[LOGO OF AUTOTOTE]
February 27, 1998
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders of
Autotote Corporation to be held at 2:00 p.m., local time, on Thursday, April
16, 1998, at the Hotel du Pont, Eleventh and Market Streets, Wilmington,
Delaware.
At the Annual Meeting you will be asked to elect five Directors and to
ratify the appointment of KPMG Peat Marwick as Auditors for the Company's next
fiscal year.
The Board of Directors recommends that you vote FOR the election of all five
nominees as Directors and FOR ratification of the appointment of the Auditors.
Regardless of the number of shares you may own, it is important that they
are represented and voted at the Annual Meeting. Therefore, please sign, date
and mail the enclosed proxy in the return envelope provided.
At the Annual Meeting, we will also report to you on the Company's current
operations and outlook. Members of the Board and management will be pleased to
respond to any questions you may have.
Sincerely,
A. Lorne Weil
Chairman of the Board
AUTOTOTE CORPORATION
----------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
APRIL 16, 1998
----------------
Notice is hereby given that the Annual Meeting of Stockholders of Autotote
Corporation (the "Company") will be held at 2:00 p.m., local time, on
Thursday, April 16, 1998, at the Hotel du Pont, Eleventh and Market Streets,
Wilmington, Delaware, for the following purposes:
1. To elect five members of the Board of Directors to serve for the
ensuing year and until their respective successors are duly elected and
qualified.
2. To ratify the appointment of KPMG Peat Marwick as independent
accountants for the Company for the fiscal year ending October 31, 1998.
3. To consider and act upon any other matters that may properly come
before the meeting or any adjournment thereof. The Board of Directors is
not presently aware of any such matters.
All holders of Class A Common Stock whose names appear of record on the
Company's books at the close of business on February 24, 1998 will be entitled
to receive notice of and to vote at the meeting and any adjournment thereof.
WHETHER OR NOT YOU PLAN TO BE PERSONALLY PRESENT AT THE MEETING, PLEASE
COMPLETE, DATE AND SIGN THE ENCLOSED PROXY AND RETURN IT PROMPTLY IN THE
ENCLOSED ENVELOPE. IF YOU LATER DESIRE TO REVOKE YOUR PROXY, YOU MAY DO SO AT
ANY TIME BEFORE IT IS EXERCISED.
By Order of the Board of Directors
MARTIN E. SCHLOSS
Secretary
Dated: February 27, 1998
AUTOTOTE CORPORATION
750 LEXINGTON AVENUE, 25TH FLOOR
NEW YORK, NEW YORK 10022
-----------------
PROXY STATEMENT
-----------------
INTRODUCTION
The Board of Directors (the "Board") of Autotote Corporation, a Delaware
corporation (the "Company"), is furnishing this Proxy Statement to holders of
shares of Class A Common Stock, $.01 par value per share, of the Company (the
"Class A Common Stock") in connection with the solicitation of the enclosed
proxy for use at the Annual Meeting of Stockholders to be held on Thursday,
April 16, 1998, at 2:00 p.m., local time, at the Hotel du Pont, Eleventh and
Market Streets, Wilmington, Delaware, and any adjournment thereof (the "Annual
Meeting"), for the purposes set forth in the Notice of Annual Meeting of
Stockholders. Shares of the Company's Class A Common Stock represented by
proxies in the form solicited will be voted in the manner directed by a
stockholder. If no direction is given, shares represented by proxies will be
voted FOR the election of the five nominees for director named in this Proxy
Statement and FOR the proposal set forth in Item 2. Proxies may be revoked at
any time prior to their being voted by giving written notice of revocation or
by giving a duly executed proxy bearing a later date to the Secretary of the
Company or by voting in person at the Annual Meeting.
It is expected that this Proxy Statement and enclosed form of proxy will be
mailed to stockholders on or about March 2, 1998.
All holders of Class A Common Stock whose names appear of record on the
Company's books at the close of business on February 24, 1998, the record date
for the determination of stockholders of the Company entitled to notice of and
to vote at the Annual Meeting, will be entitled to vote at the Annual Meeting.
At the close of business on February 24, 1998, a total of 35,435,979 shares of
Class A Common Stock were outstanding. Each share of Class A Common Stock is
entitled to one vote.
Expenses in connection with the solicitation of proxies will be paid by the
Company. Proxies are being solicited primarily by mail, but, in addition,
officers and regular employees of the Company who will receive no extra
compensation for their services may solicit proxies by telephone, telecopy,
telex or personal calls. The Company also has retained D.F. King & Co., Inc.
to assist in soliciting proxies at a fee of $4,000 plus reimbursement of
reasonable out-of-pocket costs and expenses.
The Company is not aware of any matters other than those described in this
Proxy Statement that will be acted upon at the Annual Meeting. In the event
that any other matter properly comes before the meeting for a vote of
stockholders, the persons named as proxies in the enclosed form of proxy will
vote in accordance with their best judgment on such other matters.
The annual report of the Company for the fiscal year ended October 31, 1997
is being mailed to the Company's stockholders with this proxy statement.
VOTING
A majority of the shares outstanding and entitled to vote, present in person
or represented by proxy, constitutes a quorum for the transaction of business
at the Annual Meeting. Votes cast by proxy or in person at the Annual Meeting
will be counted by persons appointed by the Company to act as inspectors of
election at the Meeting.
The five nominees for election as directors at the Annual Meeting who
receive the greatest number of votes for the election of directors shall be
elected directors. In all matters other than the election of directors, a
majority vote of the number of shares entitled to vote present in person or
represented by proxy at the Annual Meeting is necessary, unless the law or the
Company's certificate of incorporation or by-laws require otherwise.
