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 |_|
Check the appropriate box:
|_| 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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|X| No fee required.
|_| Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11.
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the filing fee is calculated and state how it was determined):
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number, or the Form or Schedule and the date of its filing.
1) Amount previously paid:
2) Form, Schedule or Registration Statement No.:
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4) Date Filed:
INTERNATIONAL GAME TECHNOLOGY
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held On March 3, 2003
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 our corporate headquarters at 9295
Prototype Drive, Reno, Nevada, on Monday, March 3, 2003, at 1:30 p.m., local
time, for the purpose of considering and acting upon the following matters:
1. Electing nine directors for the ensuing year;
2. Ratifying the appointment of Deloitte & Touche LLP as our independent
auditors for our fiscal year ending September 27,2003; and
3. Transacting any other business that may properly come before the meeting.
Only stockholders of record at the close of business on January 3, 2003
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 24, 2003
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.............................................7
NOMINEES FOR ELECTION OF DIRECTORS...........................................7
BOARD OF DIRECTORS AND COMMITTEES OF THE BOARD..............................10
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION.................11
COMPENSATION OF DIRECTORS...................................................11
RECOMMENDATION OF IGT BOARD OF DIRECTORS....................................12
OTHER INFORMATION.............................................................12
EXECUTIVE OFFICERS AND KEY EMPLOYEES........................................12
EQUITY SECURITY OWNERSHIP OF MANAGEMENT AND OTHER BENEFICIAL OWNERS.........15
EXECUTIVE COMPENSATION......................................................16
EMPLOYMENT CONTRACTS AND CHANGE IN CONTROL ARRANGEMENTS.....................18
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934........20
BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION.................20
PERFORMANCE GRAPH.............................................................22
PROPOSAL 2 - RATIFICATION OF INDEPENDENT AUDITORS.............................23
AUDIT COMMITTEE REPORT........................................................23
FEES PAID TO INDEPENDENT ACCOUNTANTS........................................25
RECOMMENDATION OF IGT BOARD OF DIRECTORS....................................25
STOCKHOLDER PROPOSALS FOR THE 2004 ANNUAL MEETING.............................26
GENERAL 28
SECOND RESTATED AUDIT COMMITTEE CHARTER................................Annex A-1
MAP TO SITE OF ANNUAL MEETING................................................M-1
INTERNATIONAL GAME TECHNOLOGY
9295 Prototype Drive
Reno, Nevada 89521
(775) 448-7777
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PROXY STATEMENT
-----------
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 3, 2003, 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 our headquarters at 9295 Prototype Drive, Reno,
Nevada. A map with directions to our headquarters is included with this proxy
statement on page M-1. These proxy solicitation materials were mailed on or
about January 24, 2003 to all shareholders entitled to vote at the annual
meeting.
QUESTIONS AND ANSWERS ABOUT THE MEETING
Q: What am I being asked to vote on?
A: (1) The election of nominees to serve on our
board of directors; and
(2) The ratification of the appointment of
Deloitte & Touche LLP as our independent
auditors for our fiscal year ending
September 27, 2003.
Q: How does the board recommend I vote on these proposals?
A: Our board of directors recommends a vote FOR each of
the nominees for director and FOR the ratification of
Deloitte & Touche LLP as our independent auditors.
Q: Who is entitled to vote?
A: The record date for the annual meeting is January 3,
2003. Stockholders of record as of the close of
business on that date 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.
Q: What if my shares are held by a broker?
A: 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. If you do not give instructions to
your broker, your broker can vote your shares with
respect to "discretionary" items, but not with
respect to "non-discretionary" items. A discretionary
item is a proposal that is considered routine under
the rules of the New York Stock Exchange, and shares
held in street name may be voted by your broker on
these items in the absence of voting instructions
given by you. On non-discretionary items for which
you do not give your broker instructions, the shares
will be treated as "broker non-votes." The proposals
discussed in this proxy statement are considered
routine and therefore may be voted upon by your
broker if you do not give instructions for the shares
held by your broker.
Q How 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://www.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 the 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: Yes. 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
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 the close of business on the record date of
January 3, 2003, 86,710,092 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. Abstentions will be counted as
present for quorum purposes.
Q: What is required to approve each proposal?
A: Once a quorum has been established, directors are
elected by a plurality of the votes cast by holders
of shares entitled to vote at the annual meeting.
This means that the individuals who receive the
largest number of votes are selected as directors up
to the maximum number of directors to be elected at
the meeting.
To approve the ratification of Deloitte & Touche LLP
as our independent auditors, 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 the proposal, the shares represented by
these proxies will not be treated as affirmative
votes.
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 each of the director nominees
named in this proxy statement and FOR the
ratification of Deloitte & Touche LLP as our
independent auditors. 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
treat the shares as present and count the shares as
votes FOR each of the director nominees named in this
proxy statement and FOR the ratification of Deloitte
& Touche LLP as our independent auditors.
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
proposal 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: What if a quorum is not present at the meeting?
A: If a quorum is not present at the scheduled time
of the annual meeting, we may adjourn the meeting,
either with or without the vote of the stockholders.
If we propose to have the stockholders vote whether
to adjourn the meeting, the proxyholders will vote
all shares for which they have authority in favor of
the adjournment. We may also adjourn the meeting if
for any reason we believe that additional time should
be allowed for the solicitation of proxies. An
adjournment will have no effect on the business that
may be conducted at the annual meeting.
Q: How much stock do IGT's directors and executive officers own?
A: As of January 3, 2003, our current directors and
executive officers collectively had the power to vote
2,602,846 shares, constituting approximately 3.0% of
the outstanding shares. These persons have indicated
that they currently intend to vote the shares held by
them for each of the director nominees named in this
proxy statement and in favor of the ratification of
Deloitte & Touche LLP and.
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 2003
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 each of the nine persons named below as
nominees. 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, 74, was appointed to our 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
of 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. 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 & Company,
Inc. 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. He was a member of the
board of directors of FelCor Lodging Trust from 1994 until 2002. From
1994 until 2002, Mr. Mathewson served as Chairman of the American
Gaming Association, and in December 2002, he was named Chairman
Emeritus of that organization. Mr. Mathewson is a member of the board
of directors of Baron Asset Fund. Mr. Mathewson is a member of the
Executive Committee of our board of directors.
