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SCHEDULE 14A
(RULE 14a)
INFORMATION REQUIRED IN PROXY STATEMENT
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 sec.240.14a-11(c) or sec.240.14a-12
DATATRAK INTERNATIONAL, INC.
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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.
[ ] 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.
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[DATATRAK LOGO]
May 3, 2001
Dear Shareholder:
You are cordially invited to attend the 2001 Annual Meeting of Shareholders
of DATATRAK International, Inc., to be held at 10:00 a.m., local time, on June
1, 2001 at National City Bank, Meeting Room B, Fourth Floor, Atrium Building,
1900 East Ninth Street, Cleveland, Ohio.
At this year's Annual Meeting, shareholders will be asked to elect four
Directors. Information relating to the election of the four Directors is
presented in the accompanying Proxy Statement, which shareholders are encouraged
to read carefully.
Whether or not you plan to attend the Annual Meeting in person, it is
important that your shares are represented. Therefore, please complete, sign,
date and promptly return the enclosed Proxy card in the accompanying envelope.
If you do attend the Annual Meeting, you may, of course, withdraw your Proxy
should you wish to vote in person, even if you have previously returned your
Proxy card.
On behalf of the Board of Directors and management of DATATRAK
International, Inc., we would like to thank you for your continued support and
confidence.
Sincerely yours,
/s/ Jeffrey A. Green
Dr. Jeffrey A. Green
President and Chief Executive Officer
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DATATRAK INTERNATIONAL, INC.
20600 Chagrin Boulevard, Suite 1050
Cleveland, Ohio 44122
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD JUNE 1, 2001
The 2001 Annual Meeting of Shareholders of DATATRAK International, Inc.
(the "Company"), will be held at 10:00 a.m., local time, on June 1, 2001 at
National City Bank, Meeting Room B, Fourth Floor, Atrium Building, 1900 East
Ninth Street, Cleveland, Ohio, for the following purposes:
1. To nominate and elect four individuals as Directors of the Company
for a two-year term ending at the Annual Meeting of Shareholders in 2003;
and
2. To transact such other business as may properly come before the
Annual Meeting and any adjournments or postponements thereof.
Only shareholders of record at the close of business on April 20, 2001 will
be entitled to receive notice of and to vote at the Annual Meeting and any
adjournments or postponements thereof.
By Order of the Board of Directors,
THOMAS F. MCKEE
Secretary
Cleveland, Ohio
May 3, 2001
EACH SHAREHOLDER IS REQUESTED TO EXECUTE AND PROMPTLY RETURN THE
ENCLOSED PROXY CARD IN THE ENCLOSED PREPAID ENVELOPE
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DATATRAK INTERNATIONAL, INC.
---------------
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
Mailed on or about May 3, 2001
INTRODUCTION
This Proxy Statement is furnished in connection with the solicitation of
Proxies by the Board of Directors of DATATRAK International, Inc. (the
"Company"), to be used at the Annual Meeting of Shareholders of the Company on
June 1, 2001 at 10:00 a.m., local time, and any adjournments or postponements
thereof. The time, place and purposes of the Annual Meeting are stated in the
Notice of Annual Meeting of Shareholders accompanying this Proxy Statement.
The accompanying Proxy is solicited by the Board of Directors of the
Company. All validly executed Proxies received by the Board of Directors of the
Company pursuant to this solicitation will be voted at the Annual Meeting, and
the instructions contained in those Proxies will be followed in each instance.
If no instructions are given, the Proxy will be voted FOR the election of the
four nominees listed on the Proxy. A shareholder may revoke a Proxy at any time
before it is exercised by delivery of written notice to the Secretary of the
Company or by a duly executed Proxy bearing a later date.
The record date for determination of shareholders entitled to vote at the
Annual Meeting was the close of business on April 20, 2001. On that date, the
Company had 3,290,322 Common Shares outstanding and entitled to vote at the
Annual Meeting. Each Common Share is entitled to one vote. Shareholders do not
have the right to vote cumulatively in the election of Directors.
The expense of soliciting Proxies, including the cost of preparing,
assembling and mailing the Notice, Proxy Statement and Proxy, will be borne by
the Company. The Company may pay persons holding Common Shares for others their
expenses for sending proxy materials to their principals. In addition to
solicitation of Proxies by mail, the Company's Directors, officers and
employees, without additional compensation, may solicit Proxies by telephone,
telegraph and personal interview. The Company also may retain a third party to
aid in the solicitation of Proxies.
At the Annual Meeting, in accordance with the General Corporation Law of
Ohio and the Company's Code of Regulations (the "Code"), the inspectors of
election appointed by the Board of Directors for the Annual Meeting will
determine the presence of a quorum and will tabulate the results of shareholder
voting. As provided by the General Corporation Law of Ohio and the Code, holders
of Common Shares entitling them to exercise a majority of the voting power of
the Company, present in person or by Proxy at the Annual Meeting, will
constitute a quorum for the Annual Meeting. The inspectors of election intend to
treat properly executed Proxies marked "abstain" as present for these purposes.
The inspectors also will treat as "present" shares held in "street name" by
brokers that are voted on at least one proposal to come before the Annual
Meeting.
Nominees for election as Directors receiving the greatest number of votes
will be elected. Votes that are withheld or broker non-votes with respect to the
election of Directors will not be counted in determining the outcome of the
election. Pursuant to the Code, the outcome of the vote relating to all other
questions and matters brought before the Annual Meeting will be, unless
otherwise provided by law or the Articles, decided by the vote of a majority of
the Common Shares present in person or by Proxy and entitled to vote on the
matter in question. In voting for these proposals, votes may be cast in favor,
against or abstained. Unless otherwise provided by law or the Company's Articles
of Incorporation, broker non-votes will not be included in the vote totals and,
therefore, will have no effect on the outcome of the vote on these proposals.
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SECURITY OWNERSHIP OF PRINCIPAL HOLDERS AND MANAGEMENT
The following table shows, as of April 20, 2001 unless otherwise indicated,
the beneficial ownership of the Common Shares of (i) each person who is known to
the Company to own beneficially more than 5% of the outstanding Common Shares,
(ii) each Director of the Company, (iii) each of the Named Executive Officers
(as hereinafter defined) and (iv) all Directors and Named Executive Officers as
a group. Unless otherwise indicated, all information with respect to beneficial
ownership has been furnished by each Director or Named Executive Officer, as the
case may be.
COMMON SHARES
BENEFICIALLY OWNED(1)
----------------------
NAME AND ADDRESS OF BENEFICIAL OWNER NUMBER PERCENT
------------------------------------ --------- ---------
Dr. Jeffrey A. Green(2)..................................... 312,593 9.4%
Timothy G. Biro(3).......................................... 38,200 1.1%
Seth B. Harris(4)........................................... 134,634 4.0%
Terry C. Black.............................................. 38,918 1.2%
Marc J. Shlaes.............................................. 19,500 *
Dr. Wolfgang Summa.......................................... 7,500 *
Dr. Robert M. Stote......................................... 69,353 3.1%
Dr. Mark J. Ratain.......................................... 75,500 2.2%
Dr. Jerome H. Kaiser........................................ 27,100 *
Robert E. Flaherty.......................................... 36,500 1.1%
State of Wisconsin Investment Board(5)...................... 370,000 11.2%
P.O. Box 7842
Madison, Wisconsin 53707
Brantley Venture Partners II, L.P. ......................... 295,412 9.0%
20600 Chagrin Boulevard, Suite 1150
Cleveland, Ohio 44122
Dimensional Fund Advisors, Incorporated(6).................. 270,200 8.2%
1299 Ocean Avenue, 11th Floor
Santa Monica, California 90401
Maxus Investment Group(7)................................... 250,159 7.6%
1301 East Ninth Street, Suite 3600
Cleveland, Ohio 44114
All directors and named executive officers as a group (10
persons).................................................. 759,798 20.6%
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* Less than one percent.
