<PAGE>
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
[X] Definitive Proxy Statement RULE 14C-5(D)(2))
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S)240.14a-11(c) or (S)240.14a-12
Autotote
------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
Autotote
------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
[_] $500 per each party to the controversy pursuant to Exchange Act Rule 14a-
6(i)(3).
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
Notes:
<PAGE>
AUTOTOTE CORPORATION
750 LEXINGTON AVENUE, 25TH FLOOR
NEW YORK, NEW YORK 10022
----------------
April 18, 1996
Dear Stockholders:
You are cordially invited to attend the Annual Meeting of Stockholders of
Autotote Corporation (the "Company") which will be held on May 29, 1996 at
12:00 noon at Sports Haven(TM), 600 Long Wharf Drive, New Haven, Connecticut
06511.
In addition to fixing the number of and electing directors (Item 1), the
Board of Directors has recommended the approval of a proposal to amend the
Autotote Corporation 1992 Equity Incentive Plan, as Amended and Restated (Item
2) and the ratification of the appointment of KPMG Peat Marwick as the
Company's independent accountants (Item 3).
We ask that you carefully review the enclosed proxy materials, and for your
support in approving the election of directors, approving the adoption of the
amendment to the Autotote Corporation 1992 Equity Incentive Plan, as Amended
and Restated and in the ratification of the appointment of the Company's
independent accountants.
Sincerely,
A. Lorne Weil
Chairman of the Board
<PAGE>
AUTOTOTE CORPORATION
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
----------------
MAY 29, 1996
----------------
To The Stockholders of Autotote Corporation:
Notice is hereby given that the Annual Meeting of Stockholders of Autotote
Corporation (the "Company") will be held on May 29, 1996 at 12:00 noon at
Sports Haven(TM), 600 Long Wharf Drive, New Haven, Connecticut 06511, for the
following purposes:
1. To fix the number of directors at six and to elect six members of the
Board of Directors to serve for the ensuing year and until their successors
are elected and qualified.
2. To approve the adoption of the amendment to the Autotote Corporation
1992 Equity Incentive Plan, as Amended and Restated.
3. To consider and act upon a proposal to ratify the appointment of KPMG
Peat Marwick as independent accountants for the Company for the fiscal year
ending October 31, 1996.
4. To consider and act upon any other matters that may properly come
before the meeting or any adjournments thereof.
All holders of Class A Common Stock whose names appear of record on the
Company's books at the close of business on April 1, 1996 will be entitled to
receive notice of and to vote at the meeting and any adjournments 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: April 18, 1996
<PAGE>
AUTOTOTE CORPORATION
750 LEXINGTON AVENUE, 25TH FLOOR
NEW YORK, NEW YORK 10022
PROXY STATEMENT
FOR
ANNUAL MEETING OF STOCKHOLDERS
MAY 29, 1996
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
form of proxy for use at the Annual Meeting of Stockholders to be held on May
29, 1996 at 12:00 noon at Sports Haven(TM), 600 Long Wharf Drive, New Haven,
Connecticut 06511, and any adjournments 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 nominees for director named in this Proxy Statement and the
proposals set forth in Item 2 and Item 3. 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 form of proxy enclosed will be
mailed to stockholders on or about April 18, 1996.
All holders of Class A Common Stock whose names appear of record on the
Company's books at the close of business on April 1, 1996 will be entitled to
vote at the Annual Meeting. At the close of business on April 1, 1996 a total
of 31,456,164 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 matters properly come 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, 1995
together with a press release issued by the Company on April 15, 1996 are
being mailed to the Company's stockholders with this proxy statement.
VOTING
Consistent with state law and under the Company's by-laws, 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 election inspectors at
the meeting.
The six 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. A majority vote of the number of shares entitled to
1
<PAGE>
vote represented at the Annual Meeting is necessary to approve the actions
proposed in Item 2 and Item 3 as well as any other matter which comes before
the Annual Meeting, except where law or the Company's certificate of
incorporation or by-laws require otherwise.
The total number of votes cast "for" approval of proposals, other than the
election of directors, will be counted for purposes of determining whether
sufficient affirmative votes have been cast. Shares represented by proxies
that withhold authority to vote for a nominee for election as a director or
that reflect abstentions and "broker non-votes" (i.e., shares represented at
the Annual Meeting held by brokers or nominees as to which (i) instructions
have not been received from the beneficial owners or persons entitled to vote
and (ii) the broker or nominee does not have the discretionary voting power on
a particular matter) will be counted as shares that are present and entitled
to vote on the matter for purposes of determining the presence of a quorum.
Abstentions on a particular matter have the effect of a no vote, but broker
non-votes will not have any effect on the outcome of voting on the matter.
ITEM 1--ELECTION OF DIRECTORS
NOMINEES
The Board has set the number of directors to be elected for the coming year
at six. Each director shall be elected at the Annual Meeting of Stockholders
for a term of one year and until his successor is 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 form of proxy may vote
for a substitute nominee at their discretion. Certain information regarding
the nominees is set forth below.
<TABLE>
<CAPTION>
DIRECTOR
NAME AGE POSITION SINCE
- ---- --- -------- --------
<S> <C> <C> <C>
A. Lorne Weil.................. 50 Chairman of the Board and
Chief Executive Officer 1989
Sir Brian Wolfson.............. 60 Vice Chairman of the Board(1) 1988
Alan J. Zakon.................. 60 Vice Chairman of the Board(1)(2)(3) 1993
Larry J. Lawrence.............. 53 Director(1)(2)(3)(4) 1989
Marshall Bartlett.............. 70 Director(2)(3) 1991
Thomas H. Lee.................. 52 Director(1)(4) 1991
</TABLE>
- --------
(1) Member of Executive Committee
(2) Member of Audit Committee
(3) Member of Compensation Committee
(4) Member of 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 and Chief Executive Officer since
April 1992. From 1982 to October 1989, Mr. Weil was a director and consultant
to the holding company of Autotote Systems, Incorporated ("ASI"). From October
1990 until April 1992, Mr. Weil held various senior management positions at
the Company and its subsidiaries. From 1979 to November 1992 he was the
President of Lorne Weil, Inc., a firm providing strategic planning and
corporate development services to high technology industries. Mr. Weil is
currently a director of Fruit of the Loom, Inc. and General Growth Properties,
Inc.
Sir Brian Wolfson has been a director of the Company since 1988 and a Vice
Chairman of the Board since May 1995. He served as Acting President and Chief
Executive Officer from June 1991 until October 31, 1991. From 1987 until May
1995 he was the Chairman, and from May 1995 to September 1995 was the Deputy
2
<PAGE>
Chairman, of Wembley plc, a United Kingdom corporation whose holdings include
The Wembley Stadium, Arena and Conference Centre and Exhibition Halls in
London. Sir Brian is currently a director of Kepner-Tregoe, Inc., Fruit of the
Loom, Inc. and Playboy Enterprises, Inc.
Mr. Alan J. Zakon has been a director of the Company since 1993 and a Vice
Chairman of the Board since May 1995. From 1989 until April 1995, he served as
a managing director of Bankers Trust Corporation. From 1989 until 1990, Mr.
Zakon served as Chairman of the Strategic Policy Committee of Bankers Trust
Corporation. From 1986 until 1989, Mr. Zakon served as Chairman of the Board
of Boston Consulting Group. Mr. Zakon is currently a director of Arkansas Best
Freight Corporation, Augat, Inc., Hechinger Corporation and Boyle Leasing
Technologies.
Mr. Larry J. Lawrence has been a director of the Company since December
1989. He 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. Since 1990, he has been managing partner of LTOS
II Partners, the general partner of Lawrence, Tyrrell, Ortale & Smith II and
since May 1995 has been the general partner of LSH Partners III, L.P., the
general partner of Lawrence, Smith & Horey III. Mr. Lawrence is currently a
director of several private companies. Mr. Lawrence served as a director of
ASI until it was acquired by the Company in 1989.
Mr. Marshall Bartlett has been a director of the Company since December
1991. From June 1994 until June 1995, Mr. Bartlett acted as a consultant to
the Company. From June 1993 through June 1994, Mr. Bartlett was employed by
the Company in various capacities. 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. Thomas H. Lee has been a director of the Company since December 1991.
Mr. Lee founded the Thomas H. Lee Company in 1974 and since that time has
served as its President. Mr. Lee is currently a director of General Nutrition
Companies, Inc., Health o Meter Products, Inc., Hills Stores Company, J.
Baker, Inc., Finlay Fine Jewelry Corporation, Playtex Family Products Inc. and
Livent Inc. as well as several private companies. Mr. Lee is also a general
partner of the ML-Lee Acquisition Fund, L.P., ML-Lee Acquisition Fund II, L.P.
and the ML-Lee Acquisition Fund (Retirement Accounts) II, L.P. (the "ML-Lee
Acquisition Funds"), Chairman and Trustee of Thomas H. Lee Advisors I, and a
general partner of Thomas H. Lee Advisors II, L.P., the investment advisors to
the ML-Lee Acquisition Funds. He is the general partner of THL Equity Advisors
Limited Partnership, the general partner of and investment advisor to Thomas
H. Lee Equity Partners, L.P. In February 1991, Hills Department Stores, Inc.,
of which Mr. Lee was Chairman of the Board, filed for protection under Chapter
11 of the United States Bankruptcy Code. Mr. Lee was a director of ASI until
it was acquired by the Company in 1989.
THE BOARD RECOMMENDS A VOTE "FOR" EACH OF THE SIX NOMINEES.
MEETINGS OF THE BOARD OF DIRECTORS AND COMMITTEES
The Board of Directors held a total of five meetings in fiscal 1995. All
incumbent directors attended at least 75 percent of those meetings of the
Board and its committees of which they were members that were held while they
were serving on the Board or such committee, except as indicated below.
The Audit Committee of the Board of Directors met 11 times during fiscal
1995 and currently consists of Larry J. Lawrence (Chairman), Marshall Bartlett
and Alan J. Zakon. Mr. Bartlett attended three of the meetings. The Audit
Committee recommends engagement of the Company's independent accountants and
is primarily responsible for approving their services and for reviewing with
the independent auditors and management and evaluating the Company's
accounting policies and its system of internal accounting controls.
The Compensation Committee met four times in fiscal 1995 and currently
consists of Marshall Bartlett (Chairman), Alan J. Zakon and Larry J. Lawrence.
The Compensation Committee determines the compensation of executive officers
of the Company and makes recommendations to the Board with regard to the
adoption of new employee benefit plans.
3
<PAGE>
The Stock Option Committee met four times in fiscal 1995 and currently
consists of Thomas H. Lee (Chairman) and Larry J. Lawrence. The Stock Option
Committee makes awards of options outside the Company's stock option plans and
administers the Company's 1984 Stock Option Plan, the 1992 Equity Incentive
Plan, as Amended and Restated (the "1992 Plan") and the 1995 Equity Incentive
Plan and makes awards under such plans.
The Executive Committee met 22 times in fiscal 1995. The Executive Committee
currently consists of Larry J. Lawrence (Chairman), Thomas H. Lee, Sir Brian
Wolfson and Alan J. Zakon. Mr. Lee was absent from all the meetings and Sir
Brian Wolfson attended nine meetings. The Executive Committee is authorized to
exercise all of the powers and authority of the Board in the management of the
business and affairs of the Company between regular meetings of the full
Board, subject to Delaware law.
The Company has no nominating committee.
The executive officers of the Company are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
A. Lorne Weil(1).......... 50 Chairman of the Board and Chief Executive Officer
Thomas C. DeFazio......... 54 President and Chief Operating Officer
William Luke.............. 48 Vice President and Chief Financial Officer
Gerald Lawrence........... 57 Vice President
Martin E. Schloss......... 49 Vice President, General Counsel and Secretary
</TABLE>
- --------
(1) See description of directors.