The inspectors of election will treat abstentions and broker non-votes
(i.e., shares held by brokers or nominees that the broker or nominee does not
have discretionary power to vote on a particular matter and as to which
instructions have not been received from the beneficial owners or persons
entitled to vote) as shares that are present and entitled to vote for purposes
of determining a quorum. With regard to the election of directors, votes may
be cast in favor of or withheld and directors will be elected by a plurality
of the votes cast by proxy or in person at the Annual Meeting. Accordingly,
votes that are withheld for the election of directors and broker non-votes
will be excluded entirely from the vote and will have no effect on the outcome
of the election except to the extent that the failure to vote for a particular
nominee results in another nominee receiving a larger number of votes. In
matters requiring a majority of the shares present and entitled to vote for
approval, abstentions are considered to be shares present and entitled to vote
and therefore will have the effect of a negative vote on the matter. Broker
non-votes on such matters are not counted as shares eligible to vote and will
have no effect on the outcome of the matter. With respect to the ratification
of the appointment of auditors, therefore, abstentions will be considered a
negative vote and broker non-votes will have no effect.
2
SECURITY OWNERSHIP
The following table sets forth certain information as of January 31, 1998 as
to the security ownership of those persons known to the Company to be the
beneficial owners of more than five percent of the outstanding Class A Common
Stock of the Company, each of the Company's directors, each of the executive
officers listed in the Summary Compensation Table under "Executive
Compensation" below and all of the Company's directors and executive officers
as a group. Except as otherwise indicated, the stockholders listed in the
table below have sole voting and investment power with respect to the shares
indicated.
SHARES OF CLASS A COMMON STOCK
NAME NUMBER PERCENT(1)
- ---- --------- ----------
Oaktree Capital Management, LLC........................ 3,763,300(2) 10.12%
550 South Hope Street
Los Angeles, CA 90071
State of Wisconsin Investment Board.................... 3,036,553(3) 8.57%
P.O. Box 7842
Madison, WI 54707
A. Lorne Weil.......................................... 2,864,642(4) 7.67%
750 Lexington Avenue
25th Floor
New York, New York 10022
Larry J. Lawrence...................................... 3,360,400(5) 9.07%
c/o Lawrence, Smith & Horey
29th Floor
515 Madison Avenue
New York, New York 10022
Marshall Bartlett...................................... 72,082(6) *
Sir Brian G. Wolfson................................... 143,750(7) *
Alan J. Zakon.......................................... 534,000(8) 1.50%
Gerald Lawrence........................................ 123,500(9) *
William Luke........................................... 112,500(10) *
Martin E. Schloss...................................... 130,000(11) *
All directors and executive officers as a group
(consisting of 8 persons)(4)(5)(6)(7)(8)(9)(10)(11)... 7,340,874(12) 18.59%
- --------
* Represents less than 1% of the outstanding shares of Class A Common Stock.
(1) For purposes of determining beneficial ownership of the Company's Class A
Common Stock, owners of Class A warrants and options exercisable within
sixty days of January 31, 1998 are considered to be the beneficial owners
of the shares of Class A Common Stock into which such securities are
convertible or for which such securities are exercisable. The percentage
ownership of the outstanding Class A Common Stock reported herein is
based on the assumption that only the person whose ownership is being
reported has exercised his warrants or options for Class A Common Stock.
3
(2) Based on a Schedule 13G filed with the Securities and Exchange Commission
on December 10, 1997. Includes 1,750,000 shares currently issuable upon
the conversion of debentures.
(3) Based upon a Schedule 13G filed with the Securities and Exchange
Commission on January 22, 1998.
(4) Includes (a) 216,644 shares held in the name of The Lorne Weil 1989
Trust, of which Mr. Weil is Trustee, (b) 588,870 shares issuable upon
exercise of warrants, 98,146 of which are exercisable by The Lorne Weil
1989 Trust, and (c) 1,311,500 shares issuable upon exercise of stock
options.
(5) Includes (a) 594,914 shares issuable upon exercise of warrants, (b)
43,750 shares issuable upon exercise of a stock option, and (c) 983,762
shares issuable upon exercise of a warrant held by Lawrence, Tyrrell,
Ortale & Smith ("LTOS"). Mr. Lawrence is a general partner of Lawrence
Venture Partners, the sole general partner of LTOS, and disclaims
beneficial ownership of the warrant held by LTOS, except to the extent of
his pecuniary interest therein.
(6) Includes 48,750 shares issuable upon exercise of stock options.
(7) Includes (a) 63,750 shares issuable upon exercise of stock options, and
(b) 25,000 shares held by Millco Limited as nominee.
(8) Includes 76,250 shares issuable upon exercise of stock options.
(9) Includes 112,500 shares issuable upon exercise of stock options.
(10) Consists of 112,500 shares issuable upon exercise of stock options.
(11) Includes 115,000 shares issuable upon exercise of stock options.
(12) Includes (a) 2,167,546 shares issuable upon exercise of warrants, and (b)
1,884,000 shares issuable upon exercise of stock options.
4
PROPOSAL 1--ELECTION OF DIRECTORS
NOMINEES
The Board has set the number of directors to be elected for the coming year
at five. Each director shall be elected at the Annual Meeting of Stockholders
for a term of one year and until his successor is duly elected and qualified.