G. Thomas Baker, 60, has served on our board of directors since October
2000. Mr. Baker first joined IGT in September 1988 as our 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. 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 our 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. Mr. Baker is a member of the Executive Committee of our
board of directors.
Neil Barsky, 45, has served on our board of directors since March 2002. Mr.
Barsky is managing partner of Alson Capital Partners, a New York City
investment management company. Through September 30, 2002, Mr. Barsky
was managing partner and co-founder of Midtown Capital Partners, LLC.
Between 1993 and 1997, Mr. Barsky was an equity research analyst at
Morgan Stanley, specializing in real estate, gaming and lodging. In
1997, Mr. Barsky was ranked #1 in lodging and #2 in gaming in the
Institutional Investor All-American Research Poll. Prior to joining
Morgan Stanley, Mr. Barsky was an award-winning reporter at the Wall
Street Journal. Mr. Barsky has an MS from Columbia University's
Graduate School of Journalism and a BA from Oberlin College. Mr.
Barsky is a member of the Audit Committee of our board of directors.
Robert A. Bittman, 48, 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 our 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, 55, 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
acquisition in December 2001. Mr. Burt served as a Director and
Chairman of Powerhouse Technologies, Inc. from 1994 through December
2001. 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 Chairman of the
Board of Weirton Steel, Inc. and as a Director of Paine Webber Mutual
Funds, and Hollinger International Inc. In addition, he is a member of
the Textron Corporation's International Advisory Council. Mr. Burt is
a member of the Audit Committee and Compensation Committee of our
board of directors.
Wilbur K. Keating, 71, has served on our board of directors since May 1987.
From 1994 until 2002, Mr. Keating was the Executive Officer for the
National Association of State Retirement Administrators. Mr. Keating
was the Assistant Executive Officer of the Nevada Public Employees
Retirement System from 1974 through 1980, and its Chief Executive
Officer from 1981 through 1994. He received his degree in Business
Management from the University of Colorado in 1956. Mr. Keating is a
member of the Audit Committee and Nominating and Corporate Governance
Committee of our board of directors.
Thomas J. Matthews, 37, has served on our board of directors since December
2001, when Anchor Gaming was acquired by IGT. He was named our 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, 57, has served on our board of directors since January 2000.
Governor Miller has been a partner at the law firm of Jones Vargas
since January 1999, which has provided and continues to provide legal
services to IGT. 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, Wynn Resorts, 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. Mr. Miller is a member of the
Compensation Committee and Nominating and Corporate Governance
Committee of our board of directors.
Frederick B. Rentschler, 63, 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. Mr. Rentschler is a
member of the Compensation Committee and Nominating and Corporate
Governance Committee of our board of directors.
Board of Directors and Committees of the Board
Our board of directors held four regular meetings and one special
meeting during fiscal 2002, and acted by unanimous written consent on three
other occasions. Each director attended at least 75% of the total 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 four standing committees: the Audit
Committee, the Compensation Committee, the Executive Committee, and the
Nominating and Corporate Governance Committee.
The Executive Committee, comprised of Messrs. Mathewson and Baker,
exercises the powers and authority of our board of directors in the management
of IGT's business affairs during the intervals between board meetings. The power
and authority of the Executive Committee is subject to the provisions of
applicable Nevada law and our charter documents. The Executive Committee does
not have any power or authority over any of the matters reserved exclusively for
the Compensation Committee, the Audit Committee or the Nominating and Corporate
Governance Committee under any federal laws, the rules and regulations of the
Securities and Exchange Commission, and the rules of the New York Stock
Exchange. The Executive Committee did not hold any meetings during fiscal 2002,
but acted by unanimous written consent on two occasions.
The Audit Committee Charter, which sets forth the authority and
responsibilities of the Audit Committee, was restated in December 2002. A copy
of the restated Audit Committee Charter is attached to this proxy statement as
Annex A. The Audit Committee assists our board of directors in overseeing the
accounting and financial reporting processes of IGT and audits of our financial
statements, including the integrity of our financial statements, compliance with
legal and regulatory requirements, our independent public accountants'
qualifications and independence, the performance of our internal audit function
and independent public accountants, and such other duties as may be directed by
our board of directors. The Audit Committee Charter requires that the Audit
Committee consist of three or more board members who satisfy the "independence"
requirements of the New York Stock Exchange. The Audit Committee consists of
Messrs. Barsky, Burt and Keating, each of whom satisfies these requirements. The
Audit Committee held nine meetings during fiscal 2002. A copy of the report of
the Audit Committee is contained in this proxy statement.
In March 2002, our board of directors adopted a Nominating Committee
Charter. The Nominating Committee changed its structure and name to the
Nominating and Corporate Governance Committee, and our board adopted a
Nominating and Corporate Governance Charter, in September 2002. This Charter was
restated by our board in December 2002. The purpose of the Nominating and
Corporate Governance Committee, which consists of Messrs. Rentschler, Keating
and Miller, is to ensure that qualified candidates are presented to our board
for election as directors, to ensure that our board and our organizational
documents are structured in a way that best serves our practices and objectives,
and to develop and recommend to our board a set of corporate governance
principles. The Nominating and Corporate Governance Charter requires that the
Nominating and Corporate Governance Committee consist of no fewer than three
board members who satisfy the "independence" requirements of the New York Stock
Exchange and applicable law. The Nominating and Corporate Governance Committee
did not hold any meetings during fiscal 2002, but acted by unanimous written
consent on one occasion.
The Nominating and Corporate Governance Committee will consider
nominees for our board of directors recommended by stockholders. Notice of
proposed stockholder nominations for director must be delivered not less than
120 days prior to any meeting at which directors are to be elected. Nominations
must include the full name of the proposed nominee and a brief description of
the proposed nominee's business experience for at least the previous five years.
Nominations should be delivered to the Nominating and Corporate Governance
Committee, c/o Corporate Secretary, International Game Technology, 9295
Prototype Drive, Reno, Nevada 89511-8986.
Compensation Committee Interlocks and Insider Participation
The Compensation Committee Charter, which sets forth the authority and
responsibilities of the Compensation Committee, was restated in December 2002.
The Compensation Committee's purpose is to discharge the responsibilities of our
board of directors relating to compensation of IGT's executives and directors,
to produce an annual report on executive compensation for inclusion in our proxy
statements, and to take such other actions within the scope of the Compensation
Committee Charter as the Compensation Committee deems necessary or appropriate.
