Exhibit 10.22
EMPLOYMENT AND SEVERANCE BENEFITS
AGREEMENT
This Agreement is made and entered
into as of 15th day of December, 2005, by and between SCIENTIFIC
GAMES CORPORATION, a Delaware corporation (hereinafter called the
“Company”), and Mr. Ira H. Raphaelson (hereinafter
called “Executive”).
W I T N E S S E T H:
WHEREAS, the Company desires to
retain and the Executive desires to provide services to the Company
as set forth herein.
NOW, THEREFORE, in consideration of
the mutual covenants and obligations hereinafter set forth, the
parties hereto, intending to be legally bound, hereby agree as
follows:
1.
EMPLOYMENT; TERM. The Company agrees
to employ the Executive and the Executive agrees to accept
employment with the Company commencing as of February 1, 2006 (the
“Commencement Date”) in the position of Vice President
and General Counsel for the Company and its subsidiaries upon the
terms and conditions hereinafter set forth. The term of
Executive’s employment is subject to termination by the
Company at any time without Cause (as defined in Section 5(a)
hereof) upon sixty (60) days’ written notice, subject to
Executive’s right to receive the applicable severance
benefits described herein. Except as otherwise provided herein
(including Section 8 hereof), Executive may terminate his
employment with the Company upon sixty (60) days’ prior
written notice or such shorter period as the Company may allow.
Except as otherwise provided herein, no severance benefits shall be
due in the event of Executive’s voluntary termination of
employment hereunder. The term of this Agreement shall be for three
(3) years following the Commencement Date (the “Term”);
provided, however, that 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 prior to the date which is one
hundred twenty (120) 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 pursuant
to the terms of the agreement.
2.
DUTIES. During the Term, the
Executive will serve as Vice President and General Counsel of the
Company, and as an officer of such subsidiaries and affiliates of
the Company as the Board of Directors of the Company (the
“Board”) shall determine. 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
or upon the authority of the Board. Subject to Section 8(a),
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 his ability in such
capacities, devoting substantially all of his business time to such
employment.
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3.
COMPENSATION.
(a)
As compensation to the Executive for
performance of the services required hereunder and as consideration
for his execution and delivery of this Agreement, the Company shall
pay or provide, as applicable, to him and the Executive agrees to
accept, the following salary and other compensation and
benefits:
(i)
Base Salary.
Effective as of the
Commencement Date, the Company shall pay to the Executive an
initial base salary, payable in equal installments not less
frequently than monthly, at the rate of $450,000 per annum (such
annual salary, increased from time to time at the sole discretion
of the Compensation Committee of the Board (the “Compensation
Committee”) is hereinafter referred to as “Base
Salary”);
(ii)
Annual Bonus.
Commencing with the fiscal
year of the Company (“Fiscal Year”) in which the
Commencement Date occurs, the Executive shall have the opportunity
to earn a bonus for each Fiscal Year (an “Annual
Bonus”) as recommended by the Compensation Committee and in
accordance with the Company’s Management Incentive
Compensation Program or any successor incentive compensation plan
from time to time maintained by the Company for senior executive
officers (the “Bonus Plan”). The target amount of
each annual bonus shall be equal to sixty six percent (66%) of Base
Salary upon attainment of certain “target” performance
goals as determined by the Compensation Committee (the
“Target Bonus”) and the maximum amount of any such
Annual Bonus in any Fiscal Year shall be one hundred thirty three
percent (133%) of Base Salary (the “Maximum
Bonus”);
(iii)
Stock Options.
The Company shall grant to
the Executive an option to purchase 200,000 shares of Company
common stock as of the Commencement Date (the “Grant
Date”) at an exercise price equal to the fair market value of
Company common stock on the Grant Date (the “Stock
Option”). Such Stock Option shall be granted under and
subject to the terms and conditions of the Company’s 2003
Incentive Compensation Plan, as Amended and Restated (the
“Equity Plan”) and the individual stock option
agreement to be entered into by and between the Company and the
Executive (the “Stock Option Agreement”). The
Stock Option Agreement shall provide that the Stock Option shall
vest with respect to twenty percent (20%) of the shares of common
stock subject to such Stock Option on each of the first five
anniversaries of the Grant Date, subject to certain provisions
relating to accelerated vesting and forfeiture as described in this
Agreement, the Stock Option Agreement or the Equity Plan. For
each year during the Term, the Company shall grant to the Executive
an option to purchase additional shares of common stock pursuant to
the Bonus Plan.
