UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K/A
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[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED: DECEMBER 31, 2001,
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ______________TO________________
COMMISSION FILE NUMBER: 0-13063
SCIENTIFIC GAMES CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 81-0422894
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
750 LEXINGTON AVENUE, 25TH FLOOR
NEW YORK, NEW YORK 10022
(Address of principal executive offices)
REGISTRANT'S TELEPHONE NUMBER: (212) 754-2233
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
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Class A Common Stock, $.01 par value Nasdaq National Market
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No___
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Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. __
As of March 18, 2002, the aggregate market value of voting common stock
held by non-affiliates of the registrant was approximately $395,469,029.
As of April 29, 2002, there were 43,056,007 shares of common stock
outstanding.
DOCUMENTS INCORPORATED BY REFERENCE:
None.
The undersigned registrant hereby amends its Annual Report on Form 10-K
for the fiscal year ended December 31, 2001 by amending Part III thereof to read
in its entirety as follows:
PART III.
ITEM 10. DIRECTORS OF THE REGISTRANT.
Certain information concerning the directors of the Company is set
forth below:
DIRECTOR
NAME AGE POSITION SINCE
------ --- -------- --------
A. Lorne Weil.............................. 56 Chairman of the Board, President and 1989
Chief Executive Officer (1)(4)
Larry J. Lawrence.......................... 59 Vice Chairman of the Board (1)(2)(3) 1989
W. Walker Lewis............................ 57 Director 2001
Colin J. O'Brien.......................... 63 Director (2) 2000
Sir Brian G. Wolfson....................... 66 Director (2) 1988
Alan J. Zakon.............................. 66 Director (1)(3)(4) 1993
Peter A. Cohen............................ 55 Director (1) 2000
Michael S. Immordino...................... 41 Director 2000
Luciano La Noce........................... 52 Director (2)(3)(4) 2000
Roberto Sgambati.......................... 46 Director 2000
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(1) Member of Executive Committee
(2) Member of Audit Committee
(3) Member of Compensation Committee
(4) Member of Nominating Committee
All directors hold office until the next annual meeting of stockholders
and until their successors have been duly elected and qualified or until their
earlier death, resignation or removal. The holders of our Series A Convertible
Preferred Stock have the right to designate and elect four members of our Board
(or a lesser number in the event that their ownership level declines) and a
voting agreement among such holders gives Cirmatica Gaming, S.A., which
purchased approximately 90% of such stock, the right to designate the persons
who will serve as the director designees, provided that, except under certain
circumstances, Peter A. Cohen is one of the designees. Such holders have elected
as directors Peter A. Cohen, Michael S. Immordino, Luciano La Noce and Roberto
Sgambati.
Mr. A. Lorne Weil has been a director of the Company since December
1989, Chairman of the Board since October 1991, Chief Executive Officer of the
Company since April 1992 and President of the Company since August 1997. Mr.
Weil held various senior management positions with the Company and its
subsidiaries from October 1990 to April 1992 and was a director and consultant
to Autotote Systems, Incorporated from 1982 until it was acquired by the Company
in 1989. Mr. Weil was President of Lorne Weil, Inc., a firm providing strategic
planning and corporate development services to high technology industries, from
1979 to November 1992. Mr. Weil is currently a director of Fruit of the Loom,
Inc. and Bluefly, Inc.
Mr. Larry J. Lawrence has been a director of the Company since December
1989 and Vice Chairman of the Board since August 1997. Mr. Lawrence has been
managing partner of LTOS II Partners, the general partner of Lawrence, Tyrrell,
Ortale & Smith II, a private equity fund manager, since 1990. Mr. Lawrence has
been general partner of Allegra Partners III, L.P., the general partner of
Allegra Capital Partners III, L.P., since May 1995, and has been managing
partner of Allegra Partners IV, L.P., the general partner of Allegra Capital
Partners IV, L.P., since January 2000. From 1985 to 2000, Mr. Lawrence was
managing partner of Lawrence Venture Partners, the general partner of Lawrence,
Tyrrell, Ortale & Smith. Mr. Lawrence served as a director of Autotote Systems,
Incorporated until it was acquired by the Company in 1989. Mr. Lawrence is
currently a director of Globe Tax Services, Inc.
Mr. W. Walker Lewis has been a director of the Company since March
2001. Mr. Lewis is the Chairman of Devon Value Advisers, a financial consulting
and investment banking firm. From 1995 to 1997, Mr. Lewis was a Senior Advisor
with SBC Warburg Dillon Read Inc. From April 1994 to December 1994, he was a
Managing Director of Kidder Peabody
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where he was also a member of the firm's management committee. From April 1992
to December 1993, he served as President of Avon North America and as Executive
Vice President of Avon Corporate. Mr. Lewis is currently Chairman of London Fog
Industries and a director of American Management Systems, Inc., Mrs. Fields
Original Cookies, Owens Corning and Unilab Corporation.
Mr. Colin J. O'Brien has been a director of the Company since September
2000. Between February 1992 and his retirement in January 2001, Mr. O'Brien was
employed in various positions with Xerox Corporation, including Vice President,
President of the Document Production Systems Division, Chief Executive Officer
of the New Enterprise Board and Executive Chairman of XESystems, Inc., a
subsidiary of Xerox. In 1986, Mr. O'Brien formed an investment company with E.M.
Warburg Pincus & Co. Inc., making a number of acquisitions in defense
electronics. Prior to that time, Mr. O'Brien served as Chief Executive of Times
Fiber Communications, Inc. and President of General Instrument's cable
television operations. He has held management positions with Union Carbide in
both Canada and Europe. Mr. O'Brien is currently a director of Document Sciences
Corporation and several privately held companies.
Sir Brian G. Wolfson has been a director of the Company since 1988. Sir
Brian served as Vice Chairman of the Company's Board of Directors from May 1995
to August 1997 and as Acting President and Chief Executive Officer of the
Company from June 1991 to October 1991. Sir Brian served as Chairman of Wembley
plc, a United Kingdom corporation, from 1987 to May 1995, and as its Deputy
Chairman from May 1995 to September 1995. Sir Brian is currently Chairman of the
Board of Fruit of the Loom, Inc., Chairman of the Board of Kepner-Tregoe Inc.
and a director of Playboy Enterprises, Inc.
