INTERNATIONAL GAME TECHNOLOGY
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
February 18, 1997
The Annual Meeting of the Stockholders of International Game
Technology will be held at the Mirage Hotel and Casino, Mirage
Ballroom at 3400 South Las Vegas Boulevard, Las Vegas, Nevada, on
Tuesday, February 18, 1997, at 1:30 p.m., local time, for the purpose
of considering and voting on:
1. Election of eight directors for the ensuing year;
2. Approval of amendments to the International Game
Technology Employee Stock Purchase Plan;
3. Approval of amendments to the International Game
Technology 1993 Stock Option Plan; and
4. Such other business as may properly come before the
meeting and any and all adjournments thereof.
The Board of Directors has fixed December 31, 1996 as the record
date for determining the stockholders of the Company entitled to
notice of and to vote at the meeting and any adjournment thereof, and
only holders of Common Stock of the Company of record at the close of
business on such date will be entitled to notice of and to vote at
said meeting or adjournment.
By Order of the Board of Directors
Brian McKay
Secretary
Reno, Nevada
January 14, 1997
TO ASSURE YOUR REPRESENTATION AT THE MEETING, PLEASE SIGN, DATE
AND RETURN YOUR PROXY AS PROMPTLY AS POSSIBLE. AN ENVELOPE, WHICH
REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES, IS ENCLOSED FOR
THIS PURPOSE. YOUR SIGNED PROXY IS THE ONLY WAY YOUR SHARES CAN BE
COUNTED IN THE VOTE UNLESS YOU PERSONALLY CAST A BALLOT AT THE
MEETING.
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TABLE OF CONTENTS
Notice of Annual Meeting Cover
Information Concerning Solicitation and Voting 3
Proposal 1 - Election of Directors
Nominees for Election of Directors 4
Certain Relationships and Related Transactions 6
Board of Directors and Committees of the Board 6
Compensation Committee Interlocks and Insider Participation 7
Compensation of Directors 7
Proposal 2 - Amendments to Employee Stock Purchase Plan 8
Proposal 3 - Amendments to 1993 Stock Option Plan 10
Other Information
Executive Officers 13
Equity Security Ownership of Management and Other
Beneficial Owners 15
Executive Compensation 17
Employment Contracts 20
Compliance with Section 16(a) of the Securities Act
of 1934 21
Relationship with Independent Public Accountants 21
Board Compensation Committee Report on Executive Compensation 21
Performance Graph 23
General 24
Exhibits
Exhibit A - Amended and restated International Game Technology
1993 Stock Option Plan A-1
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INTERNATIONAL GAME TECHNOLOGY
PROXY STATEMENT
INFORMATION CONCERNING SOLICITATION AND VOTING
General
This Proxy Statement is furnished in connection with the
solicitation of proxies by the Board of Directors of International
Game Technology (together with its subsidiaries, as the context may
require, hereinafter called the "Company") to be voted at the Annual
Meeting of Stockholders on Tuesday, February 18, 1997, and at any and
all adjournments thereof.
Solicitation of proxies by mail is expected to commence on or
about January 17, 1997 and the cost thereof will be borne by the
Company. In addition to such solicitation by mail, some of the
officers and regular employees of the Company may solicit, without
extra compensation, proxies by telephone, telegraph and personal
interview. Arrangements will be made with brokerage houses,
custodians, nominees and other fiduciaries to send proxy material to
their principals, and they will be reimbursed by the Company for
postage and clerical expense in doing so.
The executive offices of the Company are located at 5270 Neil
Road, Reno, Nevada 89502.
Voting Securities
The securities of the Company entitled to be voted at the meeting
consist of shares of its Common Stock, $0.000625 par value, of which
124,060,651 shares were issued and outstanding at the close of
business on December 31, 1996. Only stockholders of record at the
close of business on December 31, 1996, the record date, will be
entitled to vote at the meeting.
The shares of Common Stock are entitled to one vote per share but
do not have cumulative voting rights and, therefore, a majority of the
outstanding shares entitled to vote has the power to elect all
directors. Directors of the Company who have been nominated for re-
election and the executive officers of the Company collectively have
the power to vote 3,696,949 shares as of the record date (3.0% of the
outstanding shares) and have indicated that they currently intend to
vote such shares in favor of each of the director nominees named
herein and the other proposals described herein.
Quorum, Abstentions and Broker Non-Votes
Votes cast by proxy or in person at the Annual Meeting will be
counted by persons appointed by the Company to act as election
inspectors for the meeting. The election inspectors will treat shares
represented by proxies that reflect abstentions or represent "broker
non-votes" as shares that are present and entitled to vote, for
purposes of determining the presence of a quorum and for purposes of
determining the outcome of any matter submitted to the stockholders
for a vote. Abstentions and broker non-votes, however, do not
constitute a vote "for" or "against" any matter and thus will be
disregarded in the calculation of a plurality or of "votes cast."
If a broker or nominee has indicated on the proxy that it does
not have discretionary authority to vote certain shares, those shares
will be treated as not present and not entitled to vote with respect
to that matter (even though those shares may be considered entitled to
vote for quorum purposes and entitled to vote on other matters).
Shares referred to as "broker non-votes" are shares held by brokers or
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nominees as to which instructions have not been received from the
beneficial owners or persons entitled to vote that the broker or
nominee does not have discretionary power to vote on a particular
matter.
Any unmarked proxies, including those submitted by brokers or
nominees, will be voted in favor of the proposals. If a broker or
nominee who does not have discretion to vote has delivered a proxy but
has failed to physically indicate on the proxy card such person's lack
of authority to vote, the shares will be treated as present and will
be voted in accordance with the instructions on the proxy card (i.e.
as a vote FOR the proposals discussed herein).
Revocability
Proxies may be revoked at any time prior to the exercise thereof
by giving written notice to the Company or by a later dated proxy
executed by the person executing the prior proxy and filed with the
Company or otherwise presented at the meeting. Stockholders attending
the Annual Meeting may vote their shares in person whether or not a
proxy has been previously executed and returned. If the accompanying
proxy card is signed and returned to the Company, and not revoked, it
will be voted in accordance with instructions contained therein.
Unless contrary instructions are given, the persons designated as
proxy holders on the proxy card will vote FOR the proposals.
Stockholder Proposals for the 1998 Annual Meeting
Proposals of stockholders intended to be presented at the next
Annual Meeting must be received by the Company by September 20, 1997
to be considered for inclusion in the Company's proxy statement
relating to that meeting.
PROPOSAL 1 - ELECTION OF DIRECTORS
Eight directors are to be elected at the Annual Meeting, each to
hold office until the next annual meeting of stockholders and until a
successor is elected. It is the intention of the persons named in the
enclosed form of proxy to vote, if authorized, the proxies for the
election as directors of the eight persons named below as nominees.
All of the nominees are at present directors of the Company. If any
nominee declines or is unable to serve as a director (which is not
anticipated), the persons named as proxies reserve full discretion to
vote for any other person who may be nominated.
Nominees for Election of Directors
The following table sets forth for each nominee for election as a
director his or her name, all positions with the Company held by him
or her and his or her principal occupation:
Charles N. Mathewson, 68, was appointed to fill a vacancy on the
Company's Board of Directors in 1985 and was named Chairman in
February 1986. In December 1986, Mr. Mathewson was appointed
President and Chief Executive Officer and resigned as Chairman of
the Board. Mr. Mathewson resumed the position as Chairman of the
Board and resigned as President in February 1988, and Chief
Executive Officer in June 1993. In February 1996, he resumed the
position of Chief Executive Officer. He received his Bachelor of
Finance degree from the University of Southern California in 1953
and graduated from the University of California Management
Program in 1960. He served as Senior Executive Vice President
and a Director of Jefferies and Co. from 1968 to 1971, Chairman
of the Board of Arden Mayfair, Inc. from 1971 to 1974, and
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Chairman of the Board of Wagenseller & Durst from 1978 to 1979.
From 1980 until February 1986, Mr. Mathewson was a general
partner of Management Advisors Associates, a partnership engaged
in investment and business consulting. Mr. Mathewson is a member
of the Board of Directors of Baron Asset Fund, and a member of
the Board of Directors of Fel Cor Suite Hotels. He is also
Chairman of the American Gaming Association.
Warren L. Nelson, 84, joined the Company as a Director in February
1983. Since coming to Nevada in 1936, Mr. Nelson has been
actively involved in the gaming industry, holding various
management positions in several gaming establishments in the
State. Since its inception in November 1961, Mr. Nelson has been
an owner and was previously involved in the management of the
Club Cal Neva, a casino located in Reno, Nevada. Additionally,
he is on the Board of Directors and is an officer of Boyd Gaming
Group. He has previously served under three Nevada governors on
the Nevada Gaming Policy Committee.
Wilbur K. Keating, 65, was elected a Director in May 1987. He
received his degree in Business Management from the University of
Colorado in 1956. He is currently the Administrative Officer for
the National Association of State Retirement Administrators and
was previously the Chief Executive Officer of the Nevada Public
Employees Retirement System, a position he held from 1974 through
1994.
Claudine B. Williams, 75, was elected a Director in May 1988. In
1965, she began operating the Silver Slipper Casino in Las Vegas,
and opened the Holiday Casino in 1973. Ms. Williams served as
Past-President, General Manager and as Chairman of the Board of
Holiday Casino. Ms. Williams currently serves as Chairman of the
Board of the American Bank of Commerce, and the Chairman of the
Board of Harrah's Las Vegas (formerly the Holiday Casino). On
the Nevada state level, she was appointed a member of the Nevada
State Board of Equalization, a position in which she served for
six years. Ms. Williams was appointed a member of the Nevada
Commission on Tourism in 1984 and was re-appointed in 1987 and
1990. In January 1988, she was appointed a member of the
California-Nevada Super Speed Ground Transportation Commission.
In 1985, Ms. Williams was elected to serve on the Board of
Directors of the Las Vegas Convention and Visitors Authority, and
served as its Secretary/Treasurer. She also served on the Board
of Directors of the Las Vegas Chamber of Commerce for eight years
and was Chairman for one term. Ms. Williams is Past President of
the University of Nevada, Las Vegas Foundation where she
currently serves on the Board of Trustees. She received an
Honorary Doctorate of Humane Letters from University of Nevada,
Las Vegas in May 1994. Ms. Williams is a board member of the
Nevada Gaming Foundation for Educational Excellence and the
National Judicial College. She served as Chairman of the Board
of Trustees for St. Jude's Ranch for Children and she supports
numerous local and national charitable organizations. On
September 24, 1992, Ms. Williams was the first woman inducted
into the Gaming Hall of Fame.
Albert J. Crosson, 66, was elected to the Company's Board of Directors
in May 1988. In July 1996, he became Vice Chairman of the Board
and an employee of the Company. Mr. Crosson was employed for 34
years by ConAgra, Inc. and predecessor companies. He was
President of ConAgra Grocery Products Companies from 1993 until
July 1996, when he retired. From 1986 until January 1993, he was
President of Hunt-Wesson Foods, Inc., a ConAgra company. Prior
to 1986, he was Executive Vice President for Hunt-Wesson, Inc.,
and President of Arden Mayfair.
John J. Russell, 67, was appointed to the Board in January 1990.
Mr. Russell joined the Company as Senior Vice President in
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February 1986, was named Executive Vice President in June 1987
and served as President from February 1988 until December 1994.
He served as Chief Executive Officer of the Company from June
1993 until December 31, 1995. On December 31, 1995, Mr. Russell
resigned as Chief Executive Officer and became a consultant to
the Company. Mr. Russell served as President of Gabler, Russell
& Company, Inc., a firm of business consultants, from 1959 to
1986. Mr. Russell began his business career in 1948 in the
wholesale distribution and brokerage business.
Frederick B. Rentschler, 57, was appointed to the Board of Directors
in May 1992. Prior to his retirement in 1991, Mr. Rentschler
served as President and Chief Executive Officer of Northwest
Airlines from 1990 to 1991. Prior to those positions,
Mr. Rentschler served as President and Chief Executive Officer of
Beatrice Company from 1988 to 1990, as President and Chief
Executive Officer of Beatrice U.S. Foods from 1985 to 1988, as
President and Chief Executive Officer of Hunt-Wesson, Inc. from
1980 to 1984 and President of Armour-Dial from 1977 to 1980.
Mr. Rentschler is a member of the Board of Directors of the Salk
Institute, La Jolla, California and the Woods Hole Oceanographic
Institute of Cape Cod.
Rockwell A. Schnabel, 59, was elected a Director in September 1994.
Mr. Schnabel is founder and Chairman of Trident Capital, Inc., a
private equity investment firm. He also served as President of
the Board of Commissioners for the Los Angeles Fire and Police
Pension Board, which oversees investments of over $7 billion in
pension funds from 1993 to 1996. He is the former Deputy
Secretary of the U.S. Department of Commerce in Washington, D.C.,
and also served as the department's Acting Secretary. Mr.
Schnabel previously served as the U.S. Ambassador to Finland and
as President of Bateman Eichler Hill Richards (member NYSE)
(Everen Securities). He is presently serving on the Boards of
Directors of Amax Gold, Inc., Anasazi, Inc., CSG Systems, Inc.,
Cypress Amax Minerals Company, and Pegasus Systems, Inc.
Certain Relationships and Related Transactions
Mr. Nelson, a member of the Company's Board of Directors, has an
equity interest in a Nevada gaming business from which the Company
recognized revenues of $536,000 for the fiscal year ended September
30, 1996. The Company had contracts and accounts receivable balances
from this customer of $357,000 at September 30, 1996. During the
fiscal year ended September 30, 1996, the largest amount of the
Company's contract receivable balance from such customer was $993,000.
Mr. Nelson is also a Director and officer of a company that indirectly
owns ten additional gaming businesses in the United States. The
Company recognized revenues from these businesses of $11,307,000 for
the fiscal year ended September 30, 1996. The Company had contracts
and accounts receivable balances from these businesses of $3,670,000
as of September 30, 1996. During the fiscal year ended September 30,
1996, the largest amount of the Company's contract receivable balances
from these customers was $6,572,000.
Board Of Directors and Committees of the Board
The Board of Directors held five regular meetings during fiscal
1996. During fiscal 1996, each director attended at least 75% of the
aggregate number of meetings of the Board and respective Committees on
which he or she served while a member thereof. The Board of Directors
has three standing committees: the Audit Committee, the Compensation
Committee and the Executive Committee.
