<PAGE>
[LOGO OF AUTOTOTE APPEARS HERE]
March 1, 1999
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders of
Autotote Corporation to be held at 2:00 p.m., local time, on Monday, April 12,
1999, at the Hotel du Pont, Eleventh and Market Streets, Wilmington, Delaware.
At the Annual Meeting you will be asked to elect five Directors and to
ratify the appointment of KPMG LLP as independent accountants for the
Company's next fiscal year.
The Board of Directors recommends that you vote FOR the election of all five
nominees as Directors and FOR ratification of the appointment of the
independent accountants.
Whether or not you plan to attend in person, it is important that your
shares be represented and voted at the Annual Meeting. Therefore, regardless
of the number of shares you own, please sign, date and mail the enclosed proxy
in the return envelope provided.
At the Annual Meeting, we will also report to you on the Company's current
operations and goals for 1999. Members of the Board of Directors and
management will be pleased to respond to any questions you may have.
Sincerely,
A. Lorne Weil
Chairman of the Board
<PAGE>
------------------------------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
------------------------------------------------
Notice is hereby given that the Annual Meeting of Stockholders of Autotote
Corporation (the "Company") will be held at 2:00 p.m., local time, on Monday,
April 12, 1999, at the Hotel du Pont, Eleventh and Market Streets, Wilmington,
Delaware, for the following purposes:
1. To elect five members of the Board of Directors to serve for the ensuing
year and until their respective successors are duly elected and
qualified.
2. To ratify the appointment of KPMG LLP as independent accountants for the
Company for the fiscal year ending October 31, 1999.
3. To consider and act upon any other matter that may properly come before
the meeting or any adjournment thereof. The Board of Directors is not
presently aware of any such matter.
All holders of record of the Company's Class A Common Stock at the close of
business on February 19, 1999 are entitled to receive notice of and to vote at
the Annual Meeting and any adjournment thereof. A list of these holders will
be open to the examination of stockholders at the Hotel du Pont, Eleventh and
Market Streets, Wilmington, Delaware for ten days prior to the date of the
meeting and during the meeting itself.
Whether or not you plan to be personally present at the Annual 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
Vice President, General Counsel and
Secretary
Dated: March 1, 1999
<PAGE>
AUTOTOTE CORPORATION
750 Lexington Avenue, 25th Floor
New York, New York 10022
-----------------
PROXY STATEMENT
-----------------
INTRODUCTION
This Proxy Statement is furnished in connection with the solicitation by the
Board of Directors (the "Board") of Autotote Corporation, a Delaware
corporation (the "Company"), of proxies to be voted at the Annual Meeting of
Stockholders to be held on Monday, April 12, 1999, at 2:00 p.m., local time,
at the Hotel du Pont, Eleventh and Market Streets, Wilmington, Delaware, and
any adjournment thereof (the "Annual Meeting"), for the purposes set forth in
the Notice of Annual Meeting of Stockholders. It is expected that this Proxy
Statement and enclosed form of proxy will be mailed to stockholders commencing
on or about March 3, 1999.
All holders of the Company's Class A Common Stock, $.01 par value per share
(the "Common Stock"), at the close of business on February 19, 1999, the
record date for the determination of stockholders of the Company entitled to
notice of and to vote at the Annual Meeting, will be entitled to vote at the
Annual Meeting. At the close of business on February 19, 1999, a total of
36,026,115 shares of Common Stock were outstanding. Each share of Common Stock
is entitled to one vote on all matters that properly come before the Annual
Meeting. The shares of Common Stock represented by a properly signed and
returned proxy card will be voted in the manner specified by the stockholder.
If no instructions are specified in a signed and returned proxy card, the
shares will be voted FOR the election of the five nominees for director named
in this Proxy Statement and FOR ratification of the appointment of KPMG LLP as
independent accountants. A proxy may be revoked at any time prior to its being
voted by delivering written notice to the Secretary of the Company, by
submitting a new proxy bearing a later date or by voting in person at the
Annual Meeting.
The Company is not aware of any matter other than those described in this
Proxy Statement that will be acted upon at the Annual Meeting. In the event
that any other matter properly comes before the meeting for a vote of
stockholders, the persons named as proxies in the enclosed form of proxy will
vote in accordance with their best judgment on such other matter.
The annual report of the Company for the fiscal year ended October 31, 1998
is being mailed to the Company's stockholders with this proxy statement.
Voting
A majority of the shares outstanding and entitled to vote, present in person
or represented by proxy, constitutes a quorum for the transaction of business
at the Annual Meeting. Abstentions and broker non-votes (i.e., shares held by
brokers or nominees that the broker or nominee does not have discretionary
power to vote on a particular matter, and as to which instructions have not
been received from the beneficial owners or persons entitled to vote) will
count as shares that are present and entitled to vote for purposes of
determining a quorum. Assuming a quorum is present, directors will be elected
by a plurality of the votes cast by proxy or in person at the Annual Meeting.
Approval of any matter other than the election of directors requires the
affirmative vote of a majority of the number of shares entitled to vote,
present in person or represented by proxy, at the Annual Meeting. In the
election of directors, votes that are withheld and broker non-votes will have
no effect on the outcome of the election except to the extent that the failure
to vote for a particular nominee may result in another nominee receiving a
larger number of votes. With respect to ratification of the appointment of the
independent accountants, abstentions are considered to be shares present and
entitled to vote and will have the effect of a negative vote on the matter,
and broker non-votes are not counted as shares eligible to vote and will have
no effect on the outcome of the matter.
<PAGE>
Security Ownership
The following table sets forth certain information as of January 31, 1999 as
to the security ownership of those persons known to the Company to be the
beneficial owners of more than five percent of the outstanding Common Stock of
the Company, each of the Company's directors, each of the executive officers
named in the Summary Compensation Table below, and all of the Company's
directors and executive officers as a group. Except as otherwise indicated,
the stockholders listed in the table below have sole voting and investment
power with respect to the shares indicated.
