<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-2.
</TABLE>
GTECH Holdings Corporation
--------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
--------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-12.
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
(3) Filing Party:
------------------------------------------------------------------------
(4) Date Filed:
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<PAGE> 2
[GTECH LOGO]
GTECH HOLDINGS CORPORATION
------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON OCTOBER 24, 2000
------------------------
To Our Shareholders:
The Annual Meeting of Shareholders (the "Meeting") of GTECH Holdings
Corporation (the "Company") will be held at 9:00 o'clock a.m. on Tuesday,
October 24, 2000, at the Westin Hotel, One West Exchange Street, Providence,
Rhode Island, for the following purposes:
1. To elect two directors to serve for a three-year term and one
director to serve for a two-year term;
2. To vote on a proposal to approve the Company's 2000 Omnibus Stock
Option and Long-Term Incentive Plan; and
3. To transact such other business as may properly come before the
Meeting and any adjournments thereof.
The Board of Directors has fixed the close of business on September 8,
2000,
as the record date for the determination of shareholders entitled to notice of,
and to vote at, the Meeting and any adjournments thereof.
All shareholders are cordially invited to attend the Meeting in person.
HOWEVER, WHETHER OR NOT YOU PLAN TO ATTEND, PLEASE SIGN, DATE AND MAIL PROMPTLY
THE ENCLOSED PROXY CARD IN THE ENCLOSED RETURN ENVELOPE, WHICH REQUIRES NO
POSTAGE IF MAILED IN THE UNITED STATES. Returning your proxy card does not
deprive you of your right to attend the Meeting and vote your shares in person.
By order of the Board of Directors,
BRENDAN J. RADIGAN, Assistant Secretary
September 19, 2000
<PAGE> 3
GTECH HOLDINGS CORPORATION
55 TECHNOLOGY WAY
WEST GREENWICH, RI 02817
------------------------
PROXY STATEMENT
This proxy statement, which is being sent to shareholders on or about
September 22, 2000, is furnished in connection with the solicitation of proxies
by the Board of Directors of GTECH Holdings Corporation
(the "Company") for use at the forthcoming Annual Meeting of Shareholders to be
held on October 24, 2000 (the "Meeting"), and at any adjournments thereof. The
Annual Meeting originally was scheduled to be held on August 1, 2000, but was
postponed until late October due to changes in the Company's senior management
in early July and to afford time for the Board of Directors to complete the
comprehensive review and assessment of the Company's operations, which was
commenced in early July.
At the close of business on September 8, 2000, the record date for
determination of shareholders entitled to notice of, and to vote at, the
Meeting, there were outstanding an aggregate of 34,913,630 shares of the
Company's Common Stock, $.01 par value (the "Common Stock"), the Company's only
class of securities entitled to vote at the Meeting.
VOTING AND REVOCABILITY OF PROXIES
Each share of Common Stock is entitled to one vote on all matters to come
before the Meeting. In the election of directors, assuming a quorum is present,
the three nominees receiving the highest number of votes cast at the Meeting
will be elected. The affirmative vote of a majority of the shares of Common
Stock present in person or by proxy at the Meeting is required for approval of
Proposal 2, assuming that the total vote cast with respect to that Proposal
represents a majority of the outstanding shares of Common Stock entitled to vote
at the Meeting. If a proxy is marked as "withhold authority" or "abstain" on any
matter, or if specific instructions are given that no vote be cast on any
specific matter (a "Specified Non-Vote"), the shares represented by such proxy
will not be voted on such matter. Abstentions on Proposal 2 will be included
within the number of shares present at the Meeting and entitled to vote for
purposes of determining whether such matter has been authorized, but broker
non-votes and other Specified Non-Votes will not be so included.
Your proxy may be revoked at any time prior to its exercise by giving
written notice to the Secretary of the Company at the offices of the Company set
forth above, by presenting a duly executed proxy bearing a later date or by
voting in person at the Meeting, but your mere attendance at the Meeting will
not revoke your proxy. Your proxy, when properly executed, will be voted in
accordance with the specific instructions indicated on your proxy card. Unless
contrary instructions are given, your proxy will be voted FOR the election of
the three nominees for director, as provided in Proposal 1 below; FOR approval
of the Company's 2000 Omnibus Stock Option and Long-Term Incentive Plan as
provided in Proposal 2 below; and, to the extent permitted by applicable rules
of the Securities and Exchange Commission (the "SEC"), in accordance with the
judgment of the persons voting the proxies upon such other matters as may come
before the Meeting and any adjournments thereof. See "Other Matters" below.
1. ELECTION OF DIRECTORS
The Certificate of Incorporation and the By-Laws of the Company provide
that the number of directors shall be such number, not less than six and not
more than twelve, as the Board may designate, from time to time, by resolution,
to be divided into three classes as nearly equal in number as possible. The
Board of Directors by resolution currently has designated that six directors
shall constitute the whole Board. The classes which come up for election at the
Meeting consist of two directors to be elected for a three-year term and one
director to be elected for a two-year term. The Board of Directors has
nominated, and recommends the election by the shareholders of, the following two
persons to serve as directors of the Company until the 2003
<PAGE> 4
Annual Meeting, and until their successors are elected and have qualified,
subject to earlier death, resignation, retirement or removal from office:
Burnett W. Donoho
W. Bruce Turner
In addition, the Board of Directors has nominated for election the
following person to serve as a director of the Company until the 2002 Annual
Meeting and until his successor is elected and has qualified, subject to earlier
death, resignation, retirement or removal from office:
Lt. Gen. (Ret.) Emmett Paige, Jr.
The Board of Directors has nominated General Paige to serve as a director
of the Company to fill the vacancy in the class of directors whose terms expire
in 2002 created by the departure of William Y. O'Connor in July 2000 (see
"Additional Information -- Employment and Severance Agreements and Arrangements"
below).
Messrs. Donoho and Turner and General Paige are presently serving as
directors of the Company, Mr. Turner having been elected by the Board in October
1999.
Although the Board of Directors has no reason to believe that any of the
nominees will be unable to serve, if such should occur, proxies will be voted
(unless marked to the contrary) for such person or persons, if any, as shall be
recommended by the Board of Directors. However, proxies will not be voted for
the election of more than three directors.
The following table sets forth, as of September 2, 2000, certain
information with respect to each of the above nominees for election as a
director at the Meeting and each director whose term of office will continue
after the Meeting:
<TABLE>
<CAPTION>
PRESENT
DIRECTOR TERM
NAME, AGE AND OCCUPATION(1) SINCE EXPIRES
--------------------------- -------- -------
<S> <C> <C>
NOMINEES FOR ELECTION AT THE MEETING:
Burnett W. Donoho, 61....................................... 1992(2) 2000
Consultant. President and Chief Executive Officer of
Wellbridge Company, formerly Club Sports International
(an Operator of upscale health clubs) from March 1999
through August 2000. Previously, Mr. Donoho was a
self-employed Retail Consultant from January 1998 to
March 1999; Vice Chairman and Chief Operating Officer
of Montgomery Ward, Inc., a privately held department
store, from February 1997 through December 1997; a
self-employed Retail Consultant from December 1994
through February 1997; the Vice Chairman and Chief
Operating Officer of Macy's East, a division of R. H.
Macy & Co., Inc., a department store chain, from July
1992 until December 1994; a member of Ernst & Young's
Great Lakes Management Consulting Group from June 1991
to June 1992; consultant to and superintendent of the
Chicago Public Schools from November 1990 to May 1991;
and President of Marshall Field and Co., a department
store chain, from 1984 to June 1990. Mr Donoho is also
a director of OfficeMax, Inc. and Socket
Communications, Inc.
</TABLE>
2
<PAGE> 5
<TABLE>
<CAPTION>
PRESENT
DIRECTOR TERM
NAME, AGE AND OCCUPATION(1) SINCE EXPIRES
--------------------------- -------- -------
<S> <C> <C>
Lt. Gen. (Ret.) Emmett Paige, Jr. (USA), 69................. 1997 2000
President and Chief Operating Officer of OAO
Corporation, a systems engineering and information
systems and services company, from August 1988 through
May 1993, and again since May 1997. Previously, General
Paige had spent a 41-year career with the United States
Army, working his way up through the Army ranks and had
served as the Assistant Secretary of Defense for
command, control, communications, computers and
intelligence from May 1993, and as the Department of
Defense chief information officer from August 1996,
until May 23, 1997. General Paige is also a director of
Lau Defense Systems LLC, Link Plus Corporation and Ken
Cast, Inc.
W. Bruce Turner, 41(3)...................................... 1999 2000
Mr. Turner was elected Chairman of the Company by the
Board in July 2000, replacing William Y. O'Connor.
Previously, Mr. Turner was an Independent Consultant
and Private Investor from February 1999 to July 2000;
Managing Director, Equity Research, for Salomon Smith
Barney (formerly Salomon Brothers) from January 1994
until February 1999; director, Leisure Equity Research
for Raymond James & Associates from October 1989 until
January 1994; and Supervisor, Customer Relations for
Tampa Electric Company from June 1986 until October
1989. Prior to entering the private sector, Mr. Turner
Served as a Field Artillery Officer in the United
States Army from May 1981 until May 1986.
DIRECTORS WHOSE TERMS CONTINUE BEYOND THE MEETING:
Robert M. Dewey, Jr., 69.................................... 1995 2001
Recently retired. Senior Advisor, Donaldson, Lufkin &
Jenrette, Inc. ("DLJ"), investment banking firm, from
January 1998 through March 2000. Previously, Mr. Dewey
was the Chairman of Autranet, Inc., a wholly-owned
subsidiary of DLJ, from January 1996 to January 1998,
and Managing Director, Institutional Equities Division,
of Donaldson, Lufkin & Jenrette Securities Corporation,
a subsidiary of DLJ, from 1983 through June 1995. Mr.
Dewey is a director of MunicipalTrade.com and is also
the President of the Board of Trustees of Deerfield
Academy.
The Rt. Hon. Lord Moore of Lower Marsh, P.C., 62............ 1992 2001
European Chairman and a director of The Monitor
Company, a strategic consulting company, since October
1990. Previously, Lord Moore held various ministerial
posts in the Government of the United Kingdom, most
recently as Secretary of State for Social Security from
July 1988 to July 1989 and as Secretary of State for
Health and Social Services from 1987 to 1988. Lord
Moore is also the Deputy Chairman and a director of
Rolls-Royce plc and a director of Blue Circle
Industries plc, a director of Marvin & Palmer Inc. and
the President of Energy Saving Trust Ltd., a
not-for-profit energy conservation organization.
</TABLE>
3
<PAGE> 6
<TABLE>
<CAPTION>
PRESENT
DIRECTOR TERM
NAME, AGE AND OCCUPATION(1) SINCE EXPIRES
--------------------------- -------- -------
<S> <C> <C>
Anthony Ruys, 53............................................ 1996 2002
Vice Chairman of the Executive Board of Heineken N.V.,
a Netherlands-based international brewery group, since
1996 and a Board Member since 1993. He served in
increasingly senior positions within the Unilever
Group, a Netherlands and U.K.-based consumer goods
conglomerate, from 1974 to 1993.
</TABLE>
---------------
(1) Except as otherwise noted, the named individuals have had the occupations
indicated (other than directorships) for at least five years.
(2) Mr. Donoho was a director of the Company from May 1990 to June 1991 and was
again elected a director of the Company in October 1992.
(3) See "Additional Information -- Employment and Severance Agreements and
Arrangements" below.
NOMINATION OF DIRECTORS AND RELATED MATTERS
The Company's Nominating Committee (see below) has recommended to the Board
of Directors that Messrs. Donoho and Turner and General Paige be approved, and
they have been approved, as the Board's nominees for election as directors at
the Meeting.
The Company's By-Laws (Article III, Section 3) also permit shareholders
entitled to vote in the election of directors to nominate candidates for
election as directors, but only if written notice of a shareholder's intention
to do so has been received by the Company: (i) with respect to an election to be
held at an Annual Meeting of shareholders, not less than 60 nor more than 90
days prior to the first anniversary date of the preceding year's Annual Meeting
(which was held August 18, 1999), except that if the date of the Annual Meeting
at which the election is to be held is more than 20 days earlier or later than
such anniversary date, such notice must be received by the Company not later
than 10 days after the date the Company mails to shareholders the notice of the
Annual Meeting; and (ii) with respect to an election to be held at a special
meeting of shareholders, not later than 10 days after the Company mails to
shareholders notice of such special meeting. The By-Laws set forth specific
requirements for a shareholder's notice of intention to nominate directors,
including, without limitation, specified information concerning the nominating
shareholder and the person(s) proposed to be nominated, and reference is made to
the By-Laws for such requirements.
INFORMATION CONCERNING MEETINGS AND CERTAIN COMMITTEES
The Board of Directors held eight formal meetings during fiscal 2000 (which
ended February 26, 2000), and also conferred informally and took formal action
by unanimous written consent on a number of additional occasions. The Board has
an Audit Committee, a Compensation Committee, a Nominating Committee and, since
July 2000, a Corporate Governance and Compliance Committee. The Audit
Committee's members are Messrs. Dewey and Donoho and Lord Moore. The primary
role of the Audit Committee is to assist the Board in fulfilling the Board's
responsibility to oversee management's conduct of the Company's financial
reporting process. In that regard, it is the Audit Committee's responsibility,
under its newly-adopted charter, among other things, to review with the
Company's management and financial personnel and with the Company's independent
auditors the results of the independent auditors' auditing engagement, the
audited annual financial statements and the unaudited quarterly financial
statements included in the Company's annual and quarterly reports and the
quality and adequacy of the Company's system of internal controls. The Audit
Committee, along with the Board, also has responsibility for making decisions
concerning the engagement and retention of the Company's independent auditors.
The Audit Committee held two formal meetings during fiscal 2000. The
Compensation Committee's members during fiscal 2000 were Messrs. Dewey and Ruys
and General Paige. In March 2000, Mr. Turner and Lord Moore were appointed to
the Compensation Committee replacing Mr. Dewey and General Paige, and in July
2000, General Paige replaced Mr. Turner. The Compensation Committee is
responsible for administering the Company's stock option and certain other
compensation plans and is authorized to review and approve specific executive
compensation
4
<PAGE> 7
arrangements and other matters referred to it by the Board and to recommend
policies respecting the compensation of executive officers of the Company
generally. The Compensation Committee held five formal meetings during fiscal
2000, and also had several informal meetings, conferred informally and took
formal action by unanimous consent on a number of occasions. The Nominating
Committee's members during fiscal 2000 were Lord Moore, Mr. O'Connor and General
Paige. In March 2000, Messrs. Dewey and Ruys were appointed to the Nominating
Committee, replacing Lord Moore and Mr. O'Connor, and in July 2000, Mr. Turner
was appointed to the Nominating Committee. The Nominating Committee makes
recommendations to the Board concerning qualified candidates for election as
directors and did not meet formally during fiscal 2000. Prior to the Company's
2001 Annual Meeting, the Nominating Committee contemplates nominating, and the
Board contemplates appointing, several new directors (consisting both of
non-employees and employees of the Company) to serve on the Board. The
Nominating Committee has no formal procedure for considering potential
candidates recommended by shareholders. In June 2000 (after the close of fiscal
2000), a Corporate Governance and Compliance Committee of the Board was formed.
The Corporate Governance and Compliance Committee's current members are Messrs.
Dewey, Donoho and Ruys, General Paige and Lord Moore. The function of the
Committee, which has met once since its formation, is to oversee issues
affecting corporate governance and ethical compliance.
During fiscal 2000, all directors attended in person or by conference
telephone at least 75% of all formal meetings of the Board of Directors and
committees of the Board on which they served.
