UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
______________________________
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): June 17, 2005
0-13063
(Commission File Number)
______________________________
SCIENTIFIC GAMES CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 81-0422894
(State of Incorporation) (IRS Employer
Identification Number)
750 Lexington Avenue, New York, New York 10022
(Address of registrant's principal executive office)
(212) 754-2233
(Registrant's telephone number)
______________________________
Section 1 - Registrant's Business and Operations
Item 1.01. Entry into a Material Definitive Agreement.
On June 17, 2005, in connection with the appointment of Michael
Chambrello as president and chief operating officer of Scientific Games
Corporation (the "Company"), the Company entered into an employment agreement
with Mr. Chambrello, effective July 1, 2005. A brief description of the
material terms of the employment agreement between the Company and Mr.
Chambrello, as well as the terms of a stock option grant to be made to Mr.
Chambrello as of July 1, 2005, is included under Item 5.02 below.
Section 5 - Corporate Governance and Management
Item 5.02. Departure of Directors or Principal Officers; Election of
Directors; Appointment of Principal Officers.
On June 17, 2005, the Board of Directors of the Company appointed
Michael Chambrello as president and chief operating officer of the Company.
Mr. Chambrello will assume his new position with the Company on July 1,
2005. A. Lorne Weil, the Company's chairman and chief executive officer,
also served as president of the Company prior to Mr. Chambrello's appointment.
Since November 2000, Mr. Chambrello (47) has served as President and Chief
Executive Officer of Environmental Systems Products Holdings, Inc. ("ESPH"),
which provides vehicle emissions testing systems and services to government
agencies. Prior to joining ESPH, beginning in October 1999, he served as Chief
Executive Officer of Transmedia Asia Pacific, Inc. and Transmedia Europe, Inc.,
which provide membership-based consumer and business services. Previously, Mr.
Chambrello served as President of GTECH Corporation and Executive Vice President
of GTECH Holdings Corporation, which provide gaming and technology products and
services.
The Company has entered into a three-year employment agreement with Mr.
Chambrello which, among other things, provides for an initial annual base
salary of $750,000 (subject to annual adjustment, beginning with January 1,
2006, based on the New York area Consumer Price Index). The employment
agreement also provides Mr. Chambrello with the opportunity to earn up to 75%
of his base salary as incentive compensation upon achievement of certain
performance goals and up to 150% of his base salary as incentive compensation
upon achievement of certain maximum performance goals. During the term of
his employment under the agreement, Mr. Chambrello will be entitled to
participate in the Company's Supplemental Executive Retirement Plan in
accordance with its terms, subject to the Company's right to at any time
amend or terminate any such plan, provided that his benefits under such plan
shall not exceed $500,000 per annum. In addition, during the term of his
employment under the agreement, Mr. Chambrello shall receive a monthly
housing allowance of $5,000 and a monthly commutation allowance of $2,500.
On the date of commencement of his employment, Mr. Chambrello will
receive a grant of options to purchase 1,000,000 shares of the Company's
common stock, at an exercise price equal to the average of the high and low
trading prices of the stock on the preceding day, vesting in
one-third increments on each of the first, second and third anniversaries of his
employment date. The stock option grant was approved as part of Mr. Chambrello's
compensation package as an employment inducement grant pursuant to Nasdaq
Marketplace Rule 4350 without stockholder approval. Mr. Chambrello will also be
eligible to receive an annual stock option or other equity award, in the sole
discretion of the Compensation Committee of the Company's Board of Directors, in
accordance with the applicable plans and programs for senior executives of the
Company.
Mr. Chambrello's employment agreement provides that if his employment
under the agreement is terminated without "cause" or for "good reason" (as
defined in the agreement), then, among other things, he would be entitled to
receive: (i) his base salary for a period of 24 months following
termination; (ii) an amount, payable over a period of 24 months following
termination, equal to two times (x) his highest incentive compensation in
respect of one of the two most recent fiscal years or (y) his target bonus
for the then-current fiscal year (if he was not employed during the prior
fiscal year), but in any event not more than his base salary; and (iii) a pro
rata amount (based on the number of days Mr. Chambrello was employed in the
year of termination) of (x) his highest annual incentive compensation in
respect of one of the two most recent fiscal years or (y) his target bonus
for the then-current fiscal year (if he was not employed during the prior
fiscal year), payable as and when such incentive compensation would otherwise
have been payable under the employment agreement. If Mr. Chambrello's
employment under the employment agreement is terminated without "cause" or
for "good reason" within two years immediately following a "change in
control" (as defined in the agreement), the employment agreement provides
that he would be entitled to receive, in lieu of the payments described in
the preceding sentence, a lump sum payment equal to the sum of: (i) three
times his base salary; (ii) three times (x) his highest incentive
compensation in respect of one of the two most recent fiscal years or (y) his
target bonus for the then-current fiscal year (if he was not employed during
the prior fiscal year), but in any event not more than his base salary; and
(iii) the pro rata amount described in clause (iii) of the preceding sentence.
The employment agreement with Mr. Chambrello also provides that, among
other things, for the duration of Mr. Cambrello's employment thereunder and
for 12 months thereafter, he will not engage in any business that is
competitive with the business of the Company or its affiliates, or solicit
any of the Company's employees, agents, consultants, representatives,
customers, vendors or distributors to terminate their relationships with the
Company or for certain other prohibited purposes. The employment agreement
also contains covenants imposing obligations on Mr. Chambrello with regard to
proprietary information and confidentiality.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
SCIENTIFIC GAMES CORPORATION
By: /s/ Martin E. Schloss
------------------------------------------
Name: Martin E. Schloss
Title: Vice President, General Counsel and
Secretary
Date: June 23, 2005