The Board recommends that the stockholders elect the nominees named below as
directors of the Company for the ensuing year, and the persons named as
proxies in the enclosed form of proxy will vote the proxies received by them
for the election as directors of the nominees named below unless otherwise
indicated. Cumulative voting is not permitted. Each nominee is presently a
director of the Company. Each nominee has indicated a willingness to serve,
but in case any nominee is not a candidate at the meeting for reasons not now
known to the Company, the proxies named in the enclosed proxy may vote for a
substitute nominee at their discretion. Certain information regarding the
nominees as of January 31, 1998 is set forth below.
DIRECTOR
NAME AGE POSITION SINCE
- ---- --- -------- --------
A. Lorne Weil............... 52 Chairman of the Board, President and
Chief Executive Officer(1) 1989
Marshall Bartlett........... 72 Director(2) 1991
Larry J. Lawrence........... 55 Vice Chairman of the Board(1)(2)(3) 1989
Sir Brian G. Wolfson........ 62 Director(3) 1988
Alan J. Zakon............... 62 Director(1)(2)(3) 1993
- --------
(1) Member of Executive Committee
(2) Member of Audit Committee
(3) Member of Compensation and Stock Option Committee
Mr. A. Lorne Weil has been a director of the Company since December 1989,
Chairman of the Board since October 31, 1991, Chief Executive Officer of the
Company since April 1992 and President of the Company since August 1997. Mr.
Weil held various senior management positions with the Company and its
subsidiaries from October 1990 to April 1992 and was a director and consultant
to Autotote Systems, Incorporated from 1982 until it was acquired by the
Company in 1989. Mr. Weil was President of Lorne Weil, Inc., a firm providing
strategic planning and corporate development services to high technology
industries, from 1979 to November 1992. Mr. Weil is currently a director of
Fruit of the Loom, Inc. and General Growth Properties, Inc.
Mr. Marshall Bartlett has been a director of the Company since December
1991. Mr. Bartlett acted as a consultant to the Company from June 1994 to June
1995 and was employed by the Company in various capacities from June 1993 to
June 1994. Mr. Bartlett was Executive Vice President and Chief Operating
Officer of Bourns Inc., an electronic component manufacturer, from 1979 until
his retirement in 1991.
Mr. Larry J. Lawrence has been a director of the Company since December 1989
and Vice Chairman of the Board since August 1997. Mr. Lawrence is co-founder
and since 1985 has been managing partner of Lawrence Venture Partners, the
general partner of Lawrence, Tyrrell, Ortale & Smith, a private equity fund
manager. He has been managing partner of LTOS II Partners, the general partner
of Lawrence, Tyrrell, Ortale & Smith II, since 1990 and has been the general
partner of LSH Partners III, L.P., the general partner of Lawrence, Smith &
Horey III, since May 1995. Mr. Lawrence served as a director of Autotote
Systems, Incorporated until it was acquired by the Company in 1989. Mr.
Lawrence is currently a director of several private companies.
Sir Brian G. Wolfson has been a director of the Company since 1988. Sir
Brian served as Vice Chairman of the Company's Board of Directors from May
1995 to August 1997 and served as Acting President and Chief Executive Officer
of the Company from June 1991 to October 31, 1991. Sir Brian was Chairman from
1987 to May 1995, and Deputy Chairman from May 1995 to September 1995, of
Wembley plc, a United Kingdom corporation. Sir Brian is currently a director
of Kepner-Tregoe, Inc., Fruit of the Loom, Inc. and Playboy Enterprises, Inc.
5
Mr. Alan J. Zakon has been a director of the Company since 1993 and Chairman
of the Executive Committee since August 1997. Mr. Zakon served as Vice
Chairman of the Company's Board of Directors from May 1995 to August 1997. Mr.
Zakon served as a managing director of Bankers Trust Corporation from 1989 to
April 1995, and as Chairman of the Strategic Policy Committee of Bankers Trust
Corporation from 1989 to 1990. Mr. Zakon served as Chairman of the Board of
Boston Consulting Group from 1986 until 1989. Mr. Zakon is currently a
director of Arkansas Best Corporation and Boyle Leasing Technologies.
THE BOARD RECOMMENDS A VOTE "FOR" EACH OF THE FIVE NOMINEES.
MEETINGS OF THE BOARD OF DIRECTORS AND COMMITTEES
The Board of Directors held a total of seven meetings during fiscal 1997 and
currently consists of A. Lorne Weil, Marshall Bartlett, Larry J. Lawrence, Sir
Brian G. Wolfson and Alan J. Zakon. Thomas H. Lee served as a director until
his term expired on August 13, 1997. All directors attended each meeting,
except for Sir Brian G. Wolfson who attended six meetings and Thomas H. Lee
who attended one of the six meetings held during his tenure as a director
during fiscal 1997. All directors attended each meeting of the committees of
the Board of which they were members that were held while they were serving on
such committee, except as indicated below.
The Audit Committee of the Board of Directors consists of Larry J. Lawrence
(Chairman) Marshall Bartlett, and Alan J. Zakon and met two times during
fiscal 1997. The Audit Committee recommends engagement of the Company's
independent accountants and is primarily responsible for approving their
services and for reviewing and evaluating, with the independent auditors and
management, the Company's accounting policies and its system of internal
accounting controls.
