<PAGE> 1
As filed with the Securities and Exchange Commission on December 19, 1997.
Registration No. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------
FORM S-8
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------
SCIENTIFIC GAMES HOLDINGS CORP.
(Exact name of registrant as specified in its charter)
DELAWARE 13-3615274
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1500 BLUEGRASS LAKES PARKWAY
ALPHARETTA, GEORGIA 30004
(770) 664-3700
(Address, including zip code, and telephone number, including
area code, of Registrant's principal executive offices)
SCIENTIFIC GAMES HOLDINGS CORP.
1998 EMPLOYEE STOCK PURCHASE PLAN
(Full title of the Plan)
WILLIAM G. MALLOY
PRESIDENT AND CHIEF EXECUTIVE OFFICER
SCIENTIFIC GAMES HOLDINGS CORP.
1500 BLUEGRASS LAKES PARKWAY
ALPHARETTA, GEORGIA 30004
(770) 664-3700
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
------------
Copies to:
HOWARD E. TURNER, ESQ.
SMITH, GAMBRELL & RUSSELL, LLP
SUITE 3100, PROMENADE II
1230 PEACHTREE STREET, N.E.
ATLANTA, GEORGIA 30383-2501
(404) 815-3500
------------
<PAGE> 2
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
Proposed
Title of Proposed maximum Maximum
securities Amount offering aggregate Amount of
to be to be price offering registration
registered registered per unit price fee
(1) (1) (1)
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Common Stock 200,000 shares $20.4375 $4,087,500 $1,206 (1)
par value $.001
per share
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to the provisions of Rule 457(c) & (h)(1) under the Securities Act of
1933, as amended (the "Securities Act"). Based on prices on the New York Stock
Exchange on December 16, 1997, as reported in The Wall Street Journal.
================================================================================
2
<PAGE> 3
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
ITEM 3. INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE.
The Company hereby incorporates by reference in this Registration
Statement and its Prospectus the following documents:
(a) The Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1996, as filed with the Securities and Exchange Commission (the
"Commission") pursuant to Section 13 of the Securities Exchange Act of 1934 (the
"Exchange Act");
(b) The Company's Quarterly Reports on Form 10-Q for the quarters ended
March 31, June 30, and September 30, 1997;
(c) The description of the Company's Series A Participating Cumulative
Preferred Stock Purchase Rights included in its Registration Statement on Form
8-A, as amended, filed with the Commission on August 4, 1997 pursuant to Section
12(g) of the Exchange Act;
(d) The Company's Report on Form 8-K dated June 30, 1997; and
(e) All documents subsequently filed by the Company pursuant to
Sections 13(a), 13(c), 14 and 15(d) of the Exchange Act, prior to the filing of
a post-effective amendment which indicates that all securities offered have been
sold or which deregisters all securities then remaining unsold, shall be deemed
to be incorporated by reference in this prospectus and to be a part hereof from
the date of filing of such documents.
Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Registration Statement to the extent that a statement
contained herein or in any other subsequently filed document which also is or is
deemed to be incorporated by reference herein modifies or supersedes such
statement. Any such statement so modified or superseded shall be deemed, except
as so modified and superseded, to constitute a part of this Registration
Statement.
ITEM 4. DESCRIPTION OF SECURITIES.
The class of securities offered is registered under Section 12 of the
Exchange Act.
ITEM 5. INTERESTS OF NAMED EXPERTS AND COUNSEL.
None.
3
<PAGE> 4
ITEM 6. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Article IX of the Registrant's Amended and Restated By-laws provides
for indemnification of directors and officers pursuant to Section 145 of the
Delaware General Corporation Law ("DGCL"). Section 145 of the DGCL generally
grants corporations the power to indemnify their directors, officers, employees
and agents of a corporation in accordance with the provisions thereof.
