INTERNATIONAL GAME TECHNOLOGY
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held On March 5, 2001
The Annual Meeting of the Stockholders of International Game Technology
will be held at the Mandalay Bay Resort & Casino, Mandalay Theatre, at 3950
South Las Vegas Boulevard, Las Vegas, Nevada, on Monday, March 5, 2001, 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 an amendment to the International Game Technology 1993
Stock Option Plan; and
3. Such other business as may properly come before the meeting and any and
all adjournments thereof.
The Board of Directors has fixed January 5, 2001 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
Sara Beth Brown
Secretary
Reno, Nevada
January 12, 2001
YOUR VOTE IS IMPORTANT. WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING,
PLEASE VOTE AS SOON AS POSSIBLE. YOU MAY VOTE OVER THE INTERNET, AS WELL AS BY
TELEPHONE OR BY MAILING A TRADITIONAL PROXY CARD. VOTING OVER THE INTERNET, BY
PHONE OR BY WRITTEN PROXY WILL ENSURE YOUR REPRESENTATION AT THE ANNUAL MEETING
IF YOU DO NOT ATTEND IN PERSON. PLEASE REVIEW THE INSTRUCTIONS ON THE PROXY CARD
REGARDING EACH OF THESE VOTING OPTIONS.
<PAGE>
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......................... 7
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION............ 7
COMPENSATION OF DIRECTORS.............................................. 8
PROPOSAL 2 - AMENDMENT TO THE 1993 STOCK OPTION PLAN..................... 8
OTHER INFORMATION........................................................ 13
EXECUTIVE OFFICERS AND KEY EMPLOYEES................................... 13
EQUITY SECURITY OWNERSHIP OF MANAGEMENT AND OTHER BENEFICIAL OWNERS.... 16
EXECUTIVE COMPENSATION................................................. 17
EMPLOYMENT CONTRACTS................................................... 18
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934... 19
RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS....................... 19
BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION............ 20
AUDIT COMMITTEE REPORT................................................... 21
PERFORMANCE GRAPH........................................................ 22
GENERAL .............................................................. 23
EXHIBIT A - AUDIT COMMITTEE CHARTER...................................... A-1
EXHIBIT B - 1993 STOCK OPTION PLAN....................................... B-1
<PAGE>
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
Monday, March 5, 2001, and at any and all adjournments thereof.
Solicitation of proxies by mail and distribution of proxy statements
are expected to commence on or about January 26, 2001, 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 ("Common Stock"), of
which 73,301,780 shares were issued and outstanding at the close of business on
January 5, 2001. Only stockholders of record at the close of business on January
5, 2001, 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; 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 3,249,027 shares as of the
record date (4% 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 for the proposed amendment of the 1993 Stock Option Plan.
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."
Shares referred to as "broker non-votes" are shares held by brokers or
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. 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).
<PAGE>
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 a proxy is granted 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 2002 Annual Meeting
Proposals of stockholders intended to be presented at the next Annual
Meeting must be received by the Company by September 29, 2001 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 13, 2001 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. The favorable vote of a plurality of
votes cast for each nominee is required for election to the Board of Directors.
Nominees for Election of Directors
The following sets forth for each nominee for election as a director
his name, all positions with the Company held by him and his principal
occupation:
Charles N. Mathewson, 72, 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. In December 2000,
<PAGE>
he resigned as Chief Executive Officer and currently holds the position
of Chairman. He received his Bachelor of Finance degree from the
University of Southern California in 1953 and graduated from the
University of California Management Program in 1960. He served as
Senior Executive Vice President and a Director of Jefferies and Co.
from 1968 to 1971, Chairman of the Board of Arden Mayfair, Inc. from
1971 to 1974, and 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 FelCor Lodging Trust. He is also Chairman of
the American Gaming Association.
Albert J. Crosson, 70, 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. On December 31, 2000, Mr. Crosson resigned
as an employee of the Company but continues in his capacity as Vice
Chairman of the Board. 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.
G. Thomas Baker, 58, was appointed to the Board in October, 2000. 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 March 1996 as its President, Chief
Operating Officer and Chief Financial Officer. In May 1998, he
resigned as Chief Financial Officer of the Company. In August 2000,
Mr. Baker was appointed acting Chief Financial Officer and Treasurer,
in addition to his position as President and Chief Operating Officer.
In December 2000, he was appointed Chief Executive Officer of the
Company. Mr. Baker has a Bachelor of Science degree in Business
Administration and Liberal Arts from Upper Iowa University.
Robert A. Bittman, 46, was appointed to the Company's Board of Directors in May
2000. 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.
Wilbur K. Keating, 69, 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.
<PAGE>
Robert Miller, 55, was appointed to the Board in January 2000. Governor Miller
has been a senior partner at the law firm of Jones Vargas since January
1999. From January 1989 until January 1999, he served as Governor of
the State of Nevada and as Lieutenant Governor of the State of Nevada
from 1987 to 1989. Governor Miller was the Clark County District
Attorney from 1979 to 1986 and was Las Vegas Township Justice of the
Peace from 1975 to 1979. He was first legal advisor for the Las Vegas
Metropolitan Police Department from 1973 to 1975 and was a Clark
County Deputy District Attorney from 1971 to 1973. Prior to 1973,
Governor Miller was a uniformed commissioned officer for the Clark
County Sheriff's Department and the Los Angeles County Sheriff's
Department. During Governor Miller's political and professional
careers, he has served on many local and national boards and chaired or
co-chaired numerous committees within the National Governor's
Association including the Chairmanship of the Association during
1996-1997. He was appointed by President Reagan to the nine-member
President's Task Force on Victims of Crime in 1982 and was appointed
to the Advisory Commission on Intergovernmental Relations by President
Bill Clinton in 1993. Current board memberships include Newmont Mining
Corporation, Paging Network, Inc. (PageNet), America West Holdings,
American Cancer Society Foundation-National, U.S. Secretary of Energy
Advisory Board, Zenith National Insurance Corp., National Center for
Missing and Exploited Children, Advisory Board of Americans for
Technology Leadership. Governor Miller received his law degree in 1971
from Loyola Law School, Los Angeles.
Frederick B. Rentschler, 61, 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, and the Scottsdale Health Care Systems.
Rockwell A. Schnabel, 63, was elected a Director in September 1994. Mr. Schnabel
is founder and General Partner 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 $10 billion in pension funds. He
is the former Deputy Secretary of the U.S. Department of Commerce 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 (First Union Securities). He is
presently serving on the Board of Directors of CSG Systems, Inc.
Certain Relationships and Related Transactions
Mr. Warren L. Nelson, who retired from the Company's Board of Directors
on March 6, 2000, has an equity interest in a Nevada gaming business from which
the Company recognized revenues of $2.3 million for the fiscal year ended
September 30 2000. The Company had contracts and accounts receivable balances
from this customer of $812,716 at September 30, 2000. During the fiscal year
ended September 30, 2000, the largest aggregate amount of the Company's
receivable balances from such customer was $1.3 million. Mr. Nelson is also a
Director of the parent company of additional gaming businesses. The Company
recognized revenues from these businesses of $21.7 million for the fiscal year
ended September 30, 2000. The Company had contracts and accounts receivable
balances from these businesses of $3.1 million as of September 30, 2000. During
the fiscal year ended September 30, 2000, the largest aggregate amount of the
Company's receivable balances from these customers was $3.1 million.
<PAGE>
Board of Directors and Committees of the Board
The Board of Directors held five regular meetings and two special
meetings during fiscal 2000. During fiscal 2000, each Director, with the
exception of Mr. Schnabel, attended at least 75% of the aggregate number of
meetings of the Board and respective Committees on which he served while a
member thereof. Mr. Schnabel attended 50% of the meetings. 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 2000. 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.
In May 2000, the Board of Directors adopted an Audit Committee Charter
in accordance with New York Stock Exchange requirements. In accordance with its
written charter, included as Exhibit A to this Proxy Statement, the Audit
Committee assists the Board in fulfilling its responsibility for oversight of
the quality and integrity of the accounting, auditing and reporting practices of
the Company, and the independence and performance of the Company's independent
auditors.
The Audit Committee Charter requires that the Audit Committee consist
of three Board members who satisfy the "independence" requirements of the New
York Stock Exchange. In addition, each member must be able to review and
evaluate financial statements, and at least one member must have accounting or
financial management experience.
The Audit Committee consists of Messrs. Keating, Rentschler and
Schnabel, who satisfy the "independence" requirements of the New York Sock
Exchange and the other requirements as specified in the Audit Committee Charter.
The Audit Committee held five meetings during fiscal 2000.
Compensation Committee Interlocks and Insider Participation
During fiscal 2000, Messrs. Rentschler and Keating and, until his
retirement from the Board of Directors on March 6, 2000, Mr. Nelson, served as
members of the Compensation Committee. Governor Miller was appointed to the
Compensation Committee in March 2000 to replace Mr. Nelson. 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 incentive compensation
programs. The Compensation Committee held five meetings in fiscal 2000. See
"Certain Relationships and Related Transactions" for a discussion of certain
relationships between the Company and certain businesses affiliated with Mr.
Nelson.
<PAGE>
Compensation of Directors
Through December 2000, each non-employee director received 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.
Effective January 2001, non-employee director compensation increased to
$30,000 annually, and the fee for each committee meeting attended increased to
$1,500.
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 re-election to the Board. Each non-employee director received
non-qualified stock options to purchase 6,000 shares of Common Stock in fiscal
2000 at an exercise price of $18.1875 per share. Robert Miller received a
non-qualified stock option to purchase 10,000 shares of Common Stock at an
exercise price of $21.6875 when he was appointed to the Board of Directors in
January 2000.
PROPOSAL 2 - AMENDMENT TO THE 1993 STOCK OPTION PLAN
The Board recommends that stockholders approve the amendment described
below to the Company's 1993 Stock Option Plan, as amended (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 Plan was amended and
restated as of August 27, 1996. The Board last amended the Plan on December 8,
1998, which amendment was approved by stockholders on March 5, 1999. The
proposed amendment described below was approved by the Board, subject to
stockholder approval, on December 5, 2000.
Proposed Amendment to the Plan
The Plan currently provides that when a person (other than an employee
of the Company) is first elected to the Board, he or she will be granted a stock
option under the Plan to acquire 10,000 shares of Common Stock. The Plan also
currently provides that each non-employee member of the Board who is re-elected
to office will be granted a stock option under the Plan to acquire 6,000 shares
of Common Stock. This program of option grants under the Plan is referred to as
the "non-employee director option grant program." The exercise price of, as well
as the period during which a director may exercise an option granted under the
non-employee director option grant program are established by the terms of the
Plan. Members of the Board who are not employed by the Company are not eligible
to receive awards under the Plan except those contemplated by the non-employee
director option grant program.
Currently, the Plan provides that the maximum number of shares of
Common Stock that a non-employee member of the Board may acquire pursuant to
stock options granted under the non-employee director option grant program is
50,000 shares. The proposed Plan amendment deletes the 50,000 share limitation,
but does not change other elements of the non-employee director option grant
program. That is, if stockholders approve the Plan proposal, non-employee
members of the Board may receive option grants in accordance with the
non-employee director option grant program that, in the aggregate, cover more
than 50,000 shares. However, the 10,000 share and 6,000 share grant provisions
described above will not be affected. Non-employee directors will continue to be
ineligible for other awards under the Plan.
