within such other
period of time, which may be longer shorter than three months, as may be
specified in the Grant Letter), any Stock Option which was otherwise
exercisable by the Grantee at the date of death may be exercised by the
Grantee's personal representative at any time prior to the expiration of one
year from the date of death, but in any event no later than the date of
expiration of the option exercise period.
g. Satisfaction of Option Price. The Grantee shall pay the option price in
full at the time of exercise in cash, or, with the consent of the Committee in
its sole discretion, by delivering shares of Common Stock already owned by the
Grantee and having a fair market value on the date of exercise equal to the
option price or a combination of cash and shares of Common Stock. The Grantee
shall also pay the amount of withholding tax due, if any, at the time of
exercise. Shares of Common Stock shall not be issued or transferred upon any
purported exercise of a Stock Option until the option price and the
withholding obligation are fully paid.
h. Limits on Incentive Stock Options. Each Option Grant of an Incentive
Stock Option shall provide that:
(1)the Stock Option is not transferable by the Grantee, except, in the
case of an individual Grantee, by will or the laws of descent and
distribution;
4
(2)the Stock Option is exercisable only by the Grantee, except as
otherwise provided herein or in the Grant Letter in the event of the death of
an individual Grantee;
(3)the aggregate fair market value of the Common Stock determined as of
the date of the Grant with respect to which Incentive Stock Options are
exercisable for the first time by a Grantee during any calendar year under the
Plan and under any other stock option plan of the Company shall not exceed
$100,000; and
(4)unless the Grantee could otherwise transfer Common Stock issued
pursuant to the Stock Option without incurring liability under Section 16(b)
of the Securities and Exchange Act of 1934, as amended (the "Exchange Act"),
at least six months must elapse from the date of acquisition of the Stock
Option until the date of disposition of the Common Stock issued upon exercise
thereof.
6. Restricted Stock Grants
The Committee may issue shares of Common Stock to an Eligible Participant
pursuant to an incentive or long range compensation plan, program or contract
approved by the Committee (a "Restricted Stock Grant"). The following
provisions are applicable to Restricted Stock Grants:
a. General Requirements. Shares of Common Stock issued pursuant to
Restricted Stock Grants will be issued in consideration for cash or services
rendered having a value, as determined by the Board, at least equal to the par
value thereof. All conditions and restrictions imposed under each Restricted
Stock Grant, and the period of years during which the Restricted Stock Grant
will remain subject to such restrictions, shall be set forth in the Grant
Letter and designated therein as the "Restriction Period." All restrictions
imposed under any Restricted Stock Grant shall lapse on such date or dates as
the Committee may approve until the restrictions have lapsed as to 100% of the
shares, except that upon a Change of Control of the Company, all restrictions
on the transfer of the shares which have not been forfeited prior to such date
shall lapse. In addition, the Committee, in circumstances that it deems
equitable, may determine as to any or all Restricted Stock Grants, that all
the restrictions shall lapse, notwithstanding any Restriction Period.
b. Number of Shares. The Committee, in its sole discretion, shall determine
the number of shares of Common Stock that will be granted in each Restricted
Stock Grant.
c. Requirement of Relationship with Company. If the Grantee's relationship
with the Company (as an employee, independent contractor or consultant, as the
case may be) terminates during the period designated in the Grant Letter as
the Restriction Period, the Restricted Stock Grant shall terminate as to all
shares covered by the Grant as to which restrictions on transfer have not
lapsed, and such shares shall be immediately returned to the Company. The
Committee may, in its sole discretion, provide for complete or partial
exceptions to the provisions of this Section 6(c).
d. Restrictions on Transfer and Legend on Stock Certificate. During the
Restriction Period, a Grantee may not sell, assign, transfer, pledge or
otherwise dispose of the shares of Common Stock to which such Restriction
Period applies except to a Successor Grantee pursuant to Section 7 below. Each
certificate representing a share of Common Stock issued or transferred under a
Restricted Stock Grant shall contain a legend giving appropriate notice of the
restrictions in the Grant. The Grantee shall be entitled to have the legend
removed from the stock certificate or certificates representing any such
shares as to which all restrictions have lapsed.
7. Transferability of Options and Grants
Only a Grantee or Committee Member (or, in the case of an individual Grantee
and a Committee Member, his or her authorized legal representative on behalf
of such Grantee or Committee Member) may exercise rights under a Grant or a
Director's Grant. No individual Grantee or Committee Member may transfer those
rights except by will or by the laws of descent and distribution or, in the
case of a Grant other than an Incentive Stock Option and to the extent
permitted under Rule 16b-3 of the Exchange Act and by the Committee in its
sole discretion, (a) pursuant to a qualified domestic relations order as
defined under the Code or Title I of ERISA or the rules thereunder and (b) to
a trust for the benefit of a member of the Grantee's immediate family. Upon
the death of an individual Grantee or Committee Member, the personal
representative or other person entitled to succeed to the rights of the
Grantee or Committee Member ("Successor Grantee") may exercise such rights. A
5
Successor Grantee shall furnish proof satisfactory to the Company of such
person's right to receive the Grant or the Director's Grant under the
Grantee's will or under the applicable laws of descent and distribution.
