EXHIBIT 10.2


 


SCIENTIFIC GAMES CORPORATION


 


INDUCEMENT STOCK OPTION GRANT
AGREEMENT 


 


FOR MICHAEL CHAMBRELLO


 


THIS
AGREEMENT, made as of the 1st day of July, 2005, between SCIENTIFIC GAMES
CORPORATION (the “Company”) and MICHAEL CHAMBRELLO (the “Participant”).


 


WHEREAS,
the Compensation Committee (the “Committee”) administers the Company’s equity
incentive compensation programs and is authorized to grant stock options and
other awards, including to newly hired employees; and


 


WHEREAS,
the Participant was granted the option evidenced by this Agreement as of the
date hereof as an inducement to the Participant to become an employee of the
Company as of that date;


 


NOW,
THEREFORE, in consideration of the premises and the mutual covenants
hereinafter set forth, the parties hereto hereby agree as follows.


 


1.             Grant of Options. Pursuant to, and subject to, the terms
and conditions set forth herein, the Participant is hereby granted an option
(the “Option”) to purchase 1,000,000 shares of the Company’s Class A
Common Stock, $.01 par value per share (the “Common Stock”).  The Option does not constitute an “incentive
stock option” within the meaning of Section 422 of the Internal Revenue
Code of 1986.


 


2.             Grant Date.  The Grant
Date of the Option granted hereby is July 1, 2005.


 


3.             Definitions.  For purposes
of this Agreement, the following terms shall be defined as set forth below:


 


(a)           “Beneficiary” means the person, persons,
trust, or trusts which may be designated by the Participant in a written
beneficiary designation filed with the Committee to receive the benefits
specified hereunder upon the Participant’s death. If, upon the Participant’s
death, there is no designated Beneficiary or surviving designated Beneficiary,
then the term Beneficiary means the person, persons, trust, or trusts entitled
by will or the laws of descent and distribution to receive such benefits.


 


(b)           “Exchange Act” means the Securities
Exchange Act of 1934, as amended from time to time, including rules thereunder
and successor provisions and rules thereto.


 


(c)           “Fair Market Value” means the fair market
value of Common Stock, as determined by the Committee or under procedures
established by the Committee. Unless otherwise determined by the Committee, the
Fair Market Value of Common Stock shall be the average of the high and low
sales prices of the Common Stock on a given date or, if there are no sales on
that date, on the latest previous date on which there were sales, reported for
composite transactions in securities listed on the principal trading market on
which the Common Stock is then listed.


 


4.             Vesting Dates. This Option shall vest and become
exercisable in the following cumulative installments:


 


	
  Number
  of Shares

  	
   

  	
  Dates

  	
   

  
	
  333,333

  	
   

  	
  July 1, 2006

  	
   

  
	
  333,333

  	
   

  	
  July 1, 2007

  	
   

  
	
  333,334

  	
   

  	
  July 1, 2008 (the “Last Vesting Date”)

  	
   

  



 


5.             Exercise Price. The exercise price per share of each
share with respect to which this Option is granted is $27.01, which is not less
than the Fair Market Value of a share of Common Stock on the Grant Date.


 


6.             Expiration Date; Effect of Termination of
Employment.


 


(a)           Subject to the provisions of this
Agreement and the Employment Agreement between the Participant and the Company,
dated as of July 1, 2005 (the “Employment Agreement”), the Option granted
hereby shall expire on July 1,


 





















 


2015 (the “Expiration Date”).


 


(b)           Subject to the provisions of this
Agreement and the Employment Agreement, in the event the employment of the
Participant is terminated:


 


(i)            for any reason other than for “Cause” (as
defined in the Employment Agreement) or due to the Participant’s death or
permanent disability (as defined in the Company’s long-term disability plan),
the Option, to the extent that it was exercisable immediately prior to the time
of termination of employment, shall remain exercisable until the earlier of (x)
the close of business on the 90th day after termination of employment and (y) the
Expiration Date, and the Option, to the extent that it was not exercisable immediately
prior to the time of termination of employment, shall expire at the close of
business on the date of termination of employment;


 


(ii)           due to the Participant’s death or
disability, the Option, to the extent that it was exercisable immediately prior
to death or termination of employment, shall remain exercisable by the
Participant or the Participant’s executor or administrator or Beneficiary (as
the case may be) until the earlier of (x) the first anniversary of the
Participant’s death or termination of employment and (y) the Expiration Date,
and the Option, to the extent that it was not exercisable immediately prior to
death or termination of employment, shall expire at the close of business on
the date of death or termination of employment; or


 


(iii)          for “Cause,” the Option shall expire at
the commencement of business on the date of termination of employment.


