|
|
|
|
|
|
|
|
|
|
|
|
|
|
Transaction
Date
|
|
Name
|
|
Type
|
|
Shares
|
|
Price
|
|
|
|
6/10/2011
|
|
Michael R. Chambrello
|
|
RSU Vesting
|
|
|
9,600
|
|
$
|
8.98
|
|
|
|
6/10/2011
|
|
Michael R. Chambrello
|
|
Tax withholding of shares upon RSU vesting
|
|
|
3,212
|
|
$
|
8.98
|
|
|
|
6/13/2011
|
|
Ronald O. Perelman*
|
|
Open market purchase
|
|
|
325,802
|
|
$
|
8.79
|
|
|
|
6/14/2011
|
|
Ronald O. Perelman*
|
|
Open market purchase
|
|
|
261,812
|
|
$
|
9.07
|
|
|
|
6/15/2011
|
|
Ronald O. Perelman*
|
|
Open market purchase
|
|
|
412,386
|
|
$
|
9.20
|
|
-
*
-
These
purchases were made by SGMS Acquisition Two Corporation. Mr. Perelman is the sole stockholder of MacAndrews & Forbes Holdings Inc.,
which is the sole stockholder of SGMS Acquisition Two Corporation.
As
indicated above, we have granted 200,000 time-vesting stock options and 500,000 RSUs to Mr. Weil that we are obligated to settle in cash if shares are not available
for delivery under the Plan at the relevant times. As discussed above, we have also granted a total of 1,250,000 stock options to Messrs. Weil, Huntley and Trask that are not exercisable, and
1,000,000 RSUs to Mr. Weil that will be forfeited, if, at the time the awards would be exercised or settled, as the case may be, we do not have sufficient shares available under the Plan to
deliver shares. Successful completion of this offer would have the effect of reducing the aggregate number of shares subject to outstanding awards and making available a greater number of shares under
the Plan. To the extent sufficient shares become available under the Plan as a result of the completion of this offer, our Compensation Committee expects to seek to eliminate (1) the cash
settlement obligation in respect of the 200,000 stock options and 500,000 RSUs held by Mr. Weil that is triggered by the unavailability of shares and (2) the non-exercisability and
forfeiture provisions in respect of the 1,250,000 stock options and 1,000,000 RSUs that are triggered by the unavailability of shares.
Section 12.
Status of Options Acquired by Us in the Offer; Accounting Consequences of the Offer.
Options that we accept for exchange in the offer will be cancelled. Shares underlying cancelled options granted under the Plan will be
returned to the pool of shares available for grants of new awards in accordance with the terms of the Plan.
For
purposes of accounting for the expense relating to our equity awards, we apply the provisions of Financial Accounting Standards Board Accounting Standards Codification Topic 718
("FASB ASC Topic 718"). Under FASB ASC Topic 718, we will recognize the incremental compensation cost of the new RSUs granted in the option exchange, if any. If there is any incremental compensation
cost, it will be measured as the excess, if any, of the fair value of each new RSU granted to employees and directors in exchange for exchanged options, over the fair value of the exchanged options,
with all fair values measured as of the acceptance date. The unamortized compensation expense from the
47
exchanged
options and incremental compensation expense, if any, associated with the new RSUs under the option exchange will be recognized over the vesting period of the exchanged options (or, in the
case of any incremental expense, any longer vesting period of the new RSUs). In the event that any of the new RSUs are forfeited prior to their vesting due to termination of continuous service, the
compensation cost for the forfeited RSUs generally will not be recognized if the individual's exchanged options corresponding to the forfeited RSUs also would have been forfeited, but expense would be
recognized for the forfeited RSUs if the corresponding exchanged options would have vested prior to the termination of continuous service.
Because
the exchange ratios under the offer were established so as to replace eligible options with new RSUs with fair value (as valued at the time the exchange ratios were established)
less than the accounting fair value of each eligible option, we do not expect to recognize any material compensation expense. The only compensation expense that possibly would be incurred would result
from fluctuations in the market price of our common stock between the time the exchange ratios were set, based on market prices on July 18, 2011, and the time when the exchange actually occurs
as of the acceptance date. As a result, we believe that the option exchange, for those employees and directors who elect to participate, will result in a greater incentive and strengthen such
participants' retention and commitment to long-term service to Scientific Games, with the accounting expense to be recognized by Scientific Games remaining approximately the same as the
expense we would have recognized for the exchanged options.
The
dilutive impact of new RSUs in calculating fully diluted earnings per share ("EPS") likely will vary from the dilutive impact of any surrendered options. It is likely that new RSUs
will result in dilution to EPS at times when the surrendered options would not have resulted in EPS dilution, at times that the surrendered options remained underwater.
Section 13.
Legal Matters; Regulatory Approvals.
