Table of Contents

 

		Page
ARTICLE I	INTRODUCTION	1
1.1	Purpose; Old Plan	1
1.2	2005 Plan	1
1.3	Complete Discontinuance of Plan	1
1.4	Consolidated Plan Document and “Roadmap”	2
1.5	Construction	2
1.6	Amendments to Comply with Regulations	2
1.7	Coordination with CEO Employment Agreement	2
ARTICLE II	DEFINITIONS	3
2.1	“Beneficiary”	3
2.2	“Board of Directors”	3
2.3	“Change of Control”	3
2.4	“Code”	4
2.5	“Committee”	4
2.6	“Company”	4
2.7	“Disability”	4
2.8	“ERISA”	4
2.9	“Final Earnings”	4
2.10	“Grandfathered Benefit”	4
2.11	“Interest”	5
2.12	“Member”	5
2.13	“New Plan Benefit”	5
2.14	“Old Plan”	5

 

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Table of Contents

(continued)

 

		Page
2.15	“Old Plan Benefit”	5
2.16	“Old Plan Discount Rate”	6
2.17	“Plan”	6
2.18	“Regulations”	6
2.19	“Separation from Service”	6
2.20	“Specified Employee”	7
2.21	“Subsidiary”	7
2.22	“Threatened Change of Control”	7
2.23	“Total Frozen Benefit”	7
2.24	“Trust”	7
ARTICLE III	PAYMENT OF BENEFITS	8
3.1	Old Plan Benefit Payable on Retirement	8
3.2	New Plan Benefit Payable upon Separation from Service	8
3.3	Disability	8
3.4	Distributions to Specified Employees Based on Separation from Service	8
3.5	Death	8
3.6	Beneficiaries	9
3.7	Withholding for Taxes	10
3.8	Acceleration Generally Prohibited	10
3.9	Vesting	10
3.10	Delay under Section 162(m)	10
ARTICLE IV	PLAN ADMINISTRATION	11
4.1	Committee	11

 

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Table of Contents

(continued)

 

		Page
4.2	Committee Authority	11
4.3	Indemnification	11
4.4	Change of Control	11
ARTICLE V	CLAIMS PROCEDURE	11
5.1	Administrator of Claims Procedure	11
5.2	Claims	12
5.3	Denial of Claims	12
5.4	Appeal of Denial of Claims	12
5.5	Appeal	13
5.6	Written Decision on Appeal	13
5.7	Resolution of Disputes	13
ARTICLE VI	GENERAL	14
6.1	Unsecured Creditor Status	14
6.2	Source of Payment	14
6.3	Effect of Plan on Compensation	14
6.4	Nontransferable	14
6.5	Amendment of Plan	14
6.6	Prohibition against Acceleration	15
6.7	No Employment Rights	15
6.8	Binding Effect	15
6.9	Governing Law	15
6.10	Severability	15
6.11	Titles	16

 

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Table of Contents

(continued)

 

		Page
ARTICLE VII	GRANTOR TRUST	16
7.1	Grantor Trust	16
7.2	Situs of Assets	17
7.3	Trust Agreement Governs	17

 

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SCIENTIFIC GAMES CORPORATION

 

FROZEN SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN

 

ARTICLE I

 

INTRODUCTION

 

1.1               Purpose; Old Plan .  In order to retain the services of and provide rewards and incentives to members of a select group of management employees who contribute to the success of Scientific Games Corporation (the “Company”), the Company adopted a Supplemental Executive Retirement Plan (“Plan”) effective September 7, 2000 to provide supplemental retirement benefits to select members of management and highly compensated employees who became members thereof.  The Plan was thereafter amended and restated effective November 1, 2003 (the “Old Plan”), and continued to be administered in accordance with the terms of such restatement, without further change, through December 31, 2004.  Effective as of the close of business on December 31, 2004, the benefits payable under the Old Plan were limited in operation to benefits that were earned and vested on that date within the meaning of regulations and guidance issued under Section 409A of the Internal Revenue Code of 1986, as amended (“Section 409A”).

 

1.2               2005 Plan .  Effective January 1, 2005, a replacement plan (the “New Plan”) was adopted in order to provide benefits substantially similar to those provided under the Old Plan on terms intended to comply with Section 409A and with regulations and other guidance thereunder applicable to deferrals after December 31, 2004 (“Regulations”), without duplication of benefits provided under the Old Plan.  Members of the Old Plan who had not both attained age fifty-five (55) and completed ten (10) years of Service (as therein defined) on or before December 31, 2004 had no vested benefits under the Old Plan and shall, accordingly, receive their supplemental retirement income benefits solely under such New Plan.