The Compensation Committee Charter requires that the Compensation Committee
consist of three or more board members who satisfy the "independence"
requirements of the New York Stock Exchange. The Compensation Committee consists
of Messrs. Burt, Miller and Rentschler, each of whom satisfies these
requirements. The Compensation Committee held four meetings during fiscal 2002,
and acted by unanimous written consent on one other occasion. A copy of the
report of the Compensation Committee is contained in this proxy statement.
No member of our Compensation Committee is a former or current officer
or employee of IGT or any of our subsidiaries. None of our executive officers
serves as a member of the board of directors or compensation committee of any
entity that has one or more executive officers serving on our board of directors
or on our Compensation Committee.
Compensation of Directors
Non-employee directors receive a $30,000 annual fee and a fee of $1,500
for each committee meeting attended. 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 at an exercise price equal to the
closing price of the common stock on the date of grant. 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 at an
exercise price equal to the closing price of the common stock on the date of
grant. During fiscal 2002, each non-employee director except Mr. Barsky received
non-qualified stock options to purchase 6,000 shares of our common stock at an
exercise price of $70.09 per share. Mr. Barsky received non-qualified options to
purchase 10,000 shares of common stock at an exercise price of $67.85 per share
upon his appointment to the board in March 2002.
In recognition of Rockwell A. Schnabel's services to IGT, when Mr.
Schnabel resigned as a director in October 2001 in order to return to government
service, IGT accelerated the vesting of his unvested options. Concurrently, the
exercise price of Mr. Schnabel's in-the-money options was increased to the fair
market value of IGT common stock on the day of acceleration.
We do not pay to directors who are also our executive officers any fees
or additional remuneration for service as members of our board or its
committees.
Recommendation of IGT Board of Directors
The favorable vote of a plurality of votes cast for each nominee is
required for election of that nominee to the board of directors.
Our board of directors recommends a vote FOR the election of each of
the above nominees as a director.
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. Following the table are
descriptions of all positions held by each individual and the business
experience of each individual for at least the past five years.
Name Age Title
G. Thomas Baker 60 President and Chief Executive Officer
Robert A. Bittman 48 Executive Vice President, Product
Development
Sara Beth Brown 47 Senior Vice President, General Counsel,
Secretary
Ward Chilton 46 Senior Vice President, North America Sales
Anthony Ciorciari 55 Senior Vice President, Operations
Thomas J. Matthews 37 Chief Operating Officer
Maureen T. Mullarkey 43 Senior Vice President, Chief Financial
Officer, Treasurer
Richard Pennington 40 Senior Vice President, Product Management
Randy Kirner 56 Vice President, Human Resources
For descriptions of Messrs. Baker's, Bittman's and Matthews's
backgrounds, see "Election of Directors."
Ms. Brown joined us 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 JD 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 us 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 us 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 our recurring revenue products including wide
area progressives and stand-alone proprietary games. Prior to joining us, 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 BS in
Business Administration from Arizona State University in 1978 and an MS from
Golden Gate University in 1980.
Mr. Ciorciari joined us 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 us 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, and held these positions
until July 2000. Ms. Mullarkey was Chief Financial Officer at Zoho Corporation
from August 2000 to January 2001. She rejoined us 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, information system and enterprise resource planning (ERP) functions. Ms.
Mullarkey received a BS from the University of Texas at Austin in 1981, and an
MBA from the University of Nevada, Reno in 1988.
Mr. Pennington joined us 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 us, 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 BS in Business
Administration in 1987.
Mr. Kirner joined us in October 1997 as Vice President, Human
Resources. From September 1993 through September 1997, Mr. Kirner served as 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 Vice President, Human Resources
for Medical Optics, a subsidiary. Mr. Kirner was employed by 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 an MS from
West Coast University in 1975, an MBA from Georgia State University in 1968 and
a BA 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 3, 2003 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 as a group. We have no other class of equity
securities outstanding.
Shares of IGT's Common Stock
----------------------------
Options
Name of Exercisable Beneficially Percent of
Beneficial Owner Owned Within 60 Days Owned 1 Class 2
----------------------- --------- -------------- ------------ -------
G. Thomas Baker 129,805 647,400 777,205 *
Neil Barsky 5,000 --- 5,000 *
Robert A. Bittman 14,282 21,194 35,476 *
Richard R. Burt --- 5,334 5,334 *
Anthony Ciorciari 33,561 13,935 47,496 *
Wilbur K. Keating 4,718 24,000 28,718 *
Thomas J. Matthews 100,000 100,000 200,000 *
Charles N. Mathewson 2,298,163 183,963 2,482,126 2.9%
Maureen T. Mullarkey 3,772 92,637 96,409 *
Robert Miller --- 12,000 12,000 *
Frederick B. Rentschler 2,000 2,000 4,000 *
All executive officers
and directors as a group
(15 persons) 2,602,846 1,159,305 3,762,151 4.3%
Private Capital Management,
Inc. and affiliates3
6,509,625 --- 6,509,625 7.3%
Putnam, LLC and affiliates4
4,479,650 --- 4,479,650 5.1%
-----------
*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 3, 2003.
2 Any securities not outstanding which are subject to options or conversion
privileges exercisable within 60 days of January 3, 2003 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 Information with respect to number of shares beneficially owned and percent of
class derived from Schedule 13G reporting information as of December 31, 2001
and filed February 15, 2002. According to the Schedule 13G, Bruce S. Sherman is
Chairman and Gregg J. Powers is President of Private Capital Management, Inc.
("PCM"), 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 disclaim beneficial ownership for
the shares held by PCM's clients and disclaim the existence of a group. The
business address of PCM is 8889 Pelican Bay Boulevard, Suite 500, Naples,
Florida 34108.
4 Information with respect to number of shares beneficially owned and percent of
class derived from Schedule 13G, filed on and reporting information as of
November 12, 2002. According to the Schedule 13G, two subsidiaries of Putnam,
LLC d/b/a Putnam Investments ("PI"), Putnam Investment Management, LLC ("PIM")
and The Putnam Advisory Company, LLC ("PAC"), have shared voting power over
189,512 and 493,737 shares, respectively, of our common stock, and shared
dispositive power over 3,384,097 and 1,095,553 shares, respectively. As such, PI
has shared voting power over 683,249 shares and shared dispositive power over
4,479,650 shares of our common stock. The business address of PI, PIM and PAC is
One Post Office Square, Boston, Massachusetts 02109.
