OMB APPROVAL
--------------------------
OMB Number: 3235-0059
Expires: July 31, 2004
Estimated average burden
hours per response...14.73
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement.
[ ] CONFIDENTIAL, FOR USE OF THE COMMISSION ONLY (AS PERMITTED BY
RULE 14a-6(e)(2)).
[ ] Definitive Proxy Statement.
[ ] Definitive Additional Materials.
[ ] Soliciting Material Pursuant to Section 240.14A-11(c) or Section 240.14a-12
CATUITY, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
CATUITY, INC.
- --------------------------------------------------------------------------------
(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)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
- --------------------------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
5) Total fee paid:
- --------------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
- --------------------------------------------------------------------------------
2) Form, Schedule or Registration Statement No.:
- --------------------------------------------------------------------------------
3) Filing Party:
- --------------------------------------------------------------------------------
4) Date Filed:
- --------------------------------------------------------------------------------
PERSONS WHO ARE TO RESPOND TO THE COLLECTION OF INFORMATION CONTAINED IN THIS
FORM ARE NOT REQUIRED TO RESPOND UNLESS THE FORM DISPLAYS A CURRENTLY VALID OMB
CONTROL NUMBER.
SEC 1913 (11-01)
CATUITY INC.
LEVEL 4 BALLARAT HOUSE 2711 E. JEFFERSON AVE.
68-72 WENTWORTH AVE. DETROIT, MICHIGAN 48207
SURRY HILLS NSW 2010 AUSTRALIA
- ---------------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD MARCH 26, 2003
We will hold a Special Meeting of Shareholders of Catuity, Inc. at the AAP
Centre Theatrette, 259 George Street, Sydney, NSW 2000 Australia on Wednesday,
March 26, 2003 at 9:30 a.m. Australian Eastern Daylight Time (Tuesday, March
25, 2003 at 5:30 p.m. Eastern Standard Time in the United States) for the
following purposes:
1. To approve a sale of 90,000 shares of common stock to Mr. Duncan
P.F. Mount, one of our Directors.
The Directors, other than Mr. Mount, recommend a vote FOR approval of the sale
of common stock. Mr. Mount and his associates are precluded from voting on this
resolution.
2. To approve an amendment to the executive employment agreement of
Mr. Michael V. Howe, our President/CEO and a Director, and the options award
thereunder.
The Directors, other than Mr. Howe, recommend a vote FOR approval of the
amendment to Mr. Howe's executive employment agreement. Mr. Howe and his
associates are precluded from voting on this resolution.
3. To approve the Catuity Inc. 2003 Executive Director Stock Purchase
Plan ("Plan"), pursuant to which Messrs. David L. MacSmith, our Chairman, and
Michael V. Howe will receive shares of common stock at the fair market price in
lieu of portions of their cash compensation.
The Directors, other than Messrs. MacSmith and Howe, recommend a vote FOR
approval of the Plan. Messrs. MacSmith and Howe and their associates are
precluded from voting on this resolution.
4. To act upon such other matters as may properly come before the
meeting or any adjournments or postponements thereof.
We have described the items of business more fully in the Proxy Statement
accompanying this Notice. The record date for determining those shareholders who
were entitled to notice of, and to vote at, the Special Meeting and at any
adjournment is January 24, 2003. The stock transfer books will not be closed
between the record date and the date of the Special Meeting. A list of
shareholders entitled to vote at the Special Meeting will be available for
inspection at Catuity's offices.
Whether or not you plan to attend the Special Meeting, please complete, sign,
date and return the enclosed proxy promptly in the accompanying reply envelope.
Please refer to the enclosed voting form for instructions. You may revoke your
proxy at any time prior to the Special Meeting. If you decide to attend the
Special Meeting and wish to change your proxy vote, you may do so automatically
by voting in person at the Special Meeting.
By Order of the Board of Directors
/s/ John H. Lowry
JOHN H. LOWRY III
Secretary
Detroit, Michigan
February 3, 2003
TABLE OF CONTENTS
PAGE
VOTING RIGHTS AND SOLICITATION.............................. 1
Voting.................................................... 1
Proxies................................................... 1
Solicitation of Proxies................................... 1
PROPOSAL NO. 1 - APPROVAL OF THE SALE OF COMMON STOCK
TO NON-EXECUTIVE DIRECTOR, MR. DUNCAN P.F. MOUNT............ 2
General................................................... 2
Voting Exclusion Statement................................ 2
Recommendation of the Board of Directors.................. 2
PROPOSAL NO. 2 - APPROVAL OF THE AMENDMENT TO THE
EXECUTIVE EMPLOYMENT AGREEMENT OF MICHAEL V. HOWE........... 3
General................................................... 3
Voting Exclusion Statement................................ 4
Recommendation of the Board of Directors.................. 4
PROPOSAL NO. 3 - APPROVAL OF ADOPTION OF THE EXECUTIVE
DIRECTOR STOCK PURCHASE PLAN AND ISSUANCE OF STOCK
THEREUNDER.................................................. 4
General................................................... 4
Voting Exclusion Statement................................ 5
Recommendation of the Board of Directors.................. 6
OWNERSHIP OF SECURITIES..................................... 6
Compliance with SEC Reporting Requirements................ 7
EXECUTIVE COMPENSATION AND RELATED INFORMATION.............. 7
Compensation Committee Report............................. 7
Compensation Philosophy and Objectives.................... 7
Compensation Components and Process....................... 8
Compensation Committee Interlocks and Insider
Participation.......................................... 9
Summary of Cash and Certain Other Compensation............ 9
Stock Options............................................. 10
Option Exercises and Holdings............................. 10
Director Compensation..................................... 11
Employment Contracts, Termination of Employment, and
Change in Control Agreements........................... 11
Certain Relationships and Related Transactions............. 12
STOCK PERFORMANCE GRAPH..................................... 12
SHAREHOLDER PROPOSALS FOR 2003 PROXY STATEMENT.............. 13
OTHER MATTERS............................................... 14
PROXY STATEMENT FOR SPECIAL MEETING OF SHAREHOLDERS
We are furnishing these proxy materials for the solicitation of proxies by
the Catuity Inc. Board of Directors for our Special Meeting of the Shareholders
to be held on Wednesday, March 26, 2003 at 9:30 a.m. (AEDT) at the AAP
Theatrette, AAP Centre, 259 George Street, Sydney, NSW 2000 Australia
(Tuesday, March 25, 2003 at 5:30 p.m. United States Eastern Standard Time) and
at any adjournments or postponements. We first mailed these proxy materials on
or about February 13, 2003 to all shareholders entitled to vote at the Special
Meeting.
PURPOSE OF MEETING
The specific proposals to be considered and acted upon at the Special
Meeting are listed in the accompanying Notice of Special Meeting of
Shareholders. We have described each proposal in more detail in this Proxy
Statement.
The principal reason the Special Meeting is being called in March is in
order to receive shareholder approval to accept the proceeds from Mr. Duncan
P.F. Mount's participation in the November 2002 private placement of
common stock. As of September 30, 2002 Catuity experienced a deficiency in
Nasdaq's listing requirement for total shareholders equity. Nasdaq has granted
the Company a temporary exception to the listing requirement. The Company
committed to Nasdaq that it would seek shareholder approval to accept the funds
from Mr. Mount's participation in the private placement in March 2003 in order
to assist it in maintaining its total shareholder equity above the $2.5 million
on-going listing requirement.
VOTING RIGHTS AND SOLICITATION
VOTING
Our Common Stock is the only type of security entitled to vote at the
Special Meeting. On January 24, 2003, the record date for determination of
shareholders entitled to vote at the Special Meeting, there were 8,530,610
shares of Common Stock outstanding. Each shareholder of record on January 24,
2003 is entitled to one vote for each share of Common Stock held on that date.
One third of the outstanding shares of Common Stock entitled to vote must be
present or represented at the Special Meeting in order to have a quorum for the
conduct of business generally. Abstentions and broker non-votes are counted as
present for the purpose of determining the presence of a quorum for the
transaction of business. The matters to be considered at the Special Meeting
require the approval by affirmative vote of a majority of our outstanding voting
shares present or represented and entitled to vote on those matters at the
Special Meeting. Abstentions and broker non-votes can have the effect of
preventing approval of a proposal where the number of affirmative votes, though
a majority of the votes cast, does not constitute a majority of the shares
present or represented and entitled to vote on the particular matter. The
inspector of election appointed for the Special Meeting will tabulate all votes.
