Current Report Filing (8-k)
May 08 2019 - 6:44AM
Edgar (US Regulatory)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):
May 7, 2019
SCIENTIFIC GAMES CORPORATION
(Exact name of registrant as specified in its charter)
Nevada
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0-13063
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81-0422894
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(State or other jurisdiction
of incorporation)
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(Commission
File Number)
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(IRS Employer
Identification No.)
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6601 Bermuda Road, Las Vegas, NV 89119
(Address of registrants principal executive office)
(702) 897-7150
(Registrants telephone number, including area code)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (
see
General Instructions A.2. below):
o
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
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Emerging growth company
o
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Securities registered pursuant to Section 12(b) of the Exchange Act:
Title of each class
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Trading symbol
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Name on each exchange on which registered
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Common Stock, $.001 par value
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SGMS
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Nasdaq Global Select Market
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EXPLANATORY NOTE
On May 7, 2019, SciPlay Corporation (
SciPlay
), a subsidiary of Scientific Games Corporation (the
Company
), closed its initial public offering of a minority interest in the Companys social gaming business (the
IPO
), selling 22,000,000 shares of its Class A common stock, $.001 par value per share (
SciPlay Stock
), at an offering price of $16.00 per share, pursuant to SciPlays registration statement on Form S-1 (File No. 333-230727), as amended.
Item 1.01. Entry into a Material Definitive Agreement.
On May 7, 2019, in connection with the consummation of the IPO, SG Social Holding Company I, LLC and SG Social Holding Company, LLC, each a Nevada limited liability company and an indirect wholly owned subsidiary of the Company (together, the
SG Members
), entered into a tax receivable agreement (the
Tax Receivable Agreement
) with SciPlay and SciPlay Parent Company, LLC, a Nevada limited liability company (
SciPlay Parent LLC
). The Tax Receivable Agreement provides for the payment by SciPlay to the SG Members of 85% of the amount of tax benefits, if any, that it actually realizes, or in some circumstances is deemed to realize, as a result of (i) increases in the tax basis of the assets of SciPlay Parent LLC (a) in connection with the IPO, (b) resulting from any redemptions or exchanges of the applicable SG Members common members interests (
LLC Interests
) or (c) resulting from certain distributions (or deemed distributions) by SciPlay Parent LLC and (ii) certain other tax benefits related to SciPlays payments under the Tax Receivable Agreement. SciPlay Parent LLC will have in effect an election under Section 754 of the Internal Revenue Code effective for each taxable year in which a redemption or exchange of LLC Interests, in accordance with the operating agreement of SciPlay Parent LLC, for SciPlay Stock or cash occurs. These payments are not conditioned upon any continued ownership interest in either SciPlay Parent LLC or SciPlay by the SG Members. The rights of the SG Members under the Tax Receivable Agreement are assignable to transferees of their LLC Interests (other than SciPlay or SciPlay Parent LLC as transferee pursuant to subsequent redemptions or exchanges of the transferred LLC Interests). SciPlay is expected to benefit from the remaining 15% of tax benefits, if any, that it may actually realize.
Any amounts paid to the SG Members under the Tax Receivable Agreement will vary depending on a number of factors, including:
·
the price of SciPlay Stock (a) in connection with the IPO, which was $16.00 per share and (b) at the time of any subsequent redemptions or exchanges;
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the fair value, which may fluctuate over time, of the depreciable or amortizable assets of SciPlay Parent LLC at the time of each redemption or exchange;
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the extent to which such redemptions or exchanges are taxable; and
·
the amount and timing of SciPlays income.
The foregoing description is qualified in its entirety by the text of the Tax Receivable Agreement, a copy of which is attached hereto as Exhibit 10.1 and incorporated herein by reference.
Item 5.02. Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.
In connection with the IPO, on May 7, 2019, the Company and Barry L. Cottle, the Companys President and Chief Executive Officer, entered into an amendment (the
Cottle Amendment
) to the Employment Agreement, dated as of May 4, 2018, by and between the Company and Mr. Cottle, to cancel the 2018-2020 LTIP, a cash-based long-term incentive award with a payout that would have been determined based on the performance of the Companys social gaming business from 2018-2020.
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Simultaneously with the Company and Mr. Cottle entering into the Cottle Amendment, SciPlay and Mr. Cottle entered into an agreement (the
Social Award Agreement
) pursuant to which SciPlay granted Mr. Cottle an award of performance-conditioned restricted stock units (
performance-conditioned RSUs
) with respect to shares of SciPlay Stock, with a grant date value equal to approximately $12 million. The performance-conditioned RSUs will vest based on 2020 fiscal year revenue and EBITDA metrics for SciPlay, with the performance-conditioned RSUs vesting in full if $720 million of revenue and $250 million of EBITDA are achieved for the 2020 fiscal year and forfeited in full if certain threshold goals are not met, and otherwise based on linear interpolation. One-third of the performance-conditioned RSUs will vest based on achievement of the revenue metric and two-thirds will vest based on achievement of the EBITDA metric. It is expected that revenue and EBITDA will be subject to certain customary adjustments.
The Social Award Agreement provides that, in the event Mr. Cottles employment with the Company and SciPlay is terminated without Cause or for Good Reason (each, as defined in the Social Award Agreement), Mr. Cottle would remain eligible to fully vest in the performance-conditioned RSUs, based on actual performance achieved. In the event of a change in control of SciPlay (as defined in the SciPlay Long-Term Incentive Plan, which, as long as the Company remains a majority stockholder of SciPlay in respect of voting rights, includes a change in control of the Company, as defined in the Companys 2003 Incentive Compensation Plan, as amended and restated), the performance-conditioned RSUs would vest based on the level of performance determined by the Compensation Committee of the Board of Directors of SciPlay (the
SciPlay Compensation Committee
), provided that, if Mr. Cottles employment with SciPlay had terminated without Cause or for Good Reason prior to such change in control, the performance-conditioned RSUs would vest at target (regardless of whether or not Mr. Cottles employment with the Company is terminated).
The SciPlay Compensation Committee will retain discretion to adjust the number of shares vesting in connection with the performance-conditioned RSUs in order to reflect changes in the price of SciPlay Stock between the date of the IPO and the date the performance-conditioned RSUs vest.
The foregoing description is qualified in its entirety by the text of the Cottle Amendment and the Social Award Agreement, copies of which are attached hereto as Exhibit 10.2 and Exhibit 10.3, respectively, and incorporated herein by reference.
Item 9.01.
Financial Statements and Exhibits.
(d) Exhibits.
Exhibit
No.
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Description
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10.1*
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Tax Receivable Agreement, dated May 7, 2019, by and among SciPlay Corporation, SciPlay Parent Company, LLC and each of the Members (as defined therein) from time to time party thereto
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10.2*
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Amendment to Employment Agreement, dated as of May 7, 2019, by and between Scientific Games Corporation and Barry L. Cottle
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10.3*
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Social Award Agreement, dated as of May 7, 2019, by and between SciPlay Corporation and Barry L. Cottle
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* Filed herewith.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
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SCIENTIFIC GAMES CORPORATION
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Date: May 7, 2019
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By:
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/s/ Michael A. Quartieri
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Name:
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Michael A. Quartieri
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Title:
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Executive Vice President, Chief Financial Officer, Treasurer and Corporate Secretary
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