(1) The number of Common Shares deemed outstanding includes (i) 3,290,322 Common
Shares outstanding as of April 20, 2001 and (ii) with respect to each of the
following individuals and groups, the following number of Common Shares,
which may be purchased pursuant to option exercises within 60 days after the
date of this Proxy Statement: Dr. Green (50,000 Common Shares); Mr. Biro
(38,000 Common Shares); Mr. Harris (64,500 Common Shares); Dr. Stote (64,500
Common Shares); Dr. Ratain (66,500 Common Shares); Mr. Flaherty (36,500
Common Shares); Mr. Black (35,000 Common Shares); Mr. Shlaes (19,500 Common
Shares); Dr. Summa (7,500 Common Shares); Dr. Kaiser (22,500 Common Shares);
Brantley Venture Partners II, L.P. ("Brantley") (5,166 Common Shares); all
Directors and Named Executive Officers as a group (404,500 Common Shares).
(2) Includes 73,969 Common Shares held by Dr. Green's wife. Dr. Green disclaims
beneficial ownership of these 73,969 Common Shares.
(3) Includes 200 Common Shares held by Mr. Biro's wife.
(4) Includes 44,634 Common Shares held in trust for Mr. Harris.
(5) The information provided herein with respect to the beneficial ownership of
the Common Shares by the State of Wisconsin Investment Board was obtained
solely from a Schedule 13G filed with the Securities and
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Exchange Commission (the "Commission") on February 14, 2001 by the State of
Wisconsin Investment Board.
(6) Certain investment companies and certain other commingled group trusts and
commingled accounts, for which Dimensional Fund Advisors, Incorporated
("Dimensional") serves in the capacity as investment advisor, hold the
Common Shares listed. Dimensional possesses voting and/or investment power
over the Common Shares listed, however Dimensional disclaims beneficial
ownership of these securities. The information provided herein with respect
to the beneficial ownership of the Common Shares by Dimensional was obtained
solely from the Schedule 13G filed with the Commission on February 2, 2001
by Dimensional.
(7) The information provided herein with respect to the beneficial ownership of
the Common Shares by the Maxus Investment Group was obtained solely from a
Schedule 13D filed with the Commission on August 23, 2000 by the Maxus
Investment Group.
ELECTION OF DIRECTORS
The authorized number of Directors of the Company is presently fixed at
seven, with members of the Board of Directors divided into two classes and with
the term of office of one class expiring each year.
At the Annual Meeting, shareholders will nominate and elect four
individuals as Directors to serve until the Annual Meeting to be held in the
year 2003 and until the successors of those Directors are duly elected and
qualified. At its February 27, 2001 meeting, the Board of Directors nominated
Drs. Green, Stote and Kaiser and Mr. Biro to stand for election as Directors at
the Annual Meeting. Drs. Green, Stote and Kaiser and Mr. Biro are presently
Directors of the Company.
Unless otherwise directed, the persons named in the accompanying Proxy will
vote for the election of the four nominees shown below as Directors of the
Company. In the event of the death of or inability to act of any of the
nominees, the Proxies will be voted for the election of the other persons that
the Board of Directors may recommend. The Board of Directors has no reason,
however, to anticipate that this will occur. In no event will the accompanying
Proxy be voted for more than four nominees or for persons other than those
persons named below or any substitute nominees for any of them.
Included below is information concerning the nominees for election at the
Annual Meeting, as well as those Directors who will continue to serve in office
after the Annual Meeting.
NOMINEES FOR ELECTION AT THE 2001 ANNUAL MEETING
Jeffrey A. Green, Pharm.D., FCP. Dr. Green is the Company's founder and has
served as the President and Chief Executive Officer and a Director of the
Company since March 1992. From 1984 to 1992, Dr. Green served as an Assistant
Professor of Medicine and Radiology at Case Western Reserve University,
Cleveland, Ohio. During his tenure at Case Western Reserve University, Dr. Green
established and directed the Cardiovascular Clinical Pharmacology Research
Program at University Hospitals of Cleveland. In addition, Dr. Green was an
established investigator in clinical cardiology and PET scanning and was
responsible for directing over 90 individual investigations during his tenure.
Dr. Green has authored over 90 publications and has been an invited speaker at
more than 125 national meetings. He was the recipient of the McKeen Cattell
Distinguished Achievement Award from the American College of Clinical
Pharmacology in 1988. Dr. Green is a graduate of Purdue University (B.S.) and
the University of Texas (Pharm.D.). Dr. Green is 45 years of age.
Timothy G. Biro. Mr. Biro has been a Director of the Company since 1992.
Mr. Biro is the Managing Partner of Ohio Innovation Fund I, L.P., a venture
capital firm. Prior to starting Ohio Innovation Fund in 1997, Mr. Biro was a
General Partner of Brantley Venture Partners II, L.P. and Brantley Venture
Partners III, L.P. Prior to joining Brantley Venture Partners in 1991, Mr. Biro
was Superintendent of Pharmaceutical Manufacturing at Merck & Co., Inc. Mr. Biro
has a B.S. Degree in Microbiology from Pennsylvania State University and in
Pharmacy from Temple University and an MBA from The Wharton School of Business
at the University of Pennsylvania. He is a Director of OXIS International, Inc.
(Nasdaq National Market, "OXIS"), a developer of pharmaceuticals to treat
diseases of oxidative stress. Mr. Biro is 47 years of age.
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Robert M. Stote, M.D. Dr. Stote has been a Director of the Company since
1993. Dr. Stote has served as the Senior Vice President and Chief Scientific
Officer and a Director of Bentley Pharmaceuticals, Inc., a pharmaceutical
company, since 1992. Prior to that time, Dr. Stote was employed for 20 years by
SmithKline Beecham Corporation, serving as Senior Vice President and Medical
Director, Worldwide Medical Affairs, from 1989 to 1992 and Vice
President--Clinical Pharmacology--Worldwide from 1987 to 1989. Dr. Stote was
Chief of Nephrology at Presbyterian Medical Center in Philadelphia from 1972 to
1989, and served as Clinical Professor of Medicine at the University of
Pennsylvania. Dr. Stote is 61 years of age.