The inspector will separately tabulate affirmative and negative votes,
abstentions, and broker non-votes.
PROXIES
Whether or not you are able to attend the Special Meeting, we urge you to
vote your proxy. Catuity's Board of Directors is soliciting your proxy, and the
Board will vote your proxy as you direct on your proxy when properly completed.
If you sign and return your proxy but do not specify any voting directions, your
proxy will be voted FOR the proposals, and in the discretion of the proxy
holders as to other matters that may properly come before the Special Meeting.
You may revoke or change your proxy at any time before the Special Meeting. To
do this, send a written notice of revocation or another signed proxy with a
later date to Catuity's Secretary at our principal executive offices before the
beginning of the Special Meeting. You may also revoke your proxy by attending
the Special Meeting and voting in person.
SOLICITATION OF PROXIES
Catuity will bear the entire cost of solicitation, including the
preparation, assembly, printing, and mailing of this Proxy Statement, the proxy,
and any additional solicitation material we furnish to shareholders. We will
furnish copies of solicitation material to brokerage houses, fiduciaries, and
custodians holding shares in their names that are beneficially owned by others
so that they may forward this solicitation material to the beneficial owners,
and we have retained Proxy Services Inc. to assist us in this endeavor. We
anticipate that we will pay $1,500, plus reasonable out of pocket expenses, for
these services. The original solicitation of proxies by mail may be supplemented
by a solicitation by telephone, telegram, or other means by our Directors,
officers, or employees. We will not pay any additional compensation to these
individuals for these services. Except as described above, we do not presently
intend to solicit proxies other than by mail or via the Internet.
1
PROPOSAL NO. 1
APPROVAL OF THE SALE OF COMMON STOCK TO NON-EXECUTIVE DIRECTOR, MR. DUNCAN P.F.
MOUNT
GENERAL
The first matter to be considered at the Special Meeting will be the
approval of the sale of 90,000 shares of our common stock to one of our
Directors, Mr. Duncan P.F. Mount.
In November 2002, we concluded a private placement in Australia of a total
of 543,666 shares of our common stock (including Mr. Mount's 90,000 proposed
shares) to three investors at a price of $3.75 AUD per share ($2.11 USD based on
the foreign exchange rate in effect on the date of the transaction). The price
equaled our shares' fair market value on the Australian Stock Exchange (ASX) on
the transaction date. In addition, each investor received one warrant share for
every three (3) shares purchased. Each warrant entitles the investor to purchase
a share of common stock at $4.20 AUD ($2.37 USD) until November 1, 2004 when the
warrants expire. The exercise price of the warrants represented approximately a
12% premium over the fair market price of the Company's shares on the date of
transaction. A placement fee of 3% of the purchase price was paid to each
investor. The proceeds were added to our general working funds to be used for
general operating purposes and to further the Company's investigation into the
data analytics and predictive modeling aspects of Customer Relationship
Management. Mr. Mount wished to participate in this placement and purchase
90,000 shares at the same price and on the same terms as the unrelated
investors, however his participation, under Australian Stock Exchange rules, is
subject to our submitting this transaction to our shareholders for approval.
If shareholders approve of Mr. Mount's participation in the placement, Mr.
Mount will purchase 90,000 shares at a price of $3.75 AUD per share ($2.11 USD),
for aggregate proceeds of $337,500 AUD ($189,900 USD based on the foreign
exchange rate in effect on the date of the transaction). These shares - like the
shares sold to the other unrelated investors - will be sold without registration
under US securities laws pursuant to an exemption from such registration. As a
result, Mr. Mount will not be able to publicly resell these shares for at least
one year absent a registration or other available exemption from registration.
Like the two unrelated investors, Mr. Mount will also receive one warrant for
each three shares purchased (30,000 warrants in Mr. Mount's case) exercisable at
$4.20 AUD ($2.37 USD) until November 1, 2004 and a 3% placement fee. If the
resolution is approved the securities will be issued within one month of the
date of the meeting.
VOTING EXCLUSION STATEMENT
We will disregard any votes cast on Proposal 1 by Mr. Mount or an associate
of Mr. Mount. However, we need not disregard the vote if it is cast by a person
as proxy for a person who is entitled to vote, in accordance with the directions
on the proxy form; or if it is cast by such person chairing the meeting as proxy
for a person who is entitled to vote, in accordance with a direction on the
proxy form to vote as the proxy decides.
RECOMMENDATION OF THE BOARD OF DIRECTORS
The Board of Directors, other than Mr. Mount, recommend a vote FOR approval
of the sale of stock to Mr. Mount.
2
PROPOSAL NO. 2
APPROVAL OF AMENDMENT TO EXECUTIVE EMPLOYMENT AGREEMENT OF MICHAEL V. HOWE AND
OPTIONS AWARD THEREUNDER
GENERAL
The second matter to be considered at the Special Meeting will be the
approval of a proposed amendment to the executive employment agreement of
Michael V. Howe and the award of options to acquire 100,000 shares thereunder.
We entered into a five-year employment agreement with our President and
Chief Executive Officer, Michael V. Howe, dated December 5, 1999. Under the
agreement, Mr. Howe was entitled to receive a base salary of $240,000 USD, which
was subject to annual review for possible increase by the Board in conjunction
with performance. Mr. Howe was also entitled to receive a performance-based
bonus, determined by the Board each year as part of the budget review.
Under the five-year employment agreement, Mr. Howe was awarded options to
purchase up to 315,000 shares of common stock, at an exercise price of $9.50 USD
($14.62 AUD at a .65 exchange rate), which vested 75,000 shares on commencement
of employment and 12,000 shares at the end of each calendar quarter through the
quarter ending December 31, 2004, contingent upon his continued employment at
the quarter end. All options expired on the earlier of December 31, 2008 or the
date six months after cessation of employment.
If we terminate the five-year agreement without cause, Mr. Howe is entitled
to one year's written notice. We have the right to pay one year's base salary to
effect immediate termination. Mr. Howe may voluntarily terminate the agreement
at any time provided we are given 6 months' advance written notice.
We amended Mr. Howe's Employment Agreement in certain respects, subject to
shareholder approval, effective January 1, 2003. Except as specifically amended,
the original employment agreement remains in full force and effect.
First, we have increased Mr. Howe's base salary to $300,000 USD from
$240,000 USD. The increase represents the first such increase since Mr. Howe's
employment began and represents approximately a 7% annual increase over the
three years Mr. Howe has been employed by the Company.
Second, we have replaced Mr. Howe's existing bonus arrangement with a
performance based, target cash bonus. Under the Amendment, we will pay Mr. Howe
a performance bonus on Catuity achieving certain Compensation Committee
established goals for Net Revenue (NR) as defined in the Agreement and Net
Income Before Extraordinary Items and Non-Cash Stock Compensation Expense (NI).
The basis for the bonus is described below:
If NR is below the established goal and NI is less than 90% of the goal, no
bonus is earned.
If NR is at least equal to the established goal and NI is between 90% and 99.9%
of the goal, 50% of the targeted bonus is earned.
If NR and NI are between 100% and 110% of the established goal, 100% of the
targeted bonus is earned.
If NR and NI are between 110.1% and 120% of the established, 125% of the
targeted bonus is earned.
If NR and NI are greater than 120% of the established goal, 150% of the
targeted bonus is earned.
The targeted bonus for 2003, at 100% achievement, is $60,000. If one of the
measurement criteria (NR or NI) is in one of the above ranges and the other is
in a different range, the bonus amount shall be determined at the lower of the
two ranges. The goals for NR, NI and the target bonus amount at 100%
achievement of the goals will be established annually by the Compensation
Committee.
3
Third, effective January 1, 2003, Mr. Howe surrendered the 96,000 then-unvested
options he held under the grant of options included in his original contract.
These options were replaced with 100,000 options that expire December 31, 2005,
at an option exercise price of $2.64 USD ($4.70 AUD) (this price was 20% above
the closing price of our shares on Nasdaq on January 2, 2003). These options
vest immediately. There are no tax consequences to Mr. Howe or the Company upon
issuance of the options. Upon exercise of the options Mr. Howe will recognize
ordinary income based on the difference between the exercise price and the
closing price on the date of exercise and the Company will recognize a
corresponding compensation deduction. In the event Mr. Howe voluntarily resigns,
retires, or his employment with Catuity is terminated by the Company for cause
during the term of the amended agreement, all vested options he holds as of his
termination date will expire six (6) months following the date of termination.