We are not aware of any license or regulatory permit that appears to be material to our business that might be affected adversely by
our exchange of eligible options and grant of new RSUs as contemplated by the offer, or any Nasdaq listing requirements that would be required
for the acquisition or ownership of new RSUs or the shares subject thereto as contemplated herein. Should any additional approval or other action be required, we presently contemplate that we will
seek such approval or take such other action. We cannot assure you that any such approval, if needed, could be obtained or any such other action, if necessary, could be taken or what the conditions
imposed in connection with such approvals would entail or whether the failure to obtain any such approval or take any such other action would result in adverse consequences to our business. Our
obligation under the offer to accept tendered eligible options for exchange and to grant new RSUs for exchanged options is subject to the conditions described in Section 7 of this Offer to
Exchange.
Section 14.
Material Income Tax Consequences.
Material U.S. Federal Income Tax Consequences
The following is a summary of the material U.S. federal income tax consequences of the exchange of eligible options for new RSUs
pursuant to the offer for those eligible employees and directors subject to U.S. federal income tax. This discussion is based on the United States Internal Revenue Code, its legislative history,
treasury regulations promulgated thereunder, and administrative and judicial interpretations as of the date of this Offer to Exchange, all of which are subject to change, possibly on a retroactive
basis. This summary does not discuss all of the tax consequences that may be relevant to you in light of your particular circumstances, nor is it intended to be applicable in all respects to all
categories of eligible employees and directors. This summary does not address applicable state or local taxes to which you may be subject.
48
If
you are a citizen or a resident of the United States, but also are subject to the tax laws of another country, you should be aware that there might be other tax and social insurance
consequences that may apply to you.
Eligible
employees and directors who exchange outstanding options for new RSUs generally will not be required to recognize income for U.S. federal income tax purposes on the exchanged
options at the
time of the exchange. However, please refer to the tax discussion below regarding a discussion of the tax consequences of receiving new RSUs in connection with the option exchange.
We
strongly recommend that you consult your personal legal counsel, accountant, financial and/or tax advisor(s) with respect to the federal, state, local and foreign tax consequences of
participating in the offer, as the tax consequences to you are dependent on your individual tax situation.
Restricted Stock Units
If you are a U.S. taxpayer, you generally will not have taxable income at the time you are granted an RSU. Instead, you will recognize
ordinary income as the RSUs vest and we deliver the shares to you in settlement of the RSUs, at which time we generally will have an obligation to withhold applicable federal and state income taxes as
well as Social Security and Medicare taxes. The amount of ordinary income you recognize will equal the fair market value of the shares at such time. We will satisfy all tax withholding obligations in
the manner specified in your RSU agreement. Any gain or loss you recognize upon the sale or exchange of shares that you acquire through a grant of RSUs generally will be treated as capital gain or
loss and will be long-term or short-term depending upon how long you hold the shares after the date of settlement. Shares held more than 12 months are subject to
long-term capital gain or loss, while shares held 12 months or less are subject to short-term capital gain or loss.
Incentive Stock Options
Some employees are holding incentive stock options that constitute eligible options. Under current U.S. tax law, if you are a U.S.
taxpayer, you will not realize taxable income upon the grant of an incentive stock option. In addition, you generally will not realize taxable income upon the exercise of an incentive stock option.
However, in computing the alternative minimum tax, your alternative minimum taxable income may be increased by the amount that the aggregate fair market value of the shares received upon exercise of
the incentive option exceeds the aggregate exercise price of the option, unless your disposition of the option shares occurs in the same taxable year as the exercise of the option. Except in the case
of your death or disability, if an option is exercised more than three (3) months after your termination of employment, the option ceases to be treated as an incentive stock option and is
subject to taxation under the rules that apply to non-statutory stock options. In addition, to the extent that an option otherwise intended to be an incentive stock option becomes vested
as to shares with an aggregate exercise price exceeding $100,000 in any one year, the excess portion will not qualify as an incentive stock option.
If
you sell the option shares acquired upon exercise of an incentive stock option, the tax consequences of the disposition depend upon whether the disposition is qualifying or
disqualifying. The disposition of the option shares is qualifying if it is made:
-
•
-
more than two years after the date the incentive stock option was granted or deemed granted; and
-
•
-
more than one year after the date the incentive stock option was exercised.
If
the disposition of the option shares is qualifying, any excess of the sale price of the option shares over the exercise price of the option will be treated as long-term
capital gain taxable to you at the time of the sale. Any such capital gain will be taxed at the long-term capital gain rate in effect at the time of sale.
49
If
the disposition is not qualifying, which we refer to as a "disqualifying disposition," the following tax treatment can result:
-
•
-
For a sale below the amount you paid for the shares (or the adjusted basis of the shares if higher), you don't report any
compensation income. Your loss on this sale is reported as a capital loss.
-
•
-
For a sale above the amount you paid for the shares (or the adjusted basis of the shares if higher) but no higher than the
value of the shares as of the date you exercised the option, you report your gain on the sale as ordinary compensation income (not capital gain).
