Exhibit 10.3


 


EMPLOYMENT AND SEVERANCE BENEFITS AGREEMENT


[The following
Employment and Severance Benefits Agreement between Scientific Games
International, Inc. and Steven M. Saferin was entered into as of November 19,
2002, effective January 17, 2003.  Mr.
Saferin became an executive officer of Scientific Games Corporation on June 14,
2005 and, at such date, had a base salary rate of $350,000 per annum, which has
been increased over time from the initial rate of $250,000 stated in the
Agreement.]


 


This Agreement is made
and entered into as of 19th day of November, 2002, by  and between SCIENTIFIC
GAMES INTERNATIONAL, INC., a
Delaware corporation (hereinafter called the “Company”),
and STEVEN M. SAFERIN (hereinafter called “Executive”).


 


W I
T N E S S E T H:


 


WHEREAS, at the date of
consummation of the tender offer (“Commencement
Date”) contemplated under that certain Agreement and Plan of Merger
dated November 19, 2002 (the “Merger Agreement”),
by and among the Company, Blue
Suede Acquisition Co. and MDI Entertainment, Inc. (“MDI”), MDI shall become a majority-owned
direct subsidiary of the Company;


 


WHEREAS, at the effective
date of the Merger contemplated under the Merger Agreement, MDI shall become a
wholly owned direct subsidiary of the Company; and


 


WHEREAS, the Company
desires to obtain, and the Executive desires to provide, the services of
Executive to the Company beginning at the Commencement Date.


 


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.


 


As of
the Commencement Date, upon the terms and conditions set forth herein, the
Company hereby employs Executive and Executive hereby accepts employment with
the Company in the position of Senior Vice President-MDI for the Company and
President and Chief Executive Officer of MDI. 
The term of Executive’s employment is subject to termination by the
Company at any time without cause upon sixty (60) days’ written notice, subject
to Executive’s right to receive the applicable payments and other severance
benefits from and to the extent described herein.  Except as otherwise provided herein,
Executive may terminate his employment with the Company upon sixty (60) days’
prior written notice or such shorter period as the Company may allow.  If Executive terminates this Agreement
voluntarily, except pursuant to Section 9, he shall not be entitled
to any severance pay or severance benefits, but shall be entitled to all other
consideration, compensation and reimbursement otherwise due to him under the
terms of this Agreement but only through the date of such termination.  Subject to Section 24 hereof, the
term of this Agreement shall be from the Commencement Date through December 31,
2005.  The parties agree that a failure
to renew this Agreement for a term beyond December 31, 2005 by either
party shall not act as or constitute an early termination of this Agreement,
with or without cause, or a constructive termination by either party and shall
not give rise to any rights to severance or other compensation hereunder. The
Company’s obligations to provide Executive with remuneration, salary or any
other benefits described herein shall cease, in the case of a 


 





















 


non-renewal, as of December 31, 2005, except as to (i) payments
due hereunder at December 31, 2005 or becoming due thereafter for periods
ending on or before December 31, 2005, and (ii) payments that may
become due pursuant to the indemnification obligations under Section 5(a) of
this Agreement.


 


2.                                       DUTIES.


 


(a)                                  In
his position as Senior Vice President-MDI and, so long as the Company maintains
the separate corporate existence of MDI (or otherwise maintains MDI as a
distinct operating division), in his position as President and Chief Executive
Officer of MDI, Executive shall manage and oversee the day-to-day operations of
MDI, subject to the direction of the Board of Directors of the Company and MDI,
respectively.  In his position as Senior
Vice President-MDI for the Company, Executive shall also have direct reporting
authority to the Chief Executive Officer of Scientific Games Corporation, the
parent of the Company (“Parent”)
and the Company.  Executive also shall
report to such officer of the Company as shall be designated by the Chief
Executive Officer of the Company.  During
the term of this Agreement, but only so long as the Company maintains the
separate corporate existence of MDI, the Company shall nominate and cause
Executive to be elected as a member of the Board of Directors of MDI.  Executive shall participate directly in and
be responsible for the timely creation, modification and amendment of all
operating and financial plans, budgets and projections, and marketing
strategies relating to MDI or its business (collectively, the “Business Plans”), subject to the review
and approval of such Business Plans by the Board of Directors of MDI and the
Chairman of the Company.


 


(b)                                 During
the term of this Agreement, Executive also shall perform such other duties and
shall have such other responsibilities with the Company and MDI as are normally
associated with the positions set forth in Section 1 and as
otherwise may be reasonably assigned to the Executive from time to time by or
upon the authority of the Board of Directors of MDI or the Chairman of the
Company.


 


(c)                                  Executive
acknowledges that, as an officer of the Company, he may, from time to time, be
assigned other duties and responsibilities by the Company consistent with his
seniority and position as an officer of the Company so long as such duties and
responsibilities would not, without Executive’s consent which shall not
unreasonably be refused, (i) materially increase Executive’s workload
without a commensurate reduction in his workload with respect to the business
operations of MDI, and (ii) materially and significantly change his
overall responsibilities with the Company. 
Subject to the foregoing and Section 9(a), Executive’s
functions, duties and responsibilities are subject to reasonable changes as the
Company may in good faith determine.