If the Company terminates Mr. Howe without cause during the term of the amended
agreement, or if the agreement is not renewed at the end of its term, all vested
options he holds as of the termination date will expire on December 31, 2008. If
his employment terminates due to death or incapacity due to disability during
the term of this amended agreement, his vested options will expire one (1) year
from the date of termination. Any unvested options held as of the date of
termination expire immediately without regard to the reason for termination.
NEW PLAN BENEFITS
- --------------------------------------------------------------------------------
Executive Employment Agreement of Michael V. Howe
- --------------------------------------------------------------------------------
Name and Position Dollar Value ($) Number of Units
- ----------------- ---------------- ---------------
Michael V. Howe Salary $300,000
President & CEO Bonus $0 - $90,000
Options - 100,000
Executive Group $300,000-$390,000 100,000
Non-Executive Director Group $0 0
Non-Executive Officer $0 0
Employee Group
Salary and bonus amounts in Mr. Howe's Employment Agreement may be amended by
the Compensation Committee pursuant to an annual review.
VOTING EXCLUSION STATEMENT
We will disregard any votes cast on Proposal 2 by Mr. Howe or an associate
of Mr. Howe. However, we need not disregard the vote if it is cast by a person
as proxy for a person who is entitled to vote, in accordance with the directions
on the proxy form; or if it is cast by such person chairing the meeting as proxy
for a person who is entitled to vote, in accordance with a direction on the
proxy form to vote as the proxy decides.
RECOMMENDATION OF THE BOARD OF DIRECTORS
The Board of Directors, other than Mr. Howe, recommend a vote FOR approval
of the amendment of the executive employment agreement of Michael V. Howe.
PROPOSAL NO. 3
APPROVAL OF ADOPTION OF THE EXECUTIVE DIRECTOR STOCK PURCHASE PLAN AND ISSUANCE
OF STOCK THEREUNDER
GENERAL
The third matter to be considered at the Special Meeting will be the
approval of the proposed Plan.
On January 21, 2003, the Board of Directors adopted the Catuity Inc. 2003
Executive Director Stock Purchase Plan (the "Plan") to become effective upon
approval by our shareholders. We are submitting this for shareholder approval
because the Australian Stock Exchange and Nasdaq listing rules require that we
seek shareholder approval of any plan under which our executives or Directors
may acquire shares of our Common Stock. The following summary of the Plan is
subject to the specific provisions contained in the complete text of the Plan
set forth in Appendix A to this Proxy Statement.
The Plan provides a means for our two executive Directors - David L.
MacSmith and Michael V. Howe - to invest, on a routine, predetermined monthly
basis, a portion of their after tax cash compensation in shares of our Common
Stock at the closing price of such shares on the last trading day of each month.
This plan is patterned after the November 2002 Plan adopted by the Board of
Directors that provides the executives of the Company who are not Directors with
a way to invest a portion of their otherwise due monthly cash compensation in
shares of our Common Stock at the closing price on the last trading day of each
month (the Catuity Inc. 2002 Executive Stock Purchase Plan).
These plans address your Board's desire to allow our executives to tangibly
demonstrate their commitment to our company through the additional ownership of
stock. A total of 100,000 shares are reserved for issuance under this Plan, and
a total of 25,000 shares are reserved for issuance under the November 2002 plan.
The shareholders are being asked to consider and if deemed fit approve only the
2003 Executive Director Stock Purchase Plan.
4
Between September 1 and December 31, 2002, Messrs. MacSmith and Howe have
foregone a before tax combined total of approximately $16,450 USD(10%) of the
cash compensation otherwise due to them from each of their paychecks. The total
deferral amount as of the Special Meeting is projected to be approximately
$29,000 USD. If the Plan is approved, on March 26, 2003 we will issue the number
of shares to Messrs. MacSmith and Howe that are equal in value to the amount of
after tax compensation deferred up to that date divided by the closing price per
share on March 26, 2003. Thereafter, Messrs. MacSmith and Howe will purchase
shares at the closing price of Catuity's shares on the last trading day of each
month. The number of shares purchased each month will equal the amount of
compensation deferred in the month divided by the closing price per share on the
last trading day of the month. If the Plan is not approved, no shares will be
issued and the foregone compensation will not be paid or otherwise made-up to
Messrs. MacSmith and Howe. If shareholders approve the Plan, Messrs. MacSmith
and Howe may elect to defer up to 20% of their after tax cash compensation, and
use the deferred compensation amounts to purchase shares. Either participant may
terminate his participation at any time by written notice to us. Messrs.
MacSmith and Howe must provide three month's advance written notice in order to
make any change in the percentage of their compensation withheld for the purpose
of purchasing stock.
Rights under the Plan are not transferable. Any termination of employment,
including death and retirement, terminates participation. In addition, the Plan
automatically terminates on August 31, 2004, unless terminated earlier by the
Board of Directors. The Board of Directors may amend the Plan at any time,
except that it cannot be amended without shareholder approval if the amendment
would: (a) increase the maximum number of shares that may be issued under the
plan, (b) decrease the purchase price per share subject to the plan, (c)
withdraw the administration of the Plan from the Compensation Committee, or (d)
change the class of employees eligible to participate under the plan.
The Plan is not intended to be a qualified "Employee Stock Purchase Plan,"
as defined in Section 423 of the Internal Revenue Code. The following paragraph
summarizes the consequences of the acquisition and disposition of shares of the
Company's common stock for U.S. federal income tax purposes, based on
management's understanding of existing U.S. federal income tax laws.
Funds previously foregone have not been included in Messrs. MacSmith's and
Howe's 2002 ordinary income for tax purposes. If the Plan is approved and shares
are issued in respect of the foregone compensation, Messrs. MacSmith and Howe
will recognize additional ordinary income at the time of receipt of the shares
in the amount of the value of the shares and the amount of tax paid. Messrs.
MacSmith and Howe will have a basis for tax purposes in these shares equal to
the after tax amount of income he realized.
On a forward-going basis, funds contributed by Messrs. MacSmith and Howe
through payroll deductions will be a part of their current compensation taxable
as ordinary income, although not actually received by them. They will be deemed
to have purchased the shares on each purchase date, and will have a basis for
tax purposes in the shares so purchased equal to the amount paid for the shares.
All shares acquired under the Plan will be capital assets for US income tax
purposes, and a taxable gain or loss on a sale or other disposition of the
shares will be recognized in accordance with the tax treatment ordinarily
afforded to purchases and sales of capital assets such as shares of stock.
NEW PLAN BENEFITS
- --------------------------------------------------------------------------------
Executive Director Stock Purchase Plan
- --------------------------------------------------------------------------------
Name and Position Dollar Value ($) Number of Units
- ----------------- ---------------- ---------------
Michael V. Howe $0 50,000
President & CEO
David L. MacSmith $0 50,000
Chairman
Executive Group $0 100,000
Non-Executive Director Group $0 0
Non-Executive Officer $0 0
Employee Group
The Board of Directors of the Company may at any time, or from time to time
amend this Plan in any respect, except that, without shareholder approval, no
amendment shall be made increasing the number of shares approved for this Plan.
VOTING EXCLUSION STATEMENT
We will disregard any votes cast on Proposal 3 by any director, or an
associate of that director, who is eligible to participate in any incentive plan
for the Company. However, we need not disregard the vote if it is cast by a
person as proxy for a person who is entitled to vote, in accordance with the
directions on the proxy form; or if it is cast by such person chairing the
meeting as proxy for a person who is entitled to vote, in accordance with a
direction on the proxy form to vote as the proxy decides.
5
Details of any securities issued under the Plan will be published in each
annual report of the company relating to a period in which securities have been
issued, and that approval for the issue of securities was obtained under
Australian Stock Exchange listing rule 10.14.
Any additional persons who have become entitled to participate in the Plan
after the resolution was approved and who were not named in the notice of
meeting will not participate until approval is obtained under Australian Stock
Exchange listing rule 10.14.
RECOMMENDATION OF THE BOARD OF DIRECTORS
The Board of Directors, other than Messrs. MacSmith and Howe recommend a
vote FOR approval of the Plan.