Mr. Thomas C. DeFazio has been President and Chief Operating Officer of the
Company since October 1995. From April 1995 to October 1995, Mr. DeFazio was
Executive Vice President and Chief Financial Officer of the Company. From 1991
to April 1995, Mr. DeFazio was a member of the Board of Directors, Executive
Vice President and Chief Financial Officer of Smith Corona Corporation. From
1986 to 1991, he was employed in various capacities by General Instrument
Corporation, including as Vice President of Finance, Chief Financial Officer
and Treasurer. In July 1995, Smith Corona Corporation filed for protection
under Chapter 11 of the United States Bankruptcy Code.
Mr. William Luke has been Vice President and Chief Financial Officer of the
Company since February 1996. Mr. Luke served as Vice President-Finance and
Chief Financial Officer of Nashua Corporation from August 1984 through
November 1995.
Mr. Gerald Lawrence has been Vice President of the Company since November
1994 and President of North American Systems, a division of the Company, since
March 1996. From April 1995 to March 1996, he served as President of Autotote
Gaming Group, a division of the Company. From January 1991 to August 1994, he
held the position of Executive Vice President of The New York Racing
Association, Inc. From November 1984 through December 1990, he served as
Executive Vice President and Chief Operating Officer of Churchill Downs
Incorporated.
Mr. Martin E. Schloss has been Vice President and General Counsel since
December 1992 and Secretary since May 1995. From July 1992 until December
1992, Mr. Schloss provided consulting services to and was employed by the
Company. From 1976 to 1992, Mr. Schloss served in various positions in the
legal department of General Instrument Corporation, with the exception of a
hiatus of approximately one and one-half years.
EXECUTIVE COMPENSATION; CERTAIN ARRANGEMENTS; SECURITY OWNERSHIP
EXECUTIVE COMPENSATION
The following table shows the compensation paid by the Company for services
rendered for the years ended October 31, 1993, 1994 and 1995 to the chief
executive officer and the four other most highly compensated executive
officers of the Company who received more than $100,000 in salary and bonuses
during fiscal 1995 and who served as executive officers during fiscal 1995
(the "Named Executive Officers").
4
<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
ANNUAL COMPENSATION(1) COMPENSATION AWARDS
-------------------------- --------------------------------------
(A) (B) (C) (D) (F) (G) (I)
--- -------------- -------- ---------- ---------- ------------
RESTRICTED SECURITIES
NAME AND STOCK UNDERLYING ALL OTHER
PRINCIPAL POSITION SALARY BONUS AWARD OPTIONS COMPENSATION
AT FISCAL YEAR-END YEAR ($) ($) ($) (11) (#) ($)
------------------ -------------- -------- ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
A. Lorne Weil 1995 408,800 -- 534,001(5) -- 12,700 (8)
Chief Executive Officer 1994 408,800 -- -- -- 13,500 (9)
1993 391,300 200,000 -- 600,000(5) 900(10)
Thomas C. DeFazio 1995 148,100(2) 170,000(2) -- 200,000 3,000 (8)
President and Chief Op-
erating Officer
Martin E. Schloss 1995 175,000 13,000 70,272(6) -- 7,600 (8)
Vice President, General
Counsel 1994 135,600 115,000(3) -- 65,000(6) 6,200 (9)
and Secretary 1993 125,000 -- -- -- 300(10)
Gerald Lawrence 1995 184,600 50,000 137,000(7) 100,000(7) --
Vice President
Michael D. Harris (12) 1995 129,800 75,000(4) -- 150,000 1,500 (8)
Vice President
</TABLE>
- --------
(1) Amounts shown include cash and non-cash compensation earned by the Named
Executive Officers.
(2) Mr. DeFazio's employment with the Company commenced on April 17, 1995.
The bonus includes a relocation allowance of $110,000 and a $60,000 bonus
for fiscal 1995.
(3) Consists of fiscal 1994 bonus of $60,000 and special bonus of $55,000 to
recognize contributions to the Company's longer-term strategic goals.
These bonuses were initially payable in three equal installments in 1995,
1996 and 1997 as long as Mr. Schloss is employed by the Company. However,
the Compensation Committee of the Board has decided to terminate the
deferred compensation plan and to pay out the second and third
installments in 1996.
(4) Consists of a signing bonus of $25,000 and a fiscal 1995 bonus of
$50,000.
(5) 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 1992 Plan of 129,298
deferred shares of Class A Common Stock ("Deferred Shares") which will be
issued in the future. The vesting of such Deferred Shares will require
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.
(6) 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 Deferred Shares under the 1992 Plan. The vesting
of such Deferred Shares will require 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. 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 Deferred Shares under the 1992 Plan. The vesting
of such Deferred Shares will require 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.
(8) 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.
(iii) COBRA medical coverage: Mr. DeFazio, $3,000; Mr. Harris, $1,500.
(9) Amounts of All Other Compensation for fiscal 1994 include the following:
(i) Contributions to the Company's defined contribution retirement plan
for salaried employees: Mr. Weil, $7,500; Mr. Schloss, $5,800.
(ii) Life insurance coverage: Mr. Weil, $6,000; Mr. Schloss, $400.
(10) Amounts of all other compensation for fiscal 1993 include the following:
Life insurance coverage: Mr. Weil, $900; Mr. Schloss, $300.
(11) The number and value of the aggregate restricted stock holdings at
October 31, 1995, is as follows:
(i) Number of shares: Mr. Weil, 129,298; Mr. Schloss, 17,015;
Mr. Lawrence, 33,172.
(ii) Value of shares: Mr. Weil, $387,894; Mr. Schloss, $51,045;
Mr. Lawrence, $99,516.
(iii) In the event the Company declares a dividend on the Class A Common
Stock, the restricted stocks listed above would receive the
dividend(s).
(12) Mr. Harris' employment with the Company terminated on March 31, 1996.
5
<PAGE>
The table below sets forth information with respect to stock options granted
to the Named Executive Officers for fiscal 1995.
OPTIONS GRANTED IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL
REALIZABLE
VALUE
AT ASSUMED
ANNUAL RATES
OF STOCK
PRICE
APPRECIATION
FOR
INDIVIDUAL GRANTS OPTION TERM
-------------------------------------------- -------------------
(A) (B) (C) (D) (E) (F) (G)
--- ---------- ----------- -------- ---------- -------- ----------
NUMBER OF % OF TOTAL
SECURITIES OPTIONS
UNDERLYING GRANTED TO EXERCISE
OPTIONS EMPLOYEES OR BASE
GRANTED(1) IN PRICE EXPIRATION 5% 10%
NAME # FISCAL YEAR ($/SH) DATE ($) ($)
---- ---------- ----------- -------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
A. Lorne Weil........... -- 0.00% N/A N/A N/A N/A
Thomas C. DeFazio....... 200,000 31.55% $ 4.375 17-Apr-00 $241,746 $ 534,196
Martin E. Schloss....... -- 0.00% N/A N/A N/A N/A
Gerald Lawrence......... 100,000(2) 15.77% $15.000 11-Nov-99 $414,422 $ 915,765
Michael D. Harris....... 150,000 23.66% $ 4.500 24-Apr-05 $424,504 $1,075,776
</TABLE>
- --------
(1) All options were granted under the 1992 Plan. Options become exercisable
in three equal installments on the first, second and third 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 other 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, 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 options
shall be terminated.
(2) In July 1995, Mr. 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 Deferred Shares under the 1992 Plan. The vesting of
such Deferred Shares will require 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.
6
<PAGE>
The table below sets forth information for the Named Executive Officers with
respect to fiscal 1995 year-end option values.
AGGREGATED OPTION EXERCISES IN
LAST FISCAL YEAR, AND FY-END OPTION VALUE
<TABLE>
<CAPTION>
(A) (B) (C) (D) (E)
--- --- --- --- ---
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
SHARES OPTIONS AT OPTIONS AT
ACQUIRED OCT. 31, 1995(#) OCT. 31, 1995 ($)
ON VALUE OF EXERCISABLE/ EXERCISABLE/
NAME EXERCISE(#) REALIZED ($) UNEXERCISABLE UNEXERCISABLE
---- ----------- ------------ ---------------- -----------------
<S> <C> <C> <C> <C>
A. Lorne Weil...... -0- -0- 1,125,000 / -0- $346,500 / -0-
Thomas C. DeFazio.. -0- -0- -0- / 200,000 -0- / -0-
Gerald Lawrence.... -0- -0- -0- / -0- -0- / -0-
Martin E. Schloss.. -0- -0- 40,000 / -0- -0- / -0-
Michael D. Harris.. -0- -0- -0- / 150,000 -0- / -0-
</TABLE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
As of May 25, 1995, the Compensation Committee of the Board consisted of
Marshall Bartlett, Larry J. Lawrence and Alan J. Zakon. Until then, the
Compensation Committee consisted of Larry J. Lawrence, Alan J. Zakon and Sir
Brian Wolfson. Sir Brian served as Acting President and Chief Executive
Officer of the Company from June 1991 until October 31, 1991.
Effective December 1, 1994 the Company has a wagering systems service
contract with Lincoln Greyhound Racetrack, a facility owned by Wembley plc, a
United Kingdom corporation of which Sir Brian Wolfson, a director of the
Company was deputy chairman until September 1995.
The Company has a senior bank credit facility with Bankers Trust Company, a
company of which Alan J. Zakon, a director of the Company, was a managing
director from 1989 until April 1995.
From June 1994 until June 1995, Mr. Bartlett had a consulting arrangement
with the Company whereby he received $100,000 of which $41,667 was paid for
consulting services in fiscal 1994, with the balance paid in fiscal 1995.
As a result of the acquisition of Tele Control, the Company has assumed a
contract with IMMOC leasing, a real estate concern substantially owned by
certain employees of the Company to rent premises for a minimum period of 15
years. Consequently the Company has annual rental commitments of approximately
$620,000 through the year 2006. Rental payments made to this concern were
$613,000, $24,000 and $613,000 for fiscal 1995, 1994 and 1993, respectively.
CERTAIN ARRANGEMENTS BETWEEN THE COMPANY AND ITS DIRECTORS AND OFFICERS
Employee Agreements
Effective November 1, 1992, the Company and Mr. Weil entered into a five-
year employment agreement (the "Weil Employment Agreement") that provides for
a base salary of $400,000, subject to annual increases in accordance with the
Consumer Price Index, a performance bonus of 25% of base salary if the Company
meets its budgeted earnings per share, an additional performance bonus based
on excess earnings per share, not to exceed an additional 25% of base salary,
and a performance bonus of up to 50% of base salary at the discretion of the
Board. If the Company terminates Mr. Weil's employment under the Weil
Employment Agreement other than for cause, Mr. Weil will be entitled to
collect his base salary for twelve months following such termination,
7
<PAGE>
plus a portion of the annual earnings per share-based performance bonuses. In
connection with the Weil Employment Agreement, Mr. Weil received a five-year
option to purchase 600,000 shares of Class A Common Stock of the Company at an
exercise price of $3.50 per share. The option originally was exercisable in
three equal annual installments on November 1, 1993, November 1, 1994 and
November 1, 1995. In August 1993, the Compensation Committee accelerated the
vesting period of the option such that the option became exercisable in full.
Effective April 17, 1995, the Company and Mr. Thomas DeFazio entered into a
three-year employment agreement (the "DeFazio Employment Agreement") that
provides for an annual base salary of $275,000 and an annual performance bonus
of up to 45% of base salary. Fifty percent of the bonus will be based on the
formula set forth in the Company's executive compensation plan as in effect
from time to time and the remaining 50% of the bonus will be based on
achievement of objectives to be established by the Chief Executive Officer and
the Board in their sole discretion. Under the DeFazio Employment Agreement,
the Company has also paid Mr. DeFazio a relocation allowance of $110,000, a
prorated portion of which, however, must be returned to the Company by Mr.
DeFazio in the event he terminates his employment or the Company terminates
his employment for cause at any time prior to April 17, 1997. If the Company
terminates Mr. DeFazio's employment under the DeFazio Employment Agreement
other than for cause, Mr. DeFazio would be entitled to collect an amount equal
to the greater of (i) one year's base salary or (ii) the product of Mr.