Shares of Common Stock
<TABLE>
<CAPTION>
Name Number(1) Percent(1)
- ---- --------- ----------
<S> <C> <C>
Oaktree Capital Management, LLC........................ 8,119,300(2) 21.49%
333 South Grand Avenue
Los Angeles, CA 90071
State of Wisconsin Investment Board.................... 3,036,553(3) 8.43%
P.O. Box 7842
Madison, WI 54707
A. Lorne Weil.......................................... 2,020,558(4) 5.39%
750 Lexington Avenue, 25th Floor
New York, New York 10022
Larry J. Lawrence...................................... 1,860,474(5) 5.15%
c/o Allegra Partners
515 Madison Avenue, 29th Floor
New York, New York 10022
Alan J. Zakon.......................................... 863,982(6) 2.39%
Marshall Bartlett...................................... 110,832(7) *
Sir Brian G. Wolfson................................... 200,832(8) *
Gerald Lawrence........................................ 198,500(9) *
Martin E. Schloss...................................... 192,500(10) *
William Luke........................................... 150,000(11) *
All directors and executive officers as a group
(consisting of 8 persons)(4)(5)(6)(7)(8)(9)(10)....... 5,521,678(12) 14.43%
</TABLE>
- --------
* Represents less than 1% of the outstanding shares of Common Stock.
(1) Beneficial ownership as reported in the above table has been determined
in accordance with Rule 13d-3 under the Securities Exchange Act of 1934.
Owners of options, warrants or other convertible securities exercisable
within 60 days of January 31, 1999 are deemed to be the beneficial owners
of the securities which may be acquired. The percentage of outstanding
securities reported reflects the assumption that only the person whose
ownership is being reported has exercised his options or warrants.
(2) Based on a Schedule 13D/A jointly filed with the Securities and Exchange
Commission on December 15, 1998 by Oaktree Capital Management LLC
("Oaktree"), the OCM Opportunities Fund L.P. (the "Opportunities Fund")
and the OCM Principal Opportunities Fund L.P. (the "Principal Fund").
Includes 4,785,492 shares, and 1,680,000 shares issuable upon conversion
of debentures, held by the Opportunities Fund, representing 17.15% of the
outstanding Common Stock and 1,435,800 shares held by the Principal Fund,
representing 3.99% of the outstanding Common Stock. Also includes 148,008
shares, and 70,000
2
<PAGE>
shares issuable upon conversion of debentures, held by a third party
account. Oaktree is the general partner of each of the Funds and investment
manager of the third party account and may be deemed to beneficially own
all of such shares.
(3) Based on a Schedule 13G/A filed with the Securities and Exchange
Commission on February 2, 1999.
(4) Includes (a) 1,429,750 shares issuable upon exercise of stock options,
and (b) 28,691 shares issuable upon exercise of a warrant.
(5) Includes 87,500 shares issuable upon exercise of a stock option.
(6) Includes 107,500 shares issuable upon exercise of stock options.
(7) Includes 67,500 shares issuable upon exercise of stock options.
(8) Includes (a) 82,500 shares issuable upon exercise of stock options, and
(b) 25,000 shares held by Millco Limited as nominee.
(9) Includes 187,500 shares issuable upon exercise of stock options.
(10) Includes 177,500 shares issuable upon exercise of stock options.
(11) Consists of 150,000 shares issuable upon exercise of stock options. Mr.
Luke served the Company's Vice President and Chief Financial Officer
during fiscal 1998 and resigned such positions effective as of November
4, 1998.
(12) Includes (a) 2,212,250 shares issuable upon exercise of stock options,
and (b) 28,691 shares issuable upon exercise of a warrant. Excludes
150,000 shares issuable upon exercise of options held by Mr. Luke.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
officers and directors, and persons who beneficially own more than ten percent
of the Company's Common Stock, to file initial reports of ownership and
reports of changes in ownership with the Securities and Exchange Commission
("SEC"). Based solely on its review of the copies of the reports that the
directors, officers and ten percent holders filed with the SEC and on the
representations made by the Company's officers and directors, the Company
believes that all filing requirements applicable to its officers, directors
and 10% holders were complied with during fiscal 1998, except that A. Lorne
Weil, Larry J. Lawrence and Alan J. Zakon each filed a late Form 4 with
respect to the sale of a warrant indirectly held by Mr. Lawrence, and the
purchase, as to one-half of the rights subject thereto, by each of Mr. Weil
and Mr. Zakon; and the OCM Opportunities Fund, L.P. filed a late Form 3 and a
late Form 5 which disclosed 42 acquisitions over a period of seven months.
Cost of Solicitation
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 in person or by telephone
or telegram. 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.
3
<PAGE>
PROPOSAL 1--ELECTION OF DIRECTORS
Nominees
The Board has set the number of directors to be elected for the coming year
at five. Each director shall be elected at the Annual Meeting of Stockholders
for a term of one year and until his successor is duly elected and qualified.
The Board recommends that the stockholders elect the nominees named below as
directors of the Company for the ensuing year, and the persons named as
proxies in the enclosed form of proxy will vote the proxies received by them
for the election as directors of the nominees named below unless otherwise
indicated. Cumulative voting is not permitted. Each nominee is presently a
director of the Company. Each nominee has indicated a willingness to serve,
but in case any nominee is not a candidate at the meeting for reasons not now
known to the Company, the proxies named in the enclosed proxy may vote for a
substitute nominee at their discretion. Certain information regarding the
nominees as of January 31, 1999 is set forth below.
<TABLE>
<CAPTION>
Director
Name Age Position Since
- ---- --- -------- --------
<S> <C> <C> <C>
A. Lorne Weil............... 53 Chairman of the Board, President and
Chief Executive Officer(1) 1989
Marshall Bartlett........... 73 Director(2) 1991
Larry J. Lawrence........... 56 Vice Chairman of the Board(1)(2)(3) 1989
Sir Brian G. Wolfson........ 63 Director(3) 1988
Alan J. Zakon............... 63 Director(1)(2)(3) 1993
</TABLE>
- --------
(1) Member of Executive Committee
(2) Member of Audit Committee
(3) Member of Compensation and Stock Option Committee
Mr. A. Lorne Weil has been a director of the Company since December 1989,
Chairman of the Board since October 31, 1991, Chief Executive Officer of the
Company since April 1992 and President of the Company since August 1997. Mr.