-
•
-
If you sell your shares at a price that is higher than the value of the shares as of the date you exercised the option you
report two different items. The bargain element when you exercised the shares (the difference between the value of the shares as of that date and the amount you paid for the shares (or the adjusted
basis of the shares if higher)) is reported as ordinary compensation income. Any additional gain is reported as capital gain (which may be long-term or short-term depending on
how long you held the stock from the date of exercise).
No
Social Security or Medicare tax applies to the exercise of an incentive stock option or upon the subsequent disposition of the option shares.
Unless
you engage in a disqualifying disposition, we will not be entitled to a corporate tax deduction with respect to an incentive stock option. If you engage in a disqualifying
disposition, we generally will be entitled to a corporate tax deduction equal to the amount of ordinary income taxable to you.
If this offer is open for 30 calendar days or more, incentive stock options held by eligible employees who do not participate in this offer will be considered to
have been modified as of the date this offer commenced, which will be deemed to be a new date of grant for purposes of determining whether the employee will receive favorable U.S. tax treatment with
respect to the incentive stock options. As a result, if the completion date is extended beyond August 15, 2011 to a date later than August 17, 2011, then, in order to receive favorable
U.S. tax treatment with respect to any such incentive stock option, you must not dispose of any shares acquired with respect to the incentive stock option until the passage of more than two years from
the commencement date (that is, more than two years from July 19, 2011) and more than one year after the exercise of the option (this rule applies if you do not exchange your incentive stock
options for new RSUs). If these holding periods (and all other incentive stock option requirements) are met, the excess of the sale price of the option shares over the exercise price of the option
will be treated as long-term capital gain.
Non-statutory Stock Options
Most eligible options are non-statutory options (meaning they are not incentive stock options, which are discussed above).
Under current law, an option holder who is a U.S. taxpayer generally will not realize taxable income upon the grant of a non-statutory stock option. When you exercise a
non-statutory stock option, you generally will have ordinary income to the extent the fair market value of the shares you receive on the date of exercise is greater than the exercise price
you pay. If the exercise price of a non-statutory stock option is paid in shares of our common stock or a combination of cash and shares, the excess of the value (on the date of exercise)
of the shares received on the date of exercise over the value of the shares surrendered or the cash paid and shares surrendered generally will be ordinary income taxable to you.
Upon
disposition of the shares, any gain or loss is treated as capital gain or loss. The capital gain or loss will be long-term or short-term depending on whether
the shares were held for more than one year. The holding period for the shares generally will begin just after the time of exercise. The amount
50
of
such gain or loss will be the difference between (1) the amount realized upon the sale or exchange of the shares and (2) the value of the shares at the time of exercise.
If
you were an employee at the time of the grant of the option, any income recognized upon exercise of a non-statutory stock option generally will constitute wages for which
applicable federal, state and local income taxes and Social Security and Medicare tax withholdings will be required.
Material Non-U.S. Tax Consequences
The tax consequences for employees employed by us outside of the United States and employees otherwise subject to income tax and social
insurance contributions outside of the United States may differ from the U.S. federal income tax consequences summarized above and will depend on the tax rules and regulations in the applicable
jurisdiction. Please see Schedules C through J to this Offer to Exchange (as applicable) for more information.
We
strongly recommend that you consult your personal legal counsel, accountant, financial and/or tax advisor(s) with respect to the federal, state, local and foreign tax consequences of
participating in the offer. In addition, if you are a resident of more than one country or have performed services to Scientific Games and its subsidiaries in more than one country since the time of
grant of an eligible option, you should be aware that there might be tax and social insurance consequences for more than one country that may apply to you. We strongly recommend that you consult with
your personal legal counsel, accountant, financial and/or tax advisor(s) to discuss the consequences to you of this transaction.
Section 15.
Extension of Offer; Termination; Amendment.
We reserve the right, in our sole discretion, at any time and regardless of whether or not any event listed in Section 7 of this
Offer to Exchange has occurred or is deemed by us to have occurred, to extend the period of time during which the offer is open and delay the acceptance for exchange of any surrendered eligible
options. If we elect to extend the period of time during which this offer is open, we will give you written notice of the extension and delay, as described below. If we extend the offer and delay the
completion date, we also will extend your right to withdraw tenders of eligible options until such delayed completion date. In the case of an extension, we will issue a press release, email or other
form of communication no later than 9:00 a.m. EDT on the next U.S. business day following the previously scheduled completion date.
We
also reserve the right, in our discretion, before the completion date to terminate or amend the offer and to postpone our acceptance and cancellation of any eligible options elected
to be exchanged if any of the events listed in Section 7 of this Offer to Exchange occurs, by giving oral or written notice of the termination or postponement to you or by making a public
announcement of the termination. Our reservation of the right to delay our acceptance and cancellation of eligible options elected to be exchanged is limited by Rule 13e-4(f)(5)
under the Exchange Act, which requires that we must pay the consideration offered or return the options promptly after termination or withdrawal of a tender offer.