<PAGE>
The principal terms of the Plan are summarized below. The following
summary is qualified in its entirety by the full text of the Plan. The Plan, as
amended through 1999, was filed as an appendix to the copy of this Proxy
Statement that was filed electronically with the Securities and Exchange
Commission and can be reviewed on the Securities and Exchange Commission's
website at http://www.sec.gov. Shareholders may also obtain a copy of the Plan
by contacting the Company's Investor Relations office at the address or
telephone number given under "General" at the end of this Proxy Statement.
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 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.
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 members of the Board are eligible to
receive stock option grants under the non-employee director option grant program
described above. As of September 30, 2000, approximately 473 officers and
employees of the Company and its subsidiaries (including all of the named
executive officers) were considered eligible under the Plan, subject to the
power of the Committee to determine Eligible Employees to whom awards will be
granted, and four non-employee members of the Board were considered eligible for
automatic option grants under the non-employee director option grant program.
Transferability Restrictions. Plan awards generally 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. The maximum number of shares of the Common Stock that may
be delivered pursuant to awards granted to Eligible Employees under the Plan can
not exceed 8,000,000 shares. The maximum number of shares of Common Stock that
may be issued under the non-employee director option grant program is 500,000
shares (in addition to the 8,000,000 shares available for Eligible Employee
grants).
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
can not exceed 1,000,000 shares. 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).
<PAGE>
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 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, 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 re-granting 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.
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.
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
<PAGE>
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 non-employee director option grant
program under the Plan is described above.
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 Board
terminates the Plan prior to that time. 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
<PAGE>
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.
The 50,000 share non-employee director option grant limit that is to be
removed from the Plan if this proposal is approved by stockholders has not
previously affected option grants to non-employee directors. However, Mr.
Keating has previously received option grants under the non-employee director
option grant program covering an aggregate of 48,000 shares and Mr. Rentschler
has previously received option grants under the non-employee director option
grant program covering an aggregate of 48,000 shares. Thus, additional option
grants to be made to Messrs. Keating and Rentschler under the non-employee
director option grant program will (if they are re-elected to the Board in 2001
or thereafter) be limited by the non-employee director grant limit if
stockholders do not approve this proposal. (That is, if this proposal is
approved, Mr. Keating and Mr. Rentschler would each be granted, upon re-election
to office, an option under the non-employee director option grant program
covering 6,000 shares of Common Stock. If this proposal is not approved and Mr.
Keating and Mr. Rentschler are re-elected to office, Mr. Keating's grant would
be limited to 2,000 shares and Mr. Rentschler's grant would be limited to 2,000
shares.) No other non-employee director is expected to be affected by the
non-employee director grant limit before the scheduled expiration date of the
Plan. The closing price of the Company's Common Stock on the New York Stock
Exchange on January 5, 2001 was $47.625 per share.
Recommendation of Your Board of Directors "FOR" the Proposal
The Board has unanimously approved and recommends a vote FOR the
proposed amendment to the Plan as described above. Stockholders should note that
because each non-employee member of the Board may in the future be impacted by
the proposed amendment, such non-employee directors may have a personal interest
in the proposal and its approval by stockholders. (Mr. Keating's and Mr.
Rentschler's personal interest in the proposal is noted above under "Specific
Benefits" - future option grants to them under the non-employee director option
grant program of the Plan would be limited if the proposed amendment to the Plan
is not approved by stockholders.) However, the members of the Board believe that
the proposed amendment to the Plan is in the best interest of the Company and
its stockholders.
Approval of the proposed amendment to the 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 and Key Employees
The following table sets forth the name, age, and current office of the
executive officers and key employees 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.
Name Age Title
G. Thomas Baker 58 Chief Executive Officer, President,
Chief Operating Officer, Chief Fiancial
Officer and Treasurer
Robert A. Bittman 46 Executive Vice President,
Product Development
Robert M. McMonigle 56 Executive Vice President, Corporate
Relations and North America
Sales
Anthony Ciorciari 53 Senior Vice President, Operations
Sara Beth Brown 45 Senior Vice President, General Counsel,
and Corporate Secretary
Randy Kirner 54 Vice President, Human Resources
Richard Pennington 38 Vice President, Product Management
Ward Chilton 44 Vice President, MegaJackpots
For a description of Mr. Baker's and Mr. Bittman's backgrounds, see
"Election of Directors."
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 October 1993, Mr.
McMonigle was promoted to Executive Vice President, Corporate Relations and
North America 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.
<PAGE>
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 the manufacturing and supply
of Digital's workstation and systems product lines. Mr. Ciorciari is currently
a member of the Board of Directors for the National Association of Manufacturers
in Washington, D.C. He is also a Foundation Board Member for Truckee Meadows
Community College.
Ms. Brown joined the Company in November 1999 as Vice President,
General Counsel and Corporate Secretary. In October 2000, she was appointed
Senior Vice President in addition to her positions as General Counsel and
Corporate Secretary of the Company. From 1994 to 1999, Ms. Brown was Senior Vice
President and Regional Manager of Wells Fargo Private Client Services. From 1984
to 1994, Ms. Brown was Vice President and Managing Counsel for First Interstate
Bank's Legal Division for the state of Nevada. From 1981 to 1984, she practiced
law in the areas of civil rights, criminal defense and plaintiff's employment
law. Ms. Brown graduated from the University of Nevada, Reno in 1978 with high
honors and received a degree in Journalism. She received her Juris Doctorate
from McGeorge School of Law in 1981 with distinction, and is a member of the
Order of the Coif. Ms. Brown serves as a Commissioner to the Governor's
Commission on Economic Development, and was appointed by U.S. Senator Richard
Bryan to the committee which selects Nevada's military academy appointees.
Mr. Kirner joined the Company in October 1997 as 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 Bachelor's degree in Business Administration from North Georgia
College and State University in 1967.
Mr. Pennington joined the Company in July 1991 and has held several
management positions in the finance and accounting areas of the Company. In 1997
he was promoted to Finance Director with responsibility for Credit, Cost
Accounting, and Corporate Finance. In 1999, Mr. Pennington was promoted to Vice
President of Product Management where he manages and coordinates the
cross-functional activities and processes from product development through
manufacturing, sales and service. Prior to joining the Company, Mr. Pennington
was Manager of Cost Accounting at Western Digital in Irvine California, and
prior to that, Manager of Accounting at Emerson Technologies LLP., an affiliate
of Emerson Radio. Mr. Pennington attended California State University at Pomona
where he graduated with a Bachelor of Science degree in Business Administration
in 1987.
Mr. Chilton first joined the Company in September 1986 as an Account
Executive and was promoted to Manager of Megabucks in 1987. He was promoted to
Director of Progressive Systems in July 1991 and held this position until
December 1995. Mr. Chilton rejoined the company in April 1996 as Director of
Progressive Systems and was promoted to Vice President of MegaJackpots in March
of 1999. He is responsible for IGT's recurring revenue products including wide
<PAGE>
area progressives and stand-alone proprietary games. Prior to joining the
Company, from November 1980 to September 1986, Mr. Chilton developed and managed
real estate and was also a general partner in Frontier Investments, which owned
the Red Garter Hotel and Casino in Wendover, Nevada. Mr. Chilton received a
Bachelor of Science degree in Business Administration from Arizona State
University in 1978 and a Masters of Science degree from Golden Gate University
in 1980.
<PAGE>
Equity Security Ownership of Management and Other Beneficial Owners
The following table sets forth information as of January 5, 2001 with
respect to the beneficial ownership of the Company's Common Stock by principal
shareholders owning more than 5% known to the Company, all directors, the
executive 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 Class2
------------------------ -------------- ----------------- --------------- -----------
<S> <C> <C> <C> <C>
G. Thomas Baker 123,987 530,571 654,558 .89
Robert A. Bittman 132,500 7,186 139,686 .19
Albert J. Crosson 203,186 422,000 625,186 .85
Wilbur K. Keating 4,718 38,667 43,385 .06
Charles N. Mathewson 2,557,520 994,123 3,551,643 4.85
Robert M. McMonigle 64,400 44,653 109,053 .15
Robert Miller 0 5,334 5,334 .01
Raymond D. Pike 46,390 0 46,390 .06
Frederick B. Rentschler 23,500 6,000 29,500 .04
Rockwell A. Schnabel 25,000 6,000 31,000 .04
All executive officers and directors as a group 3,249,027 2,174,721 5,423,748 7.40
(15 persons)
Private Capital Management, Inc. 3 7,248,717 0 7,248,717 10.00
3003 Tamiami Trail North
Naples, FL 34103
Ariel Capital Management Inc4 7,402,340 0 7,402,340 9.87
307 North Michigan Avenue
Chicago, IL 60601
Pacific Financial Research, Inc.5 6,480,300 0 6,480,300 7.50
9601 Wilshire Blvd., Suite 800
Beverly Hills, CA 90210
ESL Partners, L.P., ESL Limited, 4,491,400 0 4,491,400 5.23
ESL Institutional Partners, L.P. 6
One Lafayette Place
Greenwich, CT 06830
<FN>
-----------
1 Represents sum of shares owned and shares which may be purchased upon exercise
of options exercisable within 60 days of January 5, 2001.
2 Any securities not outstanding which are subject to options or conversion
privileges which are exercisable within 60 days of January 5, 2001 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 As reported to the Securities and Exchange Commission on Form 13G filed on
June 14, 2000, the shares are held as follows: Private Capital Management, Inc.
- 9.6%; SPS Partners, L.P. - .4%.
4 As reported to the Securities and Exchange Commission on Form 13G filed on May
9, 2000.
5 As reported to the Securities and Exchange Commission on Form 13G filed on
February 11, 2000.
6 As reported to the Securities and Exchange Commission on Form 13G filed on
February 14, 2000.
</FN>
</TABLE>
<PAGE>
Executive Compensation
Summary Compensation Table
The following table summarizes all compensation paid for fiscal 2000,
1999, and 1998, 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 2000.
<TABLE>
<CAPTION>
Long-Term Compensation
Annual Compensation ---------------------- All
------------------- Securities Underlying Options Other
Name and Principal Position Year Salary($)2 Bonus($) Options Granted3 Compensation($)4
--------------------------- ---- ---------- -------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
Charles N. Mathewson 1 2000 1 1,300,000 --- 92,676 5
Chairman of the Board of 1999 1 --- --- 117,507
Directors and Chief Executive 1998 1 --- --- 3,076
Officer
G. Thomas Baker 6 2000 499,231 1,300,000 --- 80,983
President and Chief Operating 1999 450,000 350,000 --- 69,257
Officer 1998 450,000 640,877 10,017 65,566
Robert A. Bittman 2000 300,000 300,000 --- 56,182
Executive Vice President, 1999 300,000 200,000 --- 51,584
Product Development 1998 286,539 350,000 5,970 46,476
Robert M. McMonigle 2000 237,001 220,000 --- 49,229
Executive Vice President, 1999 225,000 175,000 --- 43,258
Corporate Relations 1998 214,114 200,000 4,162 39,541
North American Sales
Raymond D. Pike 7 2000 216,846 215,000 --- 46,339
Executive Vice President, 1999 206,000 160,000 --- 41,242
Corporate Development 1998 195,396 225,000 3,353 37,527
<FN>
------------
1 Mr. Mathewson was Chief Executive Officer until December 2000.
2 Amounts shown includes base compensation earned and received by executive
officers. No non-cash compensation was paid as salary or as a bonus during
fiscal 2000.
3 Amounts represent options to purchase the number of shares of Common Stock
shown.
4 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.
5 Amount shown also includes estate planning, and health and life insurance
premiums.
