INTERNATIONAL GAME TECHNOLOGY
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
March 5, 1999
The Annual Meeting of the Stockholders of International Game
Technology will be held at the Bellagio Hotel & Casino, Ballroom 2,
at 3600 South Las Vegas Boulevard, Las Vegas, Nevada, on Friday, March
5, 1999, 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 January 5, 1999 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 15, 1999)
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 OF STOCKHOLDERS 1
INFORMATION CONCERNING SOLICITATION AND VOTING 3
PROPOSAL 1 - ELECTION OF DIRECTORS 4
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 THE EMPLOYEE STOCK PURCHASE PLAN 7
PROPOSAL 3 - AMENDMENTS TO THE 1993 STOCK OPTION PLAN 10
OTHER INFORMATION 15
EXECUTIVE OFFICERS 15
EQUITY SECURITY OWNERSHIP OF MANAGEMENT AND OTHER BENEFICIAL
OWNERS 18
EXECUTIVE COMPENSATION 19
EMPLOYMENT CONTRACTS 21
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT
OF 1934 21
RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS 21
BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION 22
PERFORMANCE GRAPH 24
GENERAL 25
EXHIBIT A - EMPLOYEE STOCK PURCHASE PLAN
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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 to be held on Friday, March 5, 1999, and at
any and all adjournments thereof.
Solicitation of proxies by mail is expected to commence on or
about January 28, 1999 and the cost thereof will be borne by the
Company. In addition to solicitation by mail, some of the officers
and regular employees of the Company may solicit, without extra
compensation, proxies by telephone 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 9295
Prototype Drive, Reno, Nevada 89511.
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
108,029,555 shares were issued and outstanding at the close of
business on January 5, 1999. Only stockholders of record at the close
of business on January 5, 1999, 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 3,612,044 shares as of the record date (3% 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. 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 described herein.
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 described
herein.
Stockholder Proposals for the 2000 Annual Meeting
Proposals of stockholders intended to be presented at the next
Annual Meeting must be received by the Company by September 30, 1999
to be considered for inclusion in the Company's proxy statement
relating to that meeting. Stockholders desiring to present a proposal
at the next Annual Meeting, but who do not desire to have the proposal
included in the proxy materials distributed by the Company, must
deliver written notice of such proposal to the Company prior to
December 14, 1999 or the persons appointed as proxies in connection
with the next Annual Meeting will have discretionary authority to vote
on any such proposal.
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 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, 70, was appointed to 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 resigned as Chief
Executive Officer in June 1993. In February 1996, he resumed the
position of Chief Executive Officer. He received his Bachelor of
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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
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.
Albert J. Crosson, 68, 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 its 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.
Wilbur K. Keating, 67, 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 Assistant Executive Officer of the Nevada
Public Employees Retirement System from 1974 through 1980, and
the Chief Executive Officer from 1981 through 1994.
Warren L. Nelson, 86, 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 of Boyd Gaming Group. He has
previously served under three Nevada governors on the Nevada
Gaming Policy Committee.
Frederick B. Rentschler, 59, 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. 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 the Chairman of the
Board of Trustees of the Salk Institute, La Jolla, California.
Additionally, Mr. Rentschler serves on the Boards of Bionutrics,
SIBIA and the Scottsdale Memorial Hospital Systems.
John J. Russell, 69, was appointed to the Board in January 1990.
Mr. Russell joined the Company as Senior Vice President in
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 1995. In December 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.
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Rockwell A. Schnabel, 61, 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 more than $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 CSG Systems, Inc., Cyprus Amax Minerals Company, and
Rezsolutions, Inc.
Claudine B. Williams, 77, 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 currently
serves as the Chairman of the Board of Harrah's Las Vegas
(formerly the Holiday Casino). Additionally, she serves on the
Board of First Security Bank and Columbia Sunrise Hospital. 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. Ms. Williams was the first woman inducted into
the Gaming Hall of Fame.
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 $2 million for the fiscal year ended September
30, 1998. The Company had contracts and accounts receivable balances
from this customer of $1 million at September 30, 1998. During the
fiscal year ended September 30, 1998, the largest amount of the
Company's contract receivable balance from such customer was $946,083.
Mr. Nelson is also a Director of the parent company of additional
gaming businesses. The Company recognized revenues from these
businesses of $19.8 million for the fiscal year ended September 30,
1998. The Company had contracts and accounts receivable balances from
these businesses of $1.3 million as of September 30, 1998. During the
fiscal year ended September 30, 1998, the largest amount of the
Company's contract receivable balances from these customers was
$871,898.
Board of Directors and Committees of the Board
The Board of Directors held five regular meetings during fiscal
1998. During fiscal 1998, 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.
The Executive Committee, comprised of Messrs. Crosson and
Mathewson, did not hold any meetings during fiscal 1998. 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.
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The Audit Committee consists of Messrs. Keating, Rentschler and
Schnabel. The Audit Committee held four meetings during fiscal 1998.
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 1998, Ms. Williams and Messrs. Nelson and
Rentschler served as members of the Compensation Committee. 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 four meetings in fiscal 1998
and acted by unanimous written consent five times in fiscal 1998. 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 $12,500 annual fee and a fee of
$750 for each committee meeting attended. Directors who are employees
of the Company are not paid fees or additional remuneration for
service as members of the Board or its Committees.
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 6,000 shares of Common Stock upon his or her re-
election to the Board. Each non-employee director received non-
qualified stock options to purchase 6,000 shares of Common Stock in
fiscal 1998 at an exercise price of $24.50 per share.
PROPOSAL 2 - AMENDMENTS TO THE EMPLOYEE STOCK PURCHASE PLAN
The Board recommends that stockholders approve the amendments
described below to the Company's Employee Stock Purchase Plan (the
"ESPP"). The ESPP was originally adopted by the Board on February 26,
1987 and was approved by the Company's stockholders on February 16,
1988. A restatement of the ESPP was approved by the Board on December
8, 1998 to become effective March 1, 1999. The proposed amendments
were approved by the Board, subject to stockholder approval, as part
of the ESPP's restatement.
Proposed Amendments to the ESPP
Persons Eligible to Participate. All Qualified Employees may
participate in the ESPP. A "Qualified Employee" means any employee of
the Company or any of its subsidiaries which have been or may in the
future be selected as participating subsidiaries under the ESPP;
except that the ESPP currently provides that the following classes of
employees are excluded from participation:
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- - employees who have not completed at least 90 days of continuous
full-time employment with the Company or its subsidiaries;
- - employees whose customary employment is for 20 hours per week or
less;
- - employees whose customary employment is for not more than five
months in a calendar year; and
- - highly compensated employees ("HCEs").
An HCE is generally defined as an employee who (i) is a 5% owner
of the Company or certain related companies, or (ii) received
compensation for the prior year in excess of $80,000 and was in the
top 20% of employees ranked on the basis of compensation. The
proposed amendment to the ESPP would remove the HCE exclusion
effective March 1, 1999. That is, if the proposed amendment is
approved by stockholders, HCEs will be eligible to participate in the
ESPP on and after March 1, 1999, subject to the other eligibility
requirements described above.
As of March 1, 1998, approximately 1,900 employees of the Company
and its current participating subsidiaries (excluding HCEs) were
considered to be Qualified Employees. Of this number, approximately
1,000 elected to participate in the ESPP for the period March 1, 1998
through February 28, 1999. As of March 1, 1998, there were
approximately 139 HCEs (including all executive officers of the
Company) otherwise eligible to participate in the ESPP.
Amendment Authority. The ESPP currently provides that the Board
may amend the ESPP at any time, but that any amendment to increase the
number of shares subject to the ESPP or to change the designation or
class of employees eligible to participate in the ESPP must be
approved by stockholders. The proposed amendment to the ESPP would
also provide that the Board could amend the ESPP at any time, subject
to stockholder approval only to the extent required by Section 423 of
the Internal Revenue Code of 1986, as amended (the "Code"), or other
applicable law, or to the extent deemed necessary or advisable by the
Board. Currently, Section 423 of the Code generally would require
stockholder approval of an amendment to the ESPP only if the amendment
would increase the number of shares subject to the ESPP.
