<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
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:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
</TABLE>
INTERNATIONAL LOTTERY, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(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:
<PAGE> 2
INTERNATIONAL LOTTERY, INC.
NOTICE OF
1997 ANNUAL MEETING
AND
PROXY STATEMENT
<PAGE> 3
[Interlott Letterhead]
April 9, 1997
Dear Stockholder:
You are cordially invited to attend the 1997 Annual Meeting of Stockholders
of International Lottery, Inc. to be held at the Best Western Blue Ash Hotel &
Conference Center located at 5901 Pfeiffer Road, Cincinnati, Ohio, on Thursday,
May 8, 1997, at 10:00 a.m., local time.
The attached Notice of Annual Meeting and Proxy Statement describe the
formal business to be transacted at the Annual Meeting. During the meeting, we
also will report on the operations of the Company during the past year, and the
directors and officers of the Company will be present to respond to appropriate
questions from stockholders.
I hope that you will be able to attend the Annual Meeting. If you plan to
attend, please mark the appropriate box at the bottom of your proxy card so
that we can make appropriate arrangements for the anticipated number of guests.
Whether or not you plan to attend the Annual Meeting, please sign, date and
return your proxy card in the enclosed envelope at your earliest convenience.
This will assure that your shares will be represented and voted at the Annual
Meeting even if you are unable to attend.
Sincerely,
/s/ L. Rogers Wells, Jr.
L. Rogers Wells, Jr.
Chairman of the Board and
Chief Executive Officer
<PAGE> 4
INTERNATIONAL LOTTERY, INC.
6665 CREEK ROAD
CINCINNATI, OHIO 45242
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 8, 1997
NOTICE HEREBY IS GIVEN that the 1997 Annual Meeting of Stockholders of
International Lottery, Inc. ("the Company") will be held at the Best Western
Blue Ash Hotel & Conference Center located at 5901 Pfeiffer Road, Cincinnati,
Ohio, on Thursday, May 8, 1997 at 10:00 a.m., local time, for the purpose of:
1. Amending the Company's Certificate of Incorporation to change
the name of the Company to Interlott Technologies, Inc.;
2. Electing three directors to serve until the 2000 Annual
Meeting of Stockholders;
3. Ratifying the appointment of KPMG Peat Marwick LLP as
independent accountants of the Company for the fiscal year ending
December 31, 1997; and
4. Transacting such other business as properly may come before
the Annual Meeting or any adjournments thereof.
Information relating to matters 1-3 is set forth in the attached Proxy
Statement. Stockholders of record at the close of business on April 3, 1997
are entitled to receive notice of and to vote at the Annual Meeting and any
adjournments thereof. A list of stockholders of the Company as of the close of
business on April 3, 1997 will be available for inspection during normal
business hours from April 28, 1997 through May 8, 1997 at the headquarters of
the Company, 6665 Creek Road, Cincinnati, Ohio.
By Order of the Board of Directors.
/s/ Gary S. Bell
Gary S. Bell
Secretary
Cincinnati, Ohio
April 9, 1997
PLEASE READ THE ATTACHED PROXY STATEMENT AND THEN PROMPTLY COMPLETE, EXECUTE
AND RETURN THE ENCLOSED PROXY CARD IN THE ACCOMPANYING POSTAGE-PAID ENVELOPE.
YOU CAN SPARE YOUR COMPANY THE EXPENSE OF FURTHER PROXY SOLICITATION BY
RETURNING YOUR PROXY CARD PROMPTLY. IF YOU ATTEND THE ANNUAL MEETING, YOU MAY
REVOKE THE PROXY AND VOTE IN PERSON IF YOU SO DESIRE.
<PAGE> 5
INTERNATIONAL LOTTERY, INC.
____________
PROXY STATEMENT
FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 8, 1997
_____________
This Proxy Statement is furnished to the stockholders of International
Lottery, Inc. (the "Company") in connection with the solicitation of proxies by
the Board of Directors of the Company for use at the 1997 Annual Meeting of
Stockholders of the Company and at any adjournments thereof (the "Annual
Meeting"). The Annual Meeting will be held on Thursday, May 8, 1997 at 10:00
a.m. local time at the Best Western Blue Ash Hotel & Conference Center located
at 5901 Pfeiffer Road, Cincinnati, Ohio.
The approximate date on which this Proxy Statement and the accompanying
proxy card are first being sent or given to stockholders is April 9, 1997.
VOTING
GENERAL
The securities that can be voted at the Annual Meeting consist of Common
Stock of the Company, $.01 par value per share, with each share entitling its
owner to one vote on each matter submitted to the stockholders. The record
date for determining the holders of Common Stock who are entitled to receive
notice of and to vote at the Annual Meeting is April 3, 1997. On the record
date, 3,210,000 shares of Common Stock were outstanding and eligible to be
voted at the Annual Meeting.
QUORUM AND VOTE REQUIRED
The presence, in person or by proxy, of a majority of the outstanding
shares of Common Stock is necessary to constitute a quorum at the Annual
Meeting. In counting the votes to determine whether a quorum exists at the
Annual Meeting, the proposal receiving the greatest number of all votes cast
"for" or "against" as well as any abstentions (including instructions to
withhold authority to vote) will be used.