Subject
to compliance with applicable law, we further reserve the right, before the completion date, in our discretion, and regardless of whether any event listed in Section 7 of
this Offer to Exchange has occurred or is deemed by us to have occurred, to amend the offer in any respect, including by decreasing or increasing the consideration offered in this offer to option
holders or by decreasing or increasing the number of options being sought in this offer.
The
minimum period during which the offer will remain open following material changes in the terms of the offer or in the information concerning the offer, other than a change in the
consideration being offered by us or a change in amount of eligible options sought, will depend on the facts and circumstances of such change, including the relative materiality of the terms or
information changes. If
51
we
modify the number of eligible options being sought in this offer or the consideration being offered by us for the eligible options in this offer, the offer will remain open for at least ten U.S.
business days from the date of notice of such modification. If any term of the offer is amended in a manner that we determine constitutes a material change adversely affecting any holder of eligible
options, we promptly will disclose the amendments in a manner reasonably calculated to inform holders of eligible options of such amendment, and we will extend the offer's period so that at least ten
U.S. business days, or such longer period as may be required by the tender offer rules, remain after such change.
For
purposes of the offer, a "business day" means any day other than a Saturday, Sunday or a U.S. federal holiday and consists of the time period from 12:01 a.m. through 11:59 PM,
EDT. References to 11:59 PM on a specified day refer to the end of that day.
Section 16.
Fees and Expenses.
We will not pay any fees or commissions to any broker, dealer or other person for soliciting the surrender of eligible options to be
exchanged through this offer. You will be responsible for any expenses incurred by you in connection with your election to participate in the offer, including, but not limited to, any expenses
associated with any personal legal counsel, accountant, financial and/or tax advisor(s) consulted or retained by you in connection with this offer.
Section 17.
Additional Information.
This Offer to Exchange is part of a Tender Offer Statement on Schedule TO that we have filed with the SEC. This Offer to
Exchange does not contain all of the information contained in the Schedule TO and the exhibits to the Schedule TO. We recommend that you review the Schedule TO, including its
exhibits, and the following materials that we have filed with the SEC before making a decision on whether to elect to exchange your options:
-
1.
-
our
Annual Report on Form 10-K for our fiscal year ended December 31, 2010, filed with the SEC on March 1, 2011;
-
2.
-
our
definitive Proxy Statement on Schedule 14A for our 2011 Annual Meeting of Stockholders, filed with the SEC on April 25, 2011;
-
3.
-
our
Quarterly Report on Form 10-Q for our fiscal quarter ended March 31, 2011, filed with the SEC on May 10, 2011;
-
4.
-
our
Current Reports on Form 8-K filed with the SEC on March 14, 2011, April 27, 2011, May 13, 2011 and June 9,
2011; and
-
5.
-
the
description of our Class A Common Stock contained in our latest registration statement with respect to such Class A Common Stock filed
under Section 12 of the Exchange Act with the SEC on January 28, 2002, including any amendment or report filed for the purpose of updating such description.
We
also recommend that you review our Quarterly Report on Form 10-Q for our fiscal quarter ended June 30, 2011, which we expect to file on or before
August 9, 2011.
These
filings, our other annual, quarterly, and current reports, our proxy statements, and our other SEC filings may be examined, and copies may be obtained, at the SEC's public
reference room at 100 F Street, N.E., Washington, D.C. 20549. You may obtain information on the operation of the public reference room by calling the SEC at
1-800-SEC-0330. Our SEC filings also are available to the public on the SEC's Internet site at
www.sec.gov
.
Each
person to whom a copy of this Offer to Exchange is delivered may obtain a copy of any or all of the documents to which we have referred you, other than exhibits to such documents,
unless such
52
exhibits
are specifically incorporated by reference into such documents, at no cost, by writing to us at Scientific Games Corporation, 750 Lexington Avenue, 25th Floor, New York, New York
10022, Attention: Secretary or by calling us at (212) 318-9198.
If
you have any questions regarding this offer, please contact the Human Resources Department at (770) 825-4578 or by email at
sgequityadmin@scienticgames.com.
The information contained in this Offer to Exchange should be read together with the information contained in the documents to which we have referred you in
making your decision as to whether or not to participate in this offer.
Section 18.
Miscellaneous.
We are not aware of any jurisdiction where the making of the offer is not in compliance with applicable law. If we become aware of any
jurisdiction where the making of the offer is not in compliance with any applicable law, we will make a good faith effort to comply with such law.