The principal terms of the ESPP are summarized below. The
following summary is qualified in its entirety by the full text of the
ESPP, as restated and reflecting the proposed amendments, a copy of
which is included as Exhibit A to this Proxy Statement. Capitalized
terms used in the summary are used as defined in the ESPP.
Operation of the ESPP
General. The purpose of the ESPP is to assist Qualified
Employees in acquiring a stock ownership interest in the Company.
Under the ESPP, each Qualified Employee electing to participate in an
Offering Period will be granted an Option to purchase shares of the
Company's Common Stock at a discount. A Qualified 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 the Company's Common Stock. The "Option
Price" is 85% of the lower of the Fair Market Value of the Common
Stock on the Grant Date or the Exercise Date (constituting a 15%
discount). The appropriate number of shares are delivered to each
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participant as soon as practicable after the Exercise Date, together
with any money left in the participant's account which is not
sufficient to purchase a whole share of Common Stock.
Administration. The Board has appointed the Compensation
Committee as the "Committee" which administers the ESPP.
Share limitations. The maximum number of shares that may be
issued pursuant to Options granted under the ESPP is 2,400,000 shares.
In addition, the maximum number of shares which may be acquired by any
individual in any one Offering Period is 3,000 shares. Furthermore, a
participant may not contribute more than 10% of his or her
compensation to the ESPP and a participant generally may not
contribute more than $25,000 to the ESPP in any one plan year. The
proposed amendments to the ESPP do not affect these limits.
As is customary in incentive plans of this nature, the number and
kind of shares available under the ESPP and the then outstanding
Options, as well as exercise or purchase prices, are subject to
adjustment in the event of certain reorganizations, mergers,
combinations, consolidations, recapitalizations, reclassifications,
stock splits, stock dividends, asset sales or other similar events, or
extraordinary dividends or distributions of property to the
stockholders.
Termination of or Changes to the ESPP. No new Offering Periods
will commence on or after February 26, 2007. The Board may amend,
modify, or terminate the ESPP at any time without notice. Stockholder
approval for any amendment or modification is discussed above under
"Proposed Amendments to the ESPP."
Federal Income Tax Consequences
The ESPP is intended to qualify as an employee stock purchase
plan within the meaning of Section 423 of 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.
Specific Benefits
The benefits that would be received by or allocated to Qualified
Employees under the ESPP cannot be determined at this time because the
amount of contributions set aside to purchase shares of Common Stock
under the ESPP is entirely within the discretion of each participant
(subject to the limits of the ESPP); however, as a result of the
amendment described above, HCE's will be eligible to participate in
the ESPP and that group includes the Company's Chief Executive Officer
and other executive officers of the Company. The closing price of the
Company's Common Stock on the New York Stock Exchange on January 5,
1999 was $23.0625 per share.
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Recommendation of Your Board of Directors "FOR" the Proposal; Vote Required
The Board of Directors has unanimously approved and recommended a
vote FOR the proposed amendments to the ESPP as described above.
Approval of the proposed amendments to the ESPP requires the
affirmative vote of a majority of the shares of Common Stock present
or represented, and entitled to vote, at the Annual Meeting.
PROPOSAL 3 - AMENDMENTS TO THE 1993 STOCK OPTION PLAN
The Board recommends that the stockholders approve the amendment
described below to the Company's 1993 Stock Option Plan, as amended
and restated August 27, 1996 (the "Plan"). The Plan was originally
adopted by the Board on September 22, 1992, and was approved by the
Company's stockholders on February 23, 1993. The amendment was
adopted, subject to stockholder approval, by the Board on December 8,
1998.
Proposed Amendment to the Plan
The Plan currently contains the following share limits:
- - The maximum number of shares of the Company's Common Stock that
may be delivered pursuant to awards granted to eligible employees
under the Plan cannot exceed 5,000,000 shares (approximately 512,000
shares remained available as of January 5, 1999 under the Plan); and
- - The maximum number of shares of Common Stock that may be issued
to Non-Employee Directors under the Plan cannot exceed 250,000 shares
(approximately 34,000 shares remained available as of January 5, 1999
to be issued to Non-Employee Directors under the Plan).
The proposed amendment to the Plan would increase these limits to
8,000,000 shares and 500,000 shares, respectively. The proposed
amendment would therefore result in an additional 3,250,000 shares
being available for Plan purposes. These limits are subject to
adjustment as described below under "Share Limits."
The principal terms of the Plan are summarized below.
Capitalized terms used in the summary are used as defined in the Plan.
Operation of the Plan
Awards. The Plan authorizes stock options, Restricted Stock
Awards, Stock Bonuses, Stock Appreciation Rights, and performance-
based awards (payable in cash or stock). The Plan retains the
flexibility to offer competitive incentives and to tailor benefits to
specific needs and circumstances. Generally, an Option or other right
to acquire Common Stock will expire, or other Award will vest, not
more than 10 years after the date of grant. Under the Plan, the
Committee has the authority to designate in each Award the effect of a
termination of service or employment.
Administration. The Board has appointed the Compensation
Committee as the "Committee" which administers the Plan.
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Eligibility. Persons eligible to receive Awards under the Plan
include officers (whether or not directors) or key executive,
administrative, managerial, production, marketing or sales employees
of the Company and its subsidiaries. In addition, Non-Employee
Directors of the Company are eligible to receive certain automatic
Option grants under the Plan. As of January 5, 1999, approximately
475 officers and employees of the Company and its subsidiaries were
considered eligible under the Plan, subject to the power of the
Committee to determine Eligible Employees to whom Awards will be
granted, and six Non-Employee Directors were considered eligible for
automatic Option grants.
Transferability Restrictions. 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.
Share Limits. In addition to the share limits discussed above
under "Proposed Amendment to the Plan," 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. Furthermore, on December 22, 1998, the Board
amended the Plan to provide that no more than 500,000 shares may be
issued under the Plan in respect of Restricted Stock Awards or Stock
Bonuses for nominal or no consideration (other than shares issued in
respect of compensation earned but deferred).
As is customary in incentive plans of this nature, the number and
kind of shares available under the Plan and the then outstanding stock-
based Awards, as well as exercise or purchase prices, performance
targets under certain performance-based awards and share limits, are
subject to adjustment in the event of certain reorganizations,
mergers, combinations, consolidations, recapitalizations,
reclassifications, stock splits, stock dividends, asset sales or other
similar events, or extraordinary dividends or distributions of
property to the stockholders.
The Plan will not 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.
Stock Options. An option is the right to purchase Common Stock
at a future date at a specified price (the "Option Price"). The Plan
provides that the Company may grant Nonqualified and Incentive Stock
Options under the Plan to Eligible Employees. Incentive Stock Options
are taxed differently from Nonqualified Stock Options, as described
under "Federal Income Tax Consequences" below. Incentive Stock
Options are also subject to more restrictive terms and are limited in
amount by the Internal Revenue Code of 1986, as amended (the "Code"),
and the Plan. Full payment for shares purchased on the exercise of
any Option must be made at the time of such exercise in a manner
approved by the Committee. The Option Price per share will be
determined by the Committee at the time of grant. 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 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.
<PAGE>
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.
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.
Furthermore, on December 22, 1998, the Board amended the Plan to
provide that no more than 500,000 shares may be issued under the Plan
in respect of Restricted Stock Awards or Stock Bonuses for nominal or
no consideration (other than shares issued in respect of compensation
earned but deferred).
Performance-Based Awards and Stock Bonuses. The Plan permits the
granting of performance-based awards and Stock Bonuses. The amount of
cash or shares or other property that may be deliverable pursuant to
such a performance-based 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.
Performance-based awards may be designed to satisfy the
requirements for deductibility under Section 162(m) of the Code
("Performance-Based Awards") (in addition to other Awards expressly
authorized under the Plan which may also qualify as performance-based
under Section 162(m)). The eligible class of persons for these 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 Performance-Based Awards
granted during any calendar year 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. These goals are applied over performance cycles
as determined by the Committee. Specific cycles and target levels of
performance, as well as the Award levels, are 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.