Executive Compensation
Summary Compensation Table
The following table summarizes all compensation paid for fiscal 2002,
2001, and 2000 to G. Thomas Baker, our President and Chief Executive Officer, to
the other four most highly compensated executive officers during fiscal 2002,
and to our Chairman, Charles Mathewson.
Long-Term Compensation
------------------------------------
Securities
Annual Compensation Underlying Other
-------------------------------
Name and Principal Position Year Salary ($)1 Bonus ($)2 Options Granted3 Compensation ($)4
--------------------------- ---- ------------ ----------- ---------------- ------------------
G. Thomas Baker 2002 690,385 2,100,000 5 --- 161,431
President and Chief 2001 621,154 1,950,000 500,000 139,086
Executive Officer 2000 499,231 1,300,000 --- 80,983
Thomas J. Matthews6 2002 328,846 900,000 7 500,000 40,105
Chief Operating Officer 2001 --- --- --- ---
2000 --- --- --- ---
Maureen T. Mullarkey 2002 266,731 462,500 8 12,500 56,086
Senior Vice President 2001 145,615 375,000 100,000 35,648
Chief Financial Officer, 2000 166,903 --- --- 28,970
Treasurer
Robert A. Bittman 2002 300,000 400,000 8 --- 72,223
Executive Vice President, 2001 299,997 325,000 100,000 73,255
Product Development 2000 300,000 300,000 --- 56,182
Anthony Ciorciari 2002 240,000 400,000 8 12,500 56,794
Senior Vice President 2001 222,981 325,000 50,000 51,921
Operations 2000 209,516 220,000 --- 45,448
Charles N. Mathewson 2002 1 1,400,000 --- 72,022
Chairman9 2001 1 1,300,000 --- 80,192
2000 1 1,300,000 --- 92,676
------------
1 Amounts shown include base compensation earned and received by executive
officers. No non-cash compensation was paid as salary or as a bonus during
fiscal 2002.
2 Amounts represent bonuses earned in the fiscal year but paid in the following
fiscal year.
3 Amounts represent options to purchase the number of shares of common stock
shown.
4 Other compensation includes contributions by IGT to the accounts of the
identified executive officers under IGT's qualified profit sharing plan, and
payments under IGT's cash sharing plan. See Note 9 for Mr. Mathewson.
5 Amount shown includes $700,000 deferred bonus. See "Employment Contracts"
below for a description of the deferred bonus provision of Mr. Baker's
employment contract.
6 Mr. Matthews joined IGT in fiscal 2002.
7 Amount shown includes $157,000 deferred bonus. See "Employment Contracts"
below for a description of the deferred bonus provision of Mr. Matthews'
employment contract.
8 Amount shown includes $50,000 deferred bonus payable in two years if
individual is employed by IGT at that time.
9 Mr. Mathewson resigned as Chief Executive Officer in December 2000. The
Compensation Committee determined the amount of the bonus for Mr. Mathewson
based on its subjective views of his contribution to the favorable performance
of IGT in 2002 and, without an independent verification, its view about the
appropriate level of compensation to him for such contributions. Other
Compensation amounts include life insurance premiums, estate planning and
medical costs paid by IGT.
Options
The tables below sets forth certain information regarding options
granted and exercised during fiscal 2002 to the executive officers named in the
Summary Compensation Table.
Option Grants
Individual Grants
--------------------------------------------------------
Percent of Potential Realizable Value at
Total Assumed Annual Rates
Number of Options of Stock Price Appreciation
Securities Granted to for Optional Term 1
Underlying Employees Exercised or -----------------------------
Options in Fiscal Base Price Expiration
Name Granted 1 Year (%) Per Share Date 5% 10%
------------------------- ------------ ------------ ------------ ----------- ------------ ------------
G. Thomas Baker --- --- --- --- $ --- $ ---
Thomas J. Matthews 500,000 13.07 70.00 12/30/2011 22,011,312 55,780,986
Maureen T. Mullarkey 12,500 .33 68.30 12/31/2011 536,919 1,360,658
Robert A. Bittman --- --- --- --- --- ---
Anthony Ciorciari 12,500 .33 68.30 12/31/2011 536,919 1,360,658
Charles N. Mathewson --- --- --- --- --- ---
------------
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 and Fiscal Year-End Option Values
Number of Securities
Options Exercised Underlying Unexercised Value of Unexercised In-the-
------------------------- Options at 9/28/2002 Money Options at 9/28/20021
Shares ---------------------------- -------------------------------
Name Acquired Value Realized Exercisable Unexercisable Exercisable Unexercisable
------------------------- -------- -------------- ----------- ------------- ------------- -------------
G. Thomas Baker --- --- 478,729 335,337 $21,574,637 $8,292,279
Thomas J. Matthews2 388,000 15,132,691 --- 600,000 --- 5,365,250
Maureen T. Mullarkey 25,241 1,400,794 69,560 113,077 3,065,987 3,075,157
Robert A. Bittman 9,282 428,223 20,000 81,194 462,800 1,908,172
Anthony Ciorciari 18,648 1,058,366 10,705 53,230 267,595 976,557
Charles N. Mathewson 210,160 8,486,715 183,963 --- 10,270,441 ---
------------
1 Market value of the underlying securities at year-end, less the exercise price
of "in-the-money" options.
2 IGT assumed options to purchase 248,000 shares at $15.9375 per share, and
240,000 at $35.9375 per share upon its acquisition of Anchor Gaming. Of these,
Mr. Matthews holds options to purchase 100,000 shares at $15.9375 per share.