In December 1996, the Stock Option Committee and the Compensation Committee
of the Board of Directors were combined by the Board of Directors into a
single committee named the "Compensation and Stock Option Committee." The
Compensation Committee met one time and the Stock Option Committee acted one
time by Unanimous Written Consent prior to the Committees being combined. The
Compensation and Stock Option Committee met two times during fiscal 1997 and
currently consists of Alan J. Zakon (Chairman), Larry J. Lawrence and Sir
Brian G. Wolfson. Marshall Bartlett served as Chairman of the Compensation and
Stock Option Committee until October 23, 1997. The Compensation and Stock
Option Committee determines the compensation of executive officers of the
Company, makes recommendations to the Board with regard to the adoption of new
employee benefit plans, and administers and makes awards under, or outside of,
the Company's 1984 Stock Option Plan, as amended, the 1992 Equity Incentive
Plan, as amended and restated (the "1992 Plan"), the 1995 Equity Incentive
Plan, as amended and the 1997 Incentive Compensation Plan, as amended.
The Executive Committee met two times during fiscal 1997. The Executive
Committee currently consists of Alan J. Zakon (Chairman), Larry J. Lawrence
and A. Lorne Weil. Sir Brian G. Wolfson and Thomas H. Lee served as members of
the Executive Committee until August 13, 1997 and did not attend the two
meetings which were conducted during their tenure on the Committee during
fiscal 1997. A. Lorne Weil became a member of the Executive Committee on
August 13, 1997. The Executive Committee is authorized to exercise all of the
powers and authority of the Board of Directors in the management of the
business and affairs of the Company between regular meetings of the full Board
of Directors, subject to Delaware law.
The Company has no nominating committee.
6
EXECUTIVE COMPENSATION; CERTAIN ARRANGEMENTS
EXECUTIVE COMPENSATION
The following table shows the compensation awarded or paid by the Company
for services rendered for the years ended October 31, 1995, 1996 and 1997 to
the Chief Executive Officer and the individuals who, in fiscal 1997, were the
other highest paid Executive Officers of the Company who received in excess of
$100,000 in salary and bonuses in that year (collectively the "Named Executive
Officers").
SUMMARY COMPENSATION TABLE
LONG TERM
ANNUAL COMPENSATION COMPENSATION AWARDS
------------------------ -----------------------
(A) (B) (C) (D) (F) (G) (I)
----------- ---- ------- -------- ---------- ---------- ------------
RESTRICTED SECURITIES
NAME AND STOCK UNDERLYING ALL OTHER
PRINCIPAL POSITION SALARY BONUS(1) AWARD(9) OPTIONS COMPENSATION
AT FISCAL YEAR-END YEAR ($) ($) ($) (#) ($)
------------------ ---- ------- -------- ---------- ---------- ------------
A. Lorne Weil........... 1997 441,000 441,000 -- 200,000 12,300(3)
President and 1996 441,400(2) -- -- 273,000 17,200(4)
Chief Executive Officer 1995 408,800 -- 534,001(6) -- 12,700(5)
William Luke............ 1997 250,000 109,700 -- 150,000 30,700(3)
Vice President and 1996 168,300 -- -- 150,000 --
Chief Financial Officer
Gerald Lawrence......... 1997 230,000 93,700 -- 150,000 18,600(3)
Vice President 1996 219,300 -- -- 150,000 11,100(4)
1995 184,600 50,000 137,000(7) 100,000(7) --
Martin E. Schloss....... 1997 210,000 89,800 -- 150,000 7,500(3)
Vice President, General 1996 195,700 -- -- 100,000 7,500(4)
Counsel and Secretary 1995 175,000 13,000 70,272(8) -- 7,600(5)
- --------
(1) See "Report of The Compensation and the Stock Option Committee," which
describes performance based bonuses awarded to the Named Executive
Officers. Bonuses paid in any fiscal year are based on results of the
previous year.
(2) Mr. Weil's 1996 annual compensation consisted of $430,000 in base salary
plus a CPI adjustment of $11,400 owed during fiscal year 1995.
(3) Amounts of All Other Compensation for fiscal 1997 include the following:
(i) Contributions to the Company's defined contribution retirement plan
for salaried employees: Mr. Weil, $7,500; Mr. Luke, $4,300; Mr. G.
Lawrence, $7,500; Mr. Schloss, $7,500.
(ii) Life insurance coverage: Mr. Weil, $4,800.
(iii) Automobile allowance: Mr. G. Lawrence, $800.
(iv) Relocation reimbursement: Mr. Luke, $26,400; Mr. G. Lawrence, $10,300.
(4) Amounts of All Other Compensation for fiscal 1996 include the following:
(i) Contributions to the Company's defined contribution retirement plan
for salaried employees: Mr. Weil, $7,500; Mr. G. Lawrence, $7,500; Mr.
Schloss, $7,500.
(ii) Life insurance coverage: Mr. Weil, $9,700.
(iii) Automobile allowance: Mr. G. Lawrence, $3,600.
7
(5) Amounts of All Other Compensation for fiscal 1995 include the following:
(i) Contributions to the Company's defined contribution retirement plan for
salaried employees: Mr. Weil, $7,500; Mr. Schloss, $7,500.
(ii) Life insurance coverage: Mr. Weil, $5,200; Mr. Schloss, $100.
(6) On May 25, 1995, Mr. Weil exchanged options received in 1993 to purchase
600,000 shares of Class A Common Stock, constituting all of his options
having exercise prices in excess of $4.13 per share (the average of the
bid and asked trading prices of the Class A Common Stock on May 25, 1995)
("Underwater Options"), for an award under the Company's 1992 Plan of
129,298 Performance Accelerated Restricted Stock Units ("PARS").