COMPENSATION OF DIRECTORS
During fiscal 2000, directors who were not employees of the Company, were
entitled to annual directors' fees at the rate of $30,000 per year, plus $1,000
per day (other than for a day on which there was a meeting of the Board) for
attending committee or other meetings or functions relating to Company business,
plus $1,000 per day (other than a day for which such director received the
aforementioned $1,000 per diem) for any day during which such director was
required to spend more than five hours in connection with certain administrative
matters relating to the Company's business. Directors also are reimbursed for
expenses. Directors of the Company are entitled, under the Company's 1998
Non-Employee Directors' Stock Election Plan, to elect to receive all or a
portion of their directors' fees in the form of shares of Common Stock of the
Company valued at fair market value. Five of the non-employee directors (Messrs.
Dewey, Donoho and Ruys, Lord Moore and General Paige) elected to receive all of
their fiscal 2000 directors' fees in the form of Company shares valued at
market. One non-employee director (Mr. Turner) received all of his fiscal 2000
director's fees in cash.
From time to time non-employee directors provide special services for the
Company for which they receive additional compensation. During fiscal 2000, the
following amounts in addition to the annual directors' fee and usual committee
meeting fees were paid to directors in cash for special services as directors
(including $12,000 each paid to Mr. Donoho and General Paige for services on a
Special Committee of the Board): Mr. Dewey -- $7,000; Mr. Donoho -- $15,000;
Lord Moore -- $6,000; General Paige -- $18,000; Mr. Ruys -- $6,000; and Mr.
Turner -- $6,000.
The Company's 1999 Non-Employee Directors' Stock Option Plan (the "1999
Plan"), provides for automatic grants to each non-employee director, shortly
following each Annual Meeting of Stockholders, of a nonqualified stock option
for 10,000 shares of Common Stock with a per share exercise price equal to the
average of the high and low sale price of a share of Common Stock as reported on
the New York Stock Exchange Composite Transactions Tape on the date of grant.
Such options become exercisable approximately one year following the date of
grant and extend for a five-year term. Pursuant to the 1999 Plan, on
August 23, 1999, each of the five non-employee directors then in office was
granted such a 10,000 share option with an exercise price of $25.3125 per share.
The 1999 Plan replaced the similar 1996 Non-Employee Directors' Stock Option
Plan, which expired by its terms on December 31, 1998.
See "Additional Information -- Employment and Severance Agreements and
Arrangements" below.
5
<PAGE> 8
2. APPROVAL OF THE 2000 OMNIBUS STOCK OPTION AND LONG-TERM INCENTIVE PLAN
At the meeting, the shareholders also will be asked to approve the 2000
Omnibus Stock Option and Long-Term Incentive Plan (the "2000 Plan") which was
adopted by the Company's Board of Directors in September 2000. A summary of the
2000 Plan appears below, and a copy of the Plan is attached as an Appendix to
this proxy statement.
The Board approved the 2000 Plan, which authorizes grants ("Grants") of
stock options, restricted stock, stock appreciation rights and performance
awards respecting, in the aggregate, 1,800,000 shares of Common Stock
("Shares"), because it firmly believes that having such Shares available for
Grants is an essential element of compensation if the Company is to be able, in
this highly competitive environment, to hire, retain and motivate the officers
and employees upon which the Company's continued success will, in large part,
depend. The Board further believes that with respect to the type of options and
stock appreciation rights to be granted under the 2000 Plan, such Grants are a
particularly beneficial form of compensation because, since their exercise price
is not less than the fair market value on the date of Grant, such Grants only
become of real value if the price of the Shares rises. Whether or not Grants
take the form of options to purchase Shares, the Board believes that the 2000
Plan, by fostering the ownership of Shares by officers and employees, serves to
more closely align the interests of officers and employees and other
shareholders in having the Company prosper and Share value increase.
The Company currently has another option plan for officers and key
employees, the 1997 Stock Option Plan (the "1997 Plan"), but, as of August 26,
2000 fewer than 215,000 Shares remained available for future grants of options
under the 1997 Plan. That number is clearly insufficient to meet the Company's
needs and has led the Board to request shareholder approval of the 2000 Plan.
As of the date of this proxy statement, no Grants have been made under the
new 2000 Plan, and the Compensation Committee (which is responsible for Grants
under the 2000 Plan) has not made any final determination as to specific Grants
to be made under the 2000 Plan. While it can be expected that significant
numbers of Grants will be made to executive and other officers and employees
under the 2000 Plan, it is the intention of the Compensation Committee to make
Grants under the Plan to a considerably broader number of persons than
previously has been the case.
THE BOARD OF DIRECTORS BELIEVES THAT THE 2000 OMNIBUS STOCK OPTION AND
LONG-TERM INCENTIVE PLAN IS IN THE BEST INTERESTS OF THE COMPANY AND RECOMMENDS
A VOTE FOR APPROVAL OF SUCH PLAN.
SUMMARY OF THE 2000 PLAN
The following description of the 2000 Plan is intended merely as a summary
of the principal features of the Plan and is qualified in its entirety by
reference to the provisions of the Plan itself, which is attached as an Appendix
to this proxy statement.
The 2000 Plan authorizes up to an aggregate of 1,800,000 Shares for
issuance under the Plan. Generally, Shares subject to Grants under the 2000 Plan
which remain unvested or unexercised upon expiration or earlier termination of
such Grants and Shares withheld to pay taxes will once again become available
for Grants under the Plan. If Shares are used to pay the exercise price, only
the number of Shares issued net of the Shares so used will be counted against
the number of Shares available under the Plan. The Plan does not permit the
repricing of Grants, except in connection with capital adjustments and corporate
transactions as contemplated in Section 4(b) of the Plan. Authorized but
unissued Shares or treasury Shares may be issued under the Plan.
Under the 2000 Plan, the Committee may award stock options, stock
appreciation rights, restricted stock awards and performance awards. The 2000
Plan limits the number of Shares that may be granted subject to restricted stock
awards, performance awards and stock appreciation rights to not more than
900,000 in the aggregate.
6
<PAGE> 9
The 2000 Plan is to be administered by a Committee of the Board (currently
the Compensation Committee, the "Committee") which Committee is given broad
discretion under the Plan. The Plan authorizes the Committee to make Grants to
officers (including officers who also are directors) and other employees of the
Company and its subsidiaries.
Stock Options and Stock Appreciation Rights.
The Committee may award incentive stock options (within the meaning of
Section 422 of the Internal Revenue Code of 1986, as amended (the "Code")),
("ISOs") and nonqualified stock options ("NQSOs"). ISOs offer key employees
certain tax advantages (discussed below) which are not available with NSQOs. The
Committee determines the terms of option awards, including the amount, exercise
price, vesting schedule and term. Options under the Plan become exercisable at
such time or times as the Committee may specify, but not later than ten years
from the date of Grant, and the per Share exercise price may not be less than
the fair market value of a Share on the date the option is granted. Under
certain circumstances, the Plan permits the exercise price of options to be paid
in whole or in part in the form of unrestricted Shares owned by the grantee. The
Plan similarly permits the withholding or surrender of Shares to satisfy
withholding taxes. Grants under the Plan are not transferable by participants
other than by will, or pursuant to the laws of descent and distribution, except
to the extent otherwise permitted by the Committee and, with respect to ISOs, by
the Code.
In the event of termination of an optionee's employment by reason of death,
disability, retirement or without Cause (as defined in the 2000 Plan), the
Committee has broad discretion in determining if and to what extent options held
by such optionee will be terminated, will vest (including acceleration of
vesting) and remain exercisable. If an optionee's employment is terminated for
Cause, all such optionee's unexercised options will terminate unless otherwise
determined by the Committee.
The Committee may also grant stock appreciation rights ("SARs"), either in
tandem with stock options ("Tandem SARs") or independent of stock options
("Freestanding SARs"). A stock appreciation right entitles a key employee to
receive a per Share payment (in cash, Shares or restricted stock, as determined
by the Committee) equal to the excess of the fair market value of a Share on the
date of exercise over the fair market value of a Share on the date of Grant. A
Tandem SAR is exercisable only to the extent the related option is exercisable
and, when exercised, cancels the related option to the extent of the number of
Shares covered by the exercise. Conversely, a Tandem SAR is cancelled to the
extent of the number of Shares covered by the exercise of a related option. The
Committee will determine the terms and conditions of a Freestanding SAR.
The Committee may not in any calendar year grant to any individual
participant options or stock appreciation rights representing, in the aggregate,
more than 500,000 Shares.
Restricted Stock
The Committee may make restricted stock awards to key employees. The
Committee has the discretion to determine whether the Shares covered by a
restricted stock award will be subject to a restriction period, the length of
any such restriction period, and any vesting (or forfeiture) conditions and
terms that apply during any such restriction period. The Committee also has the
discretion to determine if an employee will be required to make a payment with
respect to a restricted stock award and the amount of any such payment. During
the restriction period, if any, the Company will hold the Shares and the
employee cannot transfer the Shares, except to the extent determined by the
Committee in the case of death or disability. The employee is, however,
generally entitled to vote the Shares and receive any dividends with respect to
the Shares, during any such restriction period.
Performance Awards
The Committee may make performance awards to key employees. A performance
award is an award that may be payable either in Shares or in cash, the amount of
Shares and/or cash ultimately payable is based on
7
<PAGE> 10
the achievement of certain performance goals during the performance period, as
determined by the Committee.
Adjustments and Changes in Control
The number of Shares authorized for issuance under the 2000 Plan, the
maximum number of Shares with respect to which Grants may be made to any
individual grantee, the number of Shares issuable under (and the option price
of) outstanding options and other relevant provisions of the Plan are subject to
adjustment in the event of a stock split, stock dividend or similar change in
the capitalization of the Company. Subject to certain limitations, the Committee
also has the authority under the Plan to change the terms of any outstanding
Grant to reflect any such corporate transaction. In the event of a
Change-In-Control (as defined in the 2000 Plan) of the Company, the Committee is
authorized to take such action as it deems equitable and appropriate including
causing all unexercised vested and nonvested outstanding Grants to automatically
vest and become fully exercisable.
Amendment and Termination
The Board of Directors may discontinue or amend the 2000 Plan as it deems
necessary, but no amendment may become effective without approval of the
Company's shareholders if shareholder approval is required by applicable
statutory or regulatory requirements. Further, no discontinuance or amendment
which may materially impair the rights of a participant with respect to
outstanding options, restricted stock awards, stock appreciation rights or
performance awards may be made without his or her consent. Unless earlier
terminated by the Board of Directors, the Plan will automatically terminate in
September 2010, although Grants made prior to such termination will remain in
effect in accordance with their terms and the terms of the Plan.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The Company has been advised that the following is a summary of the
material United States federal income tax consequences to the Company and the
employees receiving stock options, stock grants and stock appreciation rights
pursuant to the 2000 Plan. The following is not intended to be all inclusive or
to constitute tax advice. This summary is based on the Code, Treasury
Regulations promulgated thereunder and administrative and judicial rulings, as
of the date hereof, all of which are subject to change, possibly with
retroactive effect. This summary does not cover possible state, local or foreign
tax consequences or federal tax consequences other than income tax consequences.
Incentive Stock Options. An optionee that receives an ISO does not
recognize income either on the date the option is granted or on the date the ISO
is exercised (although, upon exercise, the difference between the fair market
value of the Shares and the exercise price will be treated as an item of
adjustment for purposes of computing the optionee's alternative minimum taxable
income). If the optionee continues to hold the Shares received for the greater
of (i) one year from the date of exercise of the option and (ii) two years from
the date the option was granted, any gain or loss recognized on the sale of the
Shares will be capital gain or loss. If the optionee disposes of the option or
disposes of the Shares prior to the expiration of the periods set forth in the
preceding sentence (a "Disqualifying Disposition"), the optionee will have
compensation income (i.e., taxed at ordinary income rates) equal to the lesser
of (i) the total amount of gain recognized upon disposition of the Shares and
(ii) the excess of the fair market value of the Shares on the date of exercise
over the exercise price for the Shares. Any additional gain will be capital
gain, and will be long-term capital gain if the optionee held the Shares for
more than one year from the date the option was exercised. The Company will not
be entitled to any deduction upon the grant or exercise of an ISO, but will
generally be entitled to a compensation deduction equal to the amount of
compensation income recognized by the optionee upon a Disqualifying Disposition.
Nonqualified Stock Options. An optionee that receives a NQSO also
generally recognizes no income on the date the option is granted. The optionee
will, however, recognize compensation income on the date the NQSO is exercised
in an amount equal to the excess of the fair market value of the Shares on the
date of
8
<PAGE> 11
exercise over the exercise price. Any gain or loss recognized on a later
disposition of the Shares will be capital gain or loss. The Company is generally
entitled to a deduction at the time the NQSO is exercised equal to the amount of
income recognized by the optionee.
Unrestricted Stock. An employee that receives unrestricted Shares (i.e.,
Shares which are not subject to any vesting restrictions) recognizes
compensation income at the time the Shares are granted equal to the difference
between the fair market value of the Shares received and the amount, if any,
paid by the employee for such Shares. The employee's basis in the Shares are
equal to the amount paid for the Shares plus any income recognized by the
employee upon the receipt of the Shares. Upon a later disposition of the Shares,
the employee recognizes capital gain or loss equal to the difference between the
amount received for such Shares and the employee's basis in those Shares. The
Company is generally entitled to a compensation deduction equal to the amount of
income recognized by the employee upon receipt of the Shares.
Restricted Stock. An employee that receives restricted (or unvested)
Shares generally does not recognize any income upon receipt of the Shares.
Instead, such employee will recognize compensation income at the time vesting
restrictions on the Shares lapse equal to the difference between the fair market
value of the Shares at the time such vesting restrictions have lapsed and the
amount, if any, paid by the employee for the Shares. Any gain or loss recognized
by the employee upon a later disposition of the Shares will be capital in
nature. The Company will generally be entitled to a compensation deduction (in
an amount equal the amount of compensation income recognized by the employee) at
the same time as such income is recognized.
An employee that receives restricted stock may make an election to include
the value of the stock received in income at the time such stock is granted as
if such stock were vested shares. If an employee makes such election, the
employee will recognize ordinary income on the stock when received (in the same
manner as vested stock), and no further income will be recognized until the
stock is later sold or disposed of. Upon such later sale or other disposition,
any gain or loss recognized will be capital in nature. The Company shall
generally receive a compensation deduction for Shares with respect to which the
employee has made such election at the same time (and in the same amount) as the
employee recognizes compensation income.
Stock Appreciation Rights. An employee who receives SARs does not
recognize any income upon the receipt of such SARs. Instead, the employee is
subject to tax (at ordinary income rates) on any amounts received in settlement
of his or her SARs at the time such amounts are paid. The Company generally is
entitled to a deduction equal to the amount included by the employee in income.
Various additional tax consequences may apply to the granting, acceleration
and exercise or vesting of Grants and to the disposition of Shares thereunder,
but such consequences are beyond the scope of this summary.
3. OTHER MATTERS
The Board of Directors knows of no matters to be presented for action at
the Meeting other than those set forth in the attached Notice and customary
procedural matters. However, if any other matters should properly come before
the meeting or any adjournments thereof, the proxies solicited hereby will be
voted on such matters, to the extent permitted by applicable rules of the SEC,
in accordance with the judgment of the persons voting such proxies. In the
latter regard, the Company intends to avail itself, until further notice, of the
provisions of Rule 14a-4(c)(i) under the Securities Exchange Act of 1934, as
amended, which grants the persons voting the proxies discretionary authority to
vote on any shareholder proposals presented at an Annual Meeting if the Company
has not received notice at least 45 days before the anniversary of the date on
which the Company first mailed its proxy materials for the previous year's
Annual Meeting or, when the date of the meeting has changed more than 30 days
from the prior year, if the Company has not received such notice a reasonable
time before it mails its proxy materials for the current year. The Company has
received no notice of any shareholder proposal. The Company is in the process of
amending its By-Laws to require somewhat greater advance notice of shareholder
proposals to be presented at shareholders' meetings more in line with the
By-Laws notice requirements for shareholder nominations of candidates for
election as directors. See "Nomination of Directors and Related Matters" above.