Weil held various senior management positions with the Company and its
subsidiaries from October 1990 to April 1992 and was a director and consultant
to Autotote Systems, Incorporated from 1982 until it was acquired by the
Company in 1989. Mr. Weil was President of Lorne Weil, Inc., a firm providing
strategic planning and corporate development services to high technology
industries, from 1979 to November 1992. Mr. Weil is currently a director of
Fruit of the Loom, Inc. and General Growth Properties, Inc.
Mr. Marshall Bartlett has been a director of the Company since December
1991. Mr. Bartlett acted as a consultant to the Company from June 1994 to June
1995 and was employed by the Company in various capacities from June 1993 to
June 1994. Mr. Bartlett was Executive Vice President and Chief Operating
Officer of Bourns Inc., an electronic component manufacturer, from 1979 until
his retirement in 1991.
Mr. Larry J. Lawrence has been a director of the Company since December 1989
and Vice Chairman of the Board since August 1997. Mr. Lawrence is co-founder
and since 1985 has been managing partner of Lawrence Venture Partners, the
general partner of Lawrence, Tyrrell, Ortale & Smith, a private equity fund
manager. He has been managing partner of LTOS II Partners, the general partner
of Lawrence, Tyrrell, Ortale & Smith II, since 1990 and has been the general
partner of Allegra (formerly LSH) Partners III, L.P., the general partner of
Allegra Capital Partners III, L.P. (formerly Lawrence, Smith & Horey III),
since May 1995. Mr. Lawrence served as a director of Autotote Systems,
Incorporated until it was acquired by the Company in 1989. Mr. Lawrence is
currently a director of several private companies.
Sir Brian G. Wolfson has been a director of the Company since 1988. Sir
Brian served as Vice Chairman of the Company's Board of Directors from May
1995 to August 1997 and as Acting President and Chief Executive Officer of the
Company from June 1991 to October 1991. Sir Brian served as Chairman from 1987
to May 1995, and as Deputy Chairman from May 1995 to September 1995, of
Wembley plc, a United Kingdom corporation.
4
<PAGE>
Sir Brian is currently Chairman of the Board of Natural Health Trends Corp.,
and a director of Fruit of the Loom, Inc. and Playboy Enterprises, Inc.
Mr. Alan J. Zakon has been a director of the Company since 1993 and Chairman
of the Executive Committee of the Board since August 1997. Mr. Zakon served as
Vice Chairman of the Company's Board of Directors from May 1995 to August
1997. Mr. Zakon served as a managing director of Bankers Trust Corporation
from 1989 to April 1995, and as Chairman of the Strategic Policy Committee of
Bankers Trust Corporation from 1989 to 1990. Mr. Zakon served as Chairman of
the Board of Boston Consulting Group from 1986 until 1989. Mr. Zakon is
currently a director of MicroFinancial Inc. and Arkansas Best Corporation.
THE BOARD RECOMMENDS A VOTE "FOR" EACH OF THE FIVE NOMINEES.
Meetings of the Board of Directors and Committees
The Board of Directors held a total of five meetings during fiscal 1998 and
consists of A. Lorne Weil, Marshall Bartlett, Larry J. Lawrence, Sir Brian G.
Wolfson and Alan J. Zakon. All directors attended each meeting of the Board,
and of the committees of the Board of which they were members that were held
during fiscal 1998, except as indicated below.
The Audit Committee of the Board of Directors consists of Larry J. Lawrence
(Chairman), Marshall Bartlett and Alan J. Zakon and met two times during
fiscal 1998. The Audit Committee recommends engagement of the Company's
independent accountants and is primarily responsible for approving their
services and for reviewing and evaluating, with the independent auditors and
management, the Company's accounting policies and its system of internal
accounting controls.
The Compensation and Stock Option Committee of the Board consists of Alan J.
Zakon (Chairman), Larry J. Lawrence and Sir Brian G. Wolfson and met five
times during fiscal 1998. Mr. Wolfson attended three of the five meetings held
during fiscal 1998. The Compensation and Stock Option Committee determines the
compensation of executive officers of the Company, makes recommendations to
the Board with regard to the adoption of new employee benefit plans, and
administers and approves awards under the Company's compensation plans
including the Annual Incentive Compensation Plan, the 1984 Stock Option Plan,
as amended, the 1992 Equity Incentive Plan, as amended and restated (the "1992
Plan"), the 1995 Equity Incentive Plan, as amended, and the 1997 Incentive
Compensation Plan, as amended (the "1997 Plan").
The Executive Committee of the Board consists of Alan J. Zakon (Chairman),
Larry J. Lawrence and A. Lorne Weil and met five times during fiscal 1998. The
Executive Committee is authorized to exercise all of the powers and authority
of the Board of Directors in the management of the business and affairs of the
Company between regular meetings of the full Board of Directors, subject to
Delaware law.
The Company has no nominating committee.
During fiscal 1998, no director attended fewer than 80% of the total number
of meetings of the Board and the committees of the Board on which he served.