8. Change of Control of the Company
As used herein, a "Change of Control" shall be deemed to have occurred when
(a) any "person" (as such term is used in Section 13(d) and 14(d) of the
Exchange Act) becomes the "beneficial owner", directly or indirectly, of
securities of the Company representing thirty (30%) percent or more of the
combined voting power of the Company's then outstanding securities or (b) the
Company becomes a subsidiary of another corporation or is merged or
consolidated into another corporation or if substantially all of its assets
shall have been sold to an unaffiliated party or parties unless thereafter (1)
directors of the Company immediately prior thereto continue to constitute at
least fifty (50%) percent of the directors of the surviving entity or
purchaser or (2) the Company's securities continue to represent, or are
converted into securities which represent, more than seventy (70%) percent of
the combined voting power of the surviving entity or purchaser, or (c) fifty
(50%) percent or more of the Board is comprised of persons who were not
nominated by the Board for election as directors, or (d) the Board adopts a
plan of complete liquidation of the Company.
9. Certain Corporate Changes
a. Sale or Exchange of Assets, Dissolution or Liquidation or Merger or
Consolidation Where the Company Does Not Survive. If all or substantially all
of the assets of the Company are to be sold or exchanged, the Company is to be
dissolved or liquidated, or the Company is a party to a merger or
consolidation with another corporation in which the Company will not be the
surviving corporation, then, at least ten days prior to the effective date of
such event, the Company shall give each Grantee with any outstanding Grants
(including Director's Grants) written notice of such event. Each such Grantee
shall thereupon have the right to exercise in full any installments of such
Grants (including Director's Grants) not previously exercised (whether or not
the right to exercise such installments has accrued pursuant to such Grants
(including Director's Grants), within ten days after such written notice is
sent by the Company. Any installments of such Grants (including Director's
Grants) not so exercised shall thereafter lapse and be of no further force or
effect.
b. Merger or Consolidation Where the Company Survives. If the Company is a
party to a merger or consolidation in which the Company will be the surviving
corporation, then the Committee may, in its sole discretion, elect to give
each Grantee with any outstanding Grants (including Director's Grants) written
notice of such event. If such notice is given, each such Grantee shall
thereupon have the right to exercise in full any installments of such Grants
(including Director's Grants) not previously exercised (whether or not the
right to exercise such installments has accrued pursuant to such Grants
(including Director's Grants), within ten days after such written notice is
sent by the Company. Any installments of such Grants (including Director's
Grants) not so exercised shall thereafter lapse and be of no further force or
effect.
10. Shareholder Approval
This Plan is subject to and no Options shall be exercisable hereunder until
after approval by holders of a majority of the shares of the stock of the
Company present or represented by a proxy in a separate vote at a duly held
meeting of the shareholders of the Company within twelve months after the date
of the adoption of the Plan by the Board. If the Plan is not so approved by
shareholders, the Plan and all Stock Options and Restricted Stock Grants,
including Director's Grants, hereunder shall terminate and be of no force or
effect.
11. Amendment and Termination of the Plan
a. Amendment and Termination of Plan. The Board may amend or terminate the
Plan at any time; provided that the approval of the shareholders of the
Company shall be required in respect of any amendment that (A) materially
increases the benefits accruing to Eligible Participants under the Plan, (B)
increases the aggregate number of shares of Common Stock that may be issued or
transferred under the Plan (other than by operation of Section 3(b) above),
(C) modifies the requirements as to eligibility for participation in the Plan;
or (D) modifies the provisions for determining the fair market value of a
share of Common Stock.
6
b. Grant Limitation. Incentive Stock Options shall not be granted pursuant
to this Plan after the expiration of ten years from January 11, 1995.
c. Termination and Amendment of Outstanding Grants. A termination or
amendment of the Plan that occurs after a Grant (including Director's Grant)
is made shall not result in the termination or amendment of such Grant
(including Director's Grant) unless the Grantee or the Committee Member, as
the case may be, consents or unless the Committee acts under Section 18(b)
below. The termination of the Plan shall not impair the power and authority of
the Committee with respect to an outstanding Grant. Whether or not the Plan
has terminated, an outstanding Grant may be terminated or amended under
Section 18(b) below or may be amended by agreement of the Company and the
Grantee which is consistent with the Plan.
d. Employees in Foreign Countries. The Board shall have the authority to
adopt such modifications, procedures and subplans as may be necessary or
desirable to comply with provisions of the laws of foreign countries in which
the Company or its Subsidiaries may operate to assure the viability of
benefits from Grants made to participants employed in such countries and to
meet the objectives of the Plan.