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The Executive Committee (comprised of Messrs. Crosson and
Mathewson) did not hold any meetings during fiscal 1996. Except for
certain powers which under Nevada law may only be exercised by the
full Board of Directors, the Executive Committee has and exercises the
powers of the Board in monitoring the management of the business of
the Company between meetings of the Board of Directors.
The Audit Committee consists of Messrs. Keating, Rentschler, and
Schnabel. Mr. Crosson served on the Audit Committee until July 1996
when he was replaced by Mr. Schnabel. Mr. Rentschler was also
appointed to the Committee in July 1996. The Audit Committee held two
meetings during fiscal 1996. The Audit Committee has responsibility
for consulting with the Company's officers regarding the appointment
of independent public accountants as auditors, discussing the scope of
the auditors' examination and reviewing annual financial statements,
related party transactions, potential conflict situations and
corporate accounting policies.
Compensation Committee Interlocks and Insider Participation
During fiscal 1996, Ms. Williams and Messrs. Crosson, Nelson and
Rentschler served as members of the Compensation Committee. Mr.
Crosson resigned from the Compensation Committee in July 1996 and was
replaced by Mr. Rentschler. No member of the Committee is a former or
current officer or employee of the Company or any of its subsidiaries.
The functions performed by the Compensation Committee include
oversight of executive compensation, review of the Company's overall
compensation programs, and administration of certain of the Company's
incentive compensation programs. The Compensation Committee held three
meetings in fiscal 1996 and acted by unanimous written consent 13
times in fiscal 1996. See "Certain Relationships and Related
Transactions" for a discussion of certain relationships between the
Company and certain businesses affiliated with Mr. Nelson.
Compensation of Directors
Each outside director receives a $10,000 annual fee and a fee of
$600 per meeting for attendance at meetings of the Board. Directors
who are employees of the Company are not paid fees or additional
remuneration for service as members of the Board or its Committees.
Effective October 1, 1996, each outside director will receive a
$12,500 annual fee, a fee of $600 per Board meeting attended and a fee
of $750 for each committee meeting attended.
Each non-employee director receives non-qualified stock options
to purchase 10,000 shares of Common Stock upon his or her initial
election to the Board of Directors. Additionally, every year
thereafter, each non-employee director receives non-qualified stock
options to purchase 4,000 shares of Common Stock upon his or her re-
election to the Board. Each non-employee director received non-
qualified stock options to purchase 4,000 shares of Common Stock in
fiscal 1996 at an exercise price of $13.625 per share. An amendment
to the 1993 Stock Option Plan is being submitted to the stockholders
for approval that would permit annual awards of non-qualified stock
options to purchase 6,000 shares and a one-time grant of an option to
purchase 2,000 shares at an exercise price of $20.00, effective August
27, 1996.
Effective January 1, 1996, the Company entered into a
Consultation Agreement with John J. Russell. The agreement provides
for Mr. Russell to be retained for advisory and consulting services
related to the Company's current or potential activities in gaming
related businesses. The one year agreement is automatically renewable
for one year increments. The agreement provides for a fee of $250 per
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hour, with a maximum of $2,000 per day. During fiscal 1996, Mr.
Russell received $22,717 under this agreement.
PROPOSAL 2 - AMENDMENTS TO THE EMPLOYEE STOCK PURCHASE PLAN
The Board recommends that stockholders approve amendments to the
Company's Employee Stock Purchase Plan (the "ESPP") to (i) modify the
class of employees who are eligible to participate in the ESPP; (ii)
clarify composition of the Board committee which administers the plan
to specify the members as "Non-Employee Directors;" (iii) include a
provision that permits options and shares issued upon exercise under
the ESPP to be subject to the conditions and restrictions required by
SEC Rule 16b-3 in order to qualify for the maximum exemption from
Section 16 of the Securities and Exchange Act of 1934 which prohibits
profits derived by affiliates from "short swing" trading; and (iv)
extend the term of the ESPP. The ESPP was originally adopted by the
Board of Directors on February 26, 1987 and was approved by the
Company's stockholders on February 16, 1988.
Proposed Amendments to the ESPP
Class of Eligible Employees
The ESPP currently provides that the following classes of
employees are excluded from participation: (i) employees who have not
completed at least 12 months of continuous service with the Company or
its subsidiaries, (ii) employees whose customary employment is for
less than 20 hours per week or for less than five months in a calendar
year, (iii) all officers of the Company and its subsidiaries, (iv)
employees whose annual compensation exceeds $50,000 and (v) employees
of IGT - Australia and such other subsidiaries of the Company as the
Company may direct. The Board of Directors has determined that it
would be in the best interests of the Company and its stockholders to
modify the class of employees who are eligible to participate in a
manner consistent with the requirements of the Internal Revenue Code
of 1986, as amended (the "Code"). Specifically, the proposed
amendment would modify the ESPP to provide that employees of the
Company and any subsidiary which has been designated as a
participating subsidiary may participate in the ESPP. In addition,
the ESPP would provide that the following individuals are excluded
from participation: (i) employees who have not completed at least 12
months of continuous service, (ii) employees whose customary
employment is for less than 20 hours per week or for less than five
months in a calendar year, and (iii) "highly compensated employees"
within the meaning of Internal Revenue Code, Section 414(q). In
general, under the applicable Code Section, an employee is considered
highly compensated if he or she (i) was a five percent owner of the
Company at any time during the current year or the preceding year, or
(ii) had compensation from the Company or its subsidiaries in excess
of $80,000 (as indexed for inflation) during the preceding year.
Composition of Committee
The ESPP currently provides that it shall be administered by a
committee (the Compensation Committee) of not less than two directors
of the Company. The proposed amendment would clarify this to state
that the committee shall be composed of "Non-Employee Directors."
Plan Construction
The Plan currently does not include a clause for exemptive relief
of SEC Rule 16b-3. The proposed amendment would permit shares
purchased under the ESPP to be entitled to the exemptive relief of
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Rule 16b-3. In general, Rule 16b-3 provides relief for transactions
which would otherwise be subject to the prohibitions of Section 16 of
the Securities and Exchange Act of 1934 which prohibits profits
derived by affiliates from "short swing" trading.
Extension of Term
The ESPP currently provides that it will expire on February 26,
1997, if not terminated sooner by the Board of Directors. The Board
of Directors has determined that it is in the best interests of the
Company and its stockholders to extend the term of the ESPP until the
earlier of (i) February 26, 2007 or (ii) the date on which all of the
Common Stock available under the ESPP has been purchased.
Operation of the ESPP
The purpose of the ESPP is to assist qualified employees in
acquiring a stock ownership interest in the Company. Under the ESPP,
each eligible employee may be granted an option to purchase a specific
number of shares of the Company's Common Stock at a discount. An
employee participates in the ESPP through payroll deductions credited
to a bookkeeping account established for the employee. Each
participant in the ESPP is deemed to have exercised his or her Option
on each exercise date to the extent that the balance then in his or
her account under the ESPP is sufficient to purchase, at the "Option
price," whole shares of Common Stock of the Company. The "Option
price" is 15% below the lower of the fair market value of the Common
Stock, as quoted by the New York Stock Exchange, on the grant date or
the exercise date. The appropriate number of shares are delivered to
each participating employee as soon as practicable after the exercise
date, together with any money left in the employee's account which is
not sufficient to purchase a whole share of Common Stock. As of
January 8, 1997, approximately 1,717 employees of the Company and its
subsidiaries were eligible to participate in the ESPP.
The benefits that would be received by or allocated to eligible
employees cannot be determined at this time because an eligible
employee's participation in the ESPP and the amount of funds set aside
to purchase shares under the ESPP (subject to the limitations
discussed above) are entirely within the discretion of the
participant. The closing price of the Company's Common Stock on the
New York Stock Exchange on January 6, 1997 was $19.00 per share.
Federal Income Tax Consequences
The ESPP is intended to qualify as an employee stock purchase
plan within the meaning of Section 423 of the Internal Revenue Code of
1986, as amended (the "Code"). Under the Code, an employee who elects
to participate in an offering under the ESPP will not realize income
at the time the offering commences or when the shares purchased under
the ESPP are transferred to him or her. The tax consequences to the
Company will vary depending on how long the employee holds the shares
transferred to him or her. If an employee disposes of such shares
after two years from the date the offering of such shares commences
and after one year from the date of the transfer of such shares to him
or her, the Company will not be entitled to any deduction with respect
to the shares. If, however, the employee disposes of the shares
purchased under the ESPP within such two-year or one-year period, the
Company will be entitled to a deduction from income equal to the
amount the employee is required to include as income as a result of
such disposition.
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Recommendation of Your Board of Directors "FOR" the Proposal
The Board of Directors has unanimously approved and recommended a
vote FOR the proposed amendments to the ESPP as described above.
PROPOSAL 3 - AMENDMENTS TO THE 1993 STOCK OPTION PLAN
The Board recommends that the stockholders approve the amendments
described below to the Company's 1993 Stock Option Plan (the "Plan"),
adopted by the Board of Directors on August 27, 1996.
The Plan currently provides for incentive and non-qualified stock
options to be granted to any officer or other key employee of the
Company or of any subsidiary. Non-Employee Directors are eligible to
participate in the Plan as described below. The Plan is administered
by either the Board or the Compensation Committee of the Board (the
"Committee"). The Plan awards are based on the Company's Common
Stock, which at January 6, 1997 had a closing price on the New York
Stock Exchange of $19.00 per share. A copy of the entire Plan as
amended has been attached to this Proxy Statement as Exhibit A.
Capitalized terms not otherwise defined herein shall have the meanings
set forth in the Plan. For information regarding options and
restricted stock awards granted to directors and executive officers of
the Company, see "Compensation of Directors" and "Executive
Compensation."
Proposed Amendments to the Plan
Share Limits
The Plan currently provides that the maximum number of shares
that may be issued pursuant to Options granted to eligible employees
cannot exceed 3,000,000 shares. The amendments adopted by the Board
would increase the total number of shares of Common Stock that may be
delivered pursuant to Awards under the Plan to 5,000,000 shares,
subject to certain adjustments. In addition, the proposed amendments
would modify the Plan to provide that the maximum number of shares
which may be covered by options and stock appreciation rights that are
granted to an individual during any calendar year cannot exceed
1,000,000 shares, subject to certain adjustments.
Transferability Restrictions
The Plan currently provides that Awards are generally
nontransferable. The proposed amendments would clarify the existing
transfer restrictions and provide for limited exceptions. The amended
Plan would provide that all Awards are non-transferable and will not
become subject in any manner to sale, transfer, anticipation,
alienation, assignment, pledge, encumbrance or charge. The Committee
may, however, permit Awards to be exercised by certain persons or
entities related to a participant for estate and/or tax planning
purposes. Incentive stock options and restricted stock awards will be
further subject to all applicable transfer restrictions under the
Code. Only the participant, subject to the above exceptions, may
exercise an Award during the participant's lifetime.
Non-Employee Director Options
The Plan currently provides that when a Non-Employee Director is
first elected to the Board, he or she will be granted an option to
acquire 10,000 shares of Common Stock. In addition, the Plan
currently provides that non-employee directors who are re-elected to
office will receive an annual grant of 4,000 shares, the grant date of
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which is the date of the director's re-election. The proposed
amendments provide that each person who was a Non-Employee Director as
of August 27, 1996 was granted on such date, on a one-time basis and
subject to stockholder approval, an option to acquire 2,000 shares of
Common Stock. The proposed amendments further provide that,
commencing in 1997, the number of shares covered by each annual option
granted to a Non-Employee Director as of the date he or she is re-
elected will be increased to 6,000 shares.
Stock Appreciation Rights
The Plan, as amended, will permit the grant of stock appreciation
rights. A stock appreciation right is the right to receive payment
based on the appreciation in the fair market value of the Common Stock
from the date of grant to the date of exercise. As determined by the
Committee, such amount may be paid in cash, in shares of Common Stock
or a combination thereof. A stock appreciation right is exercisable
at such time, and to the extent, the related option is exercisable, or
as may otherwise be provided in the applicable Award Agreement.
Restricted Stock Awards
The Plan, as amended, will permit the grant of restricted stock
awards. A restricted stock award is an award of a fixed number of
shares of Common Stock subject to vesting requirements and other
restrictions. The Committee specifies the price, if any, the
participant must pay for such shares and the restrictions imposed on
such shares. Restricted stock awarded to a participant may not be
voluntarily or involuntarily sold, assigned, transferred, pledged or
encumbered during the restricted period. Stock certificates
evidencing shares of restricted stock will bear a legend referencing
any applicable restrictions. Unless otherwise provided in the
applicable Award Agreement, the recipient of a restricted stock award
is entitled to receive any dividends and exercise voting rights
pertaining to such shares prior to the time they have vested.
The Board of Directors has determined, subject to stockholder
approval of the proposed amendments to the Plan, to grant each of Mr.
Ciorciari, Mr, McKay, Mr. McMonigle and Mr. Pike a restricted stock
award of 50,000 shares of the Company's Common Stock at a price of
$.01 per share. In each case, 40% of the restricted shares will vest
in August 1999 and the balance will vest in August 2001. The value of
each of these awards, without taking into account the diminution in
value attributable to the restrictions applicable to the shares, is
$949,500 based on the $19.00 per share closing price of the Company's
Common Stock on the New York Stock Exchange on January 6, 1997.
Performance Share Awards and Stock Bonuses
The Plan, as amended, will permit the grant of performance share
awards and stock bonuses. The amount of cash or shares or other
property that may be deliverable pursuant to such a performance share
award is based upon the degree of attainment over a specified period
of such measure(s) of performance of the Company (or any part thereof)
or the participant as may be established by the Committee. The
Committee, in its discretion, may also grant a stock bonus to any
eligible employee. A stock bonus is an award of shares of Common
Stock for no consideration other than past services.
Without limiting the generality of the foregoing, the Plan, as
amended, will permit the Committee to grant certain other types of
Awards ("Performance-Based Awards") which are intended to qualify as
"performance-based compensation" under Section 162(m) of the Code.