In accordance with Delaware law (under which the Company is organized) and
the Company's Bylaws, the affirmative vote of the holders of a majority of the
shares of Common Stock represented in person or by proxy at the Annual Meeting
is required to approve the proposal to change the name of the Company (Proposal
1) and the proposal to ratify the Board of Directors' appointment of
independent accountants for the Company (Proposal 3), provided a quorum is
present. As a result, shares that are abstained from voting on these proposals
will have the same effect as a vote against the proposal, and any broker
non-votes will have no effect. In accordance with Delaware law and the
Company's Bylaws, the affirmative vote of the holders of a plurality of the
shares of Common Stock represented in person or by proxy at the Annual Meeting
is required to elect directors (Proposal 2), provided a quorum is present. As
a result, shares that are withheld from voting on the proposal and any broker
non-votes will have no effect.
The Company has been advised by Mr. L. Rogers Wells, Jr., who owns a
majority of the outstanding Common Stock of the Company, that he intends to
vote all of his shares of Common Stock in favor of each of the three proposals.
Accordingly, adoption of the three proposals is assured.
<PAGE> 6
PROXIES
The accompanying proxy card is for use at the Annual Meeting if a
stockholder is unable to attend in person or is able to attend but does not
wish to vote in person. Stockholders should specify their choices with regard
to the three proposals on the enclosed proxy card. All properly executed and
dated proxy cards delivered by stockholders to the Company in time to be voted
at the Annual Meeting and not revoked will be voted at the Annual Meeting in
accordance with the instructions given. If no specific instructions are given,
the shares represented by a signed and dated proxy card will be voted "FOR" the
change in the name of the Company described in Proposal 1, "FOR" the election
of the three director nominees named in Proposal 2 and "FOR" the ratification
of the directors' selection of independent accountants described in Proposal 3.
If any other matters properly come before the Annual Meeting, the persons
named as proxies will vote upon such matters according to their judgment. The
Board of Directors is not aware of any other business to be presented to a vote
of the stockholders at the Annual Meeting.
The giving of a proxy does not affect the right to vote in person should
the stockholder attend the Annual Meeting. Any stockholder who has given a
proxy has the power to revoke it at any time before it is voted by giving
written notice of revocation to Gary S. Bell, the Secretary of the Company, at
6665 Creek Road, Cincinnati, Ohio 45242; by executing and delivering to Mr.
Bell a proxy card bearing a later date; or by voting in person at the Annual
Meeting.
In addition to soliciting proxies directly, the Company has requested
brokerage firms, nominees, custodians and fiduciaries to forward proxy
materials to the beneficial owners of shares held of record by them. The
Company also may solicit proxies through its directors, officers and employees
in person and by telephone and facsimile, without payment of additional
compensation to such persons. All expenses incurred in connection with the
solicitation of proxies will be borne by the Company.
PRINCIPAL STOCKHOLDERS
As of December 31, 1996, the only persons known to the Company to be the
beneficial owners of more than five percent of the Company's Common Stock were
Mr. L. Rogers Wells, Jr., who is the Chairman of the Board and Chief Executive
Officer of the Company, and Mr. Edmund F. Turek, who is the President of the
Company. For information regarding the beneficial ownership of the Company's
Common Stock as of December 31, 1996 by Messrs. Wells and Turek and by each of
the other directors, director nominees and executive officers of the Company,
see "Proposal 2 - Election of Directors - Information Regarding Nominees and
Continuing Directors." As of December 31, 1996, the nine directors and
executive officers of the Company as a group beneficially owned 1,888,300
shares, equal to 57.73% of the Common Stock of the Company (including 175,500
shares which are owned by spouses and 61,000 shares which may be acquired upon
the exercise of outstanding stock options within 60 days after December 31,
1996).
2
<PAGE> 7
PROPOSAL 1 - AMENDMENT TO CERTIFICATE OF INCORPORATION
TO CHANGE THE NAME OF THE COMPANY
The Board of Directors has approved an amendment to the Company's
Certificate of Incorporation to change the name of the Company to Interlott
Technologies, Inc. The amendment is subject to stockholder approval and is
being presented to the stockholders at the Annual Meeting for consideration and
approval.
In the Board's opinion, the name "Interlott Technologies, Inc." better
reflects the Company and its business today than does the name "International
Lottery, Inc." First, the Company has operated under the tradename "Interlott"
since the Company's inception in 1990, and the Board believes that the name
"Interlott" is more recognized and generally associated with the Company than
is the name "International Lottery." Second, the Company's business today
consists not only of manufacturing instant ticket dispensing machines for the
lottery industry but also manufacturing long distance telephone card dispensing
machines. Additionally, the Company is developing a device that dispenses
"smart cards" for the financial services industry and intends to expand its
product line to other industries in the future. The deletion of the word
"International" from the Company's name does not reflect any de-emphasis by the
Company on international operations; however, the Board of Directors believes
that it adds no significant recognition value to the Company's name.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE "FOR"
THE PROPOSAL TO AMEND THE COMPANY'S CERTIFICATE OF INCORPORATION TO CHANGE THE
NAME OF THE COMPANY TO INTERLOTT TECHNOLOGIES, INC.