Recipients of PARS are entitled to receive the equivalent number of shares
of Class A Common Stock upon lapse of the restrictions on such PARS,
following either a lengthy period of future service or the achievement of
certain performance goals for the Company as measured by the price of the
Class A Common Stock.
(7) On May 25, 1995, Mr. G. Lawrence exchanged all of his Underwater Options,
constituting options to purchase 100,000 shares of Class A Common Stock,
for an award of 33,172 PARS under the Company's 1992 Plan.
(8) On May 25, 1995, Mr. Schloss exchanged all of his Underwater Options,
constituting options to purchase 65,000 shares of Class A Common Stock,
for an award of 17,015 PARS under the Company's 1992 Plan.
(9) The number and value of the aggregate restricted stock holdings at October
31, 1997 is as follows:
(i) Number of PARS: Mr. Weil, 129,298; Mr. G. Lawrence, 33,172; Mr.
Schloss, 17,015.
(ii) Value of PARS: Mr. Weil, $315,164; Mr. G. Lawrence, $80,857; Mr.
Schloss, $41,474.
(iii) In the event the Company declares a dividend on the Class A Common
Stock, the PARS listed above would also receive the dividend(s).
8
STOCK OPTIONS
The following table sets forth information regarding stock options granted
to the Named Executive Officers during the fiscal year ended October 31, 1997.
POTENTIAL
REALIZABLE
VALUE
AT ASSUMED
ANNUAL RATES
OF STOCK
PRICE
APPRECIATION
OPTIONS GRANTED IN FISCAL YEAR 1997 FOR
INDIVIDUAL GRANTS OPTION TERM(1)
------------------------------------------ -----------------
(A) (B) (C) (D) (E) (F) (G)
NUMBER OF % OF TOTAL
SECURITIES OPTIONS
UNDERLYING GRANTED TO
OPTIONS EMPLOYEES EXERCISE
GRANTED IN PRICE EXPIRATION 5% 10%
NAME #(2) FISCAL YEAR ($/SH) DATE ($) ($)
---- ---------- ----------- -------- ---------- -------- --------
A. Lorne Weil..... 200,000 7.98% $1.0625 12-15-06 $133,640 $338,670
William Luke...... 150,000 5.98% $1.0625 12-15-06 $100,230 $254,003
Gerald Lawrence... 150,000 5.98% $1.0625 12-15-06 $100,230 $254,003
Martin E. Schloss. 100,000 3.99% $1.0625 12-15-06 $ 66,820 $169,335
Martin E. Schloss. 50,000 1.99% $2.2500 10-27-07 $ 70,751 $179,296
- --------
(1) Represents the product of (i) the difference between (A) the per-share
fair market price at the time of the grant compounded annually at the
assumed rate of appreciation over the term of the option, and (B) the per-
share exercise price of the option, and (ii) the number of shares
underlying the grant at the fiscal year-end.
(2) All options were granted under the Company's 1992 Plan. Options become
exercisable in four equal installments on the first, second, third and
fourth anniversaries of the date of grant. The options may, subject to
certain requirements, be exercised through the delivery of cash and/or
Class A Common Stock. The options permit the optionee to request that the
Company withhold shares sufficient to satisfy withholding tax
requirements. The options are not transferable otherwise than by will or
the laws of descent and distribution, in which case, and in the case of
disability, they are exercisable for the following 12 months or the term
of the option, whichever is shorter, for the full number of shares the
optionee was entitled to purchase at the time of his death or disability.
In the event of a termination of employment by the Company other than for
cause or death or disability, the 1992 Plan provides that an optionee has
the right to exercise his option at any time within the three months
following such termination or the term of the option, whichever is
shorter, for the full number of shares he was entitled to purchase at the
time of termination. In the event of termination for cause, the option
shall be canceled upon termination.
9
The following table sets forth information for the Named Executive Officers
with respect to fiscal 1997 year-end option values.
AGGREGATED OPTION EXERCISES IN
FISCAL YEAR 1997, AND 1997 FISCAL YEAR-END OPTION VALUE
(A) (B) (C) (D) (E)
--- ----------- ----------- ----------------- --------------
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS AT OPTIONS AT
OCT. 31, 1997 OCT. 31, 1997
SHARES (#) ($)
ACQUIRED ON VALUE EXERCISABLE/ EXERCISABLE/
NAME EXERCISE(#) REALIZED($) UNEXERCISABLE UNEXERCISABLE
---- ----------- ----------- ----------------- --------------
A. Lorne Weil......... -0- -0- 1,193,250/404,750 51,188/275,000
William Luke.......... -0- -0- 37,500/262,500 -0-/206,250
Gerald Lawrence....... -0- -0- 37,500/262,500 -0-/206,250
Martin E. Schloss..... -0- -0- 65,000/225,000 -0-/146,875
REPORT OF THE COMPENSATION AND STOCK OPTION COMMITTEE
The Compensation and Stock Option Committee of the Board of Directors of the
Company for fiscal 1997 consisted of Marshall Bartlett, Larry J. Lawrence and
Alan J. Zakon. On October 23, 1997, just prior to the end of fiscal 1997, Sir
Brian G. Wolfson succeeded Marshall Bartlett on the Committee. The Committee's
responsibilities include determining the compensation of the Company's
executive officers, making recommendations to the Board of Directors with
regard to the adoption of new employee benefit plans, and administering and
making awards under, or outside of, the Company's stock option plans. No
member of this Committee was an officer or employee of the Company during
fiscal 1997.