DeFazio's then current monthly salary multiplied by the number of months
remaining under the initial term of the DeFazio Employment Agreement. In
connection with the DeFazio Employment Agreement, Mr. DeFazio received a five-
year option to purchase 200,000 shares of Class A Common Stock at an exercise
price of $4.375 per share. The option will become exercisable in three equal
installments, on each of the first, second and third anniversaries of the date
of grant. If during a period of 12 months following a change of control of the
Company, the Company terminates Mr. DeFazio's employment other than for cause,
Mr. DeFazio will be entitled to collect a lump-sum payment equal to his base
salary for the remainder of the term under the DeFazio Employment Agreement,
and Mr. DeFazio's stock option will become exercisable in full.
Effective February 26, 1996, the Company and Mr. 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 and for participation in
the Company's stock option plan, pursuant to which Mr. Luke has received
options to purchase 150,000 shares of Class A Common Stock at the average
price of the Class A Common Stock on the date of employment ($3.0625), which
options become exercisable in four equal annual increments of 37,500 on
February 26, 1997, 1998, 1999 and 2000, respectively. Mr. Luke will also
receive a relocation allowance providing for reimbursement of moving expenses
and transaction costs incurred by Mr. Luke in connection with his relocation
and a temporary housing allowance of up to $12,000.
Mr. Harris' employment with the Company terminated on March 31, 1996. In
connection therewith, the Company and Mr. Harris entered into a severance
agreement pursuant to which the Company will pay Mr. Harris a total of
$295,981, permit Mr. Harris to retain options for 50,000 shares of Class A
Common Stock, and permit such options to vest on April 9, 1996. All such
options not exercised on or before June 29, 1996 expire.
On November 14, 1994, the Company and Mr. Gerald Lawrence entered into a
one-year employment agreement (the "Lawrence Employment Agreement") to employ
Mr. Lawrence as Vice President in charge of North American Pari-mutuel
Operations. The Lawrence Employment Agreement provides for a base salary of
$200,000 and a performance bonus of up to 45% of the base salary. For fiscal
1995, Mr. Lawrence is guaranteed a minimum bonus of $50,000. In connection
with the Lawrence Employment Agreement, Mr. Lawrence received a five-year
option to purchase 100,000 shares of Class A Common Stock of the Company at a
price of $15.00 per share, which option is exercisable in three equal
installments. On May 25, 1995, Mr. Lawrence exchanged such stock option for an
award of 33,172 of deferred shares under the 1992 Plan. The vesting of such
deferred
8
<PAGE>
shares will require 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. In the event that the Company terminates
Mr. Lawrence's employment other than for cause, Mr. Lawrence is entitled to
receive his base salary for twelve months following such termination.
By letter, dated January 3, 1995, the Company confirmed to Mr. Martin
Schloss that in the event the Company terminates Mr. Schloss' employment for
any reason, 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.
Directors' Compensation
Effective as of May 25, 1995, each director who is not an employee of the
Company is 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
held on the same day as a Board meeting or by telephone. Members of the
Executive Committee do not receive fees for attending meetings thereof. In
lieu of the foregoing compensation, Thomas H. Lee Company, of which Mr. Lee is
President, receives $5,000 per month for his services as a director.
In May 1995, Mr. Bartlett, Sir Brian Wolfson and Mr. Zakon each received an
award of 10,000 shares of Class A Common Stock issuable in the future ("Non-
Employee Director Deferred Stock"), and each of Sir Brian Wolfson and Mr.
Zakon received a one time award of 40,000 shares of Non-Employee Director
Deferred Stock. The shares of Non-Employee Director Deferred Stock were
awarded under the 1992 Plan and vest, on a cumulative basis, as to one-third
of the shares of Non-Employee Director Deferred Stock 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, or 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.
From June 1994 until June 1995, Mr. Bartlett had a consulting arrangement
with the Company whereby he received $100,000 of which $41,667 was paid for
consulting services in fiscal 1994, with the balance paid in fiscal 1995.
CERTAIN TRANSACTIONS
The Company has its senior bank credit facility with Bankers Trust Company,
a company of which Alan J. Zakon, a director of the Company, was a managing
director from 1989 until April 1995.
The Company has a service contract with Lincoln Greyhound Racetrack, a
facility owned by Wembley plc, a United Kingdom corporation of which Sir Brian
Wolfson, a director of the Company, was deputy chairman until September 1995.
From June 1994 until June 1995, Mr. Bartlett had a consulting arrangement
with the Company whereby he received $100,000 of which $41,667 was paid for
consulting services in fiscal 1994, with the balance paid in fiscal 1995.
The Company believes that all of these transactions were on terms no less
favorable than could have been obtained from unaffiliated third parties.
SECURITY OWNERSHIP
The following table sets forth certain information as of February 29, 1996
as to the security ownership of those persons owning of record or known to the
Company to be the beneficial owners of more than five percent
9
<PAGE>
of the outstanding Class A Common Stock of the Company, each of the Company's
directors and Named Executive Officers and the Company's executive officers
and directors as a group. Except as otherwise indicated, the stockholders
listed on the table have sole voting and investment power with respect to the
shares indicated. Share figures reflect (i) a three-for-two stock split in the
form of a stock dividend of one share of Class A Common Stock for every two
shares outstanding paid on June 30, 1993 and (ii) a two-for-one stock split in
the form of a stock dividend of one share of Class A Common Stock for each
share outstanding paid on October 25, 1993.
SHARES OF CLASS A COMMON STOCK BENEFICIALLY
OWNED OR INTO WHICH SECURITIES ARE CONVERTIBLE(1)
<TABLE>
<CAPTION>
FIVE PERCENT HOLDERS NUMBER PERCENT
- -------------------- --------- -------
<S> <C> <C>
State of Wisconsin Investment Board...................... 2,810,500(5) 8.93
P.O. Box 7842
Madison, WI 53707
Lawrence, Tyrrell, Ortale & Smith ....................... 1,886,245(2) 5.81
515 Madison Avenue
New York, NY 10022
Wellington Management Company ........................... 2,936,369(3) 8.78
75 State Street
Boston, MA 02109
The Kaufmann Fund, Inc. ................................. 1,994,000(4) 6.34
140 East 45th Street, 43rd Floor
New York, NY 10017
<CAPTION>
OFFICERS AND DIRECTORS
- ----------------------
<S> <C> <C>
A. Lorne Weil............................................ 2,428,042(6) 7.32
Marshall Bartlett........................................ 30,000(8) *
Larry J. Lawrence........................................ 2,431,207(9) 7.48
Thomas H. Lee............................................ 4,033,737(10) 12.60
Sir Brian Wolfson........................................ 30,000(11) *
Alan J. Zakon............................................ 32,000(12) *
Martin E. Schloss........................................ 55,000(14) *
Thomas C. DeFazio........................................ 86,667(7) *
Gerald Lawrence.......................................... 1,000(13) *
Michael D. Harris(15).................................... 50,000 *
William Luke............................................. -- *
All Current Directors and Executive Officers as a Group
(consisting of 10
persons)(6)(7)(8)(9)(10)(11)(12)(13)(14) ............... 9,127,653 26.12
</TABLE>
- --------
* Less than 1%.
(1) For purposes of determining beneficial ownership of the Company's Class A
Common Stock, owners of Class A Common Stock warrants and options
exercisable within sixty days 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 (expressly required by the applicable rules of the
Securities and Exchange Commission) that only the person whose ownership
is being reported has exercised his warrants or options for Class A Common
Stock.
10
<PAGE>
(2) Includes 983,762 warrants exercisable within 60 days owned by Lawrence,
Tyrrell, Ortale & Smith.
(3) Includes 2,000,000 shares of Class A Common Stock issuable upon
conversion of $40,000,000 of Debentures due 2001 convertible within 60
days owned by Wellington Management Company.
(4) Based on Schedule 13G, dated September 15, 1995, as filed with the
Securities and Exchange Commission, The Kaufmann Fund, Inc. holds
1,994,000 shares of Class A Common Stock.
(5) Based on Schedule 13F filed with the Securities and Exchange Commission
on September 30, 1995, the State of Wisconsin Investment Board holds
2,810,500 shares of Class A Common Stock.
(6) Includes shares held in the name of Lorne Weil 1989 Trust of which Mr.
Weil is Trustee. Also includes shares of Class A Common Stock warrants to
purchase 588,870 shares exercisable within 60 days owned by Mr. Weil,
some of which are held in the name of Lorne Weil 1989 Trust, and options
to purchase 1,125,000 shares of Class A Common Stock exercisable within
60 days by Mr. Weil. Mr. Weil's address is c/o the Company. Effective
March 25, 1994, Mr. Weil entered into a swap transaction (the "Swap")
with Bankers Trust Company ("BTC") in respect of 500,000 shares of the
Class A Common Stock of the Company held by him (the "Swap Shares"). Mr.
Weil continues to hold sole voting power over the Swap Shares which serve
as collateral for the Swap transaction; however, Mr. Weil may substitute
other collateral for the Swap Shares. Under the Swap arrangement (i) Mr.
Weil is obligated to pay BTC (a) at the end of each quarter during the
five (5) year term of the Swap (the "Term") the amount of any dividends
declared during such quarter on the Swap and (b) at the end of the Term,
any appreciation during the Term in the price of the Swap Shares above
$26.7769 per share, (ii) BTC is obligated to pay Mr. Weil (x) at the end
of each quarter during the Term, the amount equal to the three (3) month
London Interbank Offered Rate less 2.125% of the Calculation Amount (as
defined in the Swap documents) of $13,388,500, and (y) at the end of the
Term, an amount equal to any depreciation during the Term, in the price
of the Swap Shares below $26.7769 per share. Mr. Weil will pay BTC an
annual fee in consideration of its entering into the Swap. The Swap is
for a five (5) year period, but will terminate if Mr. Weil dies or if
certain other events occur during such period.
(7) Represents shares issuable upon exercise of options to purchase 66,667
shares of Class A Common Stock exercisable within 60 days owned by Mr.
DeFazio.
(8) Represents shares issuable upon exercise of options to purchase 30,000
shares of Class A Common Stock exercisable within 60 days owned by Mr.
Bartlett.
(9) Includes 902,483 shares and warrants to purchase 983,762 shares of Class
A Common Stock exercisable within 60 days held by the partnership of
Lawrence, Tyrrell, Ortale & Smith (see footnote 2) and warrants to
purchase 42,533 shares of Class A Common Stock exercisable within 60 days
owned by Mr. Lawrence. Mr. Lawrence is a general partner of Lawrence
Venture Partners, the sole general partner of such partnership. Mr.
Lawrence's address is c/o the Company.
(10) Includes warrants to purchase 552,381 shares of Class A Common Stock
exercisable within 60 days owned by Mr. Lee and 1,535,100 shares owned by
the 1989 Thomas H. Lee Nominee Trust and 1,946,256 shares owned by Thomas
H. Lee Equity Partners, L.P., which are deemed to be beneficially owned
by Mr. Lee. Mr. Lee is a general partner of THL Equity Advisors Limited
Partnership, which is general partner of Thomas H. Lee Equity Partners,
L.P. Mr. Lee's address is c/o the Company.
(11) Represents shares issuable upon the exercise of 30,000 options
exercisable within 60 days owned by Sir Brian Wolfson.
(12) Includes options to purchase 30,000 shares of Class A Common Stock
exercisable within 60 days owned by Mr. Zakon.
(13) Represents 1,000 shares of Class A Common Stock owned by Mr. Gerald
Lawrence.
(14) Includes options to purchase 40,000 shares of Class A Common Stock
exercisable within 60 days owned by Mr. Schloss.
(15) Mr. Harris' employment with the Company terminated on March 31, 1996.
Notwithstanding anything to the contrary set forth in any of the Company's
previous filings under the Securities Act of 1933, as amended, or the Securities
Exchange Act of 1934, as amended, that might incorporate future filings,
including this Proxy Statement, in whole or in part, the following report and
the accompanying Stock Performance Graph shall not be incorporated by reference
into any such filings.
11
<PAGE>
REPORT OF THE COMPENSATION COMMITTEE
AND THE STOCK OPTION COMMITTEE
The Compensation Committee of the Board of Directors of the Company for
fiscal 1995 consisted of Messrs. Lawrence, Bartlett and Zakon. The Committee's
responsibilities include determining the compensation of the Company's
executive officers and making recommendations to the board of directors with
regard to the adoption of new employee benefit plans. No member of this
committee was an officer or employee of the Company during fiscal 1995.