Deferrals. The Committee may authorize the deferral of any Award
due under the Plan.
Non-Employee Director Options. The Plan 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. For each
<PAGE>
year during the remaining term of the Plan, each Non-Employee Director
who is re-elected to office will receive an Option to acquire 6,000
shares of Common Stock, the grant date of which is the date of the
director's re-election. The period during which a Non-Employee
Director may exercise his or her Option following a termination from
service on the Board is established by the terms of the Plan.
Acceleration of Awards; Possible Early Termination of Awards.
Unless prior to a Change in Control Event the Committee determines
that, upon its occurrence, benefits will not be accelerated, then
generally upon the Change in Control Event each Option and Stock
Appreciation Right will become immediately exercisable, Restricted
Stock will vest, and performance-based awards will become payable. A
Change in Control Event under the Plan generally includes (subject to
certain exceptions) certain changes in a majority of the Board,
certain mergers or consolidations approved by the Company's
stockholders, stockholder approval of a liquidation of the Company or
sale of substantially all of the Company's business and/or assets, or
the acquisition, directly or indirectly, of shares amounting to more
than 50% of the combined voting power in the Company by any "person"
(as that term is used in Section 13(d) and 14(d) of the Securities
Exchange Act of 1934).
Termination of or Changes to the Plan. 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 at any time, except that stockholder approval is
required with respect to amendments which increase the number of
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 Nonqualified Stock Options, the Company is
generally entitled to deduct an amount equal to the difference between
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 to the employee 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 Nonqualified 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-based awards
generally are subject to tax at the time of payment; and unconditional
Stock Bonuses are generally subject to tax measured by the value of
the payment received; 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.
Specific Benefits
For information regarding options and other awards granted to
executive officers of the Company, see the material under the heading
"Executive Compensation" following this Proposal 3 discussion.
<PAGE>
The number and types of awards to be received by or allocated to
eligible persons under the Plan cannot be determined at this time.
The Committee has not yet considered any specific Awards under the
additional share authority contemplated by the proposed Plan
amendment. If the additional share authority had been in effect in
1998, the Company expects that the grants would not have been
substantially different from those reported under the "Option Grants
in Last Fiscal Year" table and in the "Summary Compensation Table."
The closing price of the Company's Common Stock on the New York Stock
Exchange on January 5, 1999 was $23.0625 per share.
Recommendation of Your Board of Directors "FOR" the Proposal; Vote
Required
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
each member of the Board has received one or more Awards and is
eligible to receive additional Awards under the Plan, all members of
the Board 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.
Approval of the proposed amendments to the 1993 Stock Option Plan
requires the affirmative vote of a majority of the shares of Common
Stock present or represented, and entitled to vote, at the Annual
Meeting.
<PAGE>
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>
Name Age Title
<S> <C> <C>
Charles N. Mathewson 70 Chief Executive Officer
Albert J. Crosson 68 Vice Chairman
G. Thomas Baker 56 President, Chief Operating Officer
Robert A. Bittman 44 Executive Vice President,
Product Development
Robert M. McMonigle 54 Executive Vice President,
Corporate Relations and
North American Sales
Raymond D. Pike 51 Executive Vice President,
Corporate Development
Brian McKay 54 Senior Vice President,
General Counsel,
Secretary and Treasurer
Anthony Ciorciari 51 Senior Vice President,
Operations
Maureen T. Imus 39 Vice President, Finance and
Chief Financial Officer
Randy Kirner 52 Vice President, Human Resources
</TABLE>
For a description of Mr. Mathewson's and Mr. Crosson's
backgrounds, see "Proposal 1, Election of Directors."
<PAGE>
Mr. Baker first joined the Company 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 and held these positions until August
1995. Mr. Baker was Senior Vice President and Chief Financial
Officer of Boomtown Hotels & Casinos from August 1995 to February
1996. Mr. Baker rejoined the Company in February 1996 as its
President, Chief Operating Officer and Chief Financial Officer. In May
1998, he resigned as Chief Financial Officer of the Company. 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. Bittman first 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 and held this
position until December 1995. Mr. Bittman rejoined the Company in
March 1996 as Executive Vice President, Product Development. From
1980 to 1985, Mr. Bittman worked for Caesar's Tahoe in all phases of
slot management, including two years as Director of Slot Operations.
Mr. Bittman majored in systems analysis at New York University, and
psychology at Queens College and the University of Nevada, Reno.
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, Senior Vice President, Corporate
Development for the Company in September 1993 and Executive Vice
President, Corporate Development in April 1995. He is currently a
Trustee and Legal Counsel for the International Association of Gaming
Attorneys 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. McKay joined the Company in January 1994 as General Counsel
and Corporate Secretary and in June 1994, he was promoted to Vice
President, General Counsel and Corporate Secretary. In August 1998,
he was appointed Senior Vice President, General Counsel, Corporate
Secretary and Treasurer. 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 Gaming Entertainment Research & Education Foundation. 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.
Mr. Ciorciari joined the Company as Vice President of Operations
in January 1994, with responsibility for worldwide manufacturing,
procurement, corporate facilities and services. In August 1998, he
was appointed Senior Vice President of Operations. Mr. Ciorciari 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.
Ms. Imus was named Vice President of Finance of the Company in
May 1996, and in May 1998, she was appointed Vice President of
Finance and Chief Financial Officer. Ms. Imus directs investor
relations, finance, 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 received a Bachelor of Science degree from the University of
Texas at Austin in 1981 and a Masters of Business Administration
degree from the University of Nevada, Reno in 1988.
Mr. Kirner joined the Company in October 1997 as its Vice
President, Human Resources. From September 1993 through September
1997, Mr. Kirner served as the Vice President, Human Resources for
Wyle Electronics, an international distributor of semiconductors,
computer systems and related value-added services. From 1986 to 1992,
he was employed by Allergan, Inc. of Irvine, California in various
capacities including Regional Sales Manager and earlier as Vice
President, Human Resources for Medical Optics, a subsidiary. Prior to
that, Mr. Kirner was with American Hospital Supply Corporation from
1972 to 1986. He is a Vietnam veteran having served as an officer in
the U.S. Army from 1967 to 1972. Mr. Kirner received a Masters of
Science from West Coast University in 1975, a Masters of Business
Administration degree from Georgia State University in 1968 and his
Bachelors degree in Business Administration from North Georgia College
and State University in 1967.
<PAGE>
Equity Security Ownership of Management and Other Beneficial Owners
The following table sets forth information as of January 5, 1999
with respect to the beneficial ownership of the Company's Common Stock
by principal shareholders owning more than 5%, all directors, the
officers named in the Summary Compensation Table, and all executive
officers and directors of the Company as a group. The Company has no
other class of equity securities outstanding.
<TABLE>
<CAPTION>
Shares of the Company's Common Stock
Options
Exercisable Beneficially Percent of
Name of Beneficial Owner Owned within 60 days Owned 1 Class 2
<S> <C> <C> <C> <C>
G. Thomas Baker 105,636 310,306 415,942 .39
Robert A. Bittman 200,000 2,996 202,996 .19
Albert J. Crosson 213,364 522,000 735,364 .68
Wilbur K. Keating 4,718 25,200 29,918 .03
Charles N. Mathewson 2,557,520 1,011,920 3,569,440 3.30
Robert M. McMonigle 84,400 3 33,810 118,210 .11
Warren L. Nelson 204,048 28,533 232,581 .22
Raymond D. Pike 65,066 3 2,018 67,084 .06
Frederick B. Rentschler 0 28,533 28,533 .03
John J. Russell 33,887 10,533 44,420 .04
Rockwell A. Schnabel 27,502 24,533 52,035 .05
Claudine B. Williams 9,733 25,200 34,933 .03
All executive officers and
directors as a group
(16 persons) 3,612,044 2,103,544 5,715,588 5.29
J.P. Morgan Investment
Management, Inc.