Employment Contracts and Change in Control Arrangements
We entered into a three-year employment agreement with G. Thomas Baker,
our President and Chief Executive Officer, effective on December 6, 2000. This
agreement provides for an annual base salary of $650,000 for year one, $700,000
for year two and $750,000 for year three. In addition, for each 1% increase in
operating profits before incentives over the previous fiscal year, Mr. Baker
will receive a management bonus equal to 10% of his base salary, and he will
receive 20% of his base salary for any increase in operating profits over the
prior year in excess of 10%. The bonus calculation shall not exceed 300% of the
base salary. In year one, the bonus was determined based upon 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. The amounts of the bonuses earned by Mr. Baker in each of year one and
year two of the agreement that exceeded 200% of his base salary in those years
have been accrued and payment of this amount will be paid in conjunction with
the bonus earned in year three, provided that Mr. Baker remains employed by us
through the term. We may terminate Mr. Baker for cause (as defined in the
agreement). If we terminate Mr. Baker's employment without cause or because he
becomes disabled, or if he elects at his discretion to sever his relationship
with IGT upon a transfer to a third party of 40% or more of our outstanding
stock, he will be entitled to receive a lump sum payment equal to two years'
base salary plus any applicable deferred bonus, and any unvested stock options
held by him at that time will immediately vest in full. If Mr. Baker dies during
the term of the agreement, his estate will be entitled to receive two years'
base salary and any deferred bonus. Mr. Baker is also eligible to participate in
our profit sharing, cash sharing, and employee stock purchase plans, as well as
other employee benefit plans and programs for which he is otherwise eligible
under the terms of such plans or programs. Additionally, in his employment
agreement Mr. Baker was granted an option to purchase 500,000 shares of our
common stock 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,
ending on December 5, 2003.
We entered into a three-year employment agreement, effective as of
December 30, 2001, with Thomas J. Matthews, our Chief Operating Officer. The
agreement continues through October 16, 2004. At the end of the employment
agreement term, Mr. Matthew's employment will 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 to participate in our profit
sharing, cash sharing, management bonus and employee stock purchase plans, as
well as other employee benefit plans and programs for which he is otherwise
eligible under the terms of such plans or programs. The bonus earned by Mr.
Matthews through the management bonus program may not exceed 200% of base
salary, and to the extent the bonus earned in any year exceeds 165% of Mr.
Matthews's base salary in that year, that amount will be accrued and paid two
years later, provided that Mr. Matthews remains employed by us at that time. The
management bonus is payable based upon the increase in our operating profits
before incentives over the previous fiscal year, attainment of our fiscal year
enterprise resource planning (ERP) program goals, and various management
objectives set by the Chief Executive Officer in consultation with Mr. Matthews.
We may terminate Mr. Matthews for cause or upon his disability (in each case, as
defined in the agreement). If we terminate Mr. Matthews's employment without
cause, or if he elects at his discretion to sever his relationship with IGT upon
a transfer to a third party of 40% or more of our outstanding stock, he will be
entitled to receive a lump sum payment equal to one year's base salary and any
applicable deferred bonus. Any stock options held by him at that time will
immediately vest in full. We will also pay any premiums for Mr. Matthews's
health benefits under the Consolidated Omnibus Budget Reconciliation Act
(COBRA), to the extent he is eligible for COBRA benefits, for the shorter of one
year or until he secures new employment. If Mr. Matthews dies during the term of
this agreement, his estate (or other person as he has directed in writing) will
be entitled to receive one year's base salary and any deferred bonus.
Additionally, in his employment agreement Mr. Matthews was granted an option to
purchase 500,000 shares of our 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 entered into a five-year employment agreement with
us on January 12, 2001, and was appointed as our Senior Vice President and Chief
Financial Officer effective March 2, 2001. The agreement provides 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 of at least $15,000 and is eligible to participate in our
profit sharing, cash sharing, management bonus and employee stock purchase
plans, as well as other employee benefit plans and programs for which she is
otherwise eligible under the terms of such plans or programs. The bonus earned
by Ms. Mullarkey through the management bonus program may not exceed 150% of
base salary, and to the extent the bonus earned in any year exceeds 100% of Ms.
Mullarkey's base salary in that year, that amount will be accrued and paid two
years later, provided that she remains employed by us at that time. IGT waived
its right to require Ms. Mullarkey to defer the bonuses earned pursuant to her
employment agreement in fiscal 2001 and 2002. The management bonus is payable
based upon the increase in our operating profits before incentives over the
previous fiscal year, attainment of our fiscal year ERP program goals, and
various management objectives set by the Chief Executive Officer in consultation
with Ms. Mullarkey. In addition to the bonuses under her agreement, Ms.
Mullarkey received a bonus of $50,000 for fiscal 2002, which is payable in two
years if Ms. Mullarkey continues to be employed by us at that time. We may
terminate Ms. Mullarkey for cause or upon her disability (in each case, as
defined in the agreement). If we terminate Ms. Mullarkey's employment without
cause, or if she elects at her discretion to sever her relationship with IGT
upon a transfer to a third party of 40% or more of our outstanding stock, she
will be entitled to receive a lump sum payment equal to one year's base salary
and any applicable deferred bonus. Any stock options held by her at that time
will immediately vest in full. We will also pay any premiums for Ms. Mullarkey's
health benefits under COBRA, to the extent she is eligible for COBRA benefits,
for the shorter of one year or until she secures new employment. If Ms.
Mullarkey dies during the term of the agreement, her estate (or other person as
she has directed in writing) will be entitled to receive one year's base salary
and any deferred bonus. Additionally, in her employment agreement Ms. Mullarkey
was granted an option to purchase 100,000 shares of our 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.
Our 1993 Stock Option Plan and our 2002 Stock Incentive Plan contain
provisions that would be triggered by a change of control of IGT. Unless before
a Change in Control Event, as defined in the plans, the Compensation Committee
of our board of directors determines that, upon its occurrence, benefits will
not be accelerated, then generally upon the Change in Control Event each option
will become immediately exercisable, restricted stock will vest, and
performance-based awards will become payable.
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 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 upon a review of the copies of the reports received by us, we
believe that, during fiscal 2002, except as described in the next sentence, all
filing requirements applicable to executive officers and directors were complied
with. In February 2002, Mr. Matthews timely filed a Form 4 with respect to
certain transactions he effected during January 2002, but the first three pages
of this filing were inadvertently omitted from the copies filed with the SEC; a
corrected Form 4 including all pages of the report has since been filed with the
SEC.
THE FOLLOWING REPORT OF THE COMPENSATION COMMITTEE AND THE PERFORMANCE GRAPH
THAT APPEARS AFTER THE REPORT SHALL NOT BE DEEMED TO BE SOLICITING MATERIAL OR
TO BE FILED WITH THE SECURITIES AND EXCHANGE COMMISSION UNDER THE SECURITIES ACT
OF 1933 OR THE SECURITIES EXCHANGE ACT OF 1934 OR INCORPORATED BY REFERENCE IN
ANY DOCUMENT SO FILED.