Jerome H. Kaiser, Ph.D. Dr. Kaiser has been a Director of the Company since
December 1999. Dr. Kaiser is the Senior Vice President and Director of
Information Services for Rothschild, Inc., a private investment bank. Prior to
his appointment to that position, Dr. Kaiser was a consultant to Rothschild,
Inc. From 1992 to 1999, Dr. Kaiser held various positions within the
pharmaceutical industry. During 1998 and 1999, he was the Director of Product
Management for Pfizer, Inc. From 1994 to 1998, Dr. Kaiser was employed by
Hoffman-LaRoche, Inc., first as Senior Projects Specialist and then as Director
of Information Management for Global Development. Dr. Kaiser worked in Project
Management for Boots Pharmaceuticals from 1992 to 1994. From 1986 to 1992, he
served in the positions of Assistant Professor and Associate Professor of
Physics at the University of Texas at Arlington. Dr. Kaiser is 44 years of age.
DIRECTORS CONTINUING IN OFFICE
Mark J. Ratain, M.D. Dr. Ratain has been a Director of the Company since
April 1998. Dr. Ratain is a hematologist/oncologist and a clinical
pharmacologist. He is a Professor of Medicine and Chairman of the Committee on
Clinical Pharmacology at the University of Chicago. Dr. Ratain has been
associated with the Department of Medicine at the University of Chicago since
1983. He has authored and co-authored more than 150 articles and book chapters
principally relating to the treatment of cancer. Prior to becoming a Director,
Dr. Ratain served as Chairman of the Company's Scientific Advisory Board for
four years. He received his A.B. Degree in Biochemical Sciences from Harvard
University and his M.D. from the Yale University School of Medicine. Dr. Ratain
is 46 years of age.
Seth B. Harris. Mr. Harris has been a Director of the Company since 1992
and has been the Chairman of Freider the Source, a distributor of consumer
products, since 1993. Mr. Harris is the Retired Chairman of the Board and
President of Harris Wholesale, Inc., a wholesale pharmaceutical distribution
company. Mr. Harris is also a Director of Bindley Western Industries, Inc. (New
York Stock Exchange, "BDY"), one of the largest distributors of pharmaceuticals
in the United States. Mr. Harris is 61 years of age.
Robert E. Flaherty. Mr. Flaherty has been a Director of the Company since
July 1998. Mr. Flaherty is President and Chief Executive Officer of Athena
Diagnostics, Inc., a unit of the Elan Pharmaceuticals division of Elan
Corporation, plc. Mr. Flaherty has held his position with Athena Diagnostics,
Inc. since 1992. Elan Pharmaceuticals is involved in the discovery, development
and marketing of therapeutic agents for the diagnosis and treatment of
neurological diseases and other medical disorders. From 1976 through 1992, Mr.
Flaherty was employed in various management positions with Becton Dickinson &
Company. Mr. Flaherty is 55 years of age.
COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors has an Audit Committee, a Compensation Committee and
an Executive Committee. The Company does not have a standing nominating
committee or a committee performing similar functions. Set forth below is the
current membership of each of the Company's Committees:
AUDIT COMPENSATION EXECUTIVE
COMMITTEE COMMITTEE COMMITTEE
--------- ------------ ---------
Timothy G. Biro (Chairman) Robert E. Flaherty (Chairman) Dr. Jeffrey A. Green
Dr. Jerome H. Kaiser Seth B. Harris (Chairman)
Dr. Mark J. Ratain Dr. Robert M. Stote Timothy G. Biro
Robert E. Flaherty
The Audit Committee recommends the annual appointment of the Company's
auditors, with whom the Audit Committee members review the scope of audit and
non-audit assignments and related fees, the accounting
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principles used by the Company in financial reporting, internal financial
auditing procedures and the adequacy of the Company's internal control
procedures. Each of the members of the Audit Committee is independent, as
defined under Nasdaq listing standards. The Audit Committee met two times during
2000.
The Compensation Committee has the authority to administer the Company's
stock option plans, including the selection of optionees and the timing of
option grants, and to review and monitor key employee compensation and benefits
policies and administer the Company's management compensation plans. The
Compensation Committee met one time during 2000.
The Executive Committee has the authority to exercise all the powers of the
Board of Directors in the management of the business and affairs of the Company
at any time when the entire Board of Directors cannot meet.
During the last fiscal year, the Board of Directors met five times. No
Director attended fewer than 75% of the aggregate number of meetings of the
Board of Directors and the committees on which each served during the period for
which each was a member of the Board of Directors.
COMPENSATION OF DIRECTORS
Directors of the Company do not receive cash compensation for their service
on the Board of Directors. However, they do receive reimbursement for reasonable
expenses incurred in attending meetings of the Board of Directors. Directors who
are not also employees receive options to purchase Common Shares under the
Company's 1999 Outside Director Stock Option Plan (the "1999 Director Plan").
Under the terms of this plan, each non-employee Director receives (i) an initial
option grant to purchase 10,000 Common Shares at an exercise price equal to the
fair market value of a share on the date of grant and (ii) an annual option
grant to purchase 12,500 Common Shares at an exercise price equal to the fair
market value of a share on the date of grant. The annual grant occurs
automatically on the day of the Company's Annual Meeting. As of April 20, 2001,
options to purchase an aggregate of 147,500 Common Shares had been awarded under
the 1999 Director Plan at exercise prices ranging from $3.63 to $5.19 per share.
Options awarded under the 1999 Director Plan vest one year after the date of
grant and expire ten years from the date of grant.
After the Company's initial public offering, non-employee Directors
received options to purchase Common Shares under the Company's Amended and
Restated 1996 Outside Directors' Stock Option Plan, as amended (the "1996
Director Plan"). Under the terms of the 1996 Director Plan, each non-employee
Director received an annual option grant to purchase 1,500 Common Shares at an
exercise price equal to the fair market value of a share on the date of grant.
As of April 20, 2001, options to purchase an aggregate of 66,500 Common Shares
were outstanding under the 1996 Director Plan at exercise prices ranging from
$4.19 to $9.60 per share.
Prior to the Company's initial public offering, Directors received options
under other option plans maintained by the Company. Non-employee Directors
received options to purchase Common Shares under the Company's Amended and
Restated 1992 Share Incentive Plan (the "1992 Plan"). Options to purchase an
aggregate of 80,000 Common Shares were awarded to non-employee Directors under
the 1992 Plan at an exercise price of $0.15 per share. Each Director who is not
a Named Executive Officer received options to purchase the following numbers of
Common Shares under the 1992 Plan: Mr. Harris, 25,000 Common Shares; Dr. Stote,
25,000 Common Shares; and Dr. Ratain, 30,000 Common Shares. Dr. Ratain was
awarded stock options for his service as a consultant to the Company prior to
becoming a Director. In addition, prior to the Company's initial public offering
in June 1996, members of the Board who were designated by certain investors
received, in lieu of Directors' fees, options to purchase Common Shares having a
value equal to $1,000 for each meeting attended ($500 for each meeting attended
by telephone). These awards were made under the Company's Amended and Restated
1994 Directors' Share Option Plan (the "Director Plan"). An aggregate of 3,666
Common Shares are outstanding under the Director Plan at exercise prices ranging
from $0.80 to $9.60 per share.
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EXECUTIVE OFFICER COMPENSATION
The table below shows information concerning the annual and long-term
compensation for services to the Company during the fiscal years ended December
31, 1998, 1999 and 2000 to the Company's Chief Executive Officer and the three
other highest paid executive officers of the Company (the "Named Executive
Officers").
