Table of Contents

 

		Page
ARTICLE I	INTRODUCTION	1
1.1	Purpose; Prior Plan	1
1.2	New Plan Effective January 1, 2005	1
1.3	Construction	1
1.4	Separate Plans for Executives and Non-Employee Directors	2
ARTICLE II	DEFINITIONS	2
2.1	Account	2
2.2	Change in Control Event	2
2.3	Code	3
2.4	Company	3
2.5	Compensation	3
2.6	Disability	3
2.7	Election Form	4
2.8	Elective Deferral	4
2.9	Eligible Individual	4
2.10	Employer	4
2.11	Employment	4
2.12	ERISA	4
2.13	Investment Vehicle	4
2.14	Participant	4
2.15	Performance Bonus	4
2.16	Plan	4
2.17	Plan Administrator	4
2.18	Regulations	4
2.19	Separation from Service	5
2.20	Specified Distribution Date	5
2.21	Specified Employee	6
2.22	Subsidiary	6
2.23	Subsidiary Change in Control Event	6
2.24	Trust	6
2.25	Trustee	6
2.26	Unforeseeable Emergency	6
ARTICLE III	PARTICIPATION	6
3.1	Eligible Individuals	6
3.2	Commencement of Participation	7
3.3	Continued Participation	7

 

 

Table of Contents

 

		Page
ARTICLE IV	DEFERRAL ELECTIONS	8
4.1	Deferrals of Salary	8
4.2	Deferrals of Cash Bonuses	8
4.3	Deferrals of Director’s Compensation	8
4.4	New Mid-Year Eligibles	8
4.5	New Outside Directors	9
4.6	Mechanics of Deferral	9
4.7	Irrevocability	9
ARTICLE V	ACCOUNTS	9
5.1	Accounts	9
5.2	Deemed Investment of Accounts	10
ARTICLE VI	VESTING	10
6.1	General	10
ARTICLE VII	DISTRIBUTION EVENTS	10
7.1	Specified Distribution Date	10
7.2	Separation from Service	11
7.3	Change in Control Event	11
7.4	Disability	11
7.5	Death	11
7.6	Beneficiaries	11
7.7	Unforeseeable Emergency	12
7.8	Medium of Distribution	13
7.9	Actual Payment Date	13
7.10	Taxes	13
7.11	Acceleration generally prohibited	13
7.12	Delay under Section 162(m)	13
7.13	Delays to comply with Securities and other Laws	14
7.14	Transition Rule Elections	14
ARTICLE VIII	PLAN ADMINISTRATOR	14
8.1	Plan Administration and Interpretation	14
8.2	Powers, Duties, Procedures, Etc.	15
8.3	Information	15
8.4	Indemnification of Plan Administrator	15
ARTICLE IX	AMENDMENT AND TERMINATION	15
9.1	Amendments	15
9.2	Termination of Plan	15

 

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Table of Contents

 

		Page
9.3	Existing Rights	16
ARTICLE X	MISCELLANEOUS	16
10.1	No Funding	16
10.2	Non-Assignability	16
10.3	Limitation of Participants’ Rights	16
10.4	Participants Bound	17
10.5	Release	17
10.6	Administrative Processing Considerations	17
10.7	Correction of Error	17
10.8	Governing Law	18
10.9	Headings and Subheadings	18

 

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SCIENTIFIC GAMES CORPORATION

ELECTIVE DEFERRED COMPENSATION PLAN

Executive Deferred Compensation Plan

and

Non-Employee Directors Deferred Compensation Plan

(effective January 1, 2005, as amended and restated effective January 1, 2009)

 

The Scientific Games Corporation Elective Deferred Compensation Plan established as of January 1, 2005 (the “Plan”) is hereby amended and restated in its entirety to read as follows, effective as of January 1, 2009, except as otherwise provided.

 

ARTICLE I
INTRODUCTION

 

1.1          Purpose; Prior Plan

 

Effective October 8, 1998, Scientific Games Corporation (prior to April 27, 2001, Autotote Corporation) adopted the Scientific Games Corporation Key Executive Deferred Compensation Plan (the “Prior Plan”) to provide a means by which eligible individuals may elect to defer receipt of designated percentages or amounts of their bonuses, and later, pursuant to amendment effective as of December 11, 2001, to make salary deferrals.  The Prior Plan as so amended shall continue to be administered in accordance with the terms in effect on October 3, 2004, but shall be limited in its application to benefits attributable to deferrals of salary for 2004 or prior years and bonuses payable for 2004 or prior years (all of which were earned and vested on December 31, 2004) under the terms of the Company’s Management Incentive Compensation Program and Compensation Committee action taken thereunder.