522 Fifth Avenue, 7th Fl
New York, NY 10036 10,087,079 --- 10,087,079 9.34
Manning & Napier Advisors
11 Chase Square
Rochester, NY 14604 6,294,200 --- 6,294,200 5.83
Tiger Management LLC
101 Park Avenue, 47th Fl
New York, NY 10178 5,491,400 --- 5,491,400 5.08
</TABLE>
___________
1 Includes shares which may be purchased upon exercise of options
exercisable within 60 days of January 5, 1999.
2 Any securities not outstanding which are subject to options or
conversion privileges which are exercisable within 60 days of January
5, 1999 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.
3 Includes certain shares granted pursuant to a restricted stock
award. See "Executive Compensation."
<PAGE>
Executive Compensation
Summary Compensation Table
The following table summarizes all compensation paid for the
years ended September 30, 1998, 1997 and 1996, to the persons who held
the position of Chief Executive Officer and the other four most highly
compensated executive officers (collectively, the "Named Officers")
during fiscal 1998.
<TABLE>
<CAPTION>
Long-Term Compensation
Securities
Restricted Underlying All
Annual Compensation Stock Options Other
Name & Principal Position Year Salary1 Bonus1 Awards Granted2 Compensation 3
<S> <C> <C> <C> <C> <C> <C>
Charles N. Mathewson 4 1998 $ 1 $ --- $ --- --- $ 3,076
Chairman of the Board of 1997 1 --- --- --- 3,229
Directors and Chief 1996 100,001 --- --- 1,002,906 27,216
Executive Officer
G. Thomas Baker 1998 450,000 640,877 --- 10,017 65,566
President, Chief 1997 418,269 522,000 --- 7,233 57,335
Operating Officer 1996 230,769 381,000 --- 500,000 4,062
Robert A. Bittman 1998 286,539 350,000 --- 5,970 46,476
Executive Vice President, 1997 263,461 300,000 --- 4,506 41,697
Product Development 1996 203,846 390,000 3,119,625 5 --- 17,493
Raymond D. Pike 1998 195,396 225,000 --- 3,353 37,527
Executive Vice President, 1997 190,000 125,000 912,000 6 3,640 36,804
Corporate Development 1996 181,625 165,000 --- 3,100 30,631
Robert McMonigle 1998 214,114 200,000 --- 4,162 39,541
Executive Vice President, 1997 207,478 185,000 912,000 6 3,964 41,002
Corporate Relations and 1996 185,494 185,000 --- 3,240 36,256
North American Sales
</TABLE>
____________
1 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 1998.
2 Amounts represent options to purchase the number of shares of Common
Stock shown.
3 Amounts shown include contributions by the Company to the accounts
of the identified executive officers under the Company's qualified
profit sharing plan and payment under the Company's cash sharing plan.
See "Employee Incentive Plans" for a description of these plans.
4 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 has not received a base
salary.
5 A restricted stock award was made to Mr. Bittman on March 18, 1996.
A total of 225,000 shares were 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 $4,176,450 at September 30, 1998.
6 Restricted stock awards of 50,000 shares were made to both Mr. Pike
and Mr. McMonigle on February 18, 1997. The shares were awarded for a
price of $.01 per share. 40% of these awards will vest in August 1999
and the remainder will vest in August 2001. Dividends on the shares
are paid to Mr. Pike and Mr. McMonigle. The unvested shares issued
are subject to repurchase by the Company at $.01 per share if
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 each of
the awards was $928,100 at September 30, 1998.
<PAGE>
Options
The tables below set forth certain information regarding options
granted to the Named Officers during fiscal 1998.
Option Grants In Last Fiscal Year
<TABLE>
<CAPTION>
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 1
Name Granted 1 Fiscal Year Share Date 5% 10%
<S> <C> <C> <C> <C> <C> <C>
Charles N. Mathewson --- --- --- --- --- ---
G. Thomas Baker 10,017 1.28% $21.875 12/17/07 $137,805 $349,224
Robert A. Bittman 5,970 .76 21.875 12/17/07 82,130 208,133
Raymond D. Pike 3,353 .43 21.875 12/17/07 46,127 116,896
Robert M. McMonigle 4,162 .53 21.875 12/17/07 57,257 145,100
</TABLE>
____________
1 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.
Aggregated Option Exercises In Last Fiscal Year and Fiscal Year-End Option
Values
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Options Exercised Underlying Unexercised In-The-Money Options
Shares Value Options at 09/30/98 at 09/30/98 1
Name Acquired Realized1 Exercisable Unexercisable Exercisable Unexercisable
<S> <C> <C> <C> <C> <C> <C>
Charles N. Mathewson --- --- 1,010,009 4,114 $5,285,132 $ 19,670
G. Thomas Baker 7,320 $ 80,520 206,857 329,169 1,101,723 1,673,243
Robert A. Bittman --- --- 901 9,575 282 1,127
Raymond D. Pike 15,126 185,660 --- 21,279 --- 91,899
Robert M. McMonigle 123,736 2,516,117 31,537 15,575 279,045 52,780
</TABLE>
____________
1 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.
Employee Incentive Plans
Under a discretionary program effective January 1, 1986 and
reviewable annually by the Company's Board of Directors, in fiscal
1998 the Company contributed, in the aggregate, 11% of consolidated
operating profits before incentives (excluding IGT-Australia and IGT-
UK) 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 $25.9 million in fiscal
1998.
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
<PAGE>
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 and IGT-UK employees. The management bonuses under
the management bonus plan are paid out annually to key employees
throughout the Company. IGT-Australia and IGT-UK have similar
employee incentive plans.
Employment Contracts
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 per
share. The award vests 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.
Compliance with Section 16(a) of the Securities Exchange Act of 1934
Section 16(a) of the Securities Exchange Act of 1934, and
regulations of the Securities and Exchange Commission ("SEC")
thereunder, require the Company's executive officers and directors and
persons who beneficially own more than 10% of the Company's Common
Stock, as well as certain affiliates of such persons, to file initial
reports of ownership and monthly transaction reports covering any
changes in ownership with the SEC and the New York Stock Exchange.
Executive officers, directors and persons owning more than 10% of the
Company's Common Stock are required by SEC regulations to furnish the
Company with all such reports they file. Based solely on a review of
the copies of such reports received by it, the Company believes that,
during fiscal 1998, all filing requirements applicable to executive
officers and directors were complied with, with one exception. A Form
4 reporting the involuntary disposition upon redemption by Rockwell A.
Schnabel of certain securities by a third party was untimely filed.
Relationship with Independent Public Accountants
The Company has selected Deloitte & Touche llp as its independent
accountants for the year ending September 30, 1999. A
representative of Deloitte & Touche llp will be present at the Annual
Meeting of Stockholders and will have an 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
<PAGE>
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 55% of their total salary and
bonus compensation for fiscal 1998.
Executive Compensation
The Company's management bonus plan is a cash-based incentive
program, and for fiscal year 1998, 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 1998,
jointly by the Company's Chief Executive Officer, Mr. Mathewson, and
the Company's President and Chief Operating Officer, Mr. Baker, based
on their subjective evaluation of each officer's individual
performance.
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
International Game Technology 1993 Stock Option Plan (amended and
restated effective as of August 27, 1996) (the "Stock Option Plan") to
provide various 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, except Mr. Mathewson and Mr. Crosson,
received a stock option award under the Stock Option Plan in fiscal
1998. The Committee also periodically approves additional stock option
awards for eligible individuals, including executive officers, based
on a subjective evaluation of 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
<PAGE>
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.
Chief Executive Compensation
Mr. Mathewson became Chief Executive Officer of the Company on
February 12, 1996. As Chief Executive Officer, he receives no base
salary. The Committee granted Mr. Mathewson stock options in February
1996 to acquire 1.0 million shares of the Company's Common Stock. All
of such options were fully vested in December 1996. No options were
granted to Mr. Mathewson in fiscal 1997 or 1998.