SUMMARY COMPENSATION
LONG-TERM
COMPENSATION
AWARDS
ANNUAL ------------
COMPENSATION (1) SECURITIES
------------------ UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS OPTIONS/SARS COMPENSATION(2)
--------------------------- ---- -------- ------- ------------ ---------------
Dr. Jeffrey A. Green.................. 2000 $180,000 $ -- -- $--
President, Chief Executive 1999 180,000 -- 90,000(3) --
Officer and Director 1998 180,000 -- -- --
Terry C. Black........................ 2000 125,000 -- -- --
Vice President of Finance, 1999 125,000 10,000 31,250(4) --
Chief Financial Officer, 1998 125,000 -- -- --
Treasurer and Assistant
Secretary
Marc J. Shlaes........................ 2000 110,000 -- -- --
Vice President of Research 1999 107,000 30,000 57,500(5) --
and Development 1998 47,000 -- 12,000(5) --
Dr. Wolfgang Summa.................... 2000 93,657(6) -- -- --
Vice President of Global 1999 86,236 33,000 57,500(7) --
Operations 1998 66,278 900 -- --
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(1) No Named Executive Officer received perquisites or other personal benefits
in excess of the lesser of $50,000 or 10% of that individual's salary plus
annual bonus. No long-term incentive plan payouts or restricted stock awards
have been made to any of the Named Executive Officers.
(2) No other compensation was received by the Named Executive Officers.
(3) Dr. Green's options were granted on December 9, 1999, at an exercise price
of $3.63 per share, 50% of which are exercisable on each of December 9, 2001
and December 9, 2003.
(4) Mr. Black's options were granted on December 9, 1999, at an exercise price
of $3.63 per share, 50% of which are exercisable on each of December 9, 2001
and December 9, 2003.
(5) Mr. Shlaes's options were granted as follows: (1) 12,000 on July 15, 1998,
at an exercise price of $4.50 per share, 100% of which became exercisable on
April 20, 1999, (2) 30,000 on September 22, 1999, at an exercise price of
$3.75 per share, 25% of which are exercisable on each of September 22, 2000,
September 22, 2001, September 22, 2002 and September 22, 2003 and (3) 27,500
on December 9, 1999, at an exercise price of $3.63 per share, 50% of which
are exercisable on each of December 9, 2001 and December 9, 2003.
(6) Dr. Summa's current employment contract provides for a base salary of DM
210,000 (German Deutschmarks). Based on the average exchange rate between
the United States dollar and the German Deutschmark during 2000, Dr. Summa's
salary in 2000 of DM 198,131 was the equivalent of $93,657.
(7) Dr. Summa's options were granted as follows: (1) 30,000 on September 22,
1999, at an exercise price of $3.75 per share, 25% of which are exercisable
on each of September 22, 2000, September 22, 2001, September 22, 2002 and
September 22, 2003 and (2) 27,500 on December 9, 1999, at an exercise price
of $3.63 per share, 50% of which are exercisable on each of December 9, 2001
and December 9, 2003.
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OPTION GRANTS
No stock options were granted to the Named Executive Officers during the
year ended December 31, 2000.
OPTION EXERCISES AND FISCAL YEAR-END OPTION VALUES
The table below shows information with respect to the exercise of options
to purchase Common Shares by the Named Executive Officers and unexercised
options to purchase Common Shares for the Named Executive Officers as of
December 31, 2000.
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR
AND DECEMBER 31, 2000 OPTION VALUE
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
STOCK OPTIONS AT IN-THE-MONEY OPTIONS AT
ACQUIRED DECEMBER 31, 2000 DECEMBER 31, 2000(1)
ON VALUE --------------------------- ------------------------------
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE(2) UNEXERCISABLE
---- -------- -------- ----------- ------------- -------------- -------------
Dr. Jeffrey A. Green........ -- $-- 50,000 90,000 $ -- $--
Terry C. Black.............. -- -- 35,000 31,250 26,600 --
Marc J. Shlaes.............. -- -- 19,500 50,000 -- --
Dr. Wolfgang Summa.......... -- -- 7,500 50,000 -- --
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(1) Options are in-the-money if the market value of the Common Shares exceeds
the exercise price.
(2) Represents the total gain which would be realized if all in-the-money
options beneficially held at December 31, 2000 were exercised, determined by
multiplying the number of Common Shares underlying the options by the
difference between the per share option exercise price and $2.81, the
closing price for the Common Shares as reported on Nasdaq on December 31,
2000.
EMPLOYMENT AGREEMENTS
Dr. Jeffrey A. Green. In February 2001, the Company entered into an
employment agreement with Dr. Green providing for an initial term of one year.
This agreement will automatically renew for successive one-year periods
thereafter unless certain prior notice requirements are satisfied. The base
salary provided for in this agreement is $180,000 per year, to be reviewed at
least annually by the Compensation Committee. Bonuses may be paid to Dr. Green
at the discretion of the Compensation Committee. The agreement also provides Dr.
Green with the right to participate in all benefit plans made available to the
Company's executives and/or employees. Dr. Green's employment with the Company
may be terminated with or without cause, upon his death or disability or with
sufficient reason. Additionally, under this agreement, Dr. Green is entitled to
terminate his employment for "good reason." "Good reason" for such termination
will exist if at any time, (i) there is a material breach of Dr. Green's
employment agreement by the Company, (ii) the Company's shareholders fail to
elect Dr. Green to the Board of Directors or Dr. Green is otherwise removed from
the Board of Directors, and (iii) except in connection with the termination of
Dr. Green's employment in strict compliance with the terms of the agreement, the
Board of Directors (a) fails to elect Dr. Green to his current position with the
Company, (b) fails to vest Dr. Green with the powers and authority customarily
associated with his current position with the Company, or (c) significantly
diminishes his responsibilities, duties, power or authority. If Dr. Green
terminates his employment with the Company for good reason, he will be entitled
to continue to receive his base salary for two years following the date of such
termination. If Dr. Green's employment with the Company is terminated in
connection with the sale of the Company, he will be entitled to continue to
receive his base salary for one year following the date of such termination. If
his employment is terminated without cause or without sufficient reason, he will
be entitled to continue to receive his base salary for a period of two years
subsequent to the date of termination. If Dr. Green terminates his employment
with the Company without good reason, or if he is terminated by the Company for
"cause," then he will be entitled to receive his base salary through the date of
termination. For purposes of Dr. Green's agreement, "cause" is defined as a
determination by the Board of
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Directors that the employee was (i) convicted of a felony involving moral
turpitude or a felony in connection with his employment, (ii) engaged in fraud,
embezzlement, material willful destruction of property or material disruption of
the operations of the Company, (iii) using or in possession of illegal drugs
and/or alcohol on the Company premises or reporting to work under the influence
of same, or (iv) engaged in conduct, in or out of the workplace, which in the
Company's reasonable determination has an adverse effect on the reputation or
business of the Company. "Sufficient reason" shall mean a good faith
determination that the employee failed to adequately perform his duties as an
officer of the Company or achieve the business objectives mutually agreed upon
by the parties. Dr. Green also agreed to certain noncompetition and
nondisclosure provisions which, under certain conditions, continue for a period
of up to twenty four months following a termination of Mr. Green's employment
with the Company.