Options and stock appreciation rights that are granted at fair market
value are intended to qualify as Performance-Based Awards. In
<PAGE>
addition, other share-based awards may be granted under the Plan and
are intended to qualify as Performance-Based Awards. The Plan also
provides for the grant of Performance-Based Awards that are payable
only in cash ("Cash-Based Awards").
The eligible class of persons for Performance-Based Awards is all
executive officers of the Company. The maximum number of shares of
Common Stock which may be delivered pursuant to all Awards that are
granted as Performance-Based Awards to any participant in any calendar
year may not exceed 1,000,000 shares (subject to adjustment) and the
annual aggregate amount of compensation that may be paid to any
participant in respect of Cash-Based Awards may not exceed $1,000,000.
The performance goals for Performance-Based awards are any one or
a combination of Earnings Per Share, Return on Equity, Total
Stockholder Return and Cash Flow (each as defined in the Plan). These
goals will be applied over performance cycles as determined by the
Committee. Specific cycles and target levels of performance, as well
as the award levels, will be determined by the Committee not later
than the applicable deadline under Section 162(m) of the Code and in
any event at the time when achievement of such targets is
substantially uncertain. Appropriate adjustments to goals and targets
may be made by the Committee based upon objective criteria in the case
of certain events that were not anticipated at the time goals were
established. The Company believes that specific performance targets
(when established) are likely to constitute confidential business
information, the disclosure of which may adversely affect the Company
or mislead the public.
The Committee must certify the achievement of the applicable
performance goals and the actual amount payable to each participant
under Performance-Based Awards prior to payment. The Committee may
retain discretion to reduce, but not increase, the amount payable
under a Performance-Based Award, notwithstanding the achievement of
targeted performance goals. Performance-Based Awards may be fully
accelerated or the Committee may provide for partial credit in the
event of a Change in Control Event or in certain other circumstances
that the Committee may determine.
Other Existing Features of the Plan
In addition to the types of Awards described above, the Company
may grant nonqualifed and incentive stock options under the Plan to
eligible employees. The Committee from time to time may authorize for
employees, generally or in specific cases only, any adjustment in the
exercise price of, the number of shares subject to, the restrictions
upon or the term of an option granted under the Plan by cancellation
of an outstanding option and a subsequent regranting of an option, by
amendment, by substitution of an outstanding option, by waiver or by
other legally valid means. Under the Plan, the Committee has the
authority to designate in each Award the effect of a termination from
service or employment. The period during which a non-employee
director may exercise his or her options following a termination from
service on the Board is established by the terms of the Plan. Upon
the occurrence of certain events relating to the Company, Awards will
be accelerated unless the Committee determines otherwise. The
authority to grant new Awards under the Plan will terminate on
September 22, 2002, unless the Plan is terminated prior to that time
by the Board. The Board may amend the Plan, except that stockholder
approval is required with respect to amendments which increase the
shares available for issuance under the Plan, materially increase the
benefits accruing to participants or materially change the
participation requirements.
Federal Income Tax Consequences
With respect to nonqualifed stock options, the Company is
generally entitled to deduct an amount equal to the difference between
<PAGE>
the option exercise price and the fair market value of the shares at
the time of exercise. With respect to incentive stock options, the
Company is generally not entitled to a similar deduction either upon
grant of the option or at the time the option is exercised. The
current federal income tax consequences of other awards authorized
under the Plan generally follow certain basic patterns: stock
appreciation rights are taxed and deductible in substantially the same
manner as nonqualifed stock options; nontransferable restricted stock
subject to a substantial risk of forfeiture results in income
recognition equal to the excess of the fair market value of the stock
over the purchase price only at the time the restrictions lapse
(unless the recipient elects to accelerate recognition as of the date
of grant); performance share awards generally are subject to tax at
the time of payment; unconditional stock bonuses are generally subject
to tax measured by the value of the payment received; and Cash-Based
Awards generally are subject to tax at the time of payment; in each of
the foregoing cases, the Company will generally have a corresponding
deduction at the time the participant recognizes income. If an Award
is accelerated under the Plan, the Company may not be permitted to
deduct the portion of the compensation attributable to the
acceleration. Furthermore, if the compensation attributable to Awards
is not "performance-based" within the meaning of Section 162(m) of the
Code, the Company may not be permitted to deduct such compensation in
certain circumstances.
Recommendation of Your Board of Directors "FOR" the Proposal
The Board of Directors has unanimously approved and recommends a
vote FOR the approval of the proposed amendments to the 1993 Stock
Option Plan as described above. Stockholders should note that because
outside Directors have received and continue to receive (subject to re-
election) stock options under Article VII of the Plan, all current
outside Directors of the Company may have a personal interest in the
proposal and its approval by stockholders. However, the members of
the Board believe that the proposed amendments to the Plan are in the
best interest of the Company and its stockholders.
OTHER INFORMATION
Executive Officers
The following table sets forth the names and ages of the
executive officers of the Company, all positions held with the Company
by each individual, and a description of the business experience of
each individual for at least the past five years.
<TABLE>
<CAPTION>
<S> <C> <C>
Name Age Title
Charles N. Mathewson 68 Chief Executive Officer
G. Thomas Baker 54 President, Chief Operating Officer,
and Chief Financial Officer
Robert M. McMonigle 52 Executive Vice President,
Corporate Relations and
North American Sales
Raymond D. Pike 49 Executive Vice President,
Corporate Development
Robert A. Bittman 42 Executive Vice President,
Product Development
<PAGE>
Anthony Ciorciari 49 Vice President, Operations
Brian McKay 52 Vice President, General Counsel,
Secretary and Treasurer
Maureen T. Imus 37 Vice President, Finance
</TABLE>
For a description of Mr. Mathewson's background, see "Proposal 1-
Election of Directors."
Mr. Baker rejoined the Company in March 1996 as its President,
Chief Operating Officer and Chief Financial Officer. Mr. Baker was
Senior Vice President and Chief Financial Officer of Boomtown Hotels &
Casinos from August 1995 to March 1996. Mr. Baker first joined IGT in
September 1988 as its Vice President of Finance and Administration and
Chief Financial Officer. In October 1991, Mr. Baker was named Vice
President of Finance, Chief Financial Officer and Treasurer of the
Company. He was named Executive Vice President, Corporate Finance;
Chief Financial Officer and Treasurer in September 1993. From August
1985 to September 1988, he was Chief Financial Officer for Evans
Rents, an upscale furniture rental company in Los Angeles, California.
From April 1979 until August 1985, Mr. Baker was the Chief Financial
Officer at Aurora Productions, an independent motion picture
production company in Los Angeles, California. Mr. Baker has a
Bachelor of Science degree in Business Administration and Liberal Arts
from Upper Iowa University.
Mr. McMonigle joined the Company as a Sales Manager in March of
1986. From April 1987 until October 1989, Mr. McMonigle was the
Director of Sales for the Company and from October 1989 until
September 1991 he was Vice President, Sales for the Company. From
September 1991 to September 1993 he served as Executive Vice President
of Sales for the Company. In September 1993, Mr. McMonigle was
promoted to Executive Vice President, Corporate Relations and North
American Sales for the Company. Prior to joining the Company, from
September 1984 through March 1986, Mr. McMonigle served as Regional
Sales Manager at American Protective Services located in Oakland,
California. From March 1979 through July 1984, Mr. McMonigle was
employed by ARA Services, Inc. as Regional Vice President in Los
Angeles, and prior to that was employed from 1975 to 1979 as Director
of Circulation for Straight Arrow Publishing in New York, publishers
of "Rolling Stone" and "Outside" magazines. Prior to that, Mr.
McMonigle was with Readers Digest in Pleasantville, New York. Mr.
McMonigle is a graduate of Southeast Missouri State University with a
Bachelor's Degree in Business Administration.
Mr. Pike joined the Company as its General Counsel in December
1980 and served as its Chief Counsel and Secretary from June 1981
until January 1994, was named Vice President in 1983, Senior Vice
President in February 1988, Executive Vice President, Corporate
Development for the Company in September 1993 and Executive Vice
President, Corporate Development in April 1995. He is currently a
Trustee of the International Association of Gaming Attorneys and the
National Council on Problem Gaming and serves as Vice Chairman of the
Gaming Law Committee of the American Bar Association. He received his
law degree from Boalt Hall, the University of California, Berkeley, in
1973. From September 1974 to December 1977, Mr. Pike was an Assistant
United States Attorney for the District of Nevada. He then spent one
year in the private practice of law as an associate with Lionel Sawyer
& Collins before becoming the Deputy Attorney General for the State of
Nevada/Chief of the Gaming Division. He held the latter position from
December 1978 until joining the Company in December 1980.
<PAGE>
Mr. Bittman rejoined the Company in March 1996 as Executive Vice
President, Product Development. He originally joined the Company in
1985 as Marketing Research Analyst and was subsequently named Director
of Marketing. He was promoted to Vice President of Marketing in 1988.
In December 1995, Mr. Bittman resigned to join Casino Data Systems as
President of the CDS Gaming Systems Division. Mr. Bittman rejoined the
Company before commencing work for Casino Data Systems. From 1980 to
1985, Mr. Bittman worked for Caesars Tahoe in all phases of slot
management, including two years as Director of Slot Operations. Mr.
Bittman has degrees in Psychology from New York University and Systems
Analysis from the University of Nevada, Reno.
Mr. Ciorciari joined the Company as Vice President of Operations
in January 1994, with responsibility for worldwide manufacturing,
procurement, corporate facilities and services. He has more than 26
years experience in U.S. and international manufacturing at Digital
Equipment Company. From June 1987 through December 1993, Mr.
Ciorciari was General Manager of the Digital manufacturing operations
in Albuquerque, New Mexico and Chihuahua, Mexico. In this position,
he was responsible for approximately 1,600 people and the
manufacturing and supply of Digital's workstation and systems product
lines.
Mr. McKay joined the Company in January 1994 as General Counsel
and Corporate Secretary. In June 1994, he was promoted to Vice
President, General Counsel and Corporate Secretary. From 1982 to
1990, Mr. McKay served two terms as Nevada's Attorney General, during
which time he also served as Chairman of the Conference of Western
Attorneys General. From 1990 to 1993, Mr. McKay was a partner in the
administrative law and litigation departments of the law firm of
Lionel Sawyer & Collins in Reno, Nevada. Mr. McKay serves as a member
of the Board of Directors for the National Center for Responsible
Gaming. Mr. McKay serves as Chairman of the Commission on Nuclear
Projects for the State of Nevada, and is a member of the Board of
Trustees of the International Association of Gaming Attorneys. From
1992 to 1995 he served as Chairman of the Nevada Republican Party.
Mr. McKay was a Deputy Attorney General for the State of Nevada from
1975 to 1979. Mr. McKay received his law degree in 1974 from Albany
Law School of Union University.
Ms. Imus was named Vice President of Finance of the Company in May
1996. Ms. Imus holds the senior financial position in the Company and
directs investor relations, financial planning and analysis, corporate
accounting, treasury management, tax, and information system
functions. Ms. Imus joined the Company in January 1989 as Senior
Financial Analyst. In December 1991, she was promoted to Manager of
Finance and then to Director of Finance in October 1993. Ms. Imus has
a Bachelor of Science degree from the University of Texas and a
Masters of Business Administration from the University of Nevada,
Reno.
Equity Security Ownership of Management and Other Beneficial Owners
The following table sets forth information as of December 31,
1996 with respect to the beneficial ownership of the Company's Common
Stock by all directors, the officers named in the Summary Compensation
Table, and all executive officers and directors of the Company as a
group. There is no person or group known to the Company to be the
beneficial owner of more than five percent of the Company's common
stock as of December 31, 1996. The Company has no other class of
equity securities outstanding.
<PAGE>
<TABLE>
<CAPTION>
Shares of the Company's Common Stock
Options
Exercisable Beneficially Percent of
Name of Beneficial Owner Owned within 60 days Owned<F1> Class<F2>
<S> <C> <C> <C> <C>
G. Thomas Baker 74,996 122,684 197,680 0.16 %
Robert A. Bittman 246,000<F3> - 246,000 0.20
Albert J. Crosson 249,000 418,001<F4> 667,001 0.53
Wilbur K. Keating 4,718 14,668 19,386 0.02
Charles N. Mathewson 2,649,324 1,012,714<F4> 3,662,038 2.91
Robert M. McMonigle 34,400 148,238 182,638 0.15
Warren L. Nelson 204,048 18,001 222,049 0.18
Raymond D. Pike 15,066 622 15,688 0.01
Frederick B. Rentschler - 18,001 18,001 0.01
John J. Russell 58,322 1,334 59,656 0.05
Rockwell A. Schnabel 25,002 10,668 35,670 0.03
Claudine B. Williams 129,940 14,668 144,608 0.11
All executive officers and
directors as a group
(15 persons) 3,696,949 1,813,097 5,510,046 4.38
<FN>
<F1> Includes shares which may be purchased upon exercise of options
exercisable within 60 days of December 31, 1996.
<F2> Any securities not outstanding which are subject to options or
conversion privileges which are exercisable within 60 days of December
31, 1996 are deemed outstanding for the purpose of computing the
percentage of outstanding securities of the class owned by any person
holding such securities but are not deemed outstanding for the purpose
of computing the percentage of the class owned by any other person.
<F3> Includes certain shares granted pursuant to a restricted stock
award. See "Executive Compensation."
<F4> Mr. Mathewson was granted options to purchase 2,906 shares in
December 1996 at an exercise price of $10.75 under the annual grant of
stock awards to key employees. Mr. Mathewson, upon his appointment
to Chief Executive Officer in February 1996, was granted 1,000,000
options at an exercise price of $13.25. These options were fully
vested in December 1996. Additionally, Mr. Crosson, Vice Chairman of
the Board of Directors, was granted 400,000 options at an exercise
price of $15.50 in July 1996 when he became Vice Chairman of the
Board. These options were fully vested in December 1996.
</FN>
</TABLE>
<PAGE>
Executive Compensation
Summary Compensation Table
The following table summarizes all compensation paid to the persons
who held the position of Chief Executive Officer and the other four most
highly compensated executive officers (collectively, the "Named Officers")
for the years ended September 30, 1996, 1995 and 1994.