The Stock Option Committee of the Board consists of Messrs. Lawrence and
Lee. This committee has primary responsibility for the grant of options
outside the Company's stock option plans as well as awards under the Company's
1984 Stock Option Plan, 1992 Plan and 1995 Equity Incentive Plan. No member of
this committee was an officer or employee of the Company during fiscal 1995.
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 shareholder interests by providing
incentive compensation through stock option awards and performance-based
bonuses. The Compensation and Stock Option Committees receive input from the
Company's Chief Executive Officer and review 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.
CEO Compensation
Effective November 1, 1992, the Company and Mr. Weil entered into a five-
year employment agreement (the "Employment Agreement"). The Compensation
Committee approved the Employment Agreement as a result of Mr. Weil informing
the Company in September 1992 that he was prepared to accept employment on a
full-time basis under his prior employment agreement, and that he was also
prepared to enter into a long-term agreement with the Company. On the basis of
Mr. Weil's prior performance, the Compensation Committee determined that it
was appropriate for the Company to enter into such an agreement with Mr. Weil.
During the term of Mr. Weil's prior employment agreement, the Company's
earnings per share for fiscal 1992 exceeded budget, the Company increased the
amount of its bank credit facility, was awarded major new wagering systems
contracts in California, Ontario and Connecticut, developed the PROBE
terminal, signed the TOTIP contract and recruited additional senior managers.
Pursuant to the Employment Agreement, Mr. Weil's base salary for fiscal 1995
was $408,800 ("Base Salary"). Also pursuant to the Employment Agreement, Mr.
Weil has the potential to earn bonus payments equal to (i) 25% of Base Salary
if the Company meets its budgeted earnings per share for the fiscal year and
(ii) an additional 25% of Base Salary if the Company exceeds its budgeted
earnings per share for the fiscal year by at least 15%. Under the Employment
Agreement, Mr. Weil also can receive an additional performance bonus of up to
50% of base salary at the discretion of the Board of Directors. No bonus
payments were made pursuant to these provisions during the Company's fiscal
year ending October 31, 1995.
Executive Officer Compensation
With respect to executive officers other than the Chief Executive Officer,
the Chief Executive Officer provides recommendations to the Compensation
Committee, based on his knowledge of competitive industry conditions, his
perception of those individuals' performance and their level of responsibility
relative to other officers of the Company and its subsidiaries. During fiscal
1995, bonuses were paid to certain officers of the Company based on the
foregoing considerations. For these individuals, compensation levels have not
been
12
<PAGE>
established by formula although, as a result of the Company's significant
growth in size and complexity, the Company expects to implement a formula-
based cash incentive compensation program during fiscal year 1996.
Officer compensation is generally comprised of cash compensation and grants
of options under the Company's stock option plans.
COMPENSATION COMMITTEE
Larry J. Lawrence
Marshall Bartlett
Alan J. Zakon
STOCK OPTION COMMITTEE
Larry J. Lawrence
Thomas H. Lee
13
<PAGE>
STOCK PERFORMANCE GRAPH
The following graph compares the cumulative total stockholder return from
October 31, 1990 to October 31, 1995, on the Company's Class A Common Stock,
the National Association of Securities Dealers Automated Quotation System
("NASDAQ") Market Index of companies and a peer group index of four companies
that provide similar services to those of the Company--Video Lottery
Technologies, Inc., Bally Gaming International, Inc., GTECH Holdings
Corporation and International Game Technology. 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. From October 31, 1990
through October 31, 1991, International Game Technology was the only member of
the peer group index which was publicly traded and for which share price
information was available. From October 31, 1991 to October 31, 1995, the peer
group companies have been weighted based upon their relative market
capitalizations each year. Video Lottery Technologies, Inc. is included in the
peer group index beginning on October 31, 1991. Bally Gaming International,
Inc. and GTECH Holdings Corporation are included in the peer group index
beginning on October 31, 1992.
Autotote Corporation
Comparison of Five Year-Cumulative Total Returns*
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
Autotote Nasdaq Stock Market Self-Determined
Date Corporation (US Companies) Peer Group
<S> <C> <C> <C>
10/31/90 100 100 100
10/31/91 102 169 593
10/31/92 356 191 1,229
10/31/93 2,313 246 1,806
10/31/94 1,527 247 982
10/31/95 262 333 775
</TABLE>
* $100 INVESTED ON 10/31/90 IN STOCK OR INDEX INCLUDING REINVESTMENT OF
DIVIDENDS. FISCAL YEAR ENDING OCTOBER 31.
14
<PAGE>
ITEM 2--AMENDMENT OF THE AUTOTOTE CORPORATION1992 EQUITY INCENTIVE PLAN, AS
AMENDED AND RESTATED
The stockholders are being asked to approve amendments (the "Amendments") to
the Company's 1992 Equity Incentive Plan, as Amended and Restated (the "1992
Plan"). The Amendments were adopted by the Board on December 14, 1995 and
February 21, 1996, subject to approval of the Company's stockholders. The full
text of the 1992 Plan, as amended, is set forth as Exhibit A. The Amendments
are intended to advance the interests of the Company by enhancing its ability
to attract and retain highly talented directors who are not officers or
employees of the Company or its subsidiaries ("Non-Employee Directors" or
"Participants") to serve on the Board and to encourage meaningful ownership of
the Company's Class A Common Stock ("Class A Common Stock") by the Non-
Employee Directors, thereby strengthening the commonality of interests between
Non-Employee Directors and the stockholders of the Company. The Amendments are
also defining the term "Change in Control" as used in Section 6.2 of the 1992
Plan in connection with the grant of Stock Appreciation Rights, none of which
have been granted to date.
The essential features of the Amendments are summarized below.
GENERAL
The Amendments will become effective upon shareholder approval and the Plan
will continue in effect until December 17, 2002.
FORMULA AWARDS
The Amendments provide for automatic grants of Deferred Stock ("Non-Employee
Director Deferred Stock") to Non-Employee Directors of the Company pursuant to
a formula. A Non-Employee Director Deferred Stock Award entitles the recipient
to receive shares of Class A Common Stock to be delivered in the future. The
Amendments provide that Non-Employee Directors will be granted Non-Employee
Director Deferred Stock in accordance with the following formula:
(i) On June 1, 1996, November 1, 1996, and on each anniversary of
November 1, 1996 through and including November 1, 2000, in addition to
shares of Non-Employee Director Deferred Stock granted pursuant to
paragraphs (ii) and (iii), each Non-Employee Director will be granted an
Award of 10,000 shares of Non-Employee Director Deferred Stock and with
respect to any individual who becomes a Non-Employee Director after
November 1, 1996 (provided such individual has not previously received a
grant pursuant to the first clause of paragraph (i)), such individual shall
be granted as of the date of his election or appointment as a Non-Employee
Director an Award of 10,000 shares of Non-Employee Director Deferred Stock;
(ii) as of November 1, 1996, in addition to shares of Non-Employee
Director Deferred Stock granted pursuant to paragraphs (i) or (iii), each
Vice Chairman of the Board, who is also a Non-Employee Director will be
granted an Award of 15,000 shares of Non-Employee Director Deferred Stock
and with respect to any Non-Employee Director who becomes a Vice Chairman
of the Board after November 1, 1996 (provided such individual has not
previously received a grant pursuant to the first clause of this paragraph
(ii)), such individual shall be granted as of the date of his election or
appointment as Vice Chairman an Award of 15,000 shares of Non-Employee
Director Deferred Stock; and
(iii) as of November 1, 1996, in addition to shares of Non-Employee
Director Deferred Stock granted pursuant to paragraphs (i) or (ii), the
Chairman of the Executive Committee, who is also a Non-Employee Director
will be granted an Award of 55,000 shares of Non-Employee Director Deferred
Stock and with
15
<PAGE>
respect to any Non-Employee Director who becomes the Chairman of the
Executive Committee after November 1, 1996 (provided such individual has
not previously received a grant pursuant to the first clause of this
paragraph (iii)), such individual shall be granted as of the date of his
election or appointment as the Chairman an Award of 55,000 shares of Non-
Employee Director Deferred Stock.
TERMS OF AWARD
Risks of Forfeiture
Non-Employee Director Deferred Stock shall be subject to a risk of
forfeiture until such time as the risk of forfeiture shall lapse (the
"Restrictions"). Non-Employee Director Deferred Stock shall be subject to
certain limitations on transferability.
The Restrictions on one-third of the shares of Non-Employee Director
Deferred Stock granted under the 1992 Plan (rounded to the nearest whole
number of shares) shall lapse at the close of business on the day before the
first, second, and third anniversaries of the date of grant, provided that
such risk of forfeiture shall lapse on an accelerated basis as to all shares
of Non-Employee Director Deferred Stock at the time the Participant ceases to
serve as a director due to death, disability, retirement at or after age 65,
upon the failure to be renominated or reelected to the Board of Directors, or
in the event of a consolidation or merger in which the Company is not the
surviving corporation, the sale or transfer of substantially all the Company's
assets or the dissolution or liquidation of the Company.
Following the lapse of Restrictions on Non-Employee Director Deferred Stock,
such Non-Employee Director Deferred Stock, including shares of Non-Employee
Director Deferred Stock subject to optional deferral of settlement, shall be
non-forfeitable. Non-Employee Director Deferred Stock as to which the
Restrictions have not yet lapsed shall be forfeited in any case in which the
Participant terminates service as a director for any reason other than death,
disability, retirement at or after age 65, or upon the failure to be
renominated or reelected to the Board, if the Restrictions have not lapsed
prior to and do not lapse at the time of such termination of service.
Dividend Equivalents.
Each share of Non-Employee Director Deferred Stock granted in accordance
with the terms of the Amendments confers upon Participant a right to receive
dividend equivalents in respect of such Non-Employee Director Deferred Stock,
as follows:
(x) Relating to Regular Cash Dividends. If the Company declares and pays
any regular quarterly cash dividend or distribution on the Class A Common
Stock, the record date of which is prior to the settlement of Participant's
Non-Employee Director Deferred Stock, the Company will pay to the
Participant a cash amount equal to the amount of cash actually paid as a
dividend or distribution per share of Class A Common Stock multiplied by
the number of Participant's shares of Non-Employee Director Deferred Stock,
provided that no payment will be made in respect of Non-Employee Director
Deferred Stock forfeited on or before the payment date of such dividend or
distribution.
(y) Relating to Extraordinary Stock Dividends and Stock Splits. If the
Company declares and pays a dividend or distribution in the form of Class A
Common Stock payable on Class A Common Stock, or if there occurs a forward
stock split of the Class A Common Stock, the record date of which is prior
to the settlement of Participant's Non-Employee Director Deferred Stock,
the Company will credit to the Participant a number of additional shares of
Non-Employee Director Deferred Stock (which shall include any fractional
unit) equal to the number of shares of Class A Common Stock paid as a
dividend or distribution per share of Class A Common Stock or distributed
as a result of the stock split per share of Class A Common Stock multiplied
by the number of Participant's shares of Non-Employee Director Deferred
Stock, provided that no additional Non-Employee Director Deferred Stock
will be credited in respect of Non-Employee Director Deferred Stock
forfeited on or before the payment date of such dividend or distribution or
effective date of such split.
16
<PAGE>
(z) Relating to Other Extraordinary Dividends. If the Company declares
and pays an extraordinary dividend or distribution in the form of cash or
other property (other than Class A Common Stock) payable on Class A Common
Stock, the record date of which is prior to the settlement of Participant's
Non-Employee Director Deferred Stock, the Company will, as promptly as
practicable after the payment date of such dividend or distribution, pay to
the Participant a cash amount equal to the amount of cash actually paid
plus the fair market value at such record date of any property other than
Class A Common Stock actually paid as a dividend or distribution per share
of Class A Common Stock for each of Participant's shares of Non-Employee
Director Deferred Stock.