PROPOSAL 2 - ELECTION OF DIRECTORS
NOMINEES
Pursuant to the Company's Certificate of Incorporation and Bylaws, the
Board of Directors of the Company consists of seven members who are divided
into three classes as nearly equal in number as possible. The directors in
each class are elected by the stockholders for a term of three years and until
their successors are elected and qualified. The term of office of one of the
classes of directors expires each year at the Annual Meeting of Stockholders,
and a new class of either two or three directors is elected by the stockholders
each year at that time.
At the Annual Meeting, the terms of Gary S. Bell, Edmund F. Turek and L.
Rogers Wells, Jr. will expire, and the Board of Directors has nominated each of
these three individuals to stand for re-election as directors at the Annual
Meeting. If elected by the stockholders, each of the nominees will serve a
three-year term which will expire at the 2000 Annual Meeting of Stockholders.
If any of the nominees should be unavailable to serve for any reason (which is
not anticipated), the Board of Directors may designate a substitute nominee or
nominees (in which case the persons named as proxies on the enclosed proxy card
will vote the shares represented by all valid proxy cards for the election of
such substitute nominee or nominees), allow the vacancy or vacancies to remain
open until a suitable candidate or candidates are located, or by resolution
provide for a lesser number of directors.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE "FOR"
THE PROPOSAL TO RE-ELECT GARY S. BELL, EDMUND F. TUREK AND L. ROGERS WELLS, JR.
AS DIRECTORS OF THE COMPANY FOR A THREE-YEAR TERM EXPIRING AT THE 2000 ANNUAL
MEETING OF STOCKHOLDERS AND UNTIL THEIR SUCCESSORS HAVE BEEN DULY ELECTED AND
QUALIFIED.
3
<PAGE> 8
INFORMATION REGARDING NOMINEES AND CONTINUING DIRECTORS
The following table sets forth certain information regarding the three
nominees for director as well as the four incumbent directors whose terms as
directors will continue following the Annual Meeting. Except as otherwise
indicated, each of the named persons has been engaged in his or her present
principal occupation for more than five years. Stock ownership information is
as of December 31, 1996.
<TABLE>
<CAPTION>
SHARES OF
COMMON STOCK
BENEFICIALLY OWNED
NAME BUSINESS INFORMATION (PERCENT OF CLASS)(1)
- ---- -------------------- ---------------------
<S> <C> <C>
PERSONS NOMINATED FOR ELECTION TO
SERVE AS DIRECTORS UNTIL THE 2000
ANNUAL MEETING OF STOCKHOLDERS
Gary S. Bell Mr. Bell, age 46, has been 2,750(2)
Secretary and Treasurer of the (*)
Company since 1993. Mr. Bell
has been Executive Vice
President - Commercial Loans
of Peoples Bank & Trust
Company, Greensburg, Kentucky,
since February 1997. He also
has served as Chief Financial
Officer of International
Investments, Inc. ("III"), an
investment company owned by
Mr. L. Rogers Wells, Jr.,
since May 1995 and previously
served in this position from
1993 until October 1994. He
was a self-employed business
and financial consultant from
October 1994 until May 1995.
From 1982 until 1993, he
served in various positions
with The New Farmers National
Bank of Glasgow and its
holding company, Commonwealth
Bancorp, including most
recently as Executive Vice
President and Chief Credit
Officer of The New Farmers
National Bank of Glasgow from
1986 until 1993. Mr. Bell
also served as Chief Credit
Officer of Bowling Green Bank
& Trust Company, N.A., another
subsidiary of Commonwealth
Bancorp, from 1991 until 1993.
Mr. Bell has been a director
of the Company since 1993.
</TABLE>
4
<PAGE> 9
<TABLE>
<S> <C> <C>
Edmund F. Turek Mr. Turek, age 70, has served 180,250(2)
as President and a director of (5.60%)(3)
the Company since 1990 and
served as Chairman of the
Board and Chief Executive
Officer of the Company from
1990 to 1992. Mr. Turek began
to develop the Company's
instant ticket vending machine
in 1987 and has guided the
product through six
generations to the current
model. Mr. Turek was Vice
President of Peripheral
Products in the computer
division of SCI Systems, Inc.
from 1984 to 1989 where he
developed business
opportunities in the
commercial market for the
design and manufacture of
computer products. From 1953
to 1984, Mr. Turek held
management, product
development and operations
positions with various
companies in the computer and
aerospace industries.
L. Rogers Wells Mr. Wells, age 59, is Chairman 1,666,250(2)
Jr. of the Board and Chief (51.34%)(3)
Executive Officer of the
Company and has been the
principal stockholder of the
Company since purchasing 80%
of the Common Stock of the
Company in 1992. Mr. Wells
served as a director of the
Company from 1992, and as
Chairman of the Board and
Chief Executive Officer of the
Company from 1993, until his
resignation from these
positions in October 1994. He
was re-elected to these
positions in February 1995.