6 Mr. Baker was appointed Chief Executive Officer in December 2000.
7 Mr.Pike resigned as an executive officer of the Company effective December 31,
2000.
</FN>
</TABLE>
<PAGE>
Options
No options were granted to any Named Officer during fiscal 2000.
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 9/30/2000 at 9/30/20001
Name Acquired Realized Exercisable Unexercisable Exercisable Unexercisable
---- -------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Charles N. Mathewson --- --- 1,013,541 582 $20,431,584 $ 13,313
G. Thomas Baker --- --- 427,121 108,905 $ 8,663,052 $2,152,625
Robert A. Bittman --- --- 5,091 5,385 $ 69,618 $ 69,810
Robert M. McMonigle --- --- 42,380 4,732 $ 959,104 $ 68,559
Raymond D. Pike --- --- 17,190 4,089 $ 341,086 $ 60,221
<FN>
------------
1 Market value of the underlying securities at year-end, less the exercise price
of "in-the-money" options.
</FN>
</TABLE>
Employee Incentive Plans
The Company provides the following employee incentive plans: profit
sharing and 401(k) plan, cash sharing, management bonus, and non-qualified
deferred compensation. Total annual contributions from operating profits for all
plans were $38.6 million in fiscal 2000, $27.1 million in fiscal 1999 and $26.5
million in fiscal 1998.
The profit sharing and 401(k) plan was adopted for the Company's
employees working in the US. IGT matches 75% of an employee's contributions up
to $1,000. This allows for maximum annual company matching contributions of $750
to each employee's account. Participants are 100% vested in their contributions
and the Company's matching contributions. Additionally, the Company shares a
portion of its' profits with eligible employees. These profit sharing
contributions vest over a seven year period of employment.
The cash sharing plan is distributed semi-annually in May and November
to all U.S employees. The Company's foreign subsidiaries have similar programs.
The management bonuses are paid out annually to key employees throughout the
Company.
The Company implemented a non-qualified deferred compensation plan in
September 1999 to provide an unfunded incentive compensation arrangement for
eligible management and highly compensated employees. Participants may elect to
defer up to 50% of their annual base salary, 50% of cash sharing, 50% of
discretionary management bonus and 50% of commissions with a minimum deferral of
$2,000. Distributions can be paid out as short-term payments or at retirement.
Retirement benefits can be paid out as a lump sum or in annual installments over
a term of up to 15 years.
Employment Contracts
G. Thomas Baker was appointed Chief Executive Officer and President of
the Company effective December 6, 2000. The Company entered into a three-year
employment agreement with Mr. Baker in December 2000 providing for an annual
base salary of $650,000 for year one, $700,000 during year two and $750,000
during year three. In addition, for each one percent increase in operating
<PAGE>
profits before incentives over the previous fiscal year, Mr. Baker will receive
a management bonus equal to 10 percent of his base salary, and he will receive
20 percent of his base salary for any increase over prior year in excess of 10
percent. The bonus calculation shall not exceed 300 percent of the base
salary. In year one, the bonus shall be paid based on the full 2000-2001 fiscal
year without proration. The bonus will also be payable based upon various
management objectives set by the Board of Directors in consultation with Mr.
Baker. Mr. Baker is also eligible to participate in the Company's profit sharing
and cash sharing programs (see "Employee Incentive Plans"). Additionally, Mr.
Baker was granted an option to purchase 500,000 shares of common stock of the
Company at a price of $45.00 per share. The stock option vests in three equal
installments upon the first, second and third anniversaries of the award.
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. At the end of the five year term,
employment shall continue at will. Mr. Bittman is also eligible to receive
annual salary increases and is 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. 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, 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 2000, all filing
requirements applicable to executive officers and directors were complied with.
Relationship with Independent Public Accountants
The Company has selected Deloitte & Touche LLP as its independent
accountants for the year ending September 30, 2001. A representative of Deloitte
& Touche LLP will be present at the Annual Meeting of Stockholders and will have
an opportunity to make a statement as well as respond to appropriate questions.
THE FOLLOWING REPORT OF THE COMPENSATION COMMITTEE AND THE PERFORMANCE GRAPH
THAT APPEARS AFTER SUCH REPORT SHALL NOT BE DEEMED TO BE SOLICITING MATERIAL OR
TO BE FILED WITH THE SECURITIES AND EXCHANGE COMMISSION UNDER THE SECURITIES ACT
OF 1933 OR THE SECURITIES EXCHANGE ACT OF 1934 OR INCORPORATED BY REFERENCE IN
ANY DOCUMENT SO FILED.
<PAGE>
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 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.
Executive Compensation
The Company's management bonus plan is a cash-based incentive program,
and for fiscal 2000, 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 2000, jointly by the Company's then Chief Executive Officer, Mr.
Mathewson, and the Company's then 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 (the 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.
Sara Beth Brown received a stock option award in fiscal 2000. 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 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.
<PAGE>
Chief Executive Compensation
Mr. Mathewson became Chief Executive Officer of the Company on February
12, 1996. 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 1998, 1999 or 2000. On December 8, 1998, the Compensation Committee and
Board of Directors approved the purchase of a $10 million split dollar life
insurance benefit plan. Mr. Mathewson received nominal compensation of $1.00 for
salary in fiscal 2000 and a management bonus in the amount of $1.3 million. The
Compensation Committee determined the amount of the management bonus for Mr.
Mathewson based on its subjective views of his contribution to the favorable
performance of the Company in 2000 and, without an independent verification, its
view about the appropriate level of compensation to him for such contributions.
COMPENSATION COMMITTEE
Frederick B. Rentschler, Chairman
Wilbur K. Keating
Robert Miller
AUDIT COMMITTEE REPORT
THE FOLLOWING REPORT OF THE AUDIT COMMITTEE SHALL NOT BE DEEMED TO BE SOLICITING
MATERIAL OR TO BE FILED WITH THE SECURITIES AND EXCHANGE COMMISSION UNDER THE
SECURITIES ACT OF 1933 OR THE SECURITIES EXCHANGE ACT OF 1934 OR INCORPORATED BY
REFERENCE IN ANY DOCUMENT SO FILED.
The Audit Committee has reviewed and discussed the Company's audited
financial statements with Company management and has discussed certain required
matters with the Company's independent auditors, in accordance with Statement of
Auditing Standards No. 61.
The Company's independent auditors also provided written documentation
to the Audit Committee, describing all relationships between the auditors and
the Company that might bear on the auditors' independence consistent with
Independence Standards Board Standard No. 1, discussed with the auditors any
relationships that may impact their objectivity and independence and satisfied
itself as to the auditors' independence.
Based on the above-mentioned review and discussions with management and
the independent auditors, the Committee recommended to the Board that the
Company's audited financial statements be included in its Annual Report on Form
10-K for the fiscal year ended September 30, 2000. The Committee also
recommended the re-appointment of the independent auditors and the Board
concurred in such recommendation.
AUDIT COMMITTEE
Rockwell A. Schnabel, Chairman
Wilbur K. Keating
Frederick B. Rentschler
<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, 1995 through September 30,
2000 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>
1995 1996 1997 1998 1999 2000
<S> <C> <C> <C> <C> <C> <C>
International Game Technology 100 153 175 140 136 255
S & P 500 100 120 169 184 236 267
Peer Group 100 132 148 97 88 91
</TABLE>
The peer group includes Alliance Gaming Corp., Anchor Gaming, Casino
Data Systems, GTECH Holdings Corp., Silicon Gaming, Inc. and WMS Industries,
Inc.
<PAGE>
GENERAL
The Company's Annual Report to Stockholders, containing audited
financial statements, accompanies this Proxy Statement. A copy of the Company's
most recent annual report on Form 10-K as filed with the Securities and Exchange
Commission is available to shareholders upon written request, without charge.
All requests should be directed to International Game Technology, Attn: Investor
Relations, 9295 Prototype Drive, P.O. Box 10580, Reno, Nevada 89510-0580,
telephone (775) 448-0880, fax (775) 448-1137.
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
/S/ Sara Beth Brown
Sara Beth Brown
Secretary
Reno, Nevada
January 12, 2001
<PAGE>
EXHIBIT A
INTERNATIONAL GAME TECHNOLOGY
AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
FIRST RESTATED CHARTER
The following will serve as a restatement of the Charter for Audit
Committee of the Board of Directors of International Game Technology ("IGT").
The Audit Committee assists the Board of Directors in fulfilling its
responsibility for oversight of the quality and integrity of the accounting,
auditing and reporting practices of IGT and such other duties as directed by the
Board. The evaluation of the findings of the independent auditors for IGT and
the review of financial statements by the Audit Committee which fall within the
scope of the Audit Committee's responsibility under the terms of this Charter is
not to be construed as a comprehensive review of the same quality as is
performed by IGT's independent auditors ("Independent Auditors"). Additionally,
the review and evaluation of said financial statements by the Audit Committee
will in no way substitute for the responsibilities of IGT's management for
preparing, or of the Independent Auditors for auditing the company's financial
statements.
I. Membership of the Audit Committee. The membership of the Audit
Committee shall be selected in accordance with the following criteria:
1. The Audit Committee shall consist of a minimum of three (3)
members of the Board of Directors of International Game
Technology. Each member shall be free of any relationship
that, in the opinion of the Board would interfere with his or
her individual exercise of independent judgment, and shall
meet the director independence requirements for serving on
audit committees as set forth in the corporate governance
standards of the New York Stock Exchange;
2. The members of the Audit Committee must be financially
literate, as determined by the Board of Directors, or become
financially literate within a reasonable time of assuming a
position on the Audit Committee; and
3. A minimum of one (1) member of the Audit Committee must have
accounting or financial management experience, as determined
by the Board of Directors.
II. Scope of Responsibilities. The Audit Committee will be charged with the
following responsibilities:
1. Select, employ the services of, evaluate and if necessary
terminate the services of the Independent Auditors. The
Independent Auditors will be accountable to the Audit
Committee and the Board of Directors of IGT;
<PAGE>
2. Establish and monitor procedures to ensure the ongoing
independence and integrity of the Independent Auditors, and
take appropriate action to ensure such independence;
3. Review the findings of the Independent Auditors to assure
clarity, accuracy and completeness, and to assure that the
financial statements are suitable for inclusion in the
company's SEC Forms 10-Q quarterly filings and SEC Forms 10-K
annual filings;
4. Prepare an annual report to the Board of Directors of IGT to
be included in IGT's annual proxy statement stating that
the Audit Committee: (i) has reviewed and discussed the
audited financial statements with management; (ii) has
discussed with the Independent Auditors the matters
required to be discussed in accordance with Statement on
Auditing Standards No. 61 (relating to the conduct of the
audit); (iii) has received disclosures from the Independent
Auditors regarding the auditors' independence as required by
Independent Standards Board Standard No.1; and (iv) recommends
that the annual financial statements as audited by the
Independent Auditors be included in the company's SEC Form
10-K. The annual Audit Committee report described herein
shall also state whether anything has come to the attention of
the Audit Committee which would lead its members to believe
that any information provided in the audited financial
statements contains false or misleading statements, or if the
omission of a material fact in the financial statements caused
them to be erroneous and/or misleading.
The Audit Committee shall review this Charter annually to determine
whether modifications are required to assure its adequacy and comprehensiveness,
and report all of its findings to the Board of Directors.
