Document:

Exhibit 10.2

 

FIRST
AMENDMENT TO

LETTER AGREEMENT

 

This FIRST AMENDMENT TO LETTER
AGREEMENT, (this “First Amendment”), dated as of June 9, 2005, is entered
into by and between Accellent Inc., a Maryland corporation formerly known as UTI
Corporation (“Accellent” or the “Company”), and DLJ Merchant Banking III, Inc.
(“DLMBJ”).

 

RECITALS

 

A.            Accellent and DLJMB are parties to that certain letter
agreement dated June 30, 2004 (the “Letter Agreement”) by which DLJMB was
engaged to act as the Company’s financial advisor with respect to certain
services identified in the Letter Agreement.

 

B.            Accellent and DLJMB wish to amend the
Letter Agreement to increase the cap amount of certain fees which may be paid
to DLJMB from $750,000 to $1,750,000.

 

C.            Unless otherwise amended herein, capitalized terms not
otherwise defined herein shall have the meanings ascribed to them in the Letter
Agreement.

 

AGREEMENT

 

NOW THEREFORE, in
consideration of the foregoing premises and for other good and valuable
consideration, the receipt and adequacy of which are hereby acknowledged, the
parties hereto amend the Letter Agreement as follows:

 

1.  Section 3(d) of the Letter Agreement
is hereby amended by deleting the reference in Section 3(d) to “$750,000”
and replacing it with “$1,750,000.”

 

2.  Other than the amendments and modifications
specifically contained herein, the Letter Agreement remains unmodified and in
full force and effect.

 

[SIGNATURE PAGE
FOLLOWS]

 

 

SIGNATURES

 

IN WITNESS
WHEREOF, Accellent and DLJMB have caused this First Amendment to be signed by
their respective officers thereunto duly authorized as of the date first
written above.

 

	
   

  	
  ACCELLENT INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Stewart A. Fisher

  
	
   

  	
   

  	
  Name:

  	
    Stewart A.
  Fisher

  
	
   

  	
   

  	
  Title:

  	
       Executive
  Vice President and

  
	
   

  	
   

  	
   

  	
       Chief
  Financial Officer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  DLJ MERCHANT BANKING III, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Avinash
  Kenkare

  
	
   

  	
   

  	
  Name:

  	
    Avinash
  Kenkare

  
	
   

  	
   

  	
  Title:

  	
      

  
					

 

[SIGNATURE
PAGE TO FIRST AMENDMENT TO LETTER AGREEMENT]Exhibit 10.1

 

EMPLOYMENT
AGREEMENT

 

This
EMPLOYMENT AGREEMENT (this “Agreement”) is made as of July 1, 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 Michael Chambrello (“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 the Effective Date and ending on June 30,
2008, 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 one hundred twenty (120)  days prior to the date upon which such
extension would otherwise have become effective electing not to further extend
the Term, in which case Executive’s employment shall terminate on the date upon
which such extension would otherwise have become effective, unless earlier
terminated in accordance with Section 5.

 

2.             Offices and
Duties.

 

(a)           During
the Term, Executive will serve as President and Chief Operating 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, including without limitation primary responsibility for the day to
day operations of the Company, reporting to the Chief Executive Officer of the
Company.  Executive understands that the Chief
Executive Officer shall have primary responsibility for activities of the
Company relating to corporate finance, mergers and acquisitions, corporate
legal affairs, strategic planning, and the like.  Subject to Section 5(d), Executive’s
functions, duties and responsibilities are subject to reasonable changes as the
Company may in good faith determine after consultation with Executive.

 

(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.
Executive may serve on the boards of a reasonable number of business entities,
trade associations, charitable organizations, and similar entities with the
prior consent of the Board of Directors provided that such service does not
materially interfere with Executive’s performance of his duties hereunder.

 

3.             Compensation.

 

(a)           Base Salary.  During the Term the Company shall pay
Executive a base salary (the “Base Salary”) at the initial rate of $750,000 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.  Such salary
shall be adjusted as of January 1st of each year, beginning with January 1,
2006, based on the New York area Consumer Price Index, with 2005 as the base
year.  In the event that the Company, in
its sole discretion, from time to time determines to increase the Base Salary
beyond the CPI adjustment, such increased amount (together with any CPI
adjustment) 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, provided that 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.  Under such plan,
Executive shall have the opportunity to earn up to 75% of Base Salary as
incentive compensation at Target Opportunity (“Target Bonus”) and up to 150% of
Base Salary as incentive compensation at Maximum Opportunity.  Any such incentive compensation shall be pro
rated for any portion of a fiscal year to which this agreement pertains, including
2005.