Terry C. Black. In February 2001, the Company entered into an employment
agreement with Mr. Black providing for an initial term of one year. This
agreement will automatically renew for successive one-year periods thereafter
unless certain prior notice requirements are satisfied. The base salary
initially provided for in this agreement is $125,000 per year, to be reviewed at
least annually by the Compensation Committee. Bonuses may be paid to Mr. Black
at the discretion of the Compensation Committee. The agreement also provides Mr.
Black with the right to participate in all benefits plans made available to the
Company's executives and/or employees. Mr. Black's employment with the Company
may be terminated with or without cause or upon his death or disability.
Additionally, Mr. Black is entitled to terminate his employment for "good
reason." If Mr. Black terminates his employment with the Company for good
reason, he will be entitled to receive his base salary for a period of one year
following the date of such termination. If Mr. Black's employment with the
Company is terminated in connection with the sale of the Company, he will be
entitled to continue to receive his base salary for one year following the date
of such termination. If his employment is terminated without cause, he will be
entitled to receive his base salary for a period of one year subsequent to the
date of termination. If Mr. Black terminates his employment with the Company
without good reason, or if he is terminated by the Company for "cause," he will
be entitled to receive his base salary through the date of termination. For
purposes of Mr. Black's agreement, "cause" is defined as a determination by the
Board of Directors that the employee was (i) convicted of a felony involving
moral turpitude or a felony in connection with his employment, (ii) engaged in
fraud, embezzlement, material willful destruction of property or material
disruption of the operations of the Company, (iii) using or in possession of
illegal drugs and/or alcohol on the Company premises or reporting to work under
the influence of same, or (iv) engaged in conduct, in or out of the workplace,
which in the Company's reasonable determination has an adverse effect on the
reputation or business of the Company. Mr. Black also agreed to certain
noncompetition and nondisclosure provisions which continue, under certain
conditions for a period up to eighteen months following a termination of Mr.
Black's employment with the Company.
Marc J. Shlaes. In 1998, the Company entered into an employment agreement
with Mr. Shlaes. The employment agreement provides for a term of three years.
The base salary initially provided for in this agreement was $100,000 per year,
to be reviewed at least annually by the Compensation Committee. Bonuses may be
paid to Mr. Shlaes at the discretion of the Compensation Committee. The
agreement also provides Mr. Shlaes with the right to participate in all benefits
plans made available to the Company's executives and/or employees. Mr. Shlaes's
employment with the Company may be terminated with or without cause or upon his
death or disability. Additionally, Mr. Shlaes is entitled to terminate his
employment. If Mr. Shlaes terminates his employment, his rights under the
agreement immediately cease, other than certain fringe benefits and stock
options which may have vested prior to such termination. If Mr. Shlaes's
employment with the Company is terminated in connection with the sale of the
Company, he will be entitled to continue to receive his base salary for one year
following the date of such termination. If his employment is terminated without
cause, he will be entitled to receive his base salary for one year following the
date of such termination. If Mr. Shlaes's employment with the Company is
terminated for "cause," he will be entitled to receive his salary through the
date of termination and any stock options or other benefits which may have
vested prior to the date of such termination, if any. For purposes of Mr.
Shlaes's agreement, "cause" is defined as a (i) failure to complete
satisfactorily the Company's routine pre-employment background check, (ii)
conviction of a felony involving moral turpitude or a felony in connection with
employment, (iii) theft, fraud, embezzlement, material willful destruction of
property or material disruption of the operations of the Company (iv) use or
possession of illegal drugs and/or alcohol on Company premises or reporting to
work under the influence of same, or (v) engaging in conduct, in or out of the
workplace, which in the Company's reasonable
8
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determination has an adverse effect on the reputation or business of the
Company. Mr. Shlaes also agreed to certain noncompetition and nondisclosure
provisions which continue, under certain conditions, for a period of up to
fifteen months following a termination of Mr. Shlaes employment with the
Company.
Dr. Wolfgang Summa. In December 2000, Dr. Summa signed an employment
agreement with DATATRAK Deutschland GmbH providing for an initial term of four
years. This agreement will automatically renew for successive one-year periods
thereafter unless certain prior notice requirements are satisfied. The base
salary initially provided for in this agreement is DM 210,000 (approximately
$110,000) per year, to be reviewed at least annually by the Compensation
Committee. Bonuses may be paid to Dr. Summa at the discretion of the
Compensation Committee. The agreement also provides Dr. Summa with the right to
participate in all benefits plans made available to the Company's executives
and/or employees. Dr. Summa's employment with the Company may be terminated with
or without cause or upon his death or disability. Additionally, Dr. Summa is
entitled to terminate his employment for "good reason." If Dr. Summa terminates
his employment with the Company for good reason, he will be entitled to receive
his base salary for a period of one year following the date of such termination.
If Dr. Summa's employment with the Company is terminated in connection with the
sale of the Company, he will be entitled to continue to receive his base salary
for one year following the date of such termination. If his employment is
terminated without cause, he will be entitled to receive his base salary for a
period of one year subsequent to the date of termination. If Dr. Summa
terminates his employment with the Company without good reason, or if he is
terminated by the Company for "cause," he will be entitled to receive his base
salary through the date of termination. For purposes of Dr. Summa's agreement,
"cause" is defined as a determination by the Board of Directors that the
employee was (i) convicted of a felony involving moral turpitude or a felony in
connection with his employment, (ii) engaged in fraud, embezzlement, material
willful destruction of property or material disruption of the operations of the
Company, (iii) using or in possession of illegal drugs and/or alcohol on the
Company premises or reporting to work under the influence of same, or (iv)
engaged in conduct, in or out of the workplace, which in the Company's
reasonable determination has an adverse effect on the reputation or business of
the Company. Dr. Summa also agreed to certain noncompetition and nondisclosure
provisions which continue, under certain conditions for a period up to eighteen
months following a termination of Dr. Summa's employment with the Company. The
agreement is governed by German law.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
GENERAL
The Compensation Committee administers the Company's stock option plans,
including the selection of optionees and the timing of option grants, reviews
and monitors key employee compensation and benefits policies and administers the
Company's management compensation plans. The current members of the Compensation
Committee are Messrs. Flaherty and Harris and Dr. Stote, all of whom are
non-employee Directors.
This report contains a discussion of the Company's compensation philosophy,
together with a discussion of the factors considered by the Compensation
Committee in determining the compensation of the Company's President and Chief
Executive Officer and the Named Executive Officers.
COMPENSATION PHILOSOPHY
The Company's compensation philosophy is that compensation paid to
executive officers and other management personnel should consist of four
elements: (1) salary, (2) annual incentive bonus, (3) stock options and (4)
welfare, retirement and other benefits. The compensation package is designed to
attract and retain top quality management employees. To some extent, elements of
compensation are designed to vary as Company performance varies. In general, the
elements of compensation that most typically have a significant relationship to
Company performance are awards under its stock option and bonus plans. The
Compensation Committee's decisions concerning compensation make use of
independent surveys of executive compensation of similarly situated companies.