In accordance with Section 102(a)(7) of the DGCL, Article VIII of the
Registrant's Restated Certificate of Incorporation eliminates the personal
liability of directors to Registrant or its shareholders for monetary damages
for breach of fiduciary duty as a director with certain limited exceptions set
forth in Section 102(a)(7) of the DGCL.
The Registrant also has in place a Directors and Officers liability
insurance policy.
ITEM 7. EXEMPTION FROM REGISTRATION CLAIMED.
Not applicable.
ITEM 8. EXHIBITS.
The following exhibits are filed as part of this Registration
Statement:
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------ -----------
<S> <C>
5.1 Opinion of Smith, Gambrell & Russell, LLP
23.1 Consent of Smith, Gambrell & Russell, LLP included in
Exhibit 5.1
23.2 Consent of Ernst & Young LLP
99.1 Scientific Games Holdings Corp. 1998 Employee Stock
Purchase Plan
</TABLE>
ITEM 9. UNDERTAKINGS.
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are
being made, a post-effective amendment to this Registration Statement to include
any material information with respect to the plan of distribution not previously
disclosed in this Registration Statement or any material change to such
information in this Registration Statement;
(2) That, for the purpose of determining any liability under
the Securities Act, each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof; and
4
<PAGE> 5
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the provisions of the registrant's By-Laws or
otherwise, the registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the event that a claim
for indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question of whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
5
<PAGE> 6
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1933, THE
REGISTRANT CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT MEETS ALL
OF THE REQUIREMENTS FOR FILING ON FORM S-8 AND HAS DULY CAUSED THIS REGISTRATION
STATEMENT ON FORM S-8 TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO
DULY AUTHORIZED IN THE CITY OF ALPHARETTA, STATE OF GEORGIA, ON DECEMBER 18,
1997.
By: /s/ William G. Malloy
-----------------------------------------
William G. Malloy
President and Chief Executive Officer
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS REGISTRATION
STATEMENT ON FORM S-8 HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATE INDICATED.
<TABLE>
<CAPTION>
SIGNATURES CAPACITY DATE
---------- -------- ----
<S> <C> <C>
/s/ William G. Malloy President, Chief Executive December 18, 1997
- ----------------------------------------- Officer, Chairman and Director
William G. Malloy
/s/ William F. Behm Executive Vice President December 18, 1997
- ----------------------------------------- and Director
William F. Behm
/s/ Cliff O. Bickell Vice President, Treasurer and December 18, 1997
- ----------------------------------------- Chief Financial Officer (Principal
Cliff O. Bickell Financial and Accounting Officer)
* Director December 18, 1997
- -----------------------------------------
Paul F. Balser
* Director December 18, 1997
- -----------------------------------------
Mark E. Jennings
* Director December 18, 1997
- -----------------------------------------
Frank S. Jones
Director December 18, 1997
- -----------------------------------------
Edith K. Manns
* Director December 18, 1997
- -----------------------------------------
Dennis L. Whipple
* Signed pursuant to power of attorney by:
/s/ C. Gray Bethea, Jr.
----------------------------------------
C. Gray Bethea, Jr., as Attorney-in-Fact
</TABLE>
6
<PAGE> 7
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Number Description
- ------ -----------
<S> <C>
5.1 Opinion of Smith, Gambrell & Russell, LLP
23.1 Consent of Smith, Gambrell & Russell, LLP,
included in Exhibit 5.1
23.2 Consent of Ernst & Young LLP
99.1 Scientific Games Holdings Corp. 1998 Employee
Stock Purchase Plan
</TABLE>
8
<PAGE> 1
EXHIBIT 5.1
<TABLE>
<CAPTION>
<S> <C> <C>
SMITH, GAMBRELL & RUSSELL, LLP
Telephone Attorneys At Law WEBSITE
(404)815-3500 Suite 3100, Promenade II www.sgratl.com
Facsimile 1230 Peachtree Street, N. E.
(404)815-3509 Atlanta, Georgia 30309-3592
</TABLE>
December 19, 1997
Board of Directors
Scientific Games Holdings Corp.