We have not authorized any person to make any recommendation on our behalf as to whether you should elect to exchange or refrain from exchanging your eligible
options pursuant to the offer. You should rely only on the information in this document or documents to which we have referred you. We have not authorized anyone to give you any information or to make
any representations in connection with the offer other than the information and representations contained in this Offer to Exchange and in the related offer documents. If anyone makes any
recommendation or representation to you or gives you any information, you should not rely upon that recommendation, representation, or information as having been authorized by
us.
Scientific
Games Corporation
July 19,
2011
53
SCHEDULE A
INFORMATION CONCERNING THE EXECUTIVE OFFICERS
AND DIRECTORS OF SCIENTIFIC GAMES CORPORATION
Our executive officers and directors as of June 30, 2011 are set forth in the following table:
|
|
|
|
|
Name
|
|
Position
|
|
A. Lorne Weil
|
|
Chief Executive Officer, Chairman of the Board and Director
|
|
David L. Kennedy
|
|
Chief Administrative Officer, Vice Chairman and Director
|
|
Michael R. Chambrello
|
|
Chief Executive Officer—Asia-Pacific Region and Director
|
|
Jeffrey S. Lipkin
|
|
Senior Vice President and Chief Financial Officer
|
|
Ira H. Raphaelson
|
|
Vice President, General Counsel and Secretary
|
|
Larry A. Potts
|
|
Vice President, Chief Compliance Officer and Director of Security
|
|
Robert C. Becker
|
|
Vice President and Treasurer
|
|
Stephen L. Gibbs
|
|
Vice President, Corporate Controller and Chief Accounting Officer
|
|
James B. Trask
|
|
Senior Vice President and President of Printed Products Group (SGI)
|
|
William J. Huntley
|
|
Senior Vice President and President of Lottery Systems Group (SGI)
|
|
Stephen Frater
|
|
Executive Chairman—Global Draw & Games Media
|
|
Steven W. Beason
|
|
Vice President and Enterprise Chief Technology Officer
|
|
James C. Kennedy
|
|
Senior Vice President and Chief Marketing Officer (SGI)
|
|
Peter A. Cohen
|
|
Vice Chairman and Director
|
|
Gerald J. Ford
|
|
Director
|
|
J. Robert Kerrey
|
|
Director
|
|
Ronald O. Perelman
|
|
Director
|
|
Michael J. Regan
|
|
Director
|
|
Barry F. Schwartz
|
|
Director
|
|
Frances F. Townsend
|
|
Director
|
|
Eric M. Turner
|
|
Director
|
The
address of each executive officer and director is:
Our
executive officers and members of our Board of Directors are eligible to participate in this offer, although the terms of participation (in particular, exchange ratios) vary for
directors (including executive officers who are also directors).
54
SCHEDULE B
SUMMARY FINANCIAL INFORMATION OF
SCIENTIFIC GAMES CORPORATION
The following summary financial information has been derived from and should be read in conjunction with our consolidated financial
statements for the year ended December 31, 2010, the notes thereto and the related "Management's Discussion and Analysis of Financial Condition and Results of Operations" included in our Annual
Report on Form 10-K for the year ended December 31, 2010, and "Part I. Financial Information" of our Quarterly Report on Form 10-Q for the quarter
ended March 31, 2011, which documents are incorporated by reference in this Offer to Exchange.
CONSOLIDATED STATEMENTS OF INCOME INFORMATION
(In thousands, except per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
Year Ended
|
|
Quarter Ended
|
|
Quarter Ended
|
|
|
|
December 31,
2010
|
|
December 31,
2009
|
|
March 31,
2011
|
|
March 31,
2010
|
|
|
|
|
|
|
|
(Unaudited)
|
|
(Unaudited)
|
|
|
Net Revenues
|
|
$
|
882.499
|
|
$
|
927,749
|
|
$
|
196,656
|
|
$
|
216,339
|
|
|
Income (Loss) from Operations
|
|
|
58,736
|
|
|
(27
|
)
|
|
14,353
|
|
|
21,503
|
|
|
Income (Loss) Before Income Taxes
|
|
|
(5,313
|
)
|
|
(26,332
|
)
|
|
(1,758
|
)
|
|
6,619
|
|
|
Net Income (Loss)
|
|
$
|
(149,201
|
)
|
$
|
(39,879
|
)
|
$
|
(6,932
|
)
|
$
|
4,887
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income (Loss) per Share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
(1.61
|
)
|
$
|
(0.43
|
)
|
$
|
(0.08
|
)
|
$
|
0.05
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
$
|
(1.61
|
)
|
$
|
(0.43
|
)
|
$
|
(0.08
|
)
|
$
|
0.05
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted Average Shares:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
92,666
|
|
|
92,701
|
|
|
91,886
|
|
|
93,993
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
|
92,666
|
|
|
92,701
|
|
|
91,886
|
|
|
94,662
|
|
|
|
|
|
|
|
|
|
|
|
|
CONSOLIDATED BALANCE SHEET INFORMATION
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31,
2011
|
|
December 31,
2010
|
|
December 31,
2009
|
|
|
|
(Unaudited)
|
|
|
|
|
|
|
Current Assets
|
|
$
|
397,607
|
|
$
|
413,665
|
|
$
|
672,728
|
|
|
Non-Current Assets
|
|
|
1,808,254
|
|
|
1,737,873
|
|
|
1,619,064
|
|
|
|
|
|
|
|
|
|
|
|
Total Assets
|
|