Mr. Alan J. Zakon has been a director of the Company since 1993 and
Chairman of the Executive Committee of the Board since August 1997. Mr. Zakon
served as Vice Chairman of the Company's Board of Directors from May 1995 to
August 1997. Mr. Zakon served as a managing director of Bankers Trust
Corporation from 1989 to April 1995, and as Chairman of the Strategic Policy
Committee of Bankers Trust Corporation from 1989 to 1990. Mr. Zakon served as
Chairman of the Board of The Boston Consulting Group from 1986 until 1989. Mr.
Zakon is currently a director of MicroFinancial Inc. and Arkansas Best
Corporation.
Mr. Peter A. Cohen has been a director of the Company since September
2000. Mr. Cohen is a principal of Ramius Capital Group, LLC, a private
investment firm. From November 1992 until May 1994, Mr. Cohen was Vice Chairman
and a director of Republic New York Corporation, as well as a member of its
management executive committee. Mr. Cohen was also the Chairman of Republic New
York Corporation's wholly-owned subsidiary, Republic New York Securities
Corporation. From February 1990 to November 1992, Mr. Cohen was a private
investor and an advisor to several industrial and financial companies. From 1983
to 1990, Mr. Cohen was Chairman of the Board and Chief Executive Officer of
Shearson Lehman Brothers. Mr. Cohen has served on a number of corporate,
industry and philanthropic boards, including The New York Stock Exchange, The
American Express Company, The Federal Reserve Capital Market Advisory Board, The
Depository Trust Company, Olivetti S.p.A., Ohio State University Foundation, The
New York City Opera and Telecom Italia S.p.A. Mr. Cohen is currently a director
of Presidential Life Corporation, Mount Sinai Hospital and Titan Corporation.
Mr. Michael S. Immordino has been a director of the Company since
September 2000. Mr. Immordino is a partner in the London office of the worldwide
law firm of Latham & Watkins. Prior to joining Latham & Watkins, Mr. Immordino
was a partner in the firm of Rogers & Wells. He was formerly associated with the
law firm of Wilkie Farr & Gallagher in New York.
Mr. Luciano La Noce has been a director of the Company since September
2000. Mr. La Noce is the Chief Financial Officer and Director of Corporate
Finance of Olivetti S.p.A. in Ivrea, Italy. Before joining Olivetti, Mr. La Noce
was the deputy general manager in charge of finance at CIR S.p.A. With a
background in banking, Mr. La Noce has been an officer at Continental Bank,
Chase Manhattan Bank and Banca Nazionale del Lavoro (BNL). Mr. La Noce is also a
director of Olivetti Lexikon S.p.A., Olivetti Systems Technology Corporation,
Olteco Fin and Olivetti International S.A., as well as managing director of
Texnost International N.V. Mr. La Noce is a former director of Lottomatica,
S.p.A., Olteco Fin, Hughes Olivetti Telecom Ltd., Hughes Olivetti Telecom N.V.,
Omnitel Pronto Italia, Infostrada S.p.A., Olivetti Finanziaria Industriale
S.p.A., Olivetti International (Service) S.A., CIR Services S.A., Sasib S.p.A.,
Rejna S.p.A., Gruppo Editoriale l'Espresso, Medinvest Ltd, and CIR International
S.A.
Mr. Roberto Sgambati has been a director of the Company since September
2000. Mr. Sgambati is the Chief Financial Officer of Lottomatica S.p.A. Prior to
joining Lottomatica, he was an associate director of investment banking at
Mediocredito Centrale, an investment bank owned by the Italian Treasury. He also
served as the head of corporate finance for Barclays Bank in Italy and was
employed by PriceWaterhouse in Rome, Milan and London.
There are no family relationships among any of the Company's directors
or executive officers.
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SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's officers and directors, and persons who beneficially own more than ten
percent of the Company's Common Stock, to file initial reports of ownership and
reports of changes in ownership with the Securities and Exchange Commission
("SEC"). Based solely on its review of the copies of the reports that the
directors, officers and ten percent holders filed with the SEC and on the
representations made by the Company's officers and directors, the Company
believes that all filing requirements applicable to its officers, directors and
ten percent holders were complied with during the two-month transition period
ended December 31, 2000 and during fiscal 2001, except that Peter A. Cohen filed
two late Forms 4 (with respect to the sale of shares held by Ramius Securities,
LLC in December 2000 and the sale of shares held by the Peconic Fund Ltd. in
February 2001) and Alan J. Zakon filed one late Form 4 (with respect to the
cashless exercise of a warrant in December 2001).
ITEM 11. EXECUTIVE COMPENSATION.
SUMMARY COMPENSATION TABLE
The following table shows the compensation awarded or paid by the
Company for services rendered for the fiscal years ended October 31, 1999, 2000,
the two-month transition period ended December 31, 2000 (the "Stub Period"), and
the fiscal year ended December 31, 2001 to the Chief Executive Officer and the
individuals who, in fiscal 2001, were the other highest paid executive officers
of the Company who received in excess of $100,000 in salary and bonuses in that
year (collectively, the "Named Executive Officers").
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LONG-TERM
ANNUAL COMPENSATION COMPENSATION
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SECURITIES
RESTRICTED UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS(1) STOCK AWARD OPTIONS COMPENSATION(3)
($) ($) ($) (#) ($)
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A. Lorne Weil 2001 $ 754,500 $ 754,500 $ 11,120(2) 261,000 $ 17,920 (4)
President and Stub Period(5) 125,750 125,750 ----- ---- 21 (5)
Chief Executive Officer 2000 536,000 736,000(6) ----- 70,000 17,026 (7)
1999 481,888 481,888 ----- 1,136,000 16,535 (8)
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DeWayne E. Laird 2001 250,000 118,930 ----- 40,000 9,265 (4)
Vice President and Stub Period(5) 41,666 ------- ----- ----- 21 (5)
Chief Financial Officer 2000 207,700 125,700(6) ----- 14,000 8,626 (7)
1999 175,000 87,500 ----- 60,000 8,135 (8)
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Martin E. Schloss 2001 301,844 139,583 1,462(2) 46,000 9,418 (4)
Vice President, Stub Period(5) 50,000 ------- ----- ---- 21 (5)
General Counsel and Secretary 2000 236,500 193,800(6) ----- 16,000 8,626 (7)
1999 225,000 112,500 ----- 32,000 8,135 (8)
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William J. Huntley 2001 275,000 136,585 563(2) 96,000 6,093 (4)
President, Systems Stub Period(5) 45,833 ---- ----- ---- 60,056 (5)
Division of Scientific Games 2000 213,000 106,300 ----- 164,000 8,626 (7)
International, Inc. 1999 200,000 87,500 ----- 29,000 8,135 (8)
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Cliff O. Bickell (9) 2001 275,000 64,240 ----- 42,000 6,093 (4)
President, Printed Products Stub Period(5) 45,833 ---- ----- ---- 620 (5)
Division of Scientific Games 2000 40,690(9) ---- ----- 150,000 620 (7)
International, Inc. ------ ------- ---- ----- ---- ----
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(1) See "Report of the Compensation Committee," which describes
performance-based bonuses awarded under the Company's management
incentive compensation program to the Named Executive Officers. Amounts
indicated represent bonuses earned with respect to the fiscal year, which
were paid or deferred (under the Company's deferred compensation plan) in
the following year.