PLAN BENEFITS TO CERTAIN PERSONS
Assuming approval of the Amendments by the Company's stockholders, no
executive officer named in the Summary Compensation Table and no other
employee who is not an executive officer would be granted Non-Employee
Director Deferred Shares under the 1992 Plan. All Non-Employee Directors, as a
group, would be granted a total of 50,000 shares of Non-Employee Director
Deferred Stock under the 1992 Plan on June 1, 1996 and a total of 85,000
shares of Non-Employee Director Deferred Stock under the 1992 Plan on November
1, 1996.
The 1992 Plan will be administered by the Board. The Board may, in its
discretion, delegate some or all of its powers with respect to the 1992 Plan
to a committee, consisting of at least two directors. The Board may at any
time or times amend the 1992 Plan, or any outstanding Award for any purpose
which may at the time be permitted by law, or may at any time terminate the
1992 Plan as to any further grants of Awards, provided that (except to the
extent expressly required or permitted by the 1992 Plan) no such amendment
will, without the approval of the stockholders of the Company, effectuate a
change for which stockholder approval is required in order for the 1992 Plan
to continue to qualify as a formula plan under Rule 16b-3 promulgated under
Section 16 of the Securities Exchange Act of 1934, as amended (the "Exchange
Act") and, provided further that any 1992 Plan provision that specifies the
Non-Employee Directors who may receive grants of Non-Employee Director
Deferred Stock, the amount and price of such securities to be granted to such
directors, and the timing of such grants to such directors, or is otherwise a
"plan provision" referred to in Rule 16b-3(c)(2)(ii)(B) under the Exchange Act
(or any successor provision), shall not be amended more than once every six
months, other than to comport with changes in the Internal Revenue Code of
1986, as amended, or the rules thereunder.
THE BOARD RECOMMENDS A VOTE "FOR" THIS PROPOSAL
ITEM 3--RATIFICATION OF 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, 1996, and recommends that the stockholders of the
Company ratify that appointment. KPMG Peat Marwick has served as the Company's
independent accountants since February 1984 for all fiscal years since the
fiscal year ended October 31, 1982 and has no relationship with the Company
other than that arising from their 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 appropriate questions from
stockholders.
It is intended that the proxies will be voted for the ratification of the
appointment of such firm 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
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FINANCIAL STATEMENTS
The Company's audited financial statements for the fiscal year ended October
31, 1995 and certain other related financial and business information of the
Company are contained in the Company's Annual Report. THE COMPANY'S ANNUAL
REPORT ON FORM 10-K AS AMENDED, WITHOUT EXHIBITS, FOR THE FISCAL YEAR ENDED
OCTOBER 31, 1995, FILED BY THE COMPANY WITH THE SECURITIES AND EXCHANGE
COMMISSION, IS INCLUDED IN THE COMPANY'S ANNUAL REPORT WHICH IS BEING MAILED
WITH THIS PROXY STATEMENT. ADDITIONAL COPIES OF THE ANNUAL REPORT ON FORM 10-K
MAY BE OBTAINED WITHOUT CHARGE BY CONTACTING WILLIAM LUKE, VICE PRESIDENT AND
CHIEF FINANCIAL OFFICER, AUTOTOTE CORPORATION, 100 BELLEVUE ROAD, NEWARK,
DELAWARE 19714-6009 (TELEPHONE: 302/737-4300).
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 shall be presented, votes pursuant to the proxy will be cast
thereon in accordance with the judgment of the persons named in the
accompanying proxy.
DELINQUENT FILINGS
Under the securities laws of the United States, the Company's directors, its
officers and any persons holding more than 10% of the Company's Class A Common
Stock are required to report their ownership of the Company's Class A Common
Stock and any changes in that ownership to the Securities and Exchange
Commission and the American Stock Exchange, Inc., and are also required to
furnish the Company with copies of such reports. Specific due dates for these
reports have been established, and the Company is required to report in this
proxy statement any failure to file by these dates during the 1995 fiscal
year.
Based solely on its review of the copies of such forms received by it and on
written representations from certain directors and officers that no other
reports were required for such person, the Company believes that, during the
1995 Fiscal Year, all filing requirements applicable to its officers,
directors and greater than 10% shareholders were complied with except that (i)
Mr. Gerald Lawrence did not file a Form 4 with respect to 1,000 shares of
Class A Common Stock that he purchased in fiscal 1995, but filed late a Form 5
with respect to such shares, (ii) Mr. Michael D. Harris, Mr. Gerald Lawrence
and Mr. Alan Cigich did not file a Form 3 when they became officers of the
Company, but filed late a Form 5 which reported their appointment as officers,
(iii) Mr. Marshall Bartlett, Sir Brian Wolfson and Mr. Alan J. Zakon did not
file a Form 4 with respect to deferred stock they received in May 1995, but
filed late a Form 5 reporting such options and (iv) Mr. A. Lorne Weil, Mr.
Martin A. Schloss and Mr. Gerald Lawrence filed late a Form 5 in connection
with an exchange of options for restricted stock awarded under the 1992 Plan.
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, for inclusion in the
Company's proxy materials not later than October 31, 1996.
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: April 18, 1996
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EXHIBIT A
AUTOTOTE CORPORATION
1992 EQUITY INCENTIVE PLAN,
AS AMENDED AND RESTATED
1. PURPOSE
The purpose of this Equity Incentive Plan (the "Plan") is to advance the
interests of Autotote Corporation (the "Company") by enhancing its ability to
attract and retain employees and other persons or entities who are in a
position to make significant contributions to the success of the Company and
its subsidiaries through ownership of shares of the Company's Class A Common
Stock ("Stock").
The Plan is intended to accomplish these goals by enabling the Company to
grant Awards in the form of Options, Stock Appreciation Rights, Restricted
Stock or Unrestricted Stock Awards, Deferred Stock Awards, Performance Awards,
Loans or Supplement Grants, or combinations thereof, all as more fully
described below.
2. ADMINISTRATION
The Plan will be administered by the Board of Directors of the Company (the
"Board"). The Board will have authority, not inconsistent with the express
provisions of the Plan and in addition to other authority granted under the
Plan, to (a) grant Awards at such time or times as it may choose; (b)
determine the size of each Award, including the number of shares of Stock
subject to the Award; (c) determine the type or types of each Award; (d)
determine the terms and conditions of each Award; (e) waive compliance by a
Participant (as defined below) with any obligations to be performed by the
Participant under an Award and waive any term or condition of an Award; (f)
amend or cancel an existing Award in whole or in part (and if an award is
canceled, grant another Award in its place on such terms as the Board shall
specify), except that the Board may not, without the consent of the holder of
an Award, take any action under this clause with respect to such Award if such
action would adversely affect the rights of such holder; (g) prescribe the
form or forms of instruments that are required or deemed appropriate under the
Plan, including any written notices and elections required of Participants,
and change such forms from time to time; (h) adopt, amend and rescind rules
and regulations for the administration of the Plan; and (i) interpret the Plan
and decide any questions and settle all controversies and disputes that may
arise in connection with the Plan; provided that no authority shall be
conferred under clauses (a) through (f) to grant Awards on a discretionary
basis to, or take other discretionary action of the type specified in clauses
(a) through (f) in respect of Awards granted to, Non-Employee Directors (as
defined below), with such grants and the terms thereof made and determined
solely pursuant to the express provisions of the Plan. Determinations and
actions of the Board under the preceding sentence and all other determinations
and actions of the Board made or taken under authority granted by any
provision of the Plan, will be conclusive and will bind all parties. Nothing
in this paragraph shall be construed as limiting the power of the Board to
make adjustments under Section 7.3, Section 7.4 or Section 9.6.
The Board may, in its discretion, delegate some or all of its powers with
respect to the Plan to a committee (the "Committee"), in which event all
references (as appropriate) to the Board hereunder shall be deemed to refer to
the Committee. The Committee, if one is appointed, shall consist of at least
two directors. A majority of the members of the Committee shall constitute a
quorum, and all determinations of the Committee shall be made by a majority of
its members. Any determination of the Committee under the Plan may be made
without notice or meeting of the Committee by a writing signed by a majority
of the Committee members. At any time the Stock is registered under the
Securities Exchange Act of 1934, as amended (the "1934 Act"), the Board shall
delegate the power to select directors and officers to receive Awards under
the Plan and the timing, pricing and amount of such Awards to a committee, all
members of which shall be disinterested persons within the meaning of Rule
16b-3 under the 1934 Act.
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3. EFFECTIVE DATE AND TERM OF PLAN
The Plan will become effective on the date on which it is approved by the
stockholders of the Company. Grants of Awards under the Plan may be made prior
to that date, subject to such approval of the Plan.
No Award may be granted under the Plan after December 17, 2002 (the "Term of
the Plan"), but Awards previously granted may extend beyond that date.
4. SHARES SUBJECT TO THE PLAN
Subject to the adjustment as provided in Section 9.6 below, the aggregate
number of shares of Stock that may be delivered under the Plan will be
3,000,000. If any Award requiring exercise by the Participant for delivery of
Stock terminates without having been exercised in full, or if any Award
payable in Stock or cash is satisfied in cash rather than Stock, the number of
shares of Stock as to which such Award was not exercised or for which cash was
substituted will be available for future grants.
Stock delivered under the Plan may be either authorized but unissued Stock
or previously issued Stock acquired by the Company and held in treasury. No
fractional shares of Stock will be delivered under the Plan.
5. ELIGIBILITY AND PARTICIPATION
Those eligible to receive Awards under the Plan ("Participants") will be
Employees, as defined in General Instruction A(1)(a) to Form S-8, of the
Company or any of its subsidiaries ("Employees"), including persons other than
Employees who are serving as directors of the Company ("Non-Employee
Directors") if such Employees (other than Non-Employee Directors) are
determined, in the opinion of the Board, to be in a position to make a
significant contribution to the success of the Company or its subsidiaries. A
"subsidiary" for purposes of the Plan will be a corporation in which the
Company owns, directly or indirectly, stock possessing 50% or more of the
total combined voting power of all classes of stock.
6. TYPES OF AWARDS
6.1. Options
(a) Nature of Options. An Option is an Award entitling the recipient on
exercise thereof to purchase Stock at a specified exercise price.
Both "incentive stock options," as defined in Section 422 of the Internal
Revenue Code of 1986, as amended (the "Code") (any Option intended to qualify
as an incentive stock option being hereinafter referred to as an "ISO"), and
Options that are not incentive stock options, may be granted under the Plan.
ISOs shall be awarded only to Employees.
(b) Exercise Price. The exercise price of an Option will be determined by
the Board subject to the following:
(i) The exercise price of an ISO shall not be less than 100% (110% in the
case of an ISO granted to a ten-percent shareholder) of the fair market
value of the Stock subject to the Option, determined as of the time the
Option is granted. A "ten-percent shareholder" is any person who at the
time of grant owns, directly or indirectly, or is deemed to own by reason
of the attribution rules of section 424(d) of the Code, stock possessing
more than 10% of the total combined voting power of all classes of stock of
the Company or of any of its subsidiaries.
(ii) In no case may the exercise price paid for Stock which is part of an
original issue of authorized Stock be less than the par value per share of
the Stock.
(iii) The Board may reduce the exercise price of an Option (other than a
Non-Employee Director Option) at any time after the time of grant, but in
the case of an Option originally awarded as an ISO, only with the consent
of the Participant.
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(c) Duration of Options. The latest date on which an Option may be exercised
will be the tenth anniversary (fifth anniversary, in the case of an ISO
granted to a ten-percent shareholder) of the day immediately preceding the
date the Option was granted, or such earlier date as may have been specified
by the Board at the time the Option was granted.
(d) Exercise of Options. An Option will become exercisable at such time or
times, and on such conditions, as the Board may specify. The Board may at any
time accelerate the time at which all or any part of such an Option may be
exercised.
Any exercise of an Option must be in writing, signed by the proper person
and delivered or mailed to the Company, accompanied by (1) any documents
required by the Board and (2) payment in full in accordance with paragraph (e)
below for the number of shares for which the Option is exercised.