5
<PAGE>
EXECUTIVE COMPENSATION; CERTAIN ARRANGEMENTS
Executive Compensation
The following table shows the compensation awarded or paid by the Company
for services rendered for the years ended October 31, 1996, 1997 and 1998 to
the Chief Executive Officer and the individuals who, in fiscal 1998, were the
other highest paid Executive Officers of the Company who received in excess of
$100,000 in salary and bonuses in that year (collectively the "Named Executive
Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long Term
Annual Compensation Compensation
------------------------ ------------
Awards
------
Securities
Underlying All Other
Name and Salary Bonus(1) Options Compensation
Principal Position Year ($) ($) (#) ($)
------------------ ---- ------- -------- ------------ ------------
<S> <C> <C> <C> <C> <C>
A. Lorne Weil............ 1998 475,000 683,068(2) 100,000 12,800(3)
President and 1997 441,000 441,000 200,000 12,800(4)
Chief Executive Officer 1996 441,400(5) -- 273,000 17,200(6)
William Luke(7).......... 1998 257,500 85,738 23,000 8,000(3)
Vice President and 1997 250,000 109,700 150,000 30,700(4)
Chief Financial Officer 1996 168,300 -- 150,000 --
Gerald Lawrence.......... 1998 245,700 91,799 23,000 8,000(3)
Executive Vice President 1997 230,000 93,700 150,000 19,100(4)
1996 219,300 -- 150,000 11,100(6)
Martin E. Schloss........ 1998 225,000 78,372 23,000 8,000(3)
Vice President, General 1997 210,000 89,800 150,000 8,000(4)
Counsel and Secretary 1996 195,000 -- 100,000 7,500(6)
</TABLE>
- --------
(1) See "Report of the Compensation and Stock Option Committee," which
describes performance based bonuses awarded to the Named Executive
Officers. Bonuses paid in any fiscal year are based on results of the
previous year.
(2) Consists of (i) a cash signing bonus in the amount of $275,000 payable in
connection with Mr. Weil entering into a new employment agreement with the
Company as of November 1, 1997, and (ii) a year-end bonus of $408,068 for
fiscal 1998, payment of which has been deferred by Mr. Weil pursuant to
the Company's Deferred Compensation Plan.
(3) Amounts of All Other Compensation for fiscal 1998 include the following:
(i) Contributions to the Company's defined contribution retirement plan
for salaried employees:
Mr. Weil, $8,000; Mr. Luke, $8,000, 40% of which contribution was
unvested on Mr. Luke's last date of employment; Mr. G. Lawrence,
$8,000; Mr. Schloss, $8,000.
(ii) Life insurance coverage: Mr. Weil, $4,800.
(4) Amounts of All Other Compensation for fiscal 1997 include the following:
(i) Contributions to the Company's defined contribution retirement plan
for salaried employees:
Mr. Weil, $8,000; Mr. Luke, $4,300, 40% of which contribution was
unvested on Mr. Luke's last date of employment; Mr. G. Lawrence,
$8,000; Mr. Schloss, $8,000.
(ii) Life insurance coverage: Mr. Weil, $4,800.
6
<PAGE>
(iii) Automobile allowance: Mr. G. Lawrence, $800.
(iv) Relocation reimbursement: Mr. Luke, $26,400; Mr. G. Lawrence, $10,300.
(5) Mr. Weil's 1996 annual compensation consisted of $430,000 in base salary
plus a CPI adjustment of $11,400 owed during fiscal year 1995.
(6) Amounts of All Other Compensation for fiscal 1996 include the following:
(i) Contributions to the Company's defined contribution retirement plan
for salaried employees:
Mr. Weil, $7,500; Mr. G. Lawrence, $7,500; Mr. Schloss, $7,500.
(ii) Life insurance coverage: Mr. Weil, $9,700.
(iii) Automobile allowance: Mr. G. Lawrence, $3,600.
(7) Mr. Luke served as the Company's Vice President and Chief Financial
Officer during fiscal 1998 and resigned such positions effective as of
November 4, 1998.
Stock Options
The following table sets forth information regarding stock options granted
to the Named Executive Officers during the fiscal year ended October 31, 1998.
<TABLE>
<CAPTION>
Potential
Realizable
Value
at Assumed
Annual Rates
of Stock
Price
Appreciation
Options Granted in Fiscal Year 1998 for
Individual Grants(1) Option Term(2)
------------------------------------------ -----------------
(a) (b) (c) (d) (e) (f) (g)
- ------------------------ ---------- ----------- -------- ---------- -------- --------
Number of % of Total
Securities Options
Underlying Granted to
Options Employees Exercise
Granted in Price Expiration 5% 10%
Name #(3) Fiscal Year ($/Sh) Date ($) ($)
---- ---------- ----------- -------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
A. Lorne Weil........... 100,000 13.66% $2.75 5-20-08 $172,946 $438,279
William Luke(4)......... 23,000 3.14% $2.75 12-31-00(4) $ 8,606 $ 17,900
Gerald Lawrence......... 23,000 3.14% $2.75 5-20-08 $ 39,778 $100,804
Martin E. Schloss....... 23,000 3.14% $2.75 5-20-08 $ 39,778 $100,804
</TABLE>
- --------
(1) These options were granted under the Company's 1997 Plan which was
approved by the stockholders of the Company on August 13, 1997, and the
provisions of the options are governed by the plan and the recipient's
option agreement. The options entitle the holder to purchase shares of
Common Stock at a price which is equal to the fair market value of the
stock on the date the option was granted. Payment of this price may be
made in cash or, subject to certain requirements, through delivery of
shares of Common Stock or other consideration. The payment of withholding
taxes due upon exercise of the option may be made with shares of Common
Stock.
(2) Represents the product of (i) the difference between (A) the per-share
fair market price at the time of the grant compounded annually at the
assumed rate of appreciation over the term of the option, and (B) the per-
share exercise price of the option, and (ii) the number of shares
underlying the grant at October 31, 1998.
(3) These options become exercisable in four equal annual installments
beginning on May 21, 1999, or in full as of the time of a change in
control (as defined in the plan). During the 60-day period preceding a
change in control, the option holder may, in lieu of exercise, be entitled
to elect to receive payment in cash of the excess of the change in control
price (as defined in the plan) over the exercise price with respect to the
7
<PAGE>
unvested portion of the option. The vesting of these options may also
accelerate in the event the holder's employment is terminated at the time
of or within two years following a change in control pursuant to the
agreements between the Company and the Named Executive Officers (the
"Employee Agreements") entered into as of November 1, 1997 (see "Certain
Arrangements Between the Company and its Directors and Officers--Employee
Agreements"). Mr. Weil's option may become fully exercisable pursuant to
his Employee Agreement if his employment terminates in other circumstances,
including retirement, death and disability, and the period of exercise of
such option may be longer than the period described below for other
holders, though no later than the expiration date of the option. The
options may not be pledged or encumbered and may not be transferred
otherwise than by will, the laws of descent and distribution or to the
designated beneficiary on file with the Company; upon the death of a
holder, the recipient's option agreement provides that the portion of the
option which was vested immediately prior to his death may be exercised for
a period of one year following his death, though no later than the
expiration date of the option. In the event of a termination of employment
by the Company other than for cause, or death, an option holder has the
right to exercise such option at any time within (x) the three months
following such termination, or (y) the period provided for pursuant to the
Employee Agreements, though in either case no later than the expiration
date of the option, for the full number of shares that was exercisable at
the time of termination, or such greater number pursuant to the aforesaid
Agreements. In the event of termination for cause, the option shall be
canceled upon termination.