9
<PAGE> 12
ADDITIONAL INFORMATION
BENEFICIAL OWNERSHIP OF PRINCIPAL SHAREHOLDERS AND MANAGEMENT
The following table sets forth, as of September 1, 2000, (unless otherwise
specified) certain information concerning the beneficial ownership of Common
Stock by: (i) each person who was known by the Company to be the beneficial
owner of more than 5% of such shares; (ii) each director and nominee for
director of the Company; (iii) each of the executive officers of the Company
named in the Summary Compensation Table appearing later in this proxy statement;
and (iv) all present directors and executive officers of the Company, as a
group. Such information is based upon information filed by such persons with the
SEC or provided to the Company by such persons or by other sources believed to
be reliable.
<TABLE>
<CAPTION>
SHARES PERCENT
BENEFICIALLY OF
NAME OF BENEFICIAL OWNER OWNED(1) CLASS(1)
------------------------ ------------ --------
<S> <C> <C>
Tiger Management L.L.C. .................................... 5,091,300(3) 14.630
101 Park Avenue
New York, NY 10178
Barclays Global Investors, N.A. ............................ 3,853,896(2) 11.073
45 Fremont Street
San Francisco, CA 94105
ESL Partners................................................ 2,280,600(2) 6.552
One Lafayette Place
Greenwich, CT 06830
Snyder Capital Management................................... 2,206,300(2) 6.339
350 California Street, Suite 1460
San Francisco, CA 94104
American Century Investment Management, Inc. ............... 1,890,100(4) 5.430
4500 Main Street
Kansas City, MO 64141
Deutsche Asset Management (US)(2)........................... 1,801,563 5.176
1 Bankers Trust Plaza, 130 Liberty Street
New York, NY 10006
William Y. O'Connor, former director and executive
officer................................................... 917,000(5) 2.635
Robert M. Dewey, Jr., director.............................. 64,382(6) *
Burnett W. Donoho, director................................. 51,467(6) *
The Rt. Hon. Lord Moore of Lower Marsh, P.C., director...... 51,172(6) *
Lt. Gen. (Ret.) Emmett Paige, Jr., director................. 34,207(6) *
Anthony Ruys, director...................................... 43,521(6) *
W. Bruce Turner, director................................... 102,564(9) *
Steven P. Nowick, former executive officer.................. 370,000(10) 1.063
Jean-Pierre Desbiens, executive officer..................... 20,000(8)(11) *
Donald L. Stanford, executive officer....................... 25,000(7)(8) *
Donald R. Sweitzer, executive officer....................... 21,250(7)(8) *
All present directors and executive officers, as a group (12
persons).................................................. 435,930(12) 1.253
</TABLE>
---------------
* less than 1%
(1) The shareholdings reflected in this table include shares which the person
has the right, upon exercise of options or otherwise, to acquire within 60
days following the date of this table.
10
<PAGE> 13
(2) Barclays Global Investors, N.A., ESL Partners, Snyder Capital Management
and Deutsche Asset Management (US) are institutional investment managers.
(3) Includes shares held by Tiger Performance L.L.C. Both Tiger Management
L.L.C. and Tiger Performance L.L.C. are registered investment advisors
ultimately controlled by Julian H. Robertson, Jr.
(4) Includes shares held by American Century Capital Portfolios, Inc. and a
number of additional registered investment companies, the investments of
which are managed by American Century Investment Management, Inc., a
registered investment advisor.
(5) Includes 912,000 shares subject to stock options granted under the
Company's stock option plans the vesting of 287,500 of which accelerated at
the time of the termination of Mr. O'Connor's employment with the Company.
See "Employment and Severance Agreements and Arrangements" below.
(6) Includes 40,000 shares (30,000 shares in the case of General Paige) subject
to stock options automatically granted under the Company's 1996 and 1999
Non-Employee Directors' Stock Option Plans, the last 10,000 share
installment of which options becomes exercisable in October 2000.
(7) Includes 16,250 shares subject to options granted under the Company's stock
option plans.
(8) Does not include a grant of 15,000 restricted shares awarded under the
Company's 2000 Restricted Stock Plan.
(9) Includes 100,000 shares subject to stock options granted under the
Company's 1997 Plan and 100,000 restricted shares awarded under the
Company's 2000 Restricted Stock Plan. See "Employment and Severance
Agreements and Arrangements" below.
(10) Shares subject to stock options granted under the Company's stock option
plans, the vesting of 220,000 of which accelerated at the time of the
termination of Mr. Nowick's employment with the Company. See "Employment
and Severance Agreements and Arrangements" below.
(11) Includes 15,000 shares subject to stock options granted under the Company's
stock option plans.
(12) Includes 272,500 shares subject to stock options granted under the
Company's stock option plans. Does not include shares beneficially owned by
Messrs. O'Connor and Nowick.
EXECUTIVE COMPENSATION REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF
DIRECTORS
Policies regarding executive compensation are set primarily by the
Compensation Committee (the "Committee") of the Board of Directors, subject to
the terms of applicable employment contracts, as discussed below, and possible
consultation with and ratification by the Board in certain circumstances. The
Committee currently (i.e., as of May 26, 2000) has three members, Messrs. Turner
and Ruys and Lord Moore, all of whom are outside independent directors.
Compensation Philosophy.
The Committee believes that the Company must pay competitively to attract
and retain qualified executives. To motivate executive personnel to perform at
their full potential, the Committee believes a significant portion of
compensation should be incentive-based. This would typically result in salary
levels around the median of competitive ranges, and bonuses, if performance is
achieved, well above the median. In addition, the Committee believes it is
important to reward not only individual performance and achievement, but also to
focus on overall corporate results. This latter objective serves the dual
purpose of encouraging teamwork among executives and also supporting the
Company's objective of increasing shareholder value.
The Committee also believes it is essential that it retain the flexibility
to evaluate not only overall individual performance and the performance of the
Company as a whole, but also all other circumstances and challenges facing the
Company. Consequently, it uses subjective as well as objective criteria in
setting and adjusting the base salary and the annual bonus for executive
officers.
11
<PAGE> 14
Executive Officer Employment Agreements.
Two of the executive officers of the Company during fiscal 2000 named in
the Summary Compensation Table below (Messrs. O'Connor and Nowick) are parties
to employment agreements with the Company which, to a large extent, governed
their compensation during the year. See "Employment -- Severance Agreements and
Arrangements" and the Summary Compensation Table below for further information
about the terms of these agreements.
The other executive officers named in the Summary Compensation Table below
were not parties to employment agreements, and their compensation currently is
determined based upon a review by their superiors and consideration of the
principles set forth above and elsewhere in this report.
Principal Elements of Compensation.
Compensation earned in the 2000 fiscal year, as reflected in the Summary
Compensation Table, consisted primarily of salary, annual bonus and stock
options. (Executive officers also received executive benefits and perquisites,
as well as other benefits offered under Company sponsored broad-based plans.)
Base Salary. Executive officers' salaries are reviewed annually. In
assessing whether salary increases are warranted with respect to those executive
officers without employment agreements or in connection with discretionary
increases under, or the amendment, extension or renewal of, an executive
officer's employment agreement, the Company considers a number of factors,
including corporate profitability, performance on the job, responsibility level,
internal compensation equity, external pay practices for comparable companies
(not necessarily including the Peer Group companies referred to in the
Shareholder Return Performance Graph below) and the executive officer's level of
responsibility, experience and expertise, which factors may be given varying
weights depending upon the circumstances.
Annual Bonus. The Company's policy respecting the granting of annual
bonuses is based upon the aims of recognizing individual merit and providing
incentives for the achievement of corporate performance goals. Messrs.
O'Connor's and Nowick's employment agreements provide for annual bonuses based
upon discretionary elements subject to a specified annual bonus range. Executive
officers without employment agreements receive annual bonuses at the discretion
of their superiors consistent with the principles outlined above.
Stock Options. The Company's 1997 Stock Option Plan (the "1997 Plan") was
approved by the shareholders of the Company at the 1997 Annual Meeting. The Plan
provides for the granting of stock options to officers and other key employees
of the Company and its subsidiaries. The principal purpose of the Plan is to
assist the Company in attracting and retaining officers and other key employees,
and to motivate them to increase shareholder value by enabling them to
participate in the value which has been created.
The aggregate number of annual option grants to be made under the 1997
Plan, as well as the individuals to whom options are to be granted and the
amount of such individual grants, are all within the discretion of the
Committee, subject to certain limitations in the 1997 Plan. The aggregate number
of options available for annual grants generally is tied to specific earnings
per share targets and returns on capital invested as set annually by the
Committee and approved by the Board of Directors. In making individual option
awards, the Committee generally takes into account numerous factors, including
the prospective recipient's level of responsibility, experience, expertise and
years of service, as well as internal compensation equity considerations. In
fiscal 2000, the aggregate number of annual option grants and the amounts of
individual option grants to executive officers were determined on the bases
described above. See "Option Grants in Last Fiscal Year" below.
Rationale for Fiscal 2000 Compensation of Mr. O'Connor.
Mr. O'Connor's employment agreement, as in effect for fiscal 2000, provided
for an annual base salary of $600,000 and for an annual incentive bonus of up to
a maximum of six times his current base salary. The actual multiplier of base
salary used in determining Mr. O'Connor's incentive bonus of $1,350,000 for
fiscal 2000 was determined based upon the extent to which certain levels (as set
forth in a matrix) of earnings per share, revenues, stock price and return on
capital were achieved, and to a lesser extent, upon the Committee's
12
<PAGE> 15
qualitative evaluation of Mr. O'Connor's individual performance and of external
factors affecting the Company's financial results and its stock price in fiscal
2000.
The Committee intends to continue its practice of basing executive
compensation primarily on earnings per share and other financial performance
criteria, and secondarily, but importantly, on its qualitative evaluation of
individual performance. The Committee believes that its compensation policies
promote the goals of attracting, motivating, rewarding and retaining talented
executives who will maximize value for the Company's shareholders.
Section 162(m) of the Internal Revenue Code of 1986, as amended, limits to
$1,000,000 the amount of compensation which may be deducted by the Company in
any year with respect to each of its highest paid executive officers. Certain
types of performance-based compensation, if approved by stockholders and/or
otherwise exempted by Section 162(m), are not subject to this limitation. It is
believed that the Company's stock option plans in which executive officers are
eligible to participate have been structured in such a way as to qualify as
performance-based compensation not subject to the Section 162(m) limits on
deductibility, and the Committee intends to consider whether it is practical
similarly to qualify in the future all or a portion of Mr. O'Connor's and, where
applicable, other executive officers' annual incentive bonuses so as to be
exempt from such limits. However, the Committee believes that it is important to
retain the flexibility to offer such compensation arrangements and plans as the
Committee determines to be necessary from time to time to attract, retain and
motivate executive officers without being constrained by considerations of
Section 162(m) tax deductibility.
Date: May 26, 2000
The Fiscal 2000 Compensation Committee
of the Board of Directors*
Robert M. Dewey, Jr.
The Rt. Hon. Lord Moore of Lower
Marsh, P.C.*
General Emmett Paige, Jr.
Anthony Ruys
W. Bruce Turner*
---------------
* Lord Moore and Mr. Turner replaced Mr. Dewey and General Paige as members of
the Compensation Committee in March 2000, after the end of fiscal 2000, but
Lord Moore and Mr. Turner were members of such Committee when Mr. O'Connor's
incentive compensation for fiscal 2000 was determined.
13
<PAGE> 16
SUMMARY COMPENSATION TABLE
The following table sets forth certain information concerning the annual
and long-term compensation paid for fiscal years 2000, 1999, and 1998 to or for:
(i) each person who served as the Company's Chief Executive Officer during
fiscal year 2000; and (ii) each of the Company's four other most
highly-compensated executive officers whose total annual salary and bonus for
fiscal year 2000 exceeded $100,000 (collectively, the "Named Officers") for
services rendered to the Company and its subsidiaries:
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
---------------------------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
------------------------------------------- --------------------- ---------------------
OTHER RESTRICTED LONG-TERM ALL OTHER
ANNUAL STOCK COMPEN- COMPEN-
SALARY BONUS COMPENSATION AWARD(S) OPTIONS/ SATION SATION
NAME AND PRINCIPAL POSITION(1) YEAR ($)(2) ($) ($)(3) ($) SARS(4) PAYOUTS ($)(5)
-------------------------------- ---- -------- --------- ------------ ---------- -------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
William Y. O'Connor............. 2000 600,000 1,350,000 193,876 -- 150,000 -- 215,808
Chairman and Chief Executive 1999 598,077 1,800,000 230,927 -- 150,000 -- 251,357
Officer and President 1998 511,757 1,650,000 180,943 -- -- -- 341,762
Steven P. Nowick................ 2000 374,423 600,000 202,725 -- 90,000 -- 36,849
Senior Vice President and Chief 1999 377,978 550,000 222,844 -- 60,000 -- 40,417
Operating Officer 1998 182,500 75,000 109,287 -- 130,000 -- 388
Jean-Pierre Desbiens............ 2000 230,481 263,501 94,061 -- 20,000 -- 17,104
Senior Vice President 1999 131,058 15,000 24,187 -- 20,000 -- 96
Donald L. Stanford.............. 2000 326,430 159,118 95,335 -- 40,000 -- 21,557
Senior Vice President 1999 326,430 300,000 83,025 -- 30,000 -- 33,053
1998 326,430 145,000 74,013 -- -- -- 21,527
Donald R. Sweitzer.............. 2000 300,000 188,730 86,803 -- 25,000 -- 21,686
Senior Vice President 1999 188,077 235,538 80,785 -- 30,000 -- 1,296
</TABLE>
---------------
(1) Sets forth the names and principal positions of the Named Officers as of the
end of fiscal 2000. Mr. Nowick became President of the Company shortly after
the end of fiscal 2000. Messrs. Nowick, Sweitzer and Desbiens commenced
employment with the Company in July 1997, July 1998, and August 1998,
respectively. Messrs. O'Connor and Nowick left the Company in July 2000. See
"Employment and Severance Agreements and Arrangements" below.
(2) Includes salary deferred under the Company's 401(k) retirement plan (the
"Retirement Plan") and its Income Deferral Plan 1998.
(3) Includes: (i) personal benefits provided by the Company and payments under
the Company's Executive Perquisites Program (which provides officers above a
certain rank with up to a pre-established dollar amount of specified
benefits from which they may select); (ii) taxable fringe benefits provided
by the Company, including, without limitation, personal automobile and
airplane usage and the payment of relocation expenses; and (iii) gross-ups
for taxes with respect to benefits provided by the Company, including,
without limitation, with respect to the Company's Executive Perquisites
Program, restricted stock rights granted by the Company, and the Company's
1992 supplemental retirement plan (the "SRP"). The Company made payments
under the Executive Perquisites Program to each of the Named Officers of
$27,500 in each of the fiscal years for which compensation is provided for
such officer above, except that Mr. Nowick received $27,113 in 1998, Mr.
Desbiens received $27,920 in 2000 and $11,460 in 1999, and Mr. Sweitzer
received $13,750 in 1999. In addition, the Company provided taxable fringe
benefits to the Named Officers in the following amounts: Mr.
O'Connor -- $41,613 (2000), $31,466 (1999) and $22,577 (1998) (including
imputed interest on certain loans made by the Company to Mr. O'Connor
pursuant to his employment agreement); Mr. Nowick -- $63,765 (2000), $68,778
(1999) and $32,102 (1998); Mr. Desbiens -- $6,974 (2000); Mr.
Stanford -- $26,474 (2000), $3,769 (1999) and $4,986 (1998); Mr.
Sweitzer -- $14,815 (2000), $30,982 (1999). The gross-up payments for taxes
were: Mr. O'Connor -- $124,763 (2000), $171,961 (1999) and $130,866 (1998);
Mr. Nowick -- $111,460 (2000), $126,566 (1999) and $50,072 (1998); Mr.
Desbiens -- $59,167 (2000) and $12,727 (1999); Mr. Stanford -- $41,361
(2000), $51,756 (1999) and $41,527 (1998); Mr. Sweitzer -- $44,488 (2000)
and $36,053 (1999).