In addition, Mr. Wells owns
American Materials,
Incorporated, which assembles
and distributes automobile and
truck components and serves as
a regional warehousing and
distribution center for
various businesses. Mr. Wells
also owns International
Investments, Inc. ("III"),
which invests in and provides
financing to various
businesses, including the
Company. See "Certain
Transactions." Mr. Wells also
has been active in various
other industries, including
manufacturing, mining,
explosives and banking. From
1987 through 1991, Mr. Wells
served as Secretary of Finance
and Administration for the
Commonwealth of Kentucky and
from 1989 through 1991 served
as Secretary to the Governor's
Executive Cabinet. During his
tenure as Secretary of Finance
and Administration, Mr. Wells
served as Chairman of various
finance and development
authorities, including the
Kentucky Rural Economic
Development Authority, the
Kentucky Infrastructure
Authority and the Kentucky
Housing Corporation.
</TABLE>
5
<PAGE> 10
DIRECTORS TO SERVE UNTIL THE 1999 ANNUAL MEETING OF STOCKHOLDERS
<TABLE>
<S> <C> <C>
John J. Wingfield Mr. Wingfield, age 50, has been Vice 6,750(2)
President-Investments of A.G. Edwards & Sons, (*)
Inc., a stock brokerage firm, since September
1995 and was First Vice President of Stifel,
Nicolaus & Company Incorporated, a stock
brokerage firm, from 1990 until September 1995.
Mr. Wingfield has been a registered stock broker
since 1973. Mr. Wingfield has been a director
of the Company since 1994.
W. Whitlow Wyatt Mr. Wyatt, age 49, has been Chairman of the 22,750(2)
Board and Chief Executive Officer of Altama (*)
Delta Corporation, a manufacturer of boots in
Atlanta, Georgia and a major supplier of combat
boots to the United States Department of
Defense, since 1987. In 1981, Mr. Wyatt
co-founded Stringer, Wyatt & Williams, Inc., a
privately held investment banking firm, in which
he served as a partner until 1987. Mr. Wyatt
had previously served in financial and
accounting positions with various other firms
since 1972, including Vice President-Finance of
Fuqua National, Inc., an investment company in
Atlanta, Georgia, and a certified public
accountant with Ernst & Young in Atlanta,
Georgia. He has been a director of the Company
since 1993.
DIRECTORS TO SERVE UNTIL THE 1998 ANNUAL MEETING OF STOCKHOLDERS
Kazmier J. Kasper Mr. Kasper, age 50, has been President and owner 4,750(2)
of Algonquin Industries, Inc. and HiTech Metals, (*)
Inc. in Bellingham, Massachusetts since 1974.
Theses two companies manufacture machine parts
for the computer, optic, robotic, gaming,
environmental, biomedical and electromechanical
industries. Prior to the founding of these two
companies, Mr. Kasper had served in various
positions in the manufacturing industry since
1969. Mr. Kasper has been a director of the
Company since 1993.
</TABLE>
6
<PAGE> 11
<TABLE>
<S> <C> <C>
H. Jean Marshall Ms. Marshall, age 51, has been Vice 1,500(2)
President-Marketing and a director of the Company (*)
since 1993 and was the Company's Director of
Retailer Relations from 1992 until 1993. In
these capacities, she is primarily responsible
for marketing to the lotteries and vendor support
services for the Company. Ms. Marshall served
from 1983 to 1987 as Regional Manager and then as
Regional Coordinator of the Ohio Lottery
Commission. From 1987 to 1989 she was an Account
Manager for British American Bank Note Company, a
Canadian manufacturer of instant lottery tickets,
and in this position had substantial involvement
with the Pennsylvania and New Jersey Lotteries.
In 1989, Ms. Marshall served as a consultant for
the Ohio Department of Rehabilitation and
Corrections, Bureau of Community Services. Ms.
Marshall returned to the Ohio Lottery in 1990 as
Deputy Director of Sales, where she was
responsible for the development of retailer
policies and procedures and coordinating,
directing and managing the sales division. Ms.
Marshall currently serves as Vice President of
the Board of Trustees of the Cincinnati Arts
Consortium and as a director of the Cincinnati
Minority Business Development Center.
</TABLE>
- -----------------------
* Denotes less than 1%.
(1) Beneficial ownership includes shares of Common Stock as to which a person
possesses sole or shared voting and/or investment power and shares which
may be acquired within 60 days after December 31, 1996 upon the exercise
of outstanding stock options. Shares which may be acquired upon the
exercise of stock options are deemed to be outstanding for the purpose of
computing the percentage of Common Stock owned by a particular individual
but are not deemed to be outstanding for the purpose of computing the
percentage ownership of any other person. To the Company's knowledge, the
named persons have sole voting and investment power with regard to the
shares shown as owned by them except as otherwise referenced in the
footnotes below.