(4) Mr. Luke's option will expire on December 31, 2000 pursuant to his
severance arrangement with the Company. The acceleration provisions
provided for under the aforesaid Employee Agreements do not apply to Mr.
Luke's option.
The following table sets forth information for the Named Executive Officers
with respect to fiscal 1998 year-end option values.
Aggregated Option Exercises in
Fiscal Year 1998, and 1998 Fiscal Year-End Option Value
<TABLE>
<CAPTION>
(a) (b) (c) (d) (e)
--- ----------- ----------- ------------------- -----------------
Number of
Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Options at Options at
Oct. 31, 1998 Oct. 31, 1998
Shares (#) ($)
Acquired on Value Exercisable/ Exercisable/
Name Exercise(#) Realized($) Unexercisable Unexercisable
---- ----------- ----------- ------------------- -----------------
<S> <C> <C> <C> <C>
A. Lorne Weil........... -0- -0- 1,311,500 / 386,500 $28,125 / $84,375
William Luke............ -0- -0- 112,500 / 210,500 $21,094 / $63,281
Gerald Lawrence......... -0- -0- 112,500 / 210,500 $21,094 / $63,281
Martin E. Schloss....... -0- -0- 127,500 / 185,500 $14,063 / $42,188
</TABLE>
REPORT OF THE COMPENSATION AND STOCK OPTION COMMITTEE
The Compensation and Stock Option Committee (the "Committee") of the Board
of Directors of the Company for fiscal 1998 consisted of Alan J. Zakon, Larry
J. Lawrence and Sir Brian G. Wolfson. The Committee's responsibilities include
determining the compensation of the Company's executive officers, making
recommendations to the Board of Directors with regard to the adoption of new
employee benefit plans, and administering and making awards under the
Company's compensation and stock option plans. No member of this Committee was
an officer or employee of the Company during fiscal 1998.
8
<PAGE>
Compensation Components and Philosophy
The principal components of the Company's compensation program consist of
base salaries, cash bonuses and stock options. The Company's compensation
program is designed to align management and stockholder interests by providing
incentive compensation through stock option awards and performance-based
bonuses. The Committee receives input from the Company's Chief Executive
Officer and other senior managers in the Company and reviews their proposals
concerning executive compensation before making a final determination
concerning the scope and nature of compensation arrangements. It is the
Company's current policy to establish, structure and administer compensation
plans and arrangements so that the deductibility to the Company of such
compensation will not be limited under Section 162(m) of the Internal Revenue
Code.
Executive Officer Compensation
Base salaries for key employees are reviewed by the Committee on an annual
basis in conjunction with the Company's annual budget for the upcoming fiscal
year. The Company's philosophy is to provide base salaries at a level
comparable to positions of similar responsibility in similar companies and
industries in order to retain the services of key employees who are in a
position to make significant contributions to the Company's attainment of its
objectives.
Annual Incentive Compensation
During fiscal 1996, the Company established an annual incentive compensation
plan which provides bonus opportunities for the Company's key executive
personnel based on three criteria: (1) the Company's overall financial
performance relative to the budget for a given fiscal year as approved by the
Board of Directors, (2) the financial performance of individual business units
of the Company for executives directly involved with the operation of those
units, and (3) a qualitative assessment by the Committee of individual
performance not directly measurable by financial results pursuant to
recommendations made by the Chief Executive Officer and other senior managers
in the Company. Financial performance for the Company and its business units
was principally measured by attainment of "EBITDA" (Earnings Before Interest,
Taxes, Depreciation and Amortization) targets for 1998. Potential payments
under the annual incentive compensation plan during fiscal 1998 ranged from
25% to 50% of base salary for executives other than the Chief Executive
Officer. The purpose of the plan is to reward employees who have made
significant contributions to the Company's achievement of its objectives and
to provide an incentive for further contributions. Bonuses were paid under the
plan to executives of the Company for fiscal 1998 for the achievement by the
Company and its business units of certain financial performance targets as
well as various strategic objectives during the fiscal year which
significantly strengthened and expanded the Company's businesses, including
the following:
. Obtaining and completing first shipments of an order for up to 20,000
EXTREMA(TM) lottery terminals.
. Implementation of new lotteries in Connecticut, Dominican Republic and
Barbados; and selection as lottery supplier for Montana.
. Startup of race book operations at the Mohegan Sun Casino.
. Acquisition of all pari-mutuel wagering in The Netherlands.
. Successful launch of OTBs in Germany.
. Commencement of the Company's NASRIN(TM) communications business.
Fiscal 1998 bonuses to the Named Executive Officers pursuant to this plan
totaled $663,977.
Stock Option Plan
While base salary and the annual incentive compensation components are tied
to employee responsibility and the Company's financial performance and
progress in achieving strategic goals, the purpose of stock option grants is
to align stockholder and employee interests by providing a component of
compensation tied directly to the performance of the Company's stock price.
During fiscal 1998, grants of options to purchase a total of 169,000 shares of
Common Stock were made to the Named Executive Officers of the Company at the
exercise price of $2.75 per share.
