Exhibit 10.56


 


EMPLOYMENT
AGREEMENT


 


This EMPLOYMENT
AGREEMENT (this “Agreement”) is made as of 8th day of August, 2005 (the “Effective Date”), by
and between SCIENTIFIC GAMES CORPORATION (“SGC”), a Delaware corporation or any
affiliate thereof, as indicated on the signature page (the “Company”) and
STEVEN WAYNE BEASON (“Executive”).


 


1.                                       Employment; Term. 
The Company hereby agrees to employ Executive, and Executive hereby
accepts employment with the Company, in accordance with and subject to the
terms and conditions set forth herein. 
The term of employment of Executive under this Agreement (the “Term”)
shall be the period commencing on August 8, 2005 and ending on August 8,
2008, and as may be extended in accordance with this Section 1 and subject
to earlier termination in accordance with Section 5.  The Term shall be extended automatically
without further action by either party by one additional year (added to the end
of the Term), and then on each succeeding annual anniversary thereafter, unless
either party shall have given written notice to the other party prior to the
date which is sixty days prior to the date upon which such extension would
otherwise have become effective electing not to further extend the Term, in
which case Executive’s employment shall terminate on the date upon which such
extension would otherwise have become effective, unless earlier terminated in
accordance with Section 5.


 


2.                                       Offices and Duties.


 


(a)                                  During the Term, Executive will serve as
Vice President - Chief Technology Officer for the Company, and will serve as an
officer or director of any subsidiary or affiliate of the Company if elected to
any such position by the shareholders or by the Board of Directors of the
Company or any subsidiary or affiliate, as the case may be.  In such capacities, the Executive shall
perform such duties and shall have such responsibilities as are normally
associated with such positions and as otherwise may be assigned to the
Executive from time to time by the Chief Executive Officer or President (“Chief
Officer”) of the Company or such other executive officer of the Company as
shall be designated by the Chief Officer or upon authority of the Board of
Directors.  Subject to Section 5(b),
Executive’s functions, duties and responsibilities are subject to reasonable
changes as the Company may in good faith determine.


 


(b)                                 The Executive hereby agrees to accept
such employment and election to any such offices and to render the services
described above.  Throughout the Term,
Executive agrees to: (i) devote all of Executive’s business effort, time,
attention, energy, and skill to Executive’s positions with the Company (subject
to the Company’s policies with respect to vacations and absences); (ii) faithfully,
loyally, and industriously perform such duties; (iii) comply with all of
the Company’s policies and procedures, as well as all applicable law and
regulations, that are known or should be known to Executive; (iv) comply
with all reasonable requests, instructions and regulations made by the Company;
and (v) travel for business purposes to the extent necessary or
appropriate in the performance of Executive’s duties.


 


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3.                                       Compensation.


 


(a)                                  Base
Salary.  During the Term the Company shall pay
Executive a base salary (the “Base Salary”) at the initial rate of $375,000 per
annum, payable biweekly (except to the extent deferred under a deferred
compensation plan) and subject to all withholdings that are legally required or
are agreed to by Executive.  In the event
that the Company, in its sole discretion, from time to time determines to
increase the Base Salary, such increased amount shall, from and after the
effective date of the increase, constitute the “Base Salary” for purposes of
this Agreement.


 


(b)                                 Incentive
Compensation.  Executive shall have the opportunity annually
to earn incentive compensation in amounts determined by the Compensation
Committee of the Board of SGC (the “Compensation Committee”) in accordance with
the applicable incentive compensation plan of the Company as in effect from
time to time (“Incentive Compensation”) as follows: (i) Executive shall
have the opportunity to earn up to 66% of Base Salary as Incentive Compensation
each year (the “Target Bonus”), and (ii) Executive shall have the opportunity
to earn additional incentive compensation up to 133% of Base Salary (“Enhanced
Bonus”).  Such Incentive Compensation
shall be paid no later than March 14 of the year following the end of the
calendar year in which such fiscal year ends.


 


(c)                                  Initial
Stock Option Grant.  Executive shall be granted
275,000 stock options as of the Effective Date under the SGC equity incentive
plan in effect as of the date of grant at an exercise price equal to 100% of
the fair market value of the common stock of SGC at the date of grant in the
form and subject to the terms and conditions set forth in Exhibit C
hereto.


 


(d)                                 Eligibility
for Annual Equity Awards.  Executive
shall be eligible to receive an annual stock option or other equity award, in
the sole discretion of the SGC Compensation Committee, in accordance with the
applicable plans and programs for senior executives of the Company and subject
to the Company’s right to at any time amend or terminate any such plan or
program.


 


4.                                       Benefits.


 


(a)                                  Expense
Reimbursement.  The Company shall reimburse Executive for
all reasonable and necessary travel, business entertainment and other business
expenses incurred by Executive in connection with the performance of Executive’s
duties under this Agreement, on a timely basis upon submission by Executive of
vouchers therefore in accordance with the Company’s standard procedures.


 


(b)                                 Health
and Welfare Benefits.  Executive shall be entitled to
participate, without discrimination or duplication, in any and all medical
insurance, group health, disability, life, accidental death, dismemberment
insurance, 401(k) or other retirement, deferred compensation, profit
sharing, stock ownership and such other plans and programs which are made
generally available by the Company to its other senior 


 


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executives in accordance with the terms of such plans and programs and
subject to the Company’s right to at any time amend or terminate any such plan
or program.


 


(c)                                  Vacation
and Holidays.  Executive shall initially be entitled to four
(4) weeks (or a pro rata portion thereof, as the case may be,) of paid
vacation for each year of the Term in accordance with the Company’s policies in
effect from time to time and taken in a manner which will not unreasonably
interfere with Executive’s duties hereunder. 
Executive shall also be entitled to paid holidays and any other time off
in accordance with the Company’s policies in effect from time to time.


 


(d)                                 Other
Benefits.  In addition, Executive shall also be entitled
during the Term to the benefits and perquisites identified in Exhibit D
to this Agreement.