1500 Bluegrass Lakes Parkway
Alpharetta, Georgia 30201
Re: Scientific Games Holdings Corp.
Registration Statement on Form S-8 for
1998 Employee Stock Purchase Plan
Gentlemen:
In connection with the registration of 200,000 shares of the Common
Stock, par value $.001 (the "Securities"), of Scientific Games Holdings Corp.
(the "Company") issuable under the Company's 1998 Employee Stock Purchase Plan,
we have examined the following:
1. A copy of the Registration Statement on Form S-8 to be filed
with the Securities and Exchange Commission and the Exhibits
to be filed with and as a part of said Registration Statement;
2. A copy of the Amended and Restated Certificate of
Incorporation of the Company as referred to in said
Registration Statement;
3. A copy of the Second Amended and Restated By-Laws of the
Company as referred to in said Registration Statement; and
4. Copies of the minutes of meetings of the Board of Directors of
the Company or committees thereof, and oral and/or written
confirmations deemed by us to be relevant to this opinion.
Further in connection with this matter, we have reviewed certain of the
Company's proceedings with respect to the authorization of the issuance of such
Securities and with respect to the filing of said Registration Statement.
Based on the foregoing, it is our opinion that:
<PAGE> 2
Board of Directors
December , 1997
Page 2
(i) the Company is a corporation in good standing, duly organized
and validly existing under the laws of the State of Delaware;
(ii) the necessary corporate proceedings and actions legally
required for the registration of the Securities have been held
and taken;
(iii) the issuance and sale of the Securities has been duly and
validly authorized; and
(iv) the shares of Common Stock of the Company when issued will be
fully paid, non-assessable and free of preemptive rights.
We consent to the filing of this opinion as an Exhibit to the
aforementioned Registration Statement on Form S-8. In giving this consent, we do
not thereby admit we come within the category of persons whose consent is
required under Section 7 of the Securities Act of 1933, or the rules and
regulations of the Securities and Exchange Commission thereunder.
Very truly yours,
SMITH, GAMBRELL & RUSSELL, LLP
/s/ M. Timothy Elder
M. Timothy Elder
<PAGE> 1
EXHIBIT 23.2
Consent of Independent Auditors
We consent to the incorporation by reference in the Registration Statement (Form
S-8) pertaining to the Scientific Games Holdings Corp. 1998 Employee Stock
Purchase Plan of our report, dated January 29, 1997, with respect to the
consolidated financial statements of Scientific Games Holdings Corp.
incorporated by reference in its Annual Report (Form 10-K) for the year ended
December 31, 1996.
/s/ Ernst & Young LLP
Atlanta, Georgia
December 12, 1997
<PAGE> 1
EXHIBIT 99.1
STATE OF NEW YORK
COUNTY OF KING
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that I, Mark E. Jennings, a Director of
SCIENTIFIC GAMES HOLDINGS CORP. (the "Company"), a Delaware corporation, do
constitute and appoint William G. Malloy and C. Gray Bethea, Jr., jointly and
severally, my true and lawful attorneys-in-fact, with full power of substitution
for me in any and all capacities, to sign, pursuant to the requirements of the
Securities Act of 1933, as amended, a Registration Statement on Form S-8
relating to shares of the Company's Common Stock, $.001 par value, to be issued
pursuant to the Company's 1998 Stock Purchase Plan, and to file such
Registration Statement, or cause such Registration Statement to be filed with
the Securities and Exchange Commission together with all exhibits thereto and
other documents necessary or incidental in connection therewith, and to sign on
my behalf and in my stead, in any and all capacities, any amendments (including
post-effective amendments) and supplements to said Registration Statement,
incorporating such changes as any of the said attorneys-in-fact deems
appropriate, hereby ratifying and confirming all that each of said
attorneys-in-fact, or his substitute or substitutes, may do or cause to be done
by virtue hereof.
