Exhibit 10.6
This EMPLOYMENT AGREEMENT (this Agreement) is made as of January 1, 2006 (the Effective Date), by and between SCIENTIFIC GAMES INTERNATIONAL, INC., a Delaware corporation (the Company), which is a subsidiary of SCIENTIFIC GAMES CORPORATION, a Delaware corporation (SGC), and Steven M. Saferin (Executive).
W I T N E S S E T H :
WHEREAS, Executive has been employed pursuant to an Employment and Severance Benefits Agreement with the Company effective January 17, 2003 (the Original Agreement), which contract expired on December 31, 2005; and
WHEREAS, the Company and Executive desire that this Agreement replace and supersede the Original Agreement;
NOW, THEREFORE, in consideration of the premises and the mutual benefits to be derived herefrom and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows:
1. Termination of Existing Employment Agreements. As of the Effective Date, all existing employment agreements between the parties, whether oral or written, including the Original Agreement, are hereby terminated and superseded.
2. Employment Term. The Company hereby agrees to employ Executive, and Executive hereby accepts employment with the Company, in accordance with and subject to the terms and conditions set forth herein. The term of employment of Executive under this Agreement (the Term) shall be the period commencing on the Effective Date and ending on December 31, 2008, as may be extended in accordance with this Section and subject to earlier termination in accordance with Section 5. The Term shall be extended automatically without further action by either party by one additional year (added to the end of the Term), and then on each succeeding annual anniversary thereafter, unless either party shall have given written notice to the other party at least ninety (90) days prior to the date upon which such extension would otherwise have become effective electing not to further extend the Term, in which case Executives employment shall terminate on the date upon which such extension would otherwise have become effective, unless earlier terminated in accordance with Section 5. It is also intended that Executives previous term of employment with the Company shall be included when calculating Executives tenure at the Company for all purposes.
3. Offices and Duties. During the Term, the Executive will serve as President of Properties (formerly known as Ventures), a division of the Company, as Vice President of SGC, and as an officer or director of any subsidiary or affiliate of the Company if elected to any such position by the shareholders or by the Board of Directors of the Company or any subsidiary or affiliate, as the case may be. In such capacities, the Executive shall perform such duties and shall have such responsibilities as are normally associated with such positions and as otherwise may be assigned to the Executive from time to time by the Chief Executive Officer or President of the Company or upon the authority of the Board of Directors of the Company. Subject to Section 5(e), Executives functions, duties and responsibilities are subject to reasonable changes as the
Company or SGC may in good faith determine. The Executive hereby agrees to accept such employment and to serve the Company to the best of his ability in such capacities, devoting substantially all of his business time to such employment.
4. Compensation; Benefits
(a) Base Salary. During the Term the Company shall pay Executive a base salary (the Base Salary) at the initial rate of four hundred and fifteen thousand dollars ($415,000) per annum, payable biweekly and subject to all withholdings that are legally required or are agreed to by Executive. In the event that the Company, in its sole discretion, from time to time determines to increase the Base Salary, such increased amount shall, from and after the effective date of the increase, constitute the Base Salary for purposes of this Agreement.
(b) Incentive Compensation. Executive shall have the opportunity annually to earn incentive compensation in amounts determined by the Compensation Committee of the Board of Directors of SGC (the Compensation Committee) in accordance with the applicable incentive compensation plan of the Company as in effect from time to time (Incentive Compensation). Under such plan, Executive shall have the opportunity to earn up to 66.7% of Base Salary as Incentive Compensation at Target Opportunity (Target Bonus) and up to 133% of Base Salary as Incentive Compensation at Maximum Opportunity.
(c) Eligibility for Annual Equity Awards. Executive shall be eligible to receive an annual grant of stock options or other equity awards, in the sole discretion of the Compensation Committee, in accordance with the applicable plans and programs for senior executives of the Company and subject to the Companys right to at any time amend or terminate any such plan or program, so long as any such change does not adversely affect any accrued or vested interest under any such plan or program.
(d) Expense Reimbursement. The Company shall reimburse Executive for all reasonable and necessary travel, business entertainment and other business expenses incurred by Executive in connection with the performance of Executives duties under this Agreement, on a timely basis upon submission by Executive of vouchers therefore in accordance with the Companys standard procedures.