$
|
2,205,861
|
|
$
|
2,151,538
|
|
$
|
2,291,792
|
|
|
|
|
|
|
|
|
|
|
|
Current Liabilities
|
|
$
|
213,481
|
|
$
|
195,998
|
|
$
|
225,203
|
|
|
Non-Current Liabilities
|
|
|
1,508,265
|
|
|
1,502,882
|
|
|
1,446,831
|
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities
|
|
|
1,721,746
|
|
|
1,698,880
|
|
|
1,672,034
|
|
|
Total Stockholders' Equity
|
|
|
484,115
|
|
|
452,658
|
|
|
619,758
|
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities and Stockholders' Equity
|
|
$
|
2,205,861
|
|
$
|
2,151,538
|
|
$
|
2,291,792
|
|
|
|
|
|
|
|
|
|
|
55
SCHEDULE C
GUIDE TO TAX ISSUES IN THE UNITED KINGDOM
The following is a general summary of the material tax consequences of the voluntary cancellation of eligible options in exchange for
the grant of new RSUs pursuant to the offer for eligible employees subject to tax in the United Kingdom. This summary is based on the tax laws in effect in the United Kingdom as of July 2011.
This summary is general in nature and does not discuss all of the tax consequences that may be relevant to you in light of your particular circumstances, nor is it intended to be applicable in all
respects to all categories of eligible employees. Please note that tax laws change frequently and occasionally on a retroactive basis. As a result, the information contained in this summary may be
out-of-date at the time of the exchange of your eligible options or the grant or vesting of the new RSUs or when you sell shares acquired upon settlement of your new RSUs.
Accordingly, you are strongly encouraged to consult with your personal legal counsel, accountant, financial and/or tax advisor(s) regarding the tax consequences of the option exchange and grant of new
RSUs in the United Kingdom.
Please
note that the information contained in this summary related to withholding and reporting requirements for any income you receive as a result of your new RSUs is based on the laws
in effect as of July 2011 and Scientific Games' current practice in relation to recharging costs of its equity awards in the United Kingdom. The withholding and reporting requirements may
change in the future due to tax law changes or to accommodate Scientific Games' recharge of its cost related to the new RSUs to the local employer.
If
you are a citizen or resident of more than one country or are considered a resident of more than one country for local law purposes, or if you are not treated as resident and
ordinarily resident in the
U.K., the information contained in this summary may not be applicable to you. Accordingly, you are strongly encouraged to consult with your personal legal counsel, accountant, financial and/or tax
advisor(s) as to how the tax or other laws in your country apply to your specific situation.
Option Exchange
You should not be subject to income tax, national insurance contributions or capital gains tax as a result of the exchange of eligible
options for the grant of new RSUs pursuant to the offer. This is because current guidance set forth by Her Majesty's Revenue and Customs ("HMRC") should treat the exchange of the options for the RSUs
(which are not yet vested) as an exchange of one right to acquire employment-related securities for another such right for the purposes of section 483 of the Income Tax (Earnings and Pensions)
Act 2003 and Section 237A of the Taxation of Chargeable Gains Act 1992.
Grant of New RSUs
You should not be subject to tax when the new RSUs are granted to you.
Vesting of New RSUs
You will be subject to income tax and employee national insurance contributions ("NICs") when the new RSUs vest. The taxable amount
will be the fair market value of the shares issued to you at vesting.
Sale of Shares
When you subsequently sell any shares acquired at vesting of the new RSUs, you will be subject to capital gains tax if your total
capital gains in the tax year of disposal exceed the annual exemption amount (£10,600 for the tax year April 6, 2011 to April 5, 2012), in which case you will be subject to
56
tax
at a flat rate of 28% on the difference between the sale price and the fair market value of the shares at vesting.
Please
note that, when you sell any shares acquired at vesting, you may need to take into account the share-identification rules in calculating your capital gains tax liability,
particularly if you have acquired Scientific Games shares from other sources. Please consult your legal counsel, accountant, financial and/or tax advisor(s) to determine how share-identification rules
may apply in your particular situation.
Withholding and Reporting
Your employer will calculate the income tax and employee NICs due at the vesting of new RSUs and account for these amounts to HMRC.
Your employer will account for and withhold any applicable income tax and employee NICs under the Pay As You Earn system or by any other means set forth in your RSU agreement and/or the Plan.