(4) Represents the number of shares of Common Stock underlying stock options
granted pursuant to the Company's 1994 and/or 1997 Plans. See "Stock Option
Grants in Last Fiscal year" below.
14
<PAGE> 17
(5) Includes the dollar value of insurance premiums paid by the Company during
the covered fiscal year with respect to life insurance maintained on the
lives of each of the Named Officers, matching contributions and profit
sharing contributions paid by the Company with respect to the Named Officers
under the Retirement Plan, and amounts provided under the Company's SRP.
During or with respect to fiscal 2000, the Company: (i) paid insurance
premiums with respect to life insurance maintained on the lives of the Named
Officers in the following amounts: Mr. O'Connor -- $26,455; Mr.
Nowick -- $1,072; Mr. Desbiens -- $513; Mr. Stanford -- $1,138; and Mr.
Sweitzer -- $1,709; (ii) made matching contributions under the Retirement
Plan of $4,150 for each of the Named Officers, except for Mr. Desbiens (-0-)
and Mr. Sweitzer ($3,612); (iii) made profit-sharing contributions under the
Retirement Plan of $4,800 for each of the Named Officers; (iv) made
contributions under the SRP for each of the Named Officers in the following
amounts: Mr. O'Connor -- $55,403; Mr. Nowick -- $26,827; Mr. Desbiens --
$11,791; Mr. Stanford -- $11,469; and Mr. Sweitzer -- $11,565; and (v)
forgave $125,000 of principal amount of a $500,000 principal amount loan
made by the Company in fiscal 1995 to Mr. O'Connor.
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth certain information concerning individual
grants of stock options made during fiscal 2000 to Named Officers. All grants of
stock options reflected in the following table were made pursuant to the
Company's 1997 Plan and are subject to the terms of such Plan.
<TABLE>
<CAPTION>
POTENTIAL
REALIZABLE
INDIVIDUAL GRANTS(1) VALUE AT ASSUMED
----------------------------------------------------- ANNUAL RATES
NO. OF SHARES % OF OF STOCK PRICE
OF COMMON OPTIONS APPRECIATION FOR
STOCK GRANTED TO OPTION TERM(2)
UNDERLYING EMPLOYEES EXERCISE OR ---------------------
OPTIONS IN FISCAL BASE PRICE EXPIRATION 5% 10%
NAME GRANTED YEAR ($/SH) DATE ($) ($)
---- ------------- ---------- ----------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
William Y. O'Connor............. 150,000 14.63 24.91 3/09 2,349,865 5,955,019
Steven P. Nowick................ 90,000 8.78 24.91 3/09 1,409,919 3,573,011
Jean-Pierre Desbiens............ 20,000 1.95 24.91 3/09 313,315 794,002
Donald L. Stanford.............. 40,000 3.90 24.91 3/09 626,631 1,588,005
Donald R. Sweitzer.............. 25,000 2.44 24.91 3/09 391,644 992,503
</TABLE>
---------------
(1) Grants reflected in this table were non-qualified options, and the exercise
price was equal to the fair market value of a share on the date of grant.
These stock options become exercisable in annual ratable installments on the
four successive anniversary dates of the respective dates of grant, subject
to possible acceleration in the event of the termination of the Named
Officers' employment, a change in control of the Company or otherwise as
provided in the plans or other agreements. See footnotes (5) and (10) to
"Beneficial Ownership of Principal Shareholders and Management" above.
(2) Determined by multiplying: (a) the difference between: (i) the product of
the per-share market price at the time of the grant and the sum of 1 plus
the adjusted stock price appreciation rate (the assumed rate of appreciation
compounded annually over the term of the option) and (ii) the per-share
exercise price of the option, by (b) the number of shares underlying the
option at the end of fiscal 2000.
15
<PAGE> 18
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTIONS
VALUES
The following table sets forth information concerning option exercises by
Named Officers during fiscal 2000, and the value of all unexercised stock
options held by Named Officers, as well as the number of shares of Common Stock
of the Company underlying unexercised stock options held by Named Officers, as
of the close of the Company's 2000 fiscal year on February 26, 2000:
<TABLE>
<CAPTION>
NUMBER OF SHARES OF VALUE OF UNEXERCISED
SHARES COMMON STOCK UNDERLYING IN-THE-MONEY
ACQUIRED ON VALUE STOCK OPTIONS(1) STOCK OPTIONS(2)
EXERCISE REALIZED --------------------------- ---------------------------
NAME (#) ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
William Y. O'Connor.......... -- -- 549,500 262,500 $331,250 $ --
Steven P. Nowick............. -- -- 80,000 200,000 $ -- $ --
Jean-Pierre Desbiens......... -- -- 5,000 35,000 $ -- $ --
Donald L. Stanford........... -- -- 7,500 62,500 $ -- $ --
Donald R. Sweitzer........... -- -- 7,500 47,500 $ -- $ --
</TABLE>
---------------
(1) All stock options reflected in this table were non-qualified options granted
pursuant to the Company's 1994 and/or 1997 stock option plans and are
subject to the terms of such plans. These stock options become exercisable
in annual ratable installments on the four successive anniversary dates of
the respective dates of grant, subject to possible acceleration in the event
of the termination of the Named Officers' employment, a change in control of
the Company or otherwise as provided in the plans or other agreements. See
footnotes (5) and (10) to "Beneficial Ownership of Principal Shareholders
and Management" above.
(2) Calculated based upon the aggregate of the difference between: (i) $20,
which was the per-share closing price of the Common Stock on the New York
Stock Exchange on February 25, 2000, the last trading day of the Company's
2000 fiscal year, and (ii) the per-share exercise prices for those stock
options which were in-the-money on that date.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During fiscal 2000, decisions regarding executive compensation were made
primarily by the Compensation Committee, subject to the terms of applicable
employment agreements and ratification by the full Board in certain
circumstances. Mr. O'Connor, the then Chairman, President and Chief Executive
Officer, participated in certain deliberations of the Compensation Committee
concerning executive officer compensation.
Messrs. Dewey and Ruys and General Paige were the members of the
Compensation Committee during fiscal 2000. See "Executive Compensation Report of
the Compensation Committee of the Board of Directors" above.
EMPLOYMENT AND SEVERANCE AGREEMENTS AND ARRANGEMENTS
During fiscal 2000, the Company was party to employment agreements with
Messrs. O'Connor and Nowick. As publicly reported, in July 2000, the Board
accepted the resignations of Messrs. O'Connor and Nowick and they left the
Company. At that time, they entered into agreements with the Company governing
the terms of their severance from the Company. These severance agreements
essentially provided (with certain exceptions not individually or in the
aggregate material) the payments and benefits required under the terms of
Messrs. O'Connor's and Nowick's existing employment agreements in the event of
terminations without "Cause" or resignation for "Good Cause".
Mr. O'Connor originally entered into an employment agreement with the
Company in October 1994, which agreement was amended and restated in July 1997
in connection with his promotion to Chief Executive Officer. The term of Mr.
O'Connor's amended and restated employment agreement commenced on July 14, 1997
and was to continue until his death, disability, retirement from active
employment (with the consent of
16
<PAGE> 19
the Board or in accordance with Company policy), resignation or discharge. The
agreement, as most recently in effect, provided for an annual base salary of
$600,000 (increased annually based upon the Consumer Price Index and otherwise
in the discretion of the Board or the Compensation Committee), an annual
performance bonus of up to a maximum of six times his then-current salary, and
life insurance and various other benefits (including, but not limited to,
medical coverage for Mr. O'Connor and his family, certain club memberships,
spousal travel, certain professional services, use of automobile, and certain
fringe and other benefits identified in the notes to the Summary Compensation
Table above). The agreement provided that Mr. O'Connor's performance bonus was
to be determined using a matrix of reasonable quantitative metrics established
by and in the reasonable discretion of the Compensation Committee.
Under the agreement, if Mr. O'Connor's employment with the Company was
terminated by reason of his death, retirement from active employment (with
consent of the Board or in accordance with the retirement policies of the
Company), discharge by the Company for Cause or resignation (other than for Good
Reason), Mr. O'Connor (or his estate, as the case may be) was entitled to his
base salary, benefit and bonus amounts, if any, accrued through the date of
termination, and, in the case of retirement from active employment after age 65,
comprehensive medical coverage for Mr. O'Connor and eligible family members and
certain term life insurance coverage. If Mr. O'Connor's employment was
terminated by reason of disability, discharge by the Company without Cause or by
reason of Mr. O'Connor's resignation for Good Reason, he was entitled to
receive, in addition to all salary, bonuses and benefits accrued through the
date of termination, an amount equal to the sum of three times the average of
his base salary, bonuses and certain perquisites for the prior three fiscal
years, plus $1,500,000. In addition, in the event of termination of his
employment for any of the aforesaid reasons, Mr. O'Connor was entitled to
post-employment life insurance for up to three years and comprehensive medical
coverage for a minimum of three years after such termination depending on how
many years he had been employed by the Company. The agreement further provided
in such circumstances for the payment to him of an amount equal to the sum of
the present value of all benefits accrued by him under any non-qualified Company
plan (including the Supplemental Executive Retirement Plan) and three times the
average benefits of, or Company contributions to, over the three previous fiscal
years, under all Company plans.
Mr. O'Connor's agreement also provided that irrespective of the reason for
his termination of employment with the Company, he may not compete with the
Company for three years after the date of such termination.
If Mr. O'Connor's employment had terminated within twenty-four months after
a change in control of the Company (including as a result of Mr. O'Connor's
voluntary resignation not earlier than six months, and not later than one year,
following the change in control, but not including his normal retirement), then
specific provisions were to apply in lieu of the provisions described above. In
such event, Mr. O'Connor would have been entitled to receive, in addition to his
salary, benefits and bonus amounts, if any, accrued through the date of
termination, an amount equal to 2.99 times the sum of his then-current base
salary, most recent performance bonus (or, if higher, the performance bonus most
recently awarded to him prior to the change in control) and certain perquisites
and other amounts. In addition, in the event of termination of Mr. O'Connor's
employment following a change in control, the Company would have been obligated
to provide him with life insurance and comprehensive medical coverage after
termination, and to pay him the present value of all benefits accrued for him
under any non-qualified Company plan and an amount equal to four times the
average (over the previous three fiscal years), accrued benefit under, or
Company contributions to, all qualified plans. The agreement further required
the payment to Mr. O'Connor of an amount equal to any excise tax due as a result
of a payment or benefit constituting a "parachute payment" within the meaning of
Section 280G of the Code together with amounts necessary to gross-up Mr.
O'Connor for any taxes due thereon.
A "change in control" would generally be deemed to have occurred under Mr.
O'Connor's agreement if any of the following had occurred: (i) individuals
comprising the Board of Directors of the Company at the beginning of any
consecutive twenty-four month period had ceased (other than due to death or with
the approval of a majority of such directors) to constitute a majority of the
Board; (ii) any "person" or "group" (as defined under the Securities Exchange
Act of 1934, as amended) had become a "beneficial owner" (as
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<PAGE> 20
defined under the Exchange Act), directly or indirectly, of more than 30% of the
combined voting power of the Company's then-outstanding common equity
securities; or (iii) the stockholders of the Company had approved a definitive
agreement (A) for the merger of the Company into or with another corporation
(unless the directors of the Company immediately prior to the merger had
constituted a majority of the directors of the surviving corporation or the
stockholders of the Company immediately prior to the merger had owned 50% or
more of the combined voting power of the surviving corporation) or (B) for the
sale or disposition of all or substantially all of the assets of the Company.
"Good Reason" was defined in Mr. O'Connor's agreement to mean: (i) the
assignment of duties that are materially inconsistent with the scope of his
stated duties; (ii) the Company's failure to pay him any amounts vested and due
under his employment agreement or any other Company plan or policy; (iii) a
reduction in benefits to him or a material adverse change in the terms or
conditions under which amounts are payable; (iv) a reduction in Mr. O'Connor's
title or duties; (v) a breach of the Company's obligations not to relocate him
without his consent; (vi) in the case of any merger or similar transaction
involving the Company, the failure by the Company to obtain an agreement
reasonably satisfactory to Mr. O'Connor from a successor to the Company to
assume his employment agreement; or (vii) any material breach by the Company of
the agreement. "Cause" was defined to mean: (i) any willful and continuing
failure to substantially perform employment duties with a material adverse
effect upon the Company; (ii) any engagement in serious misconduct which is
injurious to the Company; (iii) any willful and continuing material breach of
the agreement, including with respect to confidentiality, protection of
intellectual property or non-competition; (iv) conviction of a crime involving
fraud, misrepresentation, gambling or a felony with a material adverse effect
upon the Company; or (v) habitual intoxication or abuse of drugs or controlled
substances.
In July 2000, the Company and Mr. O'Connor entered into a severance
agreement pursuant to which Mr. O'Connor's employment terminated, effective July
5, 2000. At such time, essentially in accordance with the terms of his existing
employment agreement in the case of termination of employment without "Cause",
the Company made a lump-sum payment to Mr. O'Connor in the amount of $8,748,785
(before required tax withholdings). The severance agreement also provides that
Mr. O'Connor shall not be eligible for any Company benefits or perquisites from
and after the date of termination of his employment except that the Company has
agreed that: (i) for a period of three years (or until Mr. O'Connor's death, if
earlier) to continue to provide Mr. O'Connor, at its expense, with the term life
insurance coverage provided for in the employment agreement (or, if higher, the
amount in effect as of the date of termination of employment); (ii) for a period
of eighteen months commencing no later than one year after the date of
termination of employment, to provide Mr. O'Connor with certain outplacement
services; (iii) for a period of six years (or until Mr. O'Connor's death, if
earlier) to continue to provide the medical and related coverage set forth in
Mr. O'Connor's employment agreement; (iv) within 30 days after the date of Mr.
O'Connor's termination from employment, to pay Mr. O'Connor the present value of
all benefits accrued to him under the Company's non-qualified plans (including
the Company's Supplemental Retirement Plan for Senior Executives, in which Mr.
O'Connor became vested under the severance agreement) and an amount equal to
three times the average benefit accrued and/or Company contributions made to the
Company's tax qualified defined benefit plan, profit sharing and 401(k)
retirement plan and non-qualified plans over the three fiscal years; (v) it will
pay to Mr. O'Connor any amount in Mr. O'Connor's account under the Company's
profit sharing and 401(k) plan forfeited by Mr. O'Connor due to the termination
of his employment; and (vi) it will bear the expense of tax preparation services
for the 2000 calendar year, reasonable attorneys' fees incurred by Mr. O'Connor
in connection with the negotiation and preparation of the severance agreement,
business expenses incurred by, but not reimbursed to, Mr. O'Connor as of the
date of termination of his employment and expenses related to club memberships
and automobile fringe benefits through the date of termination of his
employment. Mr. O'Connor's severance agreement further provides that such of his
stock options as were outstanding and previously unvested as of the date of
termination of his employment (287,500 shares) accelerated and became vested in
full, and such accelerated options and other previously vested outstanding
options remain exercisable for one year following the date of termination of his
employment, subject to earlier termination as provided in the Company's stock
option plans pursuant to which the stock options were granted. The Company also
agreed to pay all costs and expenses incurred by Mr. O'Connor in connection with
any legal proceeding relating to any provision of the severance agreement,
including as to its enforcement, unless Mr. O'Connor institutes and fails
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<PAGE> 21
to prevail in such proceeding. Finally, the Company agreed to fully indemnify
Mr. O'Connor in connection with the performance of services under his employment
agreement and the termination of his employment and to cause Mr. O'Connor to
continue to be covered by the Company's directors and officers liability
insurance substantially similar to that provided to the Company's directors and
officers.
Under the terms of the severance agreement, Mr. O'Connor agreed for a
period of three years after the date of termination of employment: (i) to
reasonably assist the Company in connection with any claims, investigations,
litigation or similar proceedings involving the Company with respect to the
period of Mr. O'Connor's employment; (ii) not to engage in any business which
competes with the Company's lottery and gaming, electronic benefits transfer
and/or network communications services business or any other business which the
Company was engaged in, or proposed to be engaged in, at the time of Mr.