<TABLE>
Annual Compensation Long-Term Compensation
Securities
Restricted Underlying
Stock Options All
<CAPTION>
Other
Name and Principal Position Year Salary<F1> Bonus<F1> Awards Granted<F2> Compensation
<S> <C> <C> <C> <C> <C> <C>
Charles N. Mathewson<F4> 1996 $100,001<F5> $ - $ - 1,002,906 $ 27,216
Chairman of the Board of 1995 60,000 165,000 - 2,600 19,042
Directors and Chief 1994 160,000 140,000 - 6,653 54,539
Executive Officer
John J. Russell<F4> 1996 117,704 - - 4,000 635,756
Chief Executive Officer 1995 300,000 215,000 - 6,153 54,894
1994 287,706 283,884 - 6,084 71,706
David P. Hanlon<F4> 1996 155,769 190,385 - 4,500 1,957,225
President, Chief Executive 1995 377,308 476,154 - 500,000 148,571
Officer and Chief Financial
Officer
G. Thomas Baker 1996 230,769<F6> 381,000 - 500,000 4,062
President, Chief Operating 1995 147,927 7,000 - 33,416 28,765
Officer,and Chief Financial 1994 151,906 156,000 - 13,680 43,114
Officer
Robert A. Bittman 1996 203,846 390,000 $3,119,625<F7> - 17,493
Executive Vice President, 1995 177,644 150,000 - 62,915 50,152
Product Development 1994 160,144 175,000 - 28,449 50,397
Robert M. McMonigle 1996 185,494 185,000 - 3,240 36,256
Executive Vice President, 1995 182,000 125,000 - 15,746 45,150
Corporate Relations and 1994 175,030 175,000 - 4,187 56,365
North American Sales
Raymond D. Pike 1996 181,625 165,000 - 3,100 30,631
Executive Vice President 1995 162,750 123,500 - 32,888 37,103
Corporate Development 1994 158,279 160,000 - 13,798 44,488
<FN>
<F1> Amounts shown include base compensation earned and received by executive
officers. No non-cash compensation was paid as salary or as a bonus during
fiscal 1996.
<F2> Amounts represent options to purchase the number of shares of Common
Stock shown.
<F3> Amounts shown represent contributions by the Company to the accounts of
the identified executive officers under the Company's qualified profit
sharing plan and payments under the Company's cash sharing plan. See
"Employee Incentive Plans" for a description of these plans. In 1996, the
amount for Mr. Russell includes payments in connection with his resignation
from the Company of $600,000.The payments to Mr. Hanlon in 1996 include
payments of $1,859,800 related to the termination of Mr. Hanlon's
employment agreement. In addition, the amount for Mr. Hanlon, in 1995,
includes reimbursement of $112,700 in relocation costs incurred by Mr.
Hanlon.
<PAGE>
<F4> In December 1995, Mr. Russell resigned as Chief Executive Officer and Mr.
Hanlon became President and Chief Executive Officer. In February 1996, Mr.
Hanlon resigned from all positions held with the Company and Mr. Mathewson
became Chief Executive Officer.
<F5> During the period from October 1995 to February 1996, Mr. Mathewson had
an annual base salary of $260,000. Commencing with his appointment to
Chief Executive Officer, he does not receive a base salary.
<F6> Mr. Baker became President, Chief Operating Officer, and Chief Financial
Officer in February 1996. Mr. Baker's annual base salary is $375,000.
<F7> A restricted stock award was made to Mr. Bittman on March 18, 1996. A
total of 225,000 shares was awarded for a price of $.01 per share. The
award vests in three equal installments upon the second, third and fifth
anniversaries of the award. Dividends on the shares issued are paid to Mr.
Bittman. The unvested shares issued to Mr. Bittman are subject to
repurchase by the Company at $.01 per share if Mr. Bittman's employment
terminates for certain reasons prior to the vesting of such shares. The
dollar value of the shares issued, as presented, is based on the fair
market value of the stock at the date of grant and does not take into
account any diminution in value attributable to restrictions applicable to
these shares. The dollar value of the shares issued was $4,610,250 at
September 30, 1996.
</FN>
</TABLE>
<PAGE>
Options
The tables below set forth certain information regarding options
granted to the Named Officers during fiscal 1996.
<TABLE>
<CAPTION>
Option Grants In Last Fiscal Year
Individual Grants
Percent of
Total Potential Realizable
Number of Options Exercise Value at Assumed Annual
Securities Granted to or Base Rates of Stock Price
Underlying Employees Price Appreciation
Options in Per Expiration for Option Term<F1>
Name Granted<F1> Fiscal Year Share Date 5% 10%
<S> <C> <C> <C> <C> <C> <C>
Charles N. Mathewson 2,906 .12% $10.75 12/29/05 $ 19,646 $ 49,788
1,000,000<F2> 39.58 13.25 2/13/06 8,332,854 21,117,088
John J. Russell 4,000 .16 13.63 2/20/06 34,275 86,859
David P. Hanlon 4,500 .18 10.75 5/20/96 934 1,841
G. Thomas Baker 500,000 19.79 13.25 2/20/06 4,176,529 10,589,982
Robert A. Bittman - - - - - -
Robert M. McMonigle 3,240 .13 10.75 12/29/05 21,904 55,510
Raymond D. Pike 3,100 .12 10.75 12/29/05 20,958 53,111
<FN>
<F1> The options have a ten year term and are generally exercisable
commencing 12 months after the grant date, with 20% of the shares
covered thereby becoming exercisable at that time and with an
additional 20% of the option shares becoming exercisable on each
successive anniversary date, with full vesting occurring on the fifth
anniversary date.
<F2> Mr. Mathewson, upon his appointment to Chief Executive Officer in
February 1996, was granted 1,000,000 options at an exercise price of
$13.25. These options were fully vested in December 1996.
</FN>
</TABLE>
Aggregated Option Exercises In Last Fiscal Year and Fiscal Year-End Option
Values
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Options Exercised Securities Underlying In-The-Money Options
Shares Value Options at 09/30/96 at 09/30/96
Name Acquired Realized<F1> Exercisable Unexercisable Exercisable Unexercisable
<S> <C> <C> <C> <C> <C> <C>
Charles N. Mathewson - - 8,262 1,014,057 $ 4,030 $7,294,454
John J. Russell 164,218 $1,140,986 - 4,000 - 27,500
David P. Hanlon 4,500 23,625 - - - -
G. Thomas Baker - - 22,684 526,732 284,151 3,832,173
Robert A. Bittman - - - - - -
Robert M. McMonigle - - 143,590 19,836 2,366,671 179,709
Raymond D. Pike 22,576 247,444 2 29,410 16 234,128
<FN>
<F1> Market value of the underlying securities at the exercise date or
year-end, as the case may be, less the exercise price of "in-the-
money" options.
</FN>
</TABLE>
<PAGE>
Employee Incentive Plans
Under a discretionary program effective January 1, 1986 and
reviewable annually by the Company's Board of Directors, in fiscal
1996 the Company contributed, in the aggregate, 11% of consolidated
operating profits before incentives compensation expenses (excluding
IGT-Australia) equally to three employee incentive plans: the profit
sharing and 401(k) plan; the cash sharing plan; and the management
bonus plan. The total annual contribution under all three plans was
$21.8 million in fiscal 1996.
The profit sharing plan was originally adopted in 1980 for the
Company's employees working in the United States. Benefits vest over a
seven year period of employment. Effective January 1, 1993, the
Company began distributing a portion of the profit sharing plan
contribution under a 401(k) retirement plan matching program. Per the
plan agreement, the Company matches 100% of employee contributions up
to $500 and an additional 50% of the next $500 contributed by the
employee. This allows for maximum annual Company contributions of
$750 to each employee's 401(k) account. These contributions vest
immediately. The Company's foreign subsidiaries have similar
retirement plans.
The cash sharing plan calls for semi-annual distributions to all
non IGT-Australia employees. IGT-Australia has a similar plan. The
management bonuses under the management bonus plan are paid out
annually to key employees throughout the Company.
Employment Contracts
G. Thomas Baker was named President, Chief Operating Officer and
Chief Financial Officer on February 19, 1996. Pursuant to a one year
employment agreement, he receives a base salary of $375,000. Mr.
Baker was also granted stock options for 500,000 shares in February
1996, at an exercise price of $13.25, which vest at the rate of 20%
per year. Mr. Baker is eligible to participate in the Company's profit
sharing, cash sharing, and management bonus plans (see "Employee
Incentive Plans").
Robert A. Bittman was appointed Executive Vice President, Product
Development of the Company effective March 18, 1996. The Company
entered into a five year employment agreement with Mr. Bittman in
March 1996 providing for an annual base salary of $250,000 and a one-
time cash payment of $150,000, paid upon the commencement of his
employment. Mr. Bittman is also eligible to participate in the
Company's profit sharing, cash sharing and management bonus plans (see
"Employee Incentive Plans"). Additionally, Mr. Bittman was granted a
restricted stock award for 225,000 shares at a price of $.01 share.
The awards vest in three equal installments upon the second, third and
fifth anniversaries of the award (see "Summary Compensation Table").
The unvested shares issued to Mr. Bittman are subject to repurchase by
the Company at $.01 per share if Mr. Bittman's employment terminates
for certain reasons prior to the vesting of such shares.
Effective February 12, 1996, David P. Hanlon resigned his
positions of President, Chief Executive Officer, and Chief Financial
Officer of the Company. The Company entered into a Resignation and
General Release Agreement with Mr. Hanlon in February 1996. Under the
agreement, the sum of $1,859,800 was paid to Mr. Hanlon as due under
his employment agreement dated December 1, 1994. All options granted
to Mr. Hanlon during his employment with the Company became fully
vested and were exercisable until May 20, 1996.
<PAGE>
Compliance with Section 16(a) of the Securities Act of 1934
The following report filed under Section 16(a) of the Securities
Exchange Act of 1934 during or with respect to the fiscal year ended
September 30, 1996 was not filed on a timely basis: a Form 4
reporting the award of 225,000 restricted shares to Robert A. Bittman
on April 10, 1996.
Relationship with Independent Public Accountants
The Company has selected Deloitte & Touche llp as its independent
accountants for the year ended September 30, 1997.
A representative of Deloitte & Touche llp will be present at the
Annual Meeting of Stockholders and will have the opportunity to make a
statement and will respond to appropriate questions.
THE FOLLOWING REPORT OF THE COMPENSATION COMMITTEE AND THE PERFORMANCE
GRAPH THAT APPEARS IMMEDIATELY AFTER SUCH REPORT SHALL NOT BE DEEMED
TO BE SOLICITING MATERIAL OR TO BE FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION UNDER THE SECURITIES ACT OF 1933 OR THE SECURITIES
EXCHANGE ACT OF 1934 OR INCORPORATED BY REFERENCE IN ANY DOCUMENT SO
FILED.
BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors, consisting
entirely of non-employee directors, is responsible for oversight of
executive compensation, review of the Company's overall compensation
programs, and administration of certain of the Company's incentive
compensation programs.
Compensation Philosophy
Generally, the Company's compensation programs are designed to
attract, retain, motivate and appropriately reward individuals who are
responsible for the Company's short and long-term profitability,
growth and return to stockholders. The overall compensation
philosophy followed by the Committee is to pay competitively while
emphasizing qualitative indicators of corporate and individual
performance. The incentive cash bonuses received by the Named
Officers in the Summary Compensation Table under the Company's
management bonus plan comprised on average approximately 41% of their
total salary and bonus compensation for fiscal 1996.
Executive Compensation
The Company's management bonus plan is a cash-based incentive
program, and for fiscal year 1996, was based on the Company's income
from operations. Individual cash bonus awards were made to the
executive officers because the Committee believes such awards provide
appropriate performance incentives. Individual cash bonus awards for
executive officers other than the Chief Executive Officer and the
President and Chief Operating Officer were determined for fiscal 1996
jointly by the then Chief Executive Officer, Mr. Mathewson, and
President and Chief Operating Officer, Mr. Baker, based on a
qualitative evaluation of each officer's individual performance.
<PAGE>
Executive officers also participate in benefit plans available to
employees as described under "Employee Incentive Plans."
The Committee also uses stock option awards made under the Stock
Option Plan for Key Employees of International Game Technology and the
International Game Technology 1993 Stock Option Plan (the "Stock
Option Plans") to provide incentives for key personnel, including
executive officers. Stock options are priced at the fair market value
of the Common Stock of the Company on the date of the grant, and
typically vest at the rate of 20% per year over five years with
exercisability dependent on continued employment.
All executive officers received a stock option award under the
Stock Option Plans in fiscal 1996. The Committee also periodically
approves additional stock option awards for eligible individuals,
including executive officers, based on individual current performance,
assumption of significant responsibilities, anticipated future
contributions, and/or ability to impact overall corporate and/or
business unit financial results.
To the extent readily determinable, and as one of the factors in
its consideration of compensation matters, the Compensation Committee
also considers the anticipated tax treatment to the Company and to the
executives of various payments and benefits, specifically in
consideration of Section 162(m) of the Internal Revenue Code. The
Committee will not, however, necessarily limit executive compensation
to that which is deductible. For the near term, executive
compensation paid to the Company's executive officers, is expected to
remain tax deductible under Section 162(m).
Chief Executive Compensation
Mr. Russell served as the Chief Executive Officer of the Company
during fiscal 1996, until his resignation on December 31, 1995. He
received a base salary of $300,000 during fiscal 1996 pursuant to the
terms of his then existing employment agreement. For his services to
the Company over a period of ten years, the Committee approved a one-
time lump sum payment of $600,000 to Mr. Russell upon his resignation.
On January 1, 1996, Mr. Hanlon was named Chief Executive Officer
of the Company. He served in this position until his resignation on
February 12, 1996. Mr. Hanlon had a base salary in fiscal 1996 of
$450,000 pursuant to the terms of his three-year employment agreement,
dated December 1, 1994. Upon his resignation, Mr. Hanlon received
$1,859,800 in connection with the termination of his employment
agreement. Mr. Hanlon was granted 4,500 options during fiscal 1996.
Mr. Mathewson became Chief Executive Officer of the Company on
February 12, 1996. As Chief Executive Officer, he receives no base
salary. The Committee, based on its subjective evaluation of Mr.
Mathewson's performance, granted Mr. Mathewson a stock option in
February 1996, to acquire 1,000,000 shares of the Company's Common
Stock, all of such options were fully vested in December 1996 by
action of the Committee.