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 October 1, 1993
through September 30, 1998 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, 1993 1994 1995 1996 1997 1998
<S> <C> <C> <C> <C> <C> <C>
International Game Technology 100 52 34 53 60 48
Peer Group 100 62 81 105 123 73
S & P 500 100 104 135 162 227 248
</TABLE>
The peer group includes Alliance Gaming Corp., Anchor Gaming,
Casino Data Systems, GTECH, Power House Technologies, previously Video
Lottery Technologies, Inc., Silicon Gaming, Inc. and WMS Industries,
Inc.
<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 this
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 15, 1999
<PAGE>
EXHIBIT A
INTERNATIONAL GAME TECHNOLOGY
EMPLOYEE STOCK PURCHASE PLAN
(Amended and Restated Effective as of March 1, 1999)
<PAGE>
TABLE OF CONTENTS
Page
1. PURPOSE A-3
2. DEFINITIONS A-3
3. ELIGIBILITY A-5
4. STOCK SUBJECT TO THIS PLAN; SHARE LIMITATIONS A-5
5. OFFERING PERIODS A-6
6. PARTICIPATION A-6
7. METHOD OF PAYMENT OF CONTRIBUTIONS A-6
8. GRANT OF OPTION A-7
9. EXERCISE OF OPTION A-8
10. DELIVERY A-8
11. TERMINATION OF EMPLOYMENT; CHANGE IN ELIGIBLE STATUS A-8
12. ADMINISTRATION A-9
13. DESIGNATION OF BENEFICIARY A-10
14. TRANSFERABILITY A-11
15. USE OF FUNDS; INTEREST A-11
16. REPORTS A-11
17. ADJUSTMENTS OF AND CHANGES IN THE STOCK A-11
18. POSSIBLE EARLY TERMINATION OF PLAN AND OPTIONS A-12
19. TERM OF PLAN; AMENDMENT OR TERMINATION A-12
20. NOTICES A-13
21. CONDITIONS UPON ISSUANCE OF SHARES A-13
22. PLAN CONSTRUCTION A-13
23. EMPLOYEES' RIGHTS A-13
24. MISCELLANEOUS A-14
25. HIGHLY COMPENSATED EMPLOYEES A-14
<PAGE>
INTERNATIONAL GAME TECHNOLOGY
EMPLOYEE STOCK PURCHASE PLAN
(Amended and Restated Effective as of March 1, 1999)
The following constitute the provisions of the International Game
Technology Employee Stock Purchase Plan (the "Plan"). The Plan was
first adopted by the Board of Directors (the "Board") of International
Game Technology, a Nevada corporation (the "Corporation") on February
26, 1987. The Plan was approved by the Corporation's stockholders on
February 16, 1988. This amendment to and restatement of the Plan is
effective as of March 1, 1999.
1. PURPOSE
The purpose of this Plan is to assist Qualified Employees in
acquiring a stock ownership interest in the Corporation pursuant
to a plan which is intended to qualify as an "employee stock
purchase plan" under Section 423 of the Code. This Plan is also
intended to help Qualified Employees provide for their future
security and to encourage them to remain in the employ of the
Corporation (and those Subsidiaries which may be designated by
the Committee as "Participating Subsidiaries").
2. DEFINITIONS
Capitalized terms used herein which are not otherwise defined
shall have the following meanings.
"Account" means the bookkeeping account maintained by the
Corporation, or by a recordkeeper on behalf of the
Corporation, for a Participant pursuant to Section 7(a).
"Board" means the Board of Directors of the Corporation.
"Code" means the Internal Revenue Code of 1986, as amended
from time to time.
"Committee" means the committee appointed by the Board to
administer this Plan pursuant to Section 12.
"Common Stock" means the Common Stock, without par value, of
the Corporation.
"Company" means, collectively, the Corporation and its
Subsidiaries.
"Compensation" means a Qualified Employee's regular gross
pay for a 40-hour week. Compensation includes any amounts
contributed as salary reduction contributions to a plan
qualifying under Section 401(k), 125 or 129 of the Code.
Any other form of remuneration is excluded from
Compensation, including (but not limited to) the following:
overtime payments, sales commissions, prizes, awards,
relocation or housing allowances, stock option exercises,
stock appreciation rights, restricted stock exercises,
performance awards, auto allowances, tuition reimbursement
and other forms of imputed income, bonuses, incentive
compensation, special payments, fees and allowances.
Notwithstanding the foregoing, Compensation shall not
include any amounts deferred under or paid from any
nonqualified deferred compensation plan maintained by the
Company.
<PAGE>
"Contributions" means all bookkeeping amounts credited to
the Account of a Participant pursuant to Section 7(a).
"Corporation" means International Game Technology, a Nevada
corporation, and its successors.
"Effective Date" means February 26, 1987, the original
effective date of this Plan. This amendment to and
restatement of the Plan is effective as of March 1, 1999.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended from time to time.
"Exercise Date" means, with respect to an Offering Period,
the last day of that Offering Period.
"Fair Market Value" on any date means: (i) if the Common
Stock is listed or admitted to trade on a national
securities exchange, the closing price of a share of Common
Stock on the Composite Tape, as published in the Western
Edition of The Wall Street Journal, of the principal
national securities exchange on which such stock is so
listed or admitted to trade, on such date, or, if there is
no trading of the Common Stock on such date, then the
closing price of a share of Common Stock as quoted on such
Composite Tape on the next preceding date on which there was
trading in such shares; (ii) if the Common Stock is not
listed or admitted to trade on a national securities
exchange, the last/closing price for a share of Common 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 Common 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 a share of Common Stock on such date, as
furnished by the NASD or a similar organization; or (iv) if
the Common 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 Common 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.
"Grant Date" means the first day of each Offering Period, as
determined by the Committee and announced to potential
Qualified Employees; provided, however, that no Grant Date
may occur on or before the Exercise Date for the immediately
preceding Offering Period.
"Offering Period" means the twelve-consecutive month period
commencing on each Grant Date; provided, however, that the
Committee may declare, as it deems appropriate and in
advance of the applicable Offering Period, (i) a shorter
(not to be less than three months) Offering Period or a
longer (not to exceed 27 months) Offering Period.
"Option" means the stock option to acquire Shares granted to
a Participant pursuant to Section 8.
<PAGE>
"Option Price" means the per share exercise price of an
Option as determined in accordance with Section 8(b).
"Parent" means any corporation (other than the Corporation)
in an unbroken chain of corporations ending with the
Corporation in which each corporation (other than the
Corporation) owns stock possessing 50% or more of the total
combined voting power of all classes of stock in one or more
of the other corporations in the chain.
"Participant" means a Qualified Employee who has elected to
participate in this Plan and who has filed a valid and
effective Subscription Agreement to make Contributions
pursuant to Section 6.
"Plan" means this International Game Technology Employee
Stock Purchase Plan, as amended from time to time.
"Qualified Employee" means any employee of the Corporation,
or of any Subsidiary which has been designated in writing by
the Committee as a "Participating Subsidiary" (including any
Subsidiaries which have become such after the date that this
Plan is approved by the stockholders of the Corporation).
Notwithstanding the foregoing, "Qualified Employee" shall
not include any employee: (i) who has not as of the Grant
Date completed at least 90 days of continuous full-time
employment with the Company; or (ii) whose customary
employment is for 20 hours per week or less; or (iii) whose
customary employment is for not more than five months in a
calendar year.
"Rule 16b-3" means Rule 16b-3 as promulgated by the
Commission under Section 16, as amended from time to time.
"Section 16" means Section 16 of the Exchange Act.
"Share" means a share of Common Stock.
"Subscription Agreement" means the written agreement filed
by a Qualified Employee with the Corporation pursuant to
Section 6 to participate in this Plan.
"Subsidiary" means any corporation in an unbroken chain of
corporations (beginning with the Corporation) in which each
corporation (other than the last corporation) owns stock
possessing 50% or more of the total combined voting power of
all classes of stock in one or more of the other
corporations in the chain.
3. ELIGIBILITY
Any person employed as a Qualified Employee as of a Grant Date
shall be eligible to participate in this Plan during the Offering
Period in which such Grant Date occurs, subject to the Qualified
Employee satisfying the requirements of Section 6.