OWNERSHIP OF SECURITIES
The following tables set forth certain information regarding beneficial
ownership of our capital stock as of December 31, 2002 by:
- each person who is known by us to beneficially own more than five percent
of our common stock;
- our Chief Executive Officer and the other named executive officers
included in the Compensation Tables below;
- each of our Directors; and
- all of our Directors and executive officers as a group.
NAME AND ADDRESS OF BENEFICIAL OWNER AMOUNT AND NATURE OF PERCENT OWNED(2)
SHARES OF COMMON STOCK
BENEFICIALLY OWNED(1)
Alexander S. Dawson 185,000 Direct
38 Macleay Street 20,000 Vested Options
Potts Point, NSW 2011 -------
Australia 205,000 2.4
David L. MacSmith 251,417 Direct
24 View Street 192,000 Vested Options
Woollahra, NSW 2025 -------
Australia 443,417 5.1
Michael V. Howe 10,100 Direct
62 Hampton Road 219,000 Vested Options
Grosse Pointe Shores, MI 48230 -------
229,100 2.6
Duncan P.F. Mount(3) 410,000 Direct
11 Victoria Street 20,000 Vested Options
Watsons Bay, NSW 2011 ------
Australia 430,000 5.0
John H. Lowry III 1,681 Direct
21972 Heatheridge 100,000 Vested Options
Northville, MI 48167 -------
101,681 1.2
Alan L. Gilman 1,500 Direct
4720 Morris Lake Circle 20,000 Vested Options
West Bloomfield, MI 48323 -------
21,500 *
Douglas G. Kilgour 1,448 Direct
1321 Orleans #1213 0 Vested Options
Detroit, MI 48207 -------
1,448 *
Robert C. Robins 500 Direct
901 Glenway 20,000 Vested Options
Hillsborough, CA 94010 -------
20,500 *
Jonathan R.E. Adams 1,591 Direct
10 Riggs Avenue 20,000 Vested Options
Severna Park, MD 21146 -------
21,591 *
Anthony B. Garton 11,590 Direct
2700 Clarendon Blvd. #211 27,500 Vested Options
Arlington, VA 21146 -------
39,090 *
All directors and executive
officers as a group (10 persons) 874,827 Direct
638,500 Vested Options
---------
1,513,327 16.5%
6
(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and generally includes voting or investment
power with respect to securities. Shares of common stock subject to options,
warrants or other rights to purchase which are currently exercisable or are
exercisable within 60 days after December 31, 2002 are deemed vested and
outstanding for purposes of computing the percentage ownership of any other
person. Except as indicated by footnotes and subject to community property laws,
where applicable, the persons named above have sole voting and investment power
with respect to all shares of Common Stock shown as beneficially owned by them.
Share data does not include any Shares the beneficial ownership of which has
been disclaimed pursuant to SEC Rules.
(2) Percentage of Beneficial Ownership is calculated on the basis of the amount
of outstanding securities plus those securities of the named person deemed to be
outstanding under Rule 13-d3 (promulgated under the Securities and Exchange Act
of 1934, as amended) by virtue of such securities being subject to rights to
acquire beneficial ownership within 60 days after December 31, 2002. An asterisk
indicates beneficial ownership of less than 1% of the common stock outstanding.
(3) Includes 410,000 shares held by Boom Australia Pty Ltd., the trustee of the
Mount Family Trust, of which Mr. Mount is a director.
COMPLIANCE WITH SEC REPORTING REQUIREMENTS
Under the securities laws of the United States, the Company's Directors,
executive officers, and any persons holding more than ten percent of the
Company's Common Stock are required to report their initial ownership of the
Company's Common Stock and any subsequent changes in their ownership to the
Securities and Exchange Commission ("SEC"). The SEC has established specific due
dates, and Catuity is required to disclose in this Proxy Statement any failure
to file by those dates. Based upon the copies of Section 16(a) reports that we
received from such persons for their 2002 fiscal year transactions, we believe
that there has been compliance with all Section 16(a) filing requirements
applicable to such officers, Directors, and ten-percent beneficial owners for
such fiscal year. As of the date of this proxy, no reports on Form 5 were due to
be filed.
EXECUTIVE COMPENSATION AND RELATED INFORMATION
COMPENSATION COMMITTEE REPORT
The Compensation Committee (the "Committee") of the Board of Directors was
constituted in early 2001. This report describes the compensation-related
activities of the Committee and the Board as a whole taken during 2002. The
Committee sets the compensation of the Chairman and the Chief Executive Officer,
reviews the design, administration and effectiveness of compensation programs
for other key executives, and approves stock option grants for all executive
officers. The Committee is composed of both executive Directors and outside
Directors. Executive Directors do not participate in the discussions or
determination of their own compensation.
COMPENSATION PHILOSOPHY AND OBJECTIVES
The Company operates in the extremely competitive and rapidly changing high
technology industry. The Committee believes that the compensation programs for
the executive officers should be designed to attract, motivate and retain
talented executives responsible for the success of the Company, should be
determined within a competitive framework and be based on individual
contribution, customer satisfaction and financial performance relative to that
of the technology industry. Within this philosophy, the Committee's objectives
are to:
- Offer a total compensation program that takes into consideration the
compensation practices of companies in the markets that the Company competes for
executive talent.
- Provide annual variable incentive awards that take into account the
Company's overall financial performance in terms of designated corporate
objectives.
- Align the financial interests of executive officers with those of
shareholders by providing significant equity-based, long-term incentives.
7
COMPENSATION COMPONENTS AND PROCESS
The three major components of the Company's executive officer compensation
are: (i) base salary, (ii) variable incentive awards, and (iii) long-term,
equity-based incentive awards.
Base Salary. The base salary of each executive officer is determined at
levels considered appropriate, given available information for comparable
positions at other companies. The Company's objective is to provide base salary
levels that are competitive with salaries offered at other companies in the
markets where the Company competes for talent.
Variable Incentive Awards. The Company has adopted an incentive award
program to provide a portion of the annual compensation of each executive
officer in variable incentive awards. Performance based bonuses may be awarded,
at the discretion of the Board, to an executive officer when his/her
performance, as measured against specific objectives, is meritorious.
Long-Term, Equity-Based Incentive Awards. The goal of the Company's
long-term, equity-based incentive awards is to align the interests of the
executive officers with shareholders and to provide each executive officer with
a significant incentive to manage the Company from the perspective of an owner
with an equity stake in the business through the award of options. The Committee
determines the size of long-term, equity based incentives according to each
executive's position within the Company and sets a level it considers
appropriate to create a meaningful opportunity for stock ownership. In addition,
the Committee takes into consideration an individual's recent performance, his
or her potential for future responsibility and promotion, and the number of
vested options held by each individual at the time of the new grant. The
relevant weight given to each of these factors varies among individuals at the
Committee's discretion.
CEO Compensation. The Board established Mr. Howe's annual base salary and
incentive compensation in December 1999. For the three calendar years 2000
through 2002 Mr. Howe received no increases in compensation, during which time
the Committee was able to assess his performance from the perspective of the
type of company, management team, and customer relationships he was establishing
for the long-term success of Catuity. Effective January 1, 2003, as described in
this proxy statement, the Board is recommending that the shareholders approve
amendments to Mr. Howe's employment agreement. In determining the changes in Mr.
Howe's compensation and his amended employment agreement, the Committee
considered Mr. Howe's performance in the three years he has been the President
and CEO of the Company, the Company's financial performance in very difficult
market conditions relative to the performance of other U.S. technology companies
over the same period, customer relationships established during the three years
and their potential for future revenue to the Company, Mr. Howe's stature within
the payment and loyalty industries in which the Company competes, and
information available regarding the compensation levels of other Presidents and
CEOs with similar responsibilities as Mr. Howe's. Due to the significant
declines in the U.S. stock markets throughout the three year period, and
particularly in the technology sector, the Committee determined that the options
awarded to Mr. Howe in January 2000 no longer aligned Mr. Howe's interests to
those of the shareholders in the manner the options originally were intended.
Finally, it determined that a salary increase averaging approximately seven
percent per year was within the increases other Presidents and CEOs received
during the three year period of Mr. Howe's employment.
Mr. Howe does not participate in the discussions or determination of his
own compensation.
Chairman Compensation. The Board approved the employment agreement of Mr.