 

1.2          New Plan Effective January 1, 2005

 

Effective January 1, 2005, this Plan, which shall be known as the Scientific Games Corporation Elective Deferred Compensation Plan, was adopted to provide benefits substantially similar to those provided under the Prior Plan on terms modified to comply with Section 409A of the Internal Revenue Code of 1986, as amended (“Section 409A”) and regulations and other guidance thereunder.  Effective January 1, 2009, this amendment and restatement of the Plan was adopted in order to comply with the final regulations under Section 409A (the “Regulations”).

 

1.3          Construction

 

This Plan shall be administered and interpreted in accordance with Section 409A and the Regulations.  Accordingly, no provision hereof shall be construed in any manner that would violate Section 409A or the Regulations.  In addition, to the maximum extent permitted by applicable law, no provision of the Plan inconsistent with Section 409A or the Regulations shall be valid or given any effect whatever.

 

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1.4           Separate Plans for Executives and Non-Employee Directors

 

For purposes of ERISA and Section 409A, the Plan as set forth in this instrument consists of two separate plans, one for eligible key employees (the “Executive Deferred Compensation Plan”), and one for non-employee directors (the “Non-Employee Directors Deferred Compensation Plan”), each governed by those Plan terms which either apply without distinction to both eligible employees and non-employee directors or apply specifically to that particular plan.  The Plan with respect to eligible employees is intended to be a plan that is “unfunded and is maintained by an employer primarily for the purpose of providing deferred compensation for a select group of management or highly compensated employees” within the meaning of sections 201(2) and 301(a)(3) of ERISA, and shall be interpreted and administered to the extent possible in a manner consistent with that intent.

 

1.5           Coordination with CEO Employment Agreement.

 

Notwithstanding any other provision of the Plan, the entire benefit accrued and vested under the Prior Plan as of December 31, 2004 by the Participant 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 under this Plan (and no portion thereof shall be payable under the Prior Plan), 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 amendment to such employment agreement executed on May 12, 2008.

 

ARTICLE II
DEFINITIONS

 

Wherever used herein, the following terms have the meanings set forth below, unless a different meaning is clearly required by the context:

 

2.1           Account means, for each Participant, an account maintained on the books and records of the Company (including participating Subsidiary Employers) and the Trust (if applicable) that is established for his or her benefit under Section 5.1.

 

2.2           Change in Control Event means 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

 

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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 the 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 of the Company (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) whose election by the Board or nomination for election by the Company’s 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 of nomination for election was previously so approved (the “Continuing Directors”), cease for any reason to constitute a majority of the Board;

 

provided that in any such case, such occurrence constitutes a change in control event as defined in the Regulations.

 

2.3           Code means the Internal Revenue Code of 1986, as amended from time to time.   Reference to any section or subsection of the Code includes reference to any comparable or succeeding provisions of any legislation that amends, supplements or replaces such section or subsection.

 

2.4           Company means Scientific Games Corporation, a Delaware corporation, and any successor to all or a major portion of the Company’s assets or business that assumes the obligations of the Company.

 

2.5           Compensation means (a) for an employee, salary and bonuses eligible for deferral under Article IV, and (b) for a non-employee director, fees, retainers, and other cash compensation for services as such a director.  The Plan Administrator may limit the Compensation an Eligible Individual may defer for any calendar year by action taken no later than the December 31 immediately preceding such calendar year, and shall advise the affected Eligible Individual of any such limitation.

 

2.6           Disability means 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, which renders the Participant unable to engage in any substantial gainful activity or by reason of which the Participant receives income replacement benefits for a period of not less than

 

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three months under an accident and health plan of the Employer.  Notwithstanding the foregoing, a determination of total disability by the Social Security Administration shall be conclusive proof of Disability.

 

2.7          Election Form  means a deferral election form prescribed by the Plan Administrator.

 

2.8          Elective Deferral means the portion of Compensation that is deferred by a Participant under Article IV.

 

2.9          Eligible Individual means an employee of an Employer, or non-employee director of the Company, who satisfies the criteria established in Article III.

 

2.10        Employer shall mean the Company and any Subsidiary which has adopted the Plan with the approval of the Company, subject to such terms and conditions as may be imposed by the Company upon the participation in the Plan of such adopting Subsidiary.

 

2.11        “Employment” and similar terms (without regard to capitalization) shall, in the case of an eligible employee, mean service for the Company or a Subsidiary prior to Separation from Service, and in the case of a non-employee director, mean service for the Company as such director prior to Separation from Service.

 

2.12        ERISA means the Employee Retirement Income Security Act of 1974, as amended from time to time.  Reference to any section or subsection of ERISA includes reference to any comparable or succeeding provisions of any legislation that amends, supplements or replaces such section or subsection.

 

2.13        Investment Vehicle means a theoretical investment made available under the Plan by the Plan Administrator from time to time in which a Participant’s Account may be deemed to be invested in accordance with Section 5.2 hereof in order to measure the value of the Account.

 

2.14        Participant means any Eligible Individual who participates in the Plan in accordance with Article III.

 

2.15        Performance Bonus means a bonus for a calendar year that the Plan Administrator determines qualifies as performance-based compensation under the Regulations, so that the deadline for making an election to defer the bonus may be up to June 30 of such calendar year, rather than December 31 of the prior year.