(e) Payment for Stock. Stock purchased on exercise of an Option must be paid
for as follows: (1) in cash or by check (acceptable to the Company in
accordance with guidelines established for this purpose), bank draft or money
order payable to the order of the Company or (2) if so permitted by the
instrument evidencing such Option (or in the case of such an Option which is
not an ISO, by the Board at or after grant of such Option), (i) through the
delivery of shares of Stock which have been outstanding for at least six
months (unless the Board expressly approves a shorter period) and which have a
fair market value on the last business day preceding the date of exercise
equal to the exercise price, or (ii) by delivery of a promissory note of the
Option holder to the Company, payable on such terms as are specified by the
Board, or (iii) by delivery of an unconditional and irrevocable undertaking by
a broker to deliver promptly to the Company sufficient funds to pay the
exercise price, or (iv) by any combination of the permissible forms of
payment; provided, that if the Stock delivered upon exercise of the Option is
an original issue of authorized Stock, at least so much of the exercise price
as represents the par value of such Stock must be paid other than by the
Option holder's promissory note.
(f) Discretionary Payments. If the market price of shares of Stock subject
to an Option (other than an Option which is in tandem with a Stock
Appreciation Right as described in Section 6.2 below) exceeds the exercise
price of the Option at the time of its exercise, the Board may cancel the
Option and cause the Company to pay in cash or in shares of Common Stock (at a
price per share equal to the fair market value per share) to the person
exercising the Option an amount equal to the difference between the fair
market value of the Stock which would have been purchased pursuant to the
exercise (determined on the date the Option is cancelled) and the aggregate
exercise price which would have been paid. The Board may exercise its
discretion to take such action only if it has received a written request from
the person exercising the Option, but such a request will not be binding on
the Board.
6.2 Stock Appreciation Rights.
(a) Nature of Stock Appreciation Rights. A Stock Appreciation Right is an
Award entitling the recipient on exercise of the Right to receive, an amount,
in cash or Stock or a combination thereof (such form to be determined by the
Board), determined in whole or in part by reference to appreciation in Stock
value.
In general, a Stock Appreciation Right entitles the Participant to receive,
with respect to each share of Stock as to which the Right is exercised, the
excess of the share's fair market value on the date of exercise over its fair
market value on the date the Right was granted. However, the Board may provide
at the time of grant that the amount the recipient is entitled to receive will
be adjusted upward or downward under rules established by the Board to take
into account the performance of the Stock in comparison with the performance
of other stocks or an index or indices of other stocks. The Board may also
grant Stock Appreciation Rights that provide, that following a Change in
Control of the Company, as defined below, the holder of such Right will be
entitled to receive, with respect to each share of Stock subject to the Right,
an amount equal to the excess of a specified value (which may include an
average of values) for a share of Stock during a period preceding such Change
in Control over the fair market value of a share of Stock on the date the
Right was granted. "Change in Control" shall mean the occurrence of any of the
following: (i) When any "person" as defined in Section 3(a)(9) of the
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1934 Act and as used in Sections 13(d) and 14(d) thereof, including a "group"
as defined in Section 13(d) of the 1934 Act but excluding the Company and any
subsidiary and any employee benefit plan sponsored or maintained by the
Company or any subsidiary (including any trustee of such plan acting as
trustee), directly or indirectly, becomes the "beneficial owner" (as defined
in Rule 13d-3 under the 1934 Act) of securities of the Company representing at
least 40 percent (or such greater percentage as the Board may specify in any
grant of Stock Appreciation Rights) of the combined voting power of the
Company's then outstanding securities; or (ii) The occurrence of a transaction
requiring stockholder approval for the acquisition of the Company by an entity
other than the Company or a subsidiary through purchase of assets, or by
merger, or otherwise.
(b) Grant of Stock Appreciation Rights. Stock Appreciation Rights may be
granted in tandem with, or independently of, Options granted under the Plan. A
Stock Appreciation Right granted in tandem with an Option which is not an ISO
may be granted either at or after the time the Option is granted. A Stock
Appreciation Right granted in tandem with an ISO may be granted only at the
time the Option is granted.
(c) Rules Applicable to Tandem Awards. When Stock Appreciation Rights are
granted in tandem with Options, the following will apply:
(i) The Stock Appreciation Right will be exercisable only at such time or
times, and to the extent, that the related Option is exercisable and will
be exercisable in accordance with the procedure required for exercise of
the related Option.
(ii) The Stock Appreciation Right will terminate and no longer be
exercisable upon the termination or exercise of the related Option, except
that a Stock Appreciation Right granted with respect to less than the full
number of shares covered by an Option will not be reduced until the number
of shares as to which the related Option has been exercised or has
terminated exceeds the number of shares not covered by the Stock
Appreciation Right.
(iii) The Option will terminate and no longer be exercisable upon the
exercise of the related Stock Appreciation Right.
(iv) The Stock Appreciation Right will be transferable only with the
related Option.
(v) A Stock Appreciation Right granted in tandem with an ISO may be
exercised only when the market price of the Stock subject to the Option
exceeds the exercise price of such option.
(d) Exercise of Independent Stock Appreciation Rights. A Stock Appreciation
Right not granted in tandem with an Option will become exercisable at such
time or times, and on such conditions, as the Board may specify. The Board may
at any time accelerate the time at which all or any part of the Right may be
exercised.
Any exercise of an independent Stock Appreciation Right must be in writing,
signed by the proper person and delivered or mailed to the Company,
accompanied by any other documents required by the Board.
6.3 Restricted and Unrestricted Stock.
(a) Nature of Restricted Stock Award. A Restricted Stock Award entitles the
recipient to acquire, for a purchase price equal to par value, shares of Stock
subject to the restrictions described in paragraph (d) below ("Restricted
Stock").
(b) Acceptance of Award. A Participant who is granted a Restricted Stock
Award will have no rights with respect to such Award unless the Participant
accepts the Award by written instrument delivered or mailed to the Company
accompanied by payment in full of the specified purchase price, if any, of the
shares covered by the Award. Payment may be by certified or bank check or
other instrument acceptable to the Board.
(c) Rights as a Stockholder. A Participant who receives Restricted Stock
will have all the rights of a stockholder with respect to the Stock, including
voting and dividend rights, subject to the restrictions described in paragraph
(d) below and any other conditions imposed by the Board at the time of grant.
Unless the Board otherwise determines, certificates evidencing shares of
Restricted Stock will remain in the possession of the Company until such
shares are free of all restrictions under the Plan.
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(d) Restrictions. Except as otherwise specifically provided by the Plan,
Restricted Stock may not be sold, assigned, transferred, pledged or otherwise
encumbered or disposed of, and if the Participant ceases to be an Employee or
otherwise suffers a Status Change (as defined at Section 7.2(a) below) for any
reason, must be offered to the Company for purchase for the amount of cash
paid for the Stock, or forfeited to the Company if no cash was paid. These
restrictions will lapse at such time or times, and on such conditions, as the
Board may specify. The Board may at any time accelerate the time at which the
restrictions on all or any part of the shares will lapse.
(e) Notice of election. Any Participant making an election under Section
83(b) of the Code with respect to Restricted Stock must provide a copy thereof
to the Company within 10 days of the filing of such election with the Internal
Revenue Service.
(f) Other Awards Settled with Restricted Stock. The Board may, at the time
any Award described in this Section 6 is granted, provide that any or all the
Stock delivered pursuant to the Award will be Restricted Stock.
(g) Unrestricted Stock. The Board may, in its sole discretion, approve the
sale to any Participant of shares of Stock free of restrictions under the Plan
for a price which is not less than the par value of the Stock.
6.4 Deferred Stock.
A Deferred Stock Award entitles the recipient to receive shares of Stock to
be delivered in the future. Delivery of the Stock will take place at such time
or times, and on such conditions, as the Board may specify. The Board may at
any time accelerate the time at which delivery of all or any part of the Stock
will take place. At the time any Award described in this Section 6 is granted,
the Board may provide that, at the time Stock would otherwise be delivered
pursuant to the Award, the Participant will instead receive an instrument
evidencing the Participant's right to future delivery of Deferred Stock. The
foregoing notwithstanding, the terms of Deferred Stock granted to Non-Employee
Directors under Section 8 ("Non-Employee Director Deferred Stock") shall be as
set forth in that Section.
6.5 Performance Awards; Performance Goals.
(a) Nature of Performance Awards. A Performance Award entitles the recipient
to receive, without payment, an amount in cash or Stock or a combination
thereof (such form to be determined by the Board) following the attainment of
Performance Goals. Performance Goals may be related to personal performance,
corporate performance, departmental performance or any other category of
performance deemed by the Board to be important to the success of the Company.
The Board will determine the Performance Goals, the period or periods during
which performance is to be measured and all other terms and conditions
applicable to the Award.
(b) Other Awards Subject to Performance Condition. The Board may, at the
time any Award described in this Section 6 is granted, impose the condition
(in addition to any conditions specified or authorized in this Section 6 or
any other provision of the Plan) that Performance Goals be met prior to the
Participant's realization of any payment or benefit under the Award.
6.6 Loans and Supplemental Grants.
(a) Loans. The Company may make a loan to a Participant ("Loan"), either on
the date of or after the grant of any Award to the Participant. A Loan may be
made either in connection with the purchase of Stock under the Award or with
the payment of any Federal, state and local income tax with respect to income
recognized as a result of the Award. The Board will have full authority to
decide whether to make a Loan and to determine the amount, terms and
conditions of the Loan, including the interest rate (which may be zero),
whether the Loan is to be secured or unsecured or with or without recourse
against the borrower, the terms on which the Loan is to be repaid and the
conditions, if any, under which it may be forgiven. However, no Loan may have
a term (including extensions) exceeding ten years in duration.
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(b) Supplemental Grants. In connection with any Award, the Board may at the
time such Award is made or at a later date, provide for and grant a cash award
to the Participant ("Supplemental Grant") not to exceed an amount equal to (1)
the amount of any federal, state and local income tax on ordinary income for
which the Participant may be liable with respect to the Award, determined by
assuming taxation at the highest marginal rate, plus (2) an additional amount
on a grossed-up basis intended to make the Participant whole on an after-tax
basis after discharging all the Participant's income tax liabilities arising
from all payments under this Section 6. Any payments under this subsection (b)
will be made at the time the Participant incurs Federal income tax liability
with respect to the Award.
7. EVENTS AFFECTING CERTAIN OUTSTANDING AWARDS
7.1. Death.
If a Participant dies, the following will apply to Awards other than Non-
Employee Director Deferred Stock:
(a) All Options and Stock Appreciation Rights held by the Participant
immediately prior to death, to the extent then exercisable, may be
exercised by the Participant's executor or administrator or the person or
persons to whom the Option or Right is transferred by will or the
applicable laws of descent and distribution, at any time within the one
year period ending with the first anniversary of the Participant's death
(or such shorter or longer period as the Board may determine), and shall
thereupon terminate. In no event, however, shall an Option or Stock
Appreciation Right remain exercisable beyond the latest date on which it
could have been exercised without regard to this Section 7. Except as
otherwise determined by the Board, all Options and Stock Appreciation
Rights held by a Participant immediately prior to death that are not then
exercisable shall terminate at death.
(b) Except as otherwise determined by the Board, all Restricted Stock
held by the Participant must be transferred to the Company (and, in the
event the certificates representing such Restricted Stock are held by the
Company, such Restricted Stock will be so transferred without any further
action by the Participant) in accordance with Section 6.3 above.
(c) Any payment or benefit under a Deferred Stock Award, Performance
Award, or Supplemental Grant, to which the Participant was not irrevocably
entitled prior to death will be forfeited and the Award canceled as of the
time of death, unless otherwise determined by the Board.