O'Connor's termination from employment; and (iii) not to intentionally disturb
or interfere with any business relationship of the Company (including with its
employees).
Mr. O'Connor and the Company entered into mutual releases based upon Mr.
O'Connor's employment or the termination of his employment.
Mr. Nowick's employment agreement with the Company was dated as of January
15, 1999, with effect from July 11, 1997. The agreement provided for: an annual
base salary of $360,000 (was subject to increase each March 1, commencing in
1999 to reflect any increase in the Consumer Price Index); an annual management
incentive bonus of up to a maximum of two times his base salary (based upon the
attainment of personal and Company performance objectives); contribution by the
Company of $669,032 to the Income Deferral Plan for Mr. Nowick's account; and
various other benefits, including, but not limited to, home buyout option, use
of automobile, medical coverage for Mr. Nowick and his family, tax preparation
and participation in the Company's stock option, perquisites and other benefit
plans for senior executives. In the agreement, Mr. Nowick agreed, among other
things, not to compete with the Company in the lottery and gaming business for
three years, or in any other business for one year, following termination of his
employment.
The initial term of Mr. Nowick's agreement was to end February 28, 2001. On
March 1, 2001 and on each subsequent March 1, the term of the agreement was to
have been automatically extended for one year unless at least 180 days prior to
such date either the Company or Mr. Nowick had notified the other that it or he
did not wish to extend the term. If the term of Mr. Nowick's employment had
terminated by death, retirement, discharge for Cause or resignation other than
for Good Reason, he would generally have been entitled to receive his
then-current base salary and benefits accrued up to the date of termination or
as otherwise provided by the terms of the specific benefit plans in which he
participated. If Mr. Nowick's employment term terminated as a result of his
disability, discharge without Cause or resignation for Good Reason, the Company
was required to continue: (i) his then-current base salary for three years
following such termination, or until his earlier death, and (ii) his life
insurance and medical coverage for one year following such termination. With
certain exceptions, the terms "Change in Control," "Good Reason" and "Cause" in
Mr. Nowick's employment agreement are defined in generally the same manner as
such terms were defined in Mr. O'Connor's employment agreement as described
above.
Mr. Nowick resigned his position with the Company effective July 5, 2000.
At such time, Mr. Nowick and the Company entered into an agreement setting forth
the terms and conditions governing Mr. Nowick's severance from the Company.
Pursuant to this agreement, the Company agreed to pay Mr. Nowick a total of
$1,750,000, $750,000 of which was paid at the time of Mr. Nowick's resignation
from the Company, with the remainder payable in equal monthly installments over
the twenty-four months following Mr. Nowick's resignation. These payments are
equal in amount to three years of Mr. Nowick's base salary plus $250,000 paid in
consideration for Mr. Nowick's waiver of certain notice requirements provided
for in his employment agreement related to the termination of his employment.
Mr. Nowick is also to receive all benefits provided under his employment
agreement in the event of resignation for Good Reason (including life insurance
coverage for Mr. Nowick for one year, subject to continued employee
contribution), all accrued but unused vacation pay, his balance in or value of
all qualified and nonqualified Company compensation or retirement plans, all
unreimbursed travel and entertainment expenses and title to his Company car.
Additionally, the Company agreed to provide Mr. Nowick and his family, at the
Company's sole cost, with continued medical,
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<PAGE> 22
dental and optical coverage for a period of six years following his resignation.
Mr. Nowick's outstanding unvested stock options (220,000 shares) accelerated and
became vested in full on the date of Mr. Nowick's resignation and such
accelerated options and other previously vested options will remain exercisable
under the terms of Mr. Nowick's agreement with the Company, for one year
thereafter. For a period of two years after the date of his resignation, Mr.
Nowick has agreed not to: (i) engage directly or indirectly (whether as an owner
(exclusive of certain diminimus levels of investment), manager, operator,
employee or consultant) in the lottery and gaming business; or (ii) disturb or
interfere with any Company business relationship.
Mr. Turner entered into an employment agreement with the Company in August,
2000, to serve as Chairman of the Board. The term of Mr. Turner's agreement
commenced on August 9, 2000, and continues for a period of two years. The
agreement provides for an annual base salary of $300,000, as well as various
other benefits including, but not limited to, relocation expenses; housing costs
(unless and until Mr. Turner purchases a residence in Rhode Island, in which
case the Company shall be obligated to reimburse Mr. Turner for all transaction
costs, including closing costs and moving expenses, but Mr. Turner shall remain
responsible for the purchase price of the residence and all finance charges
associated with the purchase); use of an automobile; life insurance; medical
coverage for Mr. Turner and his family; legal fees incurred by Mr. Turner
associated with the negotiation and preparation of the agreement; perquisites
(on a pro rata basis for fiscal year 2001) and other benefit plans for senior
executives. To the extent that Mr. Turner incurs any Rhode Island income tax
liability for any deferred income payments he receives from previous employers,
the Company is obligated to pay to him an amount in cash equal to the sum of
such Rhode Island state income taxes plus a grossed-up amount necessary to
offset any and all applicable federal, state and local excise, income or other
taxes incurred by Mr. Turner by reason of the Company's payment of the amount of
such Rhode Island income taxes incurred by reason of the grossed-up payments.
Mr. Turner is not eligible to earn any incentive bonus.
Effective August 9, 2000, Mr. Turner was granted options to purchase
100,000 shares of Common Stock under the 1997 Plan with an exercise price of
$20.41 per share. So long as Mr. Turner is still retained under this agreement
and has not been terminated, the Company will grant him options to purchase
50,000 shares of Common Stock under the 1997 Plan (or any successor plan) on
each of the following dates: November 15, 2000, February 15, 2001, May 15, 2001,
August 15, 2001, November 15, 2001, February 15, 2002, May 15, 2002, and the
second anniversary of the effective date of the agreement (August 9, 2002). In
the event that the Company hires a Chief Executive Officer for the Company
before the expiration of the term of this agreement, the Company will grant to
Mr. Turner options to purchase 100,000 shares of Common Stock under the Stock
Option Plan in effect on the effective date of the Chief Executive Officer's
employment agreement. All of the grants of options are subject to and
conditioned upon the Company obtaining any necessary shareholder approvals.
Effective August 9, 2000, Mr. Turner was granted 100,000 shares of
Restricted Stock ("Restricted Shares") under the Company's 2000 Restricted Stock
Plan (the "Restricted Stock Plan"). (See the last paragraph of "Employment and
Severance Agreements and Arrangements" for information concerning this plan.)
The Restricted Shares required no payment by Mr. Turner, vested immediately and
may be transferred in accordance with the terms and conditions of the 2000
Restricted Stock Plan. The Company will pay to Mr. Turner an amount in cash
equal to the sum of such federal and state income taxes and any federal medicare
taxes payable by Mr. Turner as a result of the granting of such Restrictive
Shares plus a grossed-up amount necessary to offset any and all applicable
federal, state and local excise, income or other taxes incurred by Mr. Turner by
reason of the Company's payment of the amount of such Rhode Island income taxes
incurred by reason of the grossed-up payments. Mr. Turner will not receive any
payment from the Company respecting any tax liability associated with any
transfer of the Restricted Shares by him.
The Company has agreed to indemnify and hold harmless Mr. Turner for any
claims, demands or causes of action arising out of the non-competition agreement
between Mr. Turner and Citicorp, including, but not limited to, reimbursing Mr.
Turner for all costs of defense, including reasonable attorneys' fees, and any
losses of deferred compensation from Citicorp sustained by Mr. Turner as a
result of this agreement.
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<PAGE> 23
Under the agreement, if Mr. Turner's employment with the Company is
terminated by reason of his death, discharge for Cause or resignation for other
than Good Reason, Mr. Turner (or his estate, as the case may be) is entitled to
his base salary through the effective date of such termination and any other
amounts to which Mr. Turner is entitled to under the agreement up to the
effective date of such termination. If Mr. Turner's employment is terminated by
reason of disability, discharge without Cause or by reason of Mr. Turner's
resignation for Good Reason, he is entitled to receive the remaining amount of
the base salary for the balance of the term of the agreement (as if the term had
not been terminated). Mr. Turner also would be entitled to receive any
additional benefits he may be entitled to under the express terms of the
applicable benefits plans (other than bonus and severance plans), as well as to
whatever medical coverage, if any, as is required to be provided by applicable
law.
"Good Reason" is defined in Mr. Turner's agreement to mean: (i) the
assignment of duties, responsibilities and/or reporting relationship that are
materially inconsistent with the scope of his stated duties; (ii) the Company's
failure to pay him any amounts vested and due under his employment agreement or
any Company plan or policy; (iii) a reduction in the compensation or benefits
payable to him or a material adverse change in the terms or conditions under
which such amounts are payable; (iv) a reduction in Mr. Turner's title without
his consent (unless the shareholders fail to elect him as a director at the next
annual meeting) or in his authorities, duties or responsibilities; (v) a
relocation of Mr. Turner's principal place of employment by the Company in
excess of 50 miles from West Greenwich, Rhode Island; (vi) any material breach
of the agreement by the Company. "Cause" is defined to mean: (i) any willful
failure to substantially perform his duties; (ii) engaging in serious misconduct
which is injurious to the Company; (iii) any material breach by Mr. Turner of
the agreement; (iv) conviction of, or pleading nolo contendere to, a crime that
constitutes a felony or is a gambling-related offense; (v) habitual intoxication
or abuse of drugs or controlled substances.
Mr. Turner's agreement also provides that irrespective of the reason for
his termination of employment with the Company, he may not compete with the
Company during the term of the agreement or for two years after the date of such
termination.
A "change in control" is defined in Mr. Turner's agreement to mean: (i) any
"person" or "group" (as defined under the Securities Exchange Act of 1934, as
amended) becomes a "beneficial owner" (as defined under the Securities Exchange
Act of 1934, as amended), directly or indirectly, of securities representing 30%
or more of the combined voting power of the Company's then-outstanding
securities; or (ii) the stockholders of the Company approve a definitive
agreement (A) for the merger of the Company into or with another corporation (so
long as the majority of the directors of the surviving corporation were not
directors of the Company immediately prior to the effective date of such merger
or the stockholders of the Company immediately prior to the effective date of
such merger own less than 30% of the combined voting power in the
then-outstanding securities in such surviving corporation) or (B) for the sale
or disposition of all or substantially all of the assets of the Company; or
(iii) the purchase of 30% or more of the Stock pursuant to any tender or
exchange offer made by any "person" including a "group" (as defined under the
Securities Exchange Act of 1934, as amended), other than the Company, any of its
Affiliates, or any employee benefit plan of the Company or any of its
Affiliates. In the event of a change in control during the term of the
agreement, Mr. Turner is entitled to receive the amount of $1,000,000, and the
agreement and his employment will terminate on the effective date of the change
in control. Mr. Turner is not eligible to receive any other compensation in the
event of a change in control.
Thomas J. Sauser resigned as Senior Vice President and Chief Financial
Officer of the Company, effective October 22, 1999. Pursuant to an employment
severance agreement and release with the Company, Mr. Sauser received salary and
certain benefits for fiscal 2000 of $403,000. In addition, the Company sold to
him for a nominal consideration, his company automobile, a company-owned fax
machine and company-owned computer, and agreed to reimburse Mr. Sauser and his
wife for the cost of their medical benefits received under the Consolidated
Omnibus Budget Reconciliation Act (COBRA) through April 23, 2001 and to continue
providing him with life insurance coverage through April 23, 2001, tax
preparation services for calendar years 1999 and 2000, and executive
outplacement services for a maximum period of twelve months. Under the terms of
this severance agreement, the Company will continue to pay Mr. Sauser at a rate
of $309,000 per annum, in bi-weekly installments through and including April 23,
2001. The agreement also
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<PAGE> 24
provided for mutual releases of claims and liabilities, except for certain
continuing indemnification obligations, and Mr. Sauser agreed to continue to be
bound by certain restrictive covenants.
The Company does not presently have formal employment agreements with the
other current Named Officers, although the Company has entered into agreements
with these executives (and with certain other executives) with respect to
employment arrangements in the event of a "Change in Control" of the Company.
These agreements provide for three-year employment terms for the covered
executives commencing upon the date a change in control occurs (or earlier in
certain circumstances where actions are taken in anticipation of a change in
control). During each such employment term, the covered executive is to be
employed in a position at least equal in all material respects with the highest
position held by such executive during the six months immediately preceding the
change in control and will be entitled to a base annual salary, annual bonus and
benefits in values and amounts at least equal to those provided by the Company
to the executive immediately prior to the commencement of the term of
employment. In addition, upon the occurrence of a change in control, all
benefits accrued by the executive under all non-qualified Company plans
(including the Supplemental Retirement Plan) will become fully vested and shall
be contributed to a rabbi trust for the benefit of the covered executive, and
all options held by the executive will become fully vested and exercisable by
the executive.
If an executive's employment is terminated during the term of employment
(including as a result of resignation by executive without Good Reason), such
agreement provides with respect to the year in which his employment is
terminated, that he will receive his base salary, bonus, and other compensation
and benefits through the date of termination in accordance with Company policy
in effect immediately prior to the commencement of the term of employment. In
the event that a covered executive's employment is terminated (other than for
Cause) or such executive resigns for Good Reason, the Company is obligated to
pay an amount equal to 2.99 times the sum of: (i) his then-current annual base
salary; (ii) the total cash bonus received by the executive during the most
recent full fiscal year; plus (iii) the maximum amount allowable under the
Executive Perquisite Program during the most recent calendar year. In addition,
the covered executive (together with his beneficiaries and dependents) will
become fully vested in and continue to participate for up to three years at no
cost to the executive in all Company life insurance and welfare plans on terms
at least as favorable to executive as in effect immediately prior to
termination. In addition, the executive will be entitled to receive the sum of
all benefits accrued under the non-qualified plans plus the product of 2.99
times the average benefit accrued and/or contributions made to such
non-qualified plans over the preceding three years. Such agreements further
provide for the payment to the covered executives of amounts equal to any excise
tax due as any payment or benefit constituting a "parachute payment" within the
meaning of Section 280G of the Code, together with amounts necessary to gross-up
such executives for any taxes due with respect thereto. With certain exceptions,
the terms "Change in Control," "Good Reason" and "Cause" are defined in these
agreements in generally the same manner as the corresponding terms are defined
in Mr. O'Connor's employment agreement as described above.
Under the terms of the Company's option plans and various agreements, the
exercisability of outstanding stock options may accelerate in the event of a
change in control or termination of employment.
The Company has two defined contribution 401(k) retirement savings and
profit sharing plans (the "Plans") covering (subject to applicable time of
service requirements) substantially all full-time employees in the United
States, including the Named Officers. Under these Plans, an eligible employee
may elect to defer receipt of a portion of base pay for each year in which case
the Company will contribute this amount on the employee's behalf to the Plans
and also will make a matching contribution equal to 50% of the amount that the
employee has elected to defer, up to a maximum matching contribution of 2 1/2%
of the employee's base pay. The Company, at its discretion, may contribute
additional amounts to the Plans on behalf of employees based upon its profits
for a given fiscal year. Participants are 100% vested at all times in their
entire account balance in the Plans. Benefits under the Plans generally will be
paid to participants upon retirement or in certain other limited circumstances.
The Company also has a Supplemental Retirement Plan, that is a defined
contribution plan that provides to certain key employees, including the Named
Officers, additional retirement benefits. The Company, at its discretion, may
contribute additional amounts to the plan on behalf of such key
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<PAGE> 25
employees equal to the percentage of profit sharing contributions contributed
for the calendar year, multiplied by the key employees' compensation (as
defined) for such year. See "Summary Compensation Table," above.
In August 2000, the Board of Directors approved the Company's 2000
Restricted Stock Plan which provides for the grant of restricted stock awards to
key employees of the Company and it subsidiaries. The Restricted Stock Plan
authorizes an aggregate of 400,000 Shares to be issued pursuant to restricted
stock awards ("RSAs"). The Shares to be delivered under the plan will be made
available solely from issued Shares that have been reacquired by the Company.