 

1.3               Complete Discontinuance of Plan .  No benefits became payable under the Plan during the calendar year 2005.  Pursuant to action of the Compensation Committee of the Board of Directors taken December 15, 2005, the Plan was amended permanently to terminate further benefit accruals thereunder (including for this purpose any employment agreements previously treated as part of the Plan) effective as of December 31, 2005 and to make related changes, including (a) redefinition of the compensation taken into account in determining the frozen Plan benefit as of December 31, 2005, (b) crediting all Members with fifteen years of service for purposes of the benefit formula, (c) full vesting of all Members, (d) provision for all benefits to be paid in the form elected by them prior to December 31, 2004 under the Old Plan, namely a single lump sum, (e) prohibition of all future benefit enhancements of any type whatever (including those that might be based on a Change of Control Termination), and (f) provision for all benefit increases resulting from such Committee action to be provided under terms fully compliant with Section 409A, including without limitation the requirement for a six-month delay in making of distributions to Specified Employees on account of separation from service.

 

 

1.4               Consolidated Plan Document and “Roadmap” .  In order to reflect and provide for the changes made above and comply with the final regulations under Section 409A, the Plan is hereby amended and restated to read as set forth below, effective as of January 1, 2009, except as otherwise provided, and shall be known as the Scientific Games Corporation Frozen Supplemental Executive Retirement Plan.  Although contained within a single document, the Plan set forth herein comprises two separate plans for purposes of Section 409A, namely –

 

(a)              a plan providing solely the Grandfathered Benefit (as defined in Section 2.10), which as increased by interest at the Old Plan Discount Rate (as defined in Section 2.16), provides for the Old Plan Benefit (as defined in Section 2.15), to be payable on retirement under the terms of the Old Plan (as set forth in Section 3.1) or on Disability or death, and

 

(b)            a plan providing the New Plan Benefit (as defined in Section 2.13), consisting of the Total Frozen Benefit (as defined in Section 2.23), as increased by 4% interest under Section 2.11, or, for a Member entitled to payment of an Old Plan Benefit, the portion of such Total Frozen Benefit in excess of such Old Plan Benefit, to be payable in either case on Separation from Service (as defined in Section 2.19), Disability, death, or a specified payment date pursuant to Section 1.7, on terms compliant with Section 409A and the Regulations.

 

1.5               Construction .  This Plan shall be administered and interpreted in accordance with Section 409A and the Regulations to the extent subject thereto (i.e., except with respect to “grandfathered benefits” payable in accordance with the Old Plan as described above).  No provision hereof shall be construed in any manner that would violate Section 409A or the Regulations, nor, to the maximum extent permitted by law, shall any provision of the Plan inconsistent with Section 409A or the Regulations be valid or given any effect whatever.

 

1.6               Amendments to Comply with Regulations .  Notwithstanding any restriction on the general right to amend set forth in Article VI, the Company reserves the right to make any and all such amendments as it may deem necessary or advisable for compliance with Section 409A and the Regulations.

 

1.7               Coordination with Employment Agreements .  Notwithstanding any other provision of the Plan, (a) the entire benefit accrued under the Plan by the Member serving as Chief Executive Officer of the Company as of January 1, 2006, pursuant to an employment agreement with the Company effective as of such date, shall be payable solely as a New Plan Benefit (and no portion thereof shall constitute a Grandfathered Benefit or Old Plan Benefit), and the date(s) of payment thereof, other than by reason of Disability or death, shall be the specified dates of payment (within the meaning of Section 409A) set forth in the applicable amendment to such employment agreement executed on or before December 31, 2008 pursuant to transition rules allowing substitution of a specified payment date for termination of employment as the applicable payment event, and (b) the portion of the benefit accrued under the Plan as of January 1, 2006 by any other Member and not constituting a Grandfathered Benefit shall, in the event that an agreement with such Member substitutes a specified payment date for termination of employment as the date of payment for such benefit, be paid solely at such specified payment date, without regard to the date of the Member’s termination of employment.

 

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ARTICLE II

 

DEFINITIONS

 

As used herein, the following words and phrases shall have the meanings specified below unless a different meaning is clearly required by the context:

 

2.1              The term “ Beneficiary ” shall mean any person or persons entitled to receive benefits under the Plan following a Member’s death pursuant to Sections 3.5 and 3.6.

 

2.2              The term “ Board of Directors ” shall mean the Board of Directors of Scientific Games Corporation, or any duly authorized committee thereof.

