SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934
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Filed by a Party other than the Registrant |_|
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|_| Preliminary Proxy Statement
|_| Confidential, for Use of the Commission Only (as permitted by Rule
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|X| Definitive Proxy Statement
|_| Definitive Additional Materials
|_| Soliciting Material Under Rule 14a-12
International Game Technology
-----------------------------
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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and 0-11.
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number, or the Form or Schedule and the date of its filing.
1) Amount previously paid:
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4) Date Filed:
INTERNATIONAL GAME TECHNOLOGY
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held On March 4, 2002
International Game Technology hereby invites you, as one of our
stockholders, to attend our annual meeting of stockholders either in person or
by proxy. The meeting will be held at Green Valley Ranch Station Casino,
Estancia Ballroom, 2300 Paseo Verde, Henderson, Nevada, on Monday, March 4,
2002, at 1:30 p.m., local time, for the purpose of considering and voting on:
1. The election of eight directors for the ensuing year.
2. A proposal to approve the International Game Technology 2002 Stock
Incentive Plan.
3. To transact any other business that may properly come before the meeting.
Only stockholders of record at the close of business on January 4, 2002
are entitled to receive notice of and to vote at the annual meeting or any
adjournment of the meeting.
By Order of the Board of Directors,
/s/ Sara Beth Brown
----------------------
Sara Beth Brown
Secretary
Reno, Nevada
January 16, 2002
YOUR VOTE IS IMPORTANT. WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING,
PLEASE VOTE AS SOON AS POSSIBLE. YOU MAY VOTE OVER THE INTERNET, AS WELL AS BY
TELEPHONE OR BY MAILING A TRADITIONAL PROXY CARD. VOTING OVER THE INTERNET, BY
PHONE OR BY WRITTEN PROXY WILL ENSURE YOUR REPRESENTATION AT THE ANNUAL MEETING
IF YOU DO NOT ATTEND IN PERSON. PLEASE REVIEW THE INSTRUCTIONS ON THE PROXY CARD
REGARDING EACH OF THESE VOTING OPTIONS.
TABLE OF CONTENTS
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS....................................1
QUESTIONS AND ANSWERS ABOUT THE MEETING.....................................3
PROPOSAL 1 - ELECTION OF DIRECTORS..........................................5
NOMINEES FOR ELECTION OF DIRECTORS........................................6
BOARD OF DIRECTORS AND COMMITTEES OF THE BOARD............................8
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION...............8
COMPENSATION OF DIRECTORS.................................................8
RECOMMENDATION OF IGT BOARD OF DIRECTORS..................................9
PROPOSAL 2 - APPROVAL OF THE 2002 STOCK INCENTIVE PLAN......................9
OPERATION OF THE 2002 PLAN................................................9
FEDERAL INCOME TAX CONSEQUENCES..........................................13
SPECIAL BENEFITS.........................................................13
RECOMMENDATION OF IGT BOARD OF DIRECTORS.................................14
OTHER INFORMATION..........................................................15
EXECUTIVE OFFICERS AND KEY EMPLOYEES.....................................15
EQUITY SECURITY OWNERSHIP OF MANAGEMENT AND OTHER BENEFICIAL OWNERS......18
EXECUTIVE COMPENSATION...................................................19
EMPLOYMENT CONTRACTS.....................................................21
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934.....22
RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS.........................22
BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION..............22
AUDIT COMMITTEE REPORT.....................................................24
FEES PAID TO INDEPENDENT ACCOUNTANTS.....................................24
PERFORMANCE GRAPH..........................................................26
STOCKHOLDER PROPOSALS FOR THE 2003 ANNUAL MEETING..........................27
GENERAL....................................................................27
EXHIBIT A - 2002 STOCK INCENTIVE PLAN......................................A-1
MAP TO SITE OF ANNUAL MEETING..............................................M-1
INTERNATIONAL GAME TECHNOLOGY
9295 Prototype Drive
Reno, Nevada 89511-8986
(775) 448-7777
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PROXY STATEMENT
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The Board of Directors of International Game Technology ("IGT") is
soliciting the enclosed proxy for use at our annual meeting of stockholders to
be held on Monday, March 4, 2002, at 1:30 p.m., local time, or at any
adjournments of the meeting. This proxy statement and the accompanying Notice of
Annual Meeting of Stockholders describe the purposes of the annual meeting. The
annual meeting will be held at Green Valley Ranch Station Casino, Estancia
Ballroom, 2300 Paseo Verde, Henderson, Nevada. These proxy solicitation
materials were mailed on or about January 25, 2002 to all shareholders entitled
to vote at the annual meeting.
QUESTIONS AND ANSWERS ABOUT THE MEETING
Q: What may I vote on?
A: (1) The election of nominees to serve on the Board of
Directors; and
(2) The approval of the International Game Technology
2002 Stock Incentive Plan.
Q: How does the Board recommend I vote on the proposals?
A: The Board of Directors recommends a vote FOR each proposal.
Q: Who is entitled to vote?
A: Stockholders as of the close of business on January 4,
2002 are entitled to vote at the annual meeting.
Q: How do I vote?
A: If you are the record holder of your shares, you may sign
and date the enclosed proxy card and return it in the
pre-paid envelope, vote via the Internet or by telephone
following the instructions included below and with your
proxy card, or attend and vote at the annual meeting in
person. If your shares are held by your broker as your
nominee (that is, in "street name"), you will need to
obtain a proxy form from the institution that holds your
shares and follow the instructions included on that form
regarding how to instruct your broker to vote your shares.
Q: Can I vote by telephone or the Internet?
A: If you are the record holder of your shares, you may grant
a proxy to vote your shares at the annual meeting by
telephone, by calling 1-866-593-3362 and following the
simple recorded instructions, twenty-four hours a day,
seven days a week at any time prior to 11:59 p.m. Eastern
Time the day before the annual meeting. Alternatively, you
may vote via the Internet at any time prior to 11:59 p.m.
Eastern Time the day before the annual meeting, by going to
http://proxyvotenow.com/igt and following the instructions
to create an electronic ballot. If you vote by telephone or
the Internet, you will be required to provide your control
number contained on your proxy card. If your shares are
held in street name, your proxy card may contain
instructions from your broker that allow you to vote your
shares using the Internet or by telephone; please
consult with your broker if you have any questions
regarding the electronic voting of shares held in street
name. The granting of proxies electronically is allowed by
Subsection 2(b) of Section 78.355 of the Nevada General
Corporation Law.
Q: Can I revoke my proxy later?
A: You have the right to revoke your proxy at any time before
the annual meeting by:
(1) voting electronically via the Internet or by
telephone on a subsequent date prior to 11:59 p.m.
Eastern Time the day before the annual meeting,
(2) delivering a signed revocation or a subsequently
dated, signed proxy card to the Secretary of IGT
before the annual meeting, or
(3) attending the annual meeting and voting in person.
However, if you have voted electronically or have
delivered a valid proxy, your mere presence at the
annual meeting will not, by itself, revoke that
proxy.
Q: How many shares can vote?
A: As of January 4, 2002, 88,801,200 shares of common stock
were issued and outstanding. We have no other class of
voting securities outstanding. Each share of common stock
entitles its holder to one vote.
Q: How is a quorum determined?
A: For the purposes of determining a quorum, shares held
by brokers or nominees will be treated as present
even if the broker or nominee does not have
discretionary power to vote on a particular matter or
if instructions were never received from the
beneficial owner. These shares are called "broker
non-votes." Abstentions will be counted as present
for quorum purposes.
Q: What is required to approve each proposal?
A: Once a quorum has been established, the nominees for
director who receive a plurality of the shares entitled to
vote in their election will be selected as directors.
To approve the 2002 Stock Incentive Plan,
holders of a majority of the shares represented at
the annual meeting, either in person or by proxy,
must vote in favor of the proposal.
If a broker indicates on its proxy that it does not
have discretionary authority to vote on a particular
matter, we will treat the affected shares as not
present and entitled to vote with respect to that
matter, even though the same shares may be considered
present for quorum purposes and may be entitled to
vote on other matters.
Q: What happens if I abstain?
A: We will count proxies marked "abstain" as shares
present for the purpose of determining the presence
of a quorum, but for purposes of determining the
outcome of a proposal, the shares represented by
these proxies will not be treated as affirmative
votes. For the proposal to approve the 2002 Stock
Incentive Plan, which requires an affirmative vote of
a majority of the shares present, an abstention is
equivalent to a "no" vote.
Q: How will my shares be voted if I return a blank proxy card?
A: If you sign and send in your proxy card and do not
indicate how you want to vote, we will count your
proxy as a vote FOR the proposals described in this
proxy statement. If a broker or nominee who does not
have discretion to vote has delivered a proxy but has
failed to physically indicate on the proxy card that
broker's lack of authority to vote, we will be treat
the shares as present and count the shares as votes
FOR the proposals described in this proxy statement.
Q: How will voting on any other business be conducted?
A: Although we do not know of any business to be
considered at the annual meeting other than the
proposals described in this proxy statement, if any
other business comes before the annual meeting, your
signed proxy card gives authority to the
proxyholders, Charles N. Mathewson, G. Thomas Baker
and Sara Beth Brown, to vote on those matters at
their discretion.
Q: How much stock do IGT's directors and executive officers own?
A: As of January 4, 2002, our current directors and
executive officers collectively had the power to vote
2,465,365 shares, constituting approximately 2.8% of
the outstanding shares. These persons have indicated
that they currently intend to vote the shares held by
them in favor of each of the director nominees named
in this proxy statement and for approval of the 2002
Stock Incentive Plan.
Q: Who will bear the costs of this solicitation?
A: We will pay the cost of this solicitation of proxies
by mail. Our officers and regular employees may also
solicit proxies in person or by telephone without
additional compensation. We will make arrangements
with brokerage houses, custodians, nominees and other
fiduciaries to send proxy materials to their
principals, and we will reimburse these persons for
related postage and clerical expenses.
PROPOSAL 1 - ELECTION OF DIRECTORS
The current term of office of all of our directors expires at the 2002
Annual Meeting. The Board of Directors proposes that the following nominees, all
of whom are currently serving as directors, be re-elected for a new term of one
year and until their successors are duly elected and qualified. The persons
named in the enclosed form of proxy intend, if authorized, to vote the proxies
for the election as directors of the eight persons named below as nominees. All
of the nominees are at present directors of IGT. If any nominee declines or is
unable to serve as a director, which we do not anticipate, the persons named as
proxies reserve full discretion to vote for any other person who may be
nominated.
Nominees for Election of Directors
The following sets forth for each nominee for election as a director
his name, all positions with IGT held by him and his principal occupation:
Charles N. Mathewson, 73, was appointed to IGT's Board of Directors in 1985 and
was named Chairman of the Board in February 1986. In December 1986, Mr.
Mathewson was appointed President and Chief Executive Officer and
resigned as Chairman of the Board. Mr. Mathewson resumed the position
as Chairman of the Board and resigned as President in February 1988,
and resigned as Chief Executive Officer in June 1993. In February 1996,
he resumed the position of Chief Executive Officer. In December 2000,
he resigned as Chief Executive Officer and currently holds the position
of Chairman of the Board. He received his Bachelor of Finance degree
from the University of Southern California in 1953 and graduated from
the University of California Management Program in 1960. He served as
Senior Executive Vice President and a Director of Jefferies and Co.
from 1968 to 1971, Chairman of the Board of Arden Mayfair, Inc. from
1971 to 1974, and Chairman of the Board of Wagenseller & Durst from
1978 to 1979. From 1980 until February 1986, Mr. Mathewson was a
general partner of Management Advisors Associates, a partnership
engaged in investment and business consulting. Mr. Mathewson is a
member of the Board of Directors of Baron Asset Fund, and a member of
the Board of Directors of FelCor Lodging Trust. He is also Chairman of
the American Gaming Association.
G. Thomas Baker, 59, has served on our Board of Directors since
October 2000. Mr. Baker first joined IGT in September 1988 as its Vice
President of Finance and Administration and Chief Financial Officer.
In October 1991, Mr. Baker was named Vice President of Finance, Chief
Financial Officer and Treasurer of IGT. He was named Executive Vice
President, Corporate Finance, Chief Financial Officer and Treasurer in
September 1993 and held these positions until August 1995. Mr. Baker
was Senior Vice President and Chief Financial Officer of Boomtown
Hotels & Casinos from August 1995 to February 1996. Mr. Baker rejoined
IGT in March 1996 as its President, Chief Operating Officer and Chief
Financial Officer. In May 1998, he resigned as Chief Financial
Officer. From August 2000 to March 2001, Mr. Baker served as Chief
Financial Officer and Treasurer, in addition to his position as
President and Chief Operating Officer. In December 2000, he was
appointed Chief Executive Officer. Mr. Baker has a Bachelor of Science
degree in Business Administration and Liberal Arts from Upper Iowa
University.
Robert A. Bittman, 47, has served on our Board of Directors since May 2000.
Mr. Bittman first joined IGT in 1985 as Marketing Research
Analyst and was subsequently named Director of Marketing. He was
promoted to Vice President of Marketing in 1988 and held this position
until December 1995. Mr. Bittman rejoined IGT in March 1996 as
Executive Vice President, Product Development. From 1980 to 1985, Mr.
Bittman worked for Caesar's Tahoe in all phases of slot management,
including two years as Director of Slot Operations. Mr. Bittman
majored in Systems Analysis at New York University, and Psychology at
Queens College and the University of Nevada, Reno.
Richard R. Burt, 54, has served on our Board of Directors since December
2001, when Anchor Gaming was acquired by IGT. Mr. Burt was a
Director and Vice Chairman of Anchor Gaming from June 1999 until the
merger. Since 1994, Mr. Burt has served as Director and Chairman of
Powerhouse Technologies, Inc. Mr. Burt is a founder and the Chairman
of IEP Advisors, Inc. in Washington D.C. At various times between 1981
and 1994, he was a partner in McKinsey & Co., the Chief Negotiator in
the Strategic Arms Reduction Talks (START) with the former Soviet
Union, the U.S. Ambassador to the Federal Republic of Germany, the
Assistant Secretary of State for European and Canadian Affairs and
Director of Politico-Military Affairs. Mr. Burt also serves as the
Chairman of the Board of Weirton Steel, Inc. and as a director of
Paine Webber Mutual Funds, Hollinger International and Archer Daniels
Midland. In addition, he is a member of the Textron Corporation's
International Advisory Council and a board member of the National
Capitol Area Council, Boy Scouts of America.
Wilbur K. Keating, 70, has served on our Board of Directors since May 1987.
He received his degree in Business Management from the
University of Colorado in 1956. He is currently the Administrative
Officer for the National Association of State Retirement
Administrators and was previously the Assistant Executive Officer of
the Nevada Public Employees Retirement System from 1974 through 1980,
and the Chief Executive Officer from 1981 through 1994.
Thomas J. Matthews, 36, has served on our Board of Directors since December
2001, when Anchor Gaming was acquired by IGT. In addition,
Mr. Matthews was named IGT's Chief Operating Officer in December 2001.
From February 1994 until the acquisition by IGT, Mr. Matthews held a
number of key positions at Anchor Gaming, including President, Chief
Executive Officer and Chairman of the Board. Mr. Matthews previously
served as President of Global Gaming Distributors, Inc. until its
acquisition by Anchor Gaming in 1994. Mr. Matthews graduated with a BS
in Finance from the University of Southern California in 1986.
Robert Miller, 56, has served on our Board of Directors since January 2000.
Governor Miller has been a senior partner at the law firm of Jones
Vargas since January 1999. From January 1989 until January 1999, he
served as Governor of the State of Nevada and as Lieutenant Governor of
the State of Nevada from 1987 to 1989. Governor Miller was the Clark
County District Attorney from 1979 to 1986 and was Las Vegas Township
Justice of the Peace from 1975 to 1979. He was first legal advisor for
the Las Vegas Metropolitan Police Department from 1973 to 1975 and was
a Clark County Deputy District Attorney from 1971 to 1973. Prior to
1973, Governor Miller was a uniformed commissioned officer for the
Clark County Sheriff's Department and the Los Angeles County Sheriff's
Department. During Governor Miller's political and professional
careers, he has served on many local and national boards and chaired or
co-chaired numerous committees within the National Governor's
Association including the Chairmanship of the Association during
1996-1997. He was appointed by President Reagan to the nine-member
President's Task Force on Victims of Crime in 1982 and was appointed to
the Advisory Commission on Intergovernmental Relations by President
Bill Clinton in 1993. Current board memberships include Newmont Mining
Corporation, America West Holdings, American Cancer Society
Foundation-National, Zenith National Insurance Corp., K12, Inc.,
National Center for Missing and Exploited Children, Member of SSP
Solutions Advisory Board of Directors, and Member at Large - College
Board of Regents of the National College of District Attorneys.