 


7.             Method of Exercise. The Option shall be exercisable in whole or in part
by delivering notice to the Company’s principal office in the manner specified
by the Company. Payment for shares of Common Stock purchased upon the exercise
of the Option shall be made on the effective date of such exercise either: (i) in
cash, by certified check, bank cashier’s check or wire transfer; or (ii) in
such other form as shall be acceptable to the Committee. Certificates for
shares of Common Stock purchased upon the exercise of an Option shall be issued
in the name of the Participant or his Beneficiary, as the case may be, and
delivered to the Participant or his Beneficiary, as the case may be, as soon as
practicable following the effective date of exercise of the Option.


 


8.             Administration.


 


(a)           Authority of the Committee. 
The Committee has full and final authority, in each case subject to and
consistent with the provisions of this Agreement, to administer the Option,
determine all matters relating to the Option, construe and interpret the Option
and this Agreement and correct defects, supply omissions, or reconcile
inconsistencies therein, and to make all other decisions and determinations as
the Committee may deem necessary or advisable for the administration of the
Option.  The Committee shall retain full
power and discretion to accelerate, waive or modify, at any time, any term or
condition of the Option that is not mandatory under this Agreement.


 


(b)           Limitation of Liability. 
The Committee and each member thereof shall be entitled to, in good
faith, rely or act upon any report or other information furnished to him or her
by any executive officer, other officer or employee of the Company or a
subsidiary, the Company’s independent auditors, consultants, or any other
agents assisting in the administration of the Option or this Agreement.  Members of the Committee and any officer or
employee of the Company or a subsidiary acting at the direction or on behalf of
the Committee shall not be personally liable for any action or determination
taken or made in good faith with respect to the Option, and shall, to the
extent permitted by law, be fully indemnified and protected by the Company with
respect to any such action or determination.


 


9.             General Provisions.


 


(a)           Compliance with Legal and Other
Requirements.  The Company may, to the extent deemed
necessary or advisable by the Committee, postpone the issuance or delivery of
Common Stock or payment of other benefits under the Option until completion of
such registration or qualification of such Common Stock or other required
action under any federal or state law, rule, or regulation, listing or other
required action with respect to any stock exchange or automated quotation
system upon which the Common Stock or other securities of the Company are
listed or quoted, or compliance with any other obligation of the Company, as
the Committee may consider appropriate, and may require the Participant to make
such representations, furnish such information and comply with or be subject to
such other conditions as the Company may consider appropriate in connection
with the issuance or delivery of Common Stock or payment of other benefits in
compliance with applicable laws, rules, and regulations, listing requirements,
or other obligations.


 


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(b)           Transferability.  The Option may
not be pledged, hypothecated or otherwise encumbered or subject to any lien,
obligation or liability of the Participant to any party, or assigned or
transferred by the Participant otherwise than by will or the laws of descent
and distribution, and the Option shall be exercised during the lifetime of the
Participant only by the Participant or, if the Participant is incapacitated, by
his guardian or legal representative. In the event that the Option is exercised
by the Participant’s guardian or legal representative, the exercise of the
Option shall not be effective unless and until the Company has received
evidence satisfactory to it as to the authority of such guardian or legal
representative. A Beneficiary or other person claiming any rights under the
Agreement from or through the Participant shall be subject to all terms and
conditions of this Agreement except as otherwise determined by the Committee,
and to any additional terms and conditions deemed necessary or appropriate by
the Committee.


 


(c)           Adjustments.  In the event
that any dividend or other distribution (whether in the form of cash, Common
Stock, or other property), recapitalization, forward or reverse split,
reorganization, merger, consolidation, spin-off, combination, repurchase, share
exchange, liquidation, dissolution or other similar corporate transaction or
event affects the Common Stock such that an adjustment is determined by the
Committee to be appropriate hereunder then the Committee shall, in such manner
as it may deem equitable, adjust any or all of (i) the number and kind of
shares of Common Stock or other securities subject to or deliverable in respect
of the outstanding Option and (ii) the exercise price, grant price or
purchase price relating to the Option, and/or make provision for payment of
cash or other property in respect of the Option.