(e) Health and Welfare Benefits. Executive shall be entitled to participate, without discrimination or duplication, in any and all medical insurance, group health, disability, life, accidental death, dismemberment insurance, 401(k) or other retirement, deferred compensation, profit sharing, stock ownership and such other plans and programs which are made generally available by the Company to its other senior executives in accordance with the terms of such plans and programs and subject to the Companys right to at any time amend or terminate any such plan or program. Executive shall be entitled to paid vacation, holidays, and any other time off in accordance with the Companys policies in effect from time to time.
(f) Taxes and Internal Revenue Code 409A. The Company makes no representations regarding the tax implications of the compensation and benefits to be paid to Executive under this Agreement, including, without limitation, under Section 409A of the
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Internal Revenue Code of 1986, as amended (the Code), and applicable administrative guidance and regulations. Internal Revenue Code Section 409A governs plans and arrangements that provide nonqualified deferred compensation (as defined under the Code) which may include, among others, nonqualified retirement plans, bonus plans, stock option plans, employment agreements and severance agreements. The Company reserves the right to provide compensation and benefits under any plan or arrangement in amounts, at times and in a manner that minimizes taxes, interest or penalties as a result of Section 409A. In addition, in the event any benefits or amounts paid hereunder are deemed to be subject to Section 409A, including payments under Section 5 of this Agreement, Executive consents to the Company adopting such conforming amendments as the Company deems necessary, in its reasonable discretion, to comply with Section 409A (including, but not limited to, delaying payment until six months following termination of employment).
5. Termination of Employment. Executives employment hereunder may be terminated prior to the end of the Term under the following circumstances:
(a) Termination by Executive for Other than Good Reason. Executive may terminate his employment hereunder for any reason or no reason upon 60 days prior written notice to the Company referring to this Section 5(a); provided, however, that a termination of Executives employment for Good Reason (as defined below) shall not constitute a termination by Executive for other than Good Reason pursuant to this Section 5(a). In the event the Executive terminates his employment for other than Good Reason, the Executive shall be entitled only to the following compensation and benefits (collectively, the Standard Termination Payments):
(i) Any accrued but unpaid Base Salary (as determined pursuant to Section 4(a)) for services rendered to the date of termination paid to Executive in accordance with regular payroll policies;
(ii) All vested nonforfeitable amounts owing or accrued at the date of termination under benefit plans, programs, and arrangements set forth or referred to in Section 4 hereof in which Executive theretofore participated will be paid under the terms and conditions of such plans, programs, and arrangements (and agreements and documents thereunder);
(iii) Except as provided in Section 6.6, all stock options and other equity awards will be governed by the terms of the plans and programs under which the options or other awards were granted; and
(iv) Reasonable business expenses and disbursements incurred by Executive prior to such termination will be reimbursed in accordance with Section 4(d).
(b) Termination by Reason of Death. If Executive dies during the Term of this Agreement, the Company shall pay to the last beneficiary designated by the Executive by written notice to the Company or, failing such designation, to Executives estate, the following amounts:
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(i) The Standard Termination Payments (as defined in Section 5(a)); and
(ii) A lump sum payment equal to Executives annual Base Salary, payable within 30 days of termination.
(c) Termination By Reason of Total Disability. Executive and the Company agree that Executive may not reasonably be expected to be able to perform his duties and the essential functions of his office in the event of the Executives Total Disability. For purposes of this Agreement, Total Disability shall mean Executives (a) becoming eligible to receive benefits under any long-term disability insurance program or (b) failure to perform the duties and responsibilities contemplated under this Agreement for a period of more than 180 days during any consecutive 12-month period due to physical or mental incapacity or impairment. In the event that Executives employment is terminated by reason of Total Disability, the Company shall pay the following amounts, and make the following other benefits available, to Executive:
(i) The Standard Termination Payments (as defined in Section 5(a));
(ii) An amount equal to the sum of (A) Executives annual Base Salary and (B) Executives Severance Bonus Amount (as defined below) payable over a period of twelve (12) months after termination in accordance with Section 5(g) of this Agreement, provided such amount shall be reduced by any disability payments provided to Executive as a result of any disability plan sponsored by the Company or its affiliates providing benefits to Executive. For purposes of this Agreement, Severance Bonus Amount shall mean an amount equal to the highest annual Incentive Compensation paid to Executive in respect of the two most recent fiscal years of the Company but not more than the Executives Target Bonus for the-then current fiscal year;
(iii) In lieu of any Incentive Compensation for the year in which such termination of employment occurs, payment of an amount equal to (A) the highest annual Incentive Compensation paid to Executive in respect of the two most recent fiscal years of the Company but not more than Executives Target Bonus for the year of termination, multiplied by (B) a fraction the numerator of which is the number of days Executive was employed in the year of termination and the denominator of which is the total number of days in the year of termination, payable as and when such Incentive Compensation would otherwise have been payable under Section 4(b); and
(iv) If Executive elects to continue medical coverage under the Companys group health plan in accordance with COBRA, the Company shall pay the monthly premiums for such coverage for a period of eighteen (18) months.