MacSmith in June 2001 and received shareholder approval in 2002. The agreement
remained in effect during the period January 1 through December 31, 2002. On May
1, 2002 Mr. MacSmith received the salary increase specified in his employment
agreement. In establishing Mr. MacSmith's compensation, the Committee
considered the level of his involvement with the Company and his overall
performance. A substantial portion of his total compensation, in the form of
stock option grants, is tied to the Company's performance and stock price
appreciation in order to align the goals of the chairman with the long-term
interests of shareholders.
Mr. MacSmith does not participate in the discussions or determination of
his own compensation.
Submitted by the Compensation Committee
Alan L. Gilman -- Chairman
David L. MacSmith
Michael V. Howe
Alexander S. Dawson
8
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Compensation Committee of the Board of Directors for the
2002 fiscal year are:
Alan L. Gilman - Chairman
David L. MacSmith
Michael V. Howe
Alexander S. Dawson
No executive officer of Catuity has served on the Board of Directors or
compensation committee of any other entity that has, or has had, one or more
executive officers serving as a member of the Board of Directors of Catuity.
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION
EXECUTIVE COMPENSATION
The following tables provide certain summary information concerning
compensation and stock options for our Chief Executive Officer and the four most
highly compensated named executive officers that earned more than $100,000
(salary and bonus) for all services rendered in all capacities to Catuity during
the year ended December 31, 2002.
SUMMARY COMPENSATION TABLE
LONG-TERM COMPENSATION
AWARDS
-------------------------
ANNUAL COMPENSATION OTHER ANNUAL
-------------------- COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) ($)(2) OPTIONS(#)
- --------------------------- ---- --------- -------- ------------ ----------
Michael V. Howe............................ 2002 232,000 60,000 -0- -0-
President and CEO 2001 240,000 60,000 -0- -0-
2000 240,000 60,000 -0- 315,000
David L. MacSmith(1)....................... 2002 233,305 -0- 5,163 -0-
Chairman 2001 201,761 -0- 4,461 100,000
2000 156,263 -0- 4,450 -0-
John H. Lowry III (3)...................... 2002 150,000 20,000 -0- -0-
Vice President -- Finance and 2001 150,000 10,000 -0- -0-
Administration 2000 99,000 -0- -0- 150,000
Jonathan R.E. Adams (3).................... 2002 136,250 -0- -0- -0-
Vice President - Corporate Development 2001 125,000 -0- -0- -0-
2000 125,000 -0- -0- 50,000
Anthony B. Garton (1)(3).................... 2002 124,250 3,039 5,163 -0-
Vice President- Product Development 2001 85,527 -0- 4,461 20,000
and Implementation 2000 94,238 -0- 3,687 7,500
- ------------------
(1) Salary amounts have been translated from Australian dollars at the average
exchange rate for each year. The exchange rates were .544, .5182 and .5828, for
the years 2002, 2001, and 2000 respectively.
(2) Includes Australian Superannuation Guarantee Levy, a compulsory payment that
funds retirement benefits.
(3) A portion of the executive officers 2002 salary was used to purchase the
Company's stock under an executive stock purchase plan. The shares were
purchased at market price, therefore, no additional compensation resulted.
9
OPTION GRANTS IN LAST FISCAL YEAR (INDIVIDUAL GRANTS)
PERCENT OF TOTAL
NUMBER OF SECURITIES OPTIONS GRANTED TO EXERCISE PRICE
UNDERLYING OPTIONS EMPLOYEES IN PER SHARE EXPIRATION
NAME AND PRINCIPAL POSITION GRANTED FISCAL YEAR ($/SH) DATE
- --------------------------- -------------------- ------------------ -------------- ----------
Michael V. Howe..................... -0- -- -- --
President and CEO
David L. MacSmith................... -0- -- -- --
Chairman
John H. Lowry III................... -0- -- -- --
Vice President -- Finance and
Administration
Anthony B. Garton................. -0- -- -- --
Vice President - Product Development
and Implementation
Jonathan R.E. Adams................. -0- -- -- --
Vice President - Corporate Development
AGGREGATED OPTIONS EXERCISED IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
VALUE OF UNEXERCISED
NUMBER OF UNEXERCISED IN-THE-MONEY OPTIONS AT
NAME AND PRINCIPAL SHARES ACQUIRED VALUE OPTIONS AT FY-END FY-END(1)
POSITION ON EXERCISE REALIZED(2) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
- ------------------- -------------- ----------- ------------------------- -----------------------
Michael V. Howe.......... -0- -0- 219,000/96,000 $0/$0
President and CEO
David L. MacSmith........ -0- -0- 188,000/12,000 $0/$0
Chairman
John H. Lowry III........ -0- -0- 100,000/50,000 $0/$0
Vice President --
Finance and Administration
Anthony B. Garton........ -0- -0- 27,500/0 $0/$0
Vice President Product
Development and Implementation
Jonathan R.E. Adams...... -0- -0- 20,000/30,000 $0/$0
Vice President --
Corporate Development
- ------------------
(1) Based on the closing price per share of common stock on the Nasdaq small cap
market on the last day of 2002, less the option exercise price payable per
share.
(2) Based upon the market price of the purchased shares on the exercise date
less the option exercise price paid for such shares.
10
TEN-YEAR OPTION REPRICINGS
LENGTH OF
SECURITIES MARKET PRICE ORIGINAL
UNDERLYING OF STOCK AT EXERCISE PRICE NEW OPTION TERM
NAME AND PRINCIPAL OPTIONS TIME OF AT TIME OF EXERCISE REMAINING AT
POSITION DATE REPRICED (#) REPRICING ($) REPRICING ($) PRICE ($) REPRICING
- ------------------- ---------- ----------- ------------- ------------- -------- ------------
Michael V. Howe 1/2/2003 100,000 $2.20 $9.50 $2.64 6 YRS.
President and CEO
Equity Compensation Plan Information
- ------------------------------------------------------------------------------------------------------------------------------------
Number of securities
remaining available for
Number of securities future issuance under
to be issued upon Weighted-average equity compensation plans
exercise of exercise price of (excluding securities reflected
Plan Category outstanding options outstanding options (1) in column (a)
- ------------------------------------------------------------------------------------------------------------------------------------
(a) (b) (c)
- ------------------------------------------------------------------------------------------------------------------------------------
Equity compensation plans 1,026,325 $6.91 468,675
approved by security holders
Equity compensation plans see footnote (2)
not approved by security holders
(1) Some options were issued with exercise prices denominated in Australian
Dollars. These amounts have been exchanged to U.S. dollars at .565, the exchange
rate on December 31, 2002.
(2) A total of 25,000 shares of our Common Stock are reserved for issuance under
an Executive Stock Purchase Plan. The Plan provides a means for our executive
employees, other than the Chairman and CEO, to invest a predetermined portion of
their after tax cash compensation in shares of our Common Stock at the closing
price of such shares on the last trading day of each month.
DIRECTOR COMPENSATION
During 2002, non-employee Directors received a $10,000 annual retainer fee,
paid in quarterly payments of $2,500 following each calendar quarter, for
serving on the Board. In addition, each Director receives a $1,000 fee for each
meeting attended during the year. A fee of $5,000 per year is paid to the
Chairperson of a committee and a fee of $2,000 per year is paid to Board members
who serve as committee members as part of Director Compensation. Under the
Director Stock Option Plan, upon the date a person first becomes a member of the
Board, the Director automatically receives a stock option to acquire 10,000
Catuity shares. In addition, on the last business day of September of every
year, each Director then in office will receive a stock option to acquire 5,000
Catuity shares. The exercise price per share of any option is the fair market
value on the date of grant.
EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT, AND CHANGE IN CONTROL
AGREEMENTS
Michael V. Howe. We entered into a five-year employment agreement with our
President and Chief Executive Officer, Michael Howe, dated December 5, 1999.
Under the agreement, Mr. Howe is entitled to receive a base salary of $240,000
USD, which is subject to annual review for possible increase by the Board in
conjunction with performance. Mr. Howe is also entitled to receive a
performance-based bonus, which will be determined by the Board each year as part
of the budget review.
Mr. Howe received options to purchase up to 315,000 shares of common stock,
at an exercise price of $9.50 USD, which vested 75,000 on commencement of
employment and 12,000 at the end of each calendar quarter through the quarter
ending December 31, 2004 contingent upon his continued employment at the quarter
end. All options expire on the earlier of December 31, 2008 or the date six
months after cessation of employment.