IN WITNESS WHEREOF, I have hereunto set my hand and seal this 9th day
December, 1997.
/s/ Mark E. Jennings
---------------------------------
MARK E. JENNINGS
ACKNOWLEDGMENT
BEFORE me this 9th day of December, 1997, came Mark E. Jennings,
personally known to me, who in my presence did sign and seal the above and
foregoing Power of Attorney and acknowledged the same as his true act and deed.
/s/ Margo M. Farley
-----------------------------------
NOTARY PUBLIC
State of New York
-------------------------
My Commission Expires:
May 4, 1998
-----------------------------------
NOTARY SEAL
<PAGE> 2
STATE OF NEW YORK
COUNTY OF KING
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that I, Paul F. Balser, a Director of
SCIENTIFIC GAMES HOLDINGS CORP. (the "Company"), a Delaware corporation, do
constitute and appoint William G. Malloy and C. Gray Bethea, Jr., jointly and
severally, my true and lawful attorneys-in-fact, with full power of substitution
for me in any and all capacities, to sign, pursuant to the requirements of the
Securities Act of 1933, as amended, a Registration Statement on Form S-8
relating to shares of the Company's Common Stock, $.001 par value, to be issued
pursuant to the Company's 1998 Stock Purchase Plan, and to file such
Registration Statement, or cause such Registration Statement to be filed with
the Securities and Exchange Commission together with all exhibits thereto and
other documents necessary or incidental in connection therewith, and to sign on
my behalf and in my stead, in any and all capacities, any amendments (including
post-effective amendments) and supplements to said Registration Statement,
incorporating such changes as any of the said attorneys-in-fact deems
appropriate, hereby ratifying and confirming all that each of said
attorneys-in-fact, or his substitute or substitutes, may do or cause to be done
by virtue hereof.
IN WITNESS WHEREOF, I have hereunto set my hand and seal this 9th day
of December, 1997.
/s/ Paul F. Balser
-----------------------------------------------
PAUL F. BALSER
ACKNOWLEDGMENT
BEFORE me this 9th day of December, 1997, came Paul F. Balser,
personally known to me, who in my presence did sign and seal the above and
foregoing Power of Attorney and acknowledged the same as his true act and deed.
/s/ Margo M. Farley
----------------------------------------------
NOTARY PUBLIC
State of New York
-------------------------------------
My Commission Expires:
May 4, 1998
----------------------------------------------
NOTARY SEAL
<PAGE> 3
STATE OF GEORGIA
COUNTY OF FORSYTH
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that I, Frank S. Jones, a Director of
SCIENTIFIC GAMES HOLDINGS CORP. (the "Company"), a Delaware corporation, do
constitute and appoint William G. Malloy and C. Gray Bethea, Jr., jointly and
severally, my true and lawful attorneys-in-fact, with full power of substitution
for me in any and all capacities, to sign, pursuant to the requirements of the
Securities Act of 1933, as amended, a Registration Statement on Form S-8
relating to shares of the Company's Common Stock, $.001 par value, to be issued
pursuant to the Company's 1998 Stock Purchase Plan, and to file such
Registration Statement, or cause such Registration Statement to be filed with
the Securities and Exchange Commission together with all exhibits thereto and
other documents necessary or incidental in connection therewith, and to sign on
my behalf and in my stead, in any and all capacities, any amendments (including
post-effective amendments) and supplements to said Registration Statement,
incorporating such changes as any of the said attorneys-in-fact deems
appropriate, hereby ratifying and confirming all that each of said
attorneys-in-fact, or his substitute or substitutes, may do or cause to be done
by virtue hereof.
IN WITNESS WHEREOF, I have hereunto set my hand and seal this 10th day
of December, 1997.
/s/ Frank S. Jones
-----------------------------------------------
FRANK S. JONES
ACKNOWLEDGMENT
BEFORE me this 10th day of December, 1997, came Frank S. Jones,
personally known to me, who in my presence did sign and seal the above and
foregoing Power of Attorney and acknowledged the same as his true act and deed.