The Company has entered into employment agreements with all of its
executive officers. In general, the Compensation Committee believes that
employment agreements are a useful tool in attracting and retaining qualified
executives.
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Presented below is a discussion of the various components of the
compensation arrangements provided to the Named Executive Officers, as well as a
discussion of the compensation arrangements provided to the Company's President
and Chief Executive Officer.
2000 COMPENSATION DECISIONS
Base Salary and Benefits. Salaries of executive officers are subject to
minimum levels set by the terms of each executive's employment arrangement with
the Company. The primary factor in setting salary levels pursuant to these
arrangements was the Company's desire to provide compensation in amounts
sufficient to induce these individuals to either join or continue with the
Company. Salary levels for executive officers reflect the Compensation
Committee's judgments on appropriate salaries in light of the duties and
responsibilities inherent in the executives' positions. The particular
qualifications of an individual holding the position and his or her level of
experience, as well as information concerning compensation paid by other
companies in the industry, are considered in establishing salary levels. The
Compensation Committee's assessment of the individual's performance and
contribution to the Company's performance are the primary criteria influencing
decisions regarding salary adjustments.
Stock Options. The Company uses stock options as a long-term incentive
program for its executive officers. Stock options are used because they directly
relate the amounts earned by the executive officers to the amount of
appreciation realized by the Company's shareholders over comparable periods.
Stock options also provide executive officers with the opportunity to acquire
and build a meaningful ownership interest in the Company. The Compensation
Committee considers stock option awards throughout the year. In determining the
number of options awarded to an individual executive officer, the Compensation
Committee generally establishes a level of award based upon the position of the
individual and his or her level of responsibility, and upon recommendations made
by the Company's President and Chief Executive Officer. The Compensation
Committee's decisions concerning individual option awards are based on its
judgment concerning the appropriate amount of long-term compensation that should
be paid to the executive in question. On December 9, 1999, the Named Executive
Officers were granted 176,250 stock options, 50% of which will vest on December
9, 2001 and 50% of which will vest on December 9, 2003. Since stock options were
awarded to the Named Executive Officers in December 1999, and in light of the
vesting schedule relating to those option grants, no stock options were awarded
during 2000 to the Named Executive Officers. A total of 122,934 stock options
were awarded during 2000 under the Company's Amended and Restated 1996 Key
Employees and Consultants Stock Option Plan.
Bonuses. Pursuant to the terms of its employment agreements with the
executive officers of the Company, the Company may pay additional compensation
in the form of discretionary bonuses. The bonus amount in any given year is
determined by the Compensation Committee, taking into account several factors,
including the executive officer's salary and position, the executive officer's
performance and the Company's overall performance. Bonuses may be provided
either in the form of cash, Common Shares or a combination of the two, as the
Compensation Committee determines. Messrs. Black and Shlaes and Dr. Summa did
not receive cash bonuses during 2000.
PRESIDENT AND CHIEF EXECUTIVE OFFICER COMPENSATION
Dr. Green's employment contract with the Company contemplates compensation
in two broad areas: (i) a base salary and (ii) stock options under a long-term
compensation plan. His employment agreement provided for a base salary of
$180,000 for 2000. Dr. Green did not receive a bonus in 2000, nor was Dr. Green
awarded any options to purchase Common Shares during 2000.
THE COMPENSATION COMMITTEE
Robert E. Flaherty (Chairman)
Seth B. Harris
Dr. Robert M. Stote
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COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Company has engaged in various private transactions with the members of
its Compensation Committee or entities with which they are affiliated. The
Company believes that these transactions have been on terms no less favorable to
the Company than could have been obtained from unaffiliated third parties.
The Company engaged in various private equity financing transactions with
Mr. Harris, Dr. Stote and other shareholders in 1992, 1993 and 1994. As a result
of those transactions, Mr. Harris and Dr. Stote are among the parties to a
registration rights agreement with the Company under which they have been
provided certain rights to have their Common Shares registered under the
Securities Act of 1933, as amended (the "Securities Act"). See "Certain
Transactions."
AUDIT COMMITTEE AND RELATED MATTERS
REPORT OF THE AUDIT COMMITTEE
The Audit Committee oversees the Company's financial reporting process on
behalf of the Board of Directors. The Audit Committee's activities are governed
by a written charter adopted by the Board of Directors, a copy of which is
attached to this Proxy Statement as Appendix A.
Management has the primary responsibility for the Company's financial
statements and the reporting process, including the system of internal controls.
The independent auditors audit the annual financial statements prepared by
management and express an opinion on the conformity of those financial
statements with accounting principles generally accepted in the United States.
The Audit Committee monitors these processes.
In this context, the Audit Committee met and held discussions with
management and the independent auditors. Management represented to the Audit
Committee that the Company's financial statements were prepared in accordance
with accounting principles generally accepted in the United States, and the
Audit Committee reviewed and discussed the audited financial statements with
management and the independent auditors, including a discussion of the quality,
not just the acceptability, of the accounting principles, the reasonableness of
specific judgments and the clarity of disclosures in the financial statements.
The Audit Committee also discussed with the independent auditors such other
matters as are required to be discussed with the Audit Committee under generally
accepted auditing standards.
In addition, the independent auditors provided to the Audit Committee the
written disclosures and letter required by Independence Standards Board Standard
No. 1 ("Independence Discussions With Audit Committees"), related to the
auditors' independence. The Audit Committee discussed with the independent
auditors the auditors' independence from the Company and its management and
considered the compatibility of non-audit services with the auditors'
independence.
The Audit Committee discussed with the Company's financial management and
independent auditors the overall scope and plans for the audit. The Audit
Committee also met with the independent auditors, with and without management
present, to discuss the results of the examinations, their evaluation of the
Company's internal controls and the overall quality of the Company's financial
reporting. In addition, the Audit Committee considered other areas of its
oversight relating to the financial reporting process that it determined
appropriate.
Based on the reviews and discussions referred to above, the Audit Committee
recommended to the Board of Directors, and the Board of Directors has approved,
that the audited financial statements be included in the Company's Annual Report
on Form 10-K for the year ended December 31, 2000 for filing with the Securities
and Exchange Commission.
THE AUDIT COMMITTEE
Timothy G. Biro (Chairman)
Jerome H. Kaiser
Mark J. Ratain
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INDEPENDENT AUDITORS
The Board of Directors, upon recommendation of the Audit Committee, has
re-appointed Ernst & Young LLP as independent auditors to audit the financial
statements of the Company for the fiscal year ending December 31, 2001. Fees for
services rendered by Ernst & Young LLP for the last fiscal year were:
AUDIT FEES ALL OTHER FEES
- ---------- --------------
$105,500 $44,005*
- ---------------
* Includes audit related fees of $12,700.
Representatives of Ernst & Young LLP are expected to be present at the
Annual Meeting. They will have the opportunity to make a statement if they so
desire, and are expected to be available to respond to appropriate questions.
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PERFORMANCE CHART
The following line graph compares the percentage change in the cumulative
total shareholder return on the Common Shares against the cumulative total
return of the Nasdaq Stock Market U.S. Index and the Nasdaq Health Services
Index for the period commencing June 11, 1996 (the initial trading date for the
Common Shares) and ending December 31, 2000. The graph assumes that the value of
the investment in Common Shares and each index was $100 on June 11, 1996, and
that all dividends, if any, were reinvested.