<PAGE>
Map to IGT
[GRAPHIC OMITTED] [GRAPHIC OMITTED]
<PAGE>
EXHIBIT B
INTERNATIONAL GAME TECHNOLOGY
1993 STOCK OPTION PLAN
(Amended and Restated Effective as of August 27, 1996)
(Composite Plan Document Incorporating Amendments 1998-I and 1998-II)
I. THE PLAN
1.1 Purpose
The purpose of this Plan is to promote the success of the Company by
providing an additional means through the grant of Awards to attract, motivate,
retain and reward key employees, including officers, whether or not directors,
of the Company with Awards and incentives for high levels of individual
performance and improved financial performance of the Company and to attract,
motivate and retain experienced and knowledgeable independent directors through
the benefits provided under Article VII. "Corporation" means International Game
Technology, a Nevada corporation, and "Company" means the Corporation and its
Subsidiaries, collectively. These terms and other capitalized terms are defined
in Article VIII.
1.2 Administration and Authorization; Power and Procedure
(a) Committee. This Plan shall be administered by and all Awards to Eligible
Employees shall be authorized by the Committee. Action of the Committee with
respect to the administration of this Plan shall be taken pursuant to a majority
vote or by written consent of its members.
(b) Plan Awards; Interpretation; Powers of Committee. Subject to the express
provisions of this Plan, the Committee shall have the authority:
(i) to determine from among those persons eligible the particular Eligible
Employees who will receive any Awards;
(ii) to grant Awards to Eligible Employees, determine the price at which
securities will be offered or awarded and the amount of securities to
be offered or awarded to any of such individuals, and determine the
other specific terms and conditions of such Awards consistent with the
express limits of this Plan, and establish the installments (if any) in
which such Awards shall become exercisable or shall vest, or determine
that no delayed exercisability or vesting is required, and establish
the events of termination or reversion of such Awards;
(iii) to approve the forms of Award Agreements (which need not be identical
either as to type of Award or as among Participants);
(iv) to construe and interpret this Plan and any agreements defining the
rights and obligations of the Company and Participants under this Plan,
further define the terms used in this Plan, and prescribe, amend and
rescind rules and regulations relating to the administration of this
Plan;
<PAGE>
(v) to cancel, modify, or waive the Corporation's rights with respect to,
or modify, discontinue, suspend, or terminate any or all outstanding
Awards held by Eligible Employees, subject to any required consent
under Section 6.6;
(vi) to accelerate or extend the exercisability or extend the term of any or
all such outstanding Awards within the maximum ten-year term of Awards
under Section 1.6; and
(vii) to make all other determinations and take such other action as
contemplated by this Plan or as may be necessary or advisable for the
administration of this Plan and the effectuation of its purposes.
Notwithstanding the foregoing, the provisions of Article VII relating to
Non-Employee Director Options shall be automatic and, to the maximum extent
possible, self-effectuating.
(c) Binding Determinations. Any action taken by, or inaction of, the
Corporation, any Subsidiary, the Board or the Committee relating or pursuant to
this Plan shall be within the absolute discretion of that entity or body and
shall be conclusive and binding upon all persons. No member of the Board or
Committee, or officer of the Corporation or any Subsidiary, shall be liable for
any such action or inaction of the entity or body, of another person or, except
in circumstances involving bad faith of himself or herself. Subject only to
compliance with the express provisions hereof, the Board and Committee may act
in their absolute discretion in matters within their authority related to this
Plan.
(d) Reliance on Experts. In making any determination or in taking or not taking
any action under this Plan, the Committee or the Board, as the case may be, may
obtain and may rely upon the advice of experts, including professional advisors
to the Corporation. No director, officer or agent of the Company shall be liable
for any such action or determination taken or made or omitted in good faith.
(e) Delegation. The Committee may delegate ministerial, non-discretionary
functions to a third-party administrator or to individuals who are officers or
employees of the Company.
1.3 Participation
Awards may be granted by the Committee only to those persons that the
Committee determines to be Eligible Employees. An Eligible Employee who has been
granted an Award may, if otherwise eligible, be granted additional Awards if the
Committee shall so determine. Non-Employee Directors shall not be eligible to
receive any Options except for Nonqualified Stock Options granted automatically
without action of the Committee under the provisions of Article VII.
<PAGE>
1.4 Shares Available for Awards; Share Limits
Subject to the provisions of Section 6.2, the capital stock that may be
delivered under this Plan shall be shares of the Corporation's authorized but
unissued Common Stock and any shares of its Common Stock held as treasury
shares. The shares may be delivered for any lawful consideration.
(a) Share Limits. The maximum number of shares of Common Stock that may be
delivered pursuant to all Awards, including Incentive Stock Options, granted to
Eligible Employees under this Plan shall not exceed 8,000,000 shares. The
maximum number of shares of Common Stock that may be delivered to Non-Employee
Directors in respect of Options granted under the provisions of Article VII
shall not exceed 500,000 shares. The maximum number of shares of Common Stock
subject to Options and Stock Appreciation Rights that are granted during any
calendar year to any individual shall not exceed 1,000,000 shares. The maximum
number of shares of Common Stock that may be delivered to Participants in
respect of time-based Restricted Stock Awards and Stock Bonuses granted, for
nominal or no consideration other than the amount of the par value thereof,
under the provisions of Article IV and Section 5.3, respectively, shall not
exceed 500,000 shares in the aggregate. The limit in the foregoing sentence
shall not apply to shares delivered in respect of compensation earned but
deferred. Each of the foregoing numerical limits shall be subject to adjustment
as contemplated by Section 6.2.
(b) Share Reservation; Replenishment and Reissue of Unvested Awards. No Award
may be granted under this Plan unless, on the date of grant, the sum of (i) the
maximum number of shares issuable at any time pursuant to such Award, plus (ii)
the number of shares that have previously been issued pursuant to Awards granted
under this Plan, other than reacquired shares available for reissue consistent
with any applicable legal limitations, plus (iii) the maximum number of shares
that may be issued at any time after such date of grant pursuant to Awards that
are outstanding on such date, does not exceed the applicable share limit(s)
under Section 1.4(a). Shares that are subject to or underlie Awards which expire
or for any reason are cancelled or terminated, are forfeited, fail to vest, or
for any other reason are not paid or delivered under this Plan, as well as
reacquired shares, shall again, except to the extent prohibited by law, be
available for subsequent Awards under the Plan. Except as limited by law, if an
Award is or may be settled only in cash, such Award need not be counted against
any of the limits under this Section 1.4.
1.5 Grant of Awards
Subject to the express provisions of this Plan, the Committee shall
determine the number of shares of Common Stock subject to each Award, the price
(if any) to be paid for the shares or the Award and, in the case of Performance
Share Awards, in addition to matters addressed in Section 1.2(b), the specific
objectives, goals and performance criteria (such as an increase in sales, market
value, earnings or book value over a base period, the years of service before
vesting, the relevant job classification or level of responsibility or other
factors) that further define the terms of the Performance Share Award. Each
Award shall be evidenced by an Award Agreement signed by the Corporation and, if
required by the Committee, by the Participant. The Award Agreement shall set
forth the material terms and conditions of the Award established by the
Committee consistent with the specific provisions of this Plan.
<PAGE>
1.6 Award Period
Each Award and all executory rights or obligations under the related
Award Agreement shall expire on such date (if any) as shall be determined by the
Committee, but in the case of Options or other rights to acquire Common Stock
not later than ten (10) years after the Award Date.
1.7 Limitations on Exercise and Vesting of Awards
(a) Exercise. Unless the Committee expressly provides otherwise, no Award shall
be exercisable or shall vest until at least six months after the initial Award
Date, and once exercisable an Award shall remain exercisable until the
expiration or earlier termination of the Award.
(b) Procedure. Any exercisable Award shall be deemed to be exercised when the
Secretary of the Corporation receives written notice of such exercise from the
Participant, together with the required any payment made in accordance with
Section 2.2(b) or 7.3, as the case may be.
(c) Fractional Shares/Minimum Issue. Fractional share interests shall be
disregarded, but may be accumulated. The Committee, however, may determine in
the case of Eligible Employees that cash, other securities or other property
will be paid or transferred in lieu of any fractional share interests. No fewer
than 100 shares may be purchased on exercise of any Award at one time unless the
number purchased is the total number at the time available for purchase under
the Award.
1.8 Acceptance of Notes to Finance Exercise
The Corporation may, with the Committee's approval, accept one or more
notes from any Eligible Employee in connection with the exercise or receipt of
any outstanding Award; provided that any such note shall be subject to the
following terms and conditions:
(a) The principal of the note shall not exceed the amount required to be paid to
the Corporation upon the exercise or receipt of one or more Awards under the
Plan and the note shall be delivered directly to the Corporation in
consideration of such exercise or receipt.
(b) The initial term of the note shall be determined by the Committee; provided
that the term of the note, including extensions, shall not exceed a period of 10
years.
(c) The note shall provide for full recourse to the Participant and shall bear
interest at a rate determined by the Committee but not less than the applicable
imputed interest rate specified by the Code.
<PAGE>
(d) If the employment of the Participant terminates, the unpaid principal
balance of the note shall become due and payable on the 10th business day after
such termination; provided, however, that if a sale of such shares would cause
such Employee Participant to incur liability under Section 16(b) of the Exchange
Act, the unpaid balance shall become due and payable on the 10th business day
after the first day on which a sale of such shares could have been made without
incurring such liability assuming for these purposes that there are no other
transactions by the Employee Participant subsequent to such termination.
(e) If required by the Committee or by applicable law, the note shall be secured
by a pledge of any shares or rights financed thereby in compliance with
applicable law.
(f) The terms, repayment provisions, and collateral release provisions of the
note and the pledge securing the note shall conform with applicable rules and
regulations of the Federal Reserve Board as then in effect.
1.9 No Transferability
(a) Limit On Exercise and Transfer. Unless otherwise expressly provided in (or
pursuant to) this Section 1.9, by applicable law and by the Award Agreement, as
the same may be amended, (i) all Awards are non-transferable and shall not be
subject in any manner to sale, transfer, anticipation, alienation, assignment,
pledge, encumbrance or charge; Awards shall be exercised only by the
Participant; and (ii) shares issuable pursuant to an Award shall be delivered
only to (or for the account of) the Participant.
(b) Exceptions. The Committee may permit Awards to be exercised by certain
persons or entities related to the Participant, including but not limited to
members of the Participant's family, charitable institutions, or trusts or other
entities whose beneficiaries or beneficial owners are members of the
Participant's family and/or charitable institutions, or to such other persons or
entities as may be approved by the Committee, pursuant to such conditions and
procedures as the Committee may establish. Any permitted transfer shall be
subject to the condition that the Committee receive evidence satisfactory to it
that the transfer is being made for estate and/or tax planning purposes on a
gratuitous or donative basis and without consideration (other than nominal
consideration).
(c) Further Exceptions to Limits On Transfer. The exercise and transfer
restrictions in Section 1.9(a) shall not apply to:
(i) transfers to the Corporation,
(ii) the designation of a beneficiary to receive benefits in the event of
the Participant's death or, if the Participant has died, transfers to
or exercise by the Participant's beneficiary, or, in the absence of a
validly designated beneficiary, transfers by will or the laws of
descent and distribution,
(iii) transfers pursuant to a QDRO if approved or ratified by the Committee,
<PAGE>
(iv) if the Participant has suffered a Total Disability, permitted transfers
or exercises on behalf of the Participant by his or her legal
representative, or
(v) the authorization by the Committee of "cashless exercise" procedures
with third parties who provide financing for the purpose of (or who
otherwise facilitate) the exercise of Awards consistent with applicable
laws and the express authorization of the Committee.