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CEO Compensation
Effective November 1, 1997, the Company and A. Lorne Weil entered into a
three-year employment agreement (the "Weil Employment Agreement"). Pursuant to
the Weil Employment Agreement, Mr. Weil received a cash signing bonus of
$275,000, and a base salary of $475,000 for fiscal 1998. The Weil Employment
Agreement provides Mr. Weil with an opportunity to earn annual incentive
compensation in amounts determined by the Committee in accordance with the
Company's annual incentive compensation plan, provided that the opportunity
shall not be less than 25% of his base salary for achievement of target level
performance, an additional amount of not less than 25% of his base salary for
achievement of a specified level of performance in excess of the target level,
and an additional amount, in the Board's discretion, of up to 50% of his base
salary upon achievement of strategic objectives. Mr. Weil was awarded a fiscal
year-end bonus of $408,068, as a result of the Company and Mr. Weil having
achieved the financial and performance objectives referred to above. The
payment of Mr. Weil's bonus was deferred by Mr. Weil pursuant to the Company's
Deferred Compensation Plan.
Compensation and Stock Option Committee
Alan J. Zakon, Chairman
Larry J. Lawrence
Brian G. Wolfson
Compensation Committee Interlocks and Insider Participation
The Compensation and Stock Option Committee of the Board of Directors
consisted of Alan J. Zakon (Chairman), Larry J. Lawrence and Sir Brian G.
Wolfson during fiscal 1998.
Alan J. Zakon received an annual retainer of $75,000 for serving as Chairman
of the Executive Committee of the Board during fiscal 1998; and Larry J.
Lawrence received an annual retainer of $150,000 for serving as Vice Chairman
of the Board during fiscal 1998 (see "Certain Arrangements Between the Company
and its Directors and Officers--Directors' Compensation" below).
For information relating to an offer by the Company to amend warrants
originally issued as of October 31, 1991, which warrant holders include
certain members of the Compensation and Stock Option Committee, see "Certain
Transactions" below.
Certain Arrangements Between the Company and its Directors and Officers
Deferred Compensation
During fiscal 1998, the Board adopted a non-qualified deferred compensation
plan (the "Deferred Compensation Plan"), and established a "grantor trust" to
assist it in meeting its obligations under the plan. The plan enables eligible
employees and directors to defer receipt of a part of their compensation to a
future year. The individuals eligible to participate in the plan consist of
(x) certain key employees selected by the Company each year (for fiscal 1998
and 1999, all of the annual incentive compensation plan participants) with
respect to up to 100% of the compensation which may be payable as any end-of-
year bonus, for fiscal 1998 and thereafter, and (y) all of the non-employee
directors of the Company, with respect to up to 100% of the fees which may be
payable for director services, for fiscal 1999 and thereafter. Deferral
elections generally must be made prior to the beginning of the Company's
fiscal year for which compensation is paid. It is intended that amounts
deferred under the Deferred Compensation Plan will not be subject to any
federal and, in most cases, state and local income taxes until participants
receive payment from the plan. Accounts will be maintained for each of the
participants, who will elect to have their accounts mirror the performance of
investment options that the Company may offer from time to time. Unless
participants elect to extend a deferral period, deferrals and related earnings
will be paid as soon as practicable following the end of the deferral period.
Accounts under the
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Deferred Compensation Plan may be distributed prior to that date if a
participant leaves the Company, dies or becomes disabled, if there is a change
in control, if the Company terminates the Plan or, under extremely limited
circumstances, in the event of an "unforeseeable emergency". The non-employee
directors were not eligible to participate in the Deferred Compensation Plan
with respect to their fiscal 1998 compensation. Of the Named Executive
Officers, only Mr. Weil elected to defer his fiscal 1998 bonus, which was
deposited by the Company into a self-directed deferred compensation account
for the benefit of Mr. Weil in December 1998.
Employee Agreements
Effective November 1, 1997 (the "Effective Date"), the Company and A. Lorne
Weil entered into a three-year employment agreement, pursuant to which Mr.
Weil received a cash signing bonus of $275,000. Mr. Weil's agreement was
amended by letter dated September 10, 1998 (as amended, the "Weil Employment
Agreement"). The Weil Employment Agreement provides for an annual base salary
of $475,000, subject to annual increases in accordance with the Consumer Price
Index, an opportunity for annual incentive compensation of not less than 25%
of his base salary for achievement of target level performance, an additional
amount of not less than 25% of his base salary for achievement in excess of
the target level, and an additional amount, in the Board's discretion, of up
to 50% of his base salary upon achievement of strategic objectives. The term
of the Weil Employment Agreement extends automatically each year unless either
party serves written notice six months prior to the date upon which such
extension would become effective. Pursuant to the Weil Employment Agreement,
if the Company terminates Mr. Weil's employment without Cause (as defined in
the Weil Employment Agreement), which includes the Company's election not to
extend the term, or Mr. Weil terminates his employment for Good Reason (as
defined in the Weil Employment Agreement) (i) prior to or more than two years
after a Change in Control (as defined in the Weil Employment Agreement), Mr.
Weil will be entitled to: (a) receive cash severance over a period of two
years in the amount equal to two times the sum of his then current base salary
and the annual incentive compensation payable to Mr. Weil upon achievement of
the target level of performance for the year of termination; (b) retain all
stock options held at termination, such options becoming vested and
exercisable at the date of termination, and any such options which were
granted on or after the Effective Date or, if previously granted, were not "in
the money" on such date, will remain exercisable until the scheduled
expiration date of such options; (c) receive a pro rata annual incentive
amount, in accordance with a formula, for the year of termination; and (d)
continue participation in certain employee benefit plans for a period of two
years, but not after age 65, and if such plans do not allow such continuation,
to receive payment in lieu of such benefits; (ii) simultaneous with or within
two years after a Change in Control, Mr. Weil will be entitled to: (a) receive
cash severance in a lump sum equal to three times the sum of his then current
base salary and the higher of the average annual incentive compensation paid
for the prior three years and the annual incentive compensation payable upon
achievement of the target level of performance for the year of termination;
(b) retain all stock options in the manner described above; (c) full vesting
and settlement of all deferred stock held at termination; (d) receive a pro
rata annual incentive amount for the year of termination; and (e) continue
participation in certain employee benefit plans for a period of three years,
but not after age 65, and if such plans do not allow such continuation, to
receive payment in lieu of such benefits. The Weil Employment Agreement also
provides that if Mr. Weil's employment terminates due to retirement, death, or
disability, Mr. Weil will be entitled to (a) retain all stock options held at
termination, such options becoming vested and exercisable, and such options
which were granted on or after the Effective Date will be exercisable until
the earlier of three years and the scheduled expiration date of such options;
and (b) receive a pro rata annual incentive amount for the year of
termination. If Mr. Weil's employment terminates due to disability, Mr. Weil
will also be entitled to continue participation in certain employee benefit
plans until age 65, and if such plans do not allow such continuation, to
receive payment in lieu of such benefits.