 


5.                                       Termination. 
Executive’s employment hereunder may be terminated prior to the end of
the Term under the following circumstances:


 


(a)                                  Death;
Total Disability.  Executive’s employment
hereunder shall terminate upon Executive’s death, and the Company may terminate
Executive’s employment hereunder in the event of Executive’s “Total Disability.”
For purposes of this Agreement, “Total Disability” shall mean Executive’s (a) becoming
eligible to receive benefits under any long-term disability insurance program
or (b) failure to perform the duties and responsibilities contemplated
under this Agreement for a period of more than 180 days during any consecutive
12-month period due to physical or mental incapacity or impairment.


 


(b)                                 Termination
by the Company for Cause.  The Company
may terminate Executive’s employment hereunder for Cause upon written notice
(as described below) to Executive referring to this Section 5(b).  For purposes of this Agreement, the term “Cause”
shall mean (i) gross neglect by the Executive of the Executive’s duties
hereunder; (ii) conviction (including conviction on a nolo contendere plea) of the Executive of
any felony; (iii) conviction (including conviction on a nolo contendere plea) of the Executive of
any non-felony crime or offense involving the property of the Company or any of
its subsidiaries or affiliates or evidencing moral turpitude; (iv) willful
misconduct by the Executive in connection with the performance of the Executive’s
duties hereunder; (v) breach by the Executive of any material provision of
this Agreement; (vi) an assertion by the Hong Kong Jockey Club or any
affiliated company thereof (the “HKJC”), that Executive is or may be acting in
violation of the terms of his agreement with the HKJC, particularly, but
without limitation, an assertion that Executive is acting in violation of his
obligation to not compete with the business interests of the HKJC, or (vii) any
other conduct on the part of the Executive which would make the Executive’s
continued employment by the Company materially prejudicial to the best
interests of the Company, as determined by the Company acting in good
faith.  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 setting forth
in reasonable detail the facts and circumstances claimed as the basis for
termination of Executive’s employment and, with respect to clauses (i), (iv),
(v), (vi) and (vii) hereof, Executive shall have failed to cure such
Cause within thirty days after 


 


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receiving such notice. 
Furthermore, with respect to clause (vi) hereof, Executive shall
have a continuing obligation to give immediate notice to the Company of any
such assertion made by the HKJC, without regard to whether such assertion is
made formally or informally, orally or in writing, or whether Executive deems
such assertion to be with or without merit, substance or viability.


 


(c)                                  Termination
by the Company Without Cause.  The Company
may terminate Executive’s employment hereunder at any time, without Cause, for
any reason or no reason.


 


(d)                                 Termination
by Executive for Good Reason.  Executive may
terminate Executive’s employment hereunder for Good Reason (as defined below)
if the Company has failed to cure the event or condition constituting Good
Reason within thirty days after the Executive gives written notice to the
Company setting forth in reasonable detail the facts and circumstances
allegedly constituting Good Reason and specifically referencing this Section 5(d).  For purposes of this Agreement, “Good Reason”
shall mean that without Executive’s prior written consent, any of the following
shall have occurred within ninety days prior to the delivery of such notice: (i) a
material change, adverse to Executive, in Executive’s positions, titles,
offices, or duties as provided in Section 2, except, in such case, in
connection with the termination of Executive’s employment for Cause, Total
Disability or death; (ii) an assignment of any significant duties to
Executive which are inconsistent with Executive’s positions or offices held
under Section 2; (iii) a decrease in Base Salary or material decrease
in Executive’s incentive compensation opportunities provided under this
Agreement; and (iv) any other failure by the Company to perform any
material obligation under, or breach by the Company of any material provision
of, this Agreement.


 


(e)                                  Termination
by Executive for Other than Good Reason.  Executive may
terminate Executive’s employment hereunder for any reason or no reason upon 30
days’ prior written notice to the Company referring to this Section 5(e);
provided, however, that a termination of Executive’s employment by reason of
death, Total Disability or Good Reason shall not constitute a termination by
Executive for other than Good Reason pursuant to this Section 5(e).


 


6.                                       Compensation Following
Termination Prior to the End of the Term.  In the event
that Executive’s employment hereunder is terminated prior to the end of the
Term, Executive shall be entitled only to the following compensation and
benefits:


 


(a)                                  Standard
Termination Payments.  Following termination of
Executive’s employment for any reason, in addition to such other amounts
provided for pursuant to Sections 6(b) through (e) below, the Company
shall pay the following amounts, and make the following other benefits
available, to Executive (collectively, the “Standard Termination Payments”):


 


(i)                                     Any accrued but unpaid Base Salary (as
determined pursuant to Section 3(a)) for services rendered to the date of
termination payable within 30 days of termination;


 


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(ii)                                  All vested nonforfeitable amounts owing
or accrued at the date of termination under benefit plans, programs, and
arrangements set forth or referred to in Section 4 hereof in which
Executive theretofore participated will be paid under the terms and conditions
of such plans, programs, and arrangements (and agreements and documents
thereunder);


 


(iii)                               Except as provided in Section 7.6, all stock
options and other stock awards will be governed by the terms of the plans and
programs under which the options or other awards were granted; and


 


(iv)                              Reasonable business expenses and
disbursements incurred by Executive prior to such termination will be
reimbursed in accordance with Section 4(a).


 


(b)                                 Termination
by Reason of Death.  In the event that Executive’s
employment is terminated prior to the expiration of the Term by reason of
Executive’s death, the Company shall pay the following amounts, and make the
following other benefits available, to Executive:


 


(i)                                     The Standard Termination Payments (as
defined in Section 6(a));


 


(ii)                                  A lump sum payment equal to 6 months of
Executive’s Base Salary, payable within 30 days of termination;


 


(iii)                               If Incentive Compensation for the prior fiscal year
has not been paid, a lump sum payment of any Incentive Compensation Executive
would have received for such year but for such termination of employment,
payable as and when such Incentive Compensation would have been payable under Section 3(b);
and


 


(iv)                              In lieu of any Incentive Compensation for
the year in which such termination of employment occurs, payment of an amount
equal to (A) the highest annual Incentive Compensation paid to Executive
in respect of the two most recent fiscal years of the Company or, if Executive
was not employed during the prior fiscal year, Executive’s Target Bonus for the
then-current fiscal year, but in any event not more than 66% of Executive’s
Base Salary as of the date of termination, multiplied by (B) a fraction
the numerator of which is the number of days Executive was employed in the year
of termination and the denominator of which is the total number of days in the
year of termination, payable as and when such Incentive Compensation would
otherwise have been payable under Section 3(b).


