Item 5.02. Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.
Appointment of Executive Vice President and Chief Financial Officer and Departure of Executive Vice President and
Chief Financial Officer
On May 21, 2020, Scientific Games Corporation (the “Company”)
announced that Michael C. Eklund, 52, will succeed Michael A. Quartieri as Executive Vice President and Chief Financial Officer of the Company, effective June 1, 2020 (the “Transition”).
In order to provide for a smooth and orderly Transition, Mr. Quartieri has agreed to serve as an advisor to Barry L. Cottle, the Company’s President and Chief Executive Officer, through June 30, 2020 and to provide consulting services from July 1,
2020 through December 31, 2020.
Mr. Eklund’s biography is incorporated herein by reference to the Company’s press release, dated May 21, 2020, a copy of which is attached hereto as Exhibit 99.1.
Employment Agreement with Mr. Eklund
In connection with the Transition, the Company entered into an employment agreement with Mr. Eklund, with a term ending on June 1, 2023,
subject to automatic one-year extensions, and which provides that Mr. Eklund will receive: (1) an annual base salary of $750,000, which Mr. Eklund agreed to temporarily reduce by 50%, consistent with voluntary reductions by the Company’s other
executive officers in connection with the COVID-19 pandemic; (2) beginning in 2021, an annual target bonus opportunity of 75% of his base salary (with a maximum possible payout of 200% of target); (3) eligibility for annual equity awards with an
aggregate grant date fair value of approximately 125% of his base salary; (4) a cash sign-on award of $500,000, subject to reduction under certain circumstances; and (5) sign-on equity awards consisting of (a) 60,000 time-vesting restricted stock
units (“RSUs”), with 26,667 vesting on June 1, 2021 and the remainder vesting in equal installments on June 1, 2022 and June 1, 2023, and (b) 150,000 performance-conditioned
RSUs vesting on March 31, 2023, subject to the achievement of certain Attributable EBITDA (as defined in the agreement) targets the (“Sign-On Performance RSUs”).
In the event the Company terminates Mr. Eklund’s employment without “cause” or for “good reason”, Mr. Eklund will generally receive: (i)
a pro rata bonus for the year of termination; (ii) cash severance equal to the sum of his base salary and “severance bonus amount” (generally, an amount equal to the highest annual bonus paid to Mr. Eklund in respect of the two most recent fiscal
years but not more than his target bonus); (iii) a pro rata portion of the Sign-On Performance RSUs, subject to actual performance; and (iv) up to 12 months of continued COBRA coverage at the Company’s expense. Mr. Eklund’s employment agreement also
contains, among other things, a “best net cutback” provision in the event any payments or benefits to Mr. Eklund would be subject to the excise tax imposed by Section 4999 of the Internal Revenue Code of 1986, as amended, and restrictive covenants
regarding non-competition, non-solicitation, non-disparagement and confidentiality.
Amendment to Mr. Quartieri’s Employment Agreement and Consulting Agreement with Mr. Quartieri
In connection with the Transition, the Company and Mr. Quartieri entered into an amendment to his employment agreement to provide that
upon his contemplated termination of employment he will: (1) receive cash payments totaling $257,632; (2) remain eligible to receive a pro rata bonus for 2020; and (3) immediately vest in all stock options and all time-vesting RSUs granted prior to
January 1, 2019 and continue to vest in all stock options granted in 2019 and 2020 in accordance with their terms through December 31, 2020. As described above, on July 1, 2020, Mr. Quartieri will, subject to the effectiveness of his release of
claims and pursuant to a consulting agreement entered into between the Company and Mr. Quartieri, provide consulting services to the Company through December 31, 2020 in exchange for monthly consulting payments with an aggregate value of $394,875.
Amendment to Employment Agreement with Mr. Winterscheidt
On May 18, 2020, the Company entered into an amendment to its employment agreement with Michael F. Winterscheidt, Senior Vice President
and Chief Accounting Officer, to provide Mr. Winterscheidt with a cash retention award, payable $125,000 on November 30, 2020 and $50,000 on February 28, 2021, subject to Mr. Winterscheidt’s continued employment with the Company through the
applicable date.