 


(d)                                 In
addition to his other express duties set forth in this Agreement, throughout
the term of his employment under this Agreement, Executive shall, in all
capacities: (i) diligently perform such duties and fulfill such
responsibilities as are normally associated with such positions and with such
other positions as otherwise may be assigned to the Executive from time to time
in accordance with this Agreement; (ii) serve the Company and MDI to the
best of his ability in the capacities described hereunder or assumed pursuant
hereto and devote all of his


 


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business effort,
time, attention, energy, and skill to the duties of employment hereunder
(subject to (A) the policies of the Company with respect to vacations and
absences due to illness, government services, sabbaticals, etc. and (B) Executive’s
right to make and supervise investments on a personal or family basis
(including trusts, funds and investment entities in which Executive or members
of his family have an interest) so long as these activities do not result in
any material deviation from Executive’s duty to devote his full business
effort, time, attention, energy and skill to his duties or materially interfere
with the performance of his duties hereunder or violate any noncompetition or
other fiduciary obligations Executive has to Company or any of its Affiliates);
(iii) faithfully, loyally, and industriously perform his duties; (iv) diligently
follow and implement all lawful management policies and decisions of the
Company, MDI, Parent and any other Affiliates of Company that are made known to
him or are otherwise generally disseminated to employees or executive officers
of the Company; (v) comply with all of the policies, procedures and
regulations of the Company, MDI, and Parent that are generally applicable to
and generally disseminated to employees, executive officers or management of
the Company, as well as all applicable law and regulations; (vi) comply
with all reasonable and lawful requests and instructions made by the Company,
MDI or Parent; (vii) provide such explanations, information and assistance
as the Company, MDI or Parent may reasonably require; and (viii) travel
for business purposes to the extent reasonably necessary or appropriate in the
performance of his duties.  Executive
acknowledges that he has received and familiarized himself with the policies
and procedures of the Company and its Parent as set forth in the Standard Operating
Procedures Manual for the Company (the “Company
Manual”).


 


(e)                                  Executive
acknowledges that Parent has determined that, as of the Commencement Date,
Executive will not be an “Executive Officer” of Parent for purposes of Section 16(b) of
the Securities Exchange Act.  Executive
further acknowledges that such determination is subject to review from time to
time by Parent and that such status is subject to change either as a result of
changes in Parent, the Company or MDI, or in the Executive’s duties with any of
them or in applicable rules and regulations.


 


3.                                       SITUS OF EXECUTIVE AND MDI.


 


Executive shall render
his services hereunder initially from offices located in Fort Worth, Texas
until his relocation to Atlanta, Georgia or its proximate vicinity (including
Alpharetta, Georgia).  Until the
operations of MDI are relocated from Fort Worth, Texas to the Company’s
headquarters in Alpharetta, Georgia, MDI shall provide such resources as are
reasonably necessary to support Executive in performing his duties consistent
with his residence and MDI’s operations in Fort Worth, Texas.  Executive acknowledges that MDI and its
operations shall be relocated to the Company’s headquarters in Alpharetta,
Georgia as promptly as is commercially practicable.  Upon the relocation of Executive’s primary
residence or the operations of MDI to Atlanta, Georgia or proximate vicinity
(including Alpharetta, Georgia), Executive shall be provided with an executive
office at the Company’s headquarters in Alpharetta, Georgia.


 


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4.                                       COMPENSATION.


 


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 or cause to
be paid or provided, as applicable, to him, and the Executive agrees to accept,
the following salary and other compensation and benefits:


 


(a)                                  Salary.  The Executive shall receive an initial base
salary, payable in accordance with the Company’s normal procedures, which need
not be made more frequently than in equal monthly installments, at the rate of
$250,000 per annum, hereinafter referred to as “Base Salary”).  The Executive’s Base Salary shall be reviewed
periodically and may be increased by the Company from time to time and the
Executive’s Base Salary shall be increased each year by an amount equal to the
percentage increases in base salary generally provided to the executive
officers of the Company.


 


(b)                                 Benefit
Plans.  The Executive shall be
offered and shall be permitted to participate in disability, medical, dental,
hospitalization, health, life and accident insurance plans upon terms and
conditions and at coverage levels and coverage scope (including spouses and
dependents) substantially equivalent, taken as a whole, to those from time to
time then generally available to executive officers of the Company.  The Executive also shall be entitled during
the term of his employment under this Agreement and thereafter to participate
in any retirement, savings or other plans of the Company (or any similar plans
of Parent in which executives of the Company generally are eligible to
participate) upon terms and conditions substantially equivalent, taken as a
whole, from time to time generally available to all executive officers of the
Company.


 


(c)                                  Bonus
Plans.  Executive shall be eligible
for calendar year 2003 and thereafter to be considered for annual performance
bonuses of up to 50% of his Base Salary based on the attainment of performance
objectives established by the Board of Directors of the Company and Executive’s
contributions to the attainment of those objectives.  Such bonuses, if any, shall be awarded and
payable in accordance with the Company’s management incentive plans applicable
to executive officers of the Company. 
The criteria for such bonus shall be based upon substantially the same
criteria as annual cash bonuses generally awarded to executive officers of the
Company, which may take into account intrinsic differences in job duties and
responsibilities.  Any actual bonus award
shall be in such amount and payable in such manner, and otherwise be on such
terms, as are determined by the Board of Directors of the Company in good
faith.  The Company agrees that after the
Closing of the Offer, Executive is entitled to receive a bonus of $125,000 for
services provided to MDI in 2002 prior to, and in connection with, the
Offer.  The Company agrees that such
bonus shall be payable by the Company following the Closing of the Offer,
contingent upon the Closing of the Offer. 
Such bonus shall be inclusive of all bonuses Executive shall be entitled
to receive, with respect to 2002, from MDI or the Company and its
Affiliates.  Executive agrees such bonus
will be reduced by the amount of any other bonus from either MDI or the Company
paid after the date of this Agreement in or with respect to the year 2002.
Executive represents and warrants that he has not and will not receive any
other bonus from MDI for 2002.


 


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(d)                                 Reimbursement
of Expenses.  The Company shall pay,
or reimburse Executive in accordance with the Company’s prevailing corporate
policy, for reasonable business travel, continuing education, and other
expenses incurred by Executive in performing his duties under this Agreement in
accordance with and subject to corporate policy and applicable Internal Revenue
Service regulations.