Governor Miller received his law degree in 1971 from Loyola Law School,
Los Angeles.
Frederick B. Rentschler, 62, has served on our Board of Directors since May
1992. Prior to his retirement in 1991, Mr. Rentschler served as
President and Chief Executive Officer of Northwest Airlines from 1990
to 1991. Mr. Rentschler served as President and Chief Executive Officer
of Beatrice Company from 1988 to 1990, as President and Chief Executive
Officer of Beatrice U.S. Foods from 1985 to 1988, as President and
Chief Executive Officer of Hunt-Wesson, Inc. from 1980 to 1984 and
President of Armour-Dial from 1977 to 1980. Mr. Rentschler is the
Chairman of the Board of Trustees of the Salk Institute, La Jolla,
California. Additionally, Mr. Rentschler serves on the Boards of
Bionutrics and the Scottsdale Health Care Systems.
Board of Directors and Committees of the Board
Our Board of Directors held four regular meetings and one special
meeting during fiscal 2001. Each director attended at least 75% of the aggregate
number of meetings of the Board held while he was a director and of each
committee on which he served during the period in which he served as a member of
that committee. Our Board of Directors has three standing committees: the Audit
Committee, the Compensation Committee and the Executive Committee.
The Executive Committee, comprised of Messrs. Mathewson and Baker, did
not hold any meetings during fiscal 2001. Except for certain powers which under
Nevada law only the full Board of Directors may exercise, the Executive
Committee has and exercises the powers of the Board in monitoring the management
of the business of IGT between meetings of the Board of Directors.
In May 2000, the Board of Directors adopted an Audit Committee Charter
in accordance with New York Stock Exchange requirements. In accordance with its
written charter, the Audit Committee assists the Board in fulfilling its
responsibility for oversight of the quality and integrity of our accounting,
auditing and reporting practices, and the independence and performance of our
independent auditors.
The Audit Committee Charter requires that the Audit Committee consist
of three Board members who satisfy the "independence" requirements of the New
York Stock Exchange. In addition, each member must be able to review and
evaluate financial statements, and at least one member must have accounting or
financial management experience.
The Audit Committee consists of Messrs. Keating, Rentschler and Miller,
who satisfy the "independence" requirements of the New York Stock Exchange and
the other requirements as specified in the Audit Committee Charter. The Audit
Committee held four meetings during fiscal 2001.
Compensation Committee Interlocks and Insider Participation
During fiscal 2001, Messrs. Keating, Miller and Rentschler served as
members of the Compensation Committee. No member of the Compensation Committee
is a former or current officer or employee of IGT or any of our subsidiaries.
The Compensation Committee's functions include oversight of executive
compensation, review of our overall compensation programs, and administration of
certain incentive compensation programs. The Compensation Committee held five
meetings in fiscal 2001.
Compensation of Directors
Through December 2000, each non-employee director received a $12,500
annual fee and a fee of $750 for each committee meeting attended. We do not pay
to directors who are our employees any fees or additional remuneration for
service as members of our Board or its committees.
Effective January 2001, non-employee director compensation increased to
$30,000 annually, and the fee for each committee meeting attended increased to
$1,500.
Each non-employee director receives non-qualified stock options to
purchase 10,000 shares of common stock upon his initial election to the Board of
Directors. Additionally, every year thereafter, each non-employee director
receives non-qualified stock options to purchase 6,000 shares of common stock
upon his re-election to the Board. Each non-employee director received
non-qualified stock options to purchase 6,000 shares of common stock in fiscal
2001 at an exercise price of $55.78 per share.
Recommendation of IGT Board of Directors
The Board of Directors recommends a vote FOR the election of each of
the above nominees as a director.
The favorable vote of a plurality of votes cast for each nominee is
required for election of that nominee to the Board of Directors.
PROPOSAL 2 - APPROVAL OF THE 2002 STOCK INCENTIVE PLAN
Stockholders are being asked to approve the International Game
Technology 2002 Stock Incentive Plan (the "Plan" or the "2002 Plan"). The Board
of Directors approved the Plan, subject to stockholder approval, on December 4,
2001.
We believe that incentives and stock-based awards focus employees on
the objective of creating stockholder value and promoting the success of IGT,
and that incentive compensation plans like the 2002 Plan are an important
attraction, retention and motivation tool for participants in the plan. The
Board of Directors believes that the 2002 Plan will promote our interests and
those of our stockholders and that it will give us flexibility to continue to
provide incentives that are based on the attainment of corporate objectives and
increases in stockholder value.
We currently maintain the International Game Technology 1993 Stock
Option Plan, as amended (the "1993 Plan"). As of January 4, 2002, 5,087,381
shares of common stock were subject to awards outstanding under the 1993 Plan
and an additional 1,157,134 shares remained available for grant purposes under
the 1993 Plan. The authority to grant new awards under the 1993 Plan will
terminate on September 21, 2002. The Board of Directors approved the 2002 Plan
in light of the impending expiration of the 1993 Plan. We may continue to grant
additional awards under the 1993 Plan until September 21, 2002 even if
stockholders approve the 2002 Plan.
We also have the other option plans described below. No additional
awards will be made under these plans. The Stock Option Plan for Key Employees
of International Game Technology expired on December 31, 1996. As of January 4,
2002, 105,506 shares of common stock were subject to awards still outstanding
under this plan. In our merger with Anchor Gaming on December 30, 2001, all
outstanding options to purchase shares of Anchor common stock pursuant to
Anchor's 1995 Employee Stock Option Plan and 2000 Stock Incentive Plan became
options exercisable on a one-for-one basis for our common stock pursuant to the
terms of the merger agreement. As of January 4, 2002, 956,284 shares of common
stock were subject to awards outstanding under Anchor's 1995 Employee Stock
Option Plan and 416,001 shares of common stock were subject to awards
outstanding under Anchor's 2000 Stock Incentive Plan.
The principal terms of the 2002 Plan are summarized below. The
following summary is qualified in its entirety by the full text of the 2002
Plan, which is attached as Exhibit A to this proxy statement.
Operation of the 2002 Plan
Awards. The Plan authorizes stock options, restricted stock awards,
stock bonuses, stock appreciation rights, and performance-based awards (payable
in cash or stock). The Plan retains the flexibility to offer competitive
incentives and to tailor benefits to specific needs and circumstances.
Generally, an option or other right to acquire stock will expire, or other award
will vest, not more than 10 years after the date of grant.
Administration. The Compensation Committee of the Board will administer
the Plan. However, the Board of Directors may assume the administration of the
Plan or appoint one or more other committees of directors to administer the
Plan. The appropriate acting body is referred to as the "Committee."
The Committee (1) will determine the number of shares that are to be
subject to awards and the terms and conditions of such awards, including the
price (if any) to be paid for the shares or the award, (2) may permit the
recipient of any award to pay the purchase price of shares of common stock or
the award in cash or by check, the delivery of previously owned shares of common
stock, a promissory note that satisfies the terms of the Plan, or a cashless
exercise, (3) may accelerate the receipt or vesting of benefits pursuant to an
award, (4) may designate in each award the effect of a termination of service or
employment, and (5) may make adjustments to an outstanding award and authorize
the conversion, succession or substitution of an award; in each case subject to
the express terms and conditions of the Plan.
No Repricing. The Committee from time to time may authorize, generally
or in specific cases only, any adjustment in the exercise price of, the number
of shares subject to, the restrictions upon or the term of an option granted
under the Plan by cancellation of an outstanding option and a subsequent
regranting of an option, by amendment, by substitution of an outstanding option,
by waiver or by other legally valid means; provided, however, that no amendment
or other action may constitute a repricing of an outstanding option without
stockholder approval of that amendment or action.
Eligibility. Persons eligible to receive awards under the Plan include
officers (whether or not directors) or key executive, administrative,
managerial, production, marketing or sales employees of IGT and our
subsidiaries. In addition, non-employee members of the Board of Directors are
eligible to receive stock option grants under the non-employee director option
grant program described below. Non-employee directors are not eligible to
receive award grants under the 2002 Plan except under the non-employee director
option grant program.
As of January 4, 2002, approximately 700 officers and employees of IGT
and our subsidiaries (including all of the named executive officers) were
considered eligible under the Plan, subject to the power of the Committee to
determine eligible employees to whom awards will be granted, and five
non-employee members of the Board of Directors were considered eligible for
automatic option grants under the non-employee director option grant program.
Share Limits. The Plan provides for a limit on the aggregate number of
shares of common stock that may be issued or delivered pursuant to awards
granted to employees under the Plan. This aggregate employee share limit is
3,700,000 shares. The Plan provides that an additional 300,000 shares may be
issued under the Plan's non-employee director option grant program (in addition
to the shares available for employee grants).
The maximum number of shares that may be covered by options and stock
appreciation rights that are granted to an individual under the 2002 Plan during
any fiscal year cannot exceed 1,000,000 shares. No more than 370,000 shares may
be issued under the 2002 Plan in respect of restricted stock awards or stock
bonuses for nominal or no consideration (other than shares issued in respect of
compensation earned but deferred).
As is customary in incentive plans of this nature, the number and kind
of shares available under the Plan and the then outstanding stock-based awards,
as well as exercise or purchase prices, performance targets under selected
performance-based awards and share limits, may be adjusted in the event of
certain reorganizations, mergers, combinations, consolidations,
recapitalizations, reclassifications, stock splits, stock dividends, asset sales
or other similar events, or extraordinary dividends or distributions of property
to the stockholders.
In instances where a stock appreciation right or other award granted
under the 2002 Plan is settled in cash or a form other than shares, the shares
that would have been issued had there been no cash or other settlement will not
be counted against the share limits of the Plan for purposes of determining the
number of shares that remain available for issuance under the Plan. The payment
of cash dividends and dividend equivalents in conjunction with outstanding
awards will not be counted against the shares available for issuance under the
Plan. In addition, the Plan generally provides that shares issued in connection
with awards that are granted by or become obligations of IGT through the
assumption of awards (or in substitution for awards) in connection with an
acquisition of another company will not count against the shares available for
issuance under the Plan.
The Plan will not limit the authority of the Board of Directors or the
Committee to grant awards or authorize any other compensation, with or without
reference to the common stock, under any other plan or authority.
Stock Options. An option is the right to purchase common stock at a
future date at a specified price (the "exercise price"). The per share exercise
price of an option granted under the 2002 Plan may not be less than the fair
market value of a share of common stock on the date of grant of the award. We
may grant nonqualified and incentive stock options under the Plan. Incentive
stock options are taxed differently from nonqualified stock options, as
described under "Federal Income Tax Consequences" below. Incentive stock options
are also subject to more restrictive terms and are limited in amount by the
Internal Revenue Code and the Plan.
Stock Appreciation Rights. A stock appreciation right is the right to
receive a payment based on the appreciation in the fair market value of the
common stock from the date of grant to the date of exercise. As determined by
the Committee, the payment may be paid in cash, in shares of common stock or a
combination thereof.
Restricted Stock Awards. A restricted stock award is an award of a
fixed number of shares of common stock subject to restrictions. The Committee
specifies the price, if any, the participant must pay for the shares and the
restrictions (which may include, for example, continued service only and/or
performance standards) imposed on the shares. No more than 370,000 shares may be
issued under the 2002 Plan as restricted stock.
Stock Bonuses. The Committee may grant a stock bonus to any eligible
employee to reward exceptional or special services, contributions or
achievements in the manner and on such terms and conditions (including any
restrictions on the shares) as determined from time to time by the Committee.
The number of shares so awarded will be determined by the Committee and may be
granted independently or in lieu of a cash bonus.
Performance-Based Awards. The Committee may grant to key employees of
IGT and our subsidiaries Performance-Based Awards designed to satisfy the
requirements for deducibility under Section 162(m) of the Internal Revenue Code.
These Performance-Based Awards are in addition to options or stock appreciation
rights which may also qualify as performance-based awards for Section 162(m)
purposes.
Performance-Based Awards are earned and payable only if performance
reaches specific, pre-established performance goals related to one or more
business criteria approved by the Committee. The performance goals must be
approved by the Committee in advance of applicable deadlines under the Internal
Revenue Code and while the performance relating to the goals remains
substantially uncertain. The performance goals may be established based on one
or a combination of the following business criteria: earnings per share, cash
flow, total stockholder return, revenue growth, operating income, net earnings
(before or after interest, taxes, depreciation and/or amortization), return on
equity or on assets or on net investment, cost containment or reduction, or any
combination of these criteria. The business criteria may be applied based on the
performance of IGT and/or one or more of our subsidiaries, divisions, segments,
or units. The performance measurement period with respect to an award may be
from one to ten years. Performance goals may be adjusted to reflect certain
changes, including reorganizations, liquidations and capitalization and
accounting changes, to the extent permitted by Section 162(m) of the Internal
Revenue Code.
Performance-Based Awards may be stock-based (payable in stock only or
in cash or stock) or may be cash-only awards. Before any Performance-Based Award
is paid, the Committee must certify that the performance goals have been
satisfied. The Administrator will have discretion to determine the performance
goals and restrictions or other limitations of the individual awards and may
reserve "negative" discretion to reduce payments below maximum award limits. The
maximum number of shares of common stock which may be delivered pursuant to all
awards that are granted as Performance-Based Awards (other than options and
stock appreciation rights) to any participant under the 2002 Plan in any fiscal
year may not exceed 1,000,000 shares (subject to adjustment). The annual
aggregate amount of compensation that may be paid to any participant in respect
of cash-based Performance-Based Awards granted to any participant under the 2002
Plan in any fiscal year may not exceed $3,000,000.
Non-Employee Director Options. The 2002 Plan provides that when a
person (other than an employee of IGT or one of our subsidiaries) is first
elected to the Board of Directors after stockholder approval of the 2002 Plan,
he or she will receive a stock option under the Plan to acquire 10,000 shares of
common stock. The 2002 Plan also provides that, commencing in 2003, each
non-employee member of the Board of Directors who is re-elected to office will
receive a stock option under the Plan to acquire 6,000 shares of common stock.
This program of option grants under the Plan is referred to as the "non-employee
director option grant program." This program generally continues IGT's current
non-employee director option grant program that is in place under the 1993 Plan.
The purchase price per share of common stock covered by each option
granted under the non-employee director option grant program will be the fair
market value of our common stock on the date the option is granted. Options
granted under this program vest in three annual installments and generally
expire on the tenth anniversary of the date of grant. Upon the occurrence of a
Change in Control Event (as defined below), each option granted under the
non-employee director option grant program will become exercisable in full.
Deferrals. The 2002 Plan authorizes the Committee to permit the deferred
payment of awards. The Committee may determine the form and timing of payment,
vesting, and other terms applicable to deferrals.
Transferability Restrictions. Participants generally may not transfer
Plan awards or subject them in any manner to sale, transfer, anticipation,
alienation, assignment, pledge, encumbrance or charge. The Committee may,
however, permit selected persons or entities related to a participant to
exercise awards for estate and/or tax planning purposes.
Acceleration of Awards; Possible Early Termination of Awards. Unless
before a Change in Control Event the Committee determines that, upon its
occurrence, benefits will not be accelerated, then generally upon the Change in
Control Event each option and stock appreciation right will become immediately
exercisable, restricted stock will vest, and performance-based awards will
become payable. A Change in Control Event under the Plan generally includes
(subject to identified exceptions) selected changes in a majority of the Board
of Directors, the dissolution or liquidation of IGT, certain mergers,
consolidations or reorganizations in which stockholders before the transaction
do not continue to own more than 50% of the company following the transaction, a
sale of all or substantially all of our business and/or assets, or the
acquisition, directly or indirectly, of shares amounting to more than 50% of
combined outstanding shares by any person.
Termination of or Changes to the Plan. The Board of Directors may amend
or terminate the 2002 Plan at any time and in any manner. Stockholder approval
for an amendment will generally not be obtained unless required by applicable
law or deemed necessary or advisable by the Board of Directors. Unless
terminated earlier by the Board of Directors, the 2002 Plan will terminate on
December 3, 2011. Outstanding awards generally may be amended, subject to the
consent of the holder if the amendment materially and adversely affects the
holder.
Securities Underlying Awards. The market value of a share of common
stock as of the close of trading on January 4, 2002 was $67.60.