COMPENSATION COMPONENTS AND PHILOSOPHY
The components of the Company's compensation program consist of base
salaries, cash bonuses and stock options. The Company's compensation program
is designed to align management and stockholder interests by providing
incentive compensation through stock option awards and performance-based
bonuses. The Compensation and Stock Option Committee receives input from the
Company's Chief Executive Officer and reviews his proposals concerning
executive compensation before making a final determination concerning the
scope and nature of compensation arrangements. It is the Company's current
policy to establish, structure and administer compensation plans and
arrangements so that the deductibility to the Company of such compensation
will not be limited under Section 162(m) of the Internal Revenue Code.
Executive Officer Compensation
Base salaries for key employees are reviewed by the Compensation and Stock
Option Committee on an annual basis in conjunction with the Company's annual
budget for the upcoming fiscal year. The Company's philosophy is to provide
base salaries at a level comparable to positions of similar responsibility in
similar industries in order to retain the services of key employees who are in
a position to make significant contributions to the Company's attainment of
its objectives.
Annual Incentive Compensation
The Company established during fiscal 1996 an Annual Incentive Compensation
Plan which provides bonus opportunities for the Company's key executive
personnel based on three criteria: (1) the Company's overall financial
performance relative to the budget for a given fiscal year as approved by the
Board of Directors, (2) the
10
financial performance of individual business units of the Company for
executives directly involved with the operation of those units, and (3) a
qualitative assessment by the Compensation and Stock Option Committee of
significant individual contributions not directly measurable by financial
results pursuant to recommendations made by the Chief Executive Officer.
Potential payments under the Annual Incentive Compensation Plan during fiscal
1997 ranged from 22.5% to 45% of base salary for executives other than the
Chief Executive Officer. The purpose of the Plan is to reward employees who
have made significant contributions to the Company's achievement of its
objectives and to provide an incentive for further contributions. Bonuses were
paid under the Plan to executives of the Company for fiscal 1997 due to the
achievement by the Company and its executives of various strategic objectives
during the fiscal year which significantly strengthened the Company's
financial position and expanded its businesses, including the successful
completion of a notes offering during fiscal 1997 which raised $110 million,
the substantial growth of the Company's European pari-mutuel businesses,
expansion of the Company's simulcasting business, the achievement of record
EBITDA for fiscal 1997 and the successful renewal of contracts with the
Company's North American customers.
Stock Option Plan
While base salary and the annual incentive compensation components are tied
to employee responsibility and the Company's financial performance, the
purpose of stock option grants is to align stockholder and employee interests
by providing a component of compensation tied directly to the performance of
the Company's stock price. During fiscal 1997, grants of options to purchase a
total of 650,000 shares of Class A Common Stock were made to the Named
Executive Officers of the Company at exercise prices ranging from $1.0625 to
$2.250 per share.
CEO Compensation
Effective November 1, 1992, the Company and A. Lorne Weil entered into a
five-year employment agreement (the "1992 Weil Employment Agreement").
Pursuant to the 1992 Weil Employment Agreement, Mr. Weil received a base
salary of $441,000 for fiscal 1997. Mr. Weil also received his maximum bonus
potential under the 1992 Weil Employment Agreement of $441,000, representing
100% of his base salary for fiscal 1997 as a result of the Company and Mr.
Weil having exceeded the performance targets established for fiscal 1997. The
Company anticipates entering into a new employment agreement with Mr. Weil and
has agreed that Mr. Weil's employment shall be in accordance with the
provisions of a proposed employment agreement until a definitive agreement is
executed (see "Certain Arrangements Between the Company and its Directors and
Officers--Employee Agreements" below).
Compensation and Stock Option Committee
Alan J. Zakon, Chairman
Larry J. Lawrence
Brian G. Wolfson
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation and Stock Option Committee of the Board of Directors
consisted of Marshall Bartlett, Larry J. Lawrence and Alan J. Zakon during
fiscal 1997. On October 23, 1997, just prior to the end of fiscal 1997, Sir
Brian G. Wolfson succeeded Marshall Bartlett on the Committee.
On October 23, 1997, the Board of Directors increased the annual retainer
fees for the Vice Chairman of the Board of Directors and the Chairman of the
Executive Committee to $150,000 and $75,000, respectively. Larry J. Lawrence,
as Vice Chairman of the Board, and Alan J. Zakon, as Chairman of the Executive
Committee, each of whom serve on the Compensation and Stock Option Committee,
will accordingly be paid $150,000 and $75,000, respectively, for fiscal 1998.
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In January 1997, each of the three directors serving on the Compensation and
Stock Option Committee, Marshall Bartlett, Alan J. Zakon and Larry J.
Lawrence, was offered an opportunity to purchase restricted shares of Class A
Common Stock of the Company pursuant to a plan authorized by the Board of
Directors, in which an aggregate of one million shares was offered to the
management and directors of the Company at a purchase price of $1.20 per
share. Alan J. Zakon and Larry J. Lawrence each purchased 250,000 shares
pursuant to subscription agreements executed in March 1997.
CERTAIN ARRANGEMENTS BETWEEN THE COMPANY AND ITS DIRECTORS AND OFFICERS
Employee Agreements
A. Lorne Weil's employment, with respect to fiscal 1997, was governed by the
1992 Weil Employment Agreement, which expired at fiscal year-end. Pursuant to
the 1992 Weil Employment Agreement, Mr. Weil received a base salary of
$441,000 and a bonus of $441,000 for fiscal 1997.
The Company anticipates entering into a new employment agreement with Mr.