 


(e)                                  Stock
Options.  Executive shall be eligible
to be considered for an annual grant of stock options entitling the Executive
to purchase shares of Parent common stock. 
The criteria for such awards shall be based upon substantially the same
criteria as option grants generally awarded to executive officers of Parent,
which may take into account intrinsic differences in job duties and responsibilities.


 


(f)                                    Transportation
Allowance.  The Executive shall be
entitled to a transportation allowance on the basis of substantially the same
criteria as is generally employed with respect to executive officers of the
Company.  The Company shall furnish an
annual transportation allowance in an amount equal to that furnished to
executive officers of the Company, which amount is $16,536 as of the date of
this Agreement.  Such initial
transportation allowance shall be increased annually in the same amount of
increase as is generally granted to all executive officers of the Company.  The transportation allowance shall be payable
in equal monthly installments and pro rated for any partial year.


 


(g)                                 Vacation.  Executive shall be entitled to vacation time
and to days off for religious and personal reasons in accordance with the
Company’s policy for its executive officers based on credited years of service
as set forth in the Company Manual, after giving effect to Executive’s
employment with MDI as provided in Section 3(i);


 


(h)                                 Relocation
Assistance.  In connection with
Executive’s relocation of his residence to Atlanta, Georgia or the proximate
vicinity, including Alpharetta, Georgia (“Atlanta
Metropolitan Area”), the Company will, for such relocation,
reimburse Executive for the following, which Executive acknowledges may be
taxable to Executive:


 


(i)                                     usual
and customary expenses incurred if Executive sells his home himself or through
a broker; however, reimbursement for the broker’s commission (if Executive utilizes
the services of a broker) may not exceed six (6) percent of the sales
proceeds;


 


(ii)                                  difference
between the cost basis of Executive’s current Fort Worth, Texas home (including
documented improvements) and the actual sales price of such home not to exceed
$50,000; provided, however, that this subsection (ii) shall only
apply with respect to a sale made within one (1) year of the Commencement
Date and so long as Executive has used his reasonable best efforts to sell his
home at prevailing market prices;


 


(iii)                               reasonable
expenses incurred in moving furniture, normal household goods and personal
belongings to the new location and incidental expenses related to the move;


 


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(iv)                              reasonable
expenses (including travel and hotel) while house-hunting, including four trips
to the new location with Executive’s spouse and children;


 


(v)                                 reasonable
and customary closing costs incurred in buying Executive’s new home; and


 


(vi)                              reasonable
temporary living expenses incurred while awaiting occupancy in Executive’s new
dwelling.


 


(i)                                     Tenure
Considerations.  For purposes of
determining Executive’s rights and entitlements under any provision of this Section 4,
his tenure with and service to MDI or its subsidiaries during all periods prior
to the Commencement Date shall be given full consideration and weight from and
to the extent generally permitted by the terms of any benefit plan and
applicable law; provided, however, that no such tenure or service
need be recognized with respect to any employee benefit plan if it would result
in any disqualification of any employee benefit plan, result in any
determination that any employee benefit plan is “top heavy” or result in any
other material adverse effect on any employee benefit plan or the participants
therein.


 


(j)                                     Stock
Options.  The Company will recommend
to the Compensation Committee of Parent that Executive be granted, as of the
Commencement Date, options to acquire 100,000 shares of the Class A Common
Stock of Parent; such options to be awarded pursuant to a stock option award
agreement of Parent containing the same terms as are generally applicable to
other executive officers of the Company.


 


(k)                                  No
Additional Compensation for Services in Multiple Capacities.  The remuneration and benefits set forth in
this Section 4 shall be the only compensation payable to Executive
with respect to his employment hereunder, and Executive shall not be entitled
to receive any compensation in addition to that set forth in this Section 4
for any services rendered by him in any capacity to the Company or any
Affiliate of the Company unless agreed to in writing by the Company or such
Affiliate of the Company.  The Company
may change, or discontinue any such benefits; provided, however,
that so long as any benefit is made available to corporate officers or
employees generally, such benefit will be extended to Executive on
substantially the same terms such benefit is made available to other executive
officers or employees as a whole.


 


5.                                       INDEMNITY, PROFESSIONAL AND OFFICERS LIABILITY
INSURANCE.


 


(a)                                  Indemnity.  The Company agrees to indemnify and save
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 (i) Executive’s status as, or as a result of his having been an
officer or director of the Company or any Affiliate of Parent, in each case,
from and after the date hereof, or (ii) the performance bonds issued prior
to the date of this Agreement and set forth on Schedule “A” hereto
(the “Performance Bonds”) in each
case, to the full extent permitted by law. 
Executive represents and warrants that no claim or demand has been
asserted or, to his knowledge, has been threatened to be asserted with respect
to such Performance Bonds.


 


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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 Articles of
Incorporation and By-Laws of the Company to the extent permitted by law.  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 Articles 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 Articles of Incorporation or By-Laws to
provide for different terms, conditions and provisions of indemnity after the
effective date hereof, Executive shall be 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. Subject to applicable law, 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 minimize such legal
fees, but consistent with providing an adequate defense of Executive.


 


(b)                                 Officers
and Directors’ Liability Insurance. 
The Company agrees to provide, or cause Parent to provide, at no expense
to the Executive, insurance insuring Executive in his capacity as an officer
and/or director of the Company (and/or as an officer or director of any
controlled Affiliates of the Parent for which Executive serves in such
capacities) as a consequence of claims arising out of Executive’s service as an
officer and/or director of the Company and/or as an officer or director of any
Affiliates of Parent for which Executive serves in such capacities as may be
specified from time to time, in each case, from and after the date of this
Agreement in such form and amount substantially equal to that presently
maintained by Parent for or covering executive officers of the Company or in
such other form and amount as Parent may, from time to time, determine are
reasonable and appropriate.  It is
expressly agreed that this obligation to provide insurance is not intended to
require insurance for, or intended to cover, prior acts at MDI which are the
subject of a separate obligation under the terms of the Merger Agreement.