The Restricted Stock Plan is to be administered by the Compensation Committee of
the Board, or another committee appointed by the Board, which committee has
broad discretion to administer the plan. The Restricted Stock Plan provides that
restricted stock awards will be subject to such restrictions (including as to
transfer) and such forfeiture conditions as the Committee may determine. In
August 2000, the Compensation Committee approved the grant of 15,000 RSAs,
without payment of any consideration, to each of Jean-Pierre Desbiens, Donald L.
Stanford, Donald R. Sweitzer and Jaymin B. Patel, Senior Vice President and
Chief Financial Officer, pursuant to restricted stock agreements entered into
with each executive. These agreements provide for the vesting of 50% of each RSA
on the nine month anniversary of the date of grant and the vesting of the
remaining 50% of each RSA on the seventeenth month anniversary of the date of
grant. Each of these restricted stock agreements provides that all RSAs shall
become vested and non-forfeitable (to the extent they are unvested) if the
grantee dies or becomes disabled or is terminated from employment by the Company
without cause (as defined in the Restricted Stock Plan). If the restricted
stockholder ceases to be employed by the Company for other reasons (including by
reason of termination for cause or voluntary termination) all of his or her
unvested RSAs are forfeited.
SHAREHOLDER RETURN PERFORMANCE GRAPH
The graph set forth below compares, for the period February 26, 1995,
through February 26, 2000 (the end of the Company's 2000 fiscal year), the
cumulative total return to holders of Common Stock of the Company with the
cumulative total return of the Standard & Poor's Composite 500 Index (the "S&P
500") and of a peer group index of three companies selected by the Company (the
"Peer Group").
The Peer Group consists of International Totalizator Systems, Inc. (on-line
lottery and totalizator), International Game Technology (video lottery) and
Autotote Corporation (on-line lottery). Previously, Powerhouse Technologies,
Inc. was a member of the Peer Group. However, during fiscal 2000, Powerhouse
Technologies, Inc. was acquired by another company, and consequently has been
omitted from the Peer Group and from the performance graph set forth below. The
Company elected to use the Peer Group Index rather than a published industry or
line of business index because the Company is not aware of any such published
index of companies which are as comparable in terms of their businesses. For the
purposes of the Peer Group Index, the Peer Group companies have been weighted
based upon their relative market capitalizations.
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<PAGE> 26
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN
AMONG GTECH HOLDINGS CORPORATION, THE S&P 500 INDEX
LINE GRAPH AND A PEER GROUP
<TABLE>
<CAPTION>
GTECH HOLDINGS
CORPORATION PEER GROUP S & P 500
-------------- ---------- ---------
<S> <C> <C> <C>
2/95 100.00 100.00 100.00
2/96 164.15 99.46 134.71
2/97 157.86 115.01 169.95
2/98 178.62 161.04 229.44
2/99 113.84 125.79 274.72
2/00 98.11 124.00 306.95
</TABLE>
The above graph assumes an investment of $100 in the Company, the S&P 500
companies and in the Peer Group companies on February 26, 1995, and that all
dividends were reinvested. The performances indicated in the above graph and
table are not necessarily indicative of future performance.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During fiscal 1995, the Company implemented a loan program under which
employees whose restricted stock units or rights granted to them by the Company
became taxable compensation to them could obtain loans from the Company to
assist them in paying applicable federal and state income tax withholding.
During fiscal 2000, Mr. O'Connor repaid in full his outstanding loan balance
under this program of $10,496, plus interest.
During fiscal 1995, the Company, pursuant to the terms of its employment
agreement with Mr. O'Connor, made loans to him to enable him to retire certain
third-party indebtedness. The loans to Mr. O'Connor consisted of $400,000 under
a line of credit arrangement which bore no interest and which was repaid in full
during fiscal 1997, and $500,000 bearing interest at the rate of 6.0% per annum
which was repayable in full on or before November 1, 1999. During fiscal 1998,
the Company extended the due date of the $500,000 loan to January 1, 2000 and
agreed to forgive the principal amount of such loan in four installments of
$125,000 each on August 1, 1997 and on January 1, 1998, 1999 and 2000. On
January 1, 2000, the last $125,000 principal installment was forgiven and Mr.
O'Connor paid the remaining balance of interest charges.
In connection with the employment of Mr. Nowick, during fiscal 1999 and
fiscal 2000 the Company provided, at its expense, third party home relocation
services to Mr. Nowick with respect to two homes. Ultimately, the home
relocation service purchased both these homes from Mr. Nowick and his wife. The
amount paid by the Company to the home relocation service for the above services
rendered to Mr. Nowick was approximately $700,000.
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Certain current and former officers and directors of the Company are
parties to indemnification agreements with the Company providing for advances of
their expenses and their indemnification by the Company against certain
liabilities (including legal fees and expenses) incurred in legal proceedings or
otherwise in connection with their present or past status as an officer or
director of the Company. In addition, the Company's By-Laws provide for similar
advancement of expenses to and indemnification of directors and officers of the
Company. During fiscal 2000, no amounts were paid by the Company pursuant to
such indemnification agreements or such By-Law provisions with respect to
persons serving as directors or executive officers.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 , as amended, requires
the Company's officers and directors and persons who own more than 10% of a
registered class of the Company's equity securities ("reporting persons"), to
file certain reports of ownership and changes in their ownership of the
Company's equity securities with the SEC and the New York Stock Exchange. As a
result of an administrative oversight, the Company failed to file Forms 3, 4
and/or 5 within the time period specified by Rule 16(a) on behalf of the
following officers and directors of the Company with respect to fiscal year
2000: Form 3 (one late report) -- Senior Vice President David J. Calabro, Senior
Vice President Jean-Pierre Desbiens, Senior Vice President and Chief Financial
Officer Jaymin B. Patel, Vice President and Treasurer William M. Pieri, and
Director W. Bruce Turner; Form 4 (one late report reflecting one
transaction) -- Directors Robert M. Dewey, Jr., Burnett W. Donoho, The Rt. Hon.
Lord Moore, P.C., Lt. Gen. Emmett Paige, Jr. (Ret.) and Anthony Ruys; Form 5
(one late report reflecting one transaction) former Chairman of the Board and
Chief Executive Officer William Y. O'Connor, former President and Chief
Operating Officer Steven P. Nowick, Vice President and Controller Robert J.
Plourde, former Senior Vice President, Treasurer and Chief Financial Officer
Thomas J. Sauser, Senior Vice President Donald R. Sweitzer and Senior Vice
President Donald L. Stanford. Such Forms 3, 4 and 5 subsequently were filed.
Based solely on the Company's review of Forms 3, 4 and 5 received by it
from reporting persons with respect to fiscal year 2000, the Company believes
that, except as set forth above, all Forms 3, 4 and 5 required of reporting
persons by Section 16(a) were filed on a timely basis.
INDEPENDENT AUDITORS
The firm of Ernst & Young LLP served as the Company's independent public
accountants for fiscal 2000. The Company anticipates that Ernst & Young LLP will
serve as its independent public accountants for fiscal 2001, subject to the
approval of the Audit Committee and/or Board of Directors.
A representative of Ernst & Young LLP is expected to be present at the
Meeting and will be available to respond to appropriate questions. The
representative will also have the opportunity to make a statement if he or she
desires to do so.
SOLICITATION OF PROXIES
The cost of soliciting the proxies will be paid by the Company. Directors,
officers and employees of the Company may solicit proxies in person, or by mail,
telephone or telegraph, but no such person will be specifically compensated for
such services. The Company will request banks, brokers and other nominees to
forward proxy materials to beneficial owners of stock held of record by them and
will reimburse them for their reasonable out-of-pocket expenses in so doing.
SHAREHOLDER PROPOSALS
In order to be eligible for inclusion in the Company's proxy material for
the 2001 Annual Meeting of Shareholders, shareholders' proposals to take action
at such meeting must comply with applicable SEC rules and regulations, must be
directed to the Secretary of the Company at its offices set forth on page 1 of
this proxy statement, and must be received by the Company not later than
February 15, 2001.
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MISCELLANEOUS
A copy of the Company's 2000 Annual Report to Shareholders either has
previously been mailed to you or is being mailed with this proxy statement but
is not to be regarded as proxy solicitation material.
THE COMPANY, UPON REQUEST, WILL FURNISH TO RECORD AND BENEFICIAL HOLDERS OF
ITS COMMON STOCK, FREE OF CHARGE, A COPY OF ITS ANNUAL REPORT ON FORM 10-K
(INCLUDING FINANCIAL STATEMENTS AND SCHEDULES BUT WITHOUT EXHIBITS) FOR FISCAL
2000. COPIES OF EXHIBITS TO THE FORM 10-K ALSO WILL BE FURNISHED UPON REQUEST
AND THE PAYMENT OF A REASONABLE CHARGE. ALL REQUESTS SHOULD BE DIRECTED TO THE
INVESTOR RELATIONS DEPARTMENT OF THE COMPANY AT THE OFFICES OF THE COMPANY SET
FORTH ON PAGE 1 OF THIS PROXY STATEMENT.
By order of the Board of Directors,
Brendan J. Radigan, Assistant
Secretary
September 19, 2000
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<PAGE> 29
APPENDIX
GTECH HOLDINGS CORPORATION
2000 OMNIBUS STOCK OPTION AND LONG-TERM INCENTIVE PLAN
SECTION 1
PURPOSE OF PLAN
The purpose of this 2000 Omnibus Stock Option and Long-Term Incentive Plan
(the "Plan") is to advance the interests of GTECH Holdings Corporation ("GTECH"
or the "Company") and its stockholders by enabling GTECH and its Affiliates to
attract and retain highly talented employees who are in a position to make
significant contributions to the success of GTECH, to reward them for their
contributions to the success of GTECH, and to encourage them, through stock
ownership, to increase their proprietary interest in GTECH and their personal
interest in its continued success and progress.
The Plan provides for the award of GTECH stock options and GTECH common
stock. Options granted pursuant to the Plan may be incentive or non-qualified
stock options. Stock awards may be in the form of Stock Appreciation Rights,
Restricted Stock Awards and Performance Awards. Options granted pursuant to the
Plan shall be presumed to be non-qualified options unless expressly designated
as incentive options at the time of Grant.
SECTION 2
DEFINITIONS
For the purposes of this Plan and related documents, the following
definitions shall apply:
(a) "Affiliate" means any corporation which is a subsidiary of the
Company within the definition of "subsidiary corporation" under Code
Section 424(f).
(b) "Award Agreement" means the stock option agreement, restricted
stock agreement, stock appreciation right agreement, performance award
agreement or other written agreement between GTECH and a Participant that
evidences and sets out the terms and conditions of a Grant, as it may be
amended from time to time.
(c) "Board" means the Board of Directors of the Company.
(d) "Cause" means activities which constitute a serious breach of
conduct as determined by the Board in its sole discretion, including, but
not limited to: (i) the willful failure by the Participant to perform
substantially his duties as an employee of the Company or its Affiliates
(other than due to physical or mental illness) after reasonable notice to
the Participant of such failure; (ii) the Participant's engaging in serious
misconduct that is injurious to the Company and/or its Affiliates; (iii)
the Participant's having been convicted of, or entered a plea of nolo
contendere to a crime that constitutes a felony; (iv) the breach by the
Participant of any written covenant or agreement with the Company and/or
its Affiliates not to disclose or misuse any information pertaining to the
Company or not to compete or interfere with the Company and/or its
Affiliates; or (v) abuse of illegal drugs or other controlled substances,
or habitual intoxication.
(e) "Code" means the Internal Revenue Code of 1986, as it may be
amended from time to time.
(f) "Committee" means the Compensation Committee of the Board or such
other committee of the Board designated from time to time by resolution of
the Board. If at any time no Committee shall be in office, the functions of
the Committee specified herein shall be exercised by the Board.
(g) "Company" or "GTECH" means GTECH Holdings Corporation, a Delaware
corporation, or any successor thereof.
(h) "Effective Date" means the date on which the Board adopts the
Plan, as set forth in Section 14 of the Plan.
<PAGE> 30
(i) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
(j) "Fair Market Value" means, as of any given date, the mean of the
highest and lowest quoted selling prices of the Stock on the New York Stock
Exchange (consolidated trading) or such other method of determining Fair
Market Value as shall be authorized by the Code, or the rules and
regulations thereunder, and adopted by the Committee. In the event that
there are no sales of the Stock on any such exchange or market on the date
of the Grant (or such other date as is specified herein), the Fair Market
Value of the Stock on the date of the Grant (or such other date as is
specified herein) shall be deemed to be the closing sales price on the next
preceding day on which the Stock was sold on any such exchange or market.
In the event that the Stock is not listed on any such market or exchange on
the applicable date, a reasonable valuation of the Fair Market Value of the
Stock on such date shall be made by the Board.
(k) "Grant" means an award of an Option, Restricted Stock, Stock
Appreciation Right or Performance Award under the Plan.
(l) "Incentive Option" means any option granted under the Plan
intended to satisfy the requirements under Code Section 422(b) as an
incentive stock option, and expressly designated as an incentive option at
the time of Grant.
(m) "Non-Qualified Option" means any option granted under the Plan
that does not qualify as an Incentive Option.
(n) "Participant" means an employee who receives or holds an Option,
Restricted Stock Award, Stock Appreciation Right or Performance Award under
the Plan.
(o) "Performance Award" shall mean any right granted under Section 9
of the Plan.
(p) "Plan" means the GTECH Holdings Corporation 2000 Omnibus Stock
Option and Long-Term Incentive Plan.
(q) "Restricted Stock Award" means shares of Stock awarded to a
Participant pursuant to Section 8 of the Plan.
(r) "Restricted Stock" means shares of Stock purchased by, or awarded
to, a Participant pursuant to Section 8 of the Plan.
(s) "Securities Broker" means a registered securities broker
acceptable to the Company who agrees to affect the cashless exercise of an
Option pursuant to Section 6 of the Plan.
(t) "Stock" means shares of the Company's authorized common stock,
$.01 par value per share.
(u) "Stock Appreciation Right" or "SAR" means any right granted under
Section 7 of the Plan.
(v) "Stock Option" or "Option" means any Incentive Option or
Non-Qualified Option to purchase shares of Stock granted pursuant to
Section 6 of the Plan.
(w) "Total Disability" means a "total and permanent disability" as
defined in Code Section 22(e)(3).
SECTION 3
ADMINISTRATION OF PLAN
(a) Administration by Committee. The Plan shall be administered by the
Committee who shall be appointed by the Board. The Committee shall have
authority, not inconsistent with the express provisions of the Plan to:
(i) award Grants consisting of Options, Restricted Stock Awards, Stock
Appreciation Rights or Performance Awards, to such eligible persons as the
Committee may select;
(ii) determine the timing of Grants and the number of shares of Stock
subject to each Grant, subject to the limitations set forth in Section 4(a)
hereof;
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<PAGE> 31
(iii) determine the terms and conditions of each Grant, including
whether an Option is an Incentive Option or a Non-Qualified Option
(consistent with the requirements of the Code) and the nature and duration
of any restriction or condition (or provision for lapse thereof) relating
to the vesting or forfeiture of a Grant;
(iv) adopt such rules and regulations as the Committee may deem
necessary or appropriate to carry out the purposes of the Plan; and
(v) interpret the provisions of the Plan and of any Grants made
hereunder and decide any questions and settle all controversies and
disputes that may arise in connection with the Plan.
All decisions, determinations, interpretations or other actions by the
Committee with respect to the Plan shall be final, conclusive and binding on all
persons, including the Company, its Affiliates and Participants and their
respective legal representatives, their successors in interest and permitted
assigns and upon all other persons claiming by, through, under or against any of
them. Notwithstanding any provision herein to the contrary, the Committee shall
not grant any Options or Stock Appreciation Rights with an exercise price less
than Fair Market Value of the Stock on the date of the Grant.