COMPARISON OF 54 MONTH CUMULATIVE TOTAL RETURN*
AMONG DATATRAK INTERNATIONAL, INC.,
THE NASDAQ STOCK MARKET (U.S.) INDEX
AND THE NASDAQ HEALTH SERVICES INDEX
NASDAQ STOCK MARKET NASDAQ HEALTH
DATATRAK INTL INC (U.S.) SERVICES
----------------- ------------------- -------------
06/11/96 100 100 100
12/96 79.63 104.76 84.07
12/97 37.5 128.3 86.26
12/98 29.63 180.94 73.12
12/99 26.85 336.25 58.83
12/00 20.84 202.31 80.66
* $100 invested on 6/11/96 in stock
or index - including reinvestment
of dividends.
Fiscal year ending December 31.
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CERTAIN TRANSACTIONS
In connection with various financing transactions, the Company entered into
agreements with several of its Directors, executive officers and shareholders
who beneficially own more than 5% of the Common Shares. Since these arrangements
were the result of arm's length negotiation among the Company and these
shareholders prior to their acquisition of an interest in the Company, the
Company believes that the agreements are on terms no less favorable to it than
could have been obtained from unaffiliated third parties. Relationships between
the Company and those investors who are affiliated with members of the
Compensation Committee of the Board of Directors are described under the caption
"Compensation Committee Interlocks and Insider Participation."
As a result of various financing transactions, the Company is a party to a
registration rights agreement with Brantley, Drs. Green and Stote and Mr.
Harris, each of whom is either a Director, executive officer or beneficial owner
of greater than 5% or more of the Common Shares. Under the terms of the
registration rights agreement, the holders of an aggregate of 331,310 Common
Shares (the "Registrable Shares") have the right to demand, no more than once
every six months, registration under the Securities Act of Common Shares having
a market value of at least $5,000,000 (in the case of a registration on Form
S-1) or $1,000,000 (in the case of a registration on Form S-2 or S-3). Such
demand right may be exercised by the holders of at least 40% of the Registrable
Shares. The holders of Registrable Shares may exercise their right to demand
registration of the Registrable Shares on Form S-1 up to two times at the
Company's expense, and any demand registrations on Form S-2 or S-3 an unlimited
number of times at the Company's expense. Although the holders of Registrable
Shares have the right to demand additional registrations on Form S-1, they will
be required to pay their share of the expenses associated with such
registrations. The registration rights agreement also provides the holders of an
aggregate of 250,598 Common Shares (the "Related Shares"), with the limited
right to participate, at their own expense, in a registration statement demanded
by the holders of Registrable Shares. In addition, under certain conditions, the
holders of Registrable Shares and Related Shares have the limited right to
include some or all of such shares in any registration statement filed by the
Company with respect to the sale of its Common Shares.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 (the "Exchange Act")
requires the Company's Directors and certain of its executive officers and
persons who beneficially own more than 10% of the Common Shares to file reports
of ownership and changes in ownership on Forms 3, 4 and 5 with the Commission
and the Nasdaq Stock Market. Such persons are further required to furnish the
Company with copies of all such forms filed by them. Based solely on the
Company's review of the copies of such forms it has received, the Company
believes that all of the Section 16(a) filing requirements were satisfied by the
Company's Directors, executive officers and beneficial owners of more than 10%
of the Common Shares.
SHAREHOLDER PROPOSALS FOR 2002 ANNUAL MEETING
Any shareholder who meets the requirements of the proxy rules under the
Exchange Act may submit proposals to the Board of Directors to be considered for
submission to the Annual Meeting of Shareholders to be held in 2002. Proposals
should be submitted in writing by notice delivered or mailed by first-class
United States mail, postage prepaid, to DATATRAK International, Inc., 20600
Chagrin Boulevard, Suite 1050, Cleveland, Ohio 44122, Attention: Investor
Relations, and must be received no later than January 4, 2002. Any notice shall
include: (a) the name and address of the shareholder and the text of the
proposal to be introduced, (b) the number of Common Shares held of record, owned
beneficially and represented by proxy by the shareholder as of the date of the
notice and (c) a representation that the shareholder intends to appear in person
or by proxy at the meeting to introduce the proposal specified in the notice.
The Chairman of the meeting may refuse to acknowledge the introduction of any
shareholder proposal not made in compliance with the foregoing procedures.
The Company may use its discretion in voting Proxies with respect to
shareholder proposals not included in the Proxy Statement for the fiscal year
ended December 31, 2001, unless the Company receives notice of those proposals
prior to March 19, 2002.
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OTHER MATTERS
The Board of Directors is not aware of any matter to come before the Annual
Meeting other than those mentioned in the accompanying Notice. However, if other
matters shall properly come before the Annual Meeting, it is the intention of
the persons named in the accompanying Proxy to vote in accordance with their
best judgment on those matters.
A copy of the Company's Annual Report has been provided to shareholders
with this Proxy Statement. If a shareholder entitled to vote at the Annual
Meeting did not receive a copy of the Annual Report with this Proxy Statement,
that shareholder may request a copy of the Annual Report from the Company. Upon
the receipt of a written request from any shareholder entitled to vote at the
Annual Meeting, the Company will mail, at no charge to the shareholder, a copy
of the Company's Annual Report, including the financial statements and schedules
required to be filed with the Commission pursuant to Rule 13a-1 under the
Exchange Act, for the Company's most recent fiscal year. Requests from
beneficial owners of Common Shares must include a good-faith representation
that, as of the record date of the Annual Meeting, the person making the request
was the beneficial owner of securities entitled to vote at the Annual Meeting.
Written requests for the Annual Report should be directed to: Investor
Relations, DATATRAK International, Inc., 20600 Chagrin Boulevard, Suite 1050,
Cleveland, Ohio 44122.
You are urged to sign and return your Proxy promptly in order to make
certain your shares will be voted at the Annual Meeting. For your convenience, a
return envelope is enclosed requiring no additional postage if mailed in the
United States.
By Order of the Board of Directors,
Thomas F. McKee
Secretary
May 3, 2001
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APPENDIX A
AUDIT COMMITTEE CHARTER
DATATRAK INTERNATIONAL, INC.
ORGANIZATION
The Audit Committee (the "Committee") of the Board of Directors (the
"Board") of DATATRAK International, Inc. (the "Company") shall be comprised of a
minimum of three directors. Except as provided below, each director shall be an
"independent director," as such term is defined by the National Association of
Securities Dealers, Inc. (an "Independent Director"). Notwithstanding the
foregoing, one director who is not an Independent Director and is not a current
employee or an immediate family member of an executive officer of the Company,
may be appointed to the Committee, if the Board, under exceptional and limited
circumstances, determines that membership on the Committee by the individual is
required by the best interests of the Company and its stockholders. Each member
of the Committee shall be able to read and understand fundamental financial
statements or will become able to do so within a reasonable period of time after
appointment to the Committee. The Committee shall include at least one member
that has past employment experience in finance or accounting, requisite
professional certification in accounting, or any other comparable experience or
background that results in the individual's financial sophistication.