BOARD COMPENSATION COMMITTEE REPORT
ON EXECUTIVE COMPENSATION
The Compensation Committee of the board of directors, consisting
entirely of non-employee directors, is responsible for oversight of executive
compensation, review of 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 2002, 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 2002 by IGT's Chief Executive Officer, Mr. Baker, based upon 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 2002 Stock Incentive 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.
Sara Beth Brown, Ward Chilton, Anthony Ciorciari, Maureen T. Mullarkey,
Richard Pennington and Randall Kirner all received stock option awards in fiscal
2002. The Committee also periodically approves additional stock option awards
for eligible individuals, including executive officers, based upon 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. 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 2002, Mr.
Baker received a base salary of $690,385 and a management bonus of $2,100,000
pursuant to the terms of his employment agreement (see "Employment Contracts"
above).
COMPENSATION COMMITTEE
Frederick B. Rentschler, Chairman
Richard R. Burt
Robert Miller
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, 1997 through September 28, 2002 in
comparison to the Standard and Poor's 500 Composite Index and our peer groups.
The comparisons are not intended to forecast or be indicative of possible future
performance of our common stock.
[GRAPH OMITTED]
1997 1998 1999 2000 2001 2002
---- ---- ---- ---- ---- ----
International Game Technology 100 80 78 146 184 300
S & P 500 100 109 139 158 116 92
New Peer Group 100 59 54 65 96 131
Old Peer Group 100 101 63 89 100 100
The new peer group includes Alliance Gaming Corp., GTECH Holdings
Corp., Mikhon Gaming, Shuffle Master and WMS Industries, Inc. Anchor Gaming,
which was a member of the old peer group used in our last proxy statement, has
been omitted from the new peer group in this proxy statement because it was
acquired by us in December 2001. Two members of the new peer group, Mikhon
Gaming and Shuffle Master, were not included in the old peer group.
PROPOSAL 2 - RATIFICATION OF INDEPENDENT AUDITORS
Deloitte & Touche LLP were our independent auditors for the year ended
September 28, 2002 and have reported on our consolidated financial statements
included in the annual report which accompanies this proxy statement. Our
independent auditors are appointed by our board of directors in consultation
with the Audit Committee. The board has reappointed Deloitte & Touche LLP as our
independent auditors for the year ending September 27, 2003. In the event that
the stockholders do not approve Deloitte & Touche LLP as independent auditors,
the selection of independent auditors will be reconsidered by the board. A
representative of Deloitte & Touche LLP will be present at the annual meeting,
will have an opportunity to make a statement and will be available to respond to
appropriate questions.
THE FOLLOWING REPORT OF THE AUDIT COMMITTEE SHALL NOT BE DEEMED TO BE SOLICITING
MATERIAL OR TO BE FILED WITH THE SECURITIES AND EXCHANGE COMMISSION UNDER THE
SECURITIES ACT OF 1933 OR THE SECURITIES EXCHANGE ACT OF 1934 OR INCORPORATED BY
REFERENCE IN ANY DOCUMENT SO FILED.
AUDIT COMMITTEE REPORT
In accordance with its written charter, which was restated by the Board
of Directors in December 2002, the Audit Committee assists the board of
directors in fulfilling its responsibility for oversight of the quality of IGT's
accounting, auditing and financial reporting practices.
The Audit Committee consists of three members, each of whom satisfy the
independence, financial literacy and experience requirements of the New York
Stock Exchange.
Management is responsible for the financial reporting process, the
preparation of consolidated financial statements in accordance with generally
accepted accounting principles and the system of internal controls and
procedures designed to insure compliance with accounting standards and
applicable laws and regulations. IGT's independent auditors are responsible for
auditing IGT's financial statements. The Audit Committee's responsibility is to
monitor and review these processes and procedures. The members of the Audit
Committee are not professionally engaged in the practice of accounting or
auditing and are not experts in the fields of accounting or auditing. The Audit
Committee relies, without independent verification, on the information provided
to it and on the representations made by management and the independent auditors
that the financial statements have been prepared in conformity with accounting
principles generally accepted in the United States of America.
During fiscal 2002, the Audit Committee had nine meetings. The Audit
Committee met and held discussions with management, the internal auditors and
the independent auditors, Deloitte & Touche LLP. The meetings were conducted so
as to encourage communication among the members of the Audit Committee,
management, the internal auditors and the independent auditors. The Audit
Committee discussed with Deloitte & Touche LLP matters required to be discussed
by Statement on Auditing Standards No. 61, as amended, "Communications with
Audit Committees."
The Audit Committee reviewed and discussed the audited consolidated
financial statements of IGT as of and for the year ended September 28, 2002 with
management, the internal auditors and the independent auditors. The Board of
Directors, including the Audit Committee, received an opinion of Deloitte &
Touche LLP as to the conformity of such audited consolidated financial
statements with accounting principles generally accepted in the United States of
America.
The Audit Committee discussed with IGT's internal auditors and Deloitte
& Touche LLP the overall scope and plans for their respective audits. The Audit
Committee met regularly with the internal auditors and Deloitte & Touche LLP,
with and without management present, to discuss the results of their
examinations, the evaluations of IGT's internal controls and the overall quality
of IGT's accounting principles.
In addition, the Audit Committee obtained from Deloitte & Touche LLP
written documentation describing all relationships between Deloitte & Touche LLP
and IGT that might bear on Deloitte & Touche LLP's independence consistent with
Independence Standards Board Standard No. 1, "Independence Discussions with
Audit Committees." The Audit Committee discussed with Deloitte & Touche LLP any
relationships that may have an impact on their objectivity and independence and
satisfied itself as to Deloitte & Touche LLP's independence. The Audit Committee
also considered whether the provision of information technology and similar
services and other non-audit services by Deloitte & Touche LLP to IGT is
compatible with maintaining Deloitte & Touche LLP's independence. The Audit
Committee also reviewed, among other things, the amount of fees paid to Deloitte
& Touche LLP for audit and non-audit services.
Based on the above-mentioned review and discussions with management,
the internal auditors and Deloitte & Touche LLP, and subject to the limitations
on our role and responsibility described above and in the Audit Committee
Charter, the Audit Committee recommended to the Board of Directors that IGT's
audited consolidated financial statements be included in IGT's Annual Report on
Form 10-K for the fiscal year ended September 28, 2002, for filing with the
Securities and Exchange Commission. The Audit Committee also recommended the
selection of IGT's independent auditors, and based on our recommendation, the
Board of Directors has selected Deloitte & Touche LLP as IGT's independent
auditors for the fiscal year ending September 27, 2003, subject to stockholder
ratification.