Federal Income Tax Consequences
The federal income tax consequences of the 2002 Plan under current
federal law, which is subject to change, are summarized in the following
discussion of the general tax principles applicable to the 2002 Plan. This
summary is not intended to be exhaustive and, among other considerations, does
not describe state, local, or international tax consequences
With respect to nonqualified stock options, we are generally entitled
to deduct and the optionee recognizes taxable income in an amount equal to the
difference between the option exercise price and the fair market value of the
shares at the time of exercise. With respect to incentive stock options, we are
generally not entitled to a similar deduction nor does the optionee recognize
income either upon the grant of the option or at the time the option is
exercised. The current federal income tax consequences of other awards
authorized under the Plan generally follow the following basic patterns: stock
appreciation rights are taxed and deductible in substantially the same manner as
nonqualified stock options; nontransferable restricted stock subject to a
substantial risk of forfeiture results in income recognition equal to the excess
of the fair market value of the stock over the purchase price only at the time
the restrictions lapse (unless the recipient elects to accelerate recognition as
of the date of grant); performance-based awards generally are subject to tax at
the time of payment; and unconditional stock bonuses are generally subject to
tax measured by the value of the payment received; in each of the foregoing
cases, we will generally have a corresponding deduction at the time the
participant recognizes income.
If the vesting or payment of an award accelerates under the Plan in
connection with a change in control, we may not be permitted to deduct the
portion of the compensation attributable to the acceleration. Furthermore, if
the compensation attributable to awards is not "performance-based" within the
meaning of Section 162(m) of the Internal Revenue Code, we may not be permitted
to deduct this compensation in some circumstances.
Specific Benefits
The number, amount and type of awards to be received by or allocated to
eligible persons under the 2002 Plan cannot be determined at this time. We have
not yet considered any specific awards under the 2002 Plan. For information
regarding options and other awards granted to executive officers under the 1993
Plan in 2001, see the material under the heading "Other Information - Executive
Compensation" below. If the 2002 Plan had been in effect in 2001, we expect that
the grants would not have been substantially different from those actually made
under the 1993 Plan.
The Board of Directors believes that the 2002 Plan will promote our
interests and those of our stockholders and continue to enable us to attract,
retain and reward persons important to our success and to provide incentives
based on the attainment of corporate objectives and increases in stockholder
value.
Recommendation of IGT Board of Directors
The Board of Directors has unanimously approved and recommends a vote
FOR the approval of the 2002 Plan as described above. Stockholders should note
that because the 2002 Plan may in the future impact each member of the Board of
Directors, our directors may have a personal interest in the proposal and its
approval by stockholders. However, the members of the Board of Directors believe
that the approval of the 2002 Plan is in the best interests of IGT and its
stockholders.
Approval of the 2002 Plan requires the affirmative vote of a majority
of the shares of common stock present or represented, and entitled to vote, at
the annual meeting.
OTHER INFORMATION
Executive Officers and Key Employees
The following table sets forth the name, age, and current office of our
executive officers and selected key employees, all positions held by each
individual, and a description of the business experience of each individual for
at least the past five years.
Name Age Title
G. Thomas Baker 59 Chief Executive Officer, President
Robert A. Bittman 47 Executive Vice President,
Product Development
Sara Beth Brown 46 Senior Vice President, General Counsel,
Secretary
Ward Chilton 45 Senior Vice President, North America Sales
Anthony Ciorciari 54 Senior Vice President, Operations
Thomas J. Matthews 36 Chief Operating Officer
Maureen T. Mullarkey 42 Senior Vice President, Chief Financial
Officer, Treasurer
Richard Pennington 39 Senior Vice President, Product Management
Randy Kirner 55 Vice President, Human Resources
For a description of Mr. Baker's, Mr. Bittman's and Mr. Matthews's
backgrounds, see "Election of Directors."
Ms. Brown joined IGT in October 1999 as Vice President, General Counsel
and Corporate Secretary. In October 2000, she was appointed Senior Vice
President. She has responsibility for legal services, intellectual property,
corporate governance, corporate audit, regulatory compliance, product
compliance, risk management and government affairs. Prior to joining IGT, Ms.
Brown held key positions at Wells Fargo & Co., including Senior Vice President
and Regional Manager of Wells Fargo Private Client Services, and managing
counsel for the bank's predecessor First Interstate Bank of Nevada, N.A. She has
also practiced law in the areas of civil rights, criminal defense and employment
law. Ms. Brown was graduated from the University of Nevada, Reno in 1978 with
high honors and received a degree in Journalism. She received her Juris
Doctorate from McGeorge School of Law in 1981 with distinction, and is a member
of the Order of the Coif. Ms. Brown serves as a Commissioner to the Nevada
Commission on Economic Development, and was appointed by U.S. Senator Richard
Bryan to the committee that selects Nevada's military academy appointees.
Mr. Chilton first joined IGT in September 1986 as an Account Executive
and was promoted to Manager of Megabucks in 1987. He was promoted to Director of
Progressive Systems in July 1991 and held this position until December 1995. Mr.
Chilton rejoined IGT in April 1996 as Director of Progressive Systems and was
promoted to Vice President of MegaJackpots in March of 1999. In October 2001, he
was promoted to Sr. Vice President, North America Sales. He is responsible for
all of domestic sales, as well as IGT's recurring revenue products including
wide area progressives and stand-alone proprietary games. Prior to joining IGT,
from November 1980 to September 1986, Mr. Chilton developed and managed real
estate and was also a general partner in Frontier Investments, which owned the
Red Garter Hotel and Casino in Wendover, Nevada. Mr. Chilton received a Bachelor
of Science degree in Business Administration from Arizona State University in
1978 and a Masters of Science degree from Golden Gate University in 1980.
Mr. Ciorciari joined IGT as Vice President of Operations in January
1994, with responsibility for worldwide manufacturing, procurement, corporate
facilities and services. In August 1998, he was appointed Senior Vice President
of Operations. Mr. Ciorciari has more than 26 years' experience in U.S. and
international manufacturing at Digital Equipment Company. From June 1987 through
December 1993, Mr. Ciorciari was General Manager of the Digital manufacturing
operations in Albuquerque, New Mexico and Chihuahua, Mexico. In this position,
he was responsible for the manufacturing and supply of Digital's workstation and
systems product lines. Mr. Ciorciari is currently a member of the Board of
Directors for the National Association of Manufacturers in Washington, D.C. He
is also a Foundation Board Member for Truckee Meadows Community College.
Ms. Mullarkey first joined IGT in 1989 and held several financial
positions before her appointment as Chief Financial Officer in May 1998. In
1999, in addition to her role as Chief Financial Officer, Ms. Mullarkey was
appointed Vice President of Finance and Treasurer of IGT, and held these
positions until July 2000. Ms. Mullarkey was Chief Financial Officer at Zoho
Corporation from August 2000 to January 2001. She rejoined IGT in January 2001,
and was appointed Senior Vice President and Chief Financial Officer in March
2001. Ms. Mullarkey directs investor relations, finance, accounting, treasury
management, tax and information system functions. Ms. Mullarkey received a
Bachelor of Science degree from the University of Texas at Austin in 1981, and a
Masters of Business Administration degree from the University of Nevada, Reno in
1988.
Mr. Pennington joined IGT in July 1991 and has held several management
positions in the finance and accounting areas of IGT. In 1997 he was promoted to
Finance Director with responsibility for Credit, Cost Accounting, and Corporate
Finance. In 1999, Mr. Pennington was promoted to Vice President of Product
Management. In October 2001, he was promoted to Senior Vice President of Product
Management, where he manages and coordinates the cross-functional activities and
processes from product development through manufacturing, sales and service.
Prior to joining IGT, Mr. Pennington was Manager of Cost Accounting at Western
Digital in Irvine, California, and prior to that, Manager of Accounting at
Emerson Technologies LLP, an affiliate of Emerson Radio. Mr. Pennington attended
California State University at Pomona where he graduated with a Bachelor of
Science degree in Business Administration in 1987.
Mr. Kirner joined IGT in October 1997 as Vice President, Human
Resources. From September 1993 through September 1997, Mr. Kirner served as the
Vice President, Human Resources for Wyle Electronics, an international
distributor of semiconductors, computer systems and related value-added
services. From 1986 to 1992, he was employed by Allergan, Inc. of Irvine,
California in various capacities including Regional Sales Manager and earlier as
Vice President, Human Resources for Medical Optics, a subsidiary. Prior to that,
Mr. Kirner was with American Hospital Supply Corporation from 1972 to 1986. He
is a Vietnam veteran having served as an officer in the U.S. Army from 1967 to
1972. Mr. Kirner received a Masters of Science from West Coast University in
1975, a Masters of Business Administration degree from Georgia State University
in 1968 and his Bachelor's degree in Business Administration from North Georgia
College and State University in 1967.
Equity Security Ownership of Management and Other Beneficial Owners
The following table sets forth information as of January 4, 2002 with
respect to the beneficial ownership of our common stock by persons known to us
to own beneficially more than 5% of the common stock, each of our directors, our
executive officers named in the Summary Compensation Table, and all of our
executive officers and directors of IGT as a group. We have no other class of
equity securities outstanding.
Shares of IGT's Common Stock
----------------------------
Options
Exercisable Beneficially Percent of
Name of Beneficial Owner Owned Within 60 Days Owned (1) Class (2)
------------------------ -------- -------------- ------------ ----------
G. Thomas Baker 129,360 478,729 608,089 *
Robert A. Bittman 15,000 9,282 24,282 *
Sara Beth Brown 1,000 0 1,000 *
Richard R. Burt 0 0 0 *
Anthony Ciorciari 47,889 914 48,803 *
Wilbur K. Keating 4,718 28,000 32,718 *
Thomas J. Matthews 130,000 288,000 418,000 *
Charles N. Mathewson 2,128,103 394,123 2,522,226 2.8%
Maureen T. Mullarkey 3,772 59,560 63,332 *
Robert Miller 0 10,667 10,667 *
Frederick B. Rentschler 0 4,000 4,000 *
All executive officers
and directors as a group
(14 persons) 2,465,365 1,307,687 3,773,052 4.2%
Private Capital Management,
Inc. and affiliates(3) 5,284,728 0 5,284,728 7.3%
FMR Corp. (4) 4,797,015 0 4,797,015 6.6%
-----------
*Less than 1%
(1)Represents sum of shares owned and shares which may be purchased upon
exercise of options exercisable within 60 days of January 4, 2002.
(2) Any securities not outstanding which are subject to options or conversion
privileges which are exercisable within 60 days of January 4, 2002 are deemed
outstanding for the purpose of computing the percentage of outstanding
securities of the class owned by any person holding such securities but are not
deemed outstanding for the purpose of computing the percentage of the class
owned by any other person.
(3) Number of Shares Beneficially Owned and Percentage of Class information and
the information in this footnote derived from Amendment No. 2 to Schedule 13G,
reporting information as of December 31, 2000 and filed February 14, 2001. Bruce
S. Sherman is Chairman and Gregg J. Powers is President of Private Capital
Management, inc. ("PCM"), which beneficially owns 5,028,453 shares of IGT common
stock. In these capacities, Messrs. Sherman and Powers exercise shared
dispositive and shared voting power with respect to shares held by PCM's clients
and managed by PCM. Messrs. Sherman and Powers are also general partners of SPS
Partners, LP, the investment advisor to the Entrepreneurial Value Fund, L.P.
("EVF"). In this capacity, Messrs. Sherman and Powers exercise shared
dispositive and voting powers over 200,000 shares held by EVF. Mr. Sherman has
sole or shared voting power over a total of 5,284,728 shares and Mr. Powers has
sole or shared power over a total of 5,228,453 shares of common stock. Messrs.
Sherman and Powers disclaim beneficial ownership for the shares held by EVF and
by PCM's clients and disclaim the existence of a group. The business address of
PCM and Messrs. Sherman and Powers is 8889 Pelican Bay Boulevard, Suite 500,
Naples, Florida 34108.
(4) Number of Shares Beneficially Owned and Percentage of Class information
derived from Schedule 13G, reporting information as of December 31, 2000 and
filed February 14, 2001. Edward C. Johnson 3d and Abigail P. Johnson are natural
persons each having sole dispositive power over 4,797,015 of these shares, and
Edward C. Johnson 3d individually has sole voting power over 1,228,360 of these
shares. FMR Corp.'s business address is 82 Devonshire Street, Boston,
Massachusetts 02109.
Executive Compensation
Summary Compensation Table
The following table summarizes all compensation paid for fiscal 2001,
2000, and 1999 to each person who held the position of Chief Executive Officer
and to the other four most highly compensated executive officers during fiscal
2001.
Long-Term Compensation
----------------------
Annual Compensation
------------------------- Securities Underlying Other
Name and Principal Position Year Salary($)(2) Bonus($)(3) Options Granted(4) Compensation($)(5)
--------------------------- ---- ---------- -------- --------------- ---------------
Charles N. Mathewson(1) 2001 1 1,300,000 --- 80,192(6)
Chairman of the Board of 2000 1 1,300,000 --- 92,676
Directors 1999 1 --- --- 117,507
G. Thomas Baker(7) 2001 621,154 1,950,000(8) 500,000 99,674
Chief Executive Officer 2000 499,231 1,300,000 --- 80,983
and President 1999 450,000 350,000 --- 69,257
Robert A. Bittman 2001 299,997 325,000 100,000 57,999
Executive Vice President, 2000 300,000 300,000 --- 56,182
Product Development 1999 300,000 200,000 --- 51,584
Anthony A. Ciorciari 2001 222,981 325,000 50,000 48,559
Senior Vice President, 2000 209,516 220,000 --- 45,448
Operations 1999 196,500 170,000 --- 40,231
Sara Beth Brown(9) 2001 200,000 325,000 50,000 45,410
Senior Vice President, 2000 171,635 245,000 50,000 20,856
General Counsel, Secretary 1999 --- --- --- ---
Maureen T. Mullarkey 2001 145,615 375,000 100,000 35,648
Senior Vice President, 2000 166,903 --- --- 28,970
Chief Financial Officer, 1999 180,192 175,000 50,000 18,952
Treasurer
------------
(1)Mr. Mathewson was Chief Executive Officer until December 2000.
(2)Amounts shown include base compensation earned and received by executive
officers. No non-cash compensation was paid as salary or as a bonus during
fiscal 2001.
(3)Amounts represent bonuses earned in the fiscal year but paid in the following
fiscal year.
(4)Amounts represent options to purchase the number of shares of common stock
shown.
(5)Amounts shown include contributions by IGT to the accounts of the identified
executive officers under IGT's qualified profit sharing plan and payment under
IGT's cash sharing plan. See "Employee Incentive Plans" for a description of
these plans.
(6)Amount shown also includes estate planning, and life insurance premiums.
(7)Mr. Baker was appointed Chief Executive Officer in December 2000.
(8)Amount shown includes $650,000 deferred bonus. See "Employment Contracts"
for a description of the deferred bonus provision of Mr. Baker's employment
contract.
(9)Ms. Brown joined IGT in fiscal 2000.
Options
The table below sets forth certain information regarding options
granted to the executive officers named in the Summary Compensation Table during
fiscal 2001.
Option Grants In Last Fiscal Year
Individual Grants
------------------------------------------------------
Percent of
Total
Number of Options Potential Realizable Value at
Securities Granted to Assumed Annual Rates of Stock Price
Underlying Employees Exercise or Appreciation for Option Term(1)
Options in Fiscal Base Price Expiration -----------------------------------
Name Granted(1) Year (%) Per Share Date 5% 10%
--------------------- ----------- ---------- ----------- ---------- ----------------------
--- --- --- --- --- ---
Charles N. Mathewson
G. Thomas Baker 500,000 21.08 $45.00 12/5/2010 $14,150,129 $35,859,205
Robert A. Bittman 100,000 4.22 46.45 3/23/2011 2,921,216 7,402,934
Anthony Ciorciari 50,000 2.11 46.45 3/23/2011 1,460,608 3,701,467
Sara Beth Brown 50,000 2.11 46.45 3/23/2011 1,460,608 3,701,467
Maureen Mullarkey 100,000 4.22 44.75 1/22/2011 2,814,303 7,131,998
------------
(1) Except as described in the following footnote, the options have a ten year
term and are generally exercisable commencing 12 months after the grant date,
with 20% of the shares covered thereby becoming exercisable at that time and
with an additional 20% of the option shares becoming exercisable on each
successive anniversary date, with full vesting occurring on the fifth
anniversary date.