COMPENSATION COMMITTEE
Frederick B. Rentschler, Chairman
Warren L. Nelson
Claudine B. Williams
<PAGE>
PERFORMANCE GRAPH
The following graph reflects the cumulative total return (change
in stock price plus reinvested dividends) of a $100 investment in the
Company's Common Stock for the five-year period from September 30,
1991 through September 30, 1996 in comparison to the Standard and
Poor's 500 Composite Index and a Peer Group. The comparisons are not
intended to forecast or be indicative of possible future performance
of the Company's Stock.
<TABLE>
<CAPTION>
September 30, 1991 1992 1993 1994 1995 1996
<S> <C> <C> <C> <C> <C> <C>
International Game 100 321 630 327 216 331
Technology
Current Peer Group 100 112 152 93 123 141
Former Peer Group 100 112 147 96 106 128
S & P 500 100 111 125 130 169 203
</TABLE>
The former peer group consisted of WMS Industries, Inc. and Video
Lottery Technologies, Inc. The current peer group includes the
companies in the former peer group as well as Casino Data Systems
("CDS") and GTECH. CDS was added due to its introduction of
proprietary linked gaming systems. Due to the Company's involvement in
the video lottery market, GTECH was also included in the current peer
group.
<PAGE>
GENERAL
The Company's Annual Report to Stockholders, containing audited
financial statements, accompanies this Proxy Statement. As of the
date of this Proxy Statement, the Board of Directors knows of no
business which will be presented for consideration at the meeting
other than the matters stated in the notice and described in the Proxy
Statement. If, however, any matter incident to the conduct of the
meeting or other business shall properly come before the meeting, it
is intended that the proxies will be voted in respect of any such
matters or other business in accordance with the best judgment of the
persons acting under the proxies, and discretionary authority to do so
is included in the proxy.
BY ORDER OF THE BOARD OF DIRECTORS
Brian McKay
Secretary
Reno, Nevada
January 14, 1997
<PAGE>
EXHIBIT A
INTERNATIONAL GAME TECHNOLOGY
1993 STOCK OPTION PLAN
(Amended and Restated Effective as of August 27, 1996)
<PAGE>
TABLE OF CONTENTS
Page
I. THE PLAN A-1
1.1 Purpose A-1
1.2 Administration and Authorization; Power and Procedure A-1
1.3 Participation A-2
1.4 Shares Available for Awards; Share Limits A-2
1.5 Grant of Awards A-2
1.6 Award Period A-2
1.7 Limitations on Exercise and Vesting of Awards A-2
1.8 Acceptance of Notes to Finance Exercise A-3
1.9 No Transferability A-3
II. EMPLOYEE OPTIONS A-4
2.1 Grants A-4
2.2 Option Price A-4
2.3 Limitations on Grant and Terms of Incentive Stock Options A-4
2.4 Limits on 10% Holders A-5
2.5 Option Repricing/Cancellation and Regrant/Waiver of
Restrictions A-5
III. STOCK APPRECIATION RIGHTS A-5
3.1 Grants A-5
3.2 Exercise of Stock Appreciation Rights A-5
3.3 Payment A-5
IV. RESTRICTED STOCK AWARDS A-6
4.1 Grants A-6
4.2 Restrictions A-6
4.3 Return to the Corporation A-6
V. PERFORMANCE SHARE AWARDS AND STOCK BONUSES A-6
5.1 Grants of Performance Share Awards A-6
5.2 Special Performance-Based Share Awards A-7
5.3 Grants of Stock Bonuses A-8
5.4 Deferred Payments A-8
VI. OTHER PROVISIONS A-8
6.1 Rights of Eligible Employees, Participants and
Beneficiaries A-8
6.2 Adjustments; Acceleration A-8
6.3 Effect of Termination of Employment A-9
6.4 Compliance with Laws A-9
6.5 Tax Withholding A-9
6.6 Plan Amendment, Termination and Suspension A-10
6.7 Privileges of Stock Ownership A-10
6.8 Effective Date of the Plan A-10
6.9 Term of the Plan A-10
6.10 Governing Law; Construction; Severability A-10
6.11 Captions A-11
6.12 Effect of Change of Subsidiary Status A-11
6.13 Non-Exclusivity of Plan A-11
VII. NON-EMPLOYEE DIRECTOR OPTIONS A-11
7.1 Participation A-11
7.2 Annual Option Grants A-11
7.3 Option Price A-11
7.4 Option Period and Exercisability A-12
7.5 Termination of Directorship A-12
7.6 Adjustments A-12
7.7 Acceleration Upon a Change in Control Event A-12
VIII. DEFINITIONS A-12
8.1 Definitions A-12
<PAGE>
INTERNATIONAL GAME TECHNOLOGY
1993 STOCK OPTION PLAN
(Amended and Restated Effective as of August 27, 1996)
THE PLAN
Purpose
The purpose of this Plan is to promote the success of the Company
by providing an additional means through the grant of Awards to
attract, motivate, retain and reward key employees, including
officers, whether or not directors, of the Company with Awards and
incentives for high levels of individual performance and improved
financial performance of the Company and to attract, motivate and
retain experienced and knowledgeable independent directors through the
benefits provided under Article VII. "Corporation" means
International Game Technology, a Nevada corporation, and "Company"
means the Corporation and its Subsidiaries, collectively. These terms
and other capitalized terms are defined in Article VIII.
Administration and Authorization; Power and Procedure
Committee. This Plan shall be administered by and all Awards to
Eligible Employees shall be authorized by the Committee. Action of
the Committee with respect to the administration of this Plan shall be
taken pursuant to a majority vote or by written consent of its
members.
Plan Awards; Interpretation; Powers of Committee. Subject to the
express provisions of this Plan, the Committee shall have the
authority:
to determine from among those persons eligible the
particular Eligible Employees who will receive any Awards;
to grant Awards to Eligible Employees, determine the
price at which securities will be offered or awarded and the
amount of securities to be offered or awarded to any of such
individuals, and determine the other specific terms and
conditions of such Awards consistent with the express limits of
this Plan, and establish the installments (if any) in which such
Awards shall become exercisable or shall vest, or determine that
no delayed exercisability or vesting is required, and establish
the events of termination or reversion of such Awards;
to approve the forms of Award Agreements (which need
not be identical either as to type of Award or as among
Participants);
to construe and interpret this Plan and any agreements
defining the rights and obligations of the Company and
Participants under this Plan, further define the terms used in
this Plan, and prescribe, amend and rescind rules and regulations
relating to the administration of this Plan;
to cancel, modify, or waive the Corporation's rights
with respect to, or modify, discontinue, suspend, or terminate
any or all outstanding Awards held by Eligible Employees, subject
to any required consent under Section 6.6;
to accelerate or extend the exercisability or extend
the term of any or all such outstanding Awards within the maximum
ten-year term of Awards under Section 1.6; and
to make all other determinations and take such other
action as contemplated by this Plan or as may be necessary or
advisable for the administration of this Plan and the
effectuation of its purposes.
Notwithstanding the foregoing, the provisions of Article VII relating
to Non-Employee Director Options shall be automatic and, to the
maximum extent possible, self-effectuating.
Binding Determinations. Any action taken by, or inaction of, the
Corporation, any Subsidiary, the Board or the Committee relating or
pursuant to this Plan shall be within the absolute discretion of that
entity or body and shall be conclusive and binding upon all persons.
No member of the Board or Committee, or officer of the Corporation or
any Subsidiary, shall be liable for any such action or inaction of the
entity or body, of another person or, except in circumstances
involving bad faith of himself or herself. Subject only to compliance
with the express provisions hereof, the Board and Committee may act in
their absolute discretion in matters within their authority related to
this Plan.
<PAGE>
Reliance on Experts. In making any determination or in taking or
not taking any action under this Plan, the Committee or the Board, as
the case may be, may obtain and may rely upon the advice of experts,
including professional advisors to the Corporation. No director,
officer or agent of the Company shall be liable for any such action or
determination taken or made or omitted in good faith.
Delegation. The Committee may delegate ministerial, non-
discretionary functions to a third-party administrator or to
individuals who are officers or employees of the Company.
Participation
Awards may be granted by the Committee only to those persons that
the Committee determines to be Eligible Employees. An Eligible
Employee who has been granted an Award may, if otherwise eligible, be
granted additional Awards if the Committee shall so determine. Non-
Employee Directors shall not be eligible to receive any Options except
for Nonqualified Stock Options granted automatically without action of
the Committee under the provisions of Article VII.
Shares Available for Awards; Share Limits
Subject to the provisions of Section 6.2, the capital stock that
may be delivered under this Plan shall be shares of the Corporation's
authorized but unissued Common Stock and any shares of its Common
Stock held as treasury shares. The shares may be delivered for any
lawful consideration.
Share Limits. The maximum number of shares of Common Stock that
may be delivered pursuant to all Awards, including Incentive Stock
Options, granted under this Plan shall not exceed 5,000,000 shares
(the "Share Limit"). The maximum number of shares of Common Stock
that may be delivered to Non-Employee Directors issued under the
provisions of Article VII shall not exceed 250,000 shares. The
maximum number of shares subject to Options and Stock Appreciation
Rights that are granted during any calendar year to any individual
shall be limited to 1,000,000. Each of the four foregoing numerical
limits shall be subject to adjustment as contemplated by Section 6.2.
Share Reservation; Replenishment and Reissue of Unvested Awards.
No Award may be granted under this Plan unless, on the date of grant,
the sum of (i) the maximum number of shares issuable at any time
pursuant to such Award, plus (ii) the number of shares that have
previously been issued pursuant to Awards granted under this Plan,
other than reacquired shares available for reissue consistent with any
applicable legal limitations, plus (iii) the maximum number of shares
that may be issued at any time after such date of grant pursuant to
Awards that are outstanding on such date, does not exceed the Share
Limit. Shares that are subject to or underlie Awards which expire or
for any reason are canceled or terminated, are forfeited, fail to
vest, or for any other reason are not paid or delivered under this
Plan, as well as reacquired shares, shall again, except to the extent
prohibited by law, be available for subsequent Awards under the Plan.
Except as limited by law, if an Award is or may be settled only in
cash, such Award need not be counted against any of the limits under
this Section 1.4.
Grant of Awards
Subject to the express provisions of this Plan, the Committee
shall determine the number of shares of Common Stock subject to each
Award, the price (if any) to be paid for the shares or the Award and,
in the case of Performance Share Awards, in addition to matters
addressed in Section 1.2(b), the specific objectives, goals and
performance criteria (such as an increase in sales, market value,
earnings or book value over a base period, the years of service before
vesting, the relevant job classification or level of responsibility or
other factors) that further define the terms of the Performance Share
Award. Each Award shall be evidenced by an Award Agreement signed by
the Corporation and, if required by the Committee, by the Participant.
The Award Agreement shall set forth the material terms and conditions
of the Award established by the Committee consistent with the specific
provisions of this Plan.
Award Period
Each Award and all executory rights or obligations under the
related Award Agreement shall expire on such date (if any) as shall be
determined by the Committee, but in the case of Options or other
rights to acquire Common Stock not later than ten (10) years after the
Award Date.
Limitations on Exercise and Vesting of Awards
Exercise. Unless the Committee expressly provides otherwise, no
Award shall be exercisable or shall vest until at least six months
after the initial Award Date, and once exercisable an Award shall
remain exercisable until the expiration or earlier termination of the
Award.
<PAGE>
Procedure. Any exercisable Award shall be deemed to be exercised
when the Secretary of the Corporation receives written notice of such
exercise from the Participant, together with the required any payment
made in accordance with Section 2.2(b) or 7.3, as the case may be.
Fractional Shares/Minimum Issue. Fractional share interests
shall be disregarded, but may be accumulated. The Committee, however,
may determine in the case of Eligible Employees that cash, other
securities or other property will be paid or transferred in lieu of
any fractional share interests. No fewer than 100 shares may be
purchased on exercise of any Award at one time unless the number
purchased is the total number at the time available for purchase under
the Award.
Acceptance of Notes to Finance Exercise
The Corporation may, with the Committee's approval, accept one or
more notes from any Eligible Employee in connection with the exercise
or receipt of any outstanding Award; provided that any such note shall
be subject to the following terms and conditions:
The principal of the note shall not exceed the amount
required to be paid to the Corporation upon the exercise or receipt of
one or more Awards under the Plan and the note shall be delivered
directly to the Corporation in consideration of such exercise or
receipt.
The initial term of the note shall be determined by the
Committee; provided that the term of the note, including extensions,
shall not exceed a period of 10 years.
The note shall provide for full recourse to the Participant
and shall bear interest at a rate determined by the Committee but not
less than the applicable imputed interest rate specified by the Code.
If the employment of the Participant terminates, the unpaid
principal balance of the note shall become due and payable on the 10th
business day after such termination; provided, however, that if a sale
of such shares would cause such Employee Participant to incur
liability under Section 16(b) of the Exchange Act, the unpaid balance
shall become due and payable on the 10th business day after the first
day on which a sale of such shares could have been made without
incurring such liability assuming for these purposes that there are no
other transactions by the Employee Participant subsequent to such
termination.
If required by the Committee or by applicable law, the note
shall be secured by a pledge of any shares or rights financed thereby
in compliance with applicable law.
The terms, repayment provisions, and collateral release
provisions of the note and the pledge securing the note shall conform
with applicable rules and regulations of the Federal Reserve Board as
then in effect.
No Transferability
(a) Limit On Exercise and Transfer. Unless otherwise expressly
provided in (or pursuant to) this Section 1.9, by applicable law and
by the Award Agreement, as the same may be amended, (i) all Awards are
non-transferable and shall not be subject in any manner to sale,
transfer, anticipation, alienation, assignment, pledge, encumbrance or
charge; Awards shall be exercised only by the Participant; and (ii)
shares issuable pursuant to an Award shall be delivered only to (or
for the account of) the Participant.
(b) Exceptions. The Committee may permit Awards to be exercised
by certain persons or entities related to the Participant, including
but not limited to members of the Participant's family, charitable
institutions, or trusts or other entities whose beneficiaries or
beneficial owners are members of the Participant's family and/or
charitable institutions, or to such other persons or entities as may
be approved by the Committee, pursuant to such conditions and
procedures as the Committee may establish. Any permitted transfer
shall be subject to the condition that the Committee receive evidence
satisfactory to it that the transfer is being made for estate and/or
tax planning purposes on a gratuitous or donative basis and without
consideration (other than nominal consideration).