(2) The shares shown include, with regard to each of Messrs. Bell, Kasper and
Wyatt, 2,750 shares which may be acquired upon the exercise of stock
options; with regard to Mr. Turek, 8,250 shares that may be acquired upon
the exercise of stock options and 64,500 shares that are owned by Mr.
Turek's wife; with regard to Mr. Wells, 35,250 shares that may be acquired
upon the exercise of stock options and 111,000 shares that are owned by
Mr. Wells' wife; with regard to Mr. Wingfield, 4,750 shares which may be
acquired upon the exercise of stock options; and with regard to Ms.
Marshall, 1,500 shares which may be acquired upon the exercise of stock
options.
(3) The address of Messrs. Wells and Turek, who are the only persons known by
management of the Company to be the beneficial owners of more than five
percent of the Company's Common Stock, is 6665 Creek Road, Cincinnati,
Ohio 45242.
7
<PAGE> 12
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors of the Company conducts its business through
meetings of the full Board and through committees of the Board, including
standing Audit, Compensation, Directors Stock Incentive Plan and Executive
Committees. During 1996, the Board of Directors held four meetings, the Audit
Committee held one meeting and the Compensation Committee held one meeting.
The Directors Stock Incentive Plan Committee and the Executive Committee did
not meet. Each director attended at least 75% of all meetings of the full
Board of Directors and of each committee of the Board of which he is a member
except Mr. Wyatt, who attended 67% of such meetings.
The Audit Committee is responsible for reviewing with the Company's
independent accountants their audit plan, the scope and results of their audit
engagement and the accompanying management letter, if any; reviewing the scope
and results of the Company's internal auditing procedures; consulting with the
independent accountants and management with regard to the Company's accounting
methods and the adequacy of its internal accounting controls; approving
professional services provided by the independent accountants; reviewing the
independence of the independent accountants; and reviewing the range of the
independent accountants' audit and non-audit fees. The Audit Committee is
composed of W. Whitlow Wyatt (Chairman), Gary S. Bell and John J. Wingfield.
The Compensation Committee is responsible for setting the compensation of
the Chairman of the Board and the President, ratifying the compensation of all
other officers and general wage and salary limits of employees, and
administering and interpreting the Company's 1994 Stock Incentive Plan. The
Compensation Committee is composed of Gary S. Bell (Chairman), John J.
Wingfield and W. Whitlow Wyatt.
The Directors Stock Incentive Plan Committee is responsible for
administering and interpreting the Company's 1994 Directors Stock Incentive
Plan. The Directors Stock Incentive Plan Committee is composed of H. Jean
Marshall (Chairperson), Edmund F. Turek and L. Rogers Wells, Jr.
The Executive Committee is authorized, within certain limits, to exercise
all of the authority of the Board of Directors during the interval between
Board meetings. The Executive Committee is composed of L. Rogers Wells, Jr.
(Chairman), Edmund F. Turek and Gary S. Bell.
The Board of Directors as a whole functions as a nominating committee to
select management's nominees for election as directors of the Company. The
Board of Directors will consider nominees recommended by stockholders if
submitted to the Company in accordance with the procedures set forth in Section
2.3 of the Bylaws of the Company. See "Stockholders' Proposals for 1998 Annual
Meeting" below.
DIRECTOR COMPENSATION
Directors who are not employees of the Company receive a fee of $1,000 for
each meeting of the Board of Directors or committee thereof attended in person
(rather than by telephone). Directors who are employees of the Company receive
no directors' fees. The Company paid a total of $4,000 in directors' fees in
1996.
Additionally, the Company's 1994 Directors Stock Incentive Plan (the
"DSIP") provides for the issuance of up to a total of 60,000 shares of Common
Stock of the Company to the non-employee directors of the Company. Shares may
be issued upon the exercise of stock options granted under the DSIP, and
8
<PAGE> 13
restricted shares of Common Stock also may be awarded under the DSIP. Restricted
shares are shares that are subject to forfeiture unless certain conditions are
met. The exercise price of all stock options granted under the DSIP is the fair
market value of the Company's Common Stock on the date of grant of the
respective stock options. All stock options and restricted shares are granted
or awarded subject to a vesting schedule which provides for the vesting each
year for a period of four years, subject to the recipient's continued service to
the Company, of 25% of the options or shares subject to each grant or award. The
Directors Stock Incentive Plan Committee determines the recipients, the amount
and form, the timing, and certain other terms of options and restricted shares
granted or awarded under the DSIP. Upon a "Change of Control" of the Company
(as such term is defined in the DSIP), all vesting and other restrictions
applicable to outstanding stock options and restricted shares granted under the
DSIP will be deemed waived or satisfied without action by the Company, the
Directors Stock Option Plan Committee or the recipients.
Each non-employee member of the Board of Directors - Gary S. Bell, Kazmier
J. Kasper, John J. Wingfield and W. Whitlow Wyatt - was granted options in 1994
for the purchase of 5,000 shares of Common Stock and was granted additional
options in each of 1995 and 1996 for the purchase of 1,000 shares and 1,500
shares, respectively, of Common Stock pursuant to the DSIP. The exercise price
of each of these options was equal to the fair market value of the Company's
Common Stock on the date of grant. All of these options expire ten years from
the date of grant.