If we terminate the agreement without cause, Mr. Howe is entitled to one
year's written notice. We have the right to pay one year's base salary to effect
immediate termination. Mr. Howe may voluntarily terminate the agreement at any
time provided we are given 6 months' advance written notice.
David L. MacSmith. We entered into a two-year employment agreement with
our Chairman, David L. MacSmith, effective June 1, 2001. Under the agreement,
Mr. MacSmith received a base salary of $410,000AUD from June 1, 2001 to May 1,
2002 and a 10% increase on May 1, 2002. Mr. MacSmith is also entitled to
payment by us of certain required Australian withholding amounts. Under the
agreement Mr. MacSmith received 100,000 options at an exercise price of $7.75
AUD. The options vest at a rate of 26,000 shares on June 1, 2001 and 26,000 on
June 1, 2002. The remaining 48,000 options vest at the rate of 2,000 shares per
month beginning July 1, 2001. Mr. MacSmith may terminate the agreement by
giving six months' notice in writing. If a person or party gives notice of its
intention to acquire, or acquires, more than 30% of the issued capital of the
Company or any parent of the Company, all unvested shares and options will vest
and Mr. MacSmith may terminate the agreement at any time within a period of six
months following such event by giving three months' notice. We may terminate the
agreement for cause or, if Mr. MacSmith becomes unable to perform his duties,
or agreement has not been reached prior to June 1, 2003 on continued employment
after the term. If we terminate the agreement, Mr. MacSmith must resign as a
Director.
11
Under a previous employment contract, entered into on May 1, 1995, Mr.
MacSmith was entitled to the equivalent of 10% of any shares issued until the
time we became listed on the Australian Stock Exchange. A loan from us was made
available to acquire these shares. At December 31, 2002, this non-interest
bearing loan to Mr. MacSmith, at the year ending foreign currency exchange
rate, amounted to $509,000 USD. Our recourse for repayment of the loan is
limited to dividends and share sale proceeds. Mr. MacSmith may transfer shares
subject to the loan to members of his family or entities controlled by one or
more members of his family without any obligation to repay the loan. However,
the sale, any transfer, or any disposal of the shares to any other person will
trigger repayment of the loan applicable to such shares.
John H. Lowry III. We entered into a five-year employment agreement with
our Chief Financial Officer, John Lowry, effective May 1, 2000. Under the
agreement, Mr. Lowry is entitled to receive a base salary of $150,000, which is
subject to annual review for possible increase by the President and CEO. Mr.
Lowry is also entitled to receive a performance-based bonus, which will be
determined by the Board each year as part of the budget review.
Mr. Lowry received options to purchase up to 150,000 shares of common
stock, at an exercise price of $7.68, which vested 50,000 on commencement of
employment and 5,000 at the end of each calendar quarter through the quarter
ending June 30, 2005 contingent upon his continued employment at the quarter
end. All options expire on the earlier of December 31, 2008 or the date six
months after cessation of employment.
If we terminate the agreement without cause, Mr. Lowry is entitled to nine
months' written notice. We have the right to pay nine months' salary to effect
immediate termination. Mr. Lowry may voluntarily terminate the agreement at any
time provided we are given 4 months' advance written notice.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
There were no reportable relationships or transactions entered into in 2002
between the Company and a Director, executive officer or person beneficially
owning more than 5% of our common stock.
STOCK PERFORMANCE GRAPH
The graph depicted below shows the Company's stock price as an index
assuming $100 invested on May 24, 2000 (the date on which Catuity's shares
became registered under Section 12 of the Exchange Act), along with the
composite prices of companies listed on Nasdaq and Catuity's SIC Code Index.
[PERFORMANCE CHART]
- --------------------------------------------------------------------------------------------------------------------------
COMPANY/INDEX 5/24/2000 12/29/2000 12/31/2001 12/31/2002
- --------------------------------------------------------------------------------------------------------------------------
Catuity Inc. 100.00 105.76 17.82 17.64
- --------------------------------------------------------------------------------------------------------------------------
SIC Code Index 100.00 66.66 36.05 23.47
- --------------------------------------------------------------------------------------------------------------------------
NASDAQ Market Index 100.00 72.57 57.85 40.35
- --------------------------------------------------------------------------------------------------------------------------
Notwithstanding anything to the contrary set forth in any of the
Company's previous filings under the Securities Act of 1933 or the Securities
Exchange Act of 1934 that might incorporate future filings made by the Company
under those statutes, the preceding Compensation Committee Report and the
Company Stock Performance Graph will not be incorporated by reference into any
of those prior filings, nor will such report or graph be incorporated by
reference into any future filings made by the Company under those statutes.
12
SHAREHOLDER PROPOSALS FOR 2003 PROXY STATEMENT
The Company must have received any shareholder proposal that a shareholder
intends to be presented at the Company's Annual Meeting of Shareholders to be
held in 2003 no later than December 18, 2002 in order to be included in the
proxy statement and related proxy materials. We did not receive any such
proposals by the due date. A date for submission of proposals for our 2004
annual meeting will be established when we mail materials to shareholders for
the 2003 meeting.
FORM 10-K
THE COMPANY WILL MAIL WITHOUT CHARGE, UPON WRITTEN REQUEST, A COPY OF THE
COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED DECEMBER 31,
2001, INCLUDING THE FINANCIAL STATEMENTS, SCHEDULES, AND LIST OF EXHIBITS.
REQUESTS SHOULD BE SENT TO CATUITY INC., 2711 E. JEFFERSON AVE, DETROIT,
MICHIGAN 48207, ATTN: INVESTOR RELATIONS.
13
OTHER MATTERS
The Board knows of no other matters to be presented for Shareholder action
at the Special Meeting. However, if other matters do properly come before the
Special Meeting or any adjournments or postponements thereof, the Board intends
that the persons named in the proxies will vote upon such matters in accordance
with their best judgment.
By Order of the Board of Directors
/s/ John H. Lowry
JOHN H. LOWRY III
Secretary
Dated: February 3, 2003
14
APPENDIX A
CATUITY INC. 2003 EXECUTIVE DIRECTOR STOCK PURCHASE PLAN
PURPOSE. The purpose of the Catuity Inc. 2003 Executive Director Stock Purchase
Plan (the "Plan") is to provide a direct means for any Directors who are also
executives of Catuity Inc. (the "Company") to use a portion of their cash
compensation to purchase shares of common stock (the "Stock") of the Company, at
the market price thereof.
COMMITTEE TO ADMINISTER PLAN. The Compensation Committee of the Board of
Directors of the Company (the "Committee") shall administer the Plan. The
Committee may establish from time to time such regulations, provisions and
procedures, within the terms of the Plan, as in the opinion of its members may
be advisable in the administration of the Plan. The interpretation and
construction by the Committee of any provisions of the Plan shall be final
unless otherwise determined by the Board of Directors. No member of the Board of
Directors or the Committee shall be liable for any action or determination made
in good faith with respect to the Plan.
ELIGIBILITY. Participation under the Plan shall be open only to Executive
Directors (the "Eligible Executives") of the Company. No purchase rights shall
be granted under the Plan to any person who is not an Eligible Executive.
STOCK AVAILABLE FOR PLAN. Purchase of Stock pursuant to and on behalf of this
Plan for delivery under this Plan shall be made out of the Company's presently
or hereafter authorized but unissued Stock. The maximum number of shares of
Stock that may be purchased under the Plan is 100,000 shares and in no event may
the number of shares be increased without shareholder approval.
EFFECTIVE DATES. This Plan shall become effective on the date it is approved by
the Company's shareholders. The first Purchase Period under the Plan shall be
the date of shareholder approval. The next Purchase Period shall commence on the
day after shareholder approval and end on the last trading date of that month.
Thereafter, and as long as the Plan remains in effect, a new Purchase Period
shall commence on the first day of each calendar month and end on the last
trading day of each such month. For purposes of the first Purchase Period,
Eligible Executives shall be able to purchase shares with payroll deductions
voluntarily foregone prior to the Plan's approval.
PARTICIPATION. An Eligible Executive at or prior to the first day of any
Purchase Period may become a Participant as of such date by, prior to such date,
completing and forwarding a payroll deduction authorization form (the
"Authorization") to the Chief Financial Officer. The Authorization will direct a
regular payroll deduction from the Participant's compensation to be made on each
of the Participant's pay dates occurring during each Purchase Period in which he
or she is a Participant.