<PAGE>
(c) Further Exceptions to Limits On Transfer. The exercise and
transfer restrictions in Section 1.9(a) shall not apply to:
(i) transfers to the Corporation,
(ii) the designation of a beneficiary to receive
benefits in the event of the Participant's death or,
if the Participant has died, transfers to or exercise
by the Participant's beneficiary, or, in the absence
of a validly designated beneficiary, transfers by will
or the laws of descent and distribution,
(iii) transfers pursuant to a QDRO if approved
or ratified by the Committee,
(iv) if the Participant has suffered a Total
Disability, permitted transfers or exercises on behalf
of the Participant by his or her legal representative,
or
(v) the authorization by the Committee of
"cashless exercise" procedures with third parties who
provide financing for the purpose of (or who otherwise
facilitate) the exercise of Awards consistent with
applicable laws and the express authorization of the
Committee.
(d) Limitations on Incentive Stock Options and Restricted Stock
Awards. Notwithstanding the foregoing, Incentive Stock Options and
Restricted Stock Awards shall be subject to any and all applicable
transfer restrictions under the Code.
EMPLOYEE OPTIONS
Grants
One or more Options may be granted under this Article to any
Eligible Employee. Each Option granted may be either an Option
intended to be an Incentive Stock Option, or an Option not so
intended, and such intent shall be indicated in the applicable Option
Agreement.
Option Price
Pricing Limits. The purchase price per share of the Common Stock
covered by each Option shall be determined by the Committee at the
time of the Option is granted, but in the case of Incentive Stock
Options shall not be less than 100% (110% in the case of a Participant
who owns or is deemed to own under Section 424(d) of the Code more
than 10% of the total combined voting power of all classes of stock of
the Corporation) of the Fair Market Value of the Common Stock on the
Award Date.
Payment Provisions. The purchase price of any shares purchased
on exercise of an Option granted under this Article shall be paid in
full at the time of each purchase in one or a combination of the
following methods: (i) in cash or by electronic funds transfer;
(ii) by check payable to the order of the Corporation; (iii) if
authorized by the Committee or specified in the applicable Option
Agreement, by a promissory note of the Participant consistent with the
requirements of Section 1.8; (iv) by notice and third party payment in
such manner as may be authorized by the Committee; or (v) by the
delivery of shares of Common Stock of the Corporation already owned by
the Participant, provided, however, that the Committee may in its
absolute discretion limit the Participant's ability to exercise an
Option by delivering such shares. Shares of Common Stock used to
satisfy the exercise price of an Option shall be valued at their Fair
Market Value on the date of exercise.
Limitations on Grant and Terms of Incentive Stock Options
100,000 Limit. To the extent that the aggregate "Fair Market
Value" of stock with respect to which Incentive Stock Options first
become exercisable by a Participant in any calendar year exceeds
$100,000, taking into account both Common Stock subject to Incentive
Stock Options under this Plan and stock subject to Incentive Stock
Options under all other plans of the Company or any parent
corporation, such options shall be treated as nonqualified stock
options. For this purpose, the "Fair Market Value" of the stock
subject to options shall be determined as of the date the options were
optioned. In reducing the number of options treated as Incentive
Stock Options to meet the $100,000 limit, the most recently granted
options shall be reduced first. To the extent a reduction of
simultaneously granted options is necessary to meet the $100,000
limit, the Committee may, in the manner and to the extent permitted by
law, designate which shares of Common Stock are to be treated as
shares acquired pursuant to the exercise of an Incentive Stock Option.
<PAGE>
Option Period. Each Incentive Stock Option and all rights
thereunder shall expire no later than ten years after the Award Date.
Other Code Limits. There shall be imposed in any Award Agreement
relating to Incentive Stock Options such terms and conditions as from
time to time are required in order that the Option be an "incentive
stock option" as that term is defined in Section 422 of the Code.
Limits on 10% Holders
No Incentive Stock Option may be granted to any person who, at
the time the Option is granted, owns (or is deemed to own under
Section 424(d) of the Code) shares of outstanding Common Stock
possessing more than 10% of the total combined voting power of all
classes of stock of the Corporation, unless the exercise price of such
Option is at least 110% of the Fair Market Value of the stock subject
to the Option and such Option by its terms is not exercisable after
the expiration of five years from the date such Option is granted.
Cancellation and Regrant/Waiver of Restrictions
Subject to Section 1.4 and Section 6.6 and the specific
limitations on Options contained in this Plan, the Committee from time
to time may authorize, generally or in specific cases only, for the
benefit of any Eligible Employee, any adjustment in the exercise
price, the number of shares subject to or the term of, an Option
granted under this Article by cancellation of an outstanding Option
and a subsequent regranting of an Option, by amendment, by
substitution of an outstanding Option, by waiver or by other legally
valid means. Such amendment or other action may result among other
changes in an exercise price which is higher or lower than the
exercise or purchase price of the original or prior Option, provide
for a greater or lesser number of shares subject to the Option, or
provide for a longer or shorter vesting or exercise period.
STOCK APPRECIATION RIGHTS
Grants
In its discretion, the Committee may grant a Stock Appreciation
Right to any Eligible Employee either concurrently with the grant of
another Award or in respect of an outstanding Award, in whole or in
part, or independently of any other Award. Any Stock Appreciation
Right granted in connection with an Incentive Stock Option shall
contain such terms as may be required to comply with the provisions of
Section 422 of the Code and the regulations promulgated thereunder,
unless the holder otherwise agrees.
Exercise of Stock Appreciation Rights
(a) Exercisability. Unless the Award Agreement or the Committee
otherwise provides, a Stock Appreciation Right related to another
Award shall be exercisable at such time or times, and to the extent,
that the related Award shall be exercisable.
(b) Effect on Available Shares. To the extent that a Stock
Appreciation Right is exercised, the number of underlying shares of
Common Stock therefore subject to a related Award shall be charged
against the maximum amount of Common Stock that may be delivered
pursuant to Awards under this Plan. The number of shares subject to
the Stock Appreciation Right and the related Option of the Participant
shall be reduced by the number of underlying shares as to which the
exercise related, unless the Award
Agreement otherwise provides.
(c) Stand-Alone SARs. A Stock Appreciation Right granted
independently of any other Award shall be exercisable pursuant to the
terms of the Award Agreement but in no event earlier than six months
after the Award Date, except in the case of death or Total Disability.
Payment
(a) Amount. Unless the Committee otherwise provides, upon
exercise of a Stock Appreciation Right and the attendant surrender of
an exercisable portion of any related Award, the Participant shall be
entitled to receive payment of an amount determined by multiplying
(i) the difference obtained by subtracting the
exercise price per share of Common Stock under the related Award
(if applicable) or the initial share value specified in the Award
from the Fair Market Value of a share of Common Stock on the date
of exercise of the Stock Appreciation Right, by
<PAGE>
(ii) the number of shares with respect to which the
Stock Appreciation Right shall have been exercised.
(b) Form of Payment. The Committee, in its sole discretion,
shall determine the form in which payment shall be made of the amount
determined under paragraph (a) above, either solely in cash, solely in
shares of Common Stock (valued at Fair Market Value on the date of
exercise of the Stock Appreciation Right), or partly in such shares
and partly in cash, provided that the Committee shall have determined
that such exercise and payment are consistent with applicable law. If
the Committee permits the Participant to elect to receive cash or
shares (or a combination thereof) on such exercise, any such election
shall be subject to such conditions as the Committee may impose.
RESTRICTED STOCK AWARDS
Grants
The Committee may, in its discretion, grant one or more
Restricted Stock Awards to any Eligible Employee. Each Restricted
Stock Award Agreement shall specify the number of shares of Common
Stock to be issued to the Participant, the date of such issuance, the
consideration for such shares (but not less than the minimum lawful
consideration under applicable state law) by the Participant, the
extent to which the Participant shall be entitled to dividends, voting
and other rights in respect of the shares prior to vesting and the
restrictions imposed on such shares and the conditions of release or
lapse of such restrictions. Such restrictions shall not lapse earlier
than 12 months after the Award Date, except to the extent the
Committee may otherwise provide. Stock certificates evidencing shares
of Restricted Stock pending the lapse of the restrictions ("restricted
shares") shall bear a legend making appropriate reference to the
restrictions imposed hereunder and shall be held by the Corporation or
by a third party designated by the Committee until the restrictions on
such shares shall have lapsed and the shares shall have vested in
accordance with the provisions of the Award and Section 1.7. Upon
issuance of the Restricted Stock Award, the Participant may be
required to provide such further assurance and documents as the
Committee may require to enforce the restrictions.
Restrictions
(a) Pre-Vesting Restraints. Except as provided in Section 4.1
and 1.9, restricted shares comprising any Restricted Stock Award may
not be sold, assigned, transferred, pledged or otherwise disposed of
or encumbered, either voluntarily or involuntarily, until the
restrictions on such shares have lapsed and the shares have become
vested.
(b) Dividend and Voting Rights. Unless otherwise provided in
the applicable Award Agreement, a Participant receiving a Restricted
Stock Award shall be entitled to cash dividend and voting rights for
all shares issued even though they are not vested, provided that such
rights shall terminate immediately as to any restricted shares which
cease to be eligible for vesting.
(c) Cash Payments. If the Participant shall have paid or
received cash (including any dividends) in connection with the
Restricted Stock Award, the Award Agreement shall specify whether and
to what extent such cash shall be returned (with or without an
earnings factor) as to any restricted shares which cease to be
eligible for vesting.
Return to the Corporation
Unless the Committee otherwise expressly provides, restricted
shares that remain subject to restrictions at the time of termination
of employment or are subject to other conditions to vesting that have
not been satisfied by the time specified in the applicable Award
Agreement shall not vest and shall be returned to the Corporation in
such manner and on such terms as the Committee shall therein provide.
PERFORMANCE SHARE AWARDS AND STOCK BONUSES
Grants of Performance Share Awards
The Committee may, in its discretion, grant Performance Share
Awards to Eligible Employees based upon such factors as the Committee
shall deem relevant in light of the specific type and terms of the
award. An Award Agreement shall specify the maximum number of shares
of Common Stock (if any) subject to the Performance Share Award, the
consideration (but not less than the minimum lawful consideration) to
be paid for any such shares as may be issuable to the Participant, the
duration of the Award and the conditions upon which delivery of any
shares or cash to the Participant shall be based. The amount of cash
or shares or other property that may be deliverable pursuant to such
Award shall be based upon the degree of attainment over a specified
period (a "performance cycle") as may be established by the Committee
of such measure(s) of the performance of the Company (or any part
thereof) or the Participant as may be established by the Committee.
The Committee may provide for full or partial credit, prior to
completion of such performance cycle or the attainment of the
<PAGE>
performance achievement specified in the Award, in the event of the
Participant's death, or Total Disability, a Change in Control Event or
in such other circumstances as the Committee consistent with Section
6.10(c)(2), if applicable, may determine.
Special Performance-Based Share Awards
Without limiting the generality of the foregoing, and in addition
to Options and Stock Appreciation Rights granted under other
provisions of this Plan which are intended to satisfy the exception
for "performance-based compensation" under Section 162(m) of the Code
(with such Awards hereinafter referred to as a "Qualifying Option" or
a "Qualifying Stock Appreciation Right," respectively), other
performance-based awards within the meaning of Section 162(m) of the
Code ("Performance-Based Awards"), whether in the form of restricted
stock, performance stock, phantom stock, Cash-Based Awards, or other
rights, the grant, vesting, exercisability or payment of which depends
on the degree of achievement of the Performance Goals relative to
preestablished targeted levels for the Corporation or the Corporation
and one or more of its Subsidiaries, may be granted under this Plan.
Any Qualifying Option or Qualifying Stock Appreciation Right shall be
subject only to the requirements of subsections (a) and (c) below in
order for such Awards to satisfy the requirements for Performance-
Based Awards under this Section 5.2. With the exception of any
Qualifying Option or Qualifying Stock Appreciation Right, an Award
that is intended to satisfy the requirements of this Section 5.2 shall
be designated as a Performance-Based Award at the time of grant.
(a) Eligible Class. The eligible class of persons for
Performance-Based Awards under this Section shall be the executive
officers of the Corporation.
(b) Performance Goal Alternatives. The specific performance
goals for Performance-Based Awards granted under this Section (other
than Qualifying Options and Qualifying Stock Appreciation Rights)
shall be, on an absolute or relative basis, one or more of the
Performance Goals, as selected by the Committee in its sole
discretion. The Committee shall establish in the applicable Award
Agreement the specific performance target(s) relative to the
Performance Goal(s) which must be attained before the compensation
under the Performance-Based Award becomes payable. The specific
targets shall be determined within the time period permitted under
Section 162(m) of the Code (and any regulations issued thereunder) so
that such targets are considered to be preestablished and so that the
attainment of such targets is substantially uncertain at the time of
their establishment. The applicable performance measurement period
may not be less than one nor more than 10 years.
(c) Maximum Performance-Based Award. Notwithstanding any other
provision of the Plan to the contrary, the maximum number of shares of
Common Stock which may be delivered pursuant to options, stock
appreciation rights, restricted stock or other share-based awards that
are granted as Performance-Based Awards to any Participant in any
calendar year shall not exceed 1,000,000 shares, either individually
or in the aggregate, subject to adjustment as provided in Section 6.2.
Awards that are canceled during the year shall be counted against this
limit to the extent required by Section 162(m) of the Code. In
addition, the aggregate amount of compensation to be paid to any
Participant in respect of any Cash-Based Awards that are granted
during any calendar year as Performance-Based Awards shall not exceed
$1,000,000.
(d) Committee Certification. Before any Performance-Based Award
under this Section 5.2 (other than Qualifying Options or Qualifying
Stock Appreciation Rights) is paid, the Committee must certify in
writing that the Performance Goal(s) and any other material terms of
the Performance-Based Award were satisfied; provided, however, that a
Performance-Based Award may be paid without regard to the satisfaction
of the applicable Performance Goal in the event of a Change in Control
Event in accordance with Section 6.2(d).
(e) Terms and Conditions of Awards. The Committee will have the
discretion to determine the restrictions or other limitations of the
individual Awards granted under this Section 5.2 including the
authority to reduce Awards, payouts or vesting or to pay no Awards, in
its sole discretion, if the Committee preserves such authority at the
time of grant by language to this effect in its authorizing
resolutions or otherwise.