4. STOCK SUBJECT TO THIS PLAN; SHARE LIMITATIONS
(a) The maximum number of Shares that may be delivered pursuant
to Options granted under this Plan is 2,400,000 Shares
(after giving effect to the Corporation's stock splits
affecting the Common Stock through the March 1993 two-for-
<PAGE>
one stock split), subject to adjustments pursuant to Section
17. In the event that all of the Shares made available
under this Plan are subscribed prior to the expiration of
this Plan, this Plan may be terminated by the Board.
(b) The maximum number of Shares that any one individual may
acquire upon exercise of his or her Option with respect to
any one Offering Period is 3,000, subject to adjustments
pursuant to Section 17 (the "Individual Limit"); provided,
however, that the Committee may amend such Individual Limit,
effective no earlier than the first Offering Period
commencing after the adoption of such amendment, without
stockholder approval. The Individual Limit shall be
proportionately adjusted for any Offering Period of less
than six months, and may, at the discretion of the
Committee, be proportionately increased for any Offering
Period of greater than six months.
5. OFFERING PERIODS
During the term of this Plan, the Corporation will offer Options
to purchase Shares in each Offering Period to all Participants in
that Offering Period. Each Option shall become effective on the
Grant Date. The term of each Option shall be the duration of the
related Offering Period and shall end on the Exercise Date.
Offering Periods shall continue until this Plan is terminated in
accordance with Section 18 or 19, or, if earlier, until no Shares
remain available for Options pursuant to Section 4.
6. PARTICIPATION
A Qualified Employee may become a participant in this Plan by
completing a Subscription Agreement on a form approved by and in
a manner prescribed by the Committee (or its delegate). To
become effective, a Subscription Agreement must be filed with the
Corporation at the time specified by the Committee, but in all
cases prior to the start of the Offering Period with respect to
which it is to become effective, and must set forth a stated
amount (or, if the Committee so provides, a whole percentage) of
the Qualified Employee's Compensation to be credited to the
Participant's Account as Contributions each pay period; subject
to (i) the $25,000 annual limitation set forth in Section 8(c),
(ii) unless the Committee otherwise provides, an election of a
stated amount of Compensation must result in a Plan Contribution
of at least $10.00 each pay period, (iii) a Participant may not
contribute more than ten percent (10%) of his or her Compensation
as Plan Contributions, and (iv) such other limits, rules, or
procedures as the Committee may prescribe. Subscription
Agreements shall contain the Qualified Employee's authorization
and consent to the Corporation's withholding from his or her
Compensation the amount of his or her Contributions. A
Subscription Agreement shall be effective only with respect to
the related Offering Period. A Qualified Employee must timely
file a new Subscription Agreement for each Offering Period in
which he or she wishes to participate.
7. METHOD OF PAYMENT OF CONTRIBUTIONS
(a) The Corporation shall maintain on its books, or cause to be
maintained by a recordkeeper, an Account in the name of each
Participant. The percentage of Compensation elected to be
applied as Contributions by a Participant shall be deducted
from such Participant's Compensation on each payday during
the period for payroll deductions set forth below and such
payroll deductions shall be credited to that Participant's
Account as soon as administratively practicable after such
<PAGE>
date. A Participant may not make any additional payments to
his or her Account. A Participant's Account shall be
reduced by any amounts used to pay the Option Price of
Shares acquired, or by any other amounts distributed
pursuant to the terms hereof.
(b) Payroll deductions with respect to an Offering Period shall
commence as of the first day of the payroll period which
coincides with or immediately follows the applicable Grant
Date and shall end on the last day of the payroll period
which coincides with or immediately precedes the applicable
Exercise Date, unless sooner terminated by the Participant
as provided in this Section 7 or until his or her
participation terminates pursuant to Section 11.
(c) A Participant may terminate his or her Contributions during
an Offering Period (and receive a distribution of the
balance of his or her Account in accordance with Section 11)
by completing and filing with the Corporation, in such form
and on such terms as the Committee (or its delegate) may
prescribe, a written withdrawal form which shall be signed
by the Participant. Such termination shall be effective as
soon as administratively practicable after its receipt by
the Corporation. Partial withdrawals of Accounts, and other
modifications or suspensions of Subscription Agreements are
not permitted.
(d) During leaves of absence approved by the Corporation and
meeting the requirements of Regulation Section 1.421-7(h)(2)
under the Code, a Participant may continue participation in
this Plan by cash payments to the Corporation on his normal
paydays equal to the reduction in his Plan Contributions
caused by his leave.
8. GRANT OF OPTION
(a) On each Grant Date, each Qualified Employee who is a
participant during that Offering Period shall be granted an
Option to purchase a number of Shares. The Option shall be
exercised on the Exercise Date. The number of Shares
subject to the Option shall be determined by dividing the
Participant's Account balance as of the applicable Exercise
Date by the Option Price.
(b) The Option Price per Share of the Shares subject to an
Option shall be the lesser of: (i) 85% of the Fair Market
Value of a Share on the applicable Grant Date; or (ii) 85%
of the Fair Market Value of a Share on the applicable
Exercise Date.
(c) Notwithstanding anything else contained herein, a person who
is otherwise a Qualified Employee shall not be granted any
Option (or any Option granted shall be subject to compliance
with the following limitations) or other right to purchase
Shares under this Plan to the extent (i) it would, if
exercised, cause the person to own "stock" (as such term is
defined for purposes of Section 423(b)(3) of the Code)
possessing 5% or more of the total combined voting power or
value of all classes of stock of the Corporation, or of any
Parent, or of any Subsidiary, or (ii) such Option causes
such individual to have rights to purchase stock under this
Plan and any other plan of the Corporation, any Parent, or
any Subsidiary which is qualified under Section 423 of the
Code which accrue at a rate which exceeds $25,000 of the
fair market value of the stock of the Corporation, of any
Parent, or of any Subsidiary (determined at the time the
right to purchase such Stock is granted) for each calendar
year in which such right is outstanding at any time. For
this purpose a right to purchase stock accrues when it first
<PAGE>
become exercisable during the calendar year. In determining
whether the stock ownership of a Qualified Employee equals
or exceeds the 5% limit set forth above, the rules of
Section 424(d) of the Code (relating to attribution of stock
ownership) shall apply, and stock which the Qualified
Employee may purchase under outstanding options shall be
treated as stock owned by the Qualified Employee.
9. EXERCISE OF OPTION
Unless a Participant's Plan participation is terminated as
provided in Section 11, his or her Option for the purchase of
Shares shall be exercised automatically on the Exercise Date for
that Offering Period, without any further action on the
Participant's part, and the maximum number of whole Shares
subject to such Option (subject to the Individual Limit set forth
in Section 4(b) and the limitations contained in Section 8(c))
shall be purchased at the Option Price with the balance of such
Participant's Account. If any amount which is not sufficient to
purchase a whole Share remains in a Participant's Account after
the exercise of his or her Option on the Exercise Date: (i) such
amount shall be credited to such Participant's Account for the
next Offering Period, if he or she is then a Participant; or
(ii) if such Participant is not a Participant in the next
Offering Period, or if the Committee so elects, such amount shall
be refunded to such Participant as soon as administratively
practicable after such date. If any amount which exceeds the
Individual Limit set forth in Section 4(b) or one of the
limitations set forth in Section 8(c) remains in a Participant's
Account after the exercise of his or her Option on the Exercise
Date, such amount shall be refunded to the Participant as soon as
administratively practicable after such date.
10. DELIVERY
As soon as administratively practicable after the Exercise Date,
the Corporation shall deliver to each Participant a certificate
representing the Shares purchased upon exercise of his or her
Option. The Corporation may make available an alternative
arrangement for delivery of Shares to a recordkeeping service.