 


(c)                                  Termination
by Reason of Total Disability.  In the event
that Executive’s employment is terminated prior to the expiration of the Term
by reason of Total Disability pursuant to Section 5(a), the Company shall
pay the following amounts, and make the following other benefits available, to
Executive:


 


(i)                                     The Standard Termination Payments (as
defined in Section 6(a));


 


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(ii)                                  Continued payment of the Base Salary for
a period of twelve (12) months following termination, provided such amounts
shall be reduced by any disability payments provided to Executive as a result
of any disability plan sponsored by the Company or its affiliates providing
benefits to Executive, if the payments to Executive hereunder and thereunder
would exceed one hundred percent (100%) of Executive’s Base Salary;


 


(iii)                               If Incentive Compensation for the prior fiscal year
has not been paid, a lump sum payment of any Incentive Compensation Executive
would have received for such year but for such termination of employment,
payable as and when such Incentive Compensation would have been payable under Section 3(b);


 


(iv)                              In lieu of any Incentive Compensation for
the year in which such termination of employment occurs, payment of an amount
equal to (A) the highest annual Incentive Compensation paid to Executive
in respect of the two most recent fiscal years of the Company or, if Executive
was not employed during the prior fiscal year, Executive’s Target Bonus for the
then-current fiscal year, but in any event not more than 66% of Executive’s
Base Salary as of the date of termination, multiplied by (B) a fraction
the numerator of which is the number of days Executive was employed in the year
of termination and the denominator of which is the total number of days in the
year of termination, payable as and when such Incentive Compensation would
otherwise have been payable under Section 3(b).


 


(v)                                 If Executive elects to continue medical
coverage under the Company’s group health plan in accordance with COBRA, the
Company shall pay the monthly premiums for such coverage for a period of twelve
(12) months.


 


(d)                                 Termination
by the Company for Cause; Termination by Executive for Other than Good Reason. 
In the event that Executive’s employment is terminated by the Company
for Cause pursuant to Section 5(b) or by Executive for other than
Good Reason pursuant to Section 5(e), the Executive shall be entitled to
receive the Standard Termination Payments (as defined in Section 6(a)).


 


(e)                                  Termination
by the Company Without Cause or by Executive For Good Reason. 
In the event that Executive’s employment is terminated by the Company
without Cause pursuant to Section 5(c) or by Executive for Good
Reason pursuant to Section 5(d), the Company shall pay the following
amounts, and make the following other benefits available, to Executive:


 


(i)                                     The Standard Termination Payments (as
defined in Section 6(a));


 


(ii)                                  Continued payment of the Base Salary for
a period of twelve (12) months following termination;


 


(iii)                               Payment of an amount equal to the Severance Bonus
Percentage (as defined below) multiplied by the Executive’s then-current Base
Salary as severance (the “Severance Bonus Pay”).  For purposes of this Agreement, “Severance 


 


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Bonus Percentage” shall mean (A) the greater of (I) Executive’s
Incentive Compensation for the prior fiscal year divided by Executive’s Base
Salary for such year and (II) Executive’s Incentive Compensation for the
most recent fiscal year ending more than twelve months prior to such
termination of employment, divided by Executive’s Base Salary for such year, or
(B) if Executive was not employed during the prior fiscal year, Executive’s
Target Bonus for the then-current fiscal year divided by Executive’s
then-current Base Salary; provided, however, that the Severance Bonus
Percentage shall not in any event be more than 66%.  The Severance Bonus Pay shall be payable in
equal installments in accordance with the Company’s standard payroll practices
during the twelve month period following such termination;


 


(iv)                              If Incentive Compensation for the prior
fiscal year has not been paid, a lump sum payment of any Incentive Compensation
Executive would have received for such year but for such termination of
employment, payable as and when such Incentive Compensation would have been
payable under Section 3(b);


 


(v)                                 In lieu of any Incentive Compensation for
the year in which such termination of employment occurs, payment of an amount
equal to (A) the highest annual Incentive Compensation paid to Executive
in respect of the two most recent fiscal years of the Company or, if Executive
was not employed during the prior fiscal year, Executive’s Target Bonus for the
then-current fiscal year, but in any event not more than 66% of Executive’s
Base Salary as of the date of termination, multiplied by (B) a fraction
the numerator of which is the number of days Executive was employed in the year
of termination and the denominator of which is the total number of days in the
year of termination, payable as and when such Incentive Compensation would
otherwise have been payable under Section 3(b).


 


(vi)                              If Executive elects to continue medical
coverage under the Company’s group health plan in accordance with COBRA, the
Company shall pay the monthly premiums for such coverage for a period of twelve
(12) months.


 


Notwithstanding the foregoing, if a reduction in Base
Salary or other level of compensation or benefit was a basis for Executive’s
termination for Good Reason, the Base Salary or other level of compensation in
effect before such reduction shall be used to calculate payments or benefits
under this Section 6(e).


 


(f)                                    Termination
Upon the Expiration of the Term.  If either the
Company or the Executive gives notice pursuant to Section 1 of an election
not to further extend the Term, the Executive’s employment shall terminate upon
the expiration of the Term.  If Executive’s
employment terminates due to the Company’s election not to extend the Term, the
Executive shall be entitled to receive the payments and benefits payable
pursuant to Section 6(e) following a Termination by the Company
Without Cause.  If Executive elects not
to extend the Term, the Executive shall be entitled to receive the Standard
Termination Payments (as defined in Section 6(a)).


 


(g)                                 No
Obligation to Mitigate.  The Executive
shall have no obligation to mitigate damages pursuant to this Section 6,
but shall be obligated to promptly advise 


 


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the Company regarding any compensation earned or any payments that will
become due with respect to services provided during any period of continued
payments pursuant to this Section 6. 
The Company’s obligation to make continued payments to the Executive
shall be reduced by any compensation earned by the Executive during the
severance period (without regard to when such compensation is paid).


 


(h)                                 Set-Off. 
To the fullest extent permitted by law, any amounts otherwise due the
Executive hereunder (including, without limitation, any payments pursuant to
this Section 6) shall be subject to set-off with respect to any amounts
the Executive otherwise owes the Company or any subsidiary or affiliate
thereof.