(b) Grants to Officers and Directors. Notwithstanding the foregoing, (i)
Grants issued to officers or other persons subject to Section 16 of the Exchange
Act which are intended to comply with the exemption provided by Exchange Act
Rule 16b-3(d)(1) shall be approved by the Board or a committee of the Board that
meets the requirements described Exchange Act Rules 16b-3(d)(1) and 16b-3(b)(3);
and (ii) Grants to the CEO and other officers considered "covered employees"
under Code Section 162(m)(3) which are intended to comply with the exemption
provided by Code 162(m)(4)(c) shall be approved by the Board or a committee of
the Board that meets the requirements contained in Treasury Regulation Section
1.162-27(e)(3).
SECTION 4
AUTHORIZED SHARES AND ADJUSTMENTS
(a) Stock Subject to Plan. The stock to be subject or related to Grants
under the Plan shall be shares of the Company's Stock and may be either shares
held in the treasury of the Company or authorized and unissued shares. Subject
to adjustment in accordance with Section 4(b) below, up to an aggregate maximum
of 1,800,000 shares shall be authorized for Grants under the Plan. No more than
50% of the maximum number of shares authorized by this Plan shall be granted in
the form of Stock Appreciation Rights, Restricted Stock Awards and Performance
Awards payable in Stock; and, further, in any one calendar year, Stock Options
and Stock Appreciation Rights granted to a Participant may not exceed in the
aggregate 500,000 shares of Stock authorized under the Plan.
Any shares of Stock subject to an Option which expires or otherwise
terminates for any reason whatever (including, without limitation, the surrender
thereof) without having been exercised, any shares of Stock that are subject to
a Grant that are forfeited, and any shares of Stock withheld for the payment of
taxes with respect to a Grant shall continue to be available for Grants under
the Plan; provided, however, that except as contemplated in Section 4(b) below,
no Stock Option shall be exchanged for another Stock Option with a lower
exercise price. If the exercise price of any Option is satisfied by tendering
shares of Stock to the Company, only the number of shares of Stock issued net of
the shares of Stock tendered shall be deemed delivered for purposes of
determining the maximum number of shares of Stock available for delivery under
the Plan.
(b) Changes in Stock. In the event of a stock dividend, stock split or
combination of shares, exchange of shares, distribution payable in capital
stock, recapitalization or other change in GTECH's capital stock, the number and
kind of shares of Stock subject to Grants then outstanding or subsequently
awarded under the Plan, the exercise price of any outstanding Option or SAR, the
maximum number of shares of Stock that may be delivered under the Plan, the
annual limit on Grants specified in Section 4(a) above and other relevant
provisions shall be adjusted as deemed appropriate by the Committee to reflect
such event.
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SECTION 5
ELIGIBILITY
Officers and other employees of the Company and its Affiliates (but
excluding members of the Committee and any person who serves only as a
non-employee director of the Company and/or its Affiliates) who are responsible
for or contribute to the management, growth and/or profitability of the business
of the Company and its Affiliates and who are selected by the Committee are
eligible for Grants under the Plan. The selection of an employee for a Grant at
any time does not give an employee the right to receive any additional Grants in
the future, unless such employee is again selected by the Committee.
SECTION 6
STOCK OPTIONS
(a) Grant of Option. The Committee shall have the authority to grant
Incentive Options, Non-Qualified Options, or both types of Stock Options to any
Participant. To the extent that any Stock Option does not qualify as an
Incentive Option, it shall constitute a separate Non-Qualified Option. Any Stock
Option granted under the Plan shall be in such form as the Committee may from
time to time approve.
(b) Terms and Conditions of Options. Each Stock Option shall be evidenced
by an Award Agreement that shall specify the type of Option granted, the
exercise price, the duration of the Option, the number of shares of Stock to
which the Option pertains, and such other terms and conditions not inconsistent
with the Plan as the Committee shall determine. Options granted under the Plan
shall be subject to the following terms and conditions and shall contain such
additional terms and conditions, not inconsistent with the terms of the Plan, as
the Committee shall deem appropriate:
(i) Option Price. The option exercise price per share of Stock shall
be determined by the Committee at the time of Grant and in no event shall
be less than 100% of the Fair Market Value of the Stock on the date of the
Grant. However, any Incentive Option granted to any optionee who, at the
time such Option is granted, owns more than 10% of the voting power of all
classes of stock of the Company or of a "Subsidiary" corporation (as such
term is defined in the Code and the regulations promulgated thereunder),
shall have an exercise price not less than 110% of Fair Market Value per
share on the date of the Grant.
(ii) Option Term. The term of each Stock Option shall be fixed by the
Committee, but no Stock Option shall be exercisable more than ten years
after the date the Option is granted. However, any Incentive Option granted
to any optionee who, at the time the Option is granted owns more than 10%
of the voting power of all classes of stock of the Company, or of a
Subsidiary corporation, may not have a term of more than five years. No
Option may be exercised by any person after expiration of the term of such
Option.
(iii) Exercisability. Subject to Section 10 and Section 12 below,
Stock Options shall be exercisable at such time or times (including on an
accelerated basis) and subject to such terms and conditions as shall be
determined by the Committee at or after Grant; provided, however that
except as provided in Section 6(b)(vi) or Section 10 below, unless
otherwise determined by the Committee at or after Grant, no Stock Option
shall be exercisable during the six months following the date of the
granting of such Option. Only full shares shall be issued under the Plan,
and any fractional share which might otherwise be issuable upon the
exercise of an Option granted under the Plan shall be forfeited.
(iv) Method of Exercise. Subject to the terms and conditions
established by the Committee, Stock Options may be exercised, in whole or
in part to the extent exercisable, at any time and from time to time during
the option exercise period, by giving written notice of exercise to the
Company specifying the number of shares to be purchased. Such notice shall
be accompanied by payment in full of the purchase price, either by
certified or bank check, or such other instrument as the Committee may
accept. As determined by the Committee, in its sole discretion, at or after
Grant, payment in full or in part may also be made in the form of
unrestricted Stock already owned by the optionee; provided, however, that
in the case of an Incentive Option, the right to make payment in the form
of currently owned shares may be
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<PAGE> 33
authorized only at the time such Option is granted. If payment of the
option exercise price of a Stock Option is made in whole or in part in the
form of stock already owned by the Participant, the Company shall require
that the Stock be owned by the Participant for a period of time so that
such payment would not result in a charge to the Company's earnings as a
result of the exercise. Notwithstanding the foregoing, the Committee, in
its sole discretion, may permit a "cashless exercise" of an Option. Any
such cashless exercise shall be effective by the Participant delivering to
the Securities Broker instructions to sell a sufficient number of shares of
Stock to cover the costs and expenses associated therewith. As soon as
practicable after receipt of a written exercise notice and full payment of
the exercise price, the Company shall deliver to the Participant a
certificate or certificates representing the acquired shares of Stock.
(v) Transferability of Options. No Stock Option shall be transferable
by the optionee other than by will or by laws of descent and distribution,
except to the extent otherwise permitted by the Committee, and all Stock
Options shall be exercisable, during such optionee's lifetime, only by the
optionee, except to the extent otherwise permitted by the Committee and, in
the case of Stock Options intended to be Incentive Stock Options, under the
applicable provisions of Code Section 422 and the regulations promulgated
thereunder. A transferred Stock Option shall continue to be subject to the
same terms and conditions as were applicable to such Stock Option
immediately prior to transfer.
(vi) Termination of Employment. Subject to Section 10 and Section 12
below, at or after Grant, the Committee shall determine, in its sole
discretion, the period, if any, during which a vested Option may be
exercised following termination of the optionee's employment with GTECH and
its Affiliates by reason of death, Total Disability, retirement or
termination without Cause, and whether and to what extent unvested Options
shall be exercisable on an accelerated basis; provided, however, that no
Option may be exercised after the specified expiration date of the Option.
Unless otherwise determined by the Committee at or after Grant, if an
optionee's employment with the Company and its Affiliates is terminated for
any reason other than for Cause, no further installments of his or her
Option shall become exercisable after such termination of employment and
his or her Options which are then exercisable shall terminate on the
earlier of (A) six (6) months (three months if the Option is an Incentive
Option unless such Incentive Option has been converted into a Non-Qualified
Option) following the date of the Optionee's termination of employment with
the Company and its Affiliates or (B) the specified expiration date of the
Option. For purposes of this Section 6, an approved leave of absence shall
not constitute a termination of employment under the Plan. An approved
leave of absence shall mean an absence approved pursuant to the policy of
the Company for military leave, sick leave, or other bona fide leave, not
to exceed ninety (90) days or, if longer, as long as the employee's right
to re-employment is guaranteed by contract, statute or the policy of the
Company. Notwithstanding the foregoing, in no event shall an approved leave
of absence extend an Option beyond the specified expiration date of the
Option.
(vii) Termination for Cause. Unless otherwise determined by the
Committee, in its sole discretion, if an optionee's employment by the
Company and its Affiliates is terminated for Cause, all unexercised vested
and non-vested outstanding Options held by such optionee shall lapse and be
forfeited immediately on the date of such termination of employment.
(c) Incentive Stock Option Limitations. To the extent required for
"Incentive Option" status under Section 422 of the Code, the aggregate Fair
Market Value (determined as of the time of Grant) of the Stock with respect to
which Incentive Options granted are exercisable for the first time by the
optionee during any calendar year under the Plan and/or any other stock option
plan of the Company or a Parent or Subsidiary of the Company (within the meaning
of Section 424 of the Code) shall not exceed $100,000. Anything in the Plan to
the contrary notwithstanding, no term of this Plan relating to Incentive Options
shall be interpreted, amended or altered, nor shall any discretion or authority
granted under the Plan be so exercised, so as to disqualify the Plan under
Section 422 of the Code, or, without the consent of the optionee(s), so as to
disqualify any Incentive Option under such Section 422 of the Code.
(d) Conversion of Incentive Options into Non-Qualified Options. The
Committee, at the written request or with the written consent of any holder of
an Incentive Option, may take such actions, in its
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<PAGE> 34
discretion, as may be necessary to convert such holder's Incentive Options (or
any installments or portions of installments thereof) that have not been
exercised on the date of conversion into Non-Qualified Options at any time prior
to the expiration of such Incentive Option, regardless of whether the holder is
an employee of the Company or its Affiliates at the time of such conversion.
Such actions may include, but shall not be limited to, extending the exercise
period. At the time of such conversion, the Committee, (with the consent of the
optionee) may impose such conditions on the exercise of the resulting
Non-Qualified Option as the Committee in its discretion may determine, provided
that such conditions shall not be inconsistent with this Plan. Nothing in this
Plan shall be deemed to give any holder the right to have such holder's
Incentive Options converted into Non-Qualified Options, and no such conversion
shall occur until and unless the Committee shall take appropriate action.
SECTION 7
STOCK APPRECIATION RIGHTS
(a) Grant of SARs. Grants may be made in the form of Stock Appreciation
Rights (SARs). A SAR may be granted in tandem with all or a portion of a related
Option under the Plan ("Tandem SARs"), or may be granted separately
("Freestanding SARs"). A Tandem SAR may be granted either at the time of the
Grant of the related Option or at any time thereafter during the term of the
Option. The grant of a SAR shall be evidenced by an Award Agreement executed by
the Company and the Participant, and shall contain such terms and conditions and
be in such form as the Committee may from time to time approve, subject to the
requirements of this Section 7 and to the limitations set forth in Section 4(a).
In no event shall any SARs granted extend for a period in excess of ten years
from the date of Grant.
(b) Terms and Conditions of Tandem SARs. A Tandem SAR shall be exercisable
to the extent, and only to the extent, that the related Option is exercisable,
and the "exercise price" of such an SAR shall be the exercise price under the
related Option. However, at no time shall a Tandem SAR be issued if the exercise
price of its related Option is less than one-hundred percent (100%) of the Fair
Market Value of the Stock on the date of Grant of the Tandem SAR. If a related
Option is exercised as to some or all of the shares covered by the Grant, the
related Tandem SAR, if any, shall be canceled automatically to the extent of the
number of shares covered by the Option exercise. Upon exercise of a Tandem SAR
as to some or all of the shares covered by the Grant, the related Option shall
be canceled automatically to the extent of the number of shares covered by such
exercise, and such shares shall again be eligible for a Grant in accordance with
Section 4 hereof, except to the extent any shares of Stock are issued to settle
the SAR.
(c) Terms and Conditions of Freestanding SARs. Freestanding SARs shall be
exercisable in whole or in such installments and at such times as may be
determined by the Committee. The exercise price per share of a Freestanding SAR
shall be set by the Committee at the date of Grant and in no event shall be less
than 100% of the Fair Market Value of the Stock on the date of the Grant.
(d) Deemed Exercise. The Committee may provide that a SAR shall be deemed
to be exercised at the close of business on the scheduled expiration date of
such SAR, if at such time, the SAR by its terms remains exercisable and, if
exercised, would result in a payment to the holder of such SAR.
(e) Additional Terms and Conditions. The Committee may, by way of the
Award Agreement, determine such other terms, conditions, restrictions and/or
limitations, if any, of any SAR, provided they are not inconsistent with the
Plan.
(f) Exercise of SARs. A holder shall exercise his or her SARs by giving
written notice of such exercise in the form and manner determined by the
Committee, and the date upon which such written notice is received by the
Company shall be the exercise date for the SARs. A SAR shall entitle the holder
to receive a payment equal to the excess of the Fair Market Value of a share of
Stock on the date of exercise over the exercise price of the SAR, multiplied by
the number of shares with respect to which the SAR relates.
(g) Payment of SARs. Payment of a SAR may be in cash, in shares of Stock
or Restricted Stock or any combination, as the Committee shall determine. To the
extent paid in shares of Stock or Restricted Stock,
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<PAGE> 35
the value of the Stock or Restricted Stock so paid shall be the Fair Market
Value of a share of Stock upon exercise of the SAR.
SECTION 8
RESTRICTED STOCK AWARDS
(a) Grant of Restricted Stock Awards. The Committee may from time to time
grant Restricted Stock Awards to certain employees, subject to such
restrictions, conditions and other terms, if any, as the Committee may
determine, and subject further to the limitations set forth in Section 4(a).
Grants of Restricted Stock may be made for the payment of consideration by the
Participant or for no such consideration, as determined by the Committee.
(b) Restrictions. At the time a Restricted Stock Award is made, the
Committee may establish a period or periods of time (the "Restricted Period")
during which a Participant's right to all or a portion of such Restricted Stock
shall vest over time, subject to certain terms and conditions. The Committee
may, in its sole discretion, at the time a Restricted Stock Award is made,
prescribe forfeiture or vesting conditions in addition to or other than the
expiration of the Restricted Period. The Committee also may, in its sole
discretion, shorten or terminate the Restricted Period or waive any other
restrictions applicable to all or a portion of the Restricted Stock. The
Committee may impose such other restrictions on any shares of Stock covered by a
Restricted Stock Award as it may deem advisable including, without limitation,
restrictions under applicable federal or state securities laws, and may legend
certificates representing Restricted Stock to give appropriate notice of such
restrictions. Subject to Section 8(f) below, Restricted Stock may not be sold,
transferred, assigned, pledged or otherwise encumbered or disposed of during the
Restricted Period, if any, or prior to the satisfaction of any other
restrictions prescribed by the Committee with respect to such Restricted Stock.
(c) Restricted Stock Certificates. Each Restricted Stock Award may be
evidenced in such a manner as the Committee deems appropriate, including,
without limitation, book entry registration or issuance of a stock certificate
or certificates and by an Award Agreement setting forth the terms of such
Restricted Stock Award. To the extent a stock certificate is issued, the
Secretary of GTECH shall hold such certificates for the Participant's benefit
until such time as the restrictions lapse or the Restricted Stock is forfeited
to GTECH.