 

2.16        Plan means this Scientific Games Corporation Elective Deferred Compensation Plan, effective as of January 1, 2005 and restated effective January 1, 2009, as it may be from time to time amended, and comprising the Executive Deferred Compensation Plan and the Non-Employee Directors Deferred Compensation Plan (as set forth in Section 1.4).

 

2.17        Plan Administrator means the person, persons or entity designated by the Company to administer the Plan and to serve as the agent for the Company with respect to the Trust as contemplated by the agreement establishing the Trust.

 

2.18        Regulations mean regulations and other guidance issued by the Treasury or Internal

 

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Revenue Service under Section 409A. References to a specific section of the Regulations shall refer to such provision as from time to time in effect or any applicable successor section.

 

2.19         Separation from Service means (a) with respect to a Participant other than a non-employee director, 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), and (b) with respect to a non-employee director, separation from service as such a director if the Participant thereafter neither performs or is expected to perform services for the Company or any Subsidiary as an independent contractor (or, if the Participant 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)           Controlled Group .  Whether a separation of service occurs shall be determined in each case by treating the Company and all Subsidiaries as single Employer.

 

(b)           Sale of Subsidiary .  In the event of a Subsidiary Change in Control Event, distribution shall be made to each Participant who continues to be employed by the affected Subsidiary immediately following such event (and who had not previously incurred a Separation from Service) as if the Participant had thereupon incurred Separation from Service, except that no six-month delay shall be required pursuant to Section 7.2(a).

 

(c)           Leaves, etc .  A Participant’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 Participant’s right to reemployment with the Employer is provided either by statute or by contract.  If the period of leave exceeds six months and the Participant’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.

 

(d)           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).

 

2.20         Specified Distribution Date means, with respect to each Elective Deferral (as adjusted for earnings and losses), the later of:

 

(a)           the date selected by the Participant prior to the last day prescribed for an initial deferral election with regard thereto under Section 4.1 – 4.5, as applicable, which shall (i) be at least three years after the close of the calendar year in which the amount so deferred was earned or, in the case of salary deferrals, was otherwise payable (or, if applicable, complies with such other minimum period of deferral as the Plan Administrator may prescribe), and (ii) be January 2, in the case of salary deferrals for the calendar years 2005 through 2008, and February 28 for salary deferrals for all subsequent years and for all bonus deferrals;

 

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(b)           any later date elected by the Participant under Section 7.1(b).

 

2.21         Specified Employee means “specified employee” as determined pursuant to procedures adopted by the Company in accordance with the Regulations for purposes of its nonqualified deferred compensation plans subject to Section 409A.

 

2.22         Subsidiary means a subsidiary or affiliate that is a member of the same controlled group as the Company within the meaning of section 414(b) or (c) of the Code.

 

2.23         Subsidiary Change in Control Event means a change in control event with respect to a Subsidiary within the meaning of the Regulations, pursuant to which the Company ceases to have direct or indirect ownership of at least fifty-one percent (51%) of the value of the total equity or total combined voting power in respect of the Subsidiary.

 

2.24         Trust means a domestic grantor trust within the meaning of section 671 of the Code that is established by the Company to assist the Employers in meeting their obligations under the Plan and that identifies the Plan as a plan with respect to which assets are to be held by the Trustee.   At no time shall any assets of the Trust be held or located outside of the United States, and such Trust shall at all times comply with the requirements of Section 409A(b) of the Code.

 

2.25         Trustee means the trustee or trustees of the Trust.

 

2.26         Unforeseeable Emergency shall mean a severe financial hardship of the Participant resulting from an illness or accident of the Participant or the Participant’s spouse or dependent (as defined in section 152 of the Code without regard to section 152(b)(1), (b)(2) and (d)(1)(B)); loss of the Participant’s property due to casualty (including the need to rebuild a home following damage to a home not otherwise covered by insurance, for example, as a result of a natural disaster); or other similar extraordinary and unforeseeable circumstances arising as a result of events beyond the control of the Participant or his spouse or dependent as determined in accordance with Treasury Regulation § 1.409A-3(i)(3) (and which shall not include purchase of a home or the payment of tuition).  Whether a Participant is faced with an unforeseeable emergency permitting a distribution under this paragraph is to be determined by the Committee based on the relevant facts and circumstance, but, in any case, a distribution on account of unforeseeable emergency may not be made to the extent that such emergency is or may be relieved through reimbursement or compensation from insurance or otherwise, by liquidation of the Participant’s assets, to the extent the liquidation of such assets would not cause severe financial hardship, or by cessation of deferrals under the Plan.

 

ARTICLE III
PARTICIPATION

 

3.1           Eligible Individuals

 

The following categories of individuals are eligible to participate in the Plan for a particular calendar year:

 

(a)