 


6.                                       TERMINATION OF EMPLOYMENT BY COMPANY FOR CAUSE.


 


(a)                                  The
Company may terminate Executive’s employment at any time for “Cause” (as
defined below), but only after a written notice in form and substance, as
approved by the Chief Executive Officer of the Company or the Chief Executive
Officer of Parent, and materially complying with Section 6(b) below
(a “Termination Notice”) shall be
delivered to Executive and any applicable cure period prescribed below has
passed.


 


(b)                                 The
Termination Notice shall (i) set forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of Executive’s
employment (the


 


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“Statement of Cause”); and (ii) if
applicable, stating that Executive has right to cure and any time period by
which such cure must occur.


 


(c)                                  For
purposes of this Agreement:


 


(i)                                     “Cause” shall mean: (a) plea of guilty or nolo
contendere or conviction of Executive of a felony or plea of guilty or nolo
contendere or conviction of Executive of any other crime involving moral
turpitude (excluding for the avoidance of doubt, minor traffic offenses); (b) the
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 any of its Affiliates; (c) the engaging by Executive in
misconduct materially injurious to the Company or any of its Affiliates with
respect to which (1) Executive knew or reasonably should have known that
such conduct likely would result in more than de minimis financial injury to
the Company or any of its Affiliates, and (2) such conduct actually
results in more than de minimis injury to the Company or any of its Affiliates;
(d) the engaging by Executive in wrongful conduct which is reasonably likely
to have a material adverse effect on an application or existing license issued
by any governmental entity or on the likelihood that any Governmental Entity
will issue a Gaming Approval to the Parent or any of its Affiliates, where such
conduct cannot be halted or cured in a manner which will prevent such material
adverse effect; (e) Executive is expressly precluded from having any
continuing interest in or relationship with the one or more of the Company or
any of its Affiliates as a condition to, or the continued validity of, any
Gaming Approval by any Government Entity; (f) intoxication with alcohol or
drugs while on the business of the Company or any of its Affiliates during
regular business hours, except in cases where alcohol is served at sanctioned
office functions, such as holiday parties; (g) a knowing or reckless
violation by Executive of any law, rule or regulation in the course of
performance of any duties hereunder that would reasonably be deemed to cause
harm, or reasonably be deemed likely to cause harm to the Company or the
controlled Affiliates of Parent; (h) an act of disloyalty to the Company
or any of its Affiliates by Executive which is detrimental to any material
extent or in any material manner to the welfare of the Company or any of its
Affiliates; (i) the willful failure or refusal of Executive to follow the
reasonable directives of the Board of Directors of the Company or MDI or of the
Chief Executive Officer of the Company or its Parent; (j) any intentional
or reckless conduct by Executive which constitutes a material violation of the
policies of the Company or any of its Affiliates that are made known to him;
(k) any intentional or reckless conduct by Executive which causes Parent or any
of its Affiliates to violate any law, rule or regulation applicable to
Parent or any of its Affiliates; (l) if, at any time beginning two (2) years
after the Commencement Date, Executive’s material or substantial failure in the
reasonable good faith opinion of the Company, to adequately and properly
perform Executive’s job duties, following notice and an opportunity to cure if
such conduct is reasonably susceptible to cure; (m) any material breach by
Executive of any representation or warranty of Executive contained in this
Agreement following notice and an opportunity to cure if such conduct is
reasonably susceptible to cure.


 


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(ii)                                  “Gaming Laws” shall mean any Federal, state, local or foreign
statute, ordinance, rule, regulation, permit, consent, registration,
qualification, finding of suitability, approval, license, judgment, order,
decree, injunction or other authorization, including any condition of
limitation placed thereon, governing or relating to the current or contemplated
lottery and other gaining activities and operations of Company or any of the
controlled Affiliates of Parent.


 


(iii)                               “Governmental Entity” shall mean a court, arbitral tribunal,
administrative agency or commission or other governmental or other regulatory
authority or agency.


 


(d)                                 In
the event Executive shall be terminated for Cause, Executive shall be entitled
to all salary actually earned prior to termination, pay for all vacation
accrued prior to termination, all stock options vested prior to or vesting upon
termination, all bonuses vested prior to or vesting upon termination, all
restricted shares vested prior to or vesting upon termination and
reimbursements of all allowable expenses incurred prior to the
termination.  No other severance pay or
other consideration would be owing in the event of termination pursuant to this
Section 6 for Cause.


 


7.                                       TERMINATION OF EMPLOYMENT IN THE EVENT OF
EXECUTIVE’S DISABILITY.


 


(a)                                  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, in each case, on a full-time basis
for one hundred eighty (180) business days in the time periods specified
below.  Accordingly, if, in the
reasonable, good faith opinion of the Board, as a result of Executive’s
incapacity due to physical or mental illness, (i) Executive shall have
been permanently disabled, within the meaning of the applicable disability
policy then maintained for the benefit of Executives of the Company (and the
insurance company shall not have disputed such determination), or (ii) if
no such disability policy shall be in force and effect covering Executive, (A) Executive
shall have been absent from his duties with the Company on a full time basis
for one hundred eighty (180) consecutive business days or for shorter periods
aggregating one hundred eighty (180) business days during any 52-week period,
and, 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 or (B) Executive shall be entitled to disability
retirement benefits under the federal Social Security Act, then Executive’s
employment shall be terminated for “Disability.”