 

2.3              The term “ Change of Control ” shall mean the occurrence of any of the following:

 

(a)           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 the Company and any subsidiary and any employee benefit plan sponsored or maintained by the Company or any subsidiary (including any trustee of such plan acting as trustee), directly or indirectly, becomes the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act) of securities of the Company representing at least 40% of the combined voting power of the Company’s then outstanding securities;

 

(b)          the stockholders of the Company approve a merger, consolidation, recapitalization or reorganization of the Company, or the consummation of any such transactions 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 the Company or the surviving entity outstanding immediately prior to such transaction being beneficially owned by persons who together beneficially owned at least 80% of the combined voting power of the securities of the Company outstanding immediately prior to such transaction; provided that, for purposes of this paragraph (b), 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 solely to the acquisition of voting securities by an employee benefit plan of the Company or such surviving entity;

 

(c)           the stockholders of the Company approve a plan of complete liquidation of the Company or an agreement for the sale or disposition by the Company of all or substantially all of its assets (or any transaction having a similar effect); or

 

(d)          during any period of two consecutive years, individuals who at the beginning of such period constitute the Board of Directors (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 paragraph (a), (b), or (c) of this Section 2.3 ) whose election by the Board or nomination for election by the Company’s stockholders was approved

 

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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, cease for any reason to constitute a majority of the Board.

 

2.4              The term “ Code ” shall mean the Internal Revenue Code of 1986, as amended, provided that references to Sections of the Code shall, if applicable, include corresponding provisions of any subsequent Internal Revenue Code.

 

2.5              The term “ Committee ” shall mean the Compensation Committee of the Board of Directors.

 

2.6              The term “ Company ” shall mean Scientific Games Corporation, its successors and assigns, any Subsidiary authorized by the Board to participate in this Plan with respect to its employees (to the extent required or appropriate for such purpose), and any organization into which the Company may be merged or consolidated or to which all or substantially all of its assets may be transferred.

 

2.7              The term “ Disability ” shall mean (a) with respect to the New Plan Benefit, any medically determinable physical or mental impairment which can be expected to result in death or to last for a continuous period of not less than twelve (12) months and which renders the Member unable to engage in any substantial gainful activity or by reason of which the Member receives income replacement benefits for a period of not less than three months under an accident and health plan of the Company; provided that notwithstanding the foregoing, a determination of total disability by the Social Security Administration shall be conclusive proof of Disability, and (b) with respect to the Old Plan Benefit, Total and Permanent Disability as defined in the Old Plan (i.e., disability that entitles a Member to disability benefits under the Company’s long term disability plan in effect at the time the Member becomes disabled or if the Company does not maintain a long-term disability plan, inability of the Member to perform the usual and customary duties of his occupation which is likely to be permanent or of long duration).

 

2.8              The term “ERISA” shall mean the Employee Retirement Income Security Act of 1974, as amended.

 

2.9              The term “ Final Earnings ” shall mean the total of a Member’s annual rate of base salary and maximum target bonus amount as of December 31, 2005, determined without regard to any deduction of pre-tax contributions under Code Section 401(k) plans, flexible benefit (cafeteria) plans described in Code Section 125, and qualified transportation fringes described in Code Section 132(f)(4), and before deferrals of compensation under any elective deferred compensation plans.

 

2.10            The term “ Grandfathered Benefit ” shall (subject to Section 1.7) mean the present value as of December 31, 2004 of the benefit earned and vested in respect of a Member on such date under the Old Plan, calculated as the amount that the Member could have received as a lump sum distribution if he voluntarily terminated his employment with the Company without cause on December 31, 2004 and received such distribution as soon as possible

 

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thereafter.  The benefit then earned and vested shall be determined under the terms of the Old Plan, as modified by any employment agreement in effect on October 3, 2004 providing for any different basis for calculating such amount, and the present value thereof shall be determined using the Old Plan Discount Rate.

 

2.11            The term “ Interest ” shall mean interest at an annual rate of four percent (4%), credited and compounded annually up to the day prior to the date of payment (or other applicable date of reference).