12. Rights of Eligible Participants
Nothing in the Plan shall entitle any Eligible Participant or other person
to any claim or right to any Grant under the Plan. Neither the Plan nor any
action taken hereunder shall be construed as giving any Eligible Participant,
Committee Member or Grantee any rights to be retained by the Company in any
capacity, whether as an employee, member of the Board, independent contractor,
consultant or otherwise.
13. Withholding of Taxes
The Company shall have the right to require a Grantee or Committee Member to
pay to the Company the amount of any taxes which the Company is required to
withhold in respect of an Option Grant or Restricted Stock Grant or to take
whatever action it deems necessary to protect the interests of the Company in
respect of such tax liabilities, including, without limitation, withholding a
portion of the shares of Common Stock otherwise deliverable pursuant to the
Plan. The Company's obligation to issue or transfer shares of Common Stock
upon the exercise of a Stock Option or the acceptance of a Restricted Stock
Grant shall be conditioned upon the Grantee's or Committee Member's compliance
with the requirements of this section to the satisfaction of the Committee.
14. Agreements With Grantees and Committee Members
Each Option Grant made under the Plan shall be evidenced by a Grant Letter
containing such terms and conditions as the Committee shall approve. Each
Restricted Stock Grant shall be evidenced by a Grant Letter containing the
restrictions imposed upon such grant, including but not limited to,
restrictions imposed by federal and state securities laws.
15. Requirements for Issuance of Shares
No Common Stock shall be issued or transferred under the Plan unless and
until all applicable legal requirements have been complied with to the
satisfaction of the Committee. The Committee shall have the right to condition
any Stock Option or Restricted Stock Grant on the Grantee's undertaking in
writing to comply with such restrictions on any subsequent disposition of the
shares of Common Stock issued or transferred thereunder as the Committee shall
deem necessary or advisable as a result of any applicable law, regulation or
official interpretation thereof, and certificates representing such shares may
be legended to reflect any such restrictions.
16. Headings
The section headings of the Plan are for reference only. In the event of a
conflict between a section heading and the content of a section of the Plan,
the content of the section shall control.
17. Effective Date of the Plan
The Plan was effective as of January 11, 1995 with respect to 600,000 shares
of Common Stock. The Plan was amended on February 12, 2001 to increase the
number of shares of Common Stock issuable under the Plan to
7
2,600,000. The Plan shall be effective, as of February 28, 2002 with respect
to an additional 2,000,000 shares of Common Stock issuable under the Plan,
subject to the approval of the Company's shareholders within 12 months after
February 28, 2002.
18. Miscellaneous
a. Substitute Grants. The Committee may make a Grant to an employee, or an
independent contractor or consultant of another corporation, if such person
shall become an Eligible Participant by reason of a corporate merger,
consolidation, acquisition of stock or property, reorganization or liquidation
involving the Company or a Subsidiary Corporation and such other corporation.
Any such Grant shall be made in substitution for a stock option or restricted
stock grant granted by the other corporation ("Substituted Stock Incentives"),
but the terms and conditions of the substitute Grant may vary from the terms
and conditions required by the Plan and from those of the Substituted Stock
Incentives. The Committee shall prescribe the provisions of the substitute
Grants.
b. Compliance with Law. The Plan, the exercise of Grants and the obligations
of the Company to issue or transfer shares of Common Stock under Grants shall
be subject to all applicable laws and required approvals by any governmental
or regulatory agencies. The Committee (or in the case of Director's Grants,
the Board of Directors) may revoke any Grant if it is contrary to law or
modify any Grant to bring it into compliance with any valid and mandatory
government regulations. The Committee may also adopt rules regarding the
withholding of taxes on payments to Grantees. The Committee may, in its sole
discretion, agree to limit its authority under this section.
c. Ownership of Stock. A Grantee or Successor Grantee shall have no rights
as a shareholder with respect to any shares of Common Stock covered by a Grant
or Director's Grant until the shares are issued or transferred to the Grantee
or Successor Grantee on the stock transfer records of the Company.
8
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REVOCABLE PROXY
CTI GROUP (HOLDINGS) INC.
ANNUAL MEETING OF STOCKHOLDERS
MAY 30, 2002
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
CTI GROUP (HOLDINGS) INC.
The undersigned hereby appoints Harold Garrison and Michael Leeds, and each of
them, as true and lawful attorneys-in-fact and proxies of the undersigned, with
full power of substitution in each for the undersigned, to appear at and
represent the undersigned in all matters coming before the annual meeting (the
"Annual Meeting") of stockholders of CTI Group (Holdings) Inc. ("CTIG") to be
held at the Market Tower Conference Center, 10 West Market Street, Indianapolis,
Indiana 46204, located on the 3rd floor, on May 30, 2002 at 10:30 a.m., U.S.