 


(b)                                 If
Executive’s employment is terminated for Disability, then Executive shall not
be entitled to receive severance benefits under this Agreement and Executive
shall be compensated pursuant to the provisions of this Section 7
as follows: (i) Executive’s Base Salary shall continue at the level as
provided in Section 4(a) for a period of twelve (12) months from
the date of termination and the Company shall pay all vacation benefits accrued
to the date of termination; (ii) all disability, life, medical and dental
insurance provided by the Company to


 


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Executive, his
spouse and dependents prior to termination shall continue for a period of
twelve (12) months from the date of such termination; and (iii) Executive
shall also be entitled to retain all stock options vested prior to or vesting
upon termination, all unpaid non-performance-based bonuses which are vested
prior to or vesting upon termination, together with that pro rata portion of
any performance based bonus (whether or not vested) for the then-current fiscal
year prorated to date of termination (based upon performance against target
through the date of termination for disability), all restricted stock vested
prior to or vesting upon termination, reimbursement of all allowable expenses
incurred prior to the date of termination and all other benefits vested prior
to or vesting upon termination for disability.


 


(c)                                  Payments
of Base Salary under this Section 7 shall be reduced by any
disability payments provided Executive as a result of any disability plan
sponsored by the Company or its Affiliates providing benefits to Executive, if
the payments to Executive hereunder and thereunder would exceed one hundred
percent (100%) of Executive’s Base Salary.


 


(d)                                 Executive’s
employment shall not be terminable under this Section 7 if
Executive is absent from his duties upon a bona fide leave of absence granted
by the Company other than pursuant to physical or mental illness.


 


8.                                       TERMINATION OF EMPLOYMENT IN THE EVENT OF DEATH
DURING EMPLOYMENT.


 


(a)                                  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, compensation which would
otherwise be payable to Executive pursuant to this Agreement up to the end of
the month in which his death occurs.  The
compensation payable under this Section 8 also shall include all
stock options vested prior to or vesting upon termination, all unpaid
non-performance based bonuses which are vested prior to or vesting upon
termination, together with the portion of any performance-based bonus (whether
or not vested) for the then-current fiscal year prorated to the date of death
(based upon performance against target through the date of death), all
restricted stock and all other benefits vested prior to or vesting upon
termination, reimbursement of all expenses accrued prior to Executive’s death,
and all other benefits vested prior to or vesting upon Executive’s death.


 


(b)                                 The
Executive shall have the right to name, from time to time, any one person as
beneficiary hereunder or, with the consent of the Board of Directors of the
Company, he may make other forms of designation of beneficiary or
beneficiaries. The Executive’s designated beneficiary or personal
representative, as the case may be, shall accept the payments provided for in
this Section 8 in full discharge and release of the Company of and
from any further obligations under this Agreement (other than to pay
compensation or benefits which accrued prior to the date of such termination).


 


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9.                                       TERMINATION OF EMPLOYMENT WITHOUT CAUSE OR IN
CONNECTION WITH CONSTRUCTIVE TERMINATION.


 


(a)                                  Should
the Company (i) change the office and position Executive holds with the
Company, other than to a higher or equivalent office and position to which
Executive agrees, such agreement not to be unreasonably withheld, (ii) so
long as the Company maintains the separate corporate existence of MDI, (iii) change
the office held by Executive with MDI, so long as the Company maintains the
separate corporate existence of MDI (or otherwise maintains MDI as a distinct
operating division), (iv) so long as the Company maintains the separate
corporate existence of MDI, fail to elect Executive to the Board of Directors
of MDI, (v) make any reduction in Executive’s Base Salary, (vi) adversely
change the methodology (taken as a whole) pursuant to which Executive’s bonus
is determined or make any other material adverse change in any of Executive’s
employee benefits (other than any such benefit which is immaterial or
inconsequential or any change which is required by law), (vii) make such
change or changes as would, taken as a whole, result in a material diminution
in the functions, duties and responsibilities of Executive’s position as an
officer of the Company or, so long as the Company maintains the separate
corporate existence of MDI (or otherwise maintains MDI as a distinct operating
division), in the functions, duties and responsibilities of Executive’s
position as an officer of MDI, or (viii) materially reduce the seniority
of the person or persons within the Company to whom Executive reports as of the
date hereof (for the avoidance of doubt, recognizing, however, that no such
changes shall have occurred as a result of the change in the status of MDI to
that of a wholly-owned, direct or indirect subsidiary of Company as a result of
the Merger, or, subsequent to the Merger to that of a division of the Company,
including, without limitation, for the avoidance of doubt, the reconstitution
of the Board of Directors of MDI in a customary or appropriate manner for a
subsidiary corporation or the elimination or diminution of those functions,
duties or responsibilities associated with various positions at (1) a
public company which are assumed by a parent company in a consolidated group of
companies, or (2) at a company which becomes a division of another
company), or (vi) breach this Agreement in any material respect which is
not cured within thirty (30) days after written notice from Executive to the
Company (collectively, a “Constructive Termination”),
then Executive shall have sixty (60) days from the consummation of the event or
period described above to deliver to the Company written notice that his
employment has been constructively terminated (a “Constructive Termination Notice”) and his employment
hereunder shall then terminate on the 60th day after such
Constructive Termination Notice has been delivered.  Any such Constructive Termination Notice
shall automatically constitute Executive’s resignation from all positions with
the Company, Parent, and all controlled Affiliates of Parent, whether as an
officer, director or employee.


 


(b)                                 In
the event of a Constructive Termination and Executive’s resignation from all
positions with the Company and its Affiliates, or any termination of Executive
from his position with MDI without Cause (other then in the event of Executive’s
resignation, death or disability), the Company shall pay to Executive as
severance benefits under this Section 9:


 


(i)                                     a
lump sum on the first regularly scheduled payroll date following the Date of
Termination, in an amount equal to the sum of (a) Executive’s full Base
Salary through the Date of Termination to the extent such Base Salary has not
previously been paid through such date, at the rate in effect at the time
written notice of termination is given and (b) any bonus or awards
theretofore made to Executive which have not yet been paid to Executive.