(2) The amounts reported as restricted stock awards were calculated by
multiplying the number of units of the Company's Performance Accelerated
Restricted Stock (or "PARS") granted on May 25, 2001 to the Named
Executive Officer by $4.30, the closing price of the Company's Common
Stock on the grant date. Messrs. Weil, Schloss and Huntley were granted
2,586, 340 and 131 units of PARS, respectively, in exchange for their
consenting to extend the scheduled vesting date with respect to 25,859,
3,403 and 1,308 units of PARS, respectively, (representing 20% of the
PARS granted to them in May 1995) from May 2001 until May 2003. As of
December 31, 2001, Messrs Weil, Schloss and Huntley held a total of
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131,884, 17,355 and 6,675 PARS, respectively, which, based on the closing
price of $8.75 of the Company's Common Stock on December 31, 2001, had a
value of $1,153,985, $151,856, and $58,406, respectively.
(3) In accordance with SEC rules, amounts related to personal benefits,
including automobile allowances, have been omitted, since such amounts
did not exceed the lesser of $50,000 or 10% of the total annual salary
and bonus for the Named Executive Officer.
(4) The amounts indicated as All Other Compensation for fiscal 2001 consist
of the following:
(i) Employer contributions to the Company's defined contribution
retirement plan for salaried employees: $8,500 for each of
Messrs. Weil, Laird and Schloss, and $5,250 for each of Messrs.
Huntley and Bickell.
(ii) Insurance premiums paid for individual life insurance coverage:
Mr. Weil, $8,400.
(iii) Insurance premiums paid for group term life insurance coverage:
Mr. Weil, $1,020; Mr. Laird, $765; Mr. Schloss, $918; Mr.
Huntley, $843; and Mr. Bickell, $843.
(5) The amounts reported for the "Stub Period" are for the two-month
transition period beginning November 1, 2000 and ended December 31, 2000.
The amounts indicated as All Other Compensation for this period consist
of the following: (i) insurance premiums paid for group term life
insurance coverage: $21 for each of Messrs. Weil, Laird, Schloss and
Huntley, and $620 for Mr. Bickell; and (ii) relocation expenses: Mr.
Huntley, $60,035.
(6) Bonuses for fiscal 2000 consist of awards under the incentive
compensation program and special bonuses in the following amounts which
were awarded for extraordinary contributions in connection with the
acquisition of Scientific Games and the related debt and equity financing
transactions: Mr. Weil, $200,000; Mr. Laird, $25,000; and Mr. Schloss,
$75,000.
(7) The amounts indicated as All Other Compensation for fiscal 2000 consist
of the following:
(i) Employer contributions to the Company's defined contribution
retirement plan for salaried employees: $8,500 for each of
Messrs. Weil, Laird, Schloss and Huntley.
(ii) Insurance premiums paid for individual life insurance coverage:
Mr. Weil, $8,400.
(iii) Insurance premiums paid for group term life insurance coverage:
$126 for each of Messrs. Weil, Laird, Schloss and Huntley, and
$620 for Mr. Bickell.
(8) The amounts indicated as All Other Compensation for fiscal 1999 consist
of the following:
(i) Employer contributions to the Company's defined contribution
retirement plan for salaried employees: $8,000 for each of
Messrs. Weil, Laird, Schloss and Huntley.
(ii) Insurance premiums paid for individual life insurance coverage:
Mr. Weil, $8,400.
(iii) Insurance premiums paid for group term life insurance coverage:
$135 for each of Messrs. Weil, Laird, Schloss and Huntley.
(9) Mr. Bickell became an employee as of September 6, 2000 as a result of the
Company's acquisition of Scientific Games International, Inc.
Compensation paid by Scientific Games International, Inc. to Mr. Bickell
prior to that date is not included in this schedule.
OPTION GRANTS IN FISCAL 2001
The following table sets forth information regarding stock options
granted to the Named Executive Officers during the fiscal year ended December
31, 2001. (No options were granted to such individuals during the two-month
transition period ended December 31, 2000.)
INDIVIDUAL GRANTS POTENTIAL REALIZABLE VALUE
--------------------------------------------------------------------------------------------- AT ASSUMED
NUMBER OF % OF TOTAL ANNUAL RATES OF STOCK
SECURITIES OPTIONS PRICE APPRECIATION
UNDERLYING GRANTED TO FOR OPTION TERM(3)
OPTIONS EMPLOYEES EXERCISE -----------------------------
GRANTED(1) IN FISCAL PRICE(2) EXPIRATION 5% 10%
NAME (#) YEAR ($/SH) DATE ($) ($)
A. Lorne Weil................ 127,000(4) 6.29% $ 2.95 12-31-10 $ 235,615 $ 597,096
DeWayne E. Laird............. 21,000(4) 1.04% 2.95 12-31-10 38,960 98,732
Martin E. Schloss............ 25,000(4) 1.24% 2.95 12-31-10 46,381 117,539
William J. Huntley........... 23,000(4) 1.14% 2.95 12-31-10 42,671 108,135
Clifford O. Bickell.......... 23,000(4) 1.14% 2.95 12-31-10 42,671 108,135
A. Lorne Weil................ 134,000(5) 6.63% 7.10 12-13-11 598,330 1,516,287
DeWayne E. Laird............. 19,000(5) 0.94% 7.10 12-13-11 84,838 214,996
Martin E. Schloss............ 21,000(5) 1.04% 7.10 12-13-11 93,768 237,627
William J. Huntley........... 73,000(5) 3.61% 7.10 12-13-11 325,956 826,037
Clifford O. Bickell.......... 19,000(5) 0.94% 7.10 12-13-11 84,838 214,996
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(1) These options become exercisable in four equal installments, one-quarter
of the total on each of the first, second, third and fourth anniversaries
of the date of grant, or in full upon a change in control of the Company.
In the event a holder's employment is terminated under certain
circumstances, his option may become fully vested and exercisable
pursuant to his agreement with the Company (see "Employee Agreements").