(d) Limitations on Incentive Stock Options and Restricted Stock Awards.
Notwithstanding the foregoing, Incentive Stock Options and Restricted Stock
Awards shall be subject to any and all applicable transfer restrictions under
the Code.
II. EMPLOYEE OPTIONS
2.1 Grants
One or more Options may be granted under this Article to any Eligible
Employee. Each Option granted may be either an Option intended to be an
Incentive Stock Option, or an Option not so intended, and such intent shall be
indicated in the applicable Option Agreement.
2.2 Option Price
(a) Pricing Limits. The purchase price per share of the Common Stock covered by
each Option shall be determined by the Committee at the time of the Option is
granted, but in the case of Incentive Stock Options shall not be less than 100%
(110% in the case of a Participant who owns or is deemed to own under Section
424(d) of the Code more than 10% of the total combined voting power of all
classes of stock of the Corporation) of the Fair Market Value of the Common
Stock on the Award Date.
(b) Payment Provisions. The purchase price of any shares purchased on exercise
of an Option granted under this Article shall be paid in full at the time of
each purchase in one or a combination of the following methods: (i) in cash or
by electronic funds transfer; (ii) by check payable to the order of the
Corporation; (iii) if authorized by the Committee or specified in the applicable
Option Agreement, by a promissory note of the Participant consistent with the
requirements of Section 1.8; (iv) by notice and third party payment in such
manner as may be authorized by the Committee; or (v) by the delivery of shares
of Common Stock of the Corporation already owned by the Participant, provided,
however, that the Committee may in its absolute discretion limit the
Participant's ability to exercise an Option by delivering such shares. Shares of
Common Stock used to satisfy the exercise price of an Option shall be valued at
their Fair Market Value on the date of exercise.
<PAGE>
2.3 Limitations on Grant and Terms of Incentive Stock Options
(a) $100,000 Limit. To the extent that the aggregate "Fair Market Value" of
stock with respect to which Incentive Stock Options first become exercisable by
a Participant in any calendar year exceeds $100,000, taking into account both
Common Stock subject to Incentive Stock Options under this Plan and stock
subject to Incentive Stock Options under all other plans of the Company or any
parent corporation, such options shall be treated as nonqualified stock options.
For this purpose, the "Fair Market Value" of the stock subject to options shall
be determined as of the date the options were optioned. In reducing the number
of options treated as Incentive Stock Options to meet the $100,000 limit, the
most recently granted options shall be reduced first. To the extent a reduction
of simultaneously granted options is necessary to meet the $100,000 limit, the
Committee may, in the manner and to the extent permitted by law, designate which
shares of Common Stock are to be treated as shares acquired pursuant to the
exercise of an Incentive Stock Option.
(b) Option Period. Each Incentive Stock Option and all rights thereunder shall
expire no later than ten years after the Award Date.
(c) Other Code Limits. There shall be imposed in any Award Agreement relating to
Incentive Stock Options such terms and conditions as from time to time are
required in order that the Option be an "incentive stock option" as that term is
defined in Section 422 of the Code.
2.4 Limits on 10% Holders
No Incentive Stock Option may be granted to any person who, at the time
the Option is granted, owns (or is deemed to own under Section 424(d) of the
Code) shares of outstanding Common Stock possessing more than 10% of the total
combined voting power of all classes of stock of the Corporation, unless the
exercise price of such Option is at least 110% of the Fair Market Value of the
stock subject to the Option and such Option by its terms is not exercisable
after the expiration of five years from the date such Option is granted.
2.5 Cancellation and Regrant/Waiver of Restrictions
Subject to Section 1.4 and Section 6.6 and the specific limitations on
Options contained in this Plan, the Committee from time to time may authorize,
generally or in specific cases only, for the benefit of any Eligible Employee,
any adjustment in the exercise price, the number of shares subject to or the
term of, an Option granted under this Article by cancellation of an outstanding
Option and a subsequent regranting of an Option, by amendment, by substitution
of an outstanding Option, by waiver or by other legally valid means. Such
amendment or other action may result among other changes in an exercise price
which is higher or lower than the exercise or purchase price of the original or
prior Option, provide for a greater or lesser number of shares subject to the
Option, or provide for a longer or shorter vesting or exercise period.
III. STOCK APPRECIATION RIGHTS
3.1 Grants
In its discretion, the Committee may grant a Stock Appreciation Right
to any Eligible Employee either concurrently with the grant of another Award or
in respect of an outstanding Award, in whole or in part, or independently of any
other Award. Any Stock Appreciation Right granted in connection with an
Incentive Stock Option shall contain such terms as may be required to comply
with the provisions of Section 422 of the Code and the regulations promulgated
thereunder, unless the holder otherwise agrees.
<PAGE>
3.2 Exercise of Stock Appreciation Rights
(a) Exercisability. Unless the Award Agreement or the Committee otherwise
provides, a Stock Appreciation Right related to another Award shall be
exercisable at such time or times, and to the extent, that the related Award
shall be exercisable.
(b) Effect on Available Shares. To the extent that a Stock Appreciation Right is
exercised, the number of underlying shares of Common Stock therefore subject to
a related Award shall be charged against the maximum amount of Common Stock that
may be delivered pursuant to Awards under this Plan. The number of shares
subject to the Stock Appreciation Right and the related Option of the
Participant shall be reduced by the number of underlying shares as to which the
exercise related, unless the Award Agreement otherwise provides.
(c) Stand-Alone SARs. A Stock Appreciation Right granted independently of any
other Award shall be exercisable pursuant to the terms of the Award Agreement
but in no event earlier than six months after the Award Date, except in the case
of death or Total Disability.
3.3 Payment
(a) Amount. Unless the Committee otherwise provides, upon exercise of a Stock
Appreciation Right and the attendant surrender of an exercisable portion of any
related Award, the Participant shall be entitled to receive payment of an amount
determined by multiplying
(i) the difference obtained by subtracting the exercise price per share of
Common Stock under the related Award (if applicable) or the initial
share value specified in the Award from the Fair Market Value of a
share of Common Stock on the date of exercise of the Stock Appreciation
Right, by
(ii) the number of shares with respect to which the Stock Appreciation Right
shall have been exercised.
(b) Form of Payment. The Committee, in its sole discretion, shall determine the
form in which payment shall be made of the amount determined under paragraph (a)
above, either solely in cash, solely in shares of Common Stock (valued at Fair
Market Value on the date of exercise of the Stock Appreciation Right), or partly
in such shares and partly in cash, provided that the Committee shall have
determined that such exercise and payment are consistent with applicable law. If
the Committee permits the Participant to elect to receive cash or shares (or a
combination thereof) on such exercise, any such election shall be subject to
such conditions as the Committee may impose.
<PAGE>
IV. RESTRICTED STOCK AWARDS
4.1 Grants
The Committee may, in its discretion, grant one or more Restricted
Stock Awards to any Eligible Employee. Each Restricted Stock Award Agreement
shall specify the number of shares of Common Stock to be issued to the
Participant, the date of such issuance, the consideration for such shares (but
not less than the minimum lawful consideration under applicable state law) by
the Participant, the extent to which the Participant shall be entitled to
dividends, voting and other rights in respect of the shares prior to vesting and
the restrictions imposed on such shares and the conditions of release or lapse
of such restrictions. Such restrictions shall not lapse earlier than 12 months
after the Award Date, except to the extent the Committee may otherwise provide.
Stock certificates evidencing shares of Restricted Stock pending the lapse of
the restrictions ("restricted shares") shall bear a legend making appropriate
reference to the restrictions imposed hereunder and shall be held by the
Corporation or by a third party designated by the Committee until the
restrictions on such shares shall have lapsed and the shares shall have vested
in accordance with the provisions of the Award and Section 1.7. Upon issuance of
the Restricted Stock Award, the Participant may be required to provide such
further assurance and documents as the Committee may require to enforce the
restrictions.
4.2 Restrictions
(a) Pre-Vesting Restraints. Except as provided in Section 4.1 and 1.9,
restricted shares comprising any Restricted Stock Award may not be sold,
assigned, transferred, pledged or otherwise disposed of or encumbered, either
voluntarily or involuntarily, until the restrictions on such shares have lapsed
and the shares have become vested.
(b) Dividend and Voting Rights. Unless otherwise provided in the applicable
Award Agreement, a Participant receiving a Restricted Stock Award shall be
entitled to cash dividend and voting rights for all shares issued even though
they are not vested, provided that such rights shall terminate immediately as to
any restricted shares which cease to be eligible for vesting.
(c) Cash Payments. If the Participant shall have paid or received cash
(including any dividends) in connection with the Restricted Stock Award, the
Award Agreement shall specify whether and to what extent such cash shall be
returned (with or without an earnings factor) as to any restricted shares which
cease to be eligible for vesting.
4.3 Return to the Corporation
Unless the Committee otherwise expressly provides, restricted shares
that remain subject to restrictions at the time of termination of employment or
are subject to other conditions to vesting that have not been satisfied by the
time specified in the applicable Award Agreement shall not vest and shall be
returned to the Corporation in such manner and on such terms as the Committee
shall therein provide.
<PAGE>
V. PERFORMANCE SHARE AWARDS AND STOCK BONUSES
5.1 Grants of Performance Share Awards.
The Committee may, in its discretion, grant Performance Share Awards to
Eligible Employees based upon such factors as the Committee shall deem relevant
in light of the specific type and terms of the award. An Award Agreement shall
specify the maximum number of shares of Common Stock (if any) subject to the
Performance Share Award, the consideration (but not less than the minimum lawful
consideration) to be paid for any such shares as may be issuable to the
Participant, the duration of the Award and the conditions upon which delivery of
any shares or cash to the Participant shall be based. The amount of cash or
shares or other property that may be deliverable pursuant to such Award shall be
based upon the degree of attainment over a specified period (a "performance
cycle") as may be established by the Committee of such measure(s) of the
performance of the Company (or any part thereof) or the Participant as may be
established by the Committee. The Committee may provide for full or partial
credit, prior to completion of such performance cycle or the attainment of the
performance achievement specified in the Award, in the event of the
Participant's death, or Total Disability, a Change in Control Event or in such
other circumstances as the Committee consistent with Section 6.10(c)(2), if
applicable, may determine.
5.2 Special Performance-Based Share Awards.
Without limiting the generality of the foregoing, and in addition to
Options and Stock Appreciation Rights granted under other provisions of this
Plan which are intended to satisfy the exception for "performance-based
compensation" under Section 162(m) of the Code (with such Awards hereinafter
referred to as a "Qualifying Option" or a "Qualifying Stock Appreciation Right,"
respectively), other performance-based awards within the meaning of Section
162(m) of the Code ("Performance-Based Awards"), whether in the form of
restricted stock, performance stock, phantom stock, Cash-Based Awards, or other
rights, the grant, vesting, exercisability or payment of which depends on the
degree of achievement of the Performance Goals relative to preestablished
targeted levels for the Corporation or the Corporation and one or more of its
Subsidiaries, may be granted under this Plan. Any Qualifying Option or
Qualifying Stock Appreciation Right shall be subject only to the requirements of
subsections (a) and (c) below in order for such Awards to satisfy the
requirements for Performance-Based Awards under this Section 5.2. With the
exception of any Qualifying Option or Qualifying Stock Appreciation Right, an
Award that is intended to satisfy the requirements of this Section 5.2 shall be
designated as a Performance-Based Award at the time of grant.