Aggregated Option Exercises In Last Fiscal Year and Fiscal Year-End Option
Values
Number of Securities
Options Exercised Underlying Unexercised Value of Unexercised In-the
----------------- Options at 9/30/2001 Money Options at 9/30/2001 (1)
Shares -------------------- ------------------------------
Name Acquired Value Realized Exercisable Unexercisable Exercisable Unexercisable
-------------------- -------- -------------- ----------- ------------- ----------- -------------
Charles N. Mathewson 620,000 $25,680,010 394,123 --- $11,310,239 ---
G. Thomas Baker 221,960 9,982,738 308,611 505,455 8,946,114 $117,755
Robert A. Bittman --- --- 7,186 103,290 161,276 71,126
Anthony Ciorciari 50,000 2,218,540 17,919 52,164 503,470 47,188
Sara Beth Brown 7,000 171,000 3,000 90,000 48,000 792,500
Maureen Mullarkey(2) --- --- 58,772 136,606 1,507,022 912,888
------------
(1)Market value of the underlying securities at year-end, less the exercise
price of "in-the-money" options.
(2)Information provided only for portion of fiscal 2001 during which Ms.
Mullarkey was employed by IGT.
Employee Incentive Plans
We provide the following employee incentive plans: profit sharing and
401(k) plan, cash sharing, management bonus, and non-qualified deferred
compensation. Total annual contributions from operating profits for all plans
were $63.9 million in fiscal 2001, $38.6 million in fiscal 2000 and $27.1
million in fiscal 1999.
We adopted the profit sharing and 401(k) plan for our employees working
in the United States. We match 75% of an employee's contributions up to $1,000.
This allows for maximum annual company matching contributions of $750 to each
employee's account. Participants are 100% vested in their contributions and our
matching contributions. Additionally, we share a portion of our profits with
eligible employees. These profit sharing contributions vest over a seven year
period of employment.
The cash sharing plan is distributed semi-annually in May and November
to all U.S. employees. Our foreign subsidiaries have similar programs. The
management bonuses are paid out annually to key employees throughout IGT.
We implemented a non-qualified deferred compensation plan in September
1999 to provide an unfunded incentive compensation arrangement for eligible
management and highly compensated employees. Participants may elect to defer up
to 50% of their annual base salary, 50% of cash sharing, 50% of discretionary
management bonus and 50% of commissions with a minimum deferral of $2,000.
Distributions can be paid out as short-term payments or at retirement.
Retirement benefits can be paid out as a lump sum or in annual installments over
a term of up to 15 years.
Employment Contracts
G. Thomas Baker was appointed Chief Executive Officer and President of
IGT effective December 6, 2000. IGT entered into a three-year employment
agreement with Mr. Baker in December 2000 providing for an annual base salary of
$650,000 for year one, $700,000 during year two and $750,000 during year three.
In addition, for each one percent increase in operating profits before
incentives over the previous fiscal year, Mr. Baker will receive a management
bonus equal to 10 percent of his base salary, and he will receive 20 percent of
his base salary for any increase in operating profits over the prior year in
excess of 10 percent. The bonus calculation shall not exceed 300 percent of the
base salary. In year one, the bonus was determined based on the full 2000-2001
fiscal year without proration. The bonus will also be payable based upon various
management objectives set by the Board of Directors in consultation with Mr.
Baker. If the bonuses earned in year one and year two exceed 200 percent of the
base salary, the amount over 200 percent will be accrued and payment deferred to
year three of the term provided that Mr. Baker remains with IGT through the
term. Mr. Baker is also eligible to participate in IGT's profit sharing and cash
sharing programs (see "Employee Incentive Plans" above). Additionally, Mr. Baker
was granted an option to purchase 500,000 shares of common stock of IGT at a
price of $45.00 per share. The stock option vests in three equal installments
upon the first, second and third anniversaries of the award.
Robert A. Bittman was appointed Executive Vice President, Product
Development of IGT effective March 18, 1996. IGT entered into a five year
employment agreement with Mr. Bittman in March 1996 providing for an annual base
salary of $250,000 and a one-time cash payment of $150,000, paid upon the
commencement of his employment. This agreement terminated by its terms in March
2001, and Mr. Bittman has continued to be employed by IGT on an at-will basis.
Mr. Bittman is eligible to participate in IGT's profit sharing, cash sharing and
management bonus plans (see "Employee Incentive Plans" above). Additionally, Mr.
Bittman was granted a restricted stock award for 225,000 shares at a price of
$.01 per share which vested in three equal installments ending in March 2001.
Thomas J. Matthews was appointed Chief Operating Officer effective
December 30, 2001. IGT entered into an employment agreement with Mr. Matthews
effective as of December 30, 2001, which continues through October 16, 2004. At
the end of the employment agreement term, Mr. Matthew's employment shall be at
will. The employment agreement provides for an annual base salary of $450,000.
Mr. Matthews is also eligible to receive annual salary increases and is eligible
to participate in IGT's profit sharing, cash sharing and management bonus plans
(see "Employee Incentive Plans" above). Additionally, Mr. Matthews was granted
an option to purchase 500,000 shares of IGT common stock at a price of $70.00
per share. The award vests in five equal annual installments beginning on the
first anniversary of the award.
Maureen T. Mullarkey was hired and entered into an employment agreement
on January 12, 2001, and Ms. Mullarkey was appointed Senior Vice President and
Chief Financial Officer of IGT effective March 2, 2001. IGT entered into a five
year employment agreement with Ms. Mullarkey in January 2001 providing for an
annual base salary of $250,000. At the end of the five-year term, Ms.
Mullarkey's employment will be at will. Ms. Mullarkey is also eligible to
receive annual salary increases and is eligible to participate in IGT's profit
sharing, cash sharing and management bonus plans (see "Employee Incentive Plans"
above). Additionally, Ms. Mullarkey was granted an option to purchase 100,000
shares of IGT common stock at a price of $44.75 per share. The option vests in
five equal annual installments beginning on the first anniversary of the award.
Ms. Mullarkey also retained a total of 95,378 options previously granted to her.
Compliance with Section 16(a) of the Securities Exchange Act of 1934
Section 16(a) of the Securities Exchange Act of 1934 and regulations of
the Securities and Exchange Commission require our executive officers,
directors, and persons who beneficially own more than 10% of the our common
stock, as well as certain affiliates of those persons, to file initial reports
of ownership and monthly transaction reports covering any changes in ownership
with the SEC and the New York Stock Exchange. SEC regulations require these
persons to furnish us with copies of all reports they file pursuant to Section
16(a). Based solely on a review of the copies of the reports received by us, we
believe that, during fiscal 2001, all filing requirements applicable to
executive officers and directors were complied with, with one exception. A Form
4 reporting exempt grants of stock options to Mr. Anthony Ciorciari's spouse, an
employee of IGT, was inadvertently filed late.
Relationship with Independent Public Accountants
We have selected Deloitte & Touche LLP as our independent accountants
for the year ending September 28, 2002. A representative of Deloitte & Touche
LLP will be present at the annual meeting and will have an opportunity to make a
statement as well as respond to appropriate questions.
THE FOLLOWING REPORTS OF THE COMPENSATION AND AUDIT COMMITTEES AND THE
PERFORMANCE GRAPH THAT APPEARS AFTER THE REPORTS SHALL NOT BE DEEMED TO BE
SOLICITING MATERIAL OR TO BE FILED WITH THE SECURITIES AND EXCHANGE COMMISSION
UNDER THE SECURITIES ACT OF 1933 OR THE SECURITIES EXCHANGE ACT OF 1934 OR
INCORPORATED BY REFERENCE IN ANY DOCUMENT SO FILED.
BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors, consisting
entirely of non-employee directors, is responsible for oversight of executive
compensation, review of IGT's overall compensation programs, and administration
of certain incentive compensation programs.
Compensation Philosophy
Generally, IGT's compensation programs are designed to attract, retain,
motivate and appropriately reward individuals who are responsible for IGT's
short- and long-term profitability, growth and return to stockholders. The
overall compensation philosophy followed by the Committee is to pay
competitively while emphasizing qualitative indicators of corporate and
individual performance.
Executive Compensation
IGT's management bonus plan is a cash-based incentive program, and for
fiscal 2001, was based on IGT's income from operations. Individual cash bonus
awards were made to the executive officers because the Committee believes such
awards provide appropriate performance incentives. Individual cash bonus awards
for executive officers other than the Chief Executive Officer were determined
for fiscal 2001 by IGT's Chief Executive Officer, Mr. Baker, based on his
subjective evaluation of each officer's individual performance.
Executive officers also participate in benefit plans available to
employees as described under "Employee Incentive Plans."
The Committee also uses stock option awards made under the
International Game Technology 1993 Stock Option Plan to provide various
incentives for key personnel, including executive officers. Stock options are
priced at the fair market value of the common stock of IGT on the date of the
grant, and typically vest at the rate of 20% per year over five years with
exercisability dependent on continued employment.
G. Thomas Baker, Robert A. Bittman, Sara Beth Brown, Ward Chilton,
Anthony Ciorciari, Maureen T. Mullarkey, Richard Pennington and Randall Kirner
all received stock option awards in fiscal 2001. The Committee also periodically
approves additional stock option awards for eligible individuals, including
executive officers, based on a subjective evaluation of individual current
performance, assumption of significant responsibilities, anticipated future
contributions, and/or ability to impact overall corporate and/or business unit
financial results.
To the extent readily determinable, and as one of the factors in its
consideration of compensation matters, the Compensation Committee also considers
the anticipated tax treatment to IGT and to the executives of various payments
and benefits, specifically in consideration of Section 162(m) of the Internal
Revenue Code. The Committee will not, however, limit executive compensation to
that which is deductible.
Chief Executive Compensation
Mr. Mathewson served as Chief Executive Officer of IGT from February
1996 until December 2000. The Committee granted Mr. Mathewson stock options in
February 1996 to acquire 1.0 million shares of IGT's common stock. All of such
options were fully vested in December 1996. No options were granted to Mr.
Mathewson in fiscal 1998, 1999 or 2000. On December 8, 1998, the Compensation
Committee and Board of Directors approved the purchase of a $10.0 million split
dollar life insurance benefit plan. Mr. Mathewson received nominal compensation
of $1.00 for salary in fiscal 2001 and a management bonus in the amount of $1.3
million. The Compensation Committee determined the amount of the management
bonus for Mr. Mathewson based on its subjective views of his contribution to the
favorable performance of IGT in 2001 and, without an independent verification,
its view about the appropriate level of compensation to him for such
contributions.
Mr. Baker became Chief Executive Officer of IGT in December 2000. The
Committee granted Mr. Baker stock options in December 2000 to acquire 500,000
shares of IGT's common stock, which vest in three equal installments upon the
first, second and third anniversaries of the award. During fiscal
2001, Mr. Baker received a base salary of $650,000 and a management bonus of
$1,950,000, pursuant to the terms of his employment agreement (see "Employment
Contracts").
COMPENSATION COMMITTEE
Frederick B. Rentschler, Chairman
Wilbur K. Keating
Robert Miller
AUDIT COMMITTEE REPORT
The Audit Committee has reviewed and discussed IGT's audited financial
statements with IGT management and has discussed certain required matters with
IGT's independent auditors, in accordance with Statement of Auditing Standards
No. 61.
IGT's independent auditors also provided written documentation to the
Audit Committee, describing all relationships between the auditors and IGT that
might bear on the auditors' independence consistent with Independence Standards
Board Standard No. 1. The Audit Committee has discussed with the independent
auditors any relationships that may impact the auditors' objectivity and
independence and has satisfied itself as to the auditors' independence.
Based on the above-mentioned review and discussions with management and
the independent auditors, the Audit Committee recommended to the Board that
IGT's audited financial statements be included in its Annual Report on Form 10-K
for the fiscal year ended September 29, 2001. The Audit Committee also
recommended the re-appointment of the independent auditors and the Board
concurred in such recommendation.
AUDIT COMMITTEE
Wilbur K. Keating, Chairman
Frederick B. Rentschler
Robert Miller
Fees Paid to Independent Public Accountants
For the fiscal year ending September 29, 2001, fees paid for services
provided by Deloitte & Touche LLP were as follows:
Audit Fees
Fees paid for services rendered for the audit of our annual financial
statements for the fiscal year ended September 29, 2001 and the reviews of our
financial statements included in our quarterly reports on Form 10-Q for the same
fiscal year were $534,127.
Financial Information Systems Design and Implementation Fees
Fees paid for financial information systems design and implementation
were $68,505.
All Other Fees
Fees paid for services rendered, other than those services covered in
the sections captioned "Audit Fees" and "Financial Information Systems Design
and Implementation Fees," were $827,683, including fees for tax services of
$443,905.
The Audit Committee has concluded that the provision of non-audit
services by our principal independent accountants is compatible with maintaining
auditor independence.
PERFORMANCE GRAPH
The following graph reflects the cumulative total return (change in
stock price plus reinvested dividends) of a $100 investment in our common stock
for the five-year period from October 1, 1996 through September 29, 2001 in
comparison to the Standard and Poor's 500 Composite Index and a peer group. The
comparisons are not intended to forecast or be indicative of possible future
performance of our common stock.
[OBJECT OMITTED]
1996 1997 1998 1999 2000 2001
International Game Technology 100 114 92 89 166 210
S & P 500 100 140 153 196 222 163
Peer Group 100 123 84 76 77 124
The peer group includes Alliance Gaming Corp., Anchor Gaming,
GTECH Holdings Corp. and WMS Industries, Inc. Casino Data Systems and Silicon
Gaming, Inc., which were included in the peer group in last year's proxy
statement, have been omitted from the peer group in this proxy statement because
each of these
companies ceased to be publicly traded.
Stockholder Proposals for the 2003 Annual Meeting
Proposals of stockholders intended to be presented at our next annual
meeting must be received by us by September 27, 2002 to be considered for
inclusion in our proxy statement relating to that meeting. Stockholders desiring
to present a proposal at the next annual meeting but who do not desire to have
the proposal included in the proxy materials distributed by us must deliver
written notice of such proposal to us prior to December 11, 2002 or the persons
appointed as proxies in connection with the next annual meeting will have
discretionary authority to vote on any such proposal.
GENERAL
Our annual report to stockholders, containing audited financial
statements, accompanies this proxy statement. Shareholders may obtain, without
charge, a copy of our most recent annual report on Form 10-K as filed with the
Securities and Exchange Commission upon written request. Please direct all
requests to International Game Technology, Attn: Investor Relations, 9295
Prototype Drive, P.O. Box 10580, Reno, Nevada 89510-0580, telephone (775)
448-0880, fax (775) 448-1137.