 


(i)                                     No
Other Benefits or Compensation.  Except as may
be provided under this Agreement, under any other written agreement between
Executive and the Company, or under the terms of any plan or policy applicable
to Executive, Executive shall have no right to receive any other compensation
from the Company, or to participate in any other plan, arrangement or benefit
provided by the Company, with respect to any future period after such
termination or resignation.


 


(j)                                     Release
of Employment Claims; Compliance with Section 7. 
Executive agrees, as a condition to receipt of any termination payments
and benefits provided for in Section 6 (other than the Standard
Termination Payments), that Executive will execute a general release agreement,
in a form reasonably satisfactory to the Company, releasing any and all claims
arising out of Executive’s employment (other than enforcement of this
Agreement) and Executive will not in the future seek employment at the
Company.  The Company’s obligation to
make any termination payments and benefits provided for in Section 6
(other than the Standard Termination Payments) shall immediately cease if
Executive willfully and materially breaches Section 7.1(a) (other
than the first sentence thereof), 7.1(b), 7.2 (other than the first and
penultimate sentences of 7.2(a)), 7.3, 7.4, or 7.8.


 


(k)                                  Change
in Control.


 


(i)                                     In the event Executive’s employment is
terminated by the Company without Cause pursuant to Section 5(c) or
by Executive for Good Reason pursuant to Section 5(d) and the
termination occurs upon or within two years immediately following a “Change in
Control” (as defined in Section 6(k)(iii)), in lieu of receiving the
payments described in 6(e), and subject to the provisions of Section 6(j),
Executive shall receive a lump sum payment equal to the sum of:


 


(A)                              Three times the Base Salary; and


 


(B)                                Three times the product of the Severance
Bonus Percentage (as defined in Section 6(e)(iii)) multiplied by Executive’s
then-current Base Salary;


 


(C)                                If Incentive Compensation for the prior
fiscal year has not been paid, a lump sum payment of any Incentive Compensation
Executive would have 


 


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received for such
year but for such termination of employment; and


 


(D)                               In lieu of any Incentive Compensation for
the year in which such termination of employment occurs, payment of an amount
equal to (A) the highest annual Incentive Compensation paid to Executive
in respect of the two most recent fiscal years of the Company or, if Executive
was not employed during the prior fiscal year, Executive’s Target Bonus for the
then-current fiscal year, but in any event not more than 66% of Executive’s
Base Salary as of the date of termination, multiplied by (B) a fraction
the numerator of which is the number of days Executive was employed in the year
of termination and the denominator of which is the total number of days in the
year of termination.


 


In addition, if Executive elects to continue medical
coverage under the Company’s group health plan in accordance with COBRA, the
Company shall pay the monthly premiums for such coverage for a period of twelve
(12) months following such termination.


 


(ii)                                  In the event Executive’s employment is
terminated by the Company without Cause pursuant to Section 5(c) or
by Executive for Good Reason pursuant to Section 5(d) and the
termination occurs “In Anticipation of a Change in Control” (as defined in Section 6(k)(iv))
and the “Change in Control” actually occurs within six (6) months after
the termination, unless the relevant facts and circumstances clearly
demonstrate that the possibility that such “Change in Control” would occur was
remote as of the date of such termination, Executive shall receive a lump sum
payment equal to the sum of the amounts in Section 6(k)(i), less any
amounts already paid to Executive pursuant to Section 6(e).


 


(iii)                               For purposes of this Section 6(k), a “Change in
Control” shall be deemed to have occurred if:


 


(A)                              Any “person” as defined in Section 3(a)(9) of
the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and as
used in sections 13(d) and 14(d) thereof, including a “group” as
defined in Section 13(d) of the Exchange Act but excluding SGC and
any subsidiary or affiliate and any employee benefit plan sponsored or
maintained by SGC or any subsidiary or affiliate (including any trustee of such
plan acting as trustee), directly or indirectly, becomes the “beneficial owner”
(as defined in Rule 13d-3 under the Exchange Act) of securities of SGC
representing at least 40% of the 


 


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combined voting
power of SGC’s then-outstanding securities;


 


(B)                                The stockholders of SGC approve a merger,
consolidation, recapitalization, or reorganization of SGC, or a reverse stock
split of any class of voting securities of SGC, or the consummation of any such
transaction if stockholder approval is not obtained, other than any such
transaction which would result in at least 60% of the total voting power
represented by the voting securities of SGC or the surviving entity outstanding
immediately after such transaction being beneficially owned by persons who
together beneficially owned at least 80% of the combined voting power of the
voting securities of SGC outstanding immediately prior to such transaction;
provided that, for purposes of this Section 6(k)(iii)(B), such continuity
of ownership (and preservation of relative voting power) shall be deemed to be
satisfied if the failure to meet such 60% threshold is due solely to the
acquisition of voting securities by an employee benefit plan of SGC or such
surviving entity or of any subsidiary of SGC or such surviving entity;


 


(C)                                The stockholders of SGC or the Company,
as applicable, approve a plan of complete liquidation of SGC or the Company, an
agreement for the sale or disposition by SGC or the Company of all or
substantially all of its assets (or any transaction having a similar effect),
or SGC sells all or substantially all of the stock of the Company to any person
or entity other than an affiliate of SGC; or


 


(D)                               During any period of two consecutive
years, individuals who at the beginning of such period constitute the Board,
together with any new director (other than a director designated by a person
who has entered into an agreement with the Company to effect a transaction
described in Subsection (A), (B), or (C) hereof) whose election by the
Board of Directors of SGC or nomination for election by SGC’s stockholders was
approved by a vote of at least two-thirds (2/3) of the directors then still in
office who either were directors at the beginning of the period or whose
election or nomination for election was previously so approved (the


 


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“Continuing
Directors”), cease for any reason to constitute at least a majority of the
Board of Directors of SGC.


 


(iv)                              For purposes of this Section 6(k), a
termination shall be considered “In Anticipation of a Change in Control” if the
termination occurs after:


 


(A)                              the issuance of a proxy statement by SGC
with respect to an election of directors for which there is proposed one or
more directors who are not recommended by the Board of Directors of SGC or its
nominating committee, where the election of such proposed director or directors
would result in a “Change in Control”; or


 


(B)                                the announcement by any person of an
intention to take actions which might reasonably result in a “Change in
Control,”


 


and the “Change in Control” actually occurs within six
(6) months after the termination unless the relevant facts and
circumstances clearly demonstrate that the possibility that a “Change in
Control” would occur was remote as of the date of such termination.