(a) Eligible Class. The eligible class of persons for Performance-Based Awards
under this Section shall be the executive officers of the Corporation.
(b) Performance Goal Alternatives. The specific performance goals for
Performance-Based Awards granted under this Section (other than Qualifying
Options and Qualifying Stock Appreciation Rights) shall be, on an absolute or
relative basis, one or more of the Performance Goals, as selected by the
Committee in its sole discretion. The Committee shall establish in the
applicable Award Agreement the specific performance target(s) relative to the
<PAGE>
Performance Goal(s) which must be attained before the compensation under the
Performance-Based Award becomes payable. The specific targets shall be
determined within the time period permitted under Section 162(m) of the Code
(and any regulations issued thereunder) so that such targets are considered to
be preestablished and so that the attainment of such targets is substantially
uncertain at the time of their establishment. The applicable performance
measurement period may not be less than one nor more than 10 years.
(c) Maximum Performance-Based Award. Notwithstanding any other provision of the
Plan to the contrary, the maximum number of shares of Common Stock which may be
delivered pursuant to options, stock appreciation rights, restricted stock or
other share-based awards that are granted as Performance-Based Awards to any
Participant in any calendar year shall not exceed 1,000,000 shares, either
individually or in the aggregate, subject to adjustment as provided in Section
6.2. Awards that are cancelled during the year shall be counted against this
limit to the extent required by Section 162(m) of the Code. In addition, the
aggregate amount of compensation to be paid to any Participant in respect of any
Cash-Based Awards that are granted during any calendar year as Performance-Based
Awards shall not exceed $1,000,000.
(d) Committee Certification. Before any Performance-Based Award under this
Section 5.2 (other than Qualifying Options or Qualifying Stock Appreciation
Rights) is paid, the Committee must certify in writing that the Performance
Goal(s) and any other material terms of the Performance-Based Award were
satisfied; provided, however, that a Performance-Based Award may be paid without
regard to the satisfaction of the applicable Performance Goal in the event of a
Change in Control Event in accordance with Section 6.2(d).
(e) Terms and Conditions of Awards. The Committee will have the discretion to
determine the restrictions or other limitations of the individual Awards granted
under this Section 5.2 including the authority to reduce Awards, payouts or
vesting or to pay no Awards, in its sole discretion, if the Committee preserves
such authority at the time of grant by language to this effect in its
authorizing resolutions or otherwise.
(f) Adjustments for Changes in Capitalization and other Material Changes. In the
event of a change in corporate capitalization, such as a stock split or stock
dividend, or a corporate transaction, such as a merger, consolidation, spinoff,
reorganization or similar event, or any partial or complete liquidation of the
Corporation, or any similar event consistent with regulations issued under
Section 162(m) of the Code including, without limitation, any material change in
accounting policies or practices affecting the Corporation and/or the
Performance Goals or targets, then the Committee may make adjustments to the
Performance Goals and targets relating to outstanding Performance-Based Awards
to the extent such adjustments are made to reflect the occurrence of such an
event; provided, however, that adjustments described in this subsection may be
made only to the extent that the occurrence of an event described herein was
unforeseen at the time the targets for a Performance-Based Award were
established by the Committee.
<PAGE>
5.3 Grants of Stock Bonuses.
The Committee may grant a Stock Bonus to any Eligible Employee to
reward exceptional or special services, contributions or achievements in the
manner and on such terms and conditions (including any restrictions on such
shares) as determined from time to time by the Committee. The number of shares
so awarded shall be determined by the Committee. The Award may be granted
independently or in lieu of a cash bonus.
5.4 Deferred Payments.
The Committee may authorize for the benefit of any Eligible Person the
deferral of any payment of cash or shares that may become due or of cash
otherwise payable under this Plan, and provide for accredited benefits thereon
based upon such deferment, at the election or at the request of such
Participant, subject to the other terms of this Plan. Such deferral shall be
subject to such further conditions, restrictions or requirements as the
Committee may impose, subject to any then vested rights of Participants.
VI. OTHER PROVISIONS
6.1 Rights of Eligible Employees, Participants and Beneficiaries
(a) Employment Status. Status as an Eligible Employee shall not be construed as
a commitment that any Award will be granted under this Plan to an Eligible
Employee or to Eligible Employees generally.
(b) No Employment Contract. Nothing contained in this Plan (or in any other
documents related to this Plan or to any Award) shall confer upon any Eligible
Employee or other Participant any right to continue in the employ or other
service of the Company or constitute any contract or agreement of employment or
other service, nor shall interfere in any way with the right of the Company to
change such person's compensation or other benefits or to terminate the
employment of such person, with or without cause, but nothing contained in this
Plan or any document related hereto shall adversely affect any independent
contractual right of such person without his or her consent thereto.
(c) Plan Not Funded. Awards payable under this Plan shall be payable in shares
or from the general assets of the Corporation, and no special or separate
reserve, fund or deposit shall be made to assure payment of such Awards. No
Participant, Beneficiary or other person shall have any right, title or interest
in any fund or in any specific asset (including shares of Common Stock, except
as expressly otherwise provided) of the Company by reason of any Award
hereunder. Neither the provisions of this Plan (or of any related documents),
nor the creation or adoption of this Plan, nor any action taken pursuant to the
provisions of this Plan shall create, or be construed to create, a trust of any
kind or a fiduciary relationship between the Company and any Participant,
Beneficiary or other person. To the extent that a Participant, Beneficiary or
other person acquires a right to receive payment pursuant to any Award
hereunder, such right shall be no greater than the right of any unsecured
general creditor of the Company.
<PAGE>
6.2 Adjustments; Acceleration
(a) Adjustments. If there shall occur any extraordinary dividend or other
extraordinary distribution in respect of the Common Stock (whether in the form
of cash, Common Stock, other securities, or other property), or any
reclassification, recapitalization, stock split (including a stock split in the
form of a stock dividend), reverse stock split, reorganization, merger,
combination, consolidation, split-up, spin-off, combination, repurchase, or
exchange of Common Stock or other securities of the Corporation, or there shall
occur any other like corporate transaction or event in respect of the Common
Stock on a sale of substantially all the assets of the Corporation as an
entirety, then the Committee shall, in such manner and to such extent (if any)
as it deems appropriate and equitable (1) proportionately adjust any or all of
(i) the number and type of shares of Common Stock (or other securities) which
thereafter may be made the subject of Awards (including the specific maxima and
numbers of shares set forth elsewhere in this Plan), (ii) the number, amount and
type of shares of Common Stock (or other securities or property) subject to any
or all outstanding Awards, (iii) the grant, purchase, or exercise price of any
or all outstanding Awards, (iv) the securities, cash or other property
deliverable upon exercise of any outstanding Awards, or (v) the performance
standards appropriate to any outstanding Awards, or (2) in the case of an
extraordinary dividend or other distribution, recapitalization,
reclassification, merger, reorganization, consolidation, combination, sale of
assets, split up, exchange, or spin off, make provision for a cash payment or
for the substitution or exchange of any or all outstanding Awards or the cash,
securities or property deliverable to the holder of any or all outstanding
Options based upon the distribution or consideration payable to holders of the
Common Stock of the Corporation upon or in respect of such event; provided,
however, in each case, that with respect to Incentive Stock Options, no such
adjustment shall be made which would cause the Plan to violate Section 424(a) of
the Code or any successor provisions thereto.
(b) Acceleration of Awards Upon Change in Control. As to any Eligible Employee
Participant, unless prior to a Change in Control Event the Committee determines
that, upon its occurrence, there shall be no acceleration of benefits under
Awards or determines that only certain or limited benefits under Options shall
be accelerated and the extent to which they shall be accelerated, and/or
establishes a different time in respect of such Change in Control Event for such
acceleration, then upon the occurrence of a Change in Control Event (i) each
Option and Stock Appreciation Right shall become immediately exercisable, (ii)
Restricted Stock shall immediately vest free of restrictions, and (iii) each
Performance Share Award shall become payable to the Participant; provided,
however, that in no event shall any Award be accelerated as to any Section 16
Person to a date less than six months after the Award Date of such Award. The
Committee may override the limitations on acceleration in this Section 3.2(b) by
express provision in the Award Agreement and may accord any Eligible Employee a
right to refuse any acceleration, whether pursuant to the Award Agreement or
otherwise, in such circumstances as the Committee may approve. Any acceleration
of Awards shall comply with applicable regulatory requirements, including,
without limitation, Section 422 of the Code.
<PAGE>
(c) Possible Early Termination of Accelerated Awards. If any Option or other
right to acquire Common Stock under this Plan (other than under Article VII) has
been fully accelerated as permitted by Section 6.2(b) but is not exercised prior
to (i) a dissolution of the Corporation, or (ii) a reorganization event
described in Section 6.2(a) that the Corporation does not survive, or (iii) the
consummation of an event described in Section 6.2(a) that results in a Change in
Control Event approved by the Board, such Option or right shall thereupon
terminate, subject to any provision that has been expressly made by the
Committee for the survival, substitution, exchange or other settlement of such
Option or right.
6.3 Effect of Termination of Employment
The Committee shall establish in respect of each Award granted to an
Eligible Employee the effect of a termination of employment on the rights and
benefits thereunder and in so doing may make distinctions based upon the cause
of termination. In addition, in the event of, or in anticipation of, a
termination of employment with the Company for any reason, other than discharge
for cause, the Committee may, in its discretion, increase the portion of the
Participant's Award available to the Participant, or Participant's Beneficiary
or Personal Representative, as the case may be, or, subject to the provisions of
Section 1.6, extend the exercisability period upon such terms as the Committee
shall determine and expressly set forth in or by amendment to the Award
Agreement.
6.4 Compliance with Laws
This Plan, the granting and vesting of Awards under this Plan and the
offer, issuance and delivery of shares of Common Stock and/or the payment of
money under this Plan or under Awards granted hereunder are subject to
compliance with all applicable federal and state laws, rules and regulations
(including, but not limited to, state and federal securities laws and federal
margin requirements) and to such approvals by any listing, regulatory or
governmental authority as may, in the opinion of counsel for the Corporation, be
necessary or advisable in connection therewith. Any securities delivered under
this Plan shall be subject to such restrictions, and the person acquiring such
securities shall, if requested by the Corporation, provide such assurances and
representations to the Corporation as the Corporation may deem necessary or
desirable to assure compliance with all applicable legal requirements.
6.5 Tax Withholding
(a) Cash or Shares. Upon any exercise, vesting or payment of any Award or upon
the disposition of shares of Common Stock acquired pursuant to the exercise of
an Incentive Stock Option prior to satisfaction of the holding period
requirements of Section 422 of the Code, the Company shall have the right at its
option to (i) require the Participant (or Personal Representative or
Beneficiary, as the case may be) to pay or provide for payment of the amount of
any taxes which the Company may be required to withhold with respect to such
Award event or payment or (ii) deduct from any amount payable in cash the amount
of any taxes which the Company may be required to withhold with respect to such
cash payment. In any case where a tax is required to be withheld in connection
with the delivery of shares of Common Stock under this Plan, the Committee may
in its sole discretion grant (either at the time of the Award is granted or
thereafter) to the Participant the right to elect, pursuant to such rules and
subject to such conditions as the Committee may establish, to have the
Corporation reduce the number of shares to be delivered by (or otherwise
reacquire) the appropriate number of shares valued at their then Fair Market
Value, to satisfy such withholding obligation.