ADDITIONAL INFORMATION
For additional information that should be considered with regard to the
election of directors, see "Executive Compensation," "Certain Transactions" and
"Section 16(a) Beneficial Ownership Reporting Compliance" below.
EXECUTIVE COMPENSATION
SUMMARY OF COMPENSATION
The following table summarizes by various categories, for the fiscal years
ended December 31, 1994, 1995 and 1996, the total compensation earned by the
Company's Chief Executive Officer, and by each other executive officers of the
Company who received salary and bonus in excess of $100,000 from the Company
for 1996, for services rendered by them in all capacities to the Company.
9
<PAGE> 14
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
----------
COMPENSATION
------------
ANNUAL COMPENSATION(1) AWARDS
---------------------- ------
SECURITIES
UNDERLYING
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) OPTIONS(#)
- --------------------------- ---- --------- -------- ---------
<S> <C> <C> <C> <C>
L. Rogers Wells, Jr. 1996 $150,000 $1,500 1,500
Chairman of the Board and 1995 132,692 -0- 71,000(2)
Chief Executive Officer 1994 69,231 -0- -0- (2)
Edmund F. Turek 1996 $120,000 $1,500 1,500
President 1995 120,000 -0- 1,000
1994 120,000 -0- 16,000
</TABLE>
_________________
(1) Excludes any perquisites and other personal benefits received, the total
value of which did not exceed 10% of the total annual salary and bonus for
the respective executive officers. See also "Employment Agreements"
below.
(2) In accordance with the terms of the Company's 1994 Stock Incentive Plan,
options for the purchase of 70,000 shares of Common Stock which were
granted to Mr. Wells in April 1994 were canceled in October 1994 when he
resigned as Chairman of the Board and Chief Executive Officer of the
Company. When Mr. Wells was re-elected as Chairman of the Board and Chief
Executive Officer in February 1995, the Company granted replacement
options for 70,000 shares to Mr. Wells.
EMPLOYMENT AGREEMENTS
The Company entered into employment agreements with L. Rogers Wells, Jr.
and Edmund F. Turek effective as of April 21, 1994, the date of completion of
the Company's initial public offering of Common Stock. The employment
agreement with Mr. Wells provides for his employment as Chairman of the Board
and Chief Executive Officer of the Company for three years at an annual salary
of $150,000. Mr. Turek's agreement provides for his employment as President of
the Company for three years at an annual salary of $120,000. Both employment
agreements contain noncompete provisions that apply for a period of one year
and nondisclosure provisions that apply for a period of three years following
termination of employment.
STOCK OPTIONS
The 1994 Stock Incentive Plan (the "SIP") provides for the issuance of up
to 260,000 shares of Common Stock to officers, employees, consultants and other
supporters (such as suppliers) of the Company. Shares may be issued upon the
exercise of incentive stock options or nonqualified stock options granted under
the SIP, and restricted shares of Common Stock also may be awarded under the
SIP. Restricted shares are shares that are subject to forfeiture unless
certain conditions are met. The exercise price of all stock options granted
under the SIP is the fair market value of the Company's Common Stock on the
date of grant of the respective stock options. All stock options and
restricted shares are granted or awarded subject to a vesting schedule which
provides for the vesting each year for a period of four years,
10
<PAGE> 15
subject to the recipient's continued employment with or service to the Company,
of 25% of the options or shares subject to each grant or award. The
Compensation Committee determines the recipients, the amount and form, the
timing, and certain other terms of options and restricted shares granted or
awarded under the SIP. Upon a "Change of Control" of the Company (as such term
is defined in the SIP), all vesting and other restrictions applicable to
outstanding stock options and restricted shares granted under the SIP will be
deemed waived or satisfied without action by the Company, the committee
administering the SIP or the recipients.
The following table sets forth information regarding the number, terms and
potential realizable value of all stock options granted to Messrs. Wells and
Turek during 1996. The amounts shown as potential realizable values of the
options identified in the table are based on assumed annualized rates of
appreciation in the price of the Common Stock of 5% and 10% over the term of
the options, as set forth in rules of the Securities and Exchange Commission.
Actual gains, if any, on stock option exercises are dependent on the future
performance of the Common Stock. There can be no assurance that the potential
realizable values reflected in the table will be achieved.
OPTIONS GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
% OF TOTAL VALUE AT ASSUMED
NUMBER OF OPTIONS ANNUAL RATES OF STOCK
SECURITIES GRANTED TO EXERCISE PRICE APPRECIATION
UNDERLYING EMPLOYEES OR BASE FOR OPTION TERM
OPTIONS IN FISCAL PRICE EXPIRATION ------------------
NAME GRANTED(#)(1) YEAR ($/SHARE) DATE 5%($) 10%($)
- ---- ------------- --------- --------- ---------- ------ ------
<S> <C> <C> <C> <C> <C> <C>
L. Rogers Wells, Jr. 1,500 15.8% $7.00 12/31/2006 $17,105 $27,235
Edmund F. Turek 1,500 15.8% $7.00 12/31/2006 $17,105 $27,235
</TABLE>
_________________
(1) In accordance with the vesting schedule set forth in the SIP, 25% of
these options will first become exercisable one year from the date of
grant (December 31, 1996) and an additional 25% of these options will
become exercisable annually for a period of three years thereafter, with
all options being vested on December 31, 2000.