/s/ Linda Johnson Weaver
----------------------------------------------
NOTARY PUBLIC
State of Georgia
-------------------------------------
My Commission Expires:
October 8, 1999
----------------------------------------------
NOTARY SEAL
<PAGE> 4
STATE OF ARKANSAS
COUNTY OF PULASKI
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that I, Dennis L. Whipple, a Director
of SCIENTIFIC GAMES HOLDINGS CORP. (the "Company"), a Delaware corporation, do
constitute and appoint William G. Malloy and C. Gray Bethea, Jr., jointly and
severally, my true and lawful attorneys-in-fact, with full power of substitution
for me in any and all capacities, to sign, pursuant to the requirements of the
Securities Act of 1933, as amended, a Registration Statement on Form S-8
relating to shares of the Company's Common Stock, $.001 par value, to be issued
pursuant to the Company's 1998 Stock Purchase Plan, and to file such
Registration Statement, or cause such Registration Statement to be filed with
the Securities and Exchange Commission together with all exhibits thereto and
other documents necessary or incidental in connection therewith, and to sign on
my behalf and in my stead, in any and all capacities, any amendments (including
post-effective amendments) and supplements to said Registration Statement,
incorporating such changes as any of the said attorneys-in-fact deems
appropriate, hereby ratifying and confirming all that each of said
attorneys-in-fact, or his substitute or substitutes, may do or cause to be done
by virtue hereof.
IN WITNESS WHEREOF, I have hereunto set my hand and seal this 11th day
of December, 1997.
/s/ Dennis L. Whipple
----------------------------------------------
DENNIS L. WHIPPLE
ACKNOWLEDGMENT
BEFORE me this 11th day of December, 1997, came Dennis L. Whipple,
personally known to me, who in my presence did sign and seal the above and
foregoing Power of Attorney and acknowledged the same as his true act and deed.
/s/ Pamela K. Armbrust
----------------------------------------------
NOTARY PUBLIC
State of Arkansas
-------------------------------------
My Commission Expires:
July 17, 2001
----------------------------------------------
NOTARY SEAL
<PAGE> 5
SCIENTIFIC GAMES HOLDINGS CORP.
1998 EMPLOYEE STOCK PURCHASE PLAN
SECTION 1. PURPOSE OF PLAN
The Scientific Games Holdings Corp. 1998 Employee Stock Purchase Plan (the
"Plan") is intended to provide a method by which eligible employees of
Scientific Games Holdings Corp. ("Scientific Games") and of such of Scientific
Games's subsidiaries as Scientific Games's Board of Directors (the "Board of
Directors") may from time to time designate (such subsidiaries, together with
Scientific Games, being hereinafter referred to as the "Company") may use
voluntary, systematic payroll deductions to purchase shares of the Common Stock
of Scientific Games (the "Stock") and thereby acquire an interest in the future
of the Company. For purposes of the Plan, a "subsidiary" is any corporation in
which Scientific Games owns, directly or indirectly, stock possessing 50% or
more of the total combined voting power of all classes of stock.
It is the intention of the Company that the Plan qualify as an "employee stock
purchase plan" under Section 423 of the Internal Revenue Code of 1986, as
amended (the "Code"). The provisions of the Plan shall be construed so as to
comply in all respects with the requirements of the Code applicable to employee
stock purchase plans.
SECTION 2. OPTIONS TO PURCHASE STOCK
Under the Plan, there is available an aggregate of not more than 200,000 shares
of Stock (subject to adjustment as provided in Section 15) for sale pursuant to
the exercise of options ("Options") granted under the Plan to employees of the
Company ("Employees") who meet the eligibility requirements set forth in Section
3 hereof ("Eligible Employees"). The Stock to be delivered upon exercise of
Options under the Plan may be either shares of authorized but unissued Stock or
shares of reacquired Stock, as the Board of Directors may determine.