 

(c)           Initial Stock Option Grant.  Executive shall be granted 1,000,000 stock
options as of the Effective Date 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, so long as any such
change does not adversely affect any accrued or vested interest under any such
plan or program.

 

2

 

4.             Benefits.

 

(a)           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)           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 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. Executive
shall be entitled to paid vacation, holidays, and any other time off in
accordance with the Company’s policies in effect from time to time.

 

(c)           In
addition, Executive shall 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) intentional breach by
the Executive of any material provision of this Agreement; or (vi) any
other willful or grossly negligent 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.  Notwithstanding the foregoing, Executive
shall not be deemed to have been terminated for Cause unless and

 

3

 

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), and (vi) hereof, Executive shall have failed to cure such
Cause within thirty days after receiving such notice.

 

(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;

 

4

 

(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 100% 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));

 

5

 

(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 100% 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 eighteen (18) 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)           The
Base Salary for a period of twenty-four (24) months following termination in
equal installments in accordance with the Company’s standard payroll practices,
provided, however, that no payments shall be made until six months after the
termination of Executive’s employment with the Company and the first payment

 

6

 

shall be equal to the aggregate amount that would have been paid during
such six-month period;

 

(iii)          Payment
of an amount equal to the Severance Bonus Basis (as defined below) multiplied
by two (the “Severance Bonus Pay”).  For
purposes of this Agreement, “Severance Bonus Basis” shall mean (A) the
greater of (I) Executive’s Incentive Compensation for the prior fiscal year and
(II) Executive’s Incentive Compensation for the most recent fiscal year
ending more than twelve months prior to such termination of employment, or (B) if
Executive was not employed during the prior fiscal year, Executive’s Target
Bonus for the then-current fiscal year; provided, however, that the Severance
Bonus Basis shall not in any event be more than 100% of Executive’s Base Salary
as of the date of termination.  The
Severance Bonus Pay shall be payable in equal installments in accordance with
the Company’s standard payroll practices, provided, however, that no payments
shall be made until six months after the termination of Executive’s employment
with the Company and the first payment shall be equal to the aggregate amount
that would have been paid during such six-month period;

 

(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 100% 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 eighteen (18) 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 or Subsequent to the Expiration of
the Term.  In the event
that Executive’s employment is terminated upon or subsequent to the expiration
of the Term, the Executive shall be entitled to receive the Standard
Termination Payments (as defined in Section 6(a)) plus any Incentive
Compensation Executive would have received for such year but for such
termination of employment,

 

7

 

payable as and when such Incentive Compensation would have been payable
under Section 3(b), provided that if Executive’s employment is terminated
upon or subsequent to the expiration of the Term following the Company giving
notice pursuant to Section 1 electing not to further 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.

 

(g)           No Obligation to Mitigate.  The Executive shall have no obligation to
mitigate or offset damages pursuant to this Section 6.

 

(h)           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.

 

(i)            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.

 

(j)            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,” in lieu of receiving the payments described in 6(e), and subject
to the provisions of Section 6(i), Executive shall receive a lump sum
payment equal to the sum of:

 

(A)          Three times the Base
Salary; and

 

(B)           Three times the
Severance Bonus Basis (as defined in Section 6(e)(iii));

 

(C)           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

 

8

 

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 100% 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; and

 

(D)          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.

 

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 eighteen (18) 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” 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 combined voting power of SGC’s
then-outstanding securities;

 

9

 

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

 

10

 

(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), if any payment or right
accruing under this Agreement (without application of this subsection), either
alone or together with other payments or rights accruing to Executive from the
Company or its affiliate (the “Total Payments”) would constitute a “parachute
payment” as defined in Section 280G of the Internal Revenue Code (the “Code”)
and regulations thereunder, such payment or right shall be reduced to the
largest amount or greatest right that will result in no portion of the amount
payable or right accruing under this Agreement being subject to an excise tax
under Section 4999 of the Code or being disallowed as a deduction under Section 280G
of the Code, provided that Executive may elect by written notice to the Company
that no such reduction occur if after reduction for any applicable federal
excise tax imposed by Section 4999 of the Code and federal income tax
imposed by the Code, the Total Payments accruing to Executive would be greater
than the amount of the Total Payments as reduced (if applicable) pursuant to
this subsection after reduction for federal income taxes.  Executive shall cooperate in good faith with
the Company in providing the necessary information for making a determination
of the applicability of Section 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

 

11

 

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 (a) 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 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); (b) 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; (c) 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,
without the Company’s approval, (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)           Executive
agrees that upon the earlier of Executive’s (i) negotiating during the
Term (including any extensions thereof) with any Competitor (as defined below)
concerning the possible employment of Executive by the Competitor, (ii) responding
(other than for the purpose of declining) during the Term (including any
extensions thereof) to an offer of employment from a Competitor, or (iii) becoming
employed by a Competitor during the Term or the Covered Time, Executive will
provide copies of Section 7 of this Agreement to the Competitor and
promptly provide reasonable 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

 

12

 

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.