 


(v)                                 Notwithstanding the foregoing provisions
of this Section 6(k), payments pursuant to subsections (i) and (ii) hereof
shall be reduced by the amount necessary to ensure that the aggregate
compensation to be received by the Executive in connection with such change in
control does not constitute a “parachute payment,” as such term is defined in
26 U.S.C. § 280G.


 


7.                                       Noncompetition;
Nonsolicitation; Nondisclosure; etc.


 


7.1                       Noncompetition;
Nonsolicitation.


 


(a)                                  Executive acknowledges the highly
competitive nature of the Company’s business and that access to the Company’s
confidential records and proprietary information renders Executive special and
unique within the Company’s industry.  In
consideration of the amounts that may hereafter be paid to Executive pursuant
to this Agreement (including, without limitation, Sections 3, 4 and 6),
Executive agrees that during the Term (including any extensions thereof) and
during the Covered Time (as defined in Section 7.1(e)), Executive, alone
or with others, will not, directly or indirectly, engage (as owner, investor, partner,
stockholder, employer, employee, consultant, advisor, director or otherwise) in
any Competing Business.  For purposes of
this Section 7, “Competing Business” shall mean any business (i) involving
design and production of instant lottery tickets and the management of related
marketing and distribution programs, manufacture, sale, operation or management
of on-line lottery systems (Lotto-type games), development and
commercialization of licensed and other proprietary game entertainment for all
lottery product channels, provision of wagering (whether pari-mutuel (pooled)
or otherwise) and venue management services for 


 


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racetracks and off-track betting facilities; production of prepaid
cellular phone cards, or any other business in which the Company or its
affiliates is then or was within the previous twenty-four months engaged or in
which the Company, to Executive’s knowledge, intends to engage during the Term
or the Covered Time (as defined below); (ii) in which the Executive was
engaged or involved (whether in an executive or supervisory capacity or
otherwise) on behalf of the Company or with respect to which the Executive has
obtained proprietary or confidential information; and (iii) anywhere in
the United States or in any other geographic area in which such business was
conducted or planned to be conducted by the Company.


 


(b)                                 In further consideration of the amounts
that may hereafter be paid to Executive pursuant to this Agreement (including, without
limitation, Sections 3, 4 and 6), Executive agrees that during the Term
(including any extensions thereof) and during the Covered Time Executive shall
not, directly or indirectly, (i) solicit or attempt to induce any of the
employees, agents, consultants or representatives of the Company to terminate
his, her, or its relationship with the Company; (ii) solicit or attempt to
induce any of the employees, agents, consultants or representatives of the
Company to become employees, agents, consultants or representatives of any
other person or entity; (iii) solicit or attempt to induce any customer,
vendor or distributor of the Company to curtail or cancel any business with the
Company; or (iv) hire any person who, to Executive’s actual knowledge, is,
or was within 180 days prior to such hiring, an employee of the Company.


 


(c)                                  During the Term (including any extensions
thereof) and during the Covered Time, Executive agrees that upon the earlier of
Executive’s (i) negotiating with any Competitor (as defined below)
concerning the possible employment of Executive by the Competitor, (ii) responding
to (other than for the purpose of declining) an offer of employment from a
Competitor, or (iii) becoming employed by a Competitor, (x) Executive
will provide copies of Section 7 of this Agreement to the Competitor, and (y) in
the case of any circumstance described in (iii) above occurring during the
Covered Time, and in the case of any circumstance described in (i) or (ii) above
occurring during the Term or during the Covered Time, Executive will promptly
provide notice to the Company of such circumstances.  Executive further agrees that the Company may
provide notice to a Competitor of Executive’s obligations under this
Agreement.  For purposes of this
Agreement, “Competitor” shall mean any entity (other than the Company, its
subsidiaries or affiliates) that engages, directly or indirectly, in the United
States in any Competing Business.


 


(d)                                 Executive understands that the
restrictions in this Section 7.1 may limit Executive’s ability to earn a
livelihood in a business similar to the business of the Company but
nevertheless agrees and acknowledges that the consideration provided under this
Agreement (including, without limitation, Sections 3, 4 and 6) is sufficient to
justify such restrictions.  In
consideration thereof and in light of Executive’s education, skills and
abilities, Executive agrees that Executive will not assert in any forum that
such restrictions prevent Executive from earning a living or otherwise should be
held void or unenforceable.


 


12

















 


(e)                                  For purposes of this Section 7.1, “Covered
Time” shall mean the period beginning on the date of termination of Executive’s
employment (the “Date of Termination”) and ending twelve months after the Date
of Termination.


 


7.2                       Proprietary
Information; Inventions.


 


(a)                                  Executive acknowledges that during the
course of Executive’s employment with the Company Executive necessarily will
have (and during any employment by the Company prior to the Term has had)
access to and make use of proprietary information and confidential records of
the Company.  Executive covenants that
Executive shall not during the Term or at any time thereafter, directly or
indirectly, use for Executive’s own purpose or for the benefit of any person or
entity other than the Company, nor otherwise disclose to any individual or
entity, any such proprietary information, unless such disclosure has been
authorized in writing by the Company or is otherwise required by law.  The term “proprietary information”
means:  (i) the software products,
programs, applications, and processes utilized by the Company; (ii) the
name and/or address of any customer or vendor of the Company or any information
concerning the transactions or relations of any customer or vendor of the
Company with the Company; (iii) any information concerning any product,
technology, or procedure employed by the Company but not generally known to its
customers or vendors or competitors, or under development by or being tested by
the Company but not at the time offered generally to customers or vendors; (iv) any
information relating to the Company’s computer software, computer systems,
pricing or marketing methods, sales margins, cost of goods, cost of material,
capital structure, operating results, borrowing arrangements or business plans;
(v) any information identified as confidential or proprietary in any line
of business engaged in by the Company; (vi) any information that, to
Executive’s actual knowledge, the Company ordinarily maintains as confidential
or proprietary; (vii) any business plans, budgets, advertising or
marketing plans; (viii) any information contained in any of the Company’s
written or oral policies and procedures or manuals; (ix) any information
belonging to customers, vendors or any other person or entity which the
Company, to Executive’s actual knowledge, has agreed to hold in confidence; and
(x) all written, graphic, electronic data and other material containing
any of the foregoing.  Executive
acknowledges that information that is not novel or copyrighted or patented may
nonetheless be proprietary information. 
The term “proprietary information” shall not include information
generally known or available to the public or generally known or available to
the industry or information that becomes available to Executive on an
unrestricted, non-confidential basis from a source other than the Company or
its directors, officers, employees, or agents (without breach of any obligation
of confidentiality of which Executive has actual knowledge at the time of the
relevant disclosure by Executive).