SECTION 3. ELIGIBLE EMPLOYEES
Except as otherwise provided below, each individual who is an Employee of the
Company, who has a customary working schedule of at least 20 hours per week, and
who has been an Employee for at least one year will be eligible to participate
in the Plan.
(a) Any Employee who immediately after the grant of an Option to him would
(in accordance with the provisions of Sections 423 and 424(d) of the
Code) own stock possessing five percent (5%) or more of the total
combined voting power or value of all classes of stock of the employer
corporation or of its parent or subsidiary corporations, as defined in
Section 424 of the Code, will not be eligible to receive an Option to
purchase Stock pursuant to the Plan.
(b) The Plan will be operated in compliance with the limitations on
purchases of Stock contained in Section 423(b)(8) of the Code.
<PAGE> 6
SECTION 4. METHOD OF PARTICIPATION
Each of the periods during which this Plan remains in effect is hereinafter
referred to as an "Option Period." Each Option Period shall be of six-months
duration; provided, however, that the first Option Period for which Options may
be granted hereunder shall expire on June 30, 1998 irrespective of the date on
which such initial Option Period begins. Each person who will be an Eligible
Employee on the first day of an Option Period may elect to participate in the
Plan by executing and delivering, within a reasonable time frame specified by
the Committee (as defined below), a payroll deduction authorization in
accordance with Section 5. Such Employee will thereby become a participant
("Participant") for such Option Period. Any such payroll deduction authorization
will remain in effect until revoked or amended in writing by the Participant.
SECTION 5. PAYROLL DEDUCTION
The payroll deduction authorization will request withholding at a rate (in whole
percentages) of not less than 1% nor more than 15%, but in no event more than
$25,000 in any calendar year, from the Participant's Compensation (as defined
below) by means of substantially equal payroll deductions over the Option
Period. For purposes of the Plan, "Compensation" means the Participant's base
wages, salary, bonuses, and commissions, plus any amount that would be included
in the Participant's taxable income but for the fact that it was contributed to
a qualified plan pursuant to an elective deferral under Section 401(k) of the
Code or contributed under a salary reduction agreement pursuant to Section 125
of the Code or deferred pursuant to a non-qualified deferred compensation plan
in each case, to the full extent permitted by law and applicable regulations, if
any. A Participant may reduce the withholding rate of his or her payroll
deduction authorization by one or more whole percentage points (but not to below
1%) at any time during an Option Period by delivering written notice to the
Company, such reduction to take effect prospectively as soon as practicable
following receipt of such notice by the Company. In addition, and
notwithstanding anything contained herein to the contrary, as of the March 31 or
September 30 which marks the first day of the second three months of any Option
Period, a Participant may elect to increase or reduce the withholding rate of
his or her payroll deduction for such current Option Period by delivering
written notice to the Company of such election within a reasonable time period
before such March 31 or September 30 date, as applicable, as specified by the
Committee. Such increases or decreases will take place as of the applicable date
or dates or as soon thereafter as practicable. A Participant may increase or
reduce the withholding rate of his or her payroll deduction authorization for a
future Option Period by written notice delivered to the Company, within a
reasonable time period specified by the Committee, prior to the first day of the
Option Period as to which the change is to be effective. All amounts withheld in
accordance with a Participant's payroll deduction authorization will be credited
to a withholding account for such Participant.
SECTION 6. GRANT OF OPTIONS
Each person who is a Participant on the first day of an Option Period will as of
such day be granted an Option for such Option Period. Such Option will be for
the number of whole and fractional shares (not in excess of the share maximum as
hereinafter defined) of Stock to be determined by dividing (i) the balance in
the Participant's withholding account on the last day of the Option Period,
2
<PAGE> 7
by (ii) the purchase price per share of the Stock determined under Section 7.