 

(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: (a) the software products, programs, applications, and
processes utilized by the Company; (b) 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; (c) 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; (d) 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;
(e) any information identified as confidential or proprietary in any line
of business engaged in by the Company; (f) any information that, to
Executive’s actual knowledge, the Company ordinarily maintains as confidential
or proprietary; (g) any business plans, budgets, advertising or marketing
plans; (h) any information contained in any of the Company’s written or
oral policies and procedures or manuals; (i) 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 (j) 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).

 

13

 

(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
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:  (a) promptly disclose such
Inventions to the Company; (b) assign to the Company, without additional
compensation, all patent and other rights to such Inventions for the United
States and foreign countries; (c) sign all papers necessary to carry out
the foregoing; and (d) 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. Likewise, the Company agrees that it shall use its best efforts to
ensure that the directors, the Chief Executive Officer, and senior officers of
the Company who report to the Chief Executive Officer or the Chief Operating
Officer do not disparage in any material respect the Executive.  Notwithstanding the foregoing, nothing in
this Agreement shall preclude Executive or the Company representatives from
making truthful statements that are required by applicable law, regulation or
legal process.

 

14

 

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 a court of competent
jurisdiction or an arbitrator determines that Executive willfully and
materially failed 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,
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; provided however, that Executive’s
ability to exercise such options shall be suspended during the pendency of such
court or arbitration proceeding.

 

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

 

15

 

actual or potential conflicts of interests.  If the amount of time required for Executive
to provide such cooperation exceeds three days during any calendar year, then
the Company shall pay Executive $3,750 per day that Executive spends at least
four hours providing such assistance.

 

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 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:

 

16

 

To the Company:

 

Scientific
Games Corporation

750 Lexington
Avenue

New York,
NY  10022

Attention:
General Counsel

 

with a copy
to:

 

Kramer Levin
Naftalis & Frankel LLP

1177 Avenue of
the Americas

New York,
NY  10036

Attention:  Howard Rothman, Esq.

 

To Executive:

 

Michael
Chambrello

504 Mount
Vernon Road

Plantsville,
CT  06479

 

with a copy
to:

 

Outten &
Golden

3 Park Avenue,
29th Floor

New York,
NY  10016

Attention:  Wayne Outten, Esq.

 

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 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

 

17

 

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 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.

 

18

 

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.  Any dispute or controversy arising under or
in connection with this Agreement shall be settled exclusively by arbitration
in New York, New York by 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; provided, however, that the
Company shall be entitled to commence an action in any court of competent
jurisdiction to enforce any provision of Section 7.  The prevailing party in any proceeding
arising under or in connection with this Agreement shall be awarded its costs
and reasonable attorneys’ fees incurred in connection with such proceeding.
Judgment may be entered on the arbitrators’ award in any court having
jurisdiction. For purposes of entering such judgment or seeking enforcement of 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) any of the courts of the State of New
York; or (iii) any other court having jurisdiction. 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 and any
defense of inconvenient forum. 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.

 

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.

 

[Remainder of Page Intentionally Left Blank]

 

19

 

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

 

 

	
   

  	
  SCIENTIFIC
  GAMES CORPORATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  EXECUTIVE

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Name:
  Michael Chambrello

  

 

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
STOCK OPTION AGREEMENT

 

23

 

EXHIBIT D

 

ADDITIONAL
BENEFITS AND/OR PERQUISITES

 

SERP. 
During the term, Executive shall be entitled to participate in the
Scientific Games Corporation Supplemental Executive Retirement Plan, as amended
and restated effective November 1, 2003 (“SERP”) in accordance with its
terms, subject to the Company’s right to at any time amend or terminate any
such plan or program, provided that Executive’s benefits under the SERP shall
be no greater than $500,000 per annum.

 

Housing Allowance.  Executive shall receive a monthly housing
allowance of $5,000 for expenses relating to apartments used by Executive in
New York City and Atlanta, Georgia, to be paid as directed by Executive.

 

Commutation Allowance.  Executive shall be paid a monthly commutation
allowance of $2,500.

 

24

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