If
a sufficient amount is not withheld, you must reimburse your employer for the income tax due within 90 days of the vesting of the new RSUs to avoid further tax consequences. If
the employee does not reimburse the employer within this time, the outstanding tax will itself be treated as additional earnings and will be subject to income tax and employee NICs.
Your
employer also is required to report the grant and vesting of the new RSUs, the acquisition of shares and the tax withheld on its annual tax returns filed with HMRC.
In
addition to your reporting obligations to your employer, you are responsible for reporting any income resulting from the vesting of the new RSUs and the sale of shares on your annual
tax return. You also are responsible for paying any tax resulting from the sale of shares.
57
SCHEDULE D
GUIDE TO TAX ISSUES IN GERMANY
The following is a general summary of the material tax consequences of the voluntary cancellation of eligible options in exchange for
the grant of new RSUs pursuant to the offer for eligible employees subject to tax in Germany. This summary is based on the tax laws in effect in Germany as of July 2011. This summary is general
in nature and does not discuss all of the tax consequences that may be relevant to you in light of your particular circumstances, nor is it intended to be applicable in all respects to all categories
of eligible employees. Please note that tax laws change frequently and occasionally on a retroactive basis. As a result, the information contained in this summary may be
out-of-date at grant or vesting of the new RSUs, or when you sell shares acquired upon settlement of your new RSUs. Accordingly, you are strongly encouraged to consult with
your personal legal counsel, accountant, financial and/or tax advisor(s) regarding the tax consequences of the option exchange and grant of new RSUs in Germany.
Please
note that the information contained in this summary related to withholding and reporting requirements for any income you receive as a result of your new RSUs is based on the laws
in effect as of July 2011 and Scientific Games' current practice in relation to recharging costs of its equity awards in Germany. The withholding and reporting requirements may change in the
future due to tax law changes or to accommodate Scientific Games' recharge of its cost related to the new RSUs to the local employer.
If
you are a citizen or resident of more than one country, or are considered a resident of more than one country for local law purposes, the information contained in this summary may not
be applicable to you. Accordingly, you are strongly encouraged to consult with your personal legal counsel, accountant,
financial and/or tax advisor(s) as to how the tax or other laws in your country apply to your specific situation.
Option Exchange
We believe that you will not be subject to tax as a result of the exchange of eligible options for the grant of new RSUs pursuant to
the option exchange, although there is no clear guidance set forth in the Germany Income Tax Act.
Grant of New RSUs
You will not be subject to tax when the new RSUs are granted to you.
Vesting of New RSUs
You will be subject to income tax and social insurance contributions, including a solidarity surcharge and church tax (to the extent
you have not already reached the applicable contribution ceiling), when the new RSUs vest on the fair market value of the shares issued to you at vesting.
The
new RSUs may not be eligible for any favorable tax treatment. By contrast, your eligible options may be eligible for a tax deduction pursuant to Section 19a of the German
Income Tax Act (Einkommensteuergesetz), provided they met certain conditions. Therefore, you should carefully consider the tax impact of participating in the offer. Please consult with your personal
legal counsel, accountant, financial and/or tax advisor(s) to determine whether this deduction may apply at vesting of the new RSUs.
58
Sale of Shares
When you subsequently sell any shares acquired at vesting of the new RSUs, you will be subject to capital gains tax on any gains at a
flat rate of 25% (plus 5.5% solidarity surcharge and church tax, if applicable), provided you do not own 1% or more of Scientific Games' stated capital (and have not owned 1% or more at any time in
the last five years) and the shares are not held as a business asset. Please note that you may elect to be taxed at your marginal tax rate if the 25% flat rate exceeds your marginal tax rate. The
amount subject to tax, whether at the flat rate or at your marginal tax rate, will be the difference between the sale price and the fair market value of the shares issued at vesting. A savers'
allowance (Sparer-Pauschbetrag) of €801 for unmarried persons, or €1,602 for married couples filing jointly, will be applicable for all investment income (including the
taxable gain from the sale of shares). This saver's allowance covers expenses related to the generation of income (Werbungskosten), such as securities account fees, which will not be deductible from
the final withholding tax or tax assessment procedures.
Withholding and Reporting
Your employer will withhold and report income tax, and social insurance contributions, including a solidarity surcharge and church tax
(to the extent applicable), when the new RSUs vest. If your actual tax liability differs from the amount withheld, you are responsible for paying any additional tax. You are also responsible for
reporting and paying any tax resulting from the sale of your shares.
59
SCHEDULE E
GUIDE TO TAX ISSUES IN IRELAND
The following is a general summary of the material tax consequences of the voluntary cancellation of eligible options in exchange for
the grant of new RSUs pursuant to the offer for eligible employees subject to tax in Ireland. This summary is based on the tax laws in effect in Ireland as of July 2011. This summary is general in
nature and does not discuss all of the tax consequences that may be relevant to you in light of your particular circumstances, nor is it intended to be applicable in all respects to all categories of
eligible employees. Please note that tax laws change frequently and occasionally on a retroactive basis. As a result, the information contained in this summary may be
out-of-date at grant or vesting of the new RSUs or when you sell shares acquired upon settlement of your new RSUs. Accordingly, you are strongly encouraged to consult with your
personal legal counsel, accountant, financial and/or tax advisor(s) regarding the tax consequences of the option exchange and grant of new RSUs in Ireland.