 


(b)                                 Executive agrees that all processes,
technologies and inventions (collectively, “Inventions”), including new
contributions, improvements, ideas and discoveries, whether patentable or not,
conceived, developed, invented or made by Executive during the Term (and during
any employment by the Company prior to the Term) shall belong to the Company,
provided that such Inventions grew out of the Executive’s work with the Company
or any of its subsidiaries or affiliates, are related in 


 


13

















 


any manner to the business (commercial or experimental) of the Company
or any of its subsidiaries or affiliates or are conceived or made on the
Company’s time or with the use of the Company’s facilities or materials.  Executive shall further: (i) promptly
disclose such Inventions to the Company; (ii) assign to the Company,
without additional compensation, all patent and other rights to such Inventions
for the United States and foreign countries; (iii) sign all papers
necessary to carry out the foregoing; and (iv) give testimony in support
of the Executive’s inventorship.  If any
Invention is described in a patent application or is disclosed to third
parties, directly or indirectly, by the Executive within two years after the
termination of the Executive’s employment by the Company, it is to be presumed
that the Invention was conceived or made during the Term.  Executive agrees that Executive will not
assert any rights to any Invention as having been made or acquired by Executive
prior to the date of this Agreement, except for Inventions, if any, disclosed
in Exhibit A to this Agreement.


 


7.3                       Confidentiality
and Surrender of Records.  Executive
shall not during the Term or at any time thereafter (irrespective of the
circumstances under which Executive’s employment by the Company terminates),
except as required by law, directly or indirectly publish, make known or in any
fashion disclose any confidential records to, or permit any inspection or
copying of confidential records by, any individual or entity other than in the
course of such individual’s or entity’s employment or retention by the Company,
nor shall Executive retain, and will deliver promptly to the Company, any of
the same following termination of Executive’s employment hereunder for any
reason or upon request by the Company. 
For purposes hereof, “confidential records” means those portions of
correspondence, memoranda, files, manuals, books, lists, financial, operating
or marketing records, magnetic tape, or electronic or other media or equipment
of any kind in Executive’s possession or under Executive’s control or
accessible to Executive which contain any proprietary information.  All confidential records shall be and remain
the sole property of the Company during the Term and thereafter.


 


7.4                       Nondisparagement. 
Executive shall not, during the Term and thereafter, disparage in any
material respect the Company, any affiliate of the Company, any of their
respective businesses, any of their respective officers, directors or
employees, or the reputation of any of the foregoing persons or entities.  Notwithstanding the foregoing, nothing in this
Agreement shall preclude Executive from making truthful statements that are
required by applicable law, regulation or legal process.


 


7.5                       No
Other Obligations.  Executive represents that
Executive is not precluded or limited in Executive’s ability to undertake or
perform the duties described herein by any contract, agreement or restrictive
covenant.  Executive covenants that
Executive shall not employ the trade secrets or proprietary information of any
other person in connection with Executive’s employment by the Company without
such person’s authorization.


 


7.6                       Forfeiture
of Outstanding Options.  The provisions
of Section 6 notwithstanding, if Executive willfully and materially fails
to comply with any restrictive covenant under Section 7.1(a) (other
than the first sentence thereof), 7.1(b), 7.2 (other than the first sentence of
7.2(a)), 7.3, 7.4, or 7.8, all options (whether granted prior to, 


 


14

















 


contemporaneous with, or subsequent to this Agreement) to purchase
Common Stock granted by the Company and held by Executive or a transferee of
Executive shall be immediately forfeited and cancelled.


 


7.7                       Enforcement. 
Executive acknowledges and agrees that, by virtue of Executive’s
position, services and access to and use of confidential records and proprietary
information, any violation by Executive of any of the undertakings contained in
this Section 7 would cause the Company immediate, substantial and
irreparable injury for which it has no adequate remedy at law.  Accordingly, Executive agrees and consents to
the entry of an injunction or other equitable relief by a court of competent
jurisdiction restraining any violation or threatened violation of any
undertaking contained in this Section 7. 
Executive waives posting of any bond otherwise necessary to secure such
injunction or other equitable relief. 
Rights and remedies provided for in this Section 7 are cumulative
and shall be in addition to rights and remedies otherwise available to the
parties hereunder or under any other agreement or applicable law.


 


7.8                       Cooperation
with Regard to Litigation.  Executive
agrees to cooperate reasonably with the Company, during the Term and thereafter
(including following Executive’s termination of employment for any reason), by
being available to testify on behalf of the Company in any action, suit, or
proceeding, whether civil, criminal, administrative, or investigative.  In addition, except to the extent that
Executive has or intends to assert in good faith an interest or position
adverse to or inconsistent with the interest or position of the Company,
Executive agrees to cooperate reasonably with the Company, during the Term and
thereafter (including following Executive’s termination of employment for any
reason), to assist the Company in any such action, suit, or proceeding by
providing information and meeting and consulting with the Board or its
representatives or counsel, or representatives or counsel to the Company, in
each case, as reasonably requested by the Company.  The Company agrees to pay (or reimburse, if
already paid by Executive) all reasonable expenses actually incurred in
connection with Executive’s cooperation and assistance including, without
limitation, reasonable fees and disbursements of counsel, if any, chosen by
Executive if Executive reasonably determines in good faith, on the advice of
counsel, that the Company’s counsel may not ethically represent Executive in
connection with such action, suit or proceeding due to actual or potential
conflicts of interests.