 


(d)           Limitation on Rights Conferred. 
Neither this Agreement nor any action taken hereunder shall be construed
as (i) giving the Participant the right to continue in the employ or
service of the Company or a subsidiary, (ii) interfering in any way with
the right of the Company or a subsidiary to terminate the Participant’s
employment or service at any time, (iii) giving the Participant any claim
to be granted any award under any option or benefit Plan or to be treated
uniformly with other participants and employees, or (iv) conferring on the
Participant any of the rights of a stockholder of the Company unless and until
the Participant is duly issued or transferred shares of Common Stock in
accordance with the terms of the Option.


 


(e)           Fractional Shares.  No fractional
shares of Common Stock shall be issued or delivered pursuant to the
Option.  The Committee shall determine
whether cash or other property shall be issued or paid in lieu of such
fractional shares or whether such fractional shares or any rights thereto shall
be forfeited or otherwise eliminated.


 


10.           Taxes. The Company and any subsidiary is authorized to
withhold from the Option, any payment relating to the Option, including from a
distribution of Common Stock, or any payroll or other payment to the
Participant, amounts of withholding and other taxes due or potentially payable
in connection with the Option, and to take such other action as the Committee
may deem advisable to enable the Company and the Participant to satisfy
obligations for the payment of withholding taxes and other tax obligations
relating to the Option.  This authority
shall include authority to withhold or receive Common Stock or other property
and to make cash payments in respect thereof in satisfaction of a Participant’s
tax obligations, either on a mandatory or elective basis in the discretion of
the Committee.


 


11.           Securities Matters.  The exercise
of the Option granted hereby shall be effective only at such time as counsel to
the Company shall have determined that the issuance and delivery of shares of
Common Stock pursuant to such exercise is in compliance with all applicable
laws, regulations of governmental authority and requirements of any securities
exchange on which shares of Common Stock are traded. The Committee may, in its
sole discretion, defer the effectiveness of any exercise of the Option in order
to allow the issuance of shares of Common Stock pursuant thereto to be made
pursuant to registration or an exemption from registration or other methods for
compliance available under federal or state securities laws. The Committee shall
inform the Participant in writing of its decision to defer the effectiveness of
the exercise of the Option. During the period that the effectiveness of the
exercise of the Option has been deferred, the Participant may, by written
notice, withdraw such exercise and obtain the refund of any amount paid with
respect thereto.


 


12.           Delays or Omissions. No delay or omission to exercise any right, power or
remedy accruing to any party hereto upon any breach or default of any party
under this Agreement, shall impair any such right, power or remedy of such
party, nor shall it be construed to be a waiver of any such breach or default,
or an acquiescence therein, or of or in any similar breach or default
thereafter occurring, nor shall any waiver of any single breach or default be
deemed a waiver of any other breach or default theretofore or thereafter
occurring.  Any waiver, permit, consent
or approval of any kind or character on the part of any party of any breach or
default under this Agreement, or any waiver on the part of any party of any
provisions or conditions of this Agreement, must be in a writing signed by such
party and shall be effective only to the extent specifically set forth in such
writing.


 


13.           Integration. This Agreement, and the other documents referred to
herein or delivered pursuant hereto which form a part hereof, and the
Employment Agreement contain the entire understanding of the parties with
respect to its subject matter.  There are
no restrictions, agreements, promises, representations, warranties, covenants
or undertakings with


 


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respect to the subject matter hereof other than those
expressly set forth herein and in the Employment Agreement.  This Agreement and the Employment Agreement supersede
all prior agreements and understandings between the parties with respect to its
subject matter.


 


14.           Governing Law. This Agreement shall be governed by and construed
and enforced in accordance with the laws of the State of Delaware, without
regard to the provisions governing conflict of laws.


 


15.           Participant Acknowledgment. 
The Participant hereby acknowledges that all decisions, determinations
and interpretations of the Committee in respect of this Agreement and the
Option shall be final and conclusive.


 


IN WITNESS WHEREOF, the Company has caused this
Agreement to be duly executed by its duly authorized officer, and the
Participant has signed this Agreement on his own behalf, thereby representing
that he has carefully read and understands this Agreement, as of the day and
year first written above.


 


	
   

  	
  SCIENTIFIC GAMES
  CORPORATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
   Martin E. Schloss

  
	
   

  	
   

  	
   Vice President,
  General Counsel and Secretary

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  PARTICIPANT:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Michael Chambrello

  



 


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