As of the date of this proxy statement, the Board of Directors knows of
no business which will be presented for consideration at the meeting other than
the matters stated in the accompanying Notice of Annual Meeting of Stockholders
and described in this proxy statement. If, however, any matter incident to the
conduct of the meeting or other business properly comes before the meeting, the
persons acting under the proxies intend to vote with respect to those matters or
other business in accordance with their best judgment, and the proxy includes
discretionary authority to do so.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Sara Beth Brown
-----------------------
Sara Beth Brown
Secretary
Reno, Nevada
January 16, 2002
EXHIBIT A
INTERNATIONAL GAME TECHNOLOGY
2002 STOCK INCENTIVE PLAN
TABLE OF CONTENTS
Page
I. THE PLAN...........................................................1
1.1 Purpose...................................................1
1.2 Administration and Authorization; Power and Procedure.....1
1.3 Participation.............................................2
1.4 Shares Available for Awards; Share Limits.................2
1.5 Grant of Awards...........................................3
1.6 Award Period..............................................4
1.7 Limitations on Exercise and Vesting of Awards.............4
1.8 Acceptance of Notes to Finance Exercise...................4
1.9 No Transferability........................................5
II. EMPLOYEE OPTIONS...................................................6
2.1 Grants....................................................6
2.2 Option Price..............................................6
2.3 Limitations on Grant and Terms of Incentive Stock
Options...................................................6
2.4 Limits on 10% Holders.....................................7
2.5 Cancellation and Regrant/Waiver of
Restrictions; No Repricings...............................7
III. STOCK APPRECIATION RIGHTS..........................................7
3.1 Grants....................................................7
3.2 Exercise of Stock Appreciation Rights.....................7
3.3 Payment...................................................8
3.4 Limited Stock Appreciation Rights.........................8
IV. RESTRICTED STOCK AWARDS............................................8
4.1 Grants....................................................8
4.2 Restrictions..............................................9
4.3 Return to the Corporation.................................9
V. PERFORMANCE SHARE AWARDS AND STOCK BONUSES........................10
5.1 Grants of Performance Share Awards.......................10
5.2 Special Performance-Based Share Awards...................10
5.3 Grants of Stock Bonuses..................................11
5.4 Deferred Payments........................................11
VI. OTHER PROVISIONS..................................................12
6.1 Rights of Eligible Employees, Participants and
Beneficiaries............................................12
6.2 Adjustments; Acceleration................................12
6.3 Effect of Termination of Employment......................13
6.4 Compliance with Laws.....................................14
6.5 Tax Withholding..........................................14
6.6 Plan Amendment, Termination and Suspension...............15
6.7 Privileges of Stock Ownership............................15
6.8 Effective Date of the Plan...............................15
6.9 Term of the Plan.........................................16
6.10 Governing Law; Construction; Severability................16
6.11 Captions.................................................16
6.12 Effect of Change of Subsidiary, Division, or Unit
Status...................................................16
6.13 Non-Exclusivity of Plan..................................17
VII. NON-EMPLOYEE DIRECTOR OPTIONS.....................................17
7.1 Participation............................................17
7.2 Annual Option Grants.....................................17
7.3 Option Price.............................................17
7.4 Option Period and Exercisability.........................17
7.5 Termination of Directorship..............................18
7.6 Adjustments..............................................18
7.7 Acceleration Upon a Change in Control Event..............18
VIII. DEFINITIONS.......................................................18
8.1 Definitions..............................................18
I. THE PLAN
1.1 Purpose
The purpose of this Plan is to promote the success of the Company by
providing an additional means through the grant of Awards to attract, motivate,
retain and reward key employees, including officers, whether or not directors,
of the Company with Awards and incentives for high levels of individual
performance and improved financial performance of the Company and to attract,
motivate and retain experienced and knowledgeable independent directors through
the benefits provided under Article VII. "Corporation" means International Game
Technology, a Nevada corporation, and "Company" means the Corporation and its
Subsidiaries, collectively. These terms and other capitalized terms are defined
in Article VIII.
1.2 Administration and Authorization; Power and Procedure
(a) Committee. This Plan shall be administered by and all Awards to Eligible
Employees shall be authorized by the Committee. Action of the Committee with
respect to the administration of this Plan shall be taken pursuant to a majority
vote or by written consent of its members.
(b) Plan Awards; Interpretation; Powers of Committee. Subject to the express
provisions of this Plan, the Committee shall have the authority:
(i) to determine eligibility and, from among those persons determined to be
eligible, the particular Eligible Employees who will receive any
Awards;
(ii) to grant Awards to Eligible Employees, determine the price at which
securities will be offered or awarded and the amount of securities to
be offered or awarded to any of such individuals, and determine the
other specific terms and conditions of such Awards consistent with the
express limits of this Plan, and establish the installments (if any) in
which such Awards shall become exercisable or shall vest, or determine
that no delayed exercisability or vesting is required, and establish
the events of termination or reversion of such Awards;
(iii) to approve the forms of Award Agreements (which need not be identical
either as to type of Award or as among Participants);
(iv) to construe and interpret this Plan and any agreements defining the
rights and obligations of the Company and Participants under this Plan,
further define the terms used in this Plan, and prescribe, amend and
rescind rules and regulations relating to the administration of this
Plan;
(v) to cancel, modify, or waive the Corporation's rights with respect to,
or modify, discontinue, suspend, or terminate any or all outstanding
Awards held by Eligible Employees, subject to any required consent
under Section 6.6;
(vi) to accelerate or extend the exercisability or extend the term of any
or all such outstanding Awards within the maximum ten-year term of
Awards under Section 1.6; and
(vii) to make all other determinations and take such other action as
contemplated by this Plan or as may be necessary or advisable for the
administration of this Plan and the effectuation of its purposes.
Notwithstanding the foregoing, Non-Employee Directors shall be eligible for the
Nonqualified Stock Option grants contemplated by Article VII and the provisions
of Article VII shall be automatic and, to the maximum extent possible,
self-effectuating.
(c) Binding Determinations. Any action taken by, or inaction of, the
Corporation, any Subsidiary, the Board or the Committee relating or pursuant to
this Plan shall be within the absolute discretion of that entity or body and
shall be conclusive and binding upon all persons. Neither the Board nor the
Committee, nor any member thereof or person acting at the direction thereof,
shall be liable for any act, omission, interpretation, construction or
determination made in good faith in connection with this Plan (or any Award made
under this Plan), and all such persons shall be entitled to indemnification and
reimbursement by the Company in respect of any claim, loss, damage or expense
(including, without limitation, attorneys' fees) arising or resulting therefrom
to the fullest extent permitted by law and/or under any directors and officers
liability insurance coverage that may be in effect from time to time. Subject
only to compliance with the express provisions hereof, the Board and Committee
may act in their absolute discretion in matters within their authority related
to this Plan.
(d) Reliance on Experts. In making any determination or in taking or not taking
any action under this Plan, the Committee or the Board, as the case may be, may
obtain and may rely upon the advice of experts, including professional advisors
to the Corporation. No director, officer or agent of the Company shall be liable
for any such action or determination taken or made or omitted in good faith.
(e) Delegation. The Committee may delegate ministerial, non-discretionary
functions to a third-party administrator or to individuals who are officers
or employees of the Company.
1.3 Participation
Awards may be granted by the Committee only to those persons that the
Committee determines to be Eligible Employees. An Eligible Employee who has been
granted an Award may, if otherwise eligible, be granted additional Awards if the
Committee shall so determine. Non-Employee Directors shall be eligible to
receive the Nonqualified Stock Options granted automatically without action of
the Committee under the provisions of Article VII but shall not be eligible for
any other Awards under this Plan.
1.4 Shares Available for Awards; Share Limits
Subject to the provisions of Section 6.2, the capital stock that may be
delivered under this Plan shall be shares of the Corporation's authorized but
unissued Common Stock and any shares of its Common Stock held as treasury
shares. The shares may be delivered for any lawful consideration. Subject to
adjustment as provided in or pursuant to this Section 1.4 or Section 6.2:
(a) Aggregate Share Limits. The maximum number of shares of Common Stock that
may be delivered pursuant to all Awards granted under this Plan, other than
Nonqualified Stock Options granted to Non-Employee Directors pursuant to Article
VII, shall not exceed 3,700,000 shares of Common Stock. The maximum number of
shares of Common Stock that may be delivered pursuant to all Nonqualified Stock
Options granted to Non-Employee Directors pursuant to Article VII shall not
exceed 300,000 shares of Common Stock.
(b) Individual Limits. The maximum number of shares of Common Stock subject to
Options and Stock Appreciation Rights that are granted under this Plan during
any fiscal year to any individual shall not exceed 1,000,000 shares. Additional
limits are in Section 5.2(c).
(c) Incentive Stock Option Limit. The maximum number of shares of Common Stock
that may be delivered pursuant to Options intended as Incentive Stock Options
granted under this Plan shall not exceed 3,700,000.
(d) Restricted Stock and Stock Bonus Limit. The maximum number of shares of
Common Stock that may be delivered under this Plan in respect of time-based
Restricted Stock Awards and Stock Bonuses granted for nominal or no
consideration other than the amount of the par value thereof shall not exceed
370,000 shares in the aggregate. The limit in the foregoing sentence shall not
apply to shares delivered in respect of compensation earned but deferred.
(e) Share Reservation; Replenishment and Reissue of Unvested Awards. No Award
may be granted under this Plan unless, on the date of grant, the sum of (i) the
maximum number of shares issuable at any time pursuant to such Award, plus (ii)
the number of shares that have previously been issued pursuant to Awards granted
under this Plan, other than reacquired shares available for reissue consistent
with any applicable legal limitations, plus (iii) the maximum number of shares
that may be issued at any time after such date of grant pursuant to Awards that
are outstanding on such date, does not exceed the applicable limit under Section
1.4(a) or other any other limit set forth above in this Section 1.4. Shares that
are subject to or underlie Awards which expire or for any reason are cancelled
or terminated, are forfeited, fail to vest, or for any other reason are not paid
or delivered under this Plan, as well as reacquired shares (including, without
limitation, any shares which have been exchanged by a Participant as full or
partial payment to the Company in connection with any Award under this Plan as
well as any shares exchanged by a Participant or withheld by the Company to
satisfy the tax withholding obligations related to an Award), shall again,
except to the extent prohibited by law, be available for subsequent Awards under
this Plan and shall not count against the applicable limit under Section 1.4(a)
or any other limit set forth above in this Section 1.4. In instances where a
Stock Appreciation Right or other Award is settled in cash or a form other than
shares, the shares that would have been issued had there been no cash or other
settlement shall not be counted against the shares available for issuance under
this Plan. The payment of cash dividends and dividend equivalents in conjunction
with outstanding Awards shall not be counted against the shares available for
issuance under this Plan. Any shares that are issued by the Company, and any
awards that are granted by, or become obligations of, the Company, through the
assumption by the Company or an affiliate of, or in substitution for,
outstanding awards previously granted by an acquired company (or previously
granted by a predecessor employer (or direct or indirect parent thereof) in the
case of persons that become employed by the Company (or a subsidiary or
affiliate) in connection with a business or asset acquisition or similar
transaction) shall not be counted against the shares available for issuance
under this Plan.
(f) Section 162(m). Adjustments to the share limit set forth in Section 1.4(a)
as well as the other limits set forth above are subject to any applicable
limitations under Section 162(m) of the Code with respect to Awards intended as
performance-based compensation thereunder.
1.5 Grant of Awards
Subject to the express provisions of this Plan, the Committee shall determine
the number of shares of Common Stock subject to each Award, the price (if any)
to be paid for the shares or the Award and, in the case of Performance Share
Awards, in addition to matters addressed in Section 1.2(b), the specific
objectives, goals and performance criteria (such as an increase in sales, market
value, earnings or book value over a base period, the years of service before
vesting, the relevant job classification or level of responsibility or other
factors) that further define the terms of the Performance Share Award. Each
Award shall be evidenced by an Award Agreement signed by the Corporation and, if
required by the Committee, by the Participant. The Award Agreement shall set
forth the material terms and conditions of the Award established by the
Committee consistent with the specific provisions of this Plan.
1.6 Award Period
Each Award and all executory rights or obligations under the related
Award Agreement shall expire on such date (if any) as shall be determined by the
Committee, but in the case of Options or other rights to acquire Common Stock
not later than ten (10) years after the Award Date.
1.7 Limitations on Exercise and Vesting of Awards
(a) Exercise. Unless the Committee expressly provides otherwise, no Award shall
be exercisable or shall vest until at least six months after the initial Award
Date, and once exercisable an Award shall remain exercisable until the
expiration or earlier termination of the Award.
(b) Procedure. Any exercisable Award shall be deemed to be exercised when the
Secretary of the Corporation receives written notice of such exercise from the
Participant, together with any required payment made in accordance with Section
2.2(b) or 7.3, as the case may be.
(c) Fractional Shares/Minimum Issue. Fractional share interests shall be
disregarded, but may be accumulated. The Committee, however, may determine that
cash, other securities or other property will be paid or transferred in lieu of
any fractional share interests. No fewer than 100 shares may be purchased on
exercise of any Award at one time unless the number purchased is the total
number at the time available for purchase under the Award.
1.8 Acceptance of Notes to Finance Exercise
The Corporation may, with the Committee's approval, accept one or more
notes from any Eligible Employee in connection with the exercise or receipt of
any outstanding Award; provided that any such note shall be subject to the
following terms and conditions:
(a) The principal of the note shall not exceed the amount required to be paid to
the Corporation upon the exercise or receipt of one or more Awards under this
Plan and the note shall be delivered directly to the Corporation in
consideration of such exercise or receipt.
(b) The initial term of the note shall be determined by the Committee; provided
that the term of the note, including extensions, shall not exceed a period of 10
years.
(c) The note shall provide for full recourse to the Participant and shall bear
interest at a rate determined by the Committee but not less than the applicable
imputed interest rate specified by the Code.
(d) If the employment of the Participant terminates, the unpaid principal
balance of the note shall become due and payable on the 10th business day after
such termination; provided, however, that if a sale of such shares would cause
such Participant to incur liability under Section 16(b) of the Exchange Act, the
unpaid balance shall become due and payable on the 10th business day after the
first day on which a sale of such shares could have been made without incurring
such liability assuming for these purposes that there are no other transactions
by the Participant subsequent to such termination.
(e) If required by the Committee or by applicable law, the note shall be secured
by a pledge of any shares or rights financed thereby in compliance with
applicable law.
(f) The terms, repayment provisions, and collateral release provisions of the
note and the pledge securing the note shall conform with applicable rules and
regulations of the Federal Reserve Board as then in effect.
1.9 No Transferability
(a) Limit On Exercise and Transfer. Unless otherwise expressly provided in (or
pursuant to) this Section 1.9, by applicable law and by the Award Agreement, as
the same may be amended, (i) all Awards are non-transferable and shall not be
subject in any manner to sale, transfer, anticipation, alienation, assignment,
pledge, encumbrance or charge; (ii) Awards shall be exercised only by the
Participant; and (iii) amounts payable or shares issuable pursuant to an Award
shall be delivered only to (or for the account of) the Participant.
(b) Exceptions. The Committee may permit Awards to be exercised by certain
persons or entities related to the Participant, including but not limited to
members of the Participant's family, charitable institutions, or trusts or other
entities whose beneficiaries or beneficial owners are members of the
Participant's family and/or charitable institutions, or to such other persons or
entities as may be approved by the Committee, pursuant to such conditions and
procedures as the Committee may establish. Any permitted transfer shall be
subject to the condition that the Committee receive evidence satisfactory to it
that the transfer is being made for estate and/or tax planning purposes on a
gratuitous or donative basis and without consideration (other than nominal
consideration).
(c) Further Exceptions to Limits On Transfer. The exercise and transfer
restrictions in Section 1.9(a) shall not apply to:
(i) transfers to the Corporation,
(ii) the designation of a beneficiary to receive benefits in the event of
the Participant's death or, if the Participant has died, transfers to
or exercise by the Participant's beneficiary, or, in the absence of a
validly designated beneficiary, transfers by will or the laws of
descent and distribution,
(iii) transfers pursuant to a QDRO if approved or ratified by the Committee,
(iv) if the Participant has suffered a disability, permitted transfers or
exercises on behalf of the Participant by his or her legal
representative, or
(v) the authorization by the Committee of "cashless exercise" procedures
with third parties who provide financing for the purpose of (or who
otherwise facilitate) the exercise of Awards consistent with applicable
laws and the express authorization of the Committee.
(d) Limitations on Incentive Stock Options and Restricted Stock Awards.
Notwithstanding the foregoing, Incentive Stock Options and Restricted Stock
Awards shall be subject to any and all applicable transfer restrictions under
the Code.
II. EMPLOYEE OPTIONS
2.1 Grants
One or more Options may be granted under this Article to any Eligible
Employee. Each Option granted may be either an Option intended to be an
Incentive Stock Option, or an Option not so intended, and such intent shall be
indicated in the applicable Option Agreement.
2.2 Option Price
(a) Pricing Limits. The purchase price per share of the Common Stock covered by
each Option shall be determined by the Committee at the time the Option is
granted, but in no case shall such purchase price be less than 100% (110% in the
case of an Option intended as an Incentive Stock Option granted to a Participant
described in Section 2.4) of the Fair Market Value of the Common Stock on the
Award Date.
(b) Payment Provisions. The purchase price of any shares purchased on exercise
of an Option granted under this Article shall be paid in full at the time of
each purchase in one or a combination of the following methods: (i) in cash or
by electronic funds transfer; (ii) by check payable to the order of the
Corporation; (iii) if authorized by the Committee or specified in the applicable
Option Agreement, by a promissory note of the Participant consistent with the
requirements of Section 1.8; (iv) by notice and third party payment in such
manner as may be authorized by the Committee; or (v) by the delivery of shares
of Common Stock of the Corporation already owned by the Participant, provided,
however, that the Committee may in its absolute discretion limit the
Participant's ability to exercise an Option by delivering such shares. Shares of
Common Stock used to satisfy the exercise price of an Option shall be valued at
their Fair Market Value on the date of exercise. Any shares of Common Stock used
to satisfy the exercise price of an Option that were initially acquired upon
exercise of a stock option must have been owned by the Participant for at least
six months prior to such use.