<PAGE>
(b) Tax Loans. The Committee may, in its discretion, authorize a loan to an
Eligible Employee in the amount of any taxes which the Company may be required
to withhold with respect to shares of Common Stock received (or disposed of, as
the case may be) pursuant to a transaction described in subsection (a) above.
Such a loan shall be for a term, at a rate of interest and pursuant to such
other terms and conditions as the Committee, under applicable law, may establish
and such loan need not comply with the provisions of Section 1.8.
6.6 Plan Amendment, Termination and Suspension
(a) Board Authorization. The Board may, at any time, terminate or, from time to
time, amend, modify or suspend this Plan, in whole or in part. No Awards may be
granted during any suspension of this Plan or after termination of this Plan,
but the Committee shall retain jurisdiction as to Awards then outstanding in
accordance with the terms of this Plan.
(b) Stockholder Approval. Any amendment that would (i) materially increase the
benefits accruing to Participants under this Plan, (ii) materially increase the
aggregate number of securities that may be issued under this Plan, or (iii)
materially modify the requirements as to eligibility for participation in this
Plan, shall be subject to stockholder approval only to the extent then required
by Section 422 of the Code or any other applicable law, or deemed necessary or
advisable by the Board.
(c) Amendment to Awards. Without limiting any other express authority of the
Committee under but subject to the express limits of this Plan, the Committee by
agreement or resolution may waive conditions of or limitations on Awards to
Eligible Employees that the Committee in the prior exercise of its discretion
has imposed, without the consent of a Participant, and may make other changes to
the terms and conditions of Awards that do not affect in any manner materially
adverse to the Employee Participant, his or her rights and benefits under an
Award.
(d) Limitations on Amendments to Plan and Awards. No amendment, suspension or
termination of the Plan or change of or affecting any outstanding Award shall,
without written consent of the Participant, affect in any manner materially
adverse to the Participant any rights or benefits of the Participant or
obligations of the Corporation under any Award granted under this Plan prior to
the effective date of such change. Changes contemplated by Section 6.2 shall not
be deemed to constitute changes or amendments for purposes of this Section 6.6.
6.7 Privileges of Stock Ownership
Except as otherwise expressly authorized by the Committee or this Plan,
a Participant shall not be entitled to any privilege of stock ownership as to
any shares of Common Stock not actually delivered to and held of record by him
or her. No adjustment will be made for dividends or other rights as a
stockholders for which a record date is prior to such date of delivery.
<PAGE>
6.8 Effective Date of the Plan
This Plan was originally effective as of September 22, 1992 ("Effective
Date"), the date of Board approval, and was subject to stockholder approval
within 12 months thereafter. The Plan is hereby amended and restated in its
entirety, effective as of August 27, 1996.
6.9 Term of the Plan
No Award shall be granted more than ten years after the Effective Date
of this Plan (the "termination date"). Unless otherwise expressly provided in
this Plan or in an applicable Award Agreement, any Award granted prior to the
termination date may extend beyond such date, and all authority of the Committee
with respect to Awards hereunder, including the authority to amend an Award,
shall continue during any suspension of this Plan and in respect of outstanding
Awards on such termination date.
6.10 Governing Law; Construction; Severability
(a) Choice of Law. This Plan, the Awards, all documents evidencing Awards and
all other related documents shall be governed by, and construed in accordance
with the laws of the State of Nevada.
(b) Severability. If any provision shall be held by a court of competent
jurisdiction to be invalid and unenforceable, the remaining provisions of this
Plan shall continue in effect.
(c) Plan Construction.
(1) Rule 16b-3. It is the intent of the Corporation that transactions in
and affecting Awards in the case of Participants who are or may be
subject to Section 16 of the Exchange Act satisfy any then applicable
requirements of Rule 16b-3 so that such persons will be entitled to the
benefits of Rule 16b-3 or other exemptive rules under Section 16 of the
Exchange Act in respect of these transactions and will not be subjected
to avoidable liability thereunder. If any provision of this Plan or of
any Award would otherwise frustrate or conflict with the intent
expressed above, that provision to the extent possible shall be
interpreted and deemed amended so as to avoid such conflict, but to the
extent of any remaining irreconcilable conflict with such intent as to
such persons in the circumstances, such provision shall be deemed void.
(2) Section 162(m). It is the further intent of the Company that Options
and Stock Appreciation Rights with an exercise or base price not less
than Fair Market Value on the date of grant and Performance Share
Awards under Section 5.2 of the Plan that are granted to or held by a
Section 16 Person shall qualify as performance-based compensation under
Section 162(m) of the Code, and this Plan shall be interpreted
consistent with such intent.
<PAGE>
6.11 Captions
Captions and headings are given to the sections and subsections of this
Plan solely as a convenience to facilitate reference. Such headings shall not be
deemed in any way material or relevant to the construction or interpretation of
the Plan or any provision thereof.
6.12 Effect of Change of Subsidiary Status
For purposes of this Plan and any Award hereunder, if an entity ceases
to be a Subsidiary a termination of employment shall be deemed to have occurred
with respect to each employee of such Subsidiary who does not continue as an
employee of another entity within the Company.
6.13 Non-Exclusivity of Plan
Nothing in this Plan shall limit or be deemed to limit the authority of
the Board or the Committee to grant awards or authorize any other compensation,
with or without reference to the Common Stock, under any other plan or
authority.
VII. NON-EMPLOYEE DIRECTOR OPTIONS
7.1 Participation
Options under this Article VII shall be made only to Non-Employee
Directors.
7.2 Annual Option Grants
(a) Time of Initial Grant. After approval of this Plan by the stockholders of
the Corporation, if any person who is not then an officer or employee of the
Company shall become a director of the Corporation, there shall be granted
automatically to such person (without any action by the Board of Committee) a
Nonqualified Stock Option (the Award Date of which shall be the date such person
takes office) to purchase 10,000 shares.
(b) Subsequent Annual Options. In each calendar year during the term of the
Plan, commencing in 1994, there shall be granted automatically (without any
action by the Committee or the Board) a Nonqualified Stock Option to purchase
4,000 shares of Common Stock to each Non-Employee Director who is re-elected as
a director of the Corporation (the Award Date of which shall be the date of such
re-election). In addition, subject to stockholder approval at the 1997 Annual
Stockholders Meeting, each person who is a Non-Employee Director on August 27,
1996 shall be granted on a one-time basis without further action on Option to
purchase 2,000 shares of Common Stock (the Award Date of which shall be August
27, 1996, the date of Board approval of this amendment). Furthermore,
notwithstanding the first sentence of this subsection (b), but subject to
stockholder approval at the 1997 Annual Stockholders Meeting, in each calendar
year during the remaining term of the Plan, (commencing in 1997), the grant
described in the first sentence of this subsection shall not be made and instead
there shall be granted automatically (without any action by the Committee or the
Board) a Nonqualified Stock Option to purchase 6,000 shares of Common Stock to
each Non-Employee Director who is re-elected as a director of the Corporation
(the Award Date of which shall be the date of such re-election).
<PAGE>
(c) Maximum Number of Shares. Annual grants that would otherwise exceed the
maximum number of shares under Section 1.4(a) shall be prorated within such
limitation. A Non-Employee Director shall not receive more than 50,000 shares on
exercise of all Options optioned under this Section 7.2.
7.3 Option Price
The purchase price per share of the Common Stock covered by each Option
granted pursuant to Section 7.2 hereof shall be 100% of the Fair Market Value of
the Common Stock on the Award Date. The exercise price of any Option granted
under this Article shall be paid in full at the time of each purchase in cash or
by check or in shares of Common Stock valued at their Fair Market Value on the
date of exercise of the Option, or partly in such shares and partly in cash,
provided that any such shares used in payment shall have been owned by the
Participant at least six months prior to the date of exercise.
7.4 Option Period and Exercisability
Each Option granted under this Article VII and all rights or
obligations thereunder shall commence on the Award Date and expire ten years
thereafter and shall be subject to earlier termination as provided below. Each
Option granted under Section 7.2 shall become exercisable at the rate of 33-1/3%
per year, on the first, second and third anniversaries of the Award Date.
7.5 Termination of Directorship
If a Non-Employee Director's services as a member of the Board of
Directors terminate by reason of death, Disability or Retirement, an Option
granted pursuant to this Article held by such Participant shall immediately
become and shall remain exercisable for two years after the date of such
termination or until the expiration of the stated term of such Option, whichever
first occurs. If a Non-Employee Director's services as a member of the Board of
Directors terminate for any other reason, any portion of an Option granted
pursuant to this Article which is not then exercisable shall terminate and any
portion of such Option which is then exercisable may be exercised within a
period of thirty (30) days after the date of such termination or until the
expiration of the stated term, whichever first occurs.
7.6 Adjustments
Options granted under this Article VII shall be subject to adjustment
as provided in Section 6.2, but only to the extent that (a) such adjustment and
the Committee's action in respect thereof satisfy applicable law, (b) such
adjustment in the case of a Change in Control Event is effected pursuant to the
terms of a reorganization agreement approved by stockholders of the Corporation,
and (c) such adjustment is consistent with adjustments to Options held by
persons other than executive officers or directors of the Corporation.
<PAGE>
7.7 Acceleration Upon a Change in Control Event
Upon the occurrence of a Change in Control Event, each Option granted
under Section 7.2 hereof shall become immediately exercisable in full. To the
extent that any Option granted under this Article VII is not exercised prior to
(i) a dissolution of the Corporation or (ii) a merger or other corporate event
that the Corporation does not survive, and no provision is (or consistent with
the provisions of Section 7.6 can be) made for the assumption, conversion,
substitution or exchange of the Option, the Option shall terminate upon the
occurrence of such event.
VIII. DEFINITIONS
8.1 Definitions
(a) "Award" shall mean an award of any Option, Stock Appreciation Right,
Restricted Stock, Stock Bonus, Performance Share Award, Performance-Based Award,
Cash-Based Award, dividend equivalent or deferred payment right or other right
or security that would constitute a "derivative security" under Rule 16a-1(c) of
the Exchange Act, or any combination thereof, whether alternative or cumulative,
authorized by and granted under this Plan.
(b) "Award Agreement" shall mean any writing setting forth the terms of an Award
that has been authorized by the Committee.
(c) "Award Date" shall mean the date upon which the Committee took the action
granting an Award or such later date as the Committee designates as the Award
Date at the time of the Award or, in the case of Awards under Article VII, the
applicable dates set forth therein.
(d) "Award Period" shall mean the period beginning on an Award Date and ending
on the expiration date of such Award.
(e) "Beneficiary" shall mean the person, persons, trust or trusts designated by
a Participant or, in the absence of a designation, entitled by will or the laws
of the descent and distribution to receive the benefits specified in the Award
Agreement and under this Plan in the event of a Participant's death, and shall
mean the Participant's executor or administrator if no other Beneficiary is
designated and able to act under the circumstances.
(f) "Board" shall mean the Board of Directors of the Corporation.
(g) "Cash-Based Awards" shall mean Awards that, if paid, must be paid in cash
and that are neither denominated in nor have a value derived from the value of,
nor an exercise or conversion privilege at a price related to, shares of Common
Stock.
(h) "Cash Flow" shall mean cash and cash equivalents derived from either (i) net
cash flow from operations or (ii) net cash flow from operations, financings and
investing activities, as determined by the Committee at the time an Award is
granted.