 


7.9                       Survival. 
The provisions of this Section 7 shall survive the termination of
the Term and any termination or expiration of this Agreement.


 


7.10                 Company. 
For purposes of this Section 7, references to the “Company” shall
include both the Company and each subsidiary and/or affiliate of the Company.


 


8.                                       Indemnification. 
During the Term of this Agreement and all periods after the expiration
of this Agreement or termination of Executive’s employment for any reason, the
Company shall indemnify Executive to the full extent permitted under the
Company’s Certificate of Incorporation or By-Laws and pursuant to any other
agreements or policies in effect from time to time.  To the extent permitted under the Company’s
Certificate of Incorporation and By-Laws and applicable law, the Company shall
advance 


 


15

















 


expenses for which indemnification may be claimed as such expenses are
incurred, subject to any requirement that Executive provide an undertaking to
repay such advances if it is ultimately determined that Executive is not
entitled to indemnification; provided, however, that any determination required
to be made with respect to whether Executive’s conduct complies with the
standards required to be met as a condition of indemnification or advancement
of expenses under applicable law and the Company’s Certificate of
Incorporation, By-Laws, or other agreement, shall be made by independent
counsel mutually acceptable to Executive and the Company (except to the extent
otherwise required by law).  Any provision
contained herein notwithstanding, this Agreement shall not limit or reduce, and
the Company hereby agrees to provide to Executive, any and all rights to
indemnification Executive would otherwise have, to the full extent permitted
under applicable law.  In addition, the
Company will maintain directors’ and officers’ liability insurance in effect
and covering acts and omissions of Executive. 
For purposes of this Section 8, references to the “Company” shall
include both the Company and each of its subsidiaries and/or affiliate for
which Executive has acted, acts or will in the future act in any capacity.  The provisions of this Section 8 shall
survive the termination of the Term and any termination or expiration of this
Agreement.


 


9.                                       Notices. 
Whenever under this Agreement it becomes necessary to give notice, such
notice shall be in writing, signed by the party or parties giving or making the
same, and shall be served on the person or persons for whom it is intended or
who should be advised or notified, by Federal Express or other similar
overnight service or by certified or registered mail, return receipt requested,
postage prepaid and addressed to such party at the address set forth below or
at such other address as may be designated by such party by like notice:


 


To the Company:


 


Scientific Games Corporation 

750 Lexington Avenue

New York, N.Y.  10022

Attention: General Counsel


 


To Executive:


 


Steven W. Beason

Scientific Games International, Inc. 

1500 Bluegrass Lakes Parkway 

Alpharetta, GA  30004


 


10.                                 Assignability; Binding
Effect.  Neither this Agreement nor the rights or
obligations hereunder of the parties hereto shall be transferable or assignable
by Executive, except in accordance with the laws of descent and distribution
and as specified below.  The Company may
assign this Agreement and the Company’s rights and obligations hereunder, and
shall assign this Agreement and such rights and obligations, to any Successor
(as hereinafter defined) which, by operation of law or otherwise, continues 


 


16

















 


to carry on substantially the business of the Company (or a business
unit of the Company for which Executive provided services) prior to the event
of succession, and the Company shall, as a condition of the succession, require
such Successor to agree in writing to assume the Company’s obligations and be
bound by this Agreement.  For purposes of
this Agreement, “Successor” shall mean any person that succeeds to, or has the
practical ability to control, the Company’s business directly or indirectly, by
merger or consolidation, by purchase or ownership of voting securities of the
Company or all or substantially all of its assets or those relating to a
particular business unit of the Company to which Executive provides services,
or otherwise.  The Company may also
assign this Agreement and the Company’s rights and obligations hereunder to any
affiliate of the Company, provided that upon any such assignment the Company
shall remain liable for the obligations to Executive hereunder.  This Agreement shall be binding upon and
inure to the benefit of Executive, Executive’s heirs, executors,
administrators, and beneficiaries, and shall be binding upon and inure to the
benefit of the Company and its successors and assigns.


 


11.                                 Complete Understanding;
Amendment; Waiver.  This Agreement constitutes the complete
understanding between the parties with respect to the employment of Executive
and supersedes all other prior agreements and understandings, both written and
oral, between the parties with respect to the subject matter hereof, and no
statement, representation, warranty or covenant has been made by either party
with respect thereto except as expressly set forth herein. Exhibit B
lists all existing agreements and understandings which shall be terminated as
of the Effective Date.  This Agreement
shall not be modified, amended or terminated except by a written instrument
signed by each of the parties.  Any
waiver of any term or provision hereof, or of the application of any such term
or provision to any circumstances, shall be in writing signed by the party
charged with giving such waiver.  Waiver
by either party of any breach hereunder by the other party shall not operate as
a waiver of any other breach, whether similar to or different from the breach
waived.  No delay by either party in the
exercise of any rights or remedies shall operate as a waiver thereof, and no
single or partial exercise by either party of any such right or remedy shall
preclude other or further exercise thereof.


 


12.                                 Severability. 
If any provision of this Agreement or the application of any such
provision to any person or circumstances shall be determined by any court of
competent jurisdiction to be invalid or unenforceable to any extent, the
remainder of this Agreement, or the application of such provision to such
person or circumstances other than those to which it is so determined to be
invalid or unenforceable, shall not be affected thereby, and each provision
hereof shall be enforced to the fullest extent permitted by law.  If any provision of this Agreement, or any
part thereof, is held to be invalid or unenforceable because of the scope or
duration of or the area covered by such provision, the parties hereto agree
that the court making such determination shall reduce the scope, duration
and/or area of such provision (and shall substitute appropriate provisions for
any such invalid or unenforceable provisions) in order to make such provision
enforceable to the fullest extent permitted by law and/or shall delete specific
words and phrases, and such modified provision shall then be enforceable and
shall be enforced.  The parties hereto
recognize that if, in any judicial proceeding, a court shall refuse to enforce
any of the separate covenants contained in this Agreement, then that 


 


17

















 


invalid or unenforceable covenant contained in this Agreement shall be
deemed eliminated from these provisions to the extent necessary to permit the
remaining separate covenants to be enforced. 
In the event that any court determines that the time period or the area,
or both, are unreasonable and that any of the covenants is to that extent
invalid or unenforceable, the parties hereto agree that such covenants will
remain in full force and effect, first, for the greatest time period, and
second, in the greatest geographical area that would not render them
unenforceable.