 


11





















 


(ii)                                  no
later than ninety (90) days following the end of the fiscal year in which the
Date of Termination occurs, that pro rata portion of any bonus or award which
would have been payable to Executive had Executive remained in employment with
the Company during the entire year in which the Date of Termination occurred;
and


 


(A)                              if
such termination without cause or constructive termination occurs after the date of this Agreement, but on or prior to the date of the
first (1st) anniversary thereof, a sum each month for a period
of three (3) years after the Date of Termination equal to one-twelfth
(1/12th) of Executive’s Base Salary then in effect;


 


(B)                                if
such termination without cause or constructive termination occurs after the
date of the first (1st) anniversary of this Agreement, but on or
before the date of the second (2nd) anniversary thereof, a sum each month for a
period of two (2) years after the Date of Termination, equal to one
twelfth of Executive’s Base Salary then in effect; and


 


(C)                                if
such termination without cause or constructive termination occurs after the
date of the second (2nd) anniversary of this Agreement but on or before the
date of the third (3rd) anniversary thereof, a sum each month for a period of
one (1) year after the Date of Termination, equal to one twelfth of
Executive’s Base Salary then in effect.


 


(c)                                  As
a further severance benefit, the Company, at its expense, shall maintain in
full force and effect, for the continued benefit of Executive, his spouse and
dependents until the earliest of (i) during the applicable period in which
severance is being paid under Section 9(b)(iii) (the “Severance Payment Period”), (ii) eighteen months after
Executive’s Date of Termination if at such time Executive is uninsurable under
the Company’s life, accident, medical and dental insurance plans, or (iii) the
date Executive becomes entitled to participate in similar plans, programs or
arrangements provided by Executive’s subsequent employer:  all life, accident, medical and dental
insurance benefit plans and programs or arrangements in which Executive was
entitled to participate immediately prior to the Date of Termination provided
that Executive’s continued participation is possible under the general terms
and provisions of such plans and programs. 
In the event that Executive’s participation in such plan or program is
legally or contractually barred, the Company shall use commercially reasonable
efforts to provide Executive for a period of not less than the Severance Period
(eighteen (18) months if the reason Executive’s participation is barred is that
Executive is uninsurable) following Executive’s Date of Termination, with
benefits substantially similar to those which Executive would have been
entitled to receive under such plans and programs or, if it is commercially
unreasonable for the Company to do so, then the Company will pay to Executive
in a lump sum an amount of cash equal to the cost to the Company of previously
providing to Executive the benefits provided to Executive under Section 4(b) (but
which it is commercially unreasonable for the Company to provide or cause to be
provided) for the period specified or if Executive’s benefits can be


 


12





















 


continued by a
COBRA election, and Executive makes such election, then the Company shall pay
the amount of increased premiums arising as a result of such election.  In no event shall the Company’s liability
under this Section 9(c) exceed the sum of applicable COBRA
premiums for such benefits plus $25,000.


 


(d)                                 For
the avoidance of doubt, Executive expressly acknowledges and agrees that all
amounts payable or distributable under that certain Escrow and Shareholder’s
Agreement between Executive and Company and the Escrow Agent thereunder, dated
as of an even date herewith, do not constitute compensation or other
remuneration to Executive for any purpose under this Agreement.


 


10.                                 LEGAL FEES; MITIGATION OF DAMAGES; SET OFF.


 


(a)                                  The
Company shall reimburse such costs, legal fees and expenses as may be
reasonably incurred by Executive in contesting or disputing any such
termination, or in seeking to obtain or enforce any right or benefit provided
by this Agreement if Executive is successful in any material respect in
connection with enforcing any of Executive’s rights or the Company’s
obligations under this Agreement in such dispute.


 


(b)                                 The
amount of any payment by the Company provided for in this Agreement shall be
reduced by any compensation earned by Executive as the result of employment by
another employer after the Date of Termination through December 31, 2005
or if the term of this Agreement is extended, through the then current
expiration date of this Agreement.  The
Company and its subsidiaries and Affiliates shall have the right to set off
payments owed to Executive under this Agreement against amounts owed or claimed
to be owed by the Executive to any of such persons under this Agreement or
otherwise, in each case, to the maximum extent permitted by law.


 


11.                                 SUCCESSORS; BINDING AGREEMENT.


 


(a)                                  The
Company will use commercially reasonable efforts to cause any successor
(whether direct or indirect, by purchaser, merger, consolidation or otherwise)
to the business and/or assets of the Company to expressly assume and agree to
perform this Agreement in the same manner and to the same extent that the
Company would be required to perform it if no such succession had taken
place.  Failure of the Company to obtain
such agreement shall constitute a material breach of this Agreement and shall
entitle Executive to compensation from the Company in the same amount and on
the same terms as Executive would be entitled hereunder if such succession had
not occurred, except that for purposes of implementing the foregoing, the date
of which any such succession becomes effective shall be deemed the Date of
Termination.  As used in this Agreement, “Company”
shall mean the Company as hereinbefore defined and any successor to its
business and/or assets as aforesaid which executes and delivers the agreement
provided for in this Section 11 or which otherwise becomes bound by
all the terms and provisions of this Agreement by operation of law.


 


(b)                                 This
Agreement shall inure to the benefit of and be enforceable by Executive’s
personal or legal representatives, executors, administrators, successors,
heirs,


 


13





















 


distributees,
devisees and legatees.  If Executive
should die while any amounts are still payable to Executive hereunder, all such
amounts, unless otherwise provided herein, shall be paid in accordance with the
terms of this Agreement to Executive’s devisee, legatee, or other designee or,
if there be no such designee, to Executive’s estate.