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(e) Termination by the Company Without Cause or by Executive for Good Reason. The Company may terminate Executives employment hereunder at any time, without Cause, for any reason or no reason, and Executive may terminate his employment hereunder for Good Reason (as defined below) if the Company has failed to cure the event or condition constituting Good Reason within thirty days after Executive gives written notice to the Company setting forth in reasonable detail the facts and circumstances allegedly constituting Good Reason and specifically referencing this Section 5(e). For purposes of this Agreement, Good Reason shall mean that without Executives prior written consent, any of the following shall have occurred within ninety days prior to the delivery of such notice: (i) a material change, adverse to Executive, in Executives positions, titles, offices, or duties as provided in Section 3, except, in such case, in connection with the termination of Executives employment for Cause, Total Disability or death; (ii) an assignment of any significant duties to Executive which are inconsistent with Executives positions or offices held under Section 3; (iii) a decrease in Base Salary or material decrease in Executives incentive compensation opportunities provided under this Agreement; and (iv) any other failure by the Company to perform any material obligation under, or breach by the Company of any material provision of, this Agreement. In the event that Executives employment is terminated by the Company without Cause or by Executive for Good Reason, the Company shall pay the following amounts, and make the following other benefits available, to Executive:
(i) The Standard Termination Payments (as defined in Section 5(a));
(ii) An amount equal to the sum of (A) Executives annual Base Salary and (B) Executives Severance Bonus Amount payable over a period of twelve (12) months after termination in accordance with Section 5(g) of this Agreement;
(iii) Except to the extent otherwise provided at the time of grant under the terms of any equity award made to Executive, all stock options, deferred stock, restricted stock and other equity-based awards held by Executive at termination will become fully vested and non-forfeitable, and, in all other respects, all such options and other awards shall be
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governed by the plans and programs and the agreements and other documents pursuant to which the awards were granted;
(iv) In lieu of any Incentive Compensation for the year in which such termination of employment occurs, payment of an amount equal to (A) the highest annual Incentive Compensation paid to Executive in respect of the two most recent fiscal years of the Company but not more than the Executives Target Bonus for the year of termination, multiplied by (B) a fraction the numerator of which is the number of days Executive was employed in the year of termination and the denominator of which is the total number of days in the year of termination, payable as and when such Incentive Compensation would otherwise have been payable under Section 4(b); and
(v) If Executive elects to continue medical coverage under the Companys group health plan in accordance with COBRA, the Company shall pay the monthly premiums for such coverage for a period of eighteen (18) months.
(f) Change in Control. In the event Executives employment is terminated by the Company without Cause or by Executive for Good Reason under Section 5(e) and such termination occurs upon or within one year immediately following a Change in Control (as defined below), Executive shall be entitled to the payments described in Section 5(e) above except that the aggregate amount payable under 5(e)(ii) shall be multiplied by two (i.e., Base Salary plus Severance Bonus Amount multiplied by two) and such amount, as well as the amount payable under 5(e)(iv), shall be paid in a lump sum in accordance with Section 5(g) of this Agreement. Notwithstanding the foregoing, payments pursuant to this Section 5(f) shall be reduced by the amount necessary, if any, to ensure that the aggregate compensation to be received by the Executive in connection with such Change in Control does not constitute a parachute payment, as such term is defined in 26 U.S.C. § 280G.