(iv)
Restricted Stock
Units. The Company
shall grant to the Executive on the Grant Date 95,795 restricted
stock units (the “RSU Grant”). Such Restricted
Stock Units shall be granted under and subject to the terms and
conditions of the Equity Plan and the individual restricted stock
unit agreement to
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be entered into by and between the
Company and the Executive (the “RSU Agreement”).
The RSU Agreement shall provide that the RSU Grant shall vest and
shares of Company common stock shall become deliverable with
respect to twenty percent (20%) of the shares of common stock
subject to the RSU Grant on each of the first five anniversaries of
the Grant Date, subject to certain provisions relating to
accelerated vesting and forfeiture as described in this Agreement,
the RSU Agreement and the Equity Plan. For each year during
the Term, the Company shall grant to the Executive additional
restricted stock units pursuant to the Bonus Plan.
(b)
Welfare and Fringe
Benefits. The
Executive shall be offered and shall be permitted to participate in
disability, medical, hospitalization, health, life and accident
insurance plans and other fringe benefit plans upon terms and
conditions and at coverage levels substantially equivalent, taken
as a whole, to those currently provided to similarly situated
executives of the Company.
(c)
Retirement Benefits.
The Executive shall be
entitled during the Term and thereafter to participate in any
retirement, savings or other plans of the Company as and to the
same extent as is generally available to the similarly situated
executives of the Company.
(d)
Housing and Transportation
Allowance. The
Executive shall be entitled to receive a monthly transportation and
housing allowance of $6,000 for expenses related to transportation
and an apartment used by the Executive in New York City.
(e)
Vacation. The Executive shall receive four (4)
weeks of paid vacation annually, subject to the terms of the
Company’s vacation policies as they relate to executive
officers from time to time.
4.
INDEMNITY, PROFESSIONAL AND OFFICERS
LIABILITY INSURANCE.
(a)
Indemnity.
The Company agrees to indemnify and
hold harmless Executive from all liability and costs incurred
(including reasonable attorney’s fees and disbursements) as a
consequence of claims by third parties, whether or not derivatively
on behalf of the Company resulting from or growing out of
Executive’s status as or as a result of his having been an
officer or director of (or counsel to) the Company or any affiliate
thereof, to the full extent permitted by law. In no event shall the
terms, provisions and conditions of the indemnity provided for
hereunder be less than the same as those presently provided for
under the Certificate of Incorporation and By-Laws of the Company.
Said terms, provisions and conditions of indemnity shall remain an
independent, contractual obligation of the Company to Executive
from and after the date hereof regardless of how the Company might
hereafter amend or change its Certificate of Incorporation or
By-Laws to provide for different terms, conditions and provisions
of indemnity for other officers and directors of the Company. In
the event the Company should amend its Certificate of Incorporation
or Bylaws to provide for different terms, conditions and provisions
of indemnity after the effective date hereof, Executive shall
be
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notified in writing of the change.
Executive shall thereafter have thirty (30) days to elect in
writing to accept the changed conditions of indemnity as a
modification to the Company’s contractual obligation
hereunder or to continue under the terms of indemnity as provided
for herein. The Company’s agreement to provide indemnity
hereunder shall survive the termination of this contract regardless
of the cause of termination. The Company shall advance promptly as
incurred reasonable fees and disbursements of counsel for Executive
in defending Executive against any claims for which the Company
would be so required to indemnify Executive provided (i) Executive
shall otherwise comply with such mandatory requirements of Delaware
law as may be required for such indemnification and (ii) Executive
shall cause his counsel to cooperate fully in good faith with such
requests as the Company or its counsel may reasonably make in order
to endeavor to keep such legal fees at a minimum level consistent
with an adequate defense of Executive.
(b)
Officers and Directors’
Liability Insurance. The
Company agrees to provide, at no expense to the Executive,
insurance insuring Executive in his capacity as an officer and/or
director of the Company and its affiliates in such form and amount
substantially equal to that presently maintained by the Company for
or covering its executive officers and directors or in such other
form and amount as Executive and Company may, from time to time, in
good faith agree are reasonable and appropriate for executive
officers and directors of corporations substantially similar in
size to the Company.
5.
TERMINATION OF EMPLOYMENT BY COMPANY
FOR CAUSE.