Eastern Standard Time (Indiana Local Time), and any postponement or adjournment
thereof, and to vote all shares of CTIG's common stock that the undersigned is
entitled to vote, with all the powers and authority that the undersigned would
possess if personally present at the Annual Meeting.
The board of directors recommends a vote "FOR" the election of the nominees and
the proposals listed on the reverse side.
WHEN PROPERLY EXECUTED, THIS PROXY WILL BE VOTED IN THE MANNER SPECIFIED ON THE
REVERSE SIDE BY THE UNDERSIGNED. IF NO CONTRARY INSTRUCTIONS ARE GIVEN, THIS
PROXY WILL BE VOTED FOR ELECTION OF NOMINEES AND FOR PROPOSALS II AND III. IF
ANY OTHER BUSINESS IS PRESENTED AT THE ANNUAL MEETING, OR ANY ADJOURNMENT OR
POSTPONEMENT OF THE ANNUAL MEETING, THIS PROXY WILL BE VOTED BY THOSE NAMED IN
THIS PROXY IN THEIR BEST JUDGMENT. AT PRESENT, THE BOARD OF DIRECTORS KNOWS OF
NO OTHER BUSINESS TO BE PRESENTED AT THE ANNUAL MEETING OR ANY ADJOURNMENT OR
POSTPONEMENT OF THE ANNUAL MEETING.
THE PROXIES PRESENT AND ACTING IN PERSON OR BY THEIR SUBSTITUTES (OR, IF ONLY
ONE IS PRESENT AND ACTING, THEN THAT ONE) MAY EXERCISE ALL THE POWERS CONFERRED
BY THIS PROXY. DISCRETIONARY AUTHORITY IS CONFERRED BY THIS PROXY AS TO CERTAIN
MATTERS DESCRIBED IN THE ACCOMPANYING PROXY STATEMENT.
(To Be Continued And Signed On The Other Side)
- --------------------------------------------------------------------------------
A
[ X ] Please mark your
votes as in this
example
YOUR VOTE IS IMPORTANT, PLEASE DATE, SIGN AND RETURN THIS PROXY IN
THE ENCLOSED ENVELOPE PROMPTLY. NO POSTAGE IS NECESSARY IF MAILED IN
THE UNITED STATES. The undersigned directs the proxies to vote as
follows:
I. To elect as FOR WITHHOLD Nominees:
director all the all for all HAROLD GARRISON, term expiring in 2004
following nominees nominees STEVE BARTKIW, term expiring in 2004
nominees for the THOMAS GREIN, term expiring in 2005
term set forth [ ] [ ] MICHAEL LEEDS, term expiring in 2005
across from each
nominee's name
(Instructions: To withhold authority to vote
for an individual nominee(s), write such
nominee(s) name(s) on the space provided
below.)
- ---------------------------------------------
II. To consider and act upon a proposal to amend FOR AGAINST ABSTAIN
and restate the Stock Option and Restricted
Stock Plan to, among other things, increase [ ] [ ] [ ]
the number of shares of common stock of CTIG
that may be issued under such plan by
2,000,000 shares, as described in the proxy
statement.
III. To consider and act upon a proposal to ratify FOR AGAINST ABSTAIN
the appointment of PricewaterhouseCoopers LLP,
as the independent accountants of CTIG. [ ] [ ] [ ]
IV. In their discretion, to vote on any other
business as may properly come before the
Annual Meeting or any adjournment or
postponement of the Annual Meeting.
---------------------------------------------
The undersigned may revoke the proxy at any time before it is voted by giving
written notice of revocation to Manfred Hanuschek, Secretary and Chief Financial
Officer, at the address below. Upon giving the written notice of revocation, a
stockholder may duly execute a later dated proxy relating to the same shares or
attend the Annual Meeting and vote in person. Attendance of the Annual Meeting
will not in itself constitute a revocation of the proxy. Before the taking of
the vote at the Annual Meeting, any written notice of revocation or subsequent
proxy should be sent to CTI Group (Holdings) Inc., 333 North Alabama St. Suite
240, Indianapolis, IN 46204, attention: Manfred Hanuschek, or hand delivered to
Manfred Hanuschek.
The undersigned hereby acknowledges receipt of the notice of the Annual Meeting,
the proxy statement relating to the Annual Meeting and the annual report.
Signature Signature Date , 2002
------------------------------------------- -------------------------- --------
NOTE: PLEASE SIGN EXACTLY AS NAME APPEARS BELOW. (JOINT OWNERS SHOULD EACH SIGN, ATTORNEYS-IN-FACT, EXECUTORS,
ADMINISTRATORS, CUSTODIANS, PARTNERS OR CORPORATION OFFICERS SHOULD GIVE FULL TITLE.)