No stock options were exercised by Messrs. Wells or Turek during 1996.
The following table sets forth information regarding the number and value of
all of the unexercised stock options held by Messrs. Wells and Turek as of
December 31, 1996.
FISCAL YEAR END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS AT
OPTIONS AT FISCAL YEAR FISCAL YEAR
END END (1)
NAME EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
---- -------------------------- -------------------------
<S> <C> <C>
L. Rogers Wells, Jr. 17,750/54,750 $0/$0
Edmund F. Turek 8,250/10,250 0/0
</TABLE>
- ----------------------
(1) Such value is computed by subtracting the option exercise price from the
market price of the Common Stock on December 31, 1996 and multiplying that
figure by the total number of unexercised options.
11
<PAGE> 16
CERTAIN TRANSACTIONS
During 1996, Gary S. Bell, who served as the Secretary and the Treasurer
of the Company (in a non-employee capacity) as well as a director of the
Company, also served as the Chief Financial Officer of International
Investments, Inc. ("III"), a company owned by Mr. L. Rogers Wells, Jr. Mr.
Wells serves as Chairman of the Board and Chief Executive Officer of the
Company. During 1996, III provided management and administrative support
services to the Company to permit the Company to focus primarily on
manufacturing machines and maintaining service, technical assistance and parts
replacement. These services were provided by salaried as well as contract
employees of III, and the Company reimbursed III for its actual out-of-pocket
costs in compensating these employees (which amounts are believed by the
Company to approximate the general market compensation levels of other
similarly qualified persons) and for out-of-pocket expenses incurred by III on
behalf of the Company. There is no written agreement between the Company and
III for these services. For 1996 the Company paid $73,321 to III for these
services, all of which related to services by Mr. Bell.
Algonquin Industries, Inc., of which Mr. Kazmier J. Kasper, a director of
the Company, is President and owner, sells to the Company certain components of
the burster mechanisms and other dispensing mechanisms used in the Company's
machines. During 1996, the Company paid $1,986,000 to Algonquin Industries for
burster and other dispensing mechanisms, and the Company currently plans to
continue purchasing all of such mechanisms from Algonquin Industries. The
Company believes that such purchases are on terms no less favorable than those
obtainable from unaffiliated third parties.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange of 1934, as amended, and
regulations of the Securities and Exchange Commission thereunder require the
Company's directors and executive officers and any persons who beneficially own
more than 10% of the Company's Common Stock, as well as certain affiliates of
such persons, to file initial reports of their ownership of the Company's
Common Stock and subsequent reports of changes in such ownership with the
Securities and Exchange Commission and the American Stock Exchange. Directors,
executive officers and persons beneficially owning more than 10% of the
Company's Common Stock are required by applicable regulations to furnish the
Company with copies of all Section 16(a) reports they file. Based solely on
its review of the copies of such reports received by it and written
representations that no other reports were required of those persons, the
Company believes that during 1996, all of its directors, executive officers and
beneficial owners of more than 10% of its Common Stock complied with applicable
Section 16(a) filing requirements.
PROPOSAL 3 - RATIFICATION OF APPOINTMENT OF INDEPENDENT ACCOUNTANTS
The Board of Directors of the Company, upon the recommendation of the
Audit Committee, has appointed the firm of KPMG Peat Marwick LLP to serve as
independent accountants of the Company for the fiscal year ending December 31,
1997 and has directed that such appointment be submitted to the stockholders of
the Company for ratification at the Annual Meeting. KPMG Peat Marwick LLP has
served as independent accountants of the Company since 1993 and is considered
by management of the Company to be well qualified. If the stockholders do not
ratify the appointment of KPMG Peat Marwick LLP, the Board of Directors will
reconsider the appointment.
12
<PAGE> 17
Representatives of KPMG Peat Marwick LLP will 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 BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE "FOR"
THE PROPOSAL TO RATIFY THE APPOINTMENT OF KPMG PEAT MARWICK LLP AS INDEPENDENT
ACCOUNTANTS OF THE COMPANY FOR THE FISCAL YEAR ENDING DECEMBER 31, 1997.
STOCKHOLDERS' PROPOSALS FOR 1998 ANNUAL MEETING
Director nominations and other proposals of stockholders intended to be
presented at the 1998 Annual Meeting of Stockholders must be submitted to the
Company in accordance with the procedures set forth in Sections 2.3 and 1.1,
respectively, of the Bylaws of the Company and in accordance with applicable
rules of the Securities and Exchange Commission. The effect of these
provisions is that stockholders must submit such nominations and proposals,
together with certain related information specified in the above-referenced
sections of the Bylaws, in writing to the Company on or before December 10,
1997 in order for such matters to be included in the Company's proxy materials
for, and voted upon at, the 1998 Annual Meeting. All such proposals,
nominations and related information should be submitted on or before such date
by certified mail, return receipt requested, to the Secretary of the Company,
6665 Creek Road, Cincinnati, Ohio 45242. A copy of the above-referenced
sections of the Bylaws will be provided upon request in writing to the
Secretary of the Company at such address.