 


12.                                 NOTICE.


 


All notices and other
communications to be given or otherwise to be made to any party to this
Agreement shall be deemed to be sufficient if contained in a written instrument
delivered in person or duly sent by certified mail or by a recognized national
courier service, postage or charges prepaid, (a) to the Company at 1500
Bluegrass Lakes Parkway, Alpharetta, Georgia 30004, (b) to the Executive,
at the address set forth on the last page of this Agreement, or (c) to
such other replacement address as may be designated in writing by the addressee
to the addressor, or if no such address is given, or if such address is
different from that set forth on the last page of this Agreement, then to
the address last given by Executive to Company for payroll purposes.


 


13.                                 NO OUTSTANDING INDEBTEDNESS; TERMINATION OF OLD
EMPLOYMENT AGREEMENT.


 


(a)                                  Executive
shall cause his Second Amended and Restated Employment Agreement between
Executive and Media Drop-In Productions, Inc., dated August 8, 1997,
as amended by the First Amendment to such agreement dated September 21,
1998 (the “Old Employment Agreement”) to be terminated
as of the Commencement Date (i) such that no compensation shall be due to
him except for (A) Executive’s accrued but unpaid regular salary up until
the Commencement Date, and (B) any reimbursement of accrued but unpaid
expenses not to exceed $3,000, and (ii) under terms whereby no additional
rights to future payments or other compensation shall inure to Executive,
whether as a result of the termination of Executive’s Old Employment Agreement,
the Merger Agreement, or the transactions contemplated thereby or hereby,
including, without limitation, any rights arising from, or as a result of, a
change in control of MDI.  Executive
warrants and represents there are no other agreements between Executive and his
controlled Affiliates or his immediate family members pursuant to which
Executive, such controlled Affiliates or such immediate family members of
Executive are entitled to any compensation from MDI or any of its controlled
Affiliates, except for that certain Amended and Restated Agreement between Media
Drop-In Productions, Inc. and 1010 Productions, Inc. dated as of August 8,
1994, as amended by that certain first amendment thereto dated as of October,
2002.  In particular, Executive shall
waive and by this Agreement does hereby further waive all rights to any
compensation, including, without limitation, any bonus or other payment under,
or in lieu of, the Old Employment Agreement, including, without limitation, the
“2% of gross revenue” bonus contemplated thereunder, except (i) for
ordinary salary due under the terms of the Old Employment Agreement as of the
Commencement Date and documented expenses as of the Commencement Date
reasonably incurred and which are consistent with past corporate practice of
MDI and its subsidiaries, and (ii) the $125,000 bonus permitted to be paid
by MDI pursuant to Section 4(c) hereof.  Executive represents and warrants that,
except as contemplated by the preceding sentence, no compensation due to him
under his Old Employment Agreement has been deferred or not otherwise paid in
the ordinary course of business of MDI. 
Executive further


 


14





















 


warrants and
represents that no indebtedness is owed by the Company to him or any member of
his immediate family under any loan, note or other similar agreements.


 


(b)                                 To
the extent that any applicable state or federal law, rule or regulation
confers upon Executive any greater benefit or right than that set forth in this
Agreement, such law, rule or regulation shall control in lieu of the provisions
hereof relating to such benefit or right.


 


14.                                 VALIDITY; SEVERABILITY.


 


The invalidity or unenforceability of any provision of this Agreement
shall not affect the validity or enforceability of any other provision of this
Agreement, which shall remain in full force and effect.  If any provision of this Agreement is held to
be illegal, invalid, or unenforceable under present or future laws effective,
such provision shall be fully severable and this Agreement shall be construed
and enforced as if such illegal, invalid, or unenforceable provision had never
comprised a part hereof; and the remaining provisions hereof shall remain in
full force and effect and shall not be affected by the illegal, invalid, or
unenforceable provision or by its severance herefrom.  Furthermore, in lieu of such illegal,
invalid, or unenforceable provision, there shall be added automatically as a
part of this Agreement a provision as similar in terms to such illegal, invalid
or unenforceable provision as may be possible and still be legal, valid or
enforceable.  It is acknowledged that any
payment which may be made by the Company to Executive under this Agreement is
in the nature of employment and/or severance and not a penalty payment.  Should the obligation to make any payment hereunder
be held to be void or voidable as a penalty by a final non-appealable judgment,
this Agreement shall be deemed to provide an obligation on the part of the
Executive to render such consulting services as the Company may reasonably
request during the period of and in exchange for such payments as would
otherwise have been made by the Company as severance benefits and the parties
agree such payments shall constitute reasonable compensation for the value of
Executive’s services during such period.


 


15.                                 CONFIDENTIALITY AND RELATED COVENANTS.


 


(a)                                  The
term “Confidential Information”
as used in this Agreement, shall mean and include any information, data and
know-how relating to the business of Parent and its controlled Affiliates that
is disclosed to Executive by Parent or any of its controlled Affiliates,
including the Company, or known by him as a result of his relationship with
Parent or any of its controlled Affiliates, including the Company, and not
generally within the public domain (whether constituting a trade secret or not
and whether in tangible form or intangible form) or which the Parent or its
controlled Affiliates, including the Company, have taken reasonable measures to
protect, including, without limitation, the following:  business methods, business plans, data bases,
computer programs, designs, models, operating procedures, financial
information; supply and service information; marketing information; personnel
information; customer information; customer product, research and development operations,
game, branding, and pricing strategies (including prices, costs, sales and
terms), processes, techniques; and all other information with respect to any
corporate affairs that Parent or any of its controlled


 


15





















 


Affiliates treat
or have agreed to treat as confidential, whether owned, developed or possessed
by the Parent or its controlled Affiliates, including the Company.