(a)
Termination of
Employment. The
Company may terminate Executive’s employment at any time for
“Cause” but only after written Notice of Termination
(as defined below) as approved by the Chief Executive Officer of
the Company specifying the cause of such action shall be rendered
to Executive. For purposes of this Agreement, “Cause”
shall mean: conviction of a felony, material violation of material
provision of the Company’s Code of Ethics, commission of an
act or acts of dishonesty on the part of Executive when such acts
are intended to result, directly or indirectly, in substantial
wrongful gain or substantial wrongful personal enrichment of
Executive at the expense of the Company; or the engaging by
Executive in willful misconduct materially injurious to the Company
with respect to which (x) Executive knew or reasonably should have
known that such conduct would result in material financial injury
to the Company, (y) such conduct actually results in material
financial injury to the Company, and (z) such damage is not cured
(if the same is reasonably susceptible to cure) within a reasonable
time following receipt by Executive of written notice thereof from
the Company referring to this Agreement. Notwithstanding the
foregoing, Executive shall not be deemed to have been terminated
for Cause unless and until there shall have been delivered to
Executive written notice (a) setting forth in reasonable detail the
facts and circumstances claimed to provide a basis for termination
of Executive’s employment (the “Statement of
Cause”), and (b) stating that as a result, Executive is being
terminated for Cause and the specific termination provision in this
Agreement being relied upon (collectively with the Statement of
Cause, a “Notice of Termination”). For purposes of this
Agreement, no such purported termination shall be effective without
Notice of Termination.
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(b)
Payment upon
Termination.
Following the Executive’s date of termination of employment
(the “Termination Date”) for Cause, the Executive shall
not be entitled to receive any additional compensation or benefits
under this Agreement except as follows. Accordingly, the
Executive shall be entitled to receive
(i)
payment of any earned but unpaid
Base Salary,
(ii)
any earned, but unpaid, Annual Bonus
for any Fiscal Year that ended prior to the Fiscal Year in which
the Termination Date occurs,
(iii)
the cash equivalent of any accrued,
but unused, vacation; and
(iv)
Any vested and accrued employee
benefits, subject to the terms of the applicable employee benefit
plans.
The payments and benefits described
in (i), (ii), (iii) and (iv) shall be referred to in this Agreement
as the “Accrued Obligations”. In all events, the
amounts payable under subparagraphs 5(b)(i), (ii) and (iii) shall
be paid within thirty (30) days following the Termination Date
irrespective of the reason for termination of
employment.
Any unvested equity awards shall be
forfeited as of the Termination Date. Any vested stock
options shall terminate as of the Termination Date. The Executive
shall not be entitled to receive any severance pay in the event of
termination pursuant to this Section 5 for Cause.
6.
TERMINATION OF EMPLOYMENT IN THE
EVENT OF EXECUTIVE’S DISABILITY.
(a)
Termination of
Employment.
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 if Executive shall have been permanently
disabled (as defined below) or absent from his duties with the
Company, or not otherwise be performing the duties of his office
due to physical or mental illness constituting a disability.
For purposes of this Agreement, “Disability” shall mean
that the Executive (i) is unable to engage in any substantial
gainful activity by reason of any medically determinable physical
or mental impairment which can be expected to result in death or
can be expected to last for a continuous period of not less than 12
months, or (ii) is, by reason of any medically determinable
physical or mental impairment which can be expected to result in
death or can be expected to last for a continuous period of not
less than 12 months, receiving income replacement benefits for a
period of not less than 3 months under an accident and health plan
covering employees of the Company or an affiliate of the
Company.
(b)
Payment Upon
Termination. If,
within thirty (30) days after written notice of intent to terminate
is given by the Company, Executive shall not have returned to the
full time performance of his duties, Executive’s employment
shall be terminated for “Disability,” in which event
Executive shall not be entitled to receive severance
benefits
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under this Agreement and Executive
shall be compensated pursuant to the provisions of this Section 6
as follows: (i) Executive shall be entitled to receive payment of
all Accrued Obligations, (ii) Executive’s Base Salary shall
continue at the level as provided in Section 3(a) for a period of
twelve (12) months from the date of the Notice of Termination. All
disability, life and medical insurance provided by the Company
prior to termination shall continue for a period of twelve (12)
months following the Termination Date. In addition, all outstanding
stock options held by the Executive, whether vested or unvested,
shall become vested and exercisable as of the Termination Date and
shall remain exercisable until the earlier of the expiration of the
original term of the stock option or three months following the
Termination Date. All restricted stock units shall become
vested and shares of Company common stock shall become deliverable
to the Executive as of the Termination Date. All bonuses that
vested prior to or that will vest upon termination, together with
that portion of any Target Bonus (whether or not vested) for the
then-current Fiscal Year prorated to the Termination Date (based
upon performance against target through the applicable measurement
date) shall become payable to the Executive within ten business
days following the Termination Date. Payments of Base
Sal