AUDIT COMMITTEE
Neil Barsky, Chairman
Richard R. Burt
Wilbur K. Keating
Fees Paid to Independent Public Accountants
For the fiscal year ended September 28, 2002, 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 28, 2002 and the reviews of our
financial statements included in our quarterly reports on Form 10-Q for the same
fiscal year totaled $931,000.
Financial Information Systems Design and Implementation Fees
No fees were paid for financial information systems design and
implementation.
All Other Fees
Fees paid for services rendered, other than those services covered in
the sections above captioned "Audit Fees" and "Financial Information Systems
Design and Implementation Fees," totaled $1.2 million, including fees for tax
services of $752,000.
The Audit Committee has concluded that the provision of non-audit
services by our principal independent accountants is compatible with maintaining
auditor independence.
Recommendation of IGT Board of Directors
Approval of this proposal requires the affirmative vote of a majority
of all votes cast, in person or by proxy. Abstentions and broker non-votes will
have no effect on the results, although they will be counted for purposes of
determining the presence of a quorum for the conduct of business at the annual
meeting.
Our board of directors recommends a vote "FOR" approval of Deloitte &
Touche LLP as our independent auditors for the year ending September 27, 2003.
Stockholder Proposals for the 2004 Annual Meeting
Proposals of stockholders intended to be presented at our next annual
meeting must be received by us by September 26, 2003 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 10, 2003 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)
448-0110, fax (775) 448-1137. The form 10-K is also available on our web site at
http://www.IGT.com.
As of the date of this proxy statement, our 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 24, 2003
INTERNATIONAL GAME TECHNOLOGY
AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
SECOND RESTATED CHARTER
The following will serve as a restatement of the Charter for the Audit Committee
of the Board of Directors of International Game Technology (IGT).
1. Purpose. The Audit Committee (Committee) assists the Board of Directors
(the "Board") of IGT in overseeing the accounting and financial
reporting processes of the Company and audits of the financial
statements of the Company, including (a) the integrity of the Company's
financial statements, (b) the Company's compliance with legal and
regulatory requirements, (c) the independent public accountants'
qualifications and independence, (d) the performance of the Company's
internal audit function and independent public accountants, and (e)
such other duties as may be directed by the Board.
While the Committee has the responsibilities and powers set forth in
this Charter, it is not the duty of the Committee to plan or conduct
audits or to determine that the Company's financial statements and
disclosures are complete and accurate and are in accordance with
generally accepted accounting principles (GAAP) and applicable rules
and regulations. These are the responsibilities of management and the
independent public accountants.
2. Membership. The Committee will be comprised of three or more
directors of IGT's Board. All members of the Committee will be
directors who meet the knowledge requirements and the independence
requirements of the New York Stock Exchange. The members of the
Committee will be appointed by and serve at the discretion of the
Board. The Chairperson of the Committee will be appointed by the
Board.
3. Specific Responsibilities and Duties. The Board delegates to the
Committee the express authority to do the following:
3.1 Independent Public Accountants.
(a) Selection; Fees. Be solely responsible for the
appointment,compensation and oversight of the work of
the independent public accountants (including
resolution of disagreements between management and
the independent public accountant regarding financial
reporting) for the purpose of preparing or issuing an
audit report or related work, and, where appropriate,
terminate and replace such firm. Such independent
public accountants shall report directly to and be
ultimately accountable to the Committee.
(b) Scope of Audit. Review, evaluate and approve the
annual engagement proposal of the independent public
accountants (including the proposed scope and
approach of the annual audit).
(c) Pre-Approval of Audit and Non-Audit Services.
Pre-approve all auditing services and all
non-auditing services to be performed by the
independent public accountants. The independent
public accountants shall not be retained to perform
the prohibited non-audit functions listed on Exhibit
A. Such pre-approval can be given as part of the
Committee's approval of the scope of the engagement
of the independent public accountants or on an
individual basis. The pre-approval of non-auditing
services can be delegated by the Committee to one or
more of its members, but the decision must be
presented to the full Committee at the next scheduled
meeting.
(d) Statement from Independent Public Accountants.
Obtain and review from the independent public
accountants at least annually a formal written
statement regarding:
(i) the independent public accountants' internal
quality-control procedures;
(ii) any material issues raised by the most
recent internal quality-control review, or
peer review, of the independent public
accountants, or by any inquiry or
investigation by governmental or
professional authorities, within the
preceding five years, respecting one or more
independent audits carried out by the
independent public accountants, and any
steps taken to deal with any such issues;
and
(iii) all relationships between the independent
public accountants and the Company.
(e) Hiring Policies. Set clear hiring policies for
employees and former employees of the independent
public accountants.
(f) Review Problems. Review with the independent public
accountants any audit problems or difficulties
the independent public accountants may have
encountered and management's responses, including:
(i) any restrictions on the scope of
activities or access to requested information and
(ii) any recommendations made by the independent
public accountants as a result of the audit.
3.2 Financial Reporting.
(a) Annual and Quarterly Financials. Review and discuss
with management and the independent public
accountants the Company's annual and quarterly
financial statements,(including the Company's
disclosures under
"Management's Discussion and Analysis of Financial
Condition and Results of Operations"), including the
independent public accountants' reviews of the
quarterly financial statements), prior to the public
release of such information.
(b) Accounting Principles. Review with management and the
independent public accountants material accounting
principles applied in financial reporting, including
any material changes from principles followed in
prior years and any items required to be communicated
by the independent public accountants in accordance
with AICPA Statement of Auditing Standards ("SAS")61.
(c) Press Releases. Discuss and review with management
earnings press releases, as well as financial
information and earnings guidance provided to
analysts and rating agencies.
(d) Regulatory Developments. Review with management
and the independent public accountants the effect
of regulatory and accounting initiatives on the
Company's financial statements.
3.3 Internal Audit and Risk Management.
(a) Internal Audit. Review the budget, qualifications,
activities, effectiveness and organizational
structure of the internal audit function and
the performance, appointment and replacement of the
lead internal auditor, and review summaries of
material internal audit reports and management's
responses.
