CTI Group -- Holdings -- Inc. And Centillion Data Systems Announce Merger Plans.

Business Editors/Hi-Tech Writers

VALLEY FORGE, Pa.--(BUSINESS WIRE)--Feb. 3, 2000

CTI Group (Holdings) Inc. (OTC:CTIG) announced today the signing of a definitive merger agreement with Centillion Data Systems (CDS) of Indianapolis, Indiana, pursuant to which Centillion's telecommunications billing business will be merged into CTIG.

The two organizations will join forces in providing billing as well as billing analysis solutions to the telecommunications industry.

The merger of these two organizations will provide greater depth of management at both the director and officer level together with two complementary core competencies providing the strong foundation for dynamic growth. &uot;We set out with the objective of enhancing shareholder value by attracting investment capital, we ended up with much more,&uot; stated Tony Johns, Chairman &Chief Executive Officer of CTIG.

&uot;CDS has strong market presence and excellent brand equity. This merger will allow CTIG to revitalize capital, expand the functionality of our products and position the organization for the future. Our combined resources now will enable us to exploit our full market potential on a global basis. This merger provides the balance sheet requirements for a re-listing on the NASDAQ market and hence ideally positions the Company for additional strategic acquisitions, two of which we are actively in the process of reviewing.&uot;

The market for billing and operations services is projected to be in excess of $14 billion in the US alone. Third party billing systems, customer care and outsourcing services represents more than $5 billion of this rapidly expanding category. John Cauffman, President and CEO of CDS noted &uot;The market is demanding that billing, billing analysis and customer care services be flexible, easy to use and rapidly deployed. Centillion's patented Smart Bill(R) technology in combination with CTIG front end solutions will offer a strong value to providers as well as commercial customers.&uot;

Harold Garrison, Chairman of the CDS board, said the company is excited to share CTIG's vision. &uot;The marriage of CTIG and CDS is just the first step in the creation of a new Billing and Customer Care (BACC) powerhouse in the telecommunications marketplace,&uot; he said. &uot;We will apply our efforts in ensuring that we unlock the considerable synergies of the combined entity to provide for our growth objectives. Additionally, we will continue our policy of growing the business further through strategic alliances and acquisitions. At the earliest opportunity, we will apply for our NASDAQ re-listing,&uot; he said.

The specifics of the merger agreement are as follows:

CDS will divest itself of all businesses other than its billing business, and Centillion's shareholders will initially receive 9,080,738 shares of CTIG Common Stock. CDS Shareholders will be able to receive an additional 3,215,100 shares of CTIG Common Stock over a three year period based upon revenues received by CTIG from certain current CDS customers and prospects.

The CDS businesses that are not related to the billing business are being transferred to a limited liability company (that will be owned by current CDS shareholders) in exchange for a Promissory Note that will not exceed $11,500,000, which CTIG will acquire in the merger. Principal and interest will be paid as those businesses are sold.

CTIG will issue additional shares of Common Stock to the CDS shareholders for those payments, at a per share value of 88% of the average market value of the Common Stock at the time. If the Promissory Note is not fully paid in five years it is to be appraised, and shares of CTIG Common Stock are to be issued for the appraised value at the average market price at the time.

Centillion's right to enforce its patents, and its current and future patent infringement litigation, are being transferred to a limited liability company that will be wholly-owned by CTIG. In connection with the transfer, a new Class B Common Stock will be authorized and 3,500,000 shares of Class B Common Stock issued to the CDS shareholders (the current CTIG Common Stock will be re-designated as Class A).

CTIG and the Class B shareholders have certain rights to convert the Class B Common Stock into Class A Common Stock at various times after the merger based on the value of the limited liability company, at a Class A Common Stock value of $2.25 per share for a maximum of 1,000,000 additional shares and thereafter 88% of the average market value at the time or 100% of the average market value at the time, depending upon the type and amount of the conversion.

Centillion's current shareholders have committed to a non-recourse loan of up to $2,000,000 to the limited liability company to pursue its patent infringement litigation.

Centillion's billing business generated revenues from operations of approximately $10.9 million and pretax net income of approximately $4.2 million for its fiscal year end period of December 31st 1999. On the date the merger is closed, CDS has committed to have cash in excess of $6,500,000, in addition to at least $2,000,000 in book net worth and no long term liabilities other than deferred taxes.

CDS has the option to increase the cash on hand at closing to $8,000,000, in which event the shares of Class A Common Stock issued at Closing will increase to 9,747,404, and the Class B Common Stock issued will reduce to 2,833,334 shares.

CTIG, as of today's date, has 7,547,505 shares of Common Stock issued and outstanding.

Dividends on the Class A and Class B Common Stock may be paid on one Class and not the other, or unequally between Classes. However, approval by 2/3 of the Board of Directors is required to pay dividends on the Class B Common Stock if an equal or greater dividend is not to be paid on the Class A Common Stock.