(2) These options entitle the holder to purchase shares of Common Stock at a
price equal to the fair market value of the stock on the date of grant.
5
(3) The dollar amounts under these columns are based upon calculations using
assumed rates of appreciation set by the SEC and are not intended to
forecast possible future appreciation of the Company's stock price.
(4) These options were awarded as of January 1, 2001 under the Company's
management incentive compensation program for fiscal year 2001.
(5) These options were awarded as of December 14, 2001 under the Company's
management incentive compensation program for fiscal year 2002.
AGGREGATED OPTION EXERCISES IN FISCAL 2001 AND FISCAL YEAR-END OPTION VALUES
The following table sets forth information for the Named Executive
Officers with respect to the exercise of stock options during the fiscal year
ended December 31, 2001 and the year-end value of unexercised options. (None of
such individuals exercised any options during the two-month transition period
ended December 31, 2000.)
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS AT
OPTIONS AT DEC. 31, 2001 DEC. 31, 2001(1)
SHARES # ($)
ACQUIRED ON VALUE ------------------------------- ----------------------------------
NAME EXERCISE (#) REALIZED ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
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A. Lorne Weil........... -0- -0- 2,181,000 984,000 $13,212,875 $5,411,825
DeWayne E. Laird...... -0- -0- 207,000 72,000 1,449,406 362,244
Martin E. Schloss...... -0- -0- 331,250 75,750 2,152,500 368,150
William J. Huntley...... 25,000 148,000 279,000 235,000 1,731,488 1,012,725
Clifford O. Bickell...... -0- -0- 37,500 154,500 196,875 755,375
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(1) Amounts are based on the difference between the closing price of the
Company's Common Stock on December 31, 2001 ($8.75) and the exercise price.
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
The Company adopted a Supplemental Executive Retirement Plan, or
"SERP," as of September 2000, in order to provide supplemental retirement
benefits for senior executives of the Company. The SERP provides for retirement
benefits according to a formula based on each participant's years of service
with the Company and average rate of compensation.
Payments under the SERP will commence upon a participant's termination
of employment with the Company after reaching the age of at least 55 and having
at least 10 years of full-time employment with the Company. The annual
retirement benefit will be an amount equal to 3% of the participant's average
compensation for the three highest consecutive calendar years in the last ten
years before termination of employment, multiplied by the participant's years of
full-time employment with the Company up to a maximum of 15 years. Accordingly,
the maximum annual payment under the SERP would be 45% of a participant's
highest average annual compensation. A participant may receive a total of 15
annual payments in that amount, or may elect to receive the discounted present
value of those 15 annual payments in equal installments over a period of 5 or 10
years or in a single lump sum. The date for payment of benefits may be
accelerated in the event of a participant's death or total permanent disability,
and certain additional provisions will apply in the event of a change of control
of the Company. A participant whose highest average annual compensation is
$500,000 and who is credited with at least 15 years of full-time employment with
the Company would receive 15 annual payments of $225,000 under the SERP. If
their highest average compensation were based on compensation through December
31, 2001, the Named Executive Officers who are participants in the SERP would be
expected to receive annual retirement benefits for 15 years in the following
estimated amounts assuming their retirement after at least 15 years of service
with the Company: Mr. Weil, $575,000; Mr. Schloss, $183,000; Mr. Laird,
$146,500; and Mr. Huntley, $154,500. These amounts would be subject to an offset
for Social Security benefits. Messrs. Weil, Schloss, Laird and Huntley have 11,
9, 5 and 28 years of credited service, respectively, under the SERP.
DEFERRED COMPENSATION PLAN
During fiscal 1998, the Board adopted a non-qualified deferred
compensation plan, and established a grantor trust to assist it in meeting its
obligations under the plan. The deferred compensation plan enables eligible
employees to defer receipt of up to 100% of the bonus which may be payable under
the Company's management incentive compensation program, and enables all of the
non-employee directors to defer receipt of up to 100% of the fees which may be
payable for director services. Accounts are maintained for each of the
participants, who elect to have their accounts mirror the performance of
investment options that the Company may offer from time to time. It is intended
that amounts deferred under the plan will not be
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subject to any federal and, in most cases, state and local income taxes until
participants receive payment from the plan. Unless participants elect to extend
a deferral period, deferrals and related earnings will be paid as soon as
practicable following the end of the deferral period. Accounts may be
distributed prior to that date if a participant leaves the Company, dies or
becomes disabled, if there is a change in control, if the Company terminates the
plan or, under extremely limited circumstances, in the event of an
"unforeseeable emergency". None of the non-employee directors has elected to
participate in the plan. Of the Named Executive Officers, Mr. Weil is the only
current participant, having elected to defer his entire fiscal 1998 bonus, a
portion of his fiscal 2000 bonus and his entire fiscal 2001 bonus into the plan.
Such compensation is held in a self-directed deferred compensation account.
EMPLOYEE AGREEMENTS
A. Lorne Weil. Mr. Weil serves as Chairman of the Board and Chief
Executive Officer pursuant to an employment agreement dated as of November 1,
2000, which provides for an annual base salary of $750,000 (subject to increases
on each January 1 to reflect increases in the Consumer Price Index for the
Greater New York area), participation in the SERP, the opportunity to earn
annually up to 100% of his base salary as incentive compensation pursuant to the
terms of the Company's management incentive compensation program, and a term of
employment ending December 31, 2004. The term of employment extends
automatically for an additional year on December 31, 2004 and on each succeeding
December 31 thereafter unless either party serves written notice upon the other
party six months prior to the date upon which such extension would become
effective. In the event Mr. Weil's employment is terminated by the Company
without Cause (which includes the Company's election not to extend the term), or
by Mr. Weil for Good Reason (which includes Mr. Weil's election not to extend
the term due to the failure of the parties to agree to the terms of his
continued employment), or by reason of Total Disability (as such capitalized
terms are defined in Mr. Weil's employment agreement), Mr. Weil will be entitled
to receive the following: (a) cash severance in a lump sum equal to three times
the sum of his then current base salary and the higher of the average annual
incentive compensation paid for the prior three years and the amount payable
upon achievement of maximum performance targets for the year of termination; (b)
a lump sum cash payment equal to the cash value of all payments and benefits to
which Mr. Weil would have been entitled under the SERP upon termination, or if
he had 15 years of service with the Company, whichever is greater (the "SERP
Payment"); (c) a pro rata annual incentive amount for the year of termination;
(d) stock options will become fully vested and exercisable at the date of
termination, and any options which were granted on or after November 1, 1997
(the effective date of his prior employment agreement) or, if previously
granted, were not "in the money" on such effective date, will remain exercisable
until the scheduled expiration date of such options; (e) full vesting and
settlement of all deferred stock held at termination; (f) continued
participation in certain employee benefit plans for a period of three years
after termination other than due to Total Disability, in which case the period
shall be until age 65, and if such plans do not allow continuation, receive
payment in lieu of such benefits; and (g) a payment to Mr. Weil to fund any
excise tax that may be imposed under Section 4999 of the Internal Revenue Code
with respect to payments made in connection with a change in control, as well as
an amount to fund any income taxes payable with respect to such payment by the
Company. If Mr. Weil's employment terminates due to retirement or death, Mr.