(b) Risk Management. Discuss policies with respect to
risk assessment and risk management periodically with
the management, internal auditors, and independent
public accountants, and the Company's plans to
monitor, control and minimize such risks and
exposures.
3.4 Financial Reporting Processes.
(a) Reports. Obtain and review reports from the
independent public accountants regarding:
(i) all critical accounting policies and
practices to be used by the Company;
(ii) all alternative treatments of financial
information within GAAP that have been
discussed with management, ramifications of
the use of such alternative disclosures and
treatments, and the treatment preferred by
the independent public accountants; and
(iii) all other material written communications
between the independent public accountants
and management, including any management
letter or schedule of unadjusted
differences.
3.5 Legal and Regulatory Complianc.
(a) SEC Report. Prepare the annual report included in
the Company's proxy statement as required by the
proxy rules under the Act.
(b) Complaints. Establish procedures for the receipt,
retention and treatment of complaints received by the
Company regarding accounting, internal accounting
controls, or auditing matters, and the confidential,
anonymous submission by employees of concerns
regarding accounting or auditing matters.
3.6 Other
(a) Recommendations; Reports. Regularly report to the
Board on the Committee's activities and make
appropriate recommendations.
(b) Evaluation. Annually evaluate the performance of the
Committee.
(c) Review and Publication of Charter. Review and
reassess the adequacy of this Charter at least
annually and recommend any proposed changes to the
Board, as appropriate, and publish the Charter as
required by applicable law.
4. Meetings
4.1 Executive Sessions. The Committee shall meet with the
independent public accountants, internal auditors and
management in separate executive sessions regularly (with such
frequency as it determines) to discuss any matters that the
Committee or these groups believe should be discussed
privately.
4.2 Other Meetings. Other meetings will be with such frequency,
and at such times, as its Chairperson, or a majority of the
Committee, determines. A special meeting of the Committee may
be called by the Chairperson and will be called promptly upon
the request of any two Committee members.
5. Subcommittees. The Committee has the power to appoint and delegate
matters to subcommittees, but no subcommittee will have any final
decision-making authority on behalf of the Board or the Committee.
6. Reliance; Experts; Cooperation.
6.1 Retention of Independent Counsel and Advisors. The Committee
has the power, in its sole discretion, to retain at the
Company's expense such independent counsel, advisors and
experts as it deems necessary or appropriate to carry out its
duties.
6.2 Reliance Permitted. The Committee will act in reliance on
management, the Company's independent public accountants,
internal auditors, and advisors and experts, as it deems
necessary or appropriate to enable it to carry out its
duties.
6.3 Investigations. The Committee has the power, in its
discretion, to conduct any investigation it deems
necessary or appropriate to enable it to carry out its duties.
6.4 Required Participation of Employees. The Committee shall have
unrestricted access to the Company's employees, independent
public accountants, internal auditors, internal and outside
counsel, and may require any employee of the Company or
representative of the Company's outside counsel or independent
public accountants to attend a meeting of the Committee or to
meet with any members of the Committee or representative of
the Committee's counsel, advisors or experts.
EXHIBIT A
Prohibited Non-Audit Services
1. Bookkeeping or other services related to the accounting records or
financial statements of the Company;
2. Financial information systems design and implementation;
3. Appraisal or valuation services, fairness opinions, or contribution-in-
kind reports;
4. Actuarial services;
5. Internal audit outsourcing services;
6. Management functions or human resources;
7. Broker or dealer, investment advisor, or investment banking services;
8. Legal services and expert services unrelated to the audit; and
9. Any other services that the Public Company Accounting Oversight Board
to be formed pursuant to the Sarbanes-Oxley Act of 2002 determines, by
regulation, is impermissible.
MAP
[GRAPHIC OMITTED]
INTERNATIONAL GAME TECHNOLOGY VOTE BY TELEPHONE OR INTERNET
24 HOURS A DAY, 7 DAYS A WEEK
TELEPHONE INTERNET MAIL
1-XXX-XXX-XXXX https://xxxxxxxxxxxx
(Toll-free number is available in the --------------------
U.S. and Canada only)
Use any touch-tone telephone to vote Use the internet to vote your proxy. Mark, sign and date your proxy
your proxy. Have your proxy card in Have your proxy card in hand when you card and return it in the postage-
hand when you call. You will be access the website. You will be paid envelope we have provided.
prompted to enter your control prompted to enter your control number,
number, located in the box below, and located in the box below, to create an
then follow the simple directions. 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.
The Board of Directors recommends a vote "FOR" all of the nominees listed below
and "FOR" ratification of the appointment of Deloitte & Touche LLP as IGT's
independent auditors for the fiscal year ending September 27, 2003.
1. Election of Directors FOR all nominees ___ WITHHOLD AUTHORITY to vote ___ *EXCEPTIONS ___
for all nominees listed below.
The Board of Directors recommends a vote "FOR" the nominees listed below:
Nominees: G. Thomas Baker, Neil Barsky, Robert A. Bittman, Richard R. Burt,
Wilbur K. Keating, Thomas J. Matthews, Charles N. Mathewson, Robert Miller,
Frederick B. Rentschler
(INSTRUCTION: 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. Ratification of appointment of Deloitte & Touche LLP as IGT's
independent auditors for the fiscal year ending September 27, 2003.
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. DATE:__________________
Joint owners should each sign. Attorneys, trustees,
executors,administrators, conservators, custodians, SIGNATURE______________
gaurdians or corporate officers should give full title. SIGNATURE______________
Votes must be indicated
(x) in Black or Blue Ink.
INTERNATIONAL GAME TECHNOLOGY
P R O X Y
ANNUAL MEETING OF STOCKHOLDERS, March 3, 2003
The undersigned hereby acknowledges receipt of the Notice of Annual Meeting
of Stockholders dated January 24, 2003, and accompanying Proxy Statement, and
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
on March 3, 2003 at 1:30 P.M., local time, at IGT's corporate office, 9295
Prototype Drive, Reno, 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 "FOR" ALL OF THE SPECIFIED DIRECTOR NOMINEES AND "FOR" THE RATIFICATION OF
THE APPOINTMENT OF DELOITTE & TOUCHE LLP.
International Game Technology
XXXXXXXXX
XXXXXXXXX
(Continued, and to be signed and dated, on the reserve side.)
I Plan to attend the meeting ____
To change your address, please mark this
box and write new address below ____