The Committee (or its delegate), in its discretion, may either
require or permit the Participant to elect that such certificates
be delivered to such recordkeeping service. In the event the
Corporation is required to obtain from any commission or agency
authority to issue any such certificate, the Corporation will
seek to obtain such authority. Inability of the Corporation to
obtain from any such commission or agency authority which counsel
for the Corporation deems necessary for the lawful issuance of
any such certificate shall relieve the Corporation from liability
to any Participant except to return to the Participant the amount
of the balance in his or her Account.
11. TERMINATION OF EMPLOYMENT; CHANGE IN ELIGIBLE STATUS
(a) Upon a Participant's termination from employment with the
Company for any reason other than his or her death or
Retirement, or if the Participant elects to terminate
Contributions pursuant to Section 7(c), at any time prior to
the last day of an Offering Period in which he or she
participates, such Participant's Account shall be paid to
him or her or in cash, and such Participant's Option and
participation in the Plan shall be automatically terminated.
If a Participant (i) ceases to be a Qualified Employee
during an Offering Period but remains an employee of the
Company through the Exercise Date, or (ii) during an
Offering Period commences a leave of absence approved by the
Company and meeting the requirements of Treasury Regulation
Section 1.421-7(h)(2) and is an employee of the Company or
on such leave as of the applicable Exercise Date, such
<PAGE>
Participant's Contributions shall cease (subject to
Section 6(d)), and the Contributions previously credited to
the Participant's Account for that Offering Period shall be
used to exercise the Participant's Option as of the
applicable Exercise Date in accordance with Section 9
(unless the Participant makes an election to terminate
Contributions in accordance with Section 7(c) at any time
prior to the last day of the applicable Offering Period, in
which case such Participant's Account shall be paid to him
or her in cash in accordance with the foregoing).
(b) A Participant who terminates employment with the Company due
to Retirement may, at his election and by written notice to
the Corporation, either (i) exercise his Option as of his
Retirement date, in which event the Corporation shall apply
the balance in his Account to purchase Shares and pay the
Option Price (with the Exercise Date of such Option being
the date of his retirement for purposes of calculating such
price) and refund any amount which is not sufficient to
purchase a whole Share to the Participant, or (ii) request
payment of the balance in his Account in the form of cash,
in which event the Corporation promptly shall make such
payment, and thereupon his interest in the Plan and his
Option shall terminate. If the Corporation does not receive
such notice within 90 days of the Participant's Retirement
or, if earlier, the end of the applicable Offering Period,
the Participant shall be conclusively presumed to have
elected alternative (ii) and requested the payment of the
balance of his Account.
(c) If the employment of a Participant is terminated by his
death, his Beneficiary may, at his election and by written
notice to the Corporation, either (i) exercise the
Participant's Option as of the date of the Participant's
death, in which event the Corporation shall apply the
balance in the Participant's Account to purchase Shares and
pay the Option Price (with the Exercise Date of such Option
being the date of the Participant's death for purposes of
calculating such price) and refund any amount which is not
sufficient to purchase a whole share to the Beneficiary, or
(ii) request payment of the balance in the Participant's
Account in the form of cash, in which event the Corporation
promptly shall make such payment to the Beneficiary and
thereupon any interest of the Participant and his
Beneficiary in the Plan and any Option shall terminate. If
the Corporation does not receive such notice within 90 days
of the Participant's death, or, if earlier, the end of the
applicable Offering Period, the Participant's Beneficiary
shall be conclusively presumed to have elected alternative
(ii) and requested the payment of the balance of the
Participant's Account.
(d) A Participant's termination from Plan participation
precludes the Participant from again participating in this
Plan during that Offering Period. However, such termination
shall not have any effect upon his or her ability to
participate in any succeeding Offering Period, provided that
the applicable eligibility and participation requirements
are again then met. A Participant's termination from Plan
participation shall be deemed to be a revocation of that
Participant's Subscription Agreement and such Participant
must file a new Subscription Agreement to resume Plan
participation in any succeeding Offering Period.
12. ADMINISTRATION
(a) The Board shall appoint the Committee, which shall be
composed of not less than two members of the Board. Each
member of the Committee, in respect of any transaction at a
<PAGE>
time when an affected Participant may be subject to
Section 16 of the Exchange Act, shall be a "non-employee
director" within the meaning of Rule 16b-3. The Board may,
at any time, increase or decrease the number of members of
the Committee, may remove from membership on the Committee
all or any portion of its members, and may appoint such
person or persons as it desires to fill any vacancy existing
on the Committee, whether caused by removal, resignation, or
otherwise. The Board may also, at any time, assume or
change the administration of this Plan.
(b) The Committee shall supervise and administer this Plan and
shall have full power and discretion to adopt, amend and
rescind any rules deemed desirable and appropriate for the
administration of this Plan and not inconsistent with the
terms of this Plan, and to make all other determinations
necessary or advisable for the administration of this Plan.
The Committee shall act by majority vote or by unanimous
written consent. No member of the Committee shall be
entitled to act on or decide any matter relating solely to
himself or herself or solely to any of his or her rights or
benefits under this Plan. The Committee shall have full
power and discretionary authority to construe and interpret
the terms and conditions of this Plan, which construction or
interpretation shall be final and binding on all parties
including the Corporation, Participants and beneficiaries.
The Committee may delegate ministerial non-discretionary
functions to third parties, including officers of the
Corporation.
(c) Any action taken by, or inaction of, the Corporation, the
Board or the Committee relating to this Plan shall be within
the absolute discretion of that entity or body and will be
conclusive and binding upon all persons. No member of the
Board or Committee, or officer of the Corporation, will 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.
13. DESIGNATION OF BENEFICIARY
(a) A Participant may file, in a manner prescribed by the
Committee (or its delegate), a written designation of a
beneficiary who is to receive any Shares or cash from such
Participant's Account under this Plan in the event of such
Participant's death. If a Participant's death occurs
subsequent to the end of an Offering Period but prior to the
delivery to him or her of any Shares deliverable under the
terms of this Plan, such Shares and any remaining balance of
such Participant's Account shall be paid to such beneficiary
(or such other person as set forth in Section 13(b)) as soon
as administratively practicable after the Corporation
receives notice of such Participant's death and any
outstanding unexercised Option shall terminate. If a
Participant's death occurs at any other time, the balance of
such Participant's Account shall be paid to such beneficiary
(or such other person as set forth in Section 13(b)) in cash
as soon as administratively practicable after the
Corporation receives notice of such Participant's death and
such Participant's Option shall terminate. If a Participant
is married and the designated beneficiary is not his or her
spouse, spousal consent shall be required for such
designation to be effective unless it is established (to the
satisfaction of a Plan representative) that there is no
spouse or that the spouse cannot be located. The Committee
may rely on the last designation of a beneficiary filed by a
Participant in accordance with this Plan.
<PAGE>
(b) Beneficiary designations may be changed by the Participant
(and his or her spouse, if required) at any time on forms
provided and in the manner prescribed by the Committee (or
its delegate). If a Participant dies with no validly
designated beneficiary under this Plan who is living at the
time of such Participant's death, the Corporation shall
deliver all Shares and/or cash payable pursuant to the terms
hereof to the executor or administrator of the estate of the
Participant, or if no such executor or administrator has
been appointed, the Corporation, in its discretion, may
deliver such Shares and/or cash to the spouse or to any one
or more dependents or relatives of the Participant, or if no
spouse, dependent or relative is known to the Corporation,
then to such other person as the Corporation may designate.
14. TRANSFERABILITY
Neither Contributions credited to a Participant's Account nor any
Options or rights with respect to the exercise of Options or
right to receive Shares under this Plan may be anticipated,
alienated, encumbered, assigned, transferred, pledged or
otherwise disposed of in any way (other than by will, the laws of
descent and distribution, or as provided in Section 13) by the
Participant. Any such attempt at anticipation, alienation,
encumbrance, assignment, transfer, pledge or other disposition
shall be without effect and all amounts shall be paid and all
shares shall be delivered in accordance with the provisions of
this Plan. Amounts payable or Shares deliverable pursuant to
this Plan shall be paid or delivered only to the Participant or,
in the event of the Participant's death, to the Participant's
beneficiary pursuant to Section 13.