In addition to the payment methods described above, the Committee may, in its
discretion, provide that an Option can be exercised in accordance with such
cashless exercise procedures as the Committee may adopt in the circumstances.
2.3 Limitations on Grant and Terms of Incentive Stock Options
(a) $100,000 Limit. To the extent that the aggregate "Fair Market Value" of
stock with respect to which Incentive Stock Options first become exercisable by
a Participant in any calendar year exceeds $100,000, taking into account both
Common Stock subject to Incentive Stock Options under this Plan and stock
subject to Incentive Stock Options under all other plans of the Company or any
parent corporation, such options shall be treated as nonqualified stock options.
For this purpose, the "Fair Market Value" of the stock subject to options shall
be determined as of the date the options were optioned. In reducing the number
of options treated as Incentive Stock Options to meet the $100,000 limit, the
most recently granted options shall be reduced first. To the extent a reduction
of simultaneously granted options is necessary to meet the $100,000 limit, the
Committee may, in the manner and to the extent permitted by law, designate which
shares of Common Stock are to be treated as shares acquired pursuant to the
exercise of an Incentive Stock Option.
(b) Option Period. Each Incentive Stock Option and all rights thereunder shall
expire no later than ten years after the Award Date.
(c) Other Code Limits. There shall be imposed in any Award Agreement relating to
Incentive Stock Options such terms and conditions as from time to time are
required in order that the Option be an "incentive stock option" as that term is
defined in Section 422 of the Code.
2.4 Limits on 10% Holders
No Incentive Stock Option may be granted to any person who, at the time
the Option is granted, owns (or is deemed to own under Section 424(d) of the
Code) shares of outstanding Common Stock possessing more than 10% of the total
combined voting power of all classes of stock of the Corporation, unless the
exercise price of such Option is at least 110% of the Fair Market Value of the
stock subject to the Option and such Option by its terms is not exercisable
after the expiration of five years from the date such Option is granted.
2.5 Cancellation and Regrant/Waiver of Restrictions; No Repricings
Subject to Section 1.4 and Section 6.6 and the specific limitations on
Options contained in this Plan, the Committee from time to time may authorize,
generally or in specific cases only, for the benefit of any Eligible Employee,
any adjustment in the exercise price, the number of shares subject to or the
term of, an Option granted under this Article by cancellation of an outstanding
Option and a subsequent regranting of an Option, by amendment, by substitution
of an outstanding Option, by waiver or by other legally valid means; provided,
however, that no such amendment or other action shall constitute or result in a
repricing (as determined in accordance with United States generally accepted
accounting principles then in effect) of an outstanding Option without
stockholder approval of such amendment or other action.
III. STOCK APPRECIATION RIGHTS
3.1 Grants
In its discretion, the Committee may grant a Stock Appreciation Right
to any Eligible Employee either concurrently with the grant of another Award or
in respect of an outstanding Award, in whole or in part, or independently of any
other Award. Any Stock Appreciation Right granted in connection with an
Incentive Stock Option shall contain such terms as may be required to comply
with the provisions of Section 422 of the Code and the regulations promulgated
thereunder, unless the holder otherwise agrees.
3.2 Exercise of Stock Appreciation Rights
(a) Exercisability. Unless the Award Agreement or the Committee otherwise
provides, a Stock Appreciation Right related to another Award shall be
exercisable at such time or times, and to the extent, that the related Award
shall be exercisable.
(b) Effect on Available Shares. To the extent that a Stock Appreciation Right is
exercised, only the actual number of shares of Common Stock delivered shall be
charged against the maximum amount of Common Stock that may be delivered
pursuant to Awards under this Plan. The number of shares subject to the Stock
Appreciation Right and the related Option of the Participant shall, however, be
reduced by the number of underlying shares as to which the exercise related,
unless the Award Agreement otherwise provides.
(c) Stand-Alone Stock Appreciation Rights. A Stock Appreciation Right granted
independently of any other Award shall be exercisable pursuant to the terms of
the Award Agreement.
3.3 Payment
(a) Amount. Unless the Committee otherwise provides, upon exercise of a Stock
Appreciation Right and the attendant surrender of an exercisable portion of any
related Award, the Participant shall be entitled to receive payment of an amount
determined by multiplying
(i) the difference obtained by subtracting the exercise price per share of
Common Stock under the related Award (if applicable) or the initial
share value specified in the Award from the Fair Market Value of a
share of Common Stock on the date of exercise of the Stock Appreciation
Right, by
(ii) the number of shares with respect to which the Stock Appreciation Right
shall have been exercised.
(b) Form of Payment. The Committee, in its sole discretion, shall determine the
form in which payment shall be made of the amount determined under paragraph (a)
above, either solely in cash, solely in shares of Common Stock (valued at Fair
Market Value on the date of exercise of the Stock Appreciation Right), or partly
in such shares and partly in cash, provided that the Committee shall have
determined that such exercise and payment are consistent with applicable law. If
the Committee permits the Participant to elect to receive cash or shares (or a
combination thereof) on such exercise, any such election shall be subject to
such conditions as the Committee may impose.
3.4 Limited Stock Appreciation Rights
The Committee may grant to any Eligible Employee Stock Appreciation
Rights exercisable only upon or in respect of a change in control or any other
specified event ("Limited SARs") and such Limited SARs may relate to or operate
in tandem or combination with or substitution for Options, other Stock
Appreciation Rights or other Awards (or any combination thereof), and may be
payable in cash or shares based on the spread between the base price of the
Stock Appreciation Right and a price based upon the Fair Market Value of the
shares during a specified period or at a specified time within a specified
period before, after or including the date of such event.
IV. RESTRICTED STOCK AWARDS
4.1 Grants
(a) Restricted Stock. The Committee may, in its discretion, grant one or more
Restricted Stock Awards to any Eligible Employee. Each Restricted Stock Award
Agreement shall specify the number of shares of Common Stock to be issued to the
Participant, the date of such issuance, the consideration for such shares (but
not less than the minimum lawful consideration under applicable state law), the
extent (if any) to which and the time (if ever) at which the Participant shall
be entitled to dividends, voting and other rights in respect of the shares prior
to vesting and the restrictions (which may be based on performance criteria, the
passage of time or such other facts as the Committee may provide or any
combination thereof) imposed on such shares and the conditions of release or
lapse of such restrictions. Such restrictions shall not lapse earlier than 12
months after the Award Date, except to the extent the Committee may otherwise
provide. Stock certificates evidencing shares of Restricted Stock pending the
lapse of the restrictions ("restricted shares") shall bear a legend making
appropriate reference to the restrictions imposed hereunder and (if in
certificate form) shall be held by the Corporation or by a third party
designated by the Committee until the restrictions on such shares shall have
lapsed and the shares shall have vested in accordance with the provisions of the
Award and Section 1.7. Upon issuance of the Restricted Stock Award, the
Participant may be required to provide such further assurance and documents as
the Committee may require to enforce the restrictions.
(b) Stock Units. The Committee may, in its discretion, authorize and grant to
any Eligible Employee a Stock Unit Award or the crediting of Stock Units for
services rendered or to be rendered or in lieu of other compensation, consistent
with other applicable terms of this Plan, may permit an Eligible Employee to
irrevocably elect to defer by means of Stock Units or receive in Stock Units all
or a portion of any Award hereunder, or may grant Stock Units in lieu of, in
exchange for, in respect of, or in addition to any other Compensation or Award
under this Plan. The specific terms, conditions, and provisions relating to each
Stock Unit grant or election, including the applicable vesting and payout
provisions of the Stock Units and the form of payment to be made at or following
the vesting thereof, shall be set forth in or pursuant to the applicable
agreement or Award and any relevant Company deferred compensation plan, in form
substantially as approved by the Committee.
(c) Payouts. The Committee in the applicable Award Agreement or the relevant
Company deferred compensation plan may permit the Participant to elect the form
and time of payout of vested Stock Units on such conditions or subject to such
procedures as the Committee may impose, and may permit restricted stock or Stock
Unit offsets or other provision for payment of any applicable taxes that may be
due on the crediting, vesting or payment in respect of the Stock Units.
4.2 Restrictions
(a) Pre-Vesting Restraints. Except as provided in Section 4.1 and 1.9,
restricted shares comprising any Restricted Stock Award and rights in respect to
Stock Unit Awards may not be sold, assigned, transferred, pledged or otherwise
disposed of or encumbered, either voluntarily or involuntarily, until the
restrictions on such shares (or units in the case of a Stock Unit Award) have
lapsed and the shares have become vested (or amounts paid in respect of the
Stock Units).
(b) Dividend and Voting Rights. Unless otherwise provided in the applicable
Award Agreement, a Participant receiving a Restricted Stock Award shall be
entitled to cash dividend and voting rights for all shares issued even though
they are not vested, provided that such rights shall terminate immediately as to
any restricted shares which cease to be eligible for vesting. Restricted Stock
Awards and Stock Unit Awards may include dividend equivalent rights to the
extent authorized by the Committee.
(c) Cash Payments. If the Participant shall have paid or received cash
(including any payments in respect of dividends) in connection with the
Restricted Stock Award or Stock Unit Award, the Award Agreement shall specify
whether and to what extent such cash shall be returned (with or without an
earnings factor) as to any restricted shares or Stock Units which cease to be
eligible for vesting.
4.3 Return to the Corporation
Unless the Committee otherwise expressly provides, restricted shares or Stock
Units that remain subject to restrictions at the time of termination of
employment or are subject to other conditions to vesting that have not been
satisfied by the time specified in the applicable Award Agreement shall not vest
and shall be returned to the Corporation or cancelled, as the case may be, in
such manner and on such terms as the Committee shall therein provide.
V. PERFORMANCE SHARE AWARDS AND STOCK BONUSES
5.1 Grants of Performance Share Awards
The Committee may, in its discretion, grant Performance Share Awards to
Eligible Employees based upon such factors as the Committee shall deem relevant
in light of the specific type and terms of the award. An Award Agreement shall
specify the maximum number of shares of Common Stock (if any) subject to the
Performance Share Award, the consideration (but not less than the minimum lawful
consideration) to be paid for any such shares as may be issuable to the
Participant, the duration of the Award and the conditions upon which delivery of
any shares or cash to the Participant shall be based. The amount of cash or
shares or other property that may be deliverable pursuant to such Award shall be
based upon the degree of attainment over a specified period (a "performance
cycle") as may be established by the Committee of such measure(s) of the
performance of the Company (or any part thereof) or the Participant as may be
established by the Committee. The Committee may provide for full or partial
credit, prior to completion of such performance cycle or the attainment of the
performance achievement specified in the Award, in the event of the
Participant's death, or Total Disability, a Change in Control Event or in such
other circumstances as the Committee consistent with Section 6.10(c)(2), if
applicable, may determine.
5.2 Special Performance-Based Share Awards
Without limiting the generality of the foregoing, and in addition to
Options and Stock Appreciation Rights granted under other provisions of this
Plan which are intended to satisfy the exception for "performance-based
compensation" under Section 162(m) of the Code (with such Awards hereinafter
referred to as a "Qualifying Option" or a "Qualifying Stock Appreciation Right,"
respectively), other performance-based awards within the meaning of Section
162(m) of the Code ("Performance-Based Awards"), whether in the form of
restricted stock, performance stock, phantom stock, Cash-Based Awards, or other
rights, the grant, vesting, exercisability or payment of which depends on the
degree of achievement of the Performance Goals relative to preestablished
targeted levels for the Corporation on a consolidated, segment, subsidiary,
division or unit basis, may be granted under this Plan. Any Qualifying Option or
Qualifying Stock Appreciation Right shall be subject only to the requirements of
Section 5.3(a) in order for such Award to satisfy the requirements for
"performance-based compensation" under Section 162(m) of the Code.
(a) Eligible Class. The eligible class of persons for Performance-Based
Awards under this Section 5.2 shall be key employees (including officers) of the
Company.
(b) Performance Goal Alternatives. The specific performance goals for
Performance-Based Awards granted under this Section (other than Qualifying
Options and Qualifying Stock Appreciation Rights) shall be, on an absolute or
relative basis, one or more of the Performance Goals, as selected by the
Committee in its sole discretion. The Committee shall establish in the
applicable Award Agreement the specific performance target(s) relative to the
Performance Goal(s) which must be attained before the compensation under the
Performance-Based Award becomes payable. The specific targets shall be
determined within the time period permitted under Section 162(m) of the Code
(and any regulations issued thereunder) so that such targets are considered to
be preestablished and so that the attainment of such targets is substantially
uncertain at the time of their establishment. The applicable performance
measurement period may not be less than one nor more than 10 years.
(c) Maximum Performance-Based Award. Notwithstanding any other provision of this
Plan to the contrary, the maximum number of shares of Common Stock which may be
delivered pursuant to Performance-Based Awards (other than Qualifying Options
and Qualifying Stock Appreciation Rights which shall be subject to the limit set
forth in Section 1.4(b)) that are granted to any one Participant in any one
fiscal year shall not exceed 1,000,000 shares, either individually or in the
aggregate, subject to adjustment as provided in Section 6.2. Awards that are
cancelled during the year shall be counted against this limit to the extent
required by Section 162(m) of the Code. In addition, the aggregate amount of
compensation to be paid to any Participant in respect of any Cash-Based Awards
that are granted during any fiscal year as Performance-Based Awards shall not
exceed $3,000,000.
(d) Committee Certification. Before any Performance-Based Award under this
Section 5.2 (other than Qualifying Options or Qualifying Stock Appreciation
Rights) is paid, the Committee must certify in writing that the Performance
Goal(s) and any other material terms of the Performance-Based Award were
satisfied; provided, however, that a Performance-Based Award may be paid without
regard to the satisfaction of the applicable Performance Goal in the event of a
Change in Control Event in accordance with Section 6.2(d).
(e) Terms and Conditions of Awards. The Committee will have the discretion to
determine the restrictions or other limitations of the individual Awards granted
under this Section 5.2 including the authority to reduce Awards, payouts or
vesting or to pay no Awards, in its sole discretion, if the Committee preserves
such authority at the time of grant by language to this effect in its
authorizing resolutions or otherwise.
(f) Adjustments for Changes in Capitalization and other Material Changes. In the
event of a change in corporate capitalization, such as a stock split or stock
dividend, or a corporate transaction, such as a merger, consolidation, spinoff,
reorganization or similar event, or any partial or complete liquidation of the
Corporation, or any similar event consistent with regulations issued under
Section 162(m) of the Code including, without limitation, any material change in
accounting policies or practices affecting the Corporation and/or the
Performance Goals or targets, then the Committee may make adjustments to the
Performance Goals and targets relating to outstanding Performance-Based Awards
to the extent such adjustments are made to reflect the occurrence of such an
event; provided, however, that adjustments described in this subsection may be
made only to the extent that the occurrence of an event described herein was
unforeseen at the time the targets for a Performance-Based Award were
established by the Committee.
5.3 Grants of Stock Bonuses
The Committee may grant a Stock Bonus to any Eligible Employee to
reward exceptional or special services, contributions or achievements, or issue
Common Stock for past services in the ordinary course, the value of which shall
be determined by the Committee, in the manner and on such terms and conditions
(including any restrictions on such shares) as determined from time to time by
the Committee. The number of shares so awarded shall be determined by the
Committee. The Award may be granted independently or in lieu of a cash bonus.
5.4 Deferred Payments
The Committee may authorize for the benefit of any Eligible Employee
the deferral of any payment of cash or shares that may become due or of cash
otherwise payable under this Plan, and provide for accredited benefits thereon
based upon such deferment, at the election or at the request of such
Participant, subject to the other terms of this Plan. Such deferral shall be
subject to such further conditions, restrictions or requirements as the
Committee may impose, subject to any then vested rights of Participants.
VI. OTHER PROVISIONS
6.1 Rights of Eligible Employees, Participants and Beneficiaries
(a) Employment Status. Status as an Eligible Employee shall not be construed as
a commitment that any Award will be granted under this Plan to an Eligible
Employee or to Eligible Employees generally.
(b) No Employment Contract. Nothing contained in this Plan (or in any other
documents related to this Plan or to any Award) shall confer upon any Eligible
Employee or other Participant any right to continue in the employ or other
service of the Company or constitute any contract or agreement of employment or
other service, nor shall interfere in any way with the right of the Company to
change such person's compensation or other benefits or to terminate the
employment of such person, with or without cause, but nothing contained in this
Plan or any document related hereto shall adversely affect any independent
contractual right of such person without his or her consent thereto.