Weil will be entitled to receive the following: (a) the SERP Payment; (b) a pro
rata annual incentive amount for the year of termination; (c) stock options will
become fully vested and exercisable at the date of termination, and any options
which were granted on or after November 1, 1997 (the effective date of his prior
employment agreement) will be exercisable until the earlier of three years and
the scheduled expiration date of such options; and (d) full vesting and
settlement of all deferred stock held at termination.
DeWayne E. Laird. By letter dated January 11, 2001, the Company entered
into an agreement with Mr. Laird, the Company's Vice President and Chief
Financial Officer, pursuant to which his annual base salary was increased to
$250,000 (subject to annual increases in accordance with the Consumer Price
Index for Philadelphia, Pennsylvania). The terms, which will be memorialized in
a formal employment agreement, include participation in the SERP and a term of
employment ending August 31, 2003. If Mr. Laird's employment is terminated
without cause within two years of a Change in Control (as defined in the Change
in Control Agreement discussed below), he will be entitled to receive, in lieu
of any payment under said agreement, a cash payment in an amount equal to three
times the sum of his annual base salary on the date of termination and the
higher of the average incentive compensation paid to him for the three prior
years, and the amount payable to him upon achievement of the target level of
performance for the year of termination.
Martin E. Schloss. By letter dated January 11, 2001, the Company
entered into an agreement with Mr. Schloss, the Company's Vice President,
General Counsel and Secretary, pursuant to which his annual base salary was
increased to $300,000 (subject to annual increases in accordance with the
Consumer Price Index for New York, New York). The terms, which will be
memorialized in a formal employment agreement, include participation in the SERP
and a term of employment ending August 31, 2003. If Mr. Schloss's employment is
terminated without cause within two years of a Change in Control (as defined in
the Change in Control Agreement discussed below), he will be entitled to
receive, in lieu of any payment under said agreement, a cash payment in an
amount equal to three times the sum of his annual base salary on the date of
termination and the higher of the
7
average incentive compensation paid to him for the three prior years, and the
amount payable to him upon achievement of the target level of performance for
the year of termination.
Employment and Severance Benefits Agreements. As of September 6, 2000,
Scientific Games International, Inc., a subsidiary of the Company, entered into
an employment and severance benefits agreement with each of Messrs. William J.
Huntley and Clifford O. Bickell, pursuant to which they serve as Systems
Division President and Printed Products Division President, respectively, of
Scientific Games International and its subsidiaries. Each agreement provides for
an annual base salary of $275,000 (subject to annual increases in the percentage
generally provided to the Company's executive officers), a transportation
allowance of $16,000, a term of employment ending September 5, 2003, and an
opportunity to receive an annual cash bonus and an annual grant of stock options
in amounts commensurate with, and based on substantially the same criteria as,
those awarded to executive officers of the Company. Such agreements also provide
that if the executive's employment is terminated without cause or in the event
of a constructive termination that occurs on or before the second anniversary of
the agreement, he will be entitled to receive a sum each month for a period of
two years after termination equal to one-twelfth of the highest annual rate of
base salary plus bonus paid during the twenty-four month period preceding the
date of termination; and if such a termination occurs during the third year of
the agreement, he will be entitled to receive the aforesaid monthly severance
payment for a period of one year. (Had such a termination occurred on or before
September 5, 2001, the first anniversary of the agreement, he would have been
entitled to receive the aforesaid monthly sum for a period of three years.) If
such a termination occurs, the executive will also be entitled to receive a pro
rata bonus for the year of termination and to continue participation in certain
employee benefit plans for a period of time not to exceed the applicable period
in which severance is being paid, and if such plans do not allow continuation
and the Company is unable to obtain substantially similar benefits, he would be
entitled to receive a payment in lieu of such benefits. If the executive's
employment is terminated due to disability, he will be entitled to receive a pro
rata bonus for the year of termination and to continue to receive all
disability, life and medical insurance benefits for a period of twelve months as
well as his base salary for such period (to the extent payments under the
Company's disability plan do not cover 100% of base salary); and in the event of
the executive's death, his beneficiary will be paid a lump sum payment equal to
six months of base salary and a pro rata bonus for the year of termination.
Change in Control Agreements. The Company entered into a Change in
Control Agreement with each of Messrs. DeWayne E. Laird, Martin E. Schloss and
William J. Huntley as of November 1, 1997. Each of the Change in Control
Agreements has a term ending on October 31, 2002, which extends automatically
for an additional year on October 31, 2002 and on each succeeding October 31
thereafter unless either party serves written notice upon the other party six
months prior to the date upon which such extension would become effective.
Pursuant to the agreements, if the Company terminates the employment of any of
these executives without Cause, or the executive terminates his employment for
Good Reason, at the time of or within two years following a Change in Control
(as such capitalized terms are defined in the agreements), such executive will
be entitled to receive the following: (a) cash severance in a lump sum equal to
two times the sum of his then current base salary and the higher of the average
annual incentive compensation paid to him for the three prior years, and the
amount payable to him upon achievement of the target level of performance for
the year of termination; (b) a pro rata annual incentive amount for the year of
termination; (c) stock options will become fully vested and exercisable at the
date of termination, and any options which were granted on or after November 1,
1997 (the effective date of the agreement) or, if previously granted, were not
"in the money" on such effective date, will remain exercisable until the earlier
of 36 months after termination and the scheduled expiration date of such
options; (d) full vesting and settlement of all deferred stock held at
termination; and (e) continue participation in certain employee benefit plans
until the earliest of 18 months, the date equivalent benefits are provided by a
subsequent employer, and age 65, and if such plans do not allow continuation, to
receive payment in lieu of such benefits. The agreements also provide that if
the executive's employment with the Company is terminated without Cause and he
is not entitled to the severance described above, he will be entitled to receive
a lump sum cash payment equal to his then current base salary.