(d) Rights of Holders of Restricted Stock. Unless the Committee otherwise
provides in an Award Agreement, holders of Restricted Stock shall have the right
to vote such Stock and the right to receive any dividends declared or paid with
respect to such Stock. The Committee may provide that any dividends paid on
Restricted Stock must be reinvested in Stock, which may or may not be subject to
the same vesting conditions and restrictions applicable to such Restricted
Stock. All distributions, if any, received by a Participant with respect to
Restricted Stock as a result of any stock split, stock dividend, combination of
shares, or other similar transaction shall be subject to the restrictions
applicable to the original Grant.
(e) Termination of Employment. Upon termination of the employment of a
Participant with GTECH and its Affiliates, other than by reason of death or
Total Disability, any Restricted Stock held by such Participant that has not
vested, or with respect to which all applicable restrictions and conditions have
not lapsed, shall immediately be deemed forfeited, unless the Committee, in its
discretion, determines otherwise. Upon forfeiture of Restricted Stock, the
Participant shall have no further rights with respect to such Grant, including
but not limited to any right to vote Restricted Stock or any right to receive
dividends with respect to shares of Restricted Stock.
(f) Rights in the Event of Total Disability or Death. The rights of a
Participant with respect to Restricted Stock in the event such Participant
terminates employment with GTECH and its Affiliates by reason of Total
Disability or death shall be determined by the Committee at the time of Grant.
(g) Delivery of Stock and Payment Therefore. Upon the expiration or
termination of the Restricted Period and the satisfaction of any other
conditions prescribed by the Committee, the restrictions applicable to shares of
Restricted Stock shall lapse, and a stock certificate for such shares shall be
delivered, free of all such restrictions, to the Participant or the
Participant's beneficiary or estate, as the case may be. The Committee shall
determine the amount and form of any payment for Stock received pursuant to a
Restricted Stock
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Award; provided that in the absence of such a determination, a Participant shall
not be required to make any payment for Stock received pursuant to a Restricted
Stock Award, except to the extent otherwise required by law.
SECTION 9
PERFORMANCE AWARDS
(a) Grant of Performance Awards. Performance Awards may be granted to any
employee by the Committee in its sole discretion subject to the maximum share
limitation set forth in Section 4(a). A Performance Award shall consist of a
right that is (i) denominated in cash or Stock, (ii) valued, as determined by
the Committee, in accordance with the achievement of such performance goals
during such performance periods as the Committee shall establish, and (iii)
payable at such time and in such form as the Committee shall determine.
(b) Terms and Conditions. Subject to the terms of the Plan and any
applicable Award Agreement, the Committee shall (i) determine the performance
goals to be achieved during any performance period, (ii) the length of any
performance period (which must be in excess of one year), (iii) the amount of
any Performance Award, (iv) the amount and kind of any payment or transfer to be
made pursuant to any Performance Award, and (v) all other terms and conditions
of any Performance Award, including the consequences of death, Total Disability,
termination of employment or any Change In Control.
(c) Payment of Performance Awards. Performance Awards may be paid in cash
(in a lump sum or in installments) or in shares of Stock valued at Fair Market
Value, at the discretion of the Committee, following the close of the
performance period or, in accordance with procedures established by the
Committee, on a current or deferred basis.
SECTION 10
CHANGE-IN-CONTROL PROVISIONS
(a) Effect of Change-In-Control. In the event of any Change-In-Control,
the Committee shall take such action as it deems appropriate and equitable to
effectuate the purposes of this Plan and to protect the Participants, which
actions may include, but without limitation, the following: (i) provide that
Grants shall be assumed or equivalent grants shall be substituted, by the
acquiring or succeeding corporation (or an affiliate thereof), with appropriate
adjustments as to the number and kinds of shares or units and exercise prices;
(ii) upon written notice to the Participants, provide that the Plan and all
unexercised Grants (or portions thereof) will terminate immediately prior to the
consummation of the Change-In-Control unless exercised by the Participant within
a specified period of time; (iii) provide that such Grants shall be immediately
vested, fully earned, exercisable, and/or, in the case of Options, converted
into SARs, as appropriate, upon a Change-In-Control; (iv) provide that the
Company shall make full payment to each such Participant with respect to any
Performance Award, deliver certificates to such Participant with respect to each
Restricted Stock Award, and permit the exercise of Options and/or SARs,
respectively, granted hereunder to such Participant; (v) terminate all Grants in
exchange for a right to participate in any stock option or other employee
benefit plan of any successor corporation (giving proper credit to any holder of
a Grant for that portion of the Grant which has otherwise vested and become
exercisable prior to any such Change-In-Control); and (vi) in the event that
such Change-In-Control is a merger or other transaction under the terms of which
holders of Stock of the Company will receive upon the consummation thereof a
cash payment for each share surrendered in the merger or other transaction (the
"Transaction Price"), make or provide for a cash payment to the Participant
equal to the difference between (A) the Transaction Price times the number of
shares of Stock subject to such outstanding Grants (to the extent then
exercisable at prices not in excess of the Transaction Price) and
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<PAGE> 37
(B) the aggregate exercise price of all such outstanding Grants that shall
become exercisable in full immediately prior to such event.
(b) Definition of "Change-In-Control". For purposes of this Section, a
"Change-In-Control" means the happening of any of the following:
(i) the members of the Board at the beginning of any consecutive
twenty-four calendar month period (the "Incumbent Directors") cease for any
reason other than due to death to constitute at least a majority of the
members of the Board, provided that any director whose election, or
nomination for election by the Company's stockholders, was approved by vote
of at least a majority of the members of the Board then still in office who
were members of the Board at the beginning of such twenty-four calendar
month period shall be deemed an Incumbent Director;
(ii) any "person" including a "group" (as such terms are used in
Sections 13(d) and 14(d) of the Exchange Act, but excluding the Company,
any of its Affiliates or any employee benefit plan of the Company or any of
its Affiliates) is or becomes the "beneficial owner" (as defined in Rule
13(d)(3) under the Exchange Act), directly or indirectly, of securities of
the Company representing the greater of 30% or more of the combined voting
power of the Company's then outstanding securities;
(iii) the stockholders of the Company shall approve a definitive
agreement (1) for the merger or other business combination of the Company
with or into another corporation if (A) a majority of the directors of the
surviving corporation were not directors of the Company immediately prior
to the merger or (B) the stockholders of the Company immediately prior to
the effective date of such merger own less than 50% of the combined voting
power in the then outstanding securities in such surviving corporation or
(2) for the sale or other disposition of all or substantially all of the
assets of the Company; or
(iv) the purchase of Stock pursuant to any tender or exchange offer
made by any "person", including a "group" (as such terms are used in
Sections 13(d) and 14(d) of the Exchange Act), other than the Company, any
of its Affiliates or any employee benefit plan of the Company or any of its
Affiliates, for 30% or more of the Stock of the Company.
(c) Dissolution or Liquidation. In the event of the proposed dissolution
or liquidation of the Company, each Grant shall terminate immediately prior to
the consummation of such proposed action or at such other time and subject to
such other conditions as shall be determined by the Committee.
SECTION 11
COMPLIANCE WITH SECURITIES LAWS
Each Option, Stock Appreciation Right, Restricted Stock Award and
Performance Award shall be subject to compliance with (i) applicable federal and
state laws and regulations, (ii) all applicable listing requirements of any
national securities exchange or national market system on which the Stock is
then listed or quoted, and (iii) Company counsel's approval of all other legal
matters in connection with the issuance and delivery of such Stock. If the sale
of Stock has not been registered under the Securities Act of 1933, as amended,
the Company may require, as a condition to exercise of the Option or Stock
Appreciation Right, or issuance or payment of a Restricted Stock Award or
Performance Award, such representations or agreements as counsel for the Company
may consider appropriate to avoid violation of such Act and may require that the
certificates evidencing such Stock bear an appropriate legend restricting
transfer.
SECTION 12
AMENDMENT AND TERMINATION
The Board may amend, alter, modify or discontinue the Plan, and the
Committee may amend any Award Agreement, at any time and from time to time,
provided however that no amendment, alteration or modification may become
effective without approval of the amendment, alteration or modification by the
shareholders of the Company if shareholder approval is required to enable the
Plan or Grant to satisfy any applicable statutory or regulatory requirements
(including, without limitation, Section 162(m) of the Code,
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<PAGE> 38
Section 422 of the Code or any rules or regulations of the New York Stock
Exchange) or if the Company, on the advice of counsel, determines that
shareholder approval is otherwise necessary or desirable. Except as provided in
Section 10, no amendment, alteration, modification or termination of the Plan or
any Award Agreement shall in any way adversely affect any Options, Stock
Appreciation Rights, Restricted Stock Awards or Performance Awards theretofore
granted under the Plan without the consent of the Participant holding such
Options, Stock Appreciation Rights, Restricted Stock Awards or Performance
Awards.
SECTION 13
GENERAL PROVISIONS
(a) Representations. The Committee may require each person purchasing
shares pursuant to a Stock Option under the Plan to represent to and agree with
the Company in writing that the optionee or Participant is acquiring the shares
without a view to distribute thereof. The certificates for such shares may
include any legend which the Committee deems appropriate to reflect any
restrictions on transfer.
(b) Other Compensation Arrangements; Other Benefit Plans. Nothing
contained in the Plan shall prevent the Board of Directors from adopting other
or additional compensation arrangements, subject to stockholder approval if such
approval is required; and such arrangements may be either generally applicable
or applicable only in specific cases. Nothing in the Plan shall be construed to
limit the right of the Company to establish other plans or arrangements or to
pay compensation to its employees in cash or property, in a manner which is not
expressly authorized under the Plan. Grants made and amounts received under the
Plan shall not be deemed compensation for purposes of calculating an employee's
rights under any employee benefit plan unless otherwise expressly stated in such
plan.
(c) No Right to Continued Employment. The adoption of the Plan and the
receipt of Grants hereunder shall not confer upon any employee of the Company or
any Affiliate any right to continue employment with the Company or any
Affiliate, as the case may be, nor shall it interfere in any way with the right
of the Company or any Affiliate to terminate the employment of any of its
employees at any time. Further, except as otherwise provided in an Award
Agreement evidencing a Restricted Stock Award, a Participant shall have no
rights as a shareholder of the Company with respect to any shares covered by
such person's Grants until the issuance of a stock certificate to him or her
representing such shares.
(d) Withholding. No later than the date as of which an amount first
becomes includible in the gross income of a Participant for Federal income tax
purposes with respect to the exercise of any Stock Option or Stock Appreciation
Right, the vesting of any Restricted Stock Award or payment of any Performance
Awards, such Participant shall pay to the Company, or make arrangements
satisfactory to the Committee regarding the payment of, any Federal, state, or
local taxes of any kind required by law to be withheld with respect to such
amount. Unless otherwise determined by the Committee, the minimum required
withholding obligations may be settled with Stock, including Stock that is part
of the Grant that gives rise to the withholding requirement. The obligations of
the Company under the Plan shall be conditioned on such payment or arrangements,
and the Company shall, to the extent permitted by law, have the right to deduct
any such taxes from any payment of any kind otherwise due to the Participant.
(e) Right of First Refusal. At the time of grant of any Stock Option,
Stock Appreciation Right, Restricted Stock Award or Performance Award, the
Committee may provide that any shares of Stock received as a result of such
Grant shall be subject to a right of first refusal, pursuant to which the
Participant shall be required to offer to the Company any shares that the
Participant wishes to sell, with the price being the then Fair Market Value of
the Stock, subject to such other terms and conditions as the Committee may
specify at or after the time of Grant.
(f) Indemnification. Each person who is or shall have been a member of the
Committee or of the Board shall be indemnified and held harmless by the Company,
to the fullest extent permissible by Delaware Law, against and from any loss,
cost, liability, or expense that may be imposed upon or reasonably incurred by
such person in connection with or resulting from any claim, action, suit, or
proceeding to which such person may be made a party or in which such person may
be involved by reason of any action taken or failure to act
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<PAGE> 39
under the Plan and against and from any and all amounts paid by such person in
settlement thereof, with the Company's approval, or paid by such person in
satisfaction of any judgment in any such action, suit, or proceeding against
such person, provided such person shall give the Company an opportunity, at its
own expense, to handle and defend the same before such person undertakes to
handle and defend it on such person's own behalf. The foregoing right of
indemnification shall not be exclusive and shall be independent of any other
rights of indemnification to which such persons may be entitled under the
Company's Certificate of Incorporation or By-laws, by contract, as a matter of
law, or otherwise.
(g) Governing Law. The Plan and all Grants made and actions taken
thereunder shall be governed by and construed in accordance with laws of the
State of Delaware.
SECTION 14
EFFECTIVE DATE AND DURATION OF PLAN
The Plan shall be effective on September 19, 2000, subject to approval of
the Plan within one year of the Effective Date by GTECH's shareholders. Upon
approval of the Plan by the stockholders of GTECH as set forth above, all Grants
made under the Plan on or after the Effective Date shall be fully effective as
if GTECH's stockholders had approved the Plan on the Effective Date. If the
stockholders fail to approve the Plan within one year of the Effective Date, any
Grants made hereunder shall be null and void and of no effect. Unless earlier
terminated as provided in the Plan, the Plan shall terminate on the tenth
anniversary of the Effective Date, and no Grant shall be granted under the Plan
thereafter; provided, however, that termination of the Plan shall not affect any
Grants previously made which Grants shall remain in effect in accordance with
their terms and the terms of the Plan.
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PROXY
GTECH HOLDINGS CORPORATION
ANNUAL MEETING OF SHAREHOLDERS, OCTOBER 24, 2000
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints BRENDAN J. RADIGAN, MICHAEL J. FINCH and
DENISE M. OGILVIE and each or any of them as Proxies of the undersigned, with
full power of substitution, and hereby authorizes them to represent and to
vote, as designated on the reverse side, all of the shares of Common Stock of
GTECH HOLDINGS CORPORATION, held of record by the undersigned on September 8,
2000, at the Annual Meeting of Shareholders of GTECH Holdings Corporation to be
held October 24, 2000, and at any adjournment thereof.
The Board of Directors recommends a vote FOR Proposals Nos. 1 and 2. This
Proxy, when properly executed, will be voted as specified on the reverse side.
THIS PROXY WILL BE VOTED FOR PROPOSALS NOS. 1 AND 2 IF NO SPECIFICATION IS MADE.
(Continued and to be dated and signed on the reverse side)
GTECH HOLDINGS CORPORATION
P.O. BOX 11349
NEW YORK, N.Y. 10203-0349
<PAGE> 41
DETACH PROXY CARD HERE
V V
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(1) Election of Burnett W. Donoho and W. Bruce Turner as directors of GTECH
Holdings Corporation for a three year term of office expiring in 2003 and
election of Lt. Gen. (Ret.) Emmett Paige, Jr. as a director of GTECH
Holdings Corporation for a two year term of office expiring in 2002.
VOTE FOR WITHHOLD AUTHORITY VOTE FOR ALL, EXCEPT FOR
ALL NOMINEES FOR ALL NOMINEES THE FOLLOWING NOMINEE(S)
[X] [X] [X]
(Insert the name of the nominee for whom you do not wish to vote in the space
provided.)
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(2) Approve the 2000 Omnibus Stock Option and Long-Term Incentive Plan.
FOR AGAINST ABSTAIN
[X] [X] [X]
(3) In their discretion on such other business as may properly come before the
meeting.
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CHANGE OF ADDRESS AND
OR COMMENTS MARK HERE [X]
Please sign your name exactly as it appears hereon. When signing as
attorney, executor, administrator, trustee or guardian, please give
full title as such. If a corporation, please sign in full corporate
name by President or other authorized officer. If a partnership,
please sign name by authorized person.
Dated: _______________________________________________________, 2000
____________________________________________________________________
(Signature of Shareholder)
____________________________________________________________________
(Signature of Additional Shareholder)
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Votes must be indicated (x) in Black of Blue ink. [X]
PLEASE SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
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PLEASE DETACH HERE
YOU MUST DETACH THIS PORTION OF THE PROXY CARD
V BEFORE RETURNING IT IN THE ENCLOSED ENVELOPE V
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