PAYROLL DEDUCTIONS AND LUMP SUM PAYMENTS. The Company and its Participating
Subsidiaries will maintain payroll deduction accounts for all of the
Participants. Payments made by Participants by payroll deduction shall be
credited to the Participant's Stock Purchase Account (the "Purchase Account").
No amounts other than payroll deductions authorized under this Plan may be
credited to a Participant's Purchase Account. A Participant may authorize a
payroll deduction in any amount not less than $10 for each pay date, but not
more than a maximum of twenty percent (20%) of the Participant's net earnings
payable as wages, salary, and bonus compensation, after withholding or other
deductions (" Net Earnings"), with respect to which payments are to be made to
him or her by the Company or the Participating Subsidiary on such pay date. The
Committee, in its discretion, may vary
15
the Purchase Period and the payroll deduction period of Eligible Executives in a
manner necessary or convenient for participation in the Plan by Eligible
Executives of a Participating Subsidiary, and the Committee shall have the
authority to establish the terms and conditions of participation in the Plan by
Eligible Executives of a Foreign Participating Subsidiary, provided that such
terms and conditions are not materially inconsistent with the Plan.
CHANGES IN PAYROLL DEDUCTION. Payroll deductions shall be made for each
Participant in accordance with the Participant's Authorization and shall
continue until the Participant's participation terminates, the Authorization is
revised or the Plan terminates. A Participant may, as of the beginning of any
Purchase Period, increase or decrease the Participant's payroll deduction by
filing a new Authorization three months prior to the beginning of such Purchase
Period.
TERMINATION OF PARTICIPATION; WITHDRAWAL OF FUNDS. A Participant may for any
reason at any time on written notice given to the Company prior to the
Participant's last pay date in any Purchase Period elect to terminate his or her
participation in the Plan and permanently draw out the balance accumulated in
his or her Purchase Account (except for amounts foregone prior to the date of
shareholder approval of the Plan, which are not payable to the Participants
other than via shares under this Plan). Upon any termination by a Participant of
participation, he or she shall cease to be a Participant, his or her
Authorization shall be revoked insofar as subsequent payroll deductions are
concerned, and the amount to his or her credit in his or her Purchase Account,
and not previously used to purchase Stock theretofore under the Plan, as well as
any unauthorized payroll deductions made after such revocation, shall be
promptly refunded to the former Participant. Partial withdrawals of funds will
not be permitted.
PURCHASE OF SHARES. Each Participant during each Purchase Period under this Plan
will as of the "Purchase Date" (as herein defined) purchase as many whole shares
of Stock as may be purchased with the funds then in his or her Purchase Account.
This purchase shall be automatically made as provided in this Section unless the
Participant terminates participation as provided in Section 9. The purchase
price for each share of Stock purchased shall be the fair market value of a
share of Stock on the "Purchase Date" (as herein defined). For purposes of this
Plan, fair market value shall be the closing price on the Nasdaq or Australian
Stock Exchange on the "Purchase Date" unless amended by the Committee as
provided for herein. The first "Purchase Date" shall be the date of shareholder
approval (as to amounts foregone and deferred prior to such date). Thereafter,
the Purchase Dates shall be the last trading day of each Purchase Period. If, as
of each Purchase Date, the Participant's Purchase Account contains funds, the
Participant shall purchase the maximum whole number of shares possible with the
Purchase Account funds at the purchase price. The Participant's Purchase Account
shall be charged for the amount of the purchase, and a stock certificate shall
be issued or an entry shall be made to the Participant's account maintained by
the Company's transfer agent. Any residual balance, insufficient to purchase a
whole share, which remains in the Purchase Account shall be used in the
subsequent purchase period to purchase shares. As of each subsequent Purchase
Date when funds have again accrued in the Participant's Purchase Account, shares
will be purchased in the same manner.
REGISTRATION OF CERTIFICATES. Upon the request of a Participant during
participation in the Plan, and upon a Participant's termination of
participation, a stock certificate representing the full number of shares of
Stock owned by such Participant under the Plan, if not previously issued, shall
be issued and delivered to the Participant. Certificates may be registered only
in the name of the Participant or the names of the Participant and his or her
spouse.
RIGHTS ON RETIREMENT, DEATH, OR TERMINATION OF EMPLOYMENT. In the event of a
Participant's retirement, death or termination of employment, no payroll
deduction shall be taken from any pay due and owing to a Participant at such
time and the balance in the Participant's Purchase Account shall be paid to the
Participant or, in the event of the Participant's death, to the Participant's
estate.
16
RIGHTS NOT TRANSFERABLE. Rights under this Plan are not transferable by a
Participant and are exercisable only by the Participant during his or her
lifetime.
APPLICATION OF FUNDS. The Company or such Participating Subsidiary may use all
funds received or held by the Company or a Participating Subsidiary under this
Plan for any corporate purpose.
AMENDMENT OF THE PLAN. The Board of Directors of the Company may at any time, or
from time to time, amend this Plan in any respect, except that, without
shareholder approval, no amendment shall be made increasing the number of shares
approved for this Plan (other than as provided in Section 4).
TERMINATION OF THE PLAN. Unless sooner terminated as hereinafter provided, this
Plan shall terminate on August 31, 2004. The Company may, by action of its Board
of Directors, terminate the Plan at any time. Notice of termination shall be
given to all then Participants, but any failure to give such notice shall not
impair the termination. Upon termination of the Plan, all amounts in Purchase
Accounts of Participants shall be promptly refunded.
GOVERNMENTAL REGULATIONS. The Company's obligation to sell and deliver Stock
under this Plan is subject to the approval of any governmental authority
required in connection with the authorization, issuance or sale of such Stock.
If at any time shares of Stock deliverable hereunder are required to be
registered or qualified under any applicable law, or delivery of such shares is
required to be accompanied or preceded by a prospectus or similar circular,
delivery of certificates for such shares may be deferred for a reasonable time
until such registrations or qualifications are effected or such prospectus or
similar circular is available.
17
CATUITY INC. PROXY FORM
ARBN 089 327 882 ALL CORRESPONDENCE TO:
Computershare Investor Services Pty Limited
GPO Box 7045 Sydney
New South Wales 1115 Australia
Enquiries (within Australia) 1300 855 080
Mark this box with an "X" if you have made any changes (outside Australia) 61 3 9615 5970
to your name or address details (see reverse) [X] Facsimile 61 2 8234 5050
www.computershare.com
[BAR CODE]
000001
MR JOHN SMITH
FLAT 123 Securityholder Reference Number (SRN)
123 SAMPLE STREET
SAMPLEVILLE VIC 3030 [BAR CODE]
CAT
APPOINTMENT OF PROXY | 1234567890 | ND
I/We being a member/s of the Catuity Inc. and entitled to attend and vote hereby appoint
[X] the Chairman ----------------------------------- Write here the name of the person you are
of the Meeting, OR | | appointing if this person is someone other
(mark with an "X") ----------------------------------- than the Chairman of the Meeting.
or failing the person named, or if no person is named, the Chairman of the
Meeting, as my/our proxy and to vote in accordance with the following directions
(or if no directions have been given, as the proxy sees fit) at the Special
Meeting of Catuity Inc. to be held at AAP Theatrette, AAP Centre, 259 George
Street, Sydney NSW 2000 on Thursday 20 March 2003 at 9:30am and at any
adjournment of that meeting.
IMPORTANT
TO ENSURE YOUR PROXY VOTES COUNT, YOU SHOULD MARK THIS BOX.
[X] By marking this box, when you have not directed your proxy how to vote below, you acknowledge that the Chairman of
the Meeting (whether nominated or by default), acting as your proxy, may exercise your undirected proxy votes even
if he has an interest in the outcome of each resolution which carries a voting exclusion, and that votes casts by
him, other than as a proxyholder, will be disregarded because of those interests. The Chairman of the Meeting
intends to vote undirected proxies in favour of each such resolution. If you direct your proxy how to vote, it is
not necessary to mark this box.
VOTING DIRECTIONS TO YOUR PROXY - PLEASE MARK [X] TO INDICATE YOUR DIRECTIONS
FOR AGAINST ABSTAIN*
1. To approve a sale of shares
to Mr D P F Mount [ ] [ ] [ ]
2. To approve an amendment
to the executive
employment agreement
of Mr M V Howe [ ] [ ] [ ]
3. To approve the Catuity
Inc. 2003 Executive
Director Stock Purchase
Plan [ ] [ ] [ ]
* If you mark the Abstain box for a particular item, you are directing your proxy not to vote on your behalf on a show of hands or
on a poll, or if your voting entitlement cannot be voted by the Chairman of the Meeting, your votes will not be counted in
computing the required majority on a poll.