The number of shares of Stock receivable by each Participant upon exercise of
his or her Option for an Option Period will be reduced, on a substantially
proportionate basis, in the event that the number of shares then available under
the Plan is otherwise insufficient.
SECTION 7. PURCHASE PRICE
The purchase price of Stock issued pursuant to the exercise of an Option will be
90% of the fair market value of the Stock at (a) the time of grant of the Option
or (b) the time at which the Option is deemed exercised, whichever is less.
Unless the Board of Directors determines otherwise in good faith, fair market
value on any given day will mean the Closing Price (as defined below) of the
Stock on such day (or, if there was no Closing Price on such day, the latest day
prior thereto on which there was a Closing Price). The "Closing Price" of the
Stock on any business day will be the last sale price as reported on the
principal market on which the Stock is traded. A good faith determination by the
Board of Directors as to fair market value shall be final and binding.
SECTION 8. EXERCISE OF OPTIONS
Each Employee who is a Participant in the Plan on the last day of an Option
Period will be deemed to have exercised the Option granted to him or her for
that Option Period on the last day of the Option Period. Upon each such
exercise, the balance of the Participant's withholding account will be applied
to the purchase of the number of whole and fractional shares of Stock determined
under Section 6 and as soon as practicable thereafter said shares will be
maintained in separate brokerage accounts for Participants with Smith Barney, or
any successor brokerage firm. In the event that the balance of the Participant's
withholding account following an Option Period is in excess of the total
purchase price of the shares so issued, the balance of the account shall be
returned to the Participant. The entire balance of the Participant's Withholding
account following the final Option Period shall be returned to the Participant.
Each brokerage account may be in the name of the Participant or, if he or she so
indicates on the appropriate form, in his or her name jointly with another
person, with right of survivorship. A Participant who is a resident of a
jurisdiction that does not recognize such a joint tenancy may have a brokerage
account in his or her name as tenant in common with another person, without
right of survivorship.
Notwithstanding anything herein to the contrary, Scientific Games's obligation
to issue and deliver shares of Stock under the Plan is subject to the approval
required of any governmental authority in connection with the authorization,
issuance, sale or transfer of said shares, to any requirements of any national
securities exchange applicable thereto, and to compliance by the Company with
other applicable legal requirements in effect from time to time, including
without limitation any applicable tax withholding requirements.
3
<PAGE> 8
SECTION 9. USE OF FUNDS
All payroll deductions received or held by the Company under the Plan may be
used by the Company for any corporate purpose and the Company shall not be
obligated to segregate such payroll deductions; provided, however, that the
Company may elect, at its sole discretion, to segregate such payroll deductions
for the benefit of Participants.
No interest will be payable on withholding accounts; provided, however, that the
Company may elect, at its sole discretion, to pay interest on such withholding
accounts at a market rate of interest, as determined in good faith by the Board
of Directors in its sole discretion.
SECTION 10. CANCELLATION AND WITHDRAWAL
A Participant who holds an Option under the Plan may at any time prior to
exercise thereof under Section 8 cancel such Option as to all (but not less than
all) the Shares of Stock subject or to be subject to such Option by written
notice delivered to the Company. Upon such cancellation, the balance in his or
her withholding account will be returned to him.
A Participant may terminate his or her payroll deduction authorization as of any
date by written notice delivered to the Company and will thereby cease to be a
Participant as of such date. Any Participant who voluntarily terminates his or
her payroll deduction authorization prior to the last business day of an Option
Period will be deemed to have canceled his or her Option.
Any Participant who cancels an Option or terminates his or her payroll deduction
authorization may as of the beginning of a subsequent Option Period again become
a Participant in accordance with Section 4; provided, however, that, unless the
Compensation Committee of the Board of Directors or a committee duly authorized
by the Board of Directors to administer the Plan (the "Committee") determines
otherwise, any such Participant who is at the time subject to the provisions of
Section 16 of the Securities Exchange Act of 1934, as amended (the "1934 Act"),
may not again become a Participant until at least six months have elapsed after
the date on which he or she ceased to be a participant.