Effective as of November 1, 1997 (the "Effective Date"), the Company entered
into a Change in Control Agreement (the "Change in Control Agreements") with
each of Gerald Lawrence, Martin E. Schloss, William Luke and DeWayne E. Laird,
who assumed the positions of Vice President and Chief Financial Officer of the
Company in November 1998, as well as with other executives of the Company and
its subsidiaries, though Mr. Luke's Change in Control Agreement has since been
terminated (see below). The Change in Control Agreements
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provide for an initial term of three years ending on October 31, 2000, which
extends automatically each year without further action by either party, unless
either party serves written notice upon the other party six months prior to
the date upon which such extension would become effective. Pursuant to each of
the Change in Control Agreements, if the Company terminates the employment of
any of the individuals party to the agreement (the "Executives") without Cause
(as defined in the Change in Control Agreements), or an Executive terminates
his employment for Good Reason (as defined in the Change in Control
Agreements), at the time of or within two years following a Change in Control
(as defined in the Change in Control Agreements), such Executive will be
entitled to: (a) receive cash severance in a lump sum equal to two times the
sum of his then current base salary and the higher of the average annual
incentive compensation paid to him for the three prior years, and the annual
incentive compensation payable to him upon achievement of the target level of
performance for the year of termination; (b) retain all stock options held at
termination, such options becoming vested and exercisable at the date of
termination, and any such options which were granted on or after the Effective
Date or, if previously granted, were not "in the money" on such date, will
remain exercisable until the earlier of 36 months after termination and the
scheduled expiration date of such options; (c) full vesting and settlement of
all deferred stock held at termination; (d) receive a pro rata annual
incentive amount, in accordance with a formula, for the year of termination;
and (e) continue participation in certain employee benefit plans until the
earliest of 18 months, the date equivalent benefits are provided by a
subsequent employer, and age 65, and if such plans do not allow such
continuation, to receive payment in lieu of such benefits.
The Change in Control Agreements also provide that if an Executive's
employment with the Company is terminated without Cause and he is not entitled
to the severance described above, the Executive will be entitled to receive a
lump sum cash payment equal to his then current base salary.
The Company and William Luke entered into an agreement and general release
in December 1998 in connection with Mr. Luke's resignation of his positions as
Vice President and Chief Financial Officer of the Company in November 1998.
Pursuant to such arrangements, the Company agreed to (i) pay Mr. Luke cash
severance of approximately $270,000 following Mr. Luke's last day of
employment on December 31, 1998, (ii) extend the vesting and expiration date
of Mr. Luke's stock options for a two-year period ending December 31, 2000,
and (iii) pay Mr. Luke a year-end bonus of $85,738 with respect to services
rendered during fiscal 1998. All previous arrangements between the Company and
Mr. Luke, including the Change in Control Agreement, were terminated upon
execution by the parties of the agreement and general release.
Directors' Compensation
Effective as of October 23, 1997, each Director who is not an employee of
the Company is paid an annual retainer of $30,000, except that the Director
who serves as (x) Vice Chairman of the Board is paid $150,000, and (y)
Chairman of the Executive Committee is paid $75,000. Directors also receive
$1,000 plus expenses for each Board meeting attended, $1,000 plus expenses for
each committee meeting attended in person and held on a day other than on
which a Board meeting is held and $500 plus expenses for each committee
meeting attended that is held on the same day as a Board meeting or that is
held by telephone conference call. Members of the Executive Committee do not
receive fees for attending meetings thereof.
On November 1, 1997, each Director of the Company who is not an employee of
the Company received an automatic grant of 10,000 shares of Non-Employee
Director Restricted Stock pursuant to the 1992 Plan, which plan provides for
such grants of stock on an annual basis through and including November 1,
2000. The Board amended the 1992 Plan on September 10, 1998 in order to limit
the value of the grants of Non-Employee Director Restricted Stock to $30,000,
such that the number of shares granted in the future will equal the lesser of
10,000 and that number having an aggregate value of $30,000 on the date of
grant. These awards vest, on a cumulative basis, as to one-third of the shares
subject thereto on each of the first three anniversaries of the date of grant
or in full if the non-employee director ceases to serve as a director as a
result of death, disability, retirement at or after the age of 65, the failure
to be renominated or reelected, or in the event of a consolidation or merger
of the Company or a sale of substantially all of the Company's assets.
12
<PAGE>
Certain Transactions
On May 13, 1996, the Company extended a loan to A. Lorne Weil in the
principal amount of $250,000, such loan bearing interest at the rate of 5.5%
per annum and payable on May 13, 2004. In January 1998, Mr. Weil repaid the
loan in full including accrued interest of $22,000.
Effective November 2, 1998, the Board of Directors authorized the Company to
offer an amendment to its Common Stock Purchase Warrants originally issued as
of October 31, 1991 (the "Warrants") to certain holders including A. Lorne
Weil, Larry J. Lawrence, Alan J. Zakon and The Lorne Weil 1989 Trust (the
"Trust"); which amendment would extend the expiration date of the Warrants
from October 31, 1999 to October 31, 2002, in consideration for (i) a
provision precluding any exercise of such Warrants, except in the event of a
change in control (as defined in the Form of Warrant), prior to November 1,
1999, and (ii) an increase of the exercise price from $1.6357 per share to
$1.6875 per share. Mr. Weil, Mr. Zakon, and Mr. Lawrence, holders of Warrants
to purchase an aggregate of 982,605, 491,881, and 594,914, shares,
respectively, of the Company's Common Stock have each elected to amend their
respective warrants. The securities in the Trust are held for the benefit of
Mr. Weil's children and Mr. Weil disclaims beneficial ownership of such
securities.
Richard Weil, the brother of A. Lorne Weil, is Vice President of
International Business Development for Autotote Systems Inc., a subsidiary of
the Company. Richard Weil received a base salary of $150,000 and a bonus of
$64,658 for fiscal 1998.
STOCK PERFORMANCE GRAPH
The following graph compares the cumulative total stockholder return from
October 31, 1993 to October 31, 1998 on (a) the Company's Class A Common
Stock, (b) the American Stock Exchange ("AMEX") Market Value Index, on which
Exchange the Company's shares are traded, (c) a peer group index of companies
that provide services similar to those of the Company, consisting of
Powerhouse Technologies, International Lottery and Totalisator Systems, Inc.,
Penn National Gaming and Churchill Downs (the "Peer Group") and (d) a peer
group that was previously used by the Company, which consisted of
International Game Technology, Powerhouse Technologies, Alliance Gaming and
GTECH Holdings (the "Old Peer Group"). The Company chose to select a new peer
group due to changes in the Company's operations and markets and changes in
the Old Peer Group companies' businesses and markets that made the Old Peer
Group less comparable. The Company elected to use a 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 business. The peer group companies have been weighted based
upon their relative market capitalization each year.
[GRAPH APPEARS HERE]
13
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PROPOSAL 2--APPOINTMENT OF INDEPENDENT ACCOUNTANTS
The Board has appointed KPMG LLP as independent accountants for the Company
to examine the Company's financial statements for the current fiscal year
ending October 31, 1999 and recommends that the stockholders of the Company
ratify that appointment. KPMG LLP has served as the Company's independent
accountants for all fiscal years since the fiscal year ended October 31, 1982
and has no relationship with the Company other than that arising from its
employment as independent accountants, consultants and assistants in the
Company's performance of its internal audit function. Representatives of KPMG
LLP 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.
The persons named on the enclosed proxy card intend to vote each proxy for
ratification of the appointment of KPMG LLP unless such proxy specifies
otherwise. If the appointment is not ratified by stockholders, the Board is
not obligated to appoint other independent accountants, but the Board will
give consideration to such unfavorable vote.
THE BOARD RECOMMENDS A VOTE "FOR" THIS PROPOSAL
OTHER BUSINESS
The Board of Directors has no reason to believe that any other business in
addition to the foregoing will be presented at the Annual Meeting, but if any
other business is properly presented, votes pursuant to the proxy will be cast
thereon in accordance with the judgment of the persons named in the
accompanying proxy.
PROPOSALS FOR THE NEXT ANNUAL MEETING
Proposals of stockholders intended to be presented at the next annual
meeting must be received by the Company at its principal offices, 750
Lexington Avenue, 25th Floor, New York, New York 10022, Attention: Secretary,
for inclusion in the Company's proxy materials not later than November 1,
1999, except that if next year's annual meeting is more than thirty days
earlier or later than the date of this year's annual meeting, proposals must
be received a reasonable time before proxy materials are distributed in
connection with next year's annual meeting.
Your cooperation in giving this matter your immediate attention and in
returning your proxy promptly will be appreciated.
By Order of the Board of Directors
MARTIN E. SCHLOSS
Vice President, General Counsel and
Secretary
Dated: March 1, 1999
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PLEASE DATE, SIGN AND MAIL YOUR
PROXY CARD BACK AS SOON AS POSSIBLE!
ANNUAL MEETING OF STOCKHOLDERS
AUTOTOTE CORPORATION
APRIL 12, 1999
Please Detached and Mail in the Envelope Provided
A [X] Please mark your
vote as on this
example.
<TABLE>
<S> <C> <C> <C> <C> <C>
WITHHOLD
FOR All AUTHORITY
NOMINEES FOR ALL NOMINEES
1. Election of For Against Abstain
Directors: [_] [_] Nominees: A. Lorne Weil 2. Ratification of KPMG LLP as [_] [_] [_]
Marshall Barlett independent auditors of the
INSTRUCTION: To withhold authority Larry J. Lawrence Company for the fiscal year
to vote for any individual nominee(s) Sir Brian G. Wolfson ending October 31, 1998.
place an "x" in the left box (FOR ALL Alan J. Zahon 3. On such other matters as may properly come before
NOMINEES) and write that nominee's name the meeting
in the space provided below.
This proxy, when properly executed, will be voted in the
manner directed herein by the undersigned stockholder.
If no direction is given this proxy Will be voted for
the direction of all the nominees for director listed
above and for Proposal to:
Please check if you plan to attend the meeting [_]
Please mark, date and sigh the proxy and return it in
The enclosed envelope.
</TABLE>
SIGNATURE(S):_________________________ DATED _________________ __________ 1999
_________________________ DATED _____________________________ 1999
NOTE: Please sign enclosed as your name appears above. For joint accounts must
sign. Please give full of signing in a representative capacity.
<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 - APRIL 12, 1999
The undersigned hereby appoints Martin E. Schioss and DeWayne E. Laird, or
either of them, as Proxy or Proxies of the undersigned with full power of
substitution to act for the undersigned and to vote the full number of shares of
the Class A Common Stock of Autotote Corporation that the undersigned is
entitled to vote at the Annual Meeting of Stockholders of Autotote Corporation
to be held at the Hotel du Pont, Eleventh and Market Streets, Wilmington,
Delaware at 2:00 p.m., on Monday, April 12, 1999, and at any adjournments or
postponements thereof, in accordance with the instructions set forth on this
proxy card, and in their discretion, with respect to all other matters that may
properly come before the meeting. Any proxy heretofore given by the undersigned
with respect to such shares is hereby revoked.
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SEE REVERSE
(TO BE SIGNED ON REVERSE SIDE) SIDE
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