Weil. Pending execution of a definitive employment agreement, the Company has
agreed that Mr. Weil's employment shall be in accordance with the provisions
of a proposed three-year employment agreement, which provides for an annual
base salary of $475,000, subject to annual increases in accordance with the
Consumer Price Index, a cash signing bonus of $275,000, an opportunity for
annual incentive compensation of not less than 25% of his base salary for
achievement of target level performance, an additional amount of not less than
25% of his base salary for achievement in excess of the target level, and an
additional amount, in the Board's discretion, of up to 50% of his base salary
upon achievement of one or more strategic objectives. The term of the proposed
agreement extends automatically each year unless either party serves written
notice six months prior to the date upon which such extension would become
effective. Pursuant to the proposed agreement, if the Company terminates
Mr. Weil's employment without Cause (as defined in the proposed agreement),
which includes the Company's election not to extend the term, or Mr. Weil
terminates his employment for Good Reason (as defined in the proposed
agreement) (i) prior to or more than two years after a Change in Control (as
defined in the proposed agreement), Mr. Weil will be entitled to receive cash
severance over a period of two years in the amount equal to two times the sum
of his then current base salary and the average incentive compensation paid to
Mr. Weil for the three years preceding the year of termination, and Mr. Weil
will be entitled to retain all of his stock options, such options becoming
vested and exercisable at the date of termination and remaining exercisable
until the scheduled expiration dates; (ii) simultaneous with or within two
years after a Change in Control, Mr. Weil will be entitled to receive cash
severance in a lump sum equal to three times the sum of his current base
salary and the higher of (a) the average annual incentive compensation paid
for the prior three years or (b) the incentive compensation payable in the
year of termination, and retain all of his options in the manner described
above.
By letter, dated January 3, 1995, the Company confirmed to Martin E. Schloss
that in the event the Company terminates Mr. Schloss' employment, he will be
entitled to receive severance pay, at the time of such termination, of not
less than one year base salary plus all accrued but unpaid bonus installments
earned by him and Mr. Schloss will retain all unexercised options to purchase
Class A Common Stock held by him at the time of such termination, which
options will remain exercisable in accordance with their terms.
Effective February 26, 1996, the Company and William Luke entered into an
employment agreement (the "Luke Employment Agreement") pursuant to which Mr.
Luke assumed the position of Vice President and Chief Financial Officer of the
Company. The Luke Employment Agreement provides for an annual base salary of
$250,000, an annual bonus of up to 45% of base salary, participation in the
Company's stock option plan and reimbursement of relocation expenses. Mr. Luke
received an option on February 26, 1996, pursuant to the Luke Employment
Agreement, to purchase 150,000 shares of Class A Common Stock at the exercise
price of $3.0625 per share, the average price of the Class A Common Stock on
the date Mr. Luke's employment commenced, which option becomes exercisable in
four equal annual increments of 37,500 on February 26, 1997, 1998, 1999 and
2000, respectively. In the event that the Company terminates Mr. Luke's
employment other than for cause, Mr. Luke will be entitled to receive one-
year's base salary following such termination.
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Directors' Compensation
On November 1, 1996, pursuant to an amendment to the 1992 Plan approved by
the stockholders of the Company in May 1996, each Director of the Company who
is not an employee of the Company received an automatic grant of 10,000 shares
of Non-Employee Director Deferred Stock, each of the Directors then serving as
Vice Chairman of the Board received an additional grant of 15,000 shares, and
the Director then serving as Chairman of the Executive Committee received an
additional grant of 55,000 shares. These awards vest, on a cumulative basis,
as to one-third of the shares subject thereto on each of the first three
anniversaries of the date of grant or in full if the non-employee director
ceases to serve as a director as a result of death, disability, retirement at
or after the age of 65, the failure to be renominated or reelected, or in the
event of a consolidation or merger of the Company or a sale of substantially
all of the Company's assets.
In December 1996, each of the Directors of the Company was awarded a stock
option under the 1992 Plan to purchase shares of Class A Common Stock of the
Company at an exercise price of $1.0625. A. Lorne Weil was granted an option
to purchase 200,000 shares, Larry J. Lawrence was granted an option to
purchase 175,000 shares, Alan J. Zakon was granted an option to purchase
125,000 shares, and each of Marshall Bartlett and Sir Brian G. Wolfson was
granted an option to purchase 75,000 shares. The stock options vest in four
equal installments on the first, second, third and fourth anniversaries of the
date of grant and expire in December 2006.
Effective as of May 25, 1995 through and including fiscal 1997, each
Director of the Company who is not an employee of the Company was paid an
annual retainer of $20,000, as well as $1,000 plus expenses for each Board
meeting attended, $1,000 plus expenses for each committee meeting attended in
person and held on a day other than on which a Board meeting is held and $500
plus expenses for each committee meeting attended that is held on the same day
as a Board meeting or that is held by telephone conference call. Members of
the Executive Committee do not receive fees for attending meetings thereof.
The annual retainers were increased on October 23, 1997, such that each
Director of the Company who is not an employee of the Company will be paid an
annual retainer of $30,000, the Vice Chairman of the Board will be paid an
annual retainer of $150,000 and the Chairman of the Executive Committee will
be paid an annual retainer of $75,000.
CERTAIN TRANSACTIONS
Richard Weil, the brother of A. Lorne Weil, is Vice President of
International Business Development for Autotote Systems Inc., a subsidiary of
the Company. Richard Weil received a base salary of $140,000 and a bonus of
$41,720 for fiscal 1997.