15. USE OF FUNDS; INTEREST
All Contributions received or held by the Corporation under this
Plan will be included in the general assets of the Corporation
and may be used for any corporate purpose. Notwithstanding
anything else contained herein to the contrary, no interest will
be paid to any Participant or credited to his or her Account
under this Plan (in respect of Account balances, refunds of
Account balances, or otherwise).
16. REPORTS
Statements shall be provided to Participants as soon as
administratively practicable following each Exercise Date. Each
Participant's statement shall set forth, as of such Exercise
Date, that Participant's Account balance immediately prior to the
exercise of his or her Option, the Fair Market Value of a Share,
the Option Price, the number of whole Shares purchased and his or
her remaining Account balance, if any.
17. ADJUSTMENTS OF AND CHANGES IN THE STOCK
The following provisions will apply if any extraordinary dividend
or other extraordinary distribution occurs 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 any similar, unusual or
extraordinary corporate transaction (or event in respect of the
<PAGE>
Common Stock) or a sale of substantially all the assets of the
Corporation as an entirety occurs. The Committee will, in such
manner and to such extent (if any) as it deems appropriate and
equitable
(a) proportionately adjust any or all of (i) the number and type
of Shares (or other securities) that thereafter may be made
the subject of Options (including the specific maxima and
numbers of shares set forth elsewhere in this Plan), (ii)
the number, amount and type of Shares (or other securities
or property) subject to any or all outstanding Options,
(iii) the Option Price of any or all outstanding Options, or
(iv) the securities, cash or other property deliverable upon
exercise of any outstanding Options, or
(b) 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 the
substitution or exchange of any or all outstanding Options
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 upon or in respect of such event.
In each case, no such adjustment will be made that would cause
this Plan to violate Section 423 of the Code or any successor
provisions without the written consent of the holders materially
adversely affected thereby. In any of such events, the Committee
may take such action sufficiently prior to such event if
necessary to permit the Participant to realize the benefits
intended to be conveyed with respect to the underlying shares in
the same manner as is available to stockholders generally.
18. POSSIBLE EARLY TERMINATION OF PLAN AND OPTIONS
Upon a dissolution of the Corporation, or any other event
described in Section 17 that the Corporation does not survive,
the Plan and, if prior to the last day of an Offering Period, any
outstanding Option granted with respect to that Offering Period
shall terminate, subject to any provision that has been expressly
made by the Committee through a plan or reorganization approved
by the Board or otherwise for the survival, substitution,
assumption, exchange or other settlement of the Plan and Options.
In the event a Participant's Option is terminated pursuant to
this Section 18, such Participant's Account shall be paid to him
or her in cash.
19. TERM OF PLAN; AMENDMENT OR TERMINATION
(a) This Plan shall become effective as of the Effective Date.
No new Offering Periods shall commence on or after February
26, 2007 (after giving effect to the amendment approved by
the Corporation's stockholders at the 1997 annual meeting of
stockholders which extended the term of this Plan) and this
Plan shall terminate as of the Exercise Date immediately
following such date unless sooner terminated pursuant to
Section 4, Section 18, or this Section 19.
(b) The Board may amend, modify or terminate this Plan at any
time without notice. Stockholder approval for any amendment
or modification shall not be required, except to the extent
required by Section 423 of the Code or other applicable law,
or deemed necessary or advisable by the Board. No
amendment, modification, or termination pursuant to this
Section 18(b) shall, without written consent of the
Participant, affect in any manner materially adverse to the
<PAGE>
Participant any rights or benefits of such Participant or
obligations of the Corporation under any Option granted
under this Plan prior to the effective date of such change.
Changes contemplated by Section 17 or Section 18 shall not
be deemed to constitute changes or amendments requiring
Participant consent. Notwithstanding the foregoing, the
Committee shall have the right to designate from time to
time the Subsidiaries whose employees may be eligible to
participate in this Plan and such designation shall not
constitute any amendment to this Plan requiring stockholder
approval.
20. NOTICES
All notices or other communications by a Participant to the
Corporation contemplated by this Plan shall be deemed to have
been duly given when received in the form and manner specified by
the Committee (or its delegate) at the location, or by the
person, designated by the Committee (or its delegate) for that
purpose.
21. CONDITIONS UPON ISSUANCE OF SHARES
Shares shall not be issued with respect to an Option unless the
exercise of such Option and the issuance and delivery of such
Shares complies with all applicable provisions of law, domestic
or foreign, including, without limitation, the Securities Act of
1933, as amended from time to time, the Exchange Act, any
applicable state securities laws, the rules and regulations
promulgated thereunder, and the requirements of any stock
exchange upon which the Shares may then be listed.
As a condition precedent to the exercise of any Option, if, in
the opinion of counsel for the Corporation such a representation
is required under applicable law, the Corporation may require any
person exercising such Option to represent and warrant that the
Shares subject thereto are being acquired only for investment and
without any present intention to sell or distribute such Shares.
22. PLAN CONSTRUCTION
(a) It is the intent of the Corporation that transactions
involving Options under this Plan in the case of
Participants who are or may be subject to the prohibitions
of Section 16 satisfy the requirements for applicable
exemptions under Rule 16 promulgated by the Commission under
Section 16 so that such persons (unless they otherwise
agree) will be entitled to the exemptive relief of Rule 16b-
3 or other exemptive rules under Section 16 in respect of
those transactions and will not be subject to avoidable
liability thereunder.
(b) This Plan and Options are intended to qualify under
Section 423 of the Code.
(c) If any provision of this Plan or of any Option would
otherwise frustrate or conflict with the intents expressed
above, that provision to the extent possible shall be
interpreted so as to avoid such conflict. If the conflict
remains irreconcilable, the Committee may disregard the
provision if it concludes that to do so furthers the
interest of the Corporation and is consistent with the
purposes of this Plan as to such persons in the
circumstances.
<PAGE>
23. EMPLOYEES' RIGHTS
Nothing in this Plan (or in any agreement related to this Plan)
will confer upon any Qualified Employee or 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, or interfere in any way with the right of the Company to
otherwise change such person's compensation or other benefits or
to terminate the employment or other service or such Qualified
Employee or Participant, with or without cause, but nothing
contained in this Plan or any document related hereto shall
affect any other contractual right of any Qualified Employee or
Participant without such person's consent. No Participant shall
have any rights as a stockholder until a certificate for Shares
has been issued in the Participant's name following exercise of
his or her Option. No adjustment will be made for dividends or
other rights as a stockholder for which a record date is prior to
the issuance of such Share certificate. Nothing in this Plan
shall be deemed to create any fiduciary relationship between the
Corporation and any Participant.
24. MISCELLANEOUS
(a) This Plan, the Options, and related documents shall be
governed by, and construed in accordance with, the laws of
the State of Nevada. 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.
(b) Captions and headings are given to the sections of this Plan
solely as a convenience to facilitate reference. Such
captions and headings shall not be deemed in any way
material or relevant to the construction of interpretation
of this Plan or any provision hereof.
(c) The adoption of this Plan shall not affect any other Company
compensation or incentive plans in effect. Nothing in this
Plan will limit or be deemed to limit the authority of the
Board or Committee (i) to establish any other forms of
incentives or compensation for employees of the Company
(with or without reference to the Common Stock), or (ii) to
grant or assume options (outside the scope of and in
addition to those contemplated by this Plan) in connection
with any proper corporate purpose; to the extent consistent
with any other plan or authority.
25. HIGHLY COMPENSATED EMPLOYEES
Highly compensated employees (within the meaning of
Section 414(q) of the Code) were excluded from participation
under the prior version of this Plan. This amendment to and
restatement of this Plan removes such exclusion; subject to
stockholder approval of such amendment at the 1999 annual meeting
of the Corporation's stockholders. If such stockholder approval
is not obtained (i) no highly compensated employee shall be a
Qualified Employee, and (ii) all Contributions credited to any
highly compensated employee's account hereunder shall be refunded
to him or her as soon as practicable after such annual meeting of
stockholders.