(c) Plan Not Funded. Awards payable under this Plan shall be payable in shares
or from the general assets of the Corporation, and no special or separate
reserve, fund or deposit shall be made to assure payment of such Awards. No
Participant, Beneficiary or other person shall have any right, title or interest
in any fund or in any specific asset (including shares of Common Stock, except
as expressly otherwise provided) of the Company by reason of any Award
hereunder. Neither the provisions of this Plan (or of any related documents),
nor the creation or adoption of this Plan, nor any action taken pursuant to the
provisions of this Plan shall create, or be construed to create, a trust of any
kind or a fiduciary relationship between the Company and any Participant,
Beneficiary or other person. To the extent that a Participant, Beneficiary or
other person acquires a right to receive payment pursuant to any Award
hereunder, such right shall be no greater than the right of any unsecured
general creditor of the Company.
6.2 Adjustments; Acceleration
(a) Adjustments. Upon or in contemplation of any reclassification,
recapitalization, stock split (including a stock split in the form of a stock
dividend) or reverse stock split; any merger, combination, consolidation, or
other reorganization; any spin-off, split-up, or similar extraordinary dividend
distribution ("spin-off") in respect of the Common Stock (whether in the form of
securities or property); any exchange of Common Stock or other securities of the
Corporation, or any similar, unusual or extraordinary corporate transaction in
respect of the Common Stock; or a sale of all or substantially all the assets of
the Corporation as an entirety ("asset sale"); then the Committee shall, in such
manner, to such extent (if any) and at such time as it deems appropriate and
equitable in the circumstances:
(1) proportionately adjust any or all of (i) the
number and type of shares of Common Stock (or other
securities) that thereafter may be made the subject of Awards
(including the specific maxima and numbers of shares set forth
elsewhere in this Plan), (ii) the number, amount and type of
shares of Common Stock (or other securities or property)
subject to any or all outstanding Awards, (iii) the grant,
purchase, or exercise price of any or all outstanding Awards,
(iv) the securities, cash or other property deliverable upon
exercise of any outstanding Awards, or (v) (subject to
limitations under Section 6.10(c)) the performance standards
appropriate to any outstanding Awards, or
(2) make provision for a cash payment or for the
assumption, substitution or exchange of any or all outstanding
share-based Awards or the cash, securities or property
deliverable to the holder of any or all outstanding
share-based Awards, based upon the distribution or
consideration payable to holders of the Common Stock upon or
in respect of such event.
The Committee may adopt such valuation methodologies for outstanding Awards as
it deems reasonable in the event of a cash or property settlement and, in the
case of Options, Stock Appreciation Rights or similar rights, but without
limitation on other methodologies, may base such settlement solely upon the
excess if any of the amount payable upon or in respect of such event over the
exercise or strike price of the Award. In any of such events, the Committee may
take such action prior to such event to the extent that the Committee deems the
action necessary to permit the Participant to realize the benefits intended to
be conveyed with respect to the underlying shares in the same manner as is or
will be available to stockholders generally.
(b) Acceleration of Awards Upon Change in Control. As to any Eligible Employee,
unless prior to a Change in Control Event the Committee determines that, upon
its occurrence, there shall be no acceleration of benefits under Awards or
determines that only certain or limited benefits under Awards shall be
accelerated and the extent to which they shall be accelerated, and/or
establishes a different time in respect of such Change in Control Event for such
acceleration, then upon the occurrence of a Change in Control Event (i) each
Option and Stock Appreciation Right shall become immediately exercisable, (ii)
Restricted Stock and Stock Units shall immediately vest free of restrictions,
and (iii) each Performance Share Award shall become payable to the Participant.
The Committee may override the limitations on acceleration in this Section
3.2(b) by express provision in the Award Agreement and may accord any Eligible
Employee a right to refuse any acceleration, whether pursuant to the Award
Agreement or otherwise, in such circumstances as the Committee may approve.
Without limiting the generality of the foregoing, the Committee may deem an
acceleration to occur immediately prior to the applicable event and/or reinstate
the original terms of an Award if an event giving rise to acceleration does not
occur.
(c) Possible Early Termination of Accelerated Awards. If any Option or other
right to acquire Common Stock under this Plan has been fully accelerated as
permitted by Section 6.2(b) or Section 7.7 but is not exercised prior to (i) a
dissolution of the Corporation, or (ii) an event described in Section 6.2(a)
that the Corporation does not survive, or (iii) the consummation of an event
described in Section 6.2(a) that results in a Change in Control Event approved
by the Board, such Option or right shall thereupon terminate, subject to any
provision that has been expressly made by the Board or the Committee through a
plan or reorganization or otherwise for the survival, substitution, assumption,
exchange or other settlement of such Option or right.
(d) Possible Rescission of Acceleration. If the vesting of an Award has been
accelerated expressly in anticipation of an event or upon stockholder approval
of an event and the Committee or the Board later determines that the event will
not occur, the Committee may rescind the effect of the acceleration as to any
then outstanding and unexercised or otherwise unvested Awards.
6.3 Effect of Termination of Employment
(a) General. The Committee shall establish in respect of each Award granted to
an Eligible Employee the effect of a termination of employment on the rights and
benefits thereunder and in so doing may make distinctions based upon the cause
of termination. In addition, in the event of, or in anticipation of, a
termination of employment with the Company for any reason, other than discharge
for cause, the Committee may, in its discretion, increase the portion of the
Participant's Award available to the Participant, or the Participant's
Beneficiary or Personal Representative, as the case may be, or, subject to the
provisions of Section 1.6, extend the exercisability period upon such terms as
the Committee shall determine and expressly set forth in or by amendment to the
Award Agreement.
(b) Effect on Unvested Awards. Unless otherwise provided in the applicable Award
Agreement and subject to Section 6.12 and the other provisions of this Plan, a
Restricted Stock Award, Stock Appreciation Right, Performance Share Award, Stock
Unit Award or other Award, to the extent such Award has not vested as of the
termination of the Participant's employment shall terminate on the date the
Participant ceases to be employed by the Company without further payment or
benefit of any kind; and any Option theretofore outstanding shall terminate.
(c) Events Not Deemed Terminations of Service. Unless Company policy or the
Committee otherwise provides, the employment relationship shall not be
considered terminated in the case of (a) sick leave, (b) military leave, or (c)
any other leave of absence authorized by the Company or the Committee; provided
that unless reemployment upon the expiration of such leave is guaranteed by
contract or law, such leave is for a period of not more than 90 days. In the
case of any Eligible Employee on an approved leave of absence, continued vesting
of the Award while on leave from the employ of the Company may be suspended
until the employee returns to service, unless the Committee otherwise provides
or applicable law otherwise requires. In no event shall an Award be exercised
after the expiration of the term set forth in the Award Agreement.
6.4 Compliance with Laws
This Plan, the granting and vesting of Awards under this Plan and the
offer, issuance and delivery of shares of Common Stock, the acceptance or
promissory notes and/or payment of money under this Plan or under Awards granted
hereunder are subject to compliance with all applicable federal and state laws,
rules and regulations (including, but not limited to, state and federal
securities laws and federal margin requirements) and to such approvals by any
listing, regulatory or governmental authority as may, in the opinion of counsel
for the Corporation, be necessary or advisable in connection therewith. Any
securities delivered under this Plan shall be subject to such restrictions, and
the person acquiring such securities shall, if requested by the Corporation,
provide such assurances and representations to the Corporation as the
Corporation may deem necessary or desirable to assure compliance with all
applicable legal and accounting requirements.
6.5 Tax Withholding
(a) Cash or Shares. Upon any exercise, vesting or payment of any Award or upon
the disposition of shares of Common Stock acquired pursuant to the exercise of
an Incentive Stock Option prior to satisfaction of the holding period
requirements of Section 422 of the Code, the Company shall have the right at its
option to (i) require the Participant (or Personal Representative or
Beneficiary, as the case may be) to pay or provide for payment of the amount of
any taxes which the Company may be required to withhold with respect to such
Award event or payment or (ii) deduct from any amount payable in cash the amount
of any taxes which the Company may be required to withhold with respect to such
cash payment. In any case where a tax is required to be withheld in connection
with the delivery of shares of Common Stock under this Plan, the Committee may
in its sole discretion grant (either at the time of the Award is granted or
thereafter) to the Participant the right to elect, pursuant to such rules and
subject to such conditions as the Committee may establish, to have the
Corporation reduce the number of shares to be delivered by (or otherwise
reacquire) the appropriate number of shares valued in a consistent manner at
their Fair Market Value or at the sales price in accordance with authorized
procedures for cashless exercises, necessary to satisfy the minimum applicable
withholding obligation on exercise, vesting or payment. In the event shares are
withholding to satisfy tax withholding obligations, in no event shall the number
of shares withheld exceed the number required to satisfy the minimum required
withholding.
(b) Tax Loans. The Committee may, in its discretion, authorize a loan to an
Eligible Employee in the amount of any taxes which the Company may be required
to withhold with respect to shares of Common Stock received (or disposed of, as
the case may be) pursuant to a transaction described in subsection (a) above.
Such a loan shall be for a term, at a rate of interest and pursuant to such
other terms and conditions as the Committee, under applicable law, may establish
and such loan need not comply with the provisions of Section 1.8.
6.6 Plan Amendment, Termination and Suspension
(a) Board Authorization. The Board may, at any time, terminate or, from time to
time, amend, modify or suspend this Plan, in whole or in part. Without limiting
the generality of the foregoing, the Board may, at any time, amend any or all of
the provisions of Article VII relating to Nonqualified Stock Option grants to
Non-Employee Directors. No Awards may be granted during any suspension of this
Plan or after termination of this Plan, but the Committee shall retain
jurisdiction as to Awards then outstanding in accordance with the terms of this
Plan.
(b) Stockholder Approval. To the extent then required under Sections 162, 422 or
424 of the Code or any other applicable law, or deemed necessary or advisable by
the Board, any amendment to this Plan shall be subject to stockholder approval.
(c) Amendment to Awards. Without limiting any other express authority of the
Committee under but subject to the express limits of this Plan, the Committee by
agreement or resolution may waive conditions of or limitations on Awards to
Eligible Employees that the Committee in the prior exercise of its discretion
has imposed, without the consent of a Participant, and may make other changes to
the terms and conditions of Awards that do not affect in any manner materially
adverse to the Employee Participant, his or her rights and benefits under an
Award.
(d) Limitations on Amendments to Plan and Awards. No amendment, suspension or
termination of this Plan or change of or affecting any outstanding Award shall,
without written consent of the Participant, affect in any manner materially
adverse to the Participant any rights or benefits of the Participant or
obligations of the Corporation under any Award granted under this Plan prior to
the effective date of such change. Changes contemplated by Section 6.2 shall not
be deemed to constitute changes or amendments for purposes of this Section 6.6.
6.7 Privileges of Stock Ownership
Except as otherwise expressly authorized by the Committee or this Plan,
a Participant shall not be entitled to any privilege of stock ownership as to
any shares of Common Stock not actually delivered to and held of record by him
or her. No adjustment will be made for dividends or other rights as a
stockholder for which a record date is prior to such date of delivery.
6.8 Effective Date of the Plan
The effective date of this Plan shall be the date that it is first
approved by the Board (the "Effective Date").
6.9 Term of the Plan
No Award shall be granted after the close of business on the day before
the tenth anniversary of the Effective Date of this Plan (the "Termination
Date"). Unless otherwise expressly provided in this Plan or in an applicable
Award Agreement, any Award granted prior to the Termination Date may extend
beyond such date, and all authority of the Committee with respect to Awards
hereunder, including the authority to amend an Award, shall continue during any
suspension of this Plan and in respect of outstanding Awards on such Termination
Date.
6.10 Governing Law; Construction; Severability
(a) Choice of Law. This Plan, the Awards, all documents evidencing Awards and
all other related documents shall be governed by, and construed in accordance
with the laws of the State of Nevada.
(b) Severability. If any provision shall be held by a court of competent
jurisdiction to be invalid and unenforceable, the remaining provisions of this
Plan shall continue in effect.
(c) Plan Construction.
(1) Rule 16b-3. It is the intent of the Corporation
that the Awards and transactions permitted by Awards be
interpreted in a manner that, in the case of Participants who
are or may be subject to Section 16 of the Exchange Act,
satisfies the applicable requirements for exemptions under
Rule 16b-3. Notwithstanding the foregoing, the Corporation
shall have no liability to any Participant for Section 16
consequences of Awards or events under Awards.
(2) Section 162(m). It is the further intent of the
Corporation that (to the extent the Corporation or Awards
under this Plan may be or become subject to limitations on
deductibility under Section 162(m) of the Code), Options or
Stock Appreciation Rights granted with an exercise or base
price not less than Fair Market Value on the date of grant and
Awards under Section 5.2 of this Plan that are granted to or
held by a person subject to Section 162(m) of the Code will
qualify as performance-based compensation or otherwise be
exempt from deductibility limitations under Section 162(m) of
the Code, to the extent that the authorization of the Award
(or the payment thereof, as the case may be) satisfies any
applicable administrative requirements thereof.
6.11 Captions
Captions and headings are given to the sections and subsections of this
Plan solely as a convenience to facilitate reference. Such headings shall not be
deemed in any way material or relevant to the construction or interpretation of
this Plan or any provision thereof.
6.12 Effect of Change of Subsidiary, Division, or Unit Status
For purposes of this Plan and any Award hereunder, if an entity ceases
to be a Subsidiary a termination of employment shall be deemed to have occurred
with respect to each employee of such Subsidiary who does not continue as an
employee of another entity within the Company. A termination of employment shall
also be deemed to occur if an employee is employed in a Company division or
business unit and, in connection with the sale, spin-off or other divestiture of
that division or unit, the employee's employment is terminated and the employee
does not otherwise continue as an employee of the Company. In the event of a
sale, spin-off, or other divestiture of a Subsidiary, Company division or
business unit, each employee who incurs a termination of employment in
connection therewith (as determined by the Committee in its sole discretion) in
accordance with either of the two preceding sentences shall be deemed to have
been fully vested in his or her Awards immediately prior to such termination.
6.13 Non-Exclusivity of Plan
Nothing in this Plan shall limit or be deemed to limit the authority of
the Board or the Committee to grant awards or authorize any other compensation,
with or without reference to the Common Stock, under any other plan or
authority.
VII. NON-EMPLOYEE DIRECTOR OPTIONS
7.1 Participation
Options under this Article VII shall be made only to Non-Employee
Directors.
7.2 Annual Option Grants
(a) Time of Initial Grant. After approval of this Plan by the stockholders of
the Corporation, if any person who is not then an officer or employee of the
Company shall become a director of the Corporation, there shall be granted
automatically to such person (without any action by the Board of Committee) a
Nonqualified Stock Option (the Award Date of which shall be the date such person
takes office) to purchase 10,000 shares.
(b) Subsequent Annual Options. In each calendar year during the term of this
Plan, commencing in 2003, there shall be granted automatically (without any
action by the Committee or the Board) a Nonqualified Stock Option to purchase
6,000 shares of Common Stock to each Non-Employee Director who is re-elected as
a director of the Corporation (the Award Date of which shall be the date of such
re-election).
(c) Maximum Number of Shares. Annual grants that would otherwise exceed the
maximum number of shares under Section 1.4 shall be prorated within such
limitation.
7.3 Option Price
The purchase price per share of the Common Stock covered by each Option
granted pursuant to Section 7.2 hereof shall be 100% of the Fair Market Value of
the Common Stock on the Award Date. The exercise price of any Option granted
under this Article shall be paid in full at the time of each purchase in cash or
by check or in shares of Common Stock valued at their Fair Market Value on the
date of exercise of the Option, or partly in such shares and partly in cash,
provided that any such shares used in payment shall have been owned by the
Participant at least six months prior to the date of exercise.
7.4 Option Period and Exercisability
Each Option granted under this Article VII and all rights or
obligations thereunder shall commence on the Award Date and expire ten years
thereafter and shall be subject to earlier termination as provided below. Each
Option granted under Section 7.2 shall become exercisable at the rate of 33-1/3%
per year as follows:
(a) the first installment shall vest on the earlier of (i) the first
anniversary of the applicable Award Date or (ii) the Corporation's
annual meeting of stockholders that occurs in the year following the
year in which the Award Date occurs;
(b) the second installment shall vest on the earlier of (i) the second
anniversary of the applicable Award Date or (ii) the Corporation's
annual meeting of stockholders that occurs in the second year following
the year in which the Award Date occurs;
(c) the third installment shall vest on the earlier of (i) the third
anniversary of the applicable Award Date or (ii) the Corporation's
annual meeting of stockholders that occurs in the third year following
the year in which the Award Date occurs.
