Exhibit 10.3
This EMPLOYMENT AGREEMENT (this
“Agreement”) is made as of March 1, 2007 (the
“Effective Date”), by and between SCIENTIFIC GAMES
CORPORATION, a Delaware corporation (the “Company” or
“SGC”), and Stephen L. Gibbs
(“Executive”).
W I T N E S S E T H
WHEREAS,
Executive has been employed pursuant to a letter agreement with the
Company (the “Original Agreement”); 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are hereby terminated and superseded.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 February 28, 2009, 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 Executive’s 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 Executive’s previous
term of employment with the Company shall be included when
calculating Executive’s tenure at the Company for all
purposes.
3.
Offices and Duties . During the Term, the Executive will
serve as Vice President and Chief Accounting Officer of the
Company, 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, Chief Operating Officer, Chief
Financial Officer or upon the authority of the Board of Directors
of the Company. Subject to Section 5(e), Executive’s
functions, duties and responsibilities are subject to reasonable
changes as the Company may in good faith determine. The Executive
hereby agrees to accept such employment and to serve the Company to
the best of the Executive’s ability in such capacities,
devoting substantially all of the Executive’s 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 two hundred and twenty-five thousand dollars
($225,000) per annum, payable in accordance with the
Company’s regular payroll policies 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
35% of Base Salary as Incentive Compensation (“Target
Bonus”).
(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
Company’s 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 Executive’s duties under this Agreement, on a timely basis
upon submission by Executive of vouchers therefore in accordance
with the Company’s 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 executives in
accordance with the terms of such plans and programs and subject to
the Company’s 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
Company’s policies in effect from time to time.
(f)
Taxes and Internal Revenue Code 409A . Payment
of all compensation and benefits to Executive specified in this
Section 4 and in Section 5 of this Agreement shall be subject to
all legally required and customary withholdings. 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
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 .
Executive’s 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 Executive’s 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 Executive’s
estate, the following amounts:
(i)
The Standard Termination Payments (as defined in
Section 5(a)); and
(ii)
A lump sum payment equal to Executive’s 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 Executive’s “Total
Disability.” For purposes of this Agreement, “Total
Disability” shall mean Executive’s (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
Executive’s 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) Executive’s annual Base
Salary and (B) Executive’s “Severance Bonus
Amount” (as defined below) payable over a period of twelve
(12) months after termination in accordance with Section 5(f) 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 Executive’s 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 Executive’s 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
Company’s group health plan in accordance with COBRA, the
Company shall pay the monthly premiums for such coverage for a
period of twelve (12) months.
(d)
Termination by the Company for Cause . The Company may terminate
Executive’s employment hereunder for “Cause” upon
written notice to Executive referring to this Section 5(d).
For purposes of this Agreement, the term “Cause” shall
mean (i) gross neglect by the Executive of the
Executive’s duties hereunder; (ii) conviction (including
conviction on a nolo contendere plea) of the Executive of any
felony; (iii) conviction (including conviction on a nolo
contendere plea) of the Executive of any non-felony crime or
offense involving the property of the Company or any of its
subsidiaries or affiliates or evidencing moral turpitude;
(iv) willful misconduct by the Executive in connection with
the performance of the Executive’s duties hereunder;
(v) intentional breach by the Executive of any material
provision of this Agreement; (vi) material violation of material
provision of the Company’s Code of Conduct; or (vii) any
other willful or grossly negligent conduct on the part of the
Executive which would make the Executive’s continued
employment by the Company materially prejudicial to the best
interests of the Company. In the event that Executive’s
employment is terminated by the Company for Cause, the Executive
shall be entitled to receive only the Standard Termination Payments
(as defined in Section 5(a)).
(e)
Termination by the Company Without Cause or by Executive for
Good Reason . The Company may terminate
Executive’s employment hereunder at any time, without Cause,
for any reason or no reason, and Executive may terminate his
employment hereunder for “Good Reason.” For purposes of
this Agreement, “Good Reason” shall mean that without
Executive’s prior written consent, any of the following shall
have occurred: (i) a material change, adverse to
Executive, in Executive’s positions, titles, offices, or
duties as provided in Section 3, except, in such case, in
connection with the termination of Executive’s employment for
Cause, Total Disability or death; (ii) an assignment of any
significant duties to Executive which are inconsistent with
Executive’s positions or offices held under Section 3;
(iii) a decrease in Base Salary or material decrease in
Executive’s 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; provided,
however, that a termination by Executive for Good Reason under any
of clauses (i) – (iv) of this Section 5(e) shall not be
considered effective unless Executive shall have provided the
Company with written notice of the specific reasons for such
termination within thirty (30) days after he has knowledge of the
event or circumstance constituting Good Reason and the Company
shall have failed to cure the event or condition allegedly
constituting Good Reason within thirty (30) days after notice has
been given to the Company. In the event that Executive’s
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) Executive’s annual Base
Salary and (B) Executive’s Severance Bonus Amount payable
over a period of twelve (12) months after termination in accordance
with Section 5(f) 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 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 Executive’s 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
Company’s group health plan in accordance with COBRA, the
Company shall pay the monthly premiums for such coverage for a
period of twelve (12) months.
(f )
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 Company’s 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 Company’s standard
payroll practices. In addition, notwithstanding any other provision
with respect to the timing of payments under this Agreement, if
necessary to comply with Section 409A of the Code, and applicable
administrative guidance and regulations, amounts payable following
termination of employment in a lump sum, including pursuant to
Sections 5(c)(iii) and 5(e)(iv) of this Agreement, shall instead be
paid six months following the date of termination.
(g)
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 se