(f) Adjustments for Changes in Capitalization and other Material
Changes. In the event of a change in corporate capitalization, such
as a stock split or stock dividend, or a corporate transaction, such
as a merger, consolidation, spin-off, reorganization or similar event,
or any partial or complete liquidation of the Corporation, or any
similar event consistent with regulations issued under Section 162(m)
of the Code including, without limitation, any material change in
accounting policies or practices affecting the Corporation and/or the
Performance Goals or targets, then the Committee may make adjustments
to the Performance Goals and targets relating to outstanding
Performance-Based Awards to the extent such adjustments are made to
reflect the occurrence of such an event; provided, however, that
adjustments described in this subsection may be made only to the
extent that the occurrence of an event described herein was unforeseen
at the time the targets for a Performance-Based Award were established
by the Committee.
<PAGE>
Grants of Stock Bonuses
The Committee may grant a Stock Bonus to any Eligible Employee to
reward exceptional or special services, contributions or achievements
in the manner and on such terms and conditions (including any
restrictions on such shares) as determined from time to time by the
Committee. The number of shares so awarded shall be determined by the
Committee. The Award may be granted independently or in lieu of a
cash bonus.
Deferred Payments
The Committee may authorize for the benefit of any Eligible
Person the deferral of any payment of cash or shares that may become
due or of cash otherwise payable under this Plan, and provide for
accredited benefits thereon based upon such deferment, at the election
or at the request of such Participant, subject to the other terms of
this Plan. Such deferral shall be subject to such further conditions,
restrictions or requirements as the Committee may impose, subject to
any then vested rights of Participants.
OTHER PROVISIONS
Rights of Eligible Employees, Participants and Beneficiaries
Employment Status. Status as an Eligible Employee shall not be
construed as a commitment that any Award will be granted under this
Plan to an Eligible Employee or to Eligible Employees generally.
No Employment Contract. Nothing contained in this Plan (or in
any other documents related to this Plan or to any Award) shall confer
upon any Eligible Employee or other Participant any right to continue
in the employ or other service of the Company or constitute any
contract or agreement of employment or other service, nor shall
interfere in any way with the right of the Company to change such
person's compensation or other benefits or to terminate the employment
of such person, with or without cause, but nothing contained in this
Plan or any document related hereto shall adversely affect any
independent contractual right of such person without his or her
consent thereto.
Plan Not Funded. Awards payable under this Plan shall be payable
in shares or from the general assets of the Corporation, and no
special or separate reserve, fund or deposit shall be made to assure
payment of such Awards. No Participant, Beneficiary or other person
shall have any right, title or interest in any fund or in any specific
asset (including shares of Common Stock, except as expressly otherwise
provided) of the Company by reason of any Award hereunder. Neither
the provisions of this Plan (or of any related documents), nor the
creation or adoption of this Plan, nor any action taken pursuant to
the provisions of this Plan shall create, or be construed to create, a
trust of any kind or a fiduciary relationship between the Company and
any Participant, Beneficiary or other person. To the extent that a
Participant, Beneficiary or other person acquires a right to receive
payment pursuant to any Award hereunder, such right shall be no
greater than the right of any unsecured general creditor of the
Company.
Adjustments; Acceleration
Adjustments. If there shall occur any extraordinary dividend or
other extraordinary distribution in respect of the Common Stock
(whether in the form of cash, Common Stock, other securities, or other
property), or any reclassification, recapitalization, stock split
(including a stock split in the form of a stock dividend), reverse
stock split, reorganization, merger, combination, consolidation, split-
up, spin-off, combination, repurchase, or exchange of Common Stock or
other securities of the Corporation, or there shall occur any other
like corporate transaction or event in respect of the Common Stock on
a sale of substantially all the assets of the Corporation as an
entirety, then the Committee shall, in such manner and to such extent
(if any) as it deems appropriate and equitable (1) proportionately
adjust any or all of (i) the number and type of shares of Common Stock
(or other securities) which thereafter may be made the subject of
Awards (including the specific maximum and numbers of shares set forth
elsewhere in this Plan), (ii) the number, amount and type of shares of
Common Stock (or other securities or property) subject to any or all
outstanding Awards, (iii) the grant, purchase, or exercise price of
any or all outstanding Awards, (iv) the securities, cash or other
property deliverable upon exercise of any outstanding Awards, or (v)
the performance standards appropriate to any outstanding Awards, or
(2) in the case of an extraordinary dividend or other distribution,
recapitalization, reclassification, merger, reorganization,
consolidation, combination, sale of assets, split up, exchange, or
spin off, make provision for a cash payment or for the substitution or
exchange of any or all outstanding Awards or the cash, securities or
property deliverable to the holder of any or all outstanding Options
based upon the distribution or consideration payable to holders of the
Common Stock of the Corporation upon or in respect of such event;
provided, however, in each case, that with respect to Incentive Stock
Options, no such adjustment shall be made which would cause the Plan
to violate Section 424(a) of the Code or any successor provisions
thereto.
<PAGE>
Acceleration of Awards Upon Change in Control. As to any
Eligible Employee Participant, unless prior to a Change in Control
Event the Committee determines that, upon its occurrence, there shall
be no acceleration of benefits under Awards or determines that only
certain or limited benefits under Options shall be accelerated and the
extent to which they shall be accelerated, and/or establishes a
different time in respect of such Change in Control Event for such
acceleration, then upon the occurrence of a Change in Control Event
(i) each Option and Stock Appreciation Right shall become immediately
exercisable, (ii) Restricted Stock shall immediately vest free of
restrictions, and (iii) each Performance Share Award shall become
payable to the Participant; provided, however, that in no event shall
any Award be accelerated as to any Section 16 Person to a date less
than six months after the Award Date of such Award. The Committee may
override the limitations on acceleration in this Section 3.2(b) by
express provision in the Award Agreement and may accord any Eligible
Employee a right to refuse any acceleration, whether pursuant to the
Award Agreement or otherwise, in such circumstances as the Committee
may approve. Any acceleration of Awards shall comply with applicable
regulatory requirements, including, without limitation, Section 422 of
the Code.
Possible Early Termination of Accelerated Awards. If any Option
or other right to acquire Common Stock under this Plan (other than
under Article VII) has been fully accelerated as permitted by Section
6.2(b) but is not exercised prior to (i) a dissolution of the
Corporation, or (ii) a reorganization event described in Section
6.2(a) that the Corporation does not survive, or (iii) the
consummation of an event described in Section 6.2(a) that results in a
Change in Control Event approved by the Board, such Option or right
shall thereupon terminate, subject to any provision that has been
expressly made by the Committee for the survival, substitution,
exchange or other settlement of such Option or right.
Effect of Termination of Employment
The Committee shall establish in respect of each Award granted to
an Eligible Employee the effect of a termination of employment on the
rights and benefits thereunder and in so doing may make distinctions
based upon the cause of termination. In addition, in the event of, or
in anticipation of, a termination of employment with the Company for
any reason, other than discharge for cause, the Committee may, in its
discretion, increase the portion of the Participant's Award available
to the Participant, or Participant's Beneficiary or Personal
Representative, as the case may be, or, subject to the provisions of
Section 1.6, extend the exercisability period upon such terms as the
Committee shall determine and expressly set forth in or by amendment
to the Award Agreement.
Compliance with Laws
This Plan, the granting and vesting of Awards under this Plan and
the offer, issuance and delivery of shares of Common Stock and/or the
payment of money under this Plan or under Awards granted hereunder are
subject to compliance with all applicable federal and state laws,
rules and regulations (including, but not limited to, state and
federal securities laws and federal margin requirements) and to such
approvals by any listing, regulatory or governmental authority as may,
in the opinion of counsel for the Corporation, be necessary or
advisable in connection therewith. Any securities delivered under
this Plan shall be subject to such restrictions, and the person
acquiring such securities shall, if requested by the Corporation,
provide such assurances and representations to the Corporation as the
Corporation may deem necessary or desirable to assure compliance with
all applicable legal requirements.
Tax Withholding
Cash or Shares. Upon any exercise, vesting or payment of any
Award or upon the disposition of shares of Common Stock acquired
pursuant to the exercise of an Incentive Stock Option prior to
satisfaction of the holding period requirements of Section 422 of the
Code, the Company shall have the right at its option to (i) require
the Participant (or Personal Representative or Beneficiary, as the
case may be) to pay or provide for payment of the amount of any taxes
which the Company may be required to withhold with respect to such
Award event or payment or (ii) deduct from any amount payable in cash
the amount of any taxes which the Company may be required to withhold
with respect to such cash payment. In any case where a tax is
required to be withheld in connection with the delivery of shares of
Common Stock under this Plan, the Committee may in its sole discretion
grant (either at the time of the Award is granted or thereafter) to
the Participant the right to elect, pursuant to such rules and subject
to such conditions as the Committee may establish, to have the
Corporation reduce the number of shares to be delivered by (or
otherwise reacquire) the appropriate number of shares valued at their
then Fair Market Value, to satisfy such withholding obligation.
Tax Loans. The Committee may, in its discretion, authorize a
loan to an Eligible Employee in the amount of any taxes which the
Company may be required to withhold with respect to shares of Common
Stock received (or disposed of, as the case may be) pursuant to a
transaction described in subsection (a) above. Such a loan shall be
<PAGE>
for a term, at a rate of interest and pursuant to such other terms and
conditions as the Committee, under applicable law, may establish and
such loan need not comply with the provisions of Section 1.8.
Plan Amendment, Termination and Suspension
Board Authorization. The Board may, at any time, terminate or,
from time to time, amend, modify or suspend this Plan, in whole or in
part. No Awards may be granted during any suspension of this Plan or
after termination of this Plan, but the Committee shall retain
jurisdiction as to Awards then outstanding in accordance with the
terms of this Plan.
Stockholder Approval. Any amendment that would (i) materially
increase the benefits accruing to Participants under this Plan, (ii)
materially increase the aggregate number of securities that may be
issued under this Plan, or (iii) materially modify the requirements as
to eligibility for participation in this Plan, shall be subject to
stockholder approval only to the extent then required by Section 422
of the Code or any other applicable law, or deemed necessary or
advisable by the Board.
Amendment to Awards. Without limiting any other express
authority of the Committee under but subject to the express limits of
this Plan, the Committee by agreement or resolution may waive
conditions of or limitations on Awards to Eligible Employees that the
Committee in the prior exercise of its discretion has imposed, without
the consent of a Participant, and may make other changes to the terms
and conditions of Awards that do not affect in any manner materially
adverse to the Employee Participant, his or her rights and benefits
under an Award.
Limitations on Amendments to Plan and Awards. No amendment,
suspension or termination of the Plan or change of or affecting any
outstanding Award shall, without written consent of the Participant,
affect in any manner materially adverse to the Participant any rights
or benefits of the Participant or obligations of the Corporation under
any Award granted under this Plan prior to the effective date of such
change. Changes contemplated by Section 6.2 shall not be deemed to
constitute changes or amendments for purposes of this Section 6.6.
Privileges of Stock Ownership
Except as otherwise expressly authorized by the Committee or this
Plan, a Participant shall not be entitled to any privilege of stock
ownership as to any shares of Common Stock not actually delivered to
and held of record by him or her. No adjustment will be made for
dividends or other rights as a stockholders for which a record date is
prior to such date of delivery.
Effective Date of the Plan
This Plan was originally effective as of September 22, 1992
("Effective Date"), the date of Board approval, and was subject to
stockholder approval within 12 months thereafter. The Plan is hereby
amended and restated in its entirety, effective as of August 27, 1996.
Term of the Plan
No Award shall be granted more than ten years after the Effective
Date of this Plan (the "termination date"). Unless otherwise
expressly provided in this Plan or in an applicable Award Agreement,
any Award granted prior to the termination date may extend beyond such
date, and all authority of the Committee with respect to Awards
hereunder, including the authority to amend an Award, shall continue
during any suspension of this Plan and in respect of outstanding
Awards on such termination date.
Governing Law; Construction; Severability
Choice of Law. This Plan, the Awards, all documents evidencing
Awards and all other related documents shall be governed by, and
construed in accordance with the laws of the State of Nevada.
Severability. If any provision shall be held by a court of
competent jurisdiction to be invalid and unenforceable, the remaining
provisions of this Plan shall continue in effect.
Plan Construction.
(1) Rule 16b-3. It is the intent of the Corporation that
transactions in and affecting Awards in the case of Participants
who are or may be subject to Section 16 of the Exchange Act
satisfy any then applicable requirements of Rule 16b-3 so that
such persons will be entitled to the benefits of Rule 16b-3 or
other exemptive rules under Section 16 of the Exchange Act in
respect of these transactions and will not be subjected to
avoidable liability thereunder. If any provision of this Plan or
<PAGE>
of any Award would otherwise frustrate or conflict with the
intent expressed above, that provision to the extent possible
shall be interpreted and deemed amended so as to avoid such
conflict, but to the extent of any remaining irreconcilable
conflict with such intent as to such persons in the
circumstances, such provision shall be deemed void.
(2) Section 162(m). It is the further intent of the
Company that Options and Stock Appreciation Rights with an
exercise or base price not less than Fair Market Value on the
date of grant and Performance Share Awards under Section 5.2 of
the Plan that are granted to or held by a Section 16 Person shall
qualify as performance-based compensation under Section 162(m) of
the Code, and this Plan shall be interpreted consistent with such
intent.
Captions
Captions and headings are given to the sections and subsections
of this Plan solely as a convenience to facilitate reference. Such
headings shall not be deemed in any way material or relevant to the
construction or interpretation of the Plan or any provision thereof.
Effect of Change of Subsidiary Status
For purposes of this Plan and any Award hereunder, if an entity
ceases to be a Subsidiary a termination of employment shall be deemed
to have occurred with respect to each employee of such Subsidiary who
does not continue as an employee of another entity within the Company.
Non-Exclusivity of Plan
Nothing in this Plan shall limit or be deemed to limit the
authority of the Board or the Committee to grant awards or authorize
any other compensation, with or without reference to the Common Stock,
under any other plan or authority.
NON-EMPLOYEE DIRECTOR OPTIONS
Participation
Options under this Article VII shall be made only to Non-Employee
Directors.