7.2. Termination of Service (Other Than By Death).
If a Participant who is an Employee ceases to be an Employee for any reason
other than death, or if there is a termination (other than by reason of death)
of the consulting, service or similar relationship in respect of which a non-
Employee Participant was granted an Award hereunder (such termination of the
employment or other relationship being hereinafter referred to as a "Status
Change"), the following will apply to Awards other than Non-Employee Director
Deferred Stock:
(a) Except as otherwise determined by the Board, all Options and Stock
Appreciation Rights held by the Participant that were not exercisable
immediately prior to the Status Change shall terminate at the time of the
Status Change. Any Options or Rights that were exercisable immediately
prior to the Status Change will continue to be exercisable for a period of
three months (or such longer period as the Board may determine), and shall
thereupon terminate, unless the Award provides by its terms for immediate
termination in the event of a Status Change or unless the Status Change
results from a discharge for cause which in the opinion of the Board casts
such discredit on the Participant as to justify immediate termination of
the Award. In no event, however, shall an Option or Stock Appreciation
Right remain exercisable beyond the latest date on which it could have been
exercised without regard to this Section 7. For purposes of this paragraph,
in the case of a Participant who is an Employee, a Status Change shall not
be deemed to have resulted by reason of (i) a sick leave or other bona fide
leave of absence approved for purposes of the Plan by the Board, so long as
the Employee's right to reemployment is guaranteed either by statute or by
contract, or (ii) a transfer of employment between the Company and a
subsidiary or between subsidiaries,
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or to the employment of a corporation (or a parent or subsidiary
corporation of such corporation) issuing or assuming an option in a
transaction to which section 424(a) of the Code applies.
(b) Except as otherwise determined by the Board, all Restricted Stock
held by the Participant at the time of the Status Change must be
transferred to the Company (and, in the event the certificates representing
such Restricted Stock are held by the Company, such Restricted Stock will
be so transferred without any further action by the Participant) in
accordance with Section 6.3 above.
(c) Any payment or benefit under a Deferred Stock Award, Performance
Award, or Supplemental Grant to which the Participant was not irrevocably
entitled prior to the Status Change will be forfeited and the Award
cancelled as of the date of such Status Change unless otherwise determined
by the Board.
7.3. Acquisition Transactions.
Notwithstanding any other provision of the Plan or of any Award to the
contrary (other than Section 9.10), in the event of a consolidation or merger
in which the Company is not the surviving corporation or which results in the
acquisition of substantially all the Company's outstanding Stock by a single
person or entity or by a group of persons and/or entities acting in concert or
in the event of the sale or transfer of substantially all the Company's assets
(an "acquisition transaction"), all outstanding Awards will terminate as of
the effective date of the acquisition transaction, and the following will
apply:
(a) Each outstanding Option and Stock Appreciation Right will become
exercisable in full 10 days prior to the anticipated effective date of the
proposed acquisition transaction unless otherwise expressly provided at the
time of grant.
(b) Each outstanding share of Restricted Stock will become free of all
restrictions and conditions 10 days prior to the anticipated effective date
of the proposed acquisition transaction.
(c) Conditions on Deferred Stock Awards (including any Non-Employee
Director Deferred Stock), Performance Awards, and Supplemental Grants which
relate only to the passage of time and continued employment will be removed
10 days prior to the anticipated effective date of the proposed acquisition
transaction. Performance or other conditions (other than conditions
relating only to the passage of time and continued employment) will
continue to apply unless otherwise provided in the instrument evidencing
the Awards or in any other agreement between the Participant and the
Company or unless otherwise agreed to by the Board.
(d) The Board may, in its sole discretion, prior to the effective date of
the acquisition transaction, forgive all or any portion of the principal of
or interest on a Loan.
7.4. Dissolution or Liquidation Transactions.
In the event of a dissolution or liquidation of the Company (a "covered
transaction"), all outstanding Awards (including Non-Employee Director
Deferred Stock) will terminate as of the effective date of the covered
transaction, and the following rules shall apply:
(a) Subject to paragraph (b) below, the Board may in its sole discretion,
prior to the effective date of the covered transaction, (1) make each
outstanding Option and Stock Appreciation Right exercisable in full, (2)
remove the restrictions from each outstanding share of Restricted Stock,
(3) cause the Company to make any payment and provide any benefit under
each outstanding Deferred Stock Award (including Non-Employee Director
Deferred Stock), Performance Award, and Supplemental Grant which would have
been made or provided with the passage of time had the transaction not
occurred and the Participant not suffered a Status Change (or died), and
(4) forgive all or any portion of the principal of or interest on a Loan.
(b) If an outstanding Award is subject to performance or other conditions
(other than conditions relating only to the passage of time and continued
employment) which will not have been satisfied at the time of the covered
transaction, the Board may in its sole discretion remove such conditions.
If it does not do so, however, such Award will terminate as of the date of
the covered transaction notwithstanding paragraph (a) above.
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8. CERTAIN AWARDS TO NON-EMPLOYEE DIRECTORS
8.1. Automatic Grants of Non-Employee Director Deferred Stock.
(a) Grants of Non-Employee Director Deferred Stock. The grants of Awards of
Non-Employee Director Deferred Stock under this Section 8 shall be as follows:
(i) On June 1, 1996, November 1, 1996, and on each anniversary of
November 1, 1996 through and including November 1, 2000, in addition to
shares of Non-Employee Director Deferred Stock granted pursuant to sections
8.1(a)(ii) or (iii), each Non-Employee Director shall be granted an Award
of 10,000 shares of Non-Employee Director Deferred Stock upon the terms and
subject to the conditions set forth in the Plan including this Section 8.
With respect to any individual who becomes a Non-Employee Director after
November 1, 1996 (provided such individual has not previously received a
grant pursuant to the first sentence of this Section 8.1(a)(i)), such
individual shall be granted as of the date of his election or appointment
as a Non-Employee Director an Award of 10,000 shares of Non-Employee
Director Deferred Stock upon the terms and subject to the conditions set
forth in the Plan including this Section 8.
(ii) as of November 1, 1996, in addition to shares of Non-Employee
Director Deferred Stock granted pursuant to Sections 8.1(a)(i) or (iii),
each Vice Chairman of the Board, who is also a Non-Employee Director, will
be granted an Award of 15,000 shares of Non-Employee Director Deferred
Stock upon the terms and subject to the conditions set forth in the Plan
including this Section 8 and with respect to any Non-Employee Director who
becomes a Vice Chairman of the Board after November 1, 1996 (provided such
individual has not previously received a grant pursuant to the first clause
of this Section 8.1(a) (ii)), such individual shall be granted as of the
date of his election or appointment as Vice Chairman an Award of 15,000
shares of Non-Employee Director Deferred Stock upon the terms and subject
to the conditions set forth in the Plan including this Section 8.
(iii) As of November 1, 1996, in addition to shares of Non-Employee
Director Deferred Stock granted pursuant to Sections 8.1(a)(i) or (ii), the
Chairman of the Executive Committee, who is also a Non-Employee Director,
will be granted an Award of 55,000 shares of Non-Employee Director Deferred
Stock upon the terms and subject to the conditions set forth in the Plan
including this Section 8 and with respect to any Non-Employee Director who
becomes the Chairman of the Executive Committee after November 1, 1996
(provided such individual has not previously received a grant pursuant to
the first clause of this Section 8.1(a) (iii)), such individual shall be
granted as of the date of his election or appointment as the Chairman an
Award of 55,000 shares of Non-Employee Director Deferred Stock upon the
terms and subject to the conditions set forth in the Plan including this
Section 8.
(iv) If on any date when Non-Employee Director Deferred Stock is to be
granted pursuant to Section 8.1(a)(i), (ii) or (iii), the total number of
shares of Stock as to which Non-Employee Director Deferred Stock is to be
granted exceeds the number of shares of Stock remaining available under the
Plan, there shall be a pro rata reduction in the number of shares of Stock
as to which each Non-Employee Director is granted on such day.
8.2. Certain Terms of Non-Employee Director Deferred Stock.
(a) Terms of Award. The terms of each Award granted under this Section 8
shall be as follows:
(i) Each share of Non-Employee Director Deferred Stock granted hereunder
and not forfeited represents a right of Participant to receive, and an
obligation of the Company to deliver to Participant, one share of Stock, at
the settlement date specified under Section 8.2(d) subject to the terms and
conditions of the Plan.
(ii) Non-Employee Director Deferred Stock shall be subject to a risk of
forfeiture, as provided in Section 8.2(c) hereof, until such time as the
risk of forfeiture shall lapse as provided in Section 8.2(b) hereof (the
"Restrictions"). Non-Employee Director Deferred Stock shall be subject to
limitations on transferability, as provided in Section 9.5, at all times
during the period from the date of grant until the Stock becomes
deliverable in settlement of the Non-Employee Director Deferred Stock.
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(b) Lapse of Restrictions.
(i) The Restrictions on one-third of the shares of Non-Employee Director
Deferred Stock granted under the Plan (rounded to the nearest whole number
of shares) shall lapse (i.e., Non-Employee Director Deferred Stock will
"vest") at the close of business on the day before the first, second, and
third anniversaries of the date of grant, provided that such risk of
forfeiture shall lapse on an accelerated basis as to all shares of Non-
Employee Director Deferred Stock at the time the Participant ceases to
serve as a director due to death, Disability (as defined below), retirement
at or after age 65, upon the failure to be renominated or reelected to the
Board of Directors, or in the circumstances specified in Sections 7.3 and
7.4 of the Plan.
(ii) Following the lapse of Restrictions on Non-Employee Director
Deferred Stock, such Non-Employee Director Deferred Stock, including shares
of Non-Employee Director Deferred Stock subject to optional deferral of
settlement, shall be non-forfeitable.
(iii) For purposes of the Plan, a Disability shall mean a physical or
mental incapacity of long duration which, in the reasonable determination
of the Board, renders the Participant unable to perform the duties of a
director of the Company.
(c) Forfeiture of Non-Employee Director Deferred Stock Upon Certain
Terminations of Service as a Director. Non-Employee Director Deferred Stock as
to which the Restrictions have not yet lapsed shall be forfeited in any case
in which the Participant terminates service as a director for any reason other
than death, Disability, retirement at or after age 65, or upon the failure to
be renominated or reelected to the Board of Directors, if the Restrictions
have not lapsed prior to and do not lapse at the time of such termination of
service in accordance with Section 8.1(b).
(d) Settlement of Non-Employee Director Deferred Stock; Optional Deferral.
(i) Stock will be delivered to Participant or his or her beneficiary in
settlement of Non-Employee Director Deferred Stock as promptly as
practicable after the later of the lapse of Restrictions under Section
8.2(b) or the expiration of any optional deferral period as may be elected
by Participant under Section 8.2(d)(ii); provided, however, that such
optional deferral period shall expire upon the occurrence of an
"acquisition transaction" or "covered transaction" as defined in Section
7.3 and 7.4 of the Plan.
(ii) At such time or times as may be specified by the Board, a
Participant may elect to further defer receipt of Stock to a date later
than the lapse of Restrictions or other settlement date previously elected
under this Section 8.2(d); provided, however, that an optional deferral
shall be subject to such restrictions and limitations as the Board may from
time to time specify, including those deemed necessary or appropriate to
avoid "constructive receipt" of deferred amounts by Participant and for
other purposes.
(iii) Whenever Stock is to be delivered hereunder, the Company shall
deliver to Participant or, following the death of Participant,
Participant's beneficiary, one or more certificates representing the shares
of Stock, registered in the name of Participant, the beneficiary, or in
such other form of registration as instructed by Participant or such
beneficiary.
(e) Dividend Equivalents.
(i) Each share of Non-Employee Director Deferred Stock granted hereunder
shall confer upon Participant a right to receive dividend equivalents in
respect of such Non-Employee Director Deferred Stock, as follows:
(x) Relating to Regular Cash Dividends. If the Company declares and
pays any regular quarterly cash dividend or distribution on Stock, the
record date of which is prior to the settlement of Participant's Non-
Employee Director Deferred Stock, the Company shall pay to Participant,
as promptly as practicable after the payment date of such dividend or
distribution, a cash amount equal to the amount of cash actually paid
as a dividend or distribution per share of Stock multiplied by the
number of Participant's shares of Non-Employee Director Deferred Stock,
provided that no payment will be made in respect of Non-Employee
Director Deferred Stock forfeited on or before the payment date of such
dividend or distribution.