 


13.                                 Survivability. 
The provisions of this Agreement which by their terms call for
performance subsequent to termination of Executive’s employment hereunder, or
of this Agreement, shall so survive such termination, whether or not such
provisions expressly state that they shall so survive.


 


14.                                 Governing Law;
Arbitration.


 


(a)                                  Governing
Law.  This Agreement shall be governed by and
construed in accordance with the laws of the State of New York applicable to
agreements made and to be wholly performed within that State, without regard to
its conflict of laws provisions.


 


(b)                                 Arbitration. 
The Executive and the Company agree that, except for claims for Workers’
Compensation, Unemployment Compensation, and any other claim that is
non-arbitrable under applicable law, final and binding arbitration shall be the
exclusive forum for any dispute or controversy between them, including, without
limitation, disputes arising under or in connection with this Agreement,
Executive’s employment, and/or termination of employment, with the Company;
provided, however, that the Company shall be entitled to commence an action in
any court of competent jurisdiction for injunctive relief in connection with
any alleged actual or threatened violation of any provision of Section 7.  Judgment may be entered on the arbitrators’
award in any court having jurisdiction. 
For purposes of entering such judgment or seeking injunctive relief with
regard to Section 7, the Company and Executive hereby consent to the
jurisdiction of any or all of the following courts: (i) the United States
District Court for the Southern District of New York; (ii) the Supreme
Court of the State of New York, New York County; or (iii) any other court
having jurisdiction; provided, that damages for any alleged violation of Section 7,
as well as any claim, counterclaim or crossclaim brought by the Executive or
any third-party in response to, or in connection with any court action
commenced by the Company seeking said injunctive relief shall remain
exclusively subject to final and binding arbitration as provided for
herein.  The Company and Executive hereby
waive, to the fullest extent permitted by applicable law, any objection which
either may now or hereafter have to such jurisdiction, venue and any defense of
inconvenient forum.  Thus, except for the
claims carved out above, this Agreement includes all common-law and statutory claims
(whether arising under federal state or local law), including, but not limited
to, any claim for breach of contract, fraud, fraud in the inducement, unpaid
wages, wrongful termination, and gender, age, national origin, sexual
orientation, marital status, disability, or any other protected status.


 


18














 


(c)           Any arbitration under this Agreement
shall be filed exclusively with the American Arbitration Association in New
York, New York before three arbitrators, in accordance with the National Rules for
the Resolution of Employment Disputes of the American Arbitration Association
in effect at the time of submission to arbitration.  The Company and Executive hereby agree that a
judgment upon an award rendered by the arbitrators may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided by
law.  The Company shall pay all costs
uniquely attributable to arbitration, including the administrative fees and
costs of the arbitrators.  Each party
shall pay that party’s own costs and attorney fees, if any, unless the
arbitrators rule otherwise.  The
Executive understands that he is giving up no substantive rights, and this
Agreement simply governs forum.  The
arbitrators shall apply the same standards a court would apply to award any
damages, attorney fees or costs.  The
Executive shall not be required to pay any fee or cost that he would not
otherwise be required to pay in a court action, unless so ordered by the
arbitrators.


 


(d)           BY SIGNING THIS
AGREEMENT, EXECUTIVE AND THE COMPANY ACKNOWLEDGE THAT THE RIGHT TO A COURT
TRIAL AND TRIAL BY JURY IS OR VALUE, AND KNOWINGLY AND VOLUNTARILY WAIVE THAT
RIGHT FOR ANY DISPUTE SUBJECT TO THE TERMS OF THIS ARBITRATION PROVISION.


 


15.           Titles and Captions. 
All paragraph titles or captions in this Agreement are for convenience
only and in no way define, limit, extend or describe the scope or intent of any
provision hereof.


 


16.           Joint Drafting. 
In recognition of the fact that the parties hereto had an equal
opportunity to negotiate the language of, and draft, this Agreement, the
parties acknowledge and agree that there is no single drafter of this Agreement
and therefore, the general rule that ambiguities are to be construed
against the drafter is, and shall be, inapplicable.  If any language in this Agreement is found or
claimed to be ambiguous, each party shall have the same opportunity to present
evidence as to the actual intent of the parties with respect to any such
ambiguous language without any inference or presumption being drawn against any
party.


 


[Remainder of Page Intentionally
Left Blank]


 


19

















 


IN
WITNESS WHEREOF, each of the parties hereto has duly executed this Agreement on
August 8, 2005, to be deemed effective as of the date first above written.


 


 


	
   

  	
  SCIENTIFIC GAMES
  INTERNATIONAL, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Michael R.
  Chambrello

  
	
   

  	
   

  	
  Name:  Michael R. Chambrello

  
	
   

  	
   

  	
  Title:    President
  & COO

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  EXECUTIVE

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  /s/ Steven Wayne Beason

  
	
   

  	
  Name:

  	
  Steven Wayne Beason

  



 


20

















 


EXHIBIT A


 


LIST OF PRE-EXISTING
INVENTIONS OF EXECUTIVE


 


None


 


21

















 


EXHIBIT B


 


LIST OF
PRE-EXISTING AGREEMENTS 

BETWEEN EXECUTIVE AND THE COMPANY


 


None


 


22

















 


EXHIBIT C


 


FORM OF
INDUCEMENT STOCK OPTION GRANT AGREEMENT


 


(Attached)


 


23

















 


EXHIBIT D


 


ADDITIONAL
BENEFITS AND/OR PERQUISITES


 


1.             A car allowance in the amount of $1,500
per month.


 


2.             Reimbursement of all expenses related to
the shipping of Executive’s household goods and furnishings from Hong Kong to
Georgia, USA.


 


3.             A bonus payable upon the execution of the
Agreement in the amount of $150,000.


 


4.             SERP: 
During the term, the Company may revise or terminate its existing
Supplemental Executive Retirement Plan, as amended and restated effective November 1,
2003 (“SERP”) or may create a new supplemental executive retirement plan.  The Executive may be entitled to participate
in either the existing plan or a new plan, on a basis to be determined; in no
event will the benefits payable to the Executive under the SERP be greater than
$250,000 per annum.


 


24