7.5 Termination of Directorship
If a Non-Employee Director's services as a member of the Board of
Directors terminate by reason of death, Disability or Retirement, an Option
granted pursuant to this Article held by such Participant shall immediately
become and shall remain exercisable for two years after the date of such
termination or until the expiration of the stated term of such Option, whichever
first occurs. If a Non-Employee Director's services as a member of the Board of
Directors terminate for any other reason, any portion of an Option granted
pursuant to this Article which is not then exercisable shall terminate and any
portion of such Option which is then exercisable may be exercised within a
period of thirty (30) days after the date of such termination or until the
expiration of the stated term, whichever first occurs.
7.6 Adjustments
Options granted under this Article VII shall be subject to adjustment
as provided in Section 6.2, but only to the extent that (a) such adjustment and
the Committee's action in respect thereof satisfy applicable law, (b) such
adjustment in the case of a Change in Control Event is effected pursuant to the
terms of a reorganization agreement approved by stockholders of the Corporation
(or, if stockholder approval of such agreement is not required, by the Board),
and (c) such adjustment is consistent with adjustments to Options held by
persons other than executive officers or directors of the Corporation.
7.7 Acceleration Upon a Change in Control Event
Upon the occurrence of a Change in Control Event, each Option granted
under Section 7.2 hereof shall become immediately exercisable in full. To the
extent that any Option granted under this Article VII is not exercised prior to
(i) a dissolution of the Corporation or (ii) a merger or other corporate event
that the Corporation does not survive, and no provision is (or consistent with
the provisions of Section 7.6 can be) made for the assumption, conversion,
substitution or exchange of the Option, the Option shall terminate upon the
occurrence of such event.
VIII. DEFINITIONS
8.1 Definitions
(a) "Award" shall mean an award of any Option, Stock Appreciation Right,
Restricted Stock, Stock Bonus, Performance Share Award, Performance-Based Award,
Cash-Based Award, dividend equivalent or deferred payment right or other right
or security that would constitute a "derivative security" under Rule 16a-1(c) of
the Exchange Act, or any combination thereof, whether alternative or cumulative,
authorized by and granted under this Plan.
(b) "Award Agreement" shall mean any writing setting forth the terms of an Award
that has been authorized by the Committee.
(c) "Award Date" shall mean the date upon which the Committee took the action
granting an Award or such later date as the Committee designates as the Award
Date at the time of the Award or, in the case of Awards under Article VII, the
applicable dates set forth therein.
(d) "Award Period" shall mean the period beginning on an Award Date and ending
on the expiration date of such Award.
(e) "Beneficiary" shall mean the person, persons, trust or trusts designated by
a Participant or, in the absence of a designation, entitled by will or the laws
of the descent and distribution to receive the benefits specified in the Award
Agreement and under this Plan in the event of a Participant's death, and shall
mean the Participant's executor or administrator if no other Beneficiary is
designated and able to act under the circumstances.
(f) "Board" shall mean the Board of Directors of the Corporation.
(g) "Cash-Based Awards" shall mean Awards that, if paid, must be paid in cash
and that are neither denominated in nor have a value derived from the value of,
nor an exercise or conversion privilege at a price related to, shares of Common
Stock.
(h) "Cash Flow" shall mean cash and cash equivalents derived from either (i) net
cash flow from operations or (ii) net cash flow from operations, financings and
investing activities, as determined by the Committee at the time an Award is
granted.
(i) "Change in Control Event" shall mean any of the following:
(1) The dissolution or liquidation of the Corporation
(other than in the context of a transaction that does not
constitute a Change in Control event under clause (2) below);
(2) Consummation of a merger, consolidation, or other
reorganization, with or into, or the sale of all or
substantially all of the Corporation's business and/or assets
to, one or more entities that are not Subsidiaries (a
"Business Combination"), as a result of which less than 50% of
the outstanding voting securities of the surviving or
resulting entity or a parent ("Successor Entity") thereof
immediately after the reorganization are, or will be, owned by
stockholders of the Corporation immediately before the
Business Combination (assuming for purposes of such
determination that there is no change in the record ownership
of the Corporation's securities from the record date for such
approval until such reorganization and that such record owners
hold no securities of the other parties to such
reorganization);
(3) Any "person" (as such term is used in Section
13(d) and 14(d) of the Exchange Act) (other than a person
having such ownership at the time of adoption of this Plan)
becomes the "beneficial owner" (as defined in Rule 13d-3 under
the Exchange Act), directly or indirectly, of securities of
the Corporation representing more than 50% of the combined
voting power of the Corporation's then outstanding securities
entitled to then vote generally in the election of directors
of the Corporation, other than (i) an acquisition directly
from the Company, (ii) an acquisition by the Company, or (iii)
an acquisition by an employee benefit plan (or related trust)
sponsored or maintained by the Company or a Successor Entity;
or
(4) During any period not longer than two consecutive
years, individuals who at the beginning of such period
constituted the Board cease to constitute at least a majority
thereof, unless the election, or the nomination for election
by the Corporation's stockholders, of each new Board member
was approved by a vote of at least a majority of the Board
members then still in office who were Board members at the
beginning of such period (including for these purposes, new
members whose election or nomination was so approved), but
excluding, for this purpose, any such individual whose initial
assumption of office occurs as a result of an actual or
threatened election contest with respect to the election or
removal of directors or other actual or threatened
solicitation of proxies or consents by or on behalf of a
person other than the Board.
(j) "Code" shall mean the Internal Revenue Code of 1986, as amended from time to
time.
(k) "Commission" shall mean the Securities and Exchange Commission.
(l) "Committee" shall mean the Board or one or more committees appointed by the
Board to administer all or certain aspects of this Plan, each committee to be
comprised solely of one or more directors or such number as may be required
under applicable law. Each member of a Committee in respect of any decision with
respect to an Award intended to satisfy the requirements of Section 162(m) of
the Code must satisfy the requirements of "outside director" status within the
meaning of Section 162(m) of the Code; provided, however, that the failure to
satisfy such requirement shall not affect the validity of the action of any
committee otherwise duly authorized and acting in the matter. As to Awards,
grants or other transactions that are authorized only by a committee and that
are intended to be exempt under Rule 16b-3, the requirements of Rule 16b-3(d)(1)
with respect to committee action must also be satisfied.
(m) "Common Stock" shall mean the Common Stock of the Corporation and such other
securities or property as may become subject to Awards, or become subject to
Awards, pursuant to an adjustment made under Section 6.2 of this Plan.
(n) "Company" shall mean, collectively, the Corporation and its domestic or
foreign Subsidiaries or divisions.
(o) "Corporation" shall mean International Game Technology, a Nevada
corporation, and its successors.
(p) "Eligible Employee" shall mean an officer (whether or not a director) or key
executive, administrative, managerial, production, marketing or sales employee
of the Company.
(q) "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended.
(r) "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended
from time to time.
(s) "Fair Market Value" or any date shall mean (i) if the stock is listed or
admitted to trade on a national securities exchange, the closing price of the
stock on the Composite Tape, as published in the Western Edition of The Wall
Street Journal, of the principal national securities exchange on which the stock
is so listed or admitted to trade, on such date, or, if there is no trading of
the stock on such date, then the closing price of the stock as quoted on such
Composite Tape on the next preceding date on which there was trading in such
shares; (ii) if the stock is not listed or admitted to trade on a national
securities exchange, the last price for the stock on such date, as furnished by
the National Association of Securities Dealers, Inc. ("NASD") through the NASDAQ
National Market Reporting System or a similar organization if the NASD is no
longer reporting such information, (iii) if the stock is not listed or admitted
to trade on a national securities exchange and is not reported on the National
Market Reporting System, the mean between the bid and asked price for the stock
on such date, as furnished by the NASD or a similar organization, or (iv) if the
stock is not listed or admitted to trade on a national securities exchange, is
not reported on the National Market Reporting System and if bid and asked prices
for the stock are not furnished by the NASD or a similar organization, the value
as established by the Committee at such time for purposes of this Plan.
(t) "Incentive Stock Option" shall mean an Option which is designated as an
incentive stock option within the meaning of Section 422 of the Code, the award
of which contains such provisions as are necessary to comply with that section.
(u) "Nonqualified Stock Option" shall mean an Option that is designated as a
Nonqualified Stock Option and shall include any Option intended as an Incentive
Stock Option that fails to meet the applicable legal requirements thereof. Any
Option granted hereunder that is not designated as an Incentive Stock Option
shall be deemed to be designated a Nonqualified Stock Option under this Plan and
not an incentive stock option under the Code.
(v) "Non-Employee Director" shall mean a member of the Board of Directors of the
Corporation who is not an officer or employee of the Company.
(w) "Option" shall mean an option to purchase Common Stock granted under this
Plan. The Committee shall designate any Option granted to an Eligible Employee
as a Nonqualified Stock Option or an Incentive Stock Option. Options granted
under Article VII shall be Nonqualified Stock Options.
(x) "Participant" shall mean an Eligible Employee who has been granted an Award
under this Plan or a Non-Employee Director who has received a Nonqualified Stock
Option under Article VII.
(y) "Performance-Based Award" shall mean an Award of a right to receive shares
of Common Stock or other compensation (including cash) under Section 5.2, the
issuance or payment of which is contingent upon, among other conditions, the
attainment of performance objectives specified by the Committee.
(z) "Performance Goals" shall mean earnings per share, or Cash Flow, or total
stockholder return, or revenue growth, or operating income, or net earnings
(before or after interest, taxes, depreciation and/or amortization), or return
on equity or on assets or on net investment, or cost containment or reduction,
or any combination thereof.
(aa) "Performance Share Award" shall mean an Award of a right to receive shares
of Common Stock made in accordance with Section 5.1, the issuance or payment of
which is contingent upon, among other conditions, the attainment of performance
objectives specified by the Committee.
(bb) "Personal Representative" shall mean the person or persons who, upon the
disability or incompetence of a Participant, shall have acquired on behalf of
the Participant, by legal proceeding or otherwise, the power to exercise the
rights or receive benefits under this Plan and who shall have become the legal
representative of the Participant.
(cc) "Plan" shall mean this 2002 Stock Incentive Plan.
(dd) "QDRO" shall mean a qualified domestic relations order as defined in
Section 414(p) of the Code or Title I, Section 206(d)(3) of ERISA (to the same
extent as if this Plan were subject thereto), or the applicable rules
thereunder.
(ee) "Restricted Stock Award" shall mean an award of a fixed number of shares of
Common Stock to the Participant subject, however, to payment of such
consideration, if any, and such forfeiture provisions, as are set forth in the
Award Agreement.
(ff) "Restricted Stock" shall mean shares of Common Stock awarded to a
Participant under this Plan, subject to payment of such consideration, if any,
and such conditions on vesting and such transfer and other restrictions as are
established in or pursuant to this Plan, for so long as such shares remain
unvested under the terms of the applicable Award Agreement.
(gg) "Retirement" shall mean retirement with the consent of the Company, or in
the case of a Non-Employee Director, a retirement or resignation as a director
after at least eight years service as a director.
(hh) "Rule 16b-3" shall mean Rule 16b-3 as promulgated by the Commission
pursuant to the Exchange Act.
(ii) "Section 16 Person" shall mean a person subject to Section 16(a) of the
Exchange Act.
(jj) "Securities Act" shall mean the Securities Act of 1933, as amended from
time to time.
(kk) "Stock Appreciation Right" shall mean a right to receive a number of shares
of Common Stock or an amount of cash, or a combination of shares and cash, the
aggregate amount or value of which is determined by reference to a change in the
Fair Market Value of the Common Stock that is authorized under this Plan.
(ll) "Stock Bonus" shall mean an Award of shares of Common Stock granted under
this Plan for no consideration other than past services and without restriction
other than such transfer or other restrictions as the Committee may deem
advisable to assure compliance with law.
(mm) "Stock Unit" shall mean a bookkeeping entry which serves as a unit of
measurement relative to a share of Common Stock for purposes of determining the
payment, in Common Stock or cash, of an Award, including a deferred benefit or
right under this Plan. Stock Units are not outstanding shares and do not entitle
a Participant to any dividend, voting or other rights in respect of any Common
Stock represented thereby or acquirable thereunder. Stock Units, may, however,
by express provision in the applicable Award Agreement, entitle a Participant to
dividend equivalent rights, as defined by the Committee.
(nn) "Subsidiary" shall mean any corporation or other entity a majority of whose
outstanding voting stock or voting power is beneficially owned directly or
indirectly by the Corporation.
(oo) "Total Disability" shall mean a "permanent and total disability within the
meaning of Section 22(e)(3) of the Code and (except in the case of a
Non-Employee Director) such other disabilities, infirmities, afflictions or
conditions as the Committee by rule may include.
MAP TO SITE OF ANNUAL MEETING - OMITTED
FORM OF PROXY
INTERNATIONAL VOTE BY TELEPHONE OR INTERNET
GAME 24 HOURS A DAY, 7 DAYS A WEEK
TECHNOLOGY
TELEPHONE INTERNET MAIL
1-866-593-3362 http://proxyvotenow.com
(Toll-free number is
available in the
U.S. and Canada only)
Use any touch-tone telephone to vote OR Use the Internet to vote your OR Mark, sign and date your proxy
your proxy. Have your proxy card in proxy. Have your proxy card in card and return it in the
hand when you call. You will be hand when you access the postage-paid envelope we have
prompted to enter your control number, website. You will be prompted provided.
located in the box below, and then to enter your control number,
follow the simple directions. located in the box below, to
create an Electronic ballot.
Your telephone or internet vote authorizes the named proxies to vote your shares
in the same manner as if you marked, signed and returned the proxy card. If you
have submitted your proxy by telephone or the internet, there is no need for you
to mail back your proxy.
|_| (Please sign, date and return this |X| Votes must be indicated by
proxy card in the enclosed envelope) (x) in Black or Blue ink.
The Board of Directors recommends a vote "FOR ALL" of the nominees listed
below and "FOR" approval of the International Game Technology 2002 Stock
Incentive Plan:
1. Election of Directors
FOR ALL |_| WITHHOLD FOR ALL |_| EXCEPTIONS |_|
Nominees: 01 - G. Thomas Baker, 02 - Robert A. Bittman, 03 - Richard R. Burt,
04 - Wilbur K. Keating, 05 - Thomas J. Matthews,
06 - Charles N. Mathewson, 07 - Robert Miller,
08 - Frederick B. Rentschler
(INSTRUCTIONS: To withhold authority to vote for any individual nominee, mark
the "Exceptions" box and write that nominee's name in the space provided below.)
*Exceptions_____________________________________________________________________
2. Approval of the International Game Technology 2002 Stock Incentive Plan
FOR |_| AGAINST |_| ABSTAIN |_|
3. In their discretion, the Proxies are authorized to vote upon such other
matters as may properly come before the meeting.
Please sign name exactly as it appears on this card. Joint owners should each
sign. Attorneys, trustees, executors, administrators, conservators, custodians,
guardians or corporate officers should give full title.
Stockholder sign here Date
------------------------------------------------ -----------------------
------------------------------------------------ -----------------------
Co-Owner sign here
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INTERNATIONAL GAME TECHNOLOGY
P R O X Y
ANNUAL MEETING OF STOCKHOLDERS, March 4, 2002
The undersigned hereby appoints Charles N. Mathewson, G. Thomas Baker and
Sara Beth Brown, and each of them, the proxies and attorneys-in-fact of the
undersigned, with full power of substitution in each, for and in the name of the
undersigned to attend the Annual Meeting of Stockholders of International Game
Technology to be held March 4, 2002 at 1:30 P.M., local time, at the Green
Valley Ranch Station Casino, Estancia Ballroom, 2300 Paseo Verde, Henderson,
Nevada, and any and all adjournments thereof, and to vote there at the number of
shares of Common Stock which the undersigned would be entitled to vote if then
personally present, as specified on the reverse side:
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS AND WILL BE
VOTED AS SPECIFIED ON THE REVERSE SIDE. IF NO SPECIFICATION IS MADE, IT WILL BE
VOTED IN FAVOR OF THE PROPOSALS.
(Continued, and to be signed and dated, on the reverse side.)
I plan to attend the meeting. |_| International Game Technology
P.O. Box 11036
New York, N.Y. 10203-0036
To change your address, please
mark this box. |_|