Please
note that the information contained in this summary related to withholding and reporting requirements for any income you receive as a result of your new RSUs is based on the laws
in effect as of July 2011 and Scientific Games' current practice in relation to recharging costs of its equity awards in Ireland. The withholding and reporting requirements may change in the future
due to tax law changes or to accommodate Scientific Games' recharge of its cost related to the new RSUs to the local employer.
If
you are a citizen or resident of more than one country, or are considered a resident of more than one country for local law purposes, the information contained in this summary may not
be applicable to you. Accordingly, you are strongly encouraged to consult with your personal legal counsel, accountant,
financial and/or tax advisor(s) as to how the tax or other laws in your country apply to your specific situation.
Option Exchange
We believe that you will not be subject to tax as a result of the exchange of eligible options for the grant of new RSUs pursuant to
the option exchange, although there is no clear guidance set forth in the in the Taxes Consolidation Act, 1997 or by the Ireland Revenue Commissioners.
Grant of New RSUs
You will not be subject to tax when the new RSUs are granted to you.
Vesting of New RSUs
You likely will be subject to income tax when the new RSUs vest on the fair market value of the shares issued to you at vesting. You
may be subject to social insurance ("PRSI") contributions on this amount.
In
addition, a Universal Social Charge ("USC") of 2% to 7% (depending on your annual income) applies to your gross income from all sources, including the income at vesting of the new
RSUs. Certain limited exemptions apply. Please consult your personal legal counsel, accountant, financial and/or tax advisor(s) for further details about the income levy.
Sale of Shares
When you subsequently sell any shares acquired at vesting of the new RSUs, you will be subject to capital gains tax to the extent any
gain exceeds the annual exemption (currently €1,270). The taxable amount will be the difference between the net sale price and the cost basis of the shares. The cost basis
60
of
the shares will be the fair market value of the shares at the date of vesting. You are responsible for paying any capital gains tax that may arise on disposal of the shares. It will also be
necessary to include this information in your tax return for the relevant tax year.
Withholding and Reporting
Your employer is not required to withhold income tax, USC and PRSI (where applicable) when the new RSUs vest. Your employer is required
to report the details of the option exchange and may be required to report the details of the new RSUs to the Revenue Commissioners at grant and at vesting.
Director Notification Obligation
If you are a director, shadow director
1
or secretary of one of Scientific Games' majority-owned subsidiaries in Ireland,
you must notify the Irish subsidiary in writing within five business days of (i) disposing of an interest in Scientific Games (
e.g.
, exchange of
eligible options.), (ii) becoming aware of the event giving rise to the notification requirement, or (iii) becoming a director or secretary if such an interest exists at the time. This
notification requirement also applies with respect to the interests of a spouse or minor child (whose interests will be attributed to the director, shadow director or secretary, as the case may be).
-
1
-
A
shadow director is an individual who is not on the board of directors of the Irish subsidiary but who has sufficient control so that the board
of directors of the Irish subsidiary acts in accordance with the directions or instructions of the individual.
61
SCHEDULE F
GUIDE TO TAX ISSUES IN SWEDEN
The following is a general summary of the material tax consequences of the voluntary cancellation of eligible options in exchange for
the grant of new RSUs pursuant to the offer for eligible employees subject to tax in Sweden. This summary is based on the tax laws in effect in Sweden as of July 2011. This summary is general
in nature and does not discuss all of the tax consequences that may be relevant to you in light of your particular circumstances, nor is it intended to be applicable in all respects to all categories
of eligible employees. Please note that tax laws change frequently and occasionally on a retroactive basis. As a result, the information contained in this summary may be
out-of-date at grant or vesting of the new RSUs or when you sell shares acquired upon settlement of your new RSUs. Accordingly, you are strongly encouraged to consult with your
personal legal counsel, accountant, financial and/or tax advisor(s) regarding the tax consequences of the option exchange and grant of new RSUs in Sweden.
Please
note that the information contained in this summary related to withholding and reporting requirements for any income you receive as a result of your new RSUs is based on the laws
in effect as of July 2011 and Scientific Games' current practice in relation to recharging costs of its equity awards in Sweden. The withholding and reporting requirements may change in the
future due to tax law changes or to accommodate Scientific Games' recharge of its cost related to the new RSUs to the local employer.
If
you are a citizen or resident of more than one country, or are considered a resident of more than one country for local law purposes, the information contained in this summary may not
be applicable to you. Accordingly, you are strongly encouraged