On May 13, 1996, the Company extended a loan to A. Lorne Weil in the
principal amount of $250,000, such loan bearing interest at the rate of 5.5%
per annum and payable on May 13, 2004. In January 1997, Mr. Weil repaid the
loan in full including accrued interest of $22,000.
In March 1997, the Company sold an aggregate of 797,500 restricted shares of
Class A Common Stock at a purchase price of $1.20 per share in connection with
an offering of one million shares to the members of the Company's Board of
Directors and its management. The purchase price of $1.20 per share
represented the average of the closing prices of the Company's Class A Common
Stock as quoted on the American Stock Exchange for the four weeks prior to
December 17, 1996, the date the Board of Directors authorized the offering.
The directors and executive officers of the Company purchased an aggregate of
785,000 of such shares: A. Lorne Weil, Alan J. Zakon and Larry J. Lawrence
each purchased 250,000 shares, Sir Brian Wolfson purchased 25,000 shares and
Gerald Lawrence purchased 10,000 shares. The shares were not registered under
the Securities Act of 1933 and may not be sold in the absence of a
registration statement or an available exemption from such registration.
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STOCK PERFORMANCE GRAPH
The following graph compares the cumulative total stockholder return from
October 31, 1992 to October 31, 1997 of the Company's Class A Common Stock to
(i) the American Stock Exchange ("AMEX") Market Value Index and (ii) a peer
group index of companies that provide services similar to those of the Company.
The peer group consists of International Game Technology, Powerhouse
Technologies, Inc. (formerly Video Lottery Technologies, Inc.) and GTECH
Holdings Corp. for the entire five-year period, Bally Gaming International,
Inc. ("Bally") from October 31, 1992 through October 31, 1995, and Alliance
Gaming Corp. ("Alliance") for October 31, 1996 through October 31, 1997. Bally
was acquired by Alliance in June 1996 and for purposes of the peer group is
replaced by Alliance for the dates following June 1996. The Company elected to
use the peer group index rather than a published industry or line of business
index because the Company is not aware of any such published index of companies
which are as comparable in terms of their businesses. The peer group companies
have been weighted based upon their relative market capitalizations each year.
AUTOTOTE CORPORATION
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURNS*
LOGO
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PROPOSAL 2--APPOINTMENT OF INDEPENDENT ACCOUNTANTS
The Board has appointed KPMG Peat Marwick as independent accountants for the
Company to examine the Company's financial statements for the current fiscal
year ending October 31, 1998 and recommends that the stockholders of the
Company ratify that appointment. KPMG Peat Marwick has served as the Company's
independent accountants for all fiscal years since the fiscal year ended
October 31, 1982 and has no relationship with the Company other than that
arising from its employment as independent accountants, consultants and
assistants in the Company's performance of its internal audit function.
Representatives of KPMG Peat Marwick are expected to be present at the Annual
Meeting. They will have an opportunity to make a statement if they desire to
do so and will be available to respond to questions from stockholders.
It is intended that the proxies will be voted for the ratification of the
appointment of KPMG Peat Marwick unless otherwise indicated. If the
appointment is not ratified by stockholders, the Board is not obligated to
appoint other auditors, but the Board will give consideration to such
unfavorable vote.
THE BOARD RECOMMENDS A VOTE "FOR" THIS PROPOSAL
FINANCIAL STATEMENTS
The Company's audited financial statements for the fiscal year ended October
31, 1997 and certain other related financial and business information of the
Company are contained in the Company's Annual Report to stockholders which
accompanies this Proxy Statement. The Company's Annual Report on Form 10-K,
without exhibits, for the fiscal year ended October 31, 1997, filed by the
Company with the Securities and Exchange Commission, is included in the
Company's Annual Report to stockholders. Additional copies of the Annual
Report on Form 10-K may be obtained without charge by contacting John Elliott,
Director of Corporate Development, Autotote Corporation, 750 Lexington Avenue,
25th Floor, New York, New York 10022 (telephone: 212-754-2233).
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Under the securities laws of the United States, the Company's directors, its
executive officers, and any persons holding more than 10% of the Company's
Class A Common Stock are required to report certain information, including
ownership or changes in ownership of the Company's Class A Common Stock, to
the Securities and Exchange Commission (the "SEC"). Specific due dates for
these reports have been established and the Company is required to report in
this Proxy Statement any failure to file these reports by these dates during
fiscal year 1997.
Based solely on its review of the copies of the reports that the directors,
officers and 10% holders have filed with the SEC and on the representations
made by certain officers and directors that no other reports were required for
such persons, the Company believes that all filing requirements applicable to
its officers, directors and 10% holders were complied with during fiscal 1997.
OTHER BUSINESS
The Board of Directors has no reason to believe that any other business in
addition to the foregoing will be presented at the Annual Meeting, but if any
other business is presented, votes pursuant to the proxy will be cast thereon
in accordance with the judgment of the persons named in the accompanying
proxy.
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PROPOSALS FOR THE NEXT ANNUAL MEETING
Proposals of stockholders intended to be presented at the next annual
meeting must be received by the Company at its principal offices, 750
Lexington Avenue, 25th Floor, New York, New York 10022, Attention: Secretary,
for inclusion in the Company's proxy materials not later than November 2,
1998, except that if next year's annual meeting is more than thirty days
earlier or later than the date of this year's annual meeting, proposals must
be received a reasonable time before proxy materials are distributed in
connection with next year's annual meeting.
Your cooperation in giving this matter your immediate attention and in
returning your proxy promptly will be appreciated.
By Order of the Board of Directors
MARTIN E. SCHLOSS
Secretary
Dated: February 27, 1998
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