STATEMENT OF POLICY
The Committee shall provide assistance to the directors in fulfilling their
responsibility to the shareholders, potential shareholders, and investment
community relating to corporate accounting, reporting practices of the Company,
and the quality and integrity of financial reports of the Company. In so doing,
it is the responsibility of the Committee to maintain free and open
communication between the directors, the independent auditors, and the financial
management of the Company.
RESPONSIBILITIES
In carrying out its responsibilities, the Committee believes its policies
and procedures should remain flexible, in order to best react to changing
conditions and to facilitate corporate accounting and reporting practices of the
Company that are in accordance with all applicable requirements and that are of
the highest quality.
In carrying out these responsibilities, the Committee will:
- Obtain the full board of directors' approval of this Charter and
review and reassess the adequacy of this Charter as conditions dictate
(at least annually).
- Review and recommend to the directors the independent auditors to be
selected to audit the financial statements of the Company and its
divisions and subsidiaries.
- Have a clear understanding with the independent auditors that they are
ultimately accountable to the board of directors and the Committee, as
the shareholders' representatives, who have the ultimate authority and
responsibility to select, evaluate, and, where appropriate, replace
the independent auditor (or to nominate the independent auditor to be
proposed for shareholder approval in any proxy statement).
- Review and concur with management's appointment, termination, or
replacement of the director of internal audit.
- Meet with the independent auditors and financial management of the
Company to review the scope of the proposed audit and timely quarterly
reviews for the current year and the procedures to be utilized, the
adequacy of the independent auditor's compensation, and at the
conclusion thereof review such audit or review, including any comments
or recommendations of the independent auditors.
- Review with the independent auditors, 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 controls or particular areas where
new or more detailed
A-1
20
controls or procedures are desirable. Particular emphasis should be
given to the adequacy of internal controls to expose any payments,
transactions, or procedures that might be deemed illegal or otherwise
improper.
- Review reports received from regulators and other legal and regulatory
matters that may have a material effect on the financial statements or
related Company compliance policies.
- Inquire of management and the independent auditors about significant
risks or exposures and assess the steps management has taken to
minimize such risks to the Company.
- Review the quarterly financial statements with financial management
and the independent auditors prior to the filing of the Form 10-Q (or
prior to the press release of results, if possible) to determine that
the independent auditors do not take exception to the disclosure and
content of the financial statements, and discuss any other matters
required to be communicated to the Committee by the auditors. The
chair of the Committee may represent the entire Committee for purposes
of this review.
- Review the financial statements contained in the annual report to
shareholders with management and the independent auditors to determine
that the independent auditors are satisfied with the disclosure and
content of the financial statements to be presented to the
shareholders. Review with financial management and the independent
auditors the results of their timely analysis of significant financial
reporting issues and practices, including changes in, or adoptions of,
accounting principles and disclosure practices, and discuss any other
matters required to be communicated to the Committee by the auditors.
Also review with financial management and the independent auditors
their judgments about the quality, not just acceptability, of
accounting principles and the clarity of the financial disclosure
practices used or proposed to be used, and particularly, the degree of
aggressiveness or conservatism of the organization's accounting
principles and underlying estimates, and other significant decisions
made in preparing the financial statements.
- Provide sufficient opportunity for the independent auditors to meet
with the members of the Committee without members of management
present. Among the items to be discussed in these meetings are the
independent auditors' evaluation of the Company's financial,
accounting, and auditing personnel, and the cooperation that the
independent auditors received during the course of audit.
- Report the results of the annual audit to the board of directors. If
requested by the board, invite the independent auditors to attend the
full board of directors meeting to assist in reporting the results of
the annual audit or to answer other directors' questions
(alternatively, the other directors, particularly the other
independent directors, may be invited to attend the Committee meeting
during which the results of the annual audit are reviewed).
- On an annual basis, obtain from the independent auditors a written
communication delineating all their relationships and professional
services as required by Independence Standards Board Standard No. 1,
Independence Discussions with Audit Committees. In addition, review
with the independent auditors the nature and scope of any disclosed
relationships or professional services and take, or recommend that the
board of directors take, appropriate action to oversee the continuing
independence of the auditors.
- Submit the minutes of all meetings of the Committee to, or discuss the
matters discussed at each Committee meeting with, the board of
directors.
- Investigate any matter brought to its attention within the scope of
its duties, with the power to retain outside counsel for this purpose
if, in its judgment, that is appropriate.
- Review the Committee's report, containing the information required to
be stated therein by rules of the Securities and Exchange Commission,
to be set forth in the proxy statement for the Company's annual
meeting of stockholders, and review other Company disclosure relating
to the Committee required to be set forth in such proxy statements.
This Charter shall be filed as an appendix to the proxy statement at
least once every three years, or the year after any significant
amendment to the Charter.
A-2
21
DATATRAK INTERNATIONAL, INC.
P PROXY FOR COMMON SHARES
R
O PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
X THE COMPANY FOR THE ANNUAL MEETING OF SHAREHOLDERS ON JUNE 1, 2001.
Y
The undersigned hereby (i) appoints Terry C. Black and Robert J.
Fisher, and each of them, his true and lawful agents and Proxy
holders with full power of substitution in each to appear and vote
all of the Common Shares of DATATRAK International, Inc. that the
undersigned will be entitled to vote at the Annual Meeting of
Shareholders of DATATRAK International, Inc. to be held at National
City Bank, Meeting Room B, Fourth Floor, Atrium Building, 1900 East
Ninth Street, Cleveland, Ohio on June 1, 2001, and at any
adjournments thereof, hereby revoking any and all proxies
heretofore given, and (ii) authorizes and directs said Proxy
holders to vote all of the Common Shares of the Company represented
by this Proxy as follows.
(1) Election of the following nominees to serve on the Board of
Directors of the Company:
DR. JEFFREY A. GREEN FOR [ ] WITHHELD [ ]
TIMOTHY G. BIRO FOR [ ] WITHHELD [ ]
DR. ROBERT M. STOTE FOR [ ] WITHHELD [ ]
DR. JEROME H. KAISER FOR [ ] WITHHELD [ ]
(2) In their discretion to act on any other matters that may
properly come before the meeting.
(To be signed on other side)
(Continued from other side.)
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS INDICATED IN
THE SPACES ABOVE. TO THE EXTENT THAT NO DIRECTIONS ARE GIVEN FOR
PROPOSAL 1, THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED
"FOR" PROPOSAL 1. THE SHARES REPRESENTED BY THIS PROXY WILL BE
VOTED IN THE DISCRETION OF THE PROXY HOLDERS ON ALL OTHER MATTERS
PROPERLY BROUGHT BEFORE THE ANNUAL MEETING AND ANY ADJOURNMENTS
THEREOF.
You are encouraged to specify your choices by marking the
appropriate boxes, SEE REVERSE SIDE. The Proxy holders cannot vote
your shares unless you sign and return this card.
Please date, sign and return
promptly in the accompanying
envelope.
DATE
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SIGNATURE(S)
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SIGNATURE(S)
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NOTE: Please sign exactly as
name appears hereon.
Joint owners should each
sign. When signing as
attorney, executor,
administrator, trustee or
guardian, please give
full title as such.