For purposes of this Agreement, a Change in Control shall be deemed to have occurred if: (i) any person as defined in Section 3(a)(9) of the Securities Exchange Act of 1934, as amended (the Exchange Act), and as used in sections 13(d) and 14(d) thereof, including a group as defined in Section 13 (d) of the Exchange Act but excluding SGC and any subsidiary or affiliate and any employee benefit plan sponsored or maintained by SGC or any subsidiary or affiliate (including any trustee of such plan acting as trustee) or any current shareholder of 20% or more of the outstanding common stock, directly or indirectly, becomes the beneficial owner (as defined in Rule 13d-3 under the Exchange Act) of securities of SGC representing at least 40% of the combined voting power of SGCs then-outstanding securities; (ii) the stockholders of SGC approve a merger, consolidation, recapitalization, or reorganization of SGC, or a reverse stock split of any class of voting securities of SGC, or the consummation of any such transaction if stockholder approval is not obtained, other than any such transaction which would result in at least 60% of the total voting power represented by the voting securities of SGC or the surviving entity outstanding immediately after such transaction being beneficially owned by persons who together beneficially owned at least 80% of the combined voting power of the voting securities of SGC outstanding immediately prior to such transaction; provided that, for purposes of this Section 5(f), such continuity of ownership (and preservation of relative voting power) shall be deemed to be satisfied if the failure to meet such 60% threshold is due
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solely to the acquisition of voting securities by an employee benefit plan of SGC or such surviving entity or of any subsidiary of SGC or such surviving entity; (iii) the stockholders of SGC or the Company, as applicable, approve a plan of complete liquidation of SGC or the Company, an agreement for the sale or disposition by SGC or the Company of all or substantially all of its assets (or any transaction having a similar effect), or SGC sells all or substantially all of the stock of the Company to any person or entity other than an affiliate of SGC; or (iv) during any period of two consecutive years, individuals who at the beginning of such period constitute the Board, together with any new director (other than a director designated by a person who has entered into an agreement with the Company to effect a transaction described in Subsection (i), (ii), or (iii) hereof) whose election by the Board of Directors of SGC or nomination for election by SGCs stockholders was approved by a vote of at least two-thirds (2/3) of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved (the Continuing Directors), cease for any reason to constitute at least a majority of the Board of Directors of SGC.
(g) Timing of Certain Payments Under Section 5. Payments pursuant to Sections 5(c)(ii) or 5(e)(ii) of this Agreement, if any, shall be payable in equal installments in accordance with the Companys standard payroll practices over a period of twelve (12) months following the date of termination; provided, however, that if necessary to comply with Section 409A of the Code, and applicable administrative guidance and regulations, such payments shall be made as follows: (1) no payments shall be made for a six-month period following the date of termination, (2) an amount equal to the aggregate sum that would have been otherwise payable during the initial six-month period shall be paid in a lump sum six months following the date of termination, and (3) during the period beginning six months following the date of termination through the remainder of the twelve-month period, payment of the remaining amount due shall be payable in equal installments in accordance with the Companys standard payroll practices. If the lump sum amounts described in Section 5(f) of this Agreement become payable, Executive shall receive payment within thirty (30) days of termination; provided, however, that if necessary to comply with Section 409A of the Code, and applicable administrative guidance and regulations, such payment shall instead be made in a lump sum six months following the date of termination. In addition, notwithstanding any other provision with respect to the timing of payments under this Agreement, including pursuant to Sections 5(c)(iii) or 5(e)(iv) of this Agreement, if necessary to comply with Section 409A of the Code, and applicable administrative guidance and regulations, such payments shall instead be made in a lump sum six months following the date of termination.
(h) No Obligation to Mitigate. The Executive shall have no obligation to mitigate damages pursuant to this Section 5, but shall be obligated to promptly advise the Company regarding any compensation earned or any payments that will become due with respect to services provided during any period of continued payments pursuant to this Section 5. The Companys obligation to make continued payments to the Executive shall be reduced by any compensation earned by the Executive during the severance period (without regard to when such compensation is paid).
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(i) Set-Off. To the fullest extent permitted by law, any amounts otherwise due the Executive hereunder (including, without limitation, any payments pursuant to this Section 5) shall be subject to set-off with respect to any amounts the Executive otherwise owes the Company or any subsidiary or affiliate thereof.
(j) No Other Benefits or Compensation. Except as may be provided under this Agreement, under any other written agreement between Executive and the Company, or under the terms of any plan or policy applicable to Executive, Executive shall have no right to receive any other compensation from the Company, or to participate in any other plan, arrangement or benefit provided by the Company, with respect to any future period after such termination or resignation.
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6.6 Forfeiture of Outstanding Options. The provisions of Section 5 notwithstanding, if Executive willfully and materially fails to comply with Section 6.1, 6.2, 6.3, 6.4, or 6.8, all options (whether granted prior to, contemporaneous with, or subsequent to this Agreement) to purchase common stock granted by the Company and held by Executive or a transferee of Executive shall be immediately forfeited and cancelled.
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7. Code of Conduct. Executive acknowledges that he has read the Companys Code of Conduct and agrees to abide by such Code, as amended or supplemented from time to time, and other policies applicable to employees and executives of the Company.