After the merger, the Board of Directors will consist of seven members. For a period of three years, the current CDS shareholders shall have the right to designate four of those Directors, and the current CTIG shareholders shall have the right to designate the initial three Directors who will serve for a three (3) year term. The initial Directors designated will be as follows:

Anthony P. Johns, President & Chief Executive Officer

Mr. Johns, a UK citizen, was formerly

Chairman and CEO of CTI Group (Holdings) Inc.

Harold D. Garrison, Chairman & Executive Committee Member

Mr. Garrison is Chairman and CEO of

Mansur Investment Services, Inc.

Michael H. Leeds, Vice Chairman & Executive Committee Member

Mr. Leeds is Managing Partner of the Boca Raton, Florida 

office of the law firm of Blank

Rome Comisky and McCauley LLP 

Rupert D. Armitage Executive Committee Member

Mr. Armitage, a UK citizen, is Chairman and

Managing Director of three software companies in the UK.

Salah N. Osseiran

Mr. Osseiran, a Lebanese citizen, conducts widespread

business operations in the Middle East and is Chairman

of Business Projects Corp.

Graham Bevington

Mr. Bevington, a UK citizen, is Managing Director of

Mitel Telecom Ltd. (EMEAAP) Europe, Middle East, Africa,

Asia Pacific.

Thomas W. Grein

Mr. Grein is Vice President and Treasurer of Eli Lilly 

and Company.

For three years after the closing of the Merger, the Board will have an Executive Committee consisting of two of the CDS designated Directors and one of the CTIG designated Directors. The initial Executive Committee will be Michael Leeds, Harold Garrison and Rupert Armitage.

Among other responsibilities, the Executive Committee will manage the limited liability company that will own and prosecute the patent litigation.

Mr. Johns, currently Chairman and Chief Executive Officer of CTIG, will become President and Chief Executive Officer of the combined entity after the merger under a three year employment agreement.

In addition to the customary conditions to closing a transaction of this nature, consummation of the merger is conditioned upon there being no change in law that would negatively impact the merger as a tax-free reorganization under Section 368(a) of the Internal Revenue Code, and upon the per share price of CTIG's Common Stock being at least $1.26 on the closing date. CTIG anticipates that the merger will close in the second calendar quarter of this year.

CTIG is a provider of telemanagement software and services for managing telecommunications systems. Through its wholly-owned operating subsidiaries, CTIG develops, markets, and supports telemanagement solutions for corporate users of telecommunications services and customer billing solutions. CDS is a privately held, growth-oriented international software development and information services company.

By joining forces, CDS and CTIG will offer a technology that addresses the growing demand for convergence. Call accounting and billing solutions will incorporate local, long distance, wireless voice and data, Internet voice and data, cable television as well as other data events.

This merger also presents an opportunity to introduce patented SmartBill(R) software in combination with electronic bill presentment and analysis to the world market, specifically the European community. &uot;Our patented SmartBill(R) analysis technology has become an industry standard in the US. We look forward to expanding our license revenue with this product as we offer International Telecom Providers a tool to attract and retain commercial customers,&uot; noted Mike Leeds, Vice Chairman of the CDS board.

Bill Miller, Senior Vice President of CDS, said, &uot;The merger will produce stronger products in the BACC market through the combining of the companies' research and development capacities. All telecommunications providers are looking for BACC solutions that offer easy integration and use, scalability to accommodate growth and the flexibility to take advantage of new technologies. Our next-generation Unix and Windows NT-based software is designed to meet the requirements of local, long-distance, wireless voice and data, Internet voice and data, cable and other event data situations. This merger will enhance the proven strengths of both companies to create a much stronger player in the BACC market while reducing the risks inherent for each of us in developing software of this scale.&uot;

Adrian Burt, Managing Director of CTI Data Solutions Ltd., (CTIG's UK operating subsidiary) said, &uot;This merger could not have come at a better time for us. Besides relocating to our new offices today to accommodate our future growth, only yesterday British Telecom announced {a 24% drop in earnings for the quarter due to intensified competitive pricing pressure and a loss of market share to cable television and other telecom operators}. This merger clearly creates a timely opportunity to introduce SmartBill(R), Centillion's E-bill presentment and analysis software technology, to the European market. &uot;Given CTIG's established presence in the UK, we will be ideally positioned to introduce the core benefits of customer acquisition and retention to the growing number of international telecom providers.&uot;

&uot;On a personal note&uot;, Mr. Johns said, &uot;on behalf of CTIG shareholders, I would like to take this opportunity to publicly thank Frank Hunnewell and Fred Rohn for their constant support and dedication over the many years they have served as Directors of the Corporation.&uot;

This release contains forward-looking statements that involve risks and uncertainties. These statements may differ materially from actual future events or results. Readers are referred to documents filed by CTIG with the U.S. Securities and Exchange Commission.