DIRECTORS' COMPENSATION
Directors who are not employees of the Company receive the following
compensation:
(1) an annual cash retainer of $30,000;
(2) an additional annual cash retainer of $50,000 for members of
the Executive Committee;
(3) an additional annual cash retainer of $15,000 for Committee
Chairmen;
(4) meeting fees of $1,000 for each Board meeting attended in
person and for each Committee meeting attended in person that
is held on a day other than one on which a Board meeting is
held (except for Executive Committee meetings, which carry no
meeting fees); and $500 for each meeting attended by telephone
conference call and for each Committee meeting attended in
person if held on the same day as a Board meeting; and
8
(5) an annual grant of restricted stock in an amount equal to the
lesser of (x) 10,000 shares and (y) that number of shares
having a value of $30,000 on the date of grant. The
restrictions on these awards lapse in three equal
installments, one-third of the total on each of the first,
second and third anniversaries of the date of grant, or in
full if the director ceases to serve as a director due to
death, disability, retirement at or after the age of 65, the
failure to be renominated or reelected, or in the event of a
change in control.
In addition, upon joining the Board directors are granted a stock
option to purchase 50,000 shares at a price equal to the fair market value of
the Company's Common Stock on the date of grant. Such options become exercisable
in four equal installments, one-quarter of the total on each of the first,
second, third and fourth anniversaries of the date of grant, and expire on the
tenth anniversary of the date of grant.
Directors who serve on the Company's Compliance Committee also receive
fees for attending meetings thereof at the rates described above for attending
meetings held by Committees of the Board.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee of the Board of Directors currently consists
of Alan J. Zakon (Chairman), Larry J. Lawrence and Luciano La Noce.
None of the members on the Committee is or has been an officer or
employee of the Company or a subsidiary of the Company or had any relationship
or transaction with the Company requiring disclosure under this item.
No executive officer of the Company serves as a member of the board of
directors or compensation committee of any entity which has one or more
executive officers serving as a member of our Board or Compensation Committee.
REPORT OF THE COMPENSATION COMMITTEE
The Compensation Committee of the Board of Directors administers the
Company's executive compensation program. The Committee's responsibilities
include approving awards under the Company's incentive compensation and stock
option plans, approving the compensation of the Company's executives and making
recommendations to the Board of Directors with regard to the adoption of new
employee benefit plans and new executive compensation plans. The Committee is
comprised of three members of the Board of Directors who are not officers or
employees of the Company.
COMPENSATION COMPONENTS AND PHILOSOPHY
The principal components of the Company's compensation program consist
of base salaries, performance-based bonuses and stock options. The Company's
compensation program is designed to provide executives with compensation that is
competitive with other companies, reward executives based on Company and
individual performance and to align management and stockholder interests by
providing incentive compensation through stock option awards and
performance-based bonuses.
EXECUTIVE OFFICER COMPENSATION
Base salaries for the Company's executives other than the Chief
Executive Officer, as well as changes in such salaries, are based upon
recommendations by the Chief Executive Officer and other senior managers and
reviewed on an annual basis in conjunction with the Company's budget for the
upcoming fiscal year, taking into account such factors as competitive industry
salaries, a subjective assessment of the nature of the position and the
contribution and experience of the executive and the length of the executive's
service.
The Company's management incentive compensation program (the "MICP"),
which was established in fiscal 1996, provides annual bonus opportunities for
the Company's key executive personnel based on three criteria: (1) the Company's
overall financial performance relative to the budget for a given fiscal year as
approved by the Board of Directors, (2) the financial performance of individual
business units of the Company for executives directly involved with the
operation of those units, and (3) a qualitative assessment by the Committee of
individual performance not directly measurable by financial results pursuant to
recommendations made by the Chief Executive Officer and other senior managers in
the Company. The purpose of the MICP is to reward employees who have made
significant contributions to the Company's achievement of its objectives and to
provide an incentive for further contributions. The financial performance of the
Company and its business units is principally measured under the MICP by the
attainment of "EBITDA" (Earnings Before Interest, Taxes, Depreciation and
Amortization) targets established for the year. If the financial performance
targets are met or exceeded, participants will be eligible to receive
9
year-end cash bonuses based on a percentage of their base salaries, subject to
adjustment by the Committee after consideration of various objective and
subjective factors. Potential payments under the MICP during fiscal 2001 ranged
from 25% to 50% of base salary for participants other than the Chief Executive
Officer, with each of Messrs. DeWayne E. Laird, Martin E. Schloss, William J.
Huntley and Clifford O. Bickell having the opportunity to earn a bonus in an
amount equal to 50% of base salary. In awarding bonuses for fiscal 2001, the
Company considered the achievement by the Company and its business units of
financial performance targets as well as various strategic objectives during the
fiscal year which significantly strengthened and expanded the Company's
businesses, including the following:
o The integration of Scientific Games Holdings Corp. and Autotote, which
has enabled the Company to achieve substantial cost reduction and
increased marketplace effectiveness.
o The award of new instant ticket and/or Cooperative Service contracts in
Italy, Norway, Ohio and South Carolina, as well as contract renewals or
extensions in six US states.
o The award of on-line lottery equipment or service contracts in South
Carolina, Jamaica, Ontario and Atlantic Canada, together with the
simultaneous start-up of the Maine and Iowa lotteries in July 2001.
o The commercial launch of our business-to-business account wagering
platform "Trackplay" that has been adopted by a number of leading
operators in the US and abroad.
o The re-signing of several pari-mutuel customers including Woodbine
Entertainment and the Atlantic City Casinos, as well as the award of
the Turf Paradise totalizator contract.
o Successful restructuring of our pari-mutuel operations in Germany,
France and the Netherlands resulting in significant profit
improvements.
While base salary and the annual incentive compensation components are
tied to employee responsibility and the Company's financial performance and
progress in achieving strategic goals, the purpose of stock option grants is to
align stockholder and employee interests by providing a component of
compensation tied directly to the performance of the Company's stock price. In
January 2001, the Committee granted each of the Named Executive Officers and
other participants in the MICP stock options to purchase the number of shares
equal to approximately 50% of the maximum cash incentive award payable to such
executive for fiscal 2001, divided by the fair market value of the Company's
Common Stock on the date of grant.