8. Indemnification. During the Term of this Agreement and all periods after the expiration of this Agreement or termination of Executives employment for any reason, the Company shall indemnify Executive to the full extent permitted under the Companys Certificate of Incorporation or By-Laws and pursuant to any other agreements or policies in effect from time to time. To the extent permitted under the Companys Certificate of Incorporation and By-Laws and applicable law, the Company shall advance expenses for which indemnification may be claimed as such expenses are incurred, subject to any requirement that Executive provide an
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undertaking to repay such advances if it is ultimately determined that Executive is not entitled to indemnification; provided, however, that any determination required to be made with respect to whether Executives conduct complies with the standards required to be met as a condition of indemnification or advancement of expenses under applicable law and the Companys Certificate of Incorporation, By-Laws, or other agreement, shall be made by independent counsel mutually acceptable to Executive and the Company (except to the extent otherwise required by law). Any provision contained herein notwithstanding, this Agreement shall not limit or reduce, and the Company hereby agrees to provide to Executive, any and all rights to indemnification Executive would otherwise have, to the full extent permitted under applicable law. In addition, the Company will maintain directors and officers liability insurance in effect and covering acts and omissions of Executive. For purposes of this Section 8, references to the Company shall include both the Company and each of its subsidiaries and/or affiliates for which Executive has acted, acts or will in the future act in any capacity. The provisions of this Section 8 shall survive the termination of the Term and any termination or expiration of this Agreement.
9. Assignability; Binding Effect. Neither this Agreement nor the rights or obligations hereunder of the parties hereto shall be transferable or assignable by Executive, except in accordance with the laws of descent and distribution and as specified below. The Company may assign this Agreement and the Companys rights and obligations hereunder, and shall assign this Agreement and such rights and obligations, to any Successor (as hereinafter defined) which, by operation of law or otherwise, continues to carry on substantially the business of the Company (or a business unit of the Company for which Executive provided services) prior to the event of succession, and the Company shall, as a condition of the succession, require such Successor to agree in writing to assume the Companys obligations and be bound by this Agreement. For purposes of this Agreement, Successor shall mean any person that succeeds to, or has the practical ability to control, the Companys business directly or indirectly, by merger or consolidation, by purchase or ownership of voting securities of the Company or all or substantially all of its assets or those relating to a particular business unit of the Company to which Executive provides services, or otherwise. The Company may also assign this Agreement and the Companys rights and obligations hereunder to any affiliate of the Company, provided that upon any such assignment the Company shall remain liable for the obligations to Executive hereunder. This Agreement shall be binding upon and inure to the benefit of Executive, Executives heirs, executors, administrators, and beneficiaries, and shall be binding upon and inure to the benefit of the Company and its successors and assigns.
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11. Severability. If any provision of this Agreement or the application of any such provision to any person or circumstances shall be determined by any court of competent jurisdiction to be invalid or unenforceable to any extent, the remainder of this Agreement, or the application of such provision to such person or circumstances other than those to which it is so determined to be invalid or unenforceable, shall not be affected thereby, and each provision hereof shall be enforced to the fullest extent permitted by law. If any provision of this Agreement, or any part thereof, is held to be invalid or unenforceable because of the scope or duration of or the area covered by such provision, the parties hereto agree that the court making such determination shall reduce the scope, duration and/or area of such provision (and shall substitute appropriate provisions for any such invalid or unenforceable provisions) in order to make such provision enforceable to the fullest extent permitted by law and/or shall delete specific words and phrases, and such modified provision shall then be enforceable and shall be enforced. The parties hereto recognize that if, in any judicial proceeding, a court shall refuse to enforce any of the separate covenants contained in this Agreement, then that invalid or unenforceable covenant contained in this Agreement shall be deemed eliminated from these provisions to the extent necessary to permit the remaining separate covenants to be enforced. In the event that any court determines that the time period or the area, or both, are unreasonable and that any of the covenants is to that extent invalid or unenforceable, the parties hereto agree that such covenants will remain in full force and effect, first, for the greatest time period, and second, in the greatest geographical area that would not render them unenforceable.
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To the Company:
Scientific Games Corporation
750 Lexington Avenue
New York, N.Y. 10022
Attention: General Counsel
To Executive:
Steven M. Saferin
[Remainder of Page Intentionally Left Blank]
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IN WITNESS WHEREOF, each of the parties hereto has duly executed this Agreement on August 2, 2006, to be deemed effective as of the date first above written.
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SCIENTIFIC GAMES INTERNATIONAL, INC. |
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EXECUTIVE |
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Steven M. Saferin |
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EXHIBIT A
LIST OF PRE-EXISTING INVENTIONS OF EXECUTIVE
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