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<PAGE>
(y) Relating to Extraordinary Stock Dividends and Stock Splits. If
the Company declares and pays a dividend or distribution in the form of
Stock payable on Stock, or if there occurs a forward stock split of the
Stock, the record date of which is prior to the settlement of
Participant's Non-Employee Director Deferred Stock, the Company shall
credit to Participant a number of additional shares of Non-Employee
Director Deferred Stock (which shall include any fractional unit) equal
to the number of shares of Stock paid as a dividend or distribution per
share of Stock or distributed as a result of the stock split per share
of Stock multiplied by the number of Participant's shares of Non-
Employee Director Deferred Stock, provided that no additional Non-
Employee Director Deferred Stock will be credited in respect of Non-
Employee Director Deferred Stock forfeited on or before the payment
date of such dividend or distribution or effective date of such split.
(z) Relating to Other Extraordinary Dividends. If the Company
declares and pays an extraordinary dividend or distribution in the form
of cash or other property (other than Stock) payable on Stock, the
record date of which is prior to the settlement of Participant's Non-
Employee Director Deferred Stock, the Company shall, as promptly as
practicable after the payment date of such dividend or distribution,
pay to the Participant a cash amount equal to the amount of cash
actually paid plus the fair market value at such record date of any
property other than Stock actually paid as a dividend or distribution
per share of Stock for each of Participant's shares of Non-Employee
Director Deferred Stock.
(ii) Additional Non-Employee Director Deferred Stock credited under
Section 8.2(e)(i)(y) will be subject to the same Restrictions and to
settlement at the same settlement date as applied to the Non-Employee
Director Deferred Stock in respect of which such additional Non-
Employee Director Deferred Stock were credited.
9. GENERAL PROVISIONS
9.1. Documentation of Awards.
Awards will be evidenced by such written instruments, if any, as may be
prescribed by the Board from time to time. Such instruments may be in the form
of agreements to be executed by both the Participant and the Company, or
certificates, letters or similar instruments, which need not be executed by
the Participant but acceptance of which will evidence agreement to the terms
thereof.
9.2. Rights as a Stockholder, Dividend Equivalents.
Except as specifically provided by the Plan, the receipt of an Award will
not give a Participant rights as a stockholder; the participant will obtain
such rights, subject to any limitations imposed by the Plan or the instrument
evidencing the Award, upon actual receipt of Stock. However, the Board may, on
such conditions as it deems appropriate, provide that a Participant will
receive a benefit in lieu of cash dividends that would have been payable on
any or all Stock subject to the Participant's Award (other than Non-Employee
Director Deferred Stock) had such Stock been outstanding. Without limitation,
the Board may provide for payment to the Participant of amounts representing
such dividends, either currently or in the future, or for the investment of
such amounts on behalf of the Participant.
9.3. Conditions on Delivery of Stock.
The Company will not be obligated to deliver any shares of Stock pursuant to
the Plan or to remove restrictions from shares previously delivered under the
Plan (a) until all conditions of the Award have been satisfied or removed, (b)
until, in the opinion of the Company's counsel, all applicable federal and
state laws and regulation have been complied with, (c) if the outstanding
Stock is at the time listed on any stock exchange, until the shares to be
delivered have been listed or authorized to be listed on such exchange upon
official notice of issuance, and (d) until all other legal matters in
connection with the issuance and delivery of such shares have been approved by
the Company's counsel. If the sale of Stock has not been registered under the
Securities Act of 1933, as amended, the Company may require, as a condition to
exercise of the Award, such representations or agreements as counsel for the
Company may consider appropriate to avoid violation of such Act and may
require that the certificates evidencing such Stock bear an appropriate legend
restricting transfer.
A-10
<PAGE>
If an Award is exercised by the Participant's legal representative, the
Company will be under no obligation to deliver Stock pursuant to such exercise
until the Company is satisfied as to the authority of such representative.
9.4. Tax Withholding.
The Company will withhold from any cash payment made pursuant to an Award an
amount sufficient to satisfy all federal, state and local withholding tax
requirements (the "withholding requirements").
In the case of an Award pursuant to which Stock may be delivered, the Board
will have the right to require that the Participant or other appropriate
person remit to the Company an amount sufficient to satisfy the withholding
requirements, or make other arrangements satisfactory to the Board with regard
to such requirements, prior to the delivery of any Stock. If and to the extent
that such withholding is required, the Board may permit the Participant or
such other person to elect at such time and in such manner as the Board
provides to have the Company hold back from the shares to be delivered, or to
deliver to the Company, Stock having a value calculated to satisfy the
withholding requirement.
If at the time an ISO is exercised the Board determines that the Company
could be liable for withholding requirements with respect to a disposition of
the Stock received upon exercise, the Board may require as a condition of
exercise that the person exercising the ISO agree (a) to inform the Company
promptly of any disposition (within the meaning of section 424(c) of the Code)
of Stock received upon exercise, and (b) to give such security as the Board
deems adequate to meet the potential liability of the Company for the
withholding requirements and to augment such security from time to time in any
amount reasonably deemed necessary by the Board to preserve the adequacy of
such security.
9.5. Nontransferability of Awards.
No Award (other than an Award in the form of an outright transfer of cash or
Unrestricted Stock) may be transferred other than by will or by the laws of
descent and distribution, and during a Participant's lifetime an Award
requiring exercise may be exercised only by the Participant (or in the event
of the Participant's incapacity, the person or persons legally appointed to
act on the Participant's behalf).
9.6. Adjustments in the Event of Certain Transactions.
(a) In the event of a stock dividend, stock split or combination of shares,
recapitalization or other change in the Company's capitalization, or other
distribution to common stockholders other than normal cash dividends, after
the effective date of the Plan, the Board will make any appropriate
adjustments to the maximum number of shares that may be delivered under the
Plan under Section 4 above.
(b) In any event referred to in paragraph (a), the Board will also make any
appropriate adjustments to the number and kind of shares of stock or
securities subject to Awards then outstanding or subsequently granted,
including the number and kind to be automatically granted as Non-Employee
Director Deferred Stock under Section 8.1, any exercise prices relating to
Awards and any other provision of Awards affected by such change. The Board
may also make such adjustments to take into account material changes in law or
in accounting practices or principles, mergers, consolidations, acquisitions,
dispositions or similar corporate transactions, or any other event, if it is
determined by the Board that adjustments are appropriate to avoid distortion
in the operation of the Plan. Adjustments relating to Non-Employee Director
Deferred Stock shall be made solely to preserve, without increasing, the value
of such Awards, to prevent dilution or enlargement of Participants rights, and
shall in any case be subject to Section 9.10.
9.7. Employment Rights, Etc.
Neither the adoption of the Plan nor the grant of Awards will confer upon
any person any right to continued retention by the Company or any subsidiary
as an Employee or otherwise, or affect in any way the right of the Company or
subsidiary to terminate an employment, service or similar relationship at any
time. Except as specifically provided by the Board in any particular case, the
loss of existing or potential profit in Awards granted under the Plan will not
constitute an element of damages in the event of termination of an employment,
service or similar relationship even if the termination is in violation of an
obligation of the Company to the Participant.
A-11
<PAGE>
9.8. Deferral of Payments.
The Board may agree at any time, upon request of the Participant, to defer
the date on which any payment under an Award will be made.
9.9. Past Services as Consideration.
Where a Participant purchases Stock under an Award for a price equal to the
par value of the Stock, the Board may determine that such price has been
satisfied by past services rendered by the Participant.
9.10. Compliance with Certain 1934 Act Rules.
It is the intent of the Company that the Plan comply in all respects with
applicable provisions of Rule 16b-3 or Rule 16a-1(c)(3) under the 1934 Act in
connection with any grant of Awards to or other transaction by a Participant
who is subject to Section 16 of the 1934 Act. Accordingly, if any provision of
this Plan or any Award agreement does not comply with the requirements of Rule
16b-3 or Rule 16a-1(c)(3) as then applicable to any such transaction, or would
cause any Non-Employee Director then serving on the Committee to not be deemed
a "disinterested person" within the meaning of Rule 16b-3 as then applicable
to the Plan, such provision will be construed or deemed amended to the extent
necessary to conform to the applicable requirements of Rule 16b-3 or Rule 16a-
1(c)(3) so that such Participant shall avoid liability under Section 16(b) or
such Non-Employee Director's status as a "disinterested person" shall not be
affected.
10. EFFECT, DISCONTINUANCE, CANCELLATION, AMENDMENT AND TERMINATION
Neither adoption of the Plan nor the grant of Awards to a Participant will
affect the Company's right to grant to such Participant awards that are not
subject to the Plan, to issue to such Participant Stock as a bonus or
otherwise, or to adopt other plans or arrangements under which Stock will be
issued to Employees or other persons eligible to participate in the Plan.
The Board may at any time or times amend the Plan or any outstanding Award
for any purpose which may at the time be permitted by law, or may at any time
terminate the Plan as to any further grants of Awards, provided that (except
to the extent expressly required or permitted by the Plan) no such amendment
will, without the approval of the stockholders of the Company, effectuate a
change for which stockholder approval is required in order for the Plan to
continue to qualify for the award of ISOs under section 422 of the Code and to
continue to qualify under Rule 16b-3 promulgated under Section 16 of the 1934
Act, and, provided further, that any Plan provision that specifies the Non-
Employee Directors who may receive grants of Non-Employee Director Deferred
Stock, the amount and price of such securities to be granted to such
directors, and the timing of such grants to such directors, or is otherwise a
"plan provision" referred to in Rule 16b-3(c)(2)(ii)(B) under the Exchange Act
(or any successor provision), shall not be amended more than once every six
months, other than to comport with changes in the Internal Revenue Code of
1986, as amended, or the rules thereunder.
A-12
<PAGE>
PROXY
AUTOTOTE CORPORATION
750 LEXINGTON AVENUE, 25TH FLOOR, NEW YORK, NEW YORK 10022
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
ANNUAL MEETING OF STOCKHOLDERS--MAY 29,1996
The undersigned hereby appoints Martin E. Schloss and Thomas C. DeFazio, or
either of them, as Proxy or Proxies of the undersigned with full power of
substitution to attend and to represent the undersigned at the Annual Meeting
of Stockholders of Autotote Corporation (the "Company") to be held on May 29,
1996, and at any adjournments or postponements thereof, and to vote thereat the
number of shares of the Class A Common Stock of the Company that the
undersigned would be entitled to vote if personally present, in accordance with
the instructions set forth on this proxy card. Any proxy heretofore given by
the undersigned with respect to such stock is hereby revoked.
(TO BE SIGNED ON REVERSE SIDE)
SEE REVERSE
SIDE
<PAGE>
[X] PLEASE MARK YOUR +++ +
VOTES AS IN THIS + +
EXAMPLE. +++++
UNLESS OTHERWISE SPECIFIED IN THE SPACES PROVIDED, THE UNDERSIGNED'S VOTE IS TO
BE CAST FOR THE ELECTION OF THE NOMINEES FOR DIRECTOR LISTED IN PROPOSAL (1) AND
FOR APPROVAL OF PROPOSALS (2) AND (3), AS MORE FULLY DESCRIBED IN THE
ACCOMPANYING PROXY STATEMENT.
FOR ALL NOMINEES WITHHOLD AUTHORITY
1. Election of
Directors: [_] [_]
A. Lorne Weil, Sir Brian Wolfson, Alan J. Zakon, Larry J. Lawrence, Marshall
Bartlett and Thomas H. Lee
INSTRUCTION: To withhold authority to vote for any individual nominee(s),
place an "X' in the box on the left (FOR ALL NOMINEES) and write that
nominee's name in the space provided below.
- -------------------------------------------------------------------------------
FOR AGAINST ABSTAIN
2. Approval of the amendment to
the Autotote Corporation 1992 [_] [_] [_]
Equity Incentive Plan, as
amended and restated.
3. Ratification of KPMG Peat FOR AGAINST ABSTAIN
Marwick as independent
auditors of the Company for the [_] [_] [_]
fiscal year ending October 31,
1996.
4. On such other matters as may properly come before the meeting.
[_] Please check if you plan to attend the meeting.
Please mark, date and sign this proxy and return it in the enclosed
envelope.
SIGNATURE(S) _________DATED_______________________________________________,1996
_________DATED_______________________________________________,1996
NOTE: Please sign exactly as your name appears above. For joint accounts, each
joint owner must sign. Please give full title if signing in a
representative capacity.