 

2.12            The term “ Member ” shall mean any individual who was a Member of the Old Plan on December 31, 2004.

 

2.13            The term “ New Plan Benefit ” shall mean a Member’s Total Frozen Benefit increased by Interest from January 1, 2006 as provided in Section 2.10; provided, however, that

 

(a)                If the Member received a distribution of his Old Plan Benefit prior to payment of his New Plan Benefit, (i) Interest shall be credited on the Member’s Total Frozen Benefit from January 1, 2006 to the date as of which the Old Plan Benefit was paid, (ii) the amount of Old Plan Benefit paid, as increased by Interest similarly computed, shall be deducted from the Member’s Total Frozen Benefit as of such date, and (iii) the remaining balance of the Member’s Total Frozen Benefit (including such Interest) shall then be increased by Interest under Section 2.11 to the applicable date provided therein, and

 

(b)                If distribution of a Member’s New Plan Benefit is to be made prior to distribution of the Member’s Old Plan Benefit, the Member’s New Plan Benefit shall be the amount of the Member’s Total Frozen Benefit as of December 31, 2005, increased by Interest from January 1, 2006 under Section 2.11 to the applicable date provided therein, reduced (but not below zero) by the amount of the Member’s Grandfathered Benefit increased by interest to such date at the Old Plan Discount Rate.

 

(c)                Notwithstanding anything herein go the contrary, a Member’s New Plan Benefit, including associated calculations of Interest, shall be appropriately adjusted in the event of any intervening distribution in respect of such New Plan Benefit made on a specified payment date under Section 1.7, or under Section 3.8.

 

2.14            The term “ Old Plan ” shall mean the Scientific Games Corporation Supplemental Executive Retirement Plan originally established effective September 7, 2000, as amended and restated effective November 1, 2003 and in effect thereafter in respect of benefits earned and vested on December 31, 2004.

 

2.15            The term “ Old Plan Benefit ” shall (subject to Section 1.7) mean a Member’s Grandfathered Benefit (if any), increased by interest at the Old Plan Discount Rate from December 31, 2004 to the last day of the month immediately preceding the date scheduled for payment thereof under Section 3.1 (or other applicable provision hereof).  The amount of each Member’s Old Plan Benefit as of December 31, 2004 is set forth in Schedule 1.

 

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2.16            The term “Old Plan Discount Rate” shall mean the Discount Rate in effect under Section 2.12 of the Old Plan on December 31, 2004, namely, “an interest rate equal to the average yield of a 30-year U.S. Treasury security for the month prior to the month in which Termination of Employment occurs, or in the event a 30-year U.S. Treasury security is unavailable at such time, then the next longest long-term U. S. Treasury security then available.” Since 30-year Treasury securities were not then available, the interest rate applicable under such provision is the rate on 20-year Treasury securities for November 2004 (the month before the deemed termination on December 31, 2004), which was 4.89%.

 

2.17            The term “ Plan ” shall mean and include each of:

 

(a)           the Old Plan for periods through December 31, 2004, and thereafter solely with respect to the Old Plan Benefit, and

 

(b)         a new plan providing all benefits under the Scientific Games Corporation Frozen Supplemental Executive Retirement Plan set forth herein other than those provided under the Old Plan.

 

2.18            The term “ Regulations ” shall mean regulations and other guidance issued by the Treasury or Internal Revenue Service under Section 409A.

 

2.19            The term “ Separation from Service” shall mean separation from service within the meaning of the Regulations, other than by reason of death, determined by reference to the presumptive rule of Treasury Reg. § 1.409A-1(h)(l) (under which a reasonable expectation of a permanent reduction in the level of services to no more than 20% of the average level during the prior 36-month or other applicable period is presumed to result in a separation from service), or, if the Member continues or is expected to perform services as such an independent contractor, separation from service within the meaning of the applicable provisions of Treasury Reg. § 1.409A-1(h).  For purposes of the foregoing,

 

(a)          Leaves, etc .  A Member’s employment relationship shall be treated as continuing while he or she is on military leave, sick leave, or other bona fide leave of absence (such as temporary employment by the government) if the period of such leave does not exceed six months, or if longer, so long as the Member’s right to reemployment with the Company (or a Subsidiary) is provided either by statute or by contract.  If the period of leave exceeds six months and the Member’s right to reemployment is not provided either by statute or by contract, the employment relationship is deemed to terminate immediately following such six-month period.

 

(b)         Sale of a division or other substantial assets .  Notwithstanding the first paragraph of this Section 2.19, a separation from service shall not occur for purposes of this Plan to the extent that the Committee determines otherwise in accordance with Treasury Reg. § 1.409A-1(h)(4).

 

(c)           Transfers within Controlled Group . A Member shall not be treated as terminating employment, retiring or otherwise separating from service for purposes of the Plan

 

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solely by reason of a transfer to employment between the Company and a Subsidiary, or between two Subsidiaries.

 

(d)         Sale of Subsidiary .   In the event of a Subsidiary Change in Control Event, distribution shall be made to each Member who continues to be employed by the affected Subsidiary im