CEO COMPENSATION
The Company and Mr. Weil entered into a new employment agreement as of
November 1, 2000, which provides for an annual base salary of $750,000, a term
of employment ending December 31, 2004 and participation in the SERP. Mr. Weil's
employment agreement also provides him with the opportunity to earn annually up
to 100% of his base salary as incentive compensation pursuant to the terms of
the Company's MICP. Mr. Weil received his maximum incentive award for the fiscal
year ended December 31, 2001 and for the two-month transition period ended
December 31, 2000, as a result of the Company and Mr. Weil having achieved the
financial and performance objectives referred to above. (For additional
information relating to Mr. Weil's employment agreement, see "Employee
Agreements".)
DEDUCTIBILITY OF EXECUTIVE COMPENSATION
The Company expects that the compensation paid to executive officers
during fiscal 2001 will qualify for income tax deductibility under Section
162(m) of the Internal Revenue Code. In addition, the Company has a general
policy of awarding stock options to its executive officers only pursuant to
plans that the Company believes will satisfy the requirements of Section 162(m).
Compensation Committee
Alan J. Zakon, Chairman
Larry J. Lawrence
Luciano La Noce
10
STOCK PERFORMANCE GRAPH
The following graph compares the cumulative total stockholder return
over the sixty-two month period from October 31, 1996 through December 31, 2001
on (a) the Company's Common Stock, (b) the Nasdaq National Market ("Nasdaq"), on
which the Company's shares of Common Stock commenced trading as of January 29,
2002, having previously traded on the American Stock Exchange Market Value Index
("Amex"), (c) Amex and (d) a peer group index of companies that provide services
similar to those of the Company, consisting of International Lottery and
Totalisator Systems, Inc., Churchill Downs, Inc. and GTECH Holdings Corp. (the
"Peer Group Index"). The Company elected to use a peer group index rather than a
published industry or line-of-business index because the Company is not aware of
any such published index of companies which, in terms of their businesses, are
as comparable to the Company as those included in the peer group index. The peer
group companies have been weighted based upon their relative market
capitalization each year. The graph assumes that $100 was invested on October
31, 1996 in the Company's Common Stock, the Nasdaq, Amex and the Peer Group
Index and that all dividends were reinvested. The Company changed its fiscal
year-end from an October 31 year-end to a calendar year-end, beginning with the
year ending December 31, 2001, so that the measurement period for the
performance graph covers the fiscal years ended October 31, 1997, 1998, 1999 and
2000, the two-month transition period ended December 31, 2000 and the last
completed fiscal year ended December 31, 2001.
COMPARISON OF SIXTY-TWO MONTH CUMULATIVE TOTAL RETURN
FOR THE PERIOD BEGINNING ON OCTOBER 31, 1996 AND ENDING ON DECEMBER 31, 2001
[GRAPHIC OMITTED]
10/96 10/97 10/98 10/99 10/00 12/00 12/01
-------------------------------------------------------------------------------------------------------------
Scientific Games Corporation $100.00 $185.71 $123.81 $195.24 $236.19 $224.76 $666.67
Nasdaq $100.00 $131.59 $147.21 $248.85 $280.75 $204.81 $162.52
Amex $100.00 $123.72 $125.78 $156.22 $182.31 $169.94 $154.64
Peer Group Index $100.00 $111.54 $92.17 $75.41 $69.57 $80.03 $146.02
11
ITEM 12. SECURITY OWNERSHIP
The following table sets forth certain information as of March 31, 2002
as to the security ownership of those persons known to us to be the beneficial
owners of more than five percent of the outstanding shares of Class A Common
Stock and the outstanding shares of Series A Convertible Preferred Stock, each
of the Company's directors, each of the executive officers named in the Summary
Compensation Table, and all of the Company's directors and executive officers as
a group. Except as otherwise indicated, the stockholders listed in the table
below have sole voting and investment power with respect to the shares
indicated.
-------------------------------------------------------------------------------------------------------------------------------
SHARES OF COMMON STOCK SHARES OF PREFERRED STOCK(16)
------------------------------- ---------------------------------
NAME NUMBER(1) PERCENT(1) NUMBER(1) PERCENT(1)
-------------------------------------------------------------------------------------------------------------------------------
Cirmatica Gaming, S.A....................................... 21,716,204(2) 33.56% 1,207,421(17) 97.56%
(subsidiary of Lottomatica S.p.A.)
Rambla de Catalunya 16, 4E2a
Barcelona, Spain 08007
-------------------------------------------------------------------------------------------------------------------------------
Oaktree Capital Management, LLC............................. 3,900,000(3) 9.07% -0- -0-
333 South Grand Avenue
Los Angeles, CA 90071
-------------------------------------------------------------------------------------------------------------------------------
Olivetti International S.A.................................. 1,184,424(4) 2.68% 65,854(18) 5.32%
(subsidiary of Olivetti S.p.A.)
125 Avenue du X Septembre
Luxembourg
-------------------------------------------------------------------------------------------------------------------------------
A. Lorne Weil............................................... 3,723,080(5) 8.30% -0- -0-
c/o Scientific Games Corporation
750 Lexington Avenue, 25th Floor
New York, New York 10022
-------------------------------------------------------------------------------------------------------------------------------
Larry J. Lawrence........................................... 2,590,995(6) 5.92% -0- -0-
c/o Allegra Partners
515 Madison Avenue, 29th Floor
New York, New York 10022
-------------------------------------------------------------------------------------------------------------------------------
Peter A. Cohen ............................................. 1,403,026(7) 3.20% 30,183(19) 2.44%
-------------------------------------------------------------------------------------------------------------------------------
Alan J. Zakon............................................... 1,283,230(8) 2.97% -0- -0-
-------------------------------------------------------------------------------------------------------------------------------
Michael S. Immordino ....................................... 25,607(9) * -0- -0-
-------------------------------------------------------------------------------------------------------------------------------
Luciano La Noce............................................. 25,607(9) * -0- -0-
-------------------------------------------------------------------------------------------------------------------------------
W. Walker Lewis............................................. 15,930(9) * -0- -0-
-------------------------------------------------------------------------------------------------------------------------------
Colin J. O'Brien ........................................... 35,607(9) * -0- -0-
-------------------------------------------------------------------------------------------------------------------------------
Roberto Sgambati ........................................... 25,607(9) * -0- -0-
-------------------------------------------------------------------------------------------------------------------------------
Sir Brian G. Wolfson ....................................... 223,107(10) * -0- -0-
-------------------------------------------------------------------------------------------------------------------------------
DeWayne E. Laird ........................................... 223,750(11) * -0- -0-
-------------------------------------------------------------------------------------------------------------------------------
Martin E. Schloss .......................................... 369,653(12) * -0- -0-
-------------------------------------------------------------------------------------------------------------------------------
William J. Huntley ......................................... 347,386(13) * -0- -0-
-------------------------------------------------------------------------------------------------------------------------------
Clifford O. Bickell......................................... 43,250(14) * -0- -0-
-------------------------------------------------------------------------------------------------------------------------------
All directors and executive officers as a group 10,335,835(15) 21.68% 30,183(19) 2.44%
(consisting of 14 persons)(5)(6)(7)(8)(9)(10)(11)(13)(14)
-------------------------------------------------------------------------------------------------------------------------------
----------
* Represents less than 1% of the outstanding shares of Common Stock.