Annual Option Grants
Time of Initial Grant. After approval of this Plan by the
stockholders of the Corporation, if any person who is not then an
officer or employee of the Company shall become a director of the
Corporation, there shall be granted automatically to such person
(without any action by the Board of Committee) a Nonqualified Stock
Option (the Award Date of which shall be the date such person takes
office) to purchase 10,000 shares.
Subsequent Annual Options. In each calendar year during the term
of the Plan, commencing in 1994, there shall be granted automatically
(without any action by the Committee or the Board) a Nonqualified
Stock Option to purchase 4,000 shares of Common Stock to each Non-
Employee Director who is re-elected as a director of the Corporation
(the Award Date of which shall be the date of such re-election). In
addition, subject to stockholder approval at the 1997 Annual
Stockholders Meeting, each person who is a Non-Employee Director on
August 27, 1996 shall be granted on a one-time basis without further
action on Option to purchase 2,000 shares of Common Stock (the Award
Date of which shall be August 27, 1996, the date of Board approval of
this amendment). Furthermore, notwithstanding the first sentence of
this subsection (b), but subject to stockholder approval at the 1997
Annual Stockholders Meeting, in each calendar year during the
remaining term of the Plan, (commencing in 1997), the grant described
in the first sentence of this subsection shall not be made and instead
there shall be granted automatically (without any action by the
Committee or the Board) a Nonqualified Stock Option to purchase 6,000
shares of Common Stock to each Non-Employee Director who is re-elected
as a director of the Corporation (the Award Date of which shall be the
date of such re-election).
Maximum Number of Shares. Annual grants that would otherwise
exceed the maximum number of shares under Section 1.4(a) shall be
prorated within such limitation. A Non-Employee Director shall not
receive more than 50,000 shares on exercise of all Options optioned
under this Section 7.2.
Option Price
The purchase price per share of the Common Stock covered by each
Option granted pursuant to Section 7.2 hereof shall be 100% of the
Fair Market Value of the Common Stock on the Award Date. The exercise
price of any Option granted under this Article shall be paid in full
at the time of each purchase in cash or by check or in shares of
<PAGE>
Common Stock valued at their Fair Market Value on the date of exercise
of the Option, or partly in such shares and partly in cash, provided
that any such shares used in payment shall have been owned by the
Participant at least six months prior to the date of exercise.
Option Period and Exercisability
Each Option granted under this Article VII and all rights or
obligations thereunder shall commence on the Award Date and expire ten
years thereafter and shall be subject to earlier termination as
provided below. Each Option granted under Section 7.2 shall become
exercisable at the rate of 33-1/3% per year, on the first, second and
third anniversaries of the Award Date.
Termination of Directorship
If a Non-Employee Director's services as a member of the Board of
Directors terminate by reason of death, Disability or Retirement, an
Option granted pursuant to this Article held by such Participant shall
immediately become and shall remain exercisable for two years after
the date of such termination or until the expiration of the stated
term of such Option, whichever first occurs. If a Non-Employee
Director's services as a member of the Board of Directors terminate
for any other reason, any portion of an Option granted pursuant to
this Article which is not then exercisable shall terminate and any
portion of such Option which is then exercisable may be exercised
within a period of thirty (30) days after the date of such termination
or until the expiration of the stated term, whichever first occurs.
Adjustments
Options granted under this Article VII shall be subject to
adjustment as provided in Section 6.2, but only to the extent that (a)
such adjustment and the Committee's action in respect thereof satisfy
applicable law, (b) such adjustment in the case of a Change in Control
Event is effected pursuant to the terms of a reorganization agreement
approved by stockholders of the Corporation, and (c) such adjustment
is consistent with adjustments to Options held by persons other than
executive officers or directors of the Corporation.
Acceleration Upon a Change in Control Event
Upon the occurrence of a Change in Control Event, each Option
granted under Section 7.2 hereof shall become immediately exercisable
in full. To the extent that any Option granted under this Article VII
is not exercised prior to (i) a dissolution of the Corporation or (ii)
a merger or other corporate event that the Corporation does not
survive, and no provision is (or consistent with the provisions of
Section 7.6 can be) made for the assumption, conversion, substitution
or exchange of the Option, the Option shall terminate upon the
occurrence of such event.
DEFINITIONS
Definitions
"Award" shall mean an award of any Option, Stock Appreciation
Right, Restricted Stock, Stock Bonus, Performance Share Award,
Performance-Based Award, Cash-Based Award, dividend equivalent or
deferred payment right or other right or security that would
constitute a "derivative security" under Rule 16a-1(c) of the Exchange
Act, or any combination thereof, whether alternative or cumulative,
authorized by and granted under this Plan.
"Award Agreement" shall mean any writing setting forth the terms
of an Award that has been authorized by the Committee.
"Award Date" shall mean the date upon which the Committee took
the action granting an Award or such later date as the Committee
designates as the Award Date at the time of the Award or, in the case
of Awards under Article VII, the applicable dates set forth therein.
"Award Period" shall mean the period beginning on an Award Date
and ending on the expiration date of such Award.
"Beneficiary" shall mean the person, persons, trust or trusts
designated by a Participant or, in the absence of a designation,
entitled by will or the laws of the descent and distribution to
receive the benefits specified in the Award Agreement and under this
Plan in the event of a Participant's death, and shall mean the
Participant's executor or administrator if no other Beneficiary is
designated and able to act under the circumstances.
"Board" shall mean the Board of Directors of the Corporation.
<PAGE>
"Cash-Based Awards" shall mean Awards that, if paid, must be paid
in cash and that are neither denominated in nor have a value derived
from the value of, nor an exercise or conversion privilege at a price
related to, shares of Common Stock.
"Cash Flow" shall mean cash and cash equivalents derived from
either (i) net cash flow from operations or (ii) net cash flow from
operations, financings and investing activities, as determined by the
Committee at the time an Award is granted.
"Change in Control Event" shall mean any of the following:
Approval by the stockholders of the Corporation of the
dissolution or liquidation of the Corporation;
Approval by the stockholders of the Corporation of an
agreement to merge or consolidate, or otherwise reorganize, with
or into one or more entities that are not Subsidiaries, as a
result of which less than 50% of the outstanding voting
securities of the surviving or resulting entity immediately after
the reorganization are, or will be, owned by stockholders of the
Corporation immediately before such reorganization (assuming for
purposes of such determination that there is no change in the
record ownership of the Corporation's securities from the record
date for such approval until such reorganization and that such
record owners hold no securities of the other parties to such
reorganization):
Approval by the stockholders of the Corporation of the
sale of substantially all of the Corporation's business and/or
assets to a person or entity which is not a Subsidiary;
Any person (as such term is used in Section 13(d) and
14(d) of the Exchange Act) (other than a person having such
ownership at the time of adoption of this Plan) becomes the
"beneficial owner" (as defined in Rule 13d-3 under the Exchange
Act), directly or indirectly, of securities of the Corporation
representing more than 50% of the combined voting power of the
Corporation's then outstanding securities entitled to then vote
generally in the election of directors of the Corporation; or
During any period not longer than two consecutive years,
individuals who at the beginning of such period constituted the
Board cease to constitute at least a majority thereof, unless the
election, or the nomination for election by the Corporation's
stockholders, of each new Board member was approved by a vote of
at least three-fourths of the Board members then still in office
who were Board members at the beginning of such period (including
for these purposes, new members whose election or nomination was
so approved).
"Code" shall mean the Internal Revenue Code of 1986, as amended
from time to time.
"Commission" shall mean the Securities and Exchange Commission.
"Committee" shall mean the Board or a committee appointed by the
Board to administer this Plan, which committee shall be comprised only
of two or more directors or such greater number of directors as may be
required under applicable law, each of whom (i) in respect of any
decision at a time when the Participant affected by the decision may
be subject to Section 162(m) of the Code be an "outside director"
within the meaning of Code Section 162(m) and (ii) in respect of any
decision at a time when the Participant affected by the decision may
be subject to Section 16 under the Exchange Act, shall be a "Non-
Employee Director" within the meaning of Rule 16b-3(b)(3).
"Common Stock" shall mean the Common Stock of the Corporation and
such other securities or property as may become subject to Awards, or
become subject to Awards, pursuant to an adjustment made under Section
6.2 of this Plan.
"Company" shall mean, collectively, the Corporation and its
domestic or foreign Subsidiaries or divisions.
"Corporation" shall mean International Game Technology, a Nevada
corporation, and its successors.
"Eligible Employee" shall mean an officer (whether or not a
director) or key executive, administrative, managerial, production,
marketing or sales employee of the Company.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended from time to time.
<PAGE>
"Fair Market Value" or any date shall mean (i) if the stock is
listed or admitted to trade on a national securities exchange, the
closing price of the stock on the Composite Tape, as published in the
Western Edition of The Wall Street Journal, of the principal national
securities exchange on which the stock is so listed or admitted to
trade, on such date, or, if there is no trading of the stock on such
date, then the closing price of the stock as quoted on such Composite
Tape on the next preceding date on which there was trading in such
shares; (ii) if the stock is not listed or admitted to trade on a
national securities exchange, the last price for the stock on such
date, as furnished by the National Association of Securities Dealers,
Inc. ("NASD") through the NASDAQ National Market Reporting System or a
similar organization if the NASD is no longer reporting such
information, (iii) if the stock is not listed or admitted to trade on
a national securities exchange and is not reported on the National
Market Reporting System, the mean between the bid and asked price for
the stock on such date, as furnished by the NASD or a similar
organization, or (iv) if the stock is not listed or admitted to trade
on a national securities exchange, is not reported on the National
Market Reporting System and if bid and asked prices for the stock are
not furnished by the NASD or a similar organization, the value as
established by the Committee at such time for purposes of this Plan.
"Incentive Stock Option" shall mean an Option which is designated
as an incentive stock option within the meaning of Section 422 of the
Code, the award of which contains such provisions as are necessary to
comply with that section.
"Nonqualified Stock Option" shall mean an Option that is
designated as a Nonqualified Stock Option and shall include any Option
intended as an Incentive Stock Option that fails to meet the
applicable legal requirements thereof. Any Option granted hereunder
that is not designated as an Incentive Stock Option shall be deemed to
be designated a Nonqualified Stock Option under this Plan and not an
incentive stock option under the Code.
"Non-Employee Director" shall mean a member of the Board of
Directors of the Corporation who is not an officer or employee of the
Company.
"Non-Employee Director Participant" shall mean a Non-Employee
Director who has been granted an Option under the provisions of
Article VII.
"Option" shall mean an option to purchase Common Stock granted
under this Plan. The Committee shall designate any Option granted to
an Eligible Employee as a Nonqualified Stock Option or an Incentive
Stock Option. Options granted under Article VII shall be Nonqualified
Stock Options.
"Participant" shall mean an Eligible Employee who has been
granted an Award under this Plan and a Non-Employee Director who has
been received an Option under Article VII of this Plan.
"Performance-Based Award" shall mean an Award of a right to
receive shares of Common Stock or other compensation (including cash)
under Section 5.2, the issuance or payment of which is contingent
upon, among other conditions, the attainment of performance objectives
specified by the Committee.
"Performance Goals" shall mean EPS or ROE or Cash Flow or Total
Stockholder Return, and "Performance Goals" means any combination
thereof.
"Performance Share Award" shall mean an Award of a right to
receive shares of Common Stock made in accordance with Section 5.1,
the issuance or payment of which is contingent upon, among other
conditions, the attainment of performance objectives specified by the
Committee.
"Personal Representative" shall mean the person or persons who,
upon the disability or incompetence of a Participant, shall have
acquired on behalf of the Participant, by legal proceeding or
otherwise, the power to exercise the rights or receive benefits under
this Plan and who shall have become the legal representative of the
Participant.
"Plan" shall mean this 1993 Stock Option Plan, as amended and
restated.
"QDRO" shall mean a qualified domestic relations order as defined
in Section 414(p) of the Code or Title I, Section 206(d)(3) of ERISA
(to the same extent as if this Plan were subject thereto), or the
applicable rules thereunder.
"Restricted Stock Award" shall mean an award of a fixed number of
shares of Common Stock to the Participant subject, however, to payment
of such consideration, if any, and such forfeiture provisions, as are
set forth in the Award Agreement.
<PAGE>
"Restricted Stock" shall mean shares of Common Stock awarded to a
Participant under this Plan, subject to payment of such consideration,
if any, and such conditions on vesting and such transfer and other
restrictions as are established in or pursuant to this Plan, for so
long as such shares remain unvested under the terms of the applicable
Award Agreement.
"Retirement" shall mean retirement with the consent of the
Company, or in the case of a Non-Employee Director, a retirement or
resignation as a director after at least eight years service as a
director.
"ROE" shall mean consolidated net income of the Corporation (less
preferred dividends), divided by the average consolidated common
stockholders equity.
"Rule 16b-3" shall mean Rule 16b-3 as promulgated by the
Commission pursuant to the Exchange Act.
"Section 16 Person" shall mean a person subject to Section 16(a)
of the Exchange Act.
"Securities Act" shall mean the Securities Act of 1933, as
amended from time to time.
"Stock Appreciation Right" shall mean a right to receive a number
of shares of Common Stock or an amount of cash, or a combination of
shares and cash, the aggregate amount or value of which is determined
by reference to a change in the Fair Market Value of the Common Stock
that is authorized under this Plan.
"Stock Bonus" shall mean an Award of shares of Common Stock
granted under this Plan for no consideration other than past services
and without restriction other than such transfer or other
restrictions as the Committee may deem advisable to assure compliance
with law.
"Subsidiary" shall mean any corporation or other entity a
majority of whose outstanding voting stock or voting power is
beneficially owned directly or indirectly by the Corporation.
"Total Disability" shall mean a permanent and total disability
within the meaning of Section 22(e)(3) of the Code and (except in the
case of a Non-Employee Director) such other disabilities, infirmities,
afflictions or conditions as the Committee by rule may include.
"Total Stockholder Return" shall mean with respect to the
Corporation or other entities (if measures on a relative basis), the
(i) change in the market price of its common stock (as quoted in the
principal market on which it is traded as of the beginning and ending
of the period) plus dividends and other distributions paid, divided by
(ii) the beginning quoted market price, all of which is adjusted for
any changes in equity structure, including but not limited to stock
splits and stock dividends.