SECTION 11. TERMINATION OF EMPLOYMENT
Subject to Section 12, upon the termination of a Participant's service with the
Company for any reason, he or she will cease to be a Participant, and any Option
held by such Participant under the Plan will be deemed canceled, the balance of
his or her withholding account will be returned to him or her, and he or she
will have no further rights under the Plan.
SECTION 12. DEATH OF PARTICIPANT
In the event of the death of a Participant, any Option outstanding to him or her
at such time shall be deemed to be immediately canceled and any cash and/or
Stock credited to the Participant under the Plan will be delivered to his or her
estate as soon as practicable after the end of the current Option Period.
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SECTION 13. PARTICIPANT'S RIGHTS NOT TRANSFERABLE
All Participants will have the same rights and privileges under the Plan. Each
Participant's rights and privileges under any Option may be exercisable during
his or her lifetime only by him or her, and may not be sold, pledged, assigned,
or transferred in any manner. In the event any Participant violates the terms of
this Section, any Option held by him or her may be terminated by the Company and
upon return to the participant of the balance of his or her withholding account,
all his or her rights under the Plan will terminate.
SECTION 14. EMPLOYMENT RIGHTS
Nothing contained in the provisions of the Plan will be construed to give to any
Employee the right to be retained in the employ of the Company or to interfere
with the right of the Company to discharge any Employee at any time. The loss of
existing or potential profit in Options will not constitute an element of
damages in the event of termination of employment for any reason, even if the
termination is in violation of an obligation to the Participant.
SECTION 15. CHANGE IN CAPITALIZATION
In the event of any change in the outstanding Stock of Scientific Games by
reason of a stock dividend, split-up, recapitalization, merger, consolidation,
reorganization, or other capital change, after the effective date of this Plan,
the aggregate number of shares available under the Plan, the number of shares
under Options granted but not exercised, and the Option price will be
appropriately adjusted in the manner determined by the Committee, in its sole
discretion.
SECTION 16. ADMINISTRATION OF PLAN
The Committee shall have the right to determine all questions regarding the
interpretation and application of the provisions of the Plan and to make,
administer, and interpret such rules and regulations as it deems necessary or
advisable with respect to the Plan. The Committee's decisions will be final and
binding.
SECTION 17. AMENDMENT AND TERMINATION OF PLAN
(a) Scientific Games reserves the right at any time or times to amend
the Plan to any extent and in any manner it may deem advisable by proper action
of the Board of Directors; provided, however, that any amendment relating to the
aggregate number of shares which may be issued under the Plan (other than an
adjustment provided for in Section 15) or to the Employees (or class of
Employees) eligible to receive Options under the Plan will have no force or
effect unless it is approved by the shareholders of Scientific Games within
twelve months before or after its adoption.
(b) The Plan shall terminate: (i) automatically when all the Stock
reserved for the purposes of the Plan has been purchased or (ii) as of the
conclusion of any Option Period, as the Board, acting in its sole discretion
prior to the last day of such Option Period, shall specify.
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SECTION 18. COSTS AND EXPENSES
No brokerage commissions or fees shall be charged by the Company in connection
with the purchase of shares of Common Stock by Participants under the Plan. All
costs and expenses incurred in administering the Plan shall be borne by the
Company.
SECTION 19. APPROVAL OF SHAREHOLDERS
The Plan is subject to the approval of the shareholders of Scientific Games,
which approval must be secured within twelve months before or after the date the
Plan is adopted by the Board of Directors, and any Option granted hereunder
prior to such approval is conditioned on such approval being obtained prior to
the exercise thereof.
IN WITNESS WHEREOF, the Company has caused this Plan to be executed on its
behalf the ___ day of __________, 1997.
SCIENTIFIC GAMES HOLDINGS CORP.
By:
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