(1) Beneficial ownership as reported in the above table has been determined in
accordance with Rule 13d-3 under the Securities Exchange Act of 1934.
Owners of options, warrants, the Preferred Stock or other convertible
securities exercisable or convertible within 60 days of March 31, 2002 are
deemed to be the beneficial owners of the securities which may be
acquired. The percentage of outstanding securities reported reflects the
assumption that only the person whose ownership is being reported has
exercised or converted his options, warrants or Preferred Stock.
(2) Includes 19,742,158 shares issuable upon conversion of Preferred Stock
held by Cirmatica Gaming, S.A. ("Cirmatica"), representing 31.47% of the
outstanding Common Stock. Also includes (a) 1,184,424 shares issuable upon
conversion of Preferred Stock held by Olivetti International S.A.
12
("Olivetti") and (b) 789,622 shares issuable upon conversion of Preferred
Stock held by The Oak Fund ("Oak"), all of which shares are subject to a
voting agreement dated September 6, 2000 between Cirmatica, Olivetti and
Oak (the "Voting Agreement"). Pursuant to the Voting Agreement, Cirmatica
has the power to direct the voting of the shares held by Olivetti on all
matters and to direct the voting of the shares held by Oak with respect to
electing the persons who the holders of the Preferred Stock have the right
to elect to the Board of Directors.
(3) Based on a Schedule 13G filed with the SEC on February 5, 2002 by Oaktree
Capital Management, LLC.
(4) Consists of 1,184,424 shares issuable upon conversion of Preferred Stock
held by Olivetti. As described in footnote 2 above, Cirmatica has sole
power to direct the voting of these securities.
(5) Includes (a) 1,784,750 shares issuable upon exercise of stock options, (b)
28,691 shares issuable upon exercise of a warrant and (c) 25,859 shares of
deferred stock. Also includes (a) 108,445 shares and (b) 14,345 shares
issuable upon exercise of a warrant held for Mr. Weil's deferred
compensation account by a grantor trust established in connection with the
Company's deferred compensation plan. Excludes 297,076 shares held by The
Lorne Weil 1989 Trust, John Novogrod, Trustee, as to which Mr. Weil
disclaims beneficial ownership.
(6) Includes (a) 175,000 shares issuable upon exercise of a stock option and
(b) 594,914 shares issuable upon exercise of a warrant.
(7) Includes 12,500 shares issuable upon exercise of a stock option held by
Mr. Cohen. Also includes (a) 964,959 shares held by Ramius Securities, LLC
("Ramius Securities") (which holdings consist of (i) 172,100 shares, (ii)
542,859 shares issuable upon conversion of Preferred Stock and (iii)
250,000 of which shares are issuable upon exercise of a warrant) and (b)
412,460 shares held by third party accounts managed by Ramius Securities
(124,900 of which shares are held for the accounts of Peter Cohen and
members of his immediate family). Mr. Cohen is one of three managing
members of C4S & Co., LLC, the sole managing member of Ramius Capital
Group, LLC, which is the parent company of Ramius Securities. Accordingly,
Mr. Cohen may be deemed to beneficially own all of the securities held by
Ramius Securities and the third party accounts. Mr. Cohen disclaims
beneficial ownership of such securities except 124,900 of the shares held
by the third party accounts.
(8) Includes 170,000 shares issuable upon exercise of stock options.
(9) Includes 12,500 shares issuable upon exercise of stock options.
(10) Includes 120,000 shares issuable upon exercise of stock options.
(11) Includes 222,250 shares issuable upon exercise of stock options.
(12) Includes (a) 351,250 shares issuable upon exercise of stock options and
(b) 3,403 shares of deferred stock.
(13) Includes (a) 297,000 shares issuable upon exercise of stock options and
(b) 1,308 shares of deferred stock.
(14) Consists of 43,250 shares issuable upon exercise of stock options.
(15) Includes (a) 3,238,500 shares issuable upon exercise of stock options, (b)
887,950 shares issuable upon exercise of warrants, (c) 542,859 shares
issuable upon conversion of Preferred Stock and (d) 30,570 shares of
deferred stock.
(16) Pursuant to the Certificate of Designations governing the Preferred Stock,
the holders of the Preferred Stock are entitled to vote along with the
holders of Common Stock, on an `as-converted' basis, on all matters on
which the holders of Common Stock are entitled to vote; and the holders of
the Preferred Stock, voting separately as a class, are entitled to elect
four directors (or a lesser number in the event that their ownership level
declines).
(17) Includes 1,097,664 shares of Preferred Stock held by Cirmatica,
representing 88.69% of the outstanding Preferred Stock. Also includes (a)
65,854 shares of Preferred held by Olivetti and (b) 43,903 shares of
Preferred Stock held by Oak, all of which shares are subject to the Voting
Agreement.
(18) Consists of 65,854 shares of Preferred Stock held by Olivetti. As
described in footnote 2 above, Cirmatica has sole power to direct the
voting of these securities.
(19) Solely for purposes of disclosure in this table with respect to ownership
by directors, consists of 30,183 shares of Preferred Stock held by Ramius
Securities. Mr. Cohen disclaims beneficial ownership of these securities.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company is part of a consortium which includes Lottomatica S.p.A.
(the parent company of Cirmatica Gaming, S.A.) that has been awarded a contract
to be the exclusive operator for instant tickets in Italy. This award has been
protested and is being reviewed in the Italian courts. If the award is ratified,
we expect to enter into a contract, which initially would provide for the
printing of tickets and the installation of a new centralized system, along with
a full complement of cooperative services.
Richard Weil, the brother of A. Lorne Weil, is Vice President of
International Business Development for the Company. Richard Weil received a base
salary of $225,000 and a bonus of $111,375 for fiscal 2001.
13
SIGNATURE
PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934, THE REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON
ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED.
SCIENTIFIC GAMES CORPORATION
Dated: April 30, 2002
By: /s/ DeWayne E. Laird
----------------------------------------------
DeWayne E. Laird
Vice President and Chief Financial Officer
14