(i) "Change in Control Event" shall mean any of the following:
<PAGE>
(1) Approval by the stockholders of the Corporation of the dissolution or
liquidation of the Corporation;
(2) Approval by the stockholders of the Corporation of an agreement to
merge or consolidate, or otherwise reorganize, with or into one or more
entities that are not Subsidiaries, as a result of which less than 50%
of the outstanding voting securities of the surviving or resulting
entity immediately after the reorganization are, or will be, owned by
stockholders of the Corporation immediately before such reorganization
(assuming for purposes of such determination that there is no change in
the record ownership of the Corporation's securities from the record
date for such approval until such reorganization and that such record
owners hold no securities of the other parties to such reorganization):
(3) Approval by the stockholders of the Corporation of the sale of
substantially all of the Corporation's business and/or assets to a
person or entity which is not a Subsidiary;
(4) Any "person (as such term is used in Section 13(d) and 14(d) of the
Exchange Act) (other than a person having such ownership at the time of
adoption of this Plan) becomes the "beneficial owner" (as defined in
Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities of the Corporation representing more than 50% of the
combined voting power of the Corporation's then outstanding securities
entitled to then vote generally in the election of directors of the
Corporation; or
(5) During any period not longer than two consecutive years, individuals
who at the beginning of such period constituted the Board cease to
constitute at least a majority thereof, unless the election, or the
nomination for election by the Corporation's stockholders, of each new
Board member was approved by a vote of at least three-fourths of the
Board members then still in office who were Board members at the
beginning of such period (including for these purposes, new members
whose election or nomination was so approved).
(j) "Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time.
(k) "Commission" shall mean the Securities and Exchange Commission.
(l) "Committee" shall mean the Board or a committee appointed by the Board to
administer this Plan, which committee shall be comprised only of two or more
directors or such greater number of directors as may be required under
applicable law, each of whom (i) in respect of any decision at a time when the
Participant affected by the decision may be subject to Section 162(m) of the
Code be an "outside director" within the meaning of Code Section 162(m) and (ii)
in respect of any decision at a time when the Participant affected by the
decision may be subject to Section 16 under the Exchange Act, shall be a
"Non-Employee Director" within the meaning of Rule 16b-3(b)(3).
<PAGE>
(m) "Common Stock" shall mean the Common Stock of the Corporation and such other
securities or property as may become subject to Awards, or become subject to
Awards, pursuant to an adjustment made under Section 6.2 of this Plan.
(n) "Company" shall mean, collectively, the Corporation and its domestic or
foreign Subsidiaries or divisions.
(o) "Corporation" shall mean International Game Technology, a Nevada
corporation, and its successors.
(p) "Eligible Employee" shall mean an officer (whether or not a director) or key
executive, administrative, managerial, production, marketing or sales employee
of the Company.
(q) "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended.
(r) "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended
from time to time.
(s) "Fair Market Value" or any date shall mean (i) if the stock is listed or
admitted to trade on a national securities exchange, the closing price of the
stock on the Composite Tape, as published in the Western Edition of The Wall
Street Journal, of the principal national securities exchange on which the stock
is so listed or admitted to trade, on such date, or, if there is no trading of
the stock on such date, then the closing price of the stock as quoted on such
Composite Tape on the next preceding date on which there was trading in such
shares; (ii) if the stock is not listed or admitted to trade on a national
securities exchange, the last price for the stock on such date, as furnished by
the National Association of Securities Dealers, Inc. ("NASD") through the NASDAQ
National Market Reporting System or a similar organization if the NASD is no
longer reporting such information, (iii) if the stock is not listed or admitted
to trade on a national securities exchange and is not reported on the National
Market Reporting System, the mean between the bid and asked price for the stock
on such date, as furnished by the NASD or a similar organization, or (iv) if the
stock is not listed or admitted to trade on a national securities exchange, is
not reported on the National Market Reporting System and if bid and asked prices
for the stock are not furnished by the NASD or a similar organization, the value
as established by the Committee at such time for purposes of this Plan.
(t) "Incentive Stock Option" shall mean an Option which is designated as an
incentive stock option within the meaning of Section 422 of the Code, the award
of which contains such provisions as are necessary to comply with that section.
(u) "Nonqualified Stock Option" shall mean an Option that is designated as a
Nonqualified Stock Option and shall include any Option intended as an Incentive
Stock Option that fails to meet the applicable legal requirements thereof. Any
Option granted hereunder that is not designated as an Incentive Stock Option
shall be deemed to be designated a Nonqualified Stock Option under this Plan and
not an incentive stock option under the Code.
<PAGE>
(v) "Non-Employee Director" shall mean a member of the Board of Directors of the
Corporation who is not an officer or employee of the Company.
(w) "Non-Employee Director Participant" shall mean a Non-Employee Director who
has been granted an Option under the provisions of Article VII.
(x) "Option" shall mean an option to purchase Common Stock granted under this
Plan. The Committee shall designate any Option granted to an Eligible Employee
as a Nonqualified Stock Option or an Incentive Stock Option. Options granted
under Article VII shall be Nonqualified Stock Options.
(y) "Participant" shall mean an Eligible Employee who has been granted an Award
under this Plan and a Non-Employee Director who has been received an Option
under Article VII of this Plan.
(z) "Performance-Based Award" shall mean an Award of a right to receive shares
of Common Stock or other compensation (including cash) under Section 5.2, the
issuance or payment of which is contingent upon, among other conditions, the
attainment of performance objectives specified by the Committee.
(aa) "Performance Goals" shall mean EPS or ROE or Cash Flow or Total Stockholder
Return, and "Performance Goals" means any combination thereof.
(bb) "Performance Share Award" shall mean an Award of a right to receive shares
of Common Stock made in accordance with Section 5.1, the issuance or payment of
which is contingent upon, among other conditions, the attainment of performance
objectives specified by the Committee.
(cc) "Personal Representative" shall mean the person or persons who, upon the
disability or incompetence of a Participant, shall have acquired on behalf of
the Participant, by legal proceeding or otherwise, the power to exercise the
rights or receive benefits under this Plan and who shall have become the legal
representative of the Participant.
(dd) "Plan" shall mean this 1993 Stock Option Plan, as amended and restated.
(ee) "QDRO" shall mean a qualified domestic relations order as defined in
Section 414(p) of the Code or Title I, Section 206(d)(3) of ERISA (to the same
extent as if this Plan were subject thereto), or the applicable rules
thereunder.
(ff) "Restricted Stock Award" shall mean an award of a fixed number of shares of
Common Stock to the Participant subject, however, to payment of such
consideration, if any, and such forfeiture provisions, as are set forth in the
Award Agreement.
(gg) "Restricted Stock" shall mean shares of Common Stock awarded to a
Participant under this Plan, subject to payment of such consideration, if any,
and such conditions on vesting and such transfer and other restrictions as are
established in or pursuant to this Plan, for so long as such shares remain
unvested under the terms of the applicable Award Agreement.
<PAGE>
(hh) "Retirement" shall mean retirement with the consent of the Company, or in
the case of a Non-Employee Director, a retirement or resignation as a director
after at least eight years service as a director.
(ii) "ROE" shall mean consolidated net income of the Corporation (less preferred
dividends), divided by the average consolidated common shareholders equity.
(jj) "Rule 16b-3" shall mean Rule 16b-3 as promulgated by the Commission
pursuant to the Exchange Act.
(kk) "Section 16 Person" shall mean a person subject to Section 16(a) of the
Exchange Act.
(ll) "Securities Act" shall mean the Securities Act of 1933, as amended from
time to time.
(mm) "Stock Appreciation Right" shall mean a right to receive a number of shares
of Common Stock or an amount of cash, or a combination of shares and cash, the
aggregate amount or value of which is determined by reference to a change in the
Fair Market Value of the Common Stock that is authorized under this Plan.
(nn) "Stock Bonus" shall mean an Award of shares of Common Stock granted under
this Plan for no consideration other than past services and without restriction
other than such transfer or other restrictions as the Committee may deem
advisable to assure compliance with law.
(oo) "Subsidiary" shall mean any corporation or other entity a majority of whose
outstanding voting stock or voting power is beneficially owned directly or
indirectly by the Corporation.
(pp) "Total Disability" shall mean a "permanent and total disability within the
meaning of Section 22(e)(3) of the Code and (except in the case of a
Non-Employee Director) such other disabilities, infirmities, afflictions or
conditions as the Committee by rule may include.
(qq) "Total Stockholder Return" shall mean with respect to the Corporation or
other entities (if measures on a relative basis), the (i) change in the market
price of its common stock (as quoted in the principal market on which it is
traded as of the beginning and ending of the period) plus dividends and other
distributions paid, divided by (ii) the beginning quoted market price, all of
which is adjusted for any changes in equity structure, including but not limited
to stock splits and stock dividends.
<PAGE>
INTERNATIONAL GAME TECHNOLOGY
1993 STOCK OPTION PLAN
(Amended and Restated Effective as of August 27, 1996)
(Composite Plan Document Incorporating Amendments 1998-I and 1998-II)
<PAGE>
TABLE OF CONTENTS
Page
-i-
I. THE PLAN..............................................................1
1.1 Purpose......................................................1
1.2 Administration and Authorization; Power and Procedure........1
1.3 Participation................................................2
1.4 Shares Available for Awards; Share Limits....................3
1.5 Grant of Awards..............................................3
1.6 Award Period.................................................4
1.7 Limitations on Exercise and Vesting of Awards................4
1.8 Acceptance of Notes to Finance Exercise......................4
1.9 No Transferability...........................................5
II. EMPLOYEE OPTIONS......................................................6
2.1 Grants.......................................................6
2.2 Option Price.................................................6
2.3 Limitations on Grant and Terms of Incentive Stock Options....6
2.4 Limits on 10% Holders........................................7
2.5 Cancellation and Regrant/Waiver of Restrictions..............7
III. STOCK APPRECIATION RIGHTS.............................................7
3.1 Grants.......................................................7
3.2 Exercise of Stock Appreciation Rights........................8
3.3 Payment......................................................8
IV. RESTRICTED STOCK AWARDS...............................................8
4.1 Grants.......................................................8
4.2 Restrictions.................................................9
4.3 Return to the Corporation....................................9
V. PERFORMANCE SHARE AWARDS AND STOCK BONUSES............................9
5.1 Grants of Performance Share Awards...........................9
5.2 Special Performance-Based Share Awards......................10
5.3 Grants of Stock Bonuses.....................................11
5.4 Deferred Payments...........................................11
VI. OTHER PROVISIONS.....................................................12
6.1 Rights of Eligible Employees, Participants and
Beneficiaries...............................................12
6.2 Adjustments; Acceleration...................................12
6.3 Effect of Termination of Employment.........................13
6.4 Compliance with Laws........................................14
6.5 Tax Withholding.............................................14
6.6 Plan Amendment, Termination and Suspension..................14
6.7 Privileges of Stock Ownership...............................15
6.8 Effective Date of the Plan..................................15
6.9 Term of the Plan............................................15
6.10 Governing Law; Construction; Severability...................16
<PAGE>
TABLE OF CONTENTS
(continued)
6.11 Captions....................................................16
6.12 Effect of Change of Subsidiary Status.......................16
6.13 Non-Exclusivity of Plan.....................................16
VII. NON-EMPLOYEE DIRECTOR OPTIONS........................................17
7.1 Participation...............................................17
7.2 Annual Option Grants........................................17
7.3 Option Price................................................17
7.4 Option Period and Exercisability............................18
7.5 Termination of Directorship.................................18
7.6 Adjustments.................................................18
7.7 Acceleration Upon a Change in Control Event.................18
VIII. DEFINITIONS..........................................................18
8.1 Definitions.................................................18