 


(b)                                 During
the term of his employment under this Agreement, and thereafter during the
Severance Payment Period (but, in no event, longer than two (2) years
after the term of this Agreement), the Executive will not use or disclose,
furnish or make accessible to anyone any Confidential Information, except (i) in
the course of performing his duties for the Company or its Affiliates, (ii) with
the Company’s express written consent, (iii) to the extent that any such
information generally is in the public domain other than as a result of his
breach of any of his obligations hereunder, or (iv) where required to be
disclosed by court order, subpoena or other government process.


 


(c)                                  Notwithstanding
anything to the contrary contained in this Section 15, in the event
that the Executive is required to disclose any Confidential Information by court
order or decree or in compliance with the rules and regulations of a
governmental agency or in compliance with law, the Executive will provide the
Company with prompt notice of such required disclosure so that the Company may
seek an appropriate protective order and/or waive the Executive’s compliance
with the provisions of this Section 15.  If, in the absence of a protective order or
the receipt of a waiver hereunder, the Executive is advised by his counsel that
such disclosure is necessary to comply with such court order, decree, rule,
regulation or law, he may disclose such information without liability
hereunder.


 


16.                                 DEDUCTIONS AND WITHHOLDING.


 


The Executive agrees that
the Company and/or its subsidiaries or affiliated companies shall withhold from
any and all compensation required to be paid to the Executive pursuant to this
Agreement all Federal, state, local and/or other taxes which the Company
determines are required to be withheld in accordance with applicable statutes
and/or regulations from time to time in effect.


 


17.                                 ENTIRE AGREEMENT; GOVERNING LAW; AMENDMENT; WAIVER.


 


At
the Commencement Date, this Agreement sets forth the entire understanding of
the parties and supersedes all prior agreements or understandings, whether
written or oral, with respect to the subject matter hereof, with respect to
Company and its Affiliates on the one hand and Executive on the other hand,
including any prior employment or severance benefit agreement, including the
Old Employment Agreement.  No agreements
or representations, oral or otherwise, express or implied, with respect to the
subject matter hereof have been made by either party which are not set forth
expressly in this Agreement.  The
validity, interpretation construction and performance of this Agreement shall
be governed by the laws of the State of Delaware without giving effect to the
conflict of laws principles thereof, and any applicable federal laws of the
United States of America.  No terms,
conditions, warranties, other than those contained herein, and no amendments or
modifications hereto shall be binding unless made in writing and signed by the
parties hereto.  No provisions of this
Agreement may be modified, waived or discharged unless such waiver, modification
or discharge is agreed to in writing and signed by Executive and the Chief
Executive Officer of the Company or such executive of the


 


16





















 


Company as may be specifically designated by the Chief Executive Officer
of the Company.  No waiver by either
party hereto at any time of any breach by the other party hereto of, or
compliance with, any condition or provision of this Agreement to be performed
by such other party shall be deemed a waiver of similar or dissimilar
provisions or conditions at the same or at any prior or subsequent time.


 


18.                                 BINDING EFFECT.


 


This
Agreement shall extend to and be binding upon and inure to the benefit of the
parties hereto, their respective successors and assigns; provided, however,
that neither party shall have the right to assign, transfer or convey this
Agreement.


 


19.                                 TITLES.


 


Titles
of the headings herein are used solely for convenience and shall not be used
for interpretation or construing any word, section, clause, paragraph, or
provision of this Agreement.


 


20.                                 COUNTERPARTS.


 


This
Agreement may be executed in any number of counterparts, and by different
parties hereto in separate counterparts, each of which shall be deemed to be an
original and all of which taken together shall constitute one and the same
Agreement.  Delivery of an executed
counterpart of a signature page to this Agreement by telecopier shall be
effective as delivery of a manually executed counterpart of this Agreement.


 


21.                                 ENFORCEMENT.


 


The
provisions of this Agreement may be enforced by all legal and equitable
remedies available to the parties including specific performance and
injunction.  Nothing herein shall be
construed as prohibiting either party from pursuing any other remedies
available to it, including recovery of damages.


 


22.                                 CERTAIN DEFINITIONS.


 


“Affiliates” has the meaning set forth in Rule 12b-2 of
the Securities Exchange Act of 1934, as amended.


 


“Board” means the Board of Directors of the Company.


 


“Securities Exchange Act” means the
Securities Exchange Act of 1934, as amended and the rules and regulation
promulgated thereunder.


 


23.                                 CONSTRUCTION.  Each of the parties has agreed to
the use of the particular language of the provisions of this Agreement and all
attached exhibits, and any questions of doubtful interpretation shall not be
resolved solely by any rule or interpretation against the draftsman but
rather in accordance with the fair meaning thereof.


 


17





















 


24.                                 SPECIAL TERMINATION. 
Notwithstanding the term set forth in Section 1 of this
Agreement, in the event the Merger Agreement terminates for any reason prior to
the consummation of the Offer contemplated thereby, this Agreement shall
automatically terminate as of the date of the termination of the Merger
Agreement (the “Special Termination Date”)
without further obligation on the part of any party hereto.


 


IN
WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date
and year first written above.


 


	
   

  	
  SCIENTIFIC
  GAMES INTERNATIONAL, INC.

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Its:

  	
   

  
	
   

  	
  EXECUTIVE

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  STEVEN M. SAFERIN

  
	
   

  	
  (PRINT NAME)

  
	
   

  	
   

  
	
   

  	
  4041
  Shadow Drive

  
	
   

  	
  Fort
  Worth, Texas  76116

  
	
   

  	
  (ADDRESS FOR NOTICE)

  



 


18





















 


SCHEDULE A


 


	
  Loss Payee

  	
   

  	
  Amount of Bond

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  State of
  Wisconsin

  	
   

  	
  $

  	
   

  	
  200,000

  	
   

  
						



 


19