APPOINTING A SECOND PROXY
I/We wish to appoint a second proxy
Mark with an "X" if you State the percentage of your rights or the number
[X] wish to appoint a second AND ________% OR ________________ of securities for this Proxy Form.
proxy.
AUTHORIZED SIGNATURE/S This section MUST be signed in accordance with the instructions overleaf to enable your directions
to be implemented.
INDIVIDUAL OR SECURITYHOLDER 1 SECURITYHOLDER 2 SECURITYHOLDER 3
- - -------------------------------------- ---------------------------------------- ---------------------------------
| | | | | |
- - -------------------------------------- ---------------------------------------- ---------------------------------
INDIVIDUAL/SOLE DIRECTOR AND DIRECTOR DIRECTOR/COMPANY SECRETARY
SOLE COMPANY SECRETARY
------------------------------------------- ------------------------------------------ -----/-----/-----
CONTACT NAME CONTACT DAYTIME TELEPHONE DATE
C A T 7 P R
HOW TO COMPLETE THE PROXY FORM
1 YOUR NAME AND ADDRESS
This is your name and address as it appears on the share register of
Catuity Inc.. If this information is incorrect, please mark the box and
make the correction on the form. Securityholders sponsored by a broker
should advise their broker of any changes. PLEASE NOTE, YOU CANNOT CHANGE
OWNERSHIP OF YOUR SECURITIES USING THIS FORM.
2 APPOINTMENT OF A PROXY
If you wish to appoint the Chairman of the Meeting as your proxy, mark the
box. If the person you wish to appoint as your proxy is someone other than
the Chairman of the Meeting please write the name of that person. If you
leave this section blank, or your named proxy does not attend the meeting,
the Chairman of the Meeting will be your proxy and vote on your behalf. A
proxy need not be a securityholder of Catuity Inc..
3 VOTES ON ITEMS OF BUSINESS
You may direct your proxy how to vote by placing a mark in one of the three
boxes opposite each item of business. All your securities will be voted in
accordance with such a direction unless you indicate only a portion of
voting rights are to be voted on any item by inserting the percentage or
number of securities you wish to vote in the appropriate box or boxes. If
you do not mark any of the boxes on a given item, your proxy will vote as
he or she chooses. If you mark more than one box on an item your vote on
that item will be invalid.
4 APPOINTMENT OF A SECOND PROXY
If you wish to appoint a second proxy, an additional Proxy Form may be
obtained by telephoning the share registry of Catuity Inc. or you may copy
this form.
To appoint a second proxy you must:
(a) indicate that you wish to appoint a second proxy by marking the
box.
(b) on each of the first Proxy Form and the second Proxy Form state
the percentage of your voting rights or number of securities
applicable to that form.
(c) return both forms together in the same envelope.
5 AUTHORIZED SIGNATURE(S)
You must sign this form as follows in the spaces provided:
Joint Holding: where the holding is in more than one name all of
the holders must sign.
Power of Attorney: if signed under a Power of Attorney, you must
have already lodged it with the registry, or
alternatively, attach a certified photocopy of
the Power of Attorney to this Proxy Form when you
return it.
Companies: a Director can sign jointly with another Director
or a Company Secretary. A sole Director who is
also a sole Company Secretary can also sign. A
sole Director of a corporation without a Company
Secretary can sign, pursuant to s204A of the
Corporations Act 2001. Please indicate the office
held by signing in the appropriate space.
If a representative of the corporation is to attend the meeting the
appropriate "Certificate of Appointment of Corporate Representative" should
be produced prior to admission. A form of the certificate may be obtained
from the share registry of Catuity Inc..
LODGEMENT OF A PROXY
This Proxy Form (and any Power of Attorney under which it is signed) must
be received not later than 48 hours before the commencement of the meeting.
Any Proxy Form received after that time will not be valid for the scheduled
meeting.
DOCUMENTS MAY BE LODGED :
- - - By posting, delivery or facsimile to the Company's share registry at the
address opposite, or
- - - By delivery or facsimile to the Registered Office of Catuity Inc being
Level 4 Ballarat House
68-72 Wentworth Avenue
Surry Hills NSW 2010 Australia
Facsimile : 61 2 92811242
Catuity Inc. share registry
Computershare Investor Services Pty Limited
GPO Box 7045
Sydney New South Wales 1115
Australia
Facsimile 61 2 8234 5050
PROXY - CATUITY, INC.
LEVEL 4 BALLARAT HOUSE
68-72 WENTWORTH AVE.
SURRY HILLS, NSW 2010 AUSTRALIA
2711 E. JEFFERSON AVE.
DETROIT, MI 48207 USA
MEETING DETAILS
AAP THEATRETTE, AAP CENTRE, 259 GEORGE STREET, SYDNEY, NSW 2000 AUSTRALIA
PROXY SOLICITED BY BOARD OF DIRECTORS FOR SPECIAL MEETING - MARCH 19, 2003 AT 7:30 P.M. EASTERN DAYLIGHT TIME IN THE UNITED STATES
MARCH 20, 2003 AT 9:30 A.M. AUSTRALIAN EASTERN STANDARD TIME
David L. MacSmith and Michael V. Howe, or one of them, each with the power of
substitution, are hereby authorized to represent and vote the shares of the
undersigned, with all the powers which the undersigned would possess if
personally present, at the Special Meeting of Shareholders of Catuity, Inc. to
be held on March 19, 2003 at 7:30 p.m. Eastern Daylight Time in the United
States and March 20, 2003 at 9:30 a.m. Australian Eastern Standard Time or at
any postponement or adjournment thereof.
SHARES REPRESENTED BY THIS PROXY WILL BE VOTED BY THE SHAREHOLDER. IF NO SUCH
DIRECTIONS ARE INDICATED, THE PROXIES WILL HAVE AUTHORITY TO VOTE FOR APPROVAL
OF THE SHARE SALE IN ITEM 1, FOR THE AMENDMENT TO THE EXECUTIVE EMPLOYMENT
AGREEMENT OF M. V. HOWE IN ITEM 2 AND FOR APPROVAL OF THE 2003 EXECUTIVE
DIRECTOR STOCK PURCHASE PLAN IN ITEM 3.
IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER BUSINESS
AS MAY PROPERLY COME BEFORE THE MEETING.
(Continued and to be voted on reverse side.)
18
000000 0000000000 0 0000
CATUITY, INC. 000000000.000 ext
000000000.000 ext
000000000.000 ext
000000000.000 ext
000000000.000 ext
MR A SAMPLE 000000000.000 ext
DESIGNATION (IF ANY) 000000000.000 ext
ADD 1
ADD 2 HOLDER ACCOUNT NUMBER
ADD 3
ADD 4 C 1234567890 J N T
ADD 5
ADD 6
[BAR CODE]
Use a black pen. Mark with Mark this box with an X if you have made changes
an X inside the grey areas [X] [ ] to your name or address details above. as shown in
this example.
- ------------------------------------------------------------------------------------------------------------------------------------
ANNUAL MEETING PROXY CARD
- ------------------------------------------------------------------------------------------------------------------------------------
A. The Board of Directors recommends a vote FOR the following proposals.
FOR AGAINST ABSTAIN
1. Approve share sale to D. P. F. Mount. [ ] [ ] [ ]
2. Approve agreement amendment for M. V. Howe. [ ] [ ] [ ]
3. Approve Executive Director Stock Purchase Plan. [ ] [ ] [ ]
B. AUTHORIZED SIGNATURES - SIGN HERE - THIS SECTION MUST BE COMPLETED FOR YOUR INSTRUCTIONS TO BE EXECUTED.
NOTE: Please sign your name(s) EXACTLY as your name(s) appear(s) on this proxy. All joint holders must sign. When signing as
attorney, trustee, executor, administrator, guardian or corporate officer, please provide your FULL title.
Signature 1 - Please keep signature within the box Signature 2 - Please keep signature within the box Date (dd/mm/yyyy)
- --------------------------------------------------- --------------------------------------------------- -----------------------
| | | | | / / |
- --------------------------------------------------- --------------------------------------------------- -----------------------
1 U P X A768
19