OTHER MATTERS THAT MAY COME BEFORE THE ANNUAL MEETING
The Board of Directors of the Company knows of no matters other than those
referred to in the accompanying Notice of Annual Meeting of Stockholders which
may properly come before the Annual Meeting. However, if any other matter
should be properly presented for consideration and voting at the Annual Meeting
or any adjournments thereof, it is the intention of the persons named as
proxies on the enclosed form of proxy card to vote the shares represented by
all valid proxy cards in accordance with their judgment of what is in the best
interest of the Company.
By Order of the Board of Directors.
/s/ Gary S. Bell
Gary S. Bell
Secretary
Cincinnati, Ohio
April 9, 1997
_________________
The Company's 1996 Annual Report, which includes audited financial
statements, has been mailed to stockholders of the Company with these proxy
materials. The Annual Report does not form any part of the material for the
solicitation of proxies.
13
<PAGE> 18
APPENDIX
REVOCABLE PROXY
COMMON STOCK
INTERNATIONAL LOTTERY, INC.
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS FOR THE 1997 ANNUAL MEETING OF
STOCKHOLDERS.
The undersigned hereby appoints Jerome J. Cain and David F. Nichols, and
each of them, proxies, with full power of substitution, to act for and in the
name of the undersigned to vote all shares of Common Stock of International
Lottery, Inc. (the "Company") which the undersigned is entitled to vote at the
1997 Annual Meeting of Stockholders of the Company, to be held at the Best
Western Blue Ash Hotel & Conference Center located at 5901 Pfeiffer Road,
Cincinnati, Ohio, on Thursday, May 8, 1997 at 10:00 a.m., local time, and at any
and all adjournments thereof, as indicated below.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" EACH OF THE LISTED PROPOSALS.
1. An amendment to the Company's Certificate of Incorporation to change the name
of the Company to Interiott Technologies, Inc.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
2. The election of Gary S. Bell, Edmund F. Turek and L. Rogers Wells, Jr. as
directors to serve until the 2000 Annual Meeting of Stockholders and until
their successors are elected and qualified.
<TABLE>
<S> <C>
[ ] FOR ALL NOMINEES listed below (except as [ ] WITHHOLD AUTHORITY to vote for all
marked to the contrary below) nominees listed below
</TABLE>
INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, STRIKE
A LINE THROUGH THE NOMINEE'S NAME IN THE LIST BELOW.
GARY S. BELL, EDMUND F. TUREK, L. ROGERS WELLS, JR.
3. The ratification of the appointment of KPMG Peat Marwick LLP as independent
public accountants for the fiscal year ending December 31, 1997.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
In their discretion, the proxies are authorized to vote upon such other
business as properly may come before the Annual Meeting and any adjournments
thereof.
PLEASE COMPLETE, DATE, SIGN AND MAIL THIS PROXY CARD IN THE ENCLOSED PREPAID
ENVELOPE.
(Continued, and to be signed and dated, on the reverse side)
(Continued from other side)
PROXY -- SOLICITED BY THE BOARD OF DIRECTORS
THIS PROXY CARD WILL BE VOTED AS DIRECTED. IF NO INSTRUCTIONS ARE SPECIFIED,
THIS PROXY CARD WILL BE VOTED IN THE DISCRETION OF THE PROXIES "FOR" PROPOSAL 1
AND 3 AND "FOR" THE ELECTION OF THE THREE NOMINEES NAMED IN PROPOSAL 2. If any
other business is presented to a vote of the stockholders at the Annual Meeting,
this proxy card will be voted by the proxies in their best judgment. At the
present time, the Board of Directors knows of no other business to be presented
to a vote of the stockholders at the Annual Meeting.
If the undersigned elects to withdraw this proxy card on or before the time
of the Annual Meeting or any adjournments thereof and notifies the Secretary of
the Company at or prior to the Annual Meeting of the decision of the undersigned
to withdraw this proxy card, then the power of said proxies shall be deemed
terminated and of no further force and effect. If the undersigned withdraws this
proxy card in the manner described above and prior to the Annual Meeting does
not submit a duly executed and subsequently dated proxy card to the Company, the
undersigned may vote in person at the Annual Meeting all shares of Common Stock
of the Company owned by the undersigned as of the record date, April 3, 1997.
Please mark, date and sign
exactly as your name appears on
this proxy card. When shares are
held jointly, both holders
should sign. When signing as
attorney, executor,
administrator, trustee or
guardian, please give your full
title. If the holder is a
corporation or a partnership,
the full corporate or
partnership name should be
signed by a duly authorized
officer.
Date: , 1997
----------------------
--------------------------------
Signature
--------------------------------
Signature, if shares held
jointly
Do you plan to attend the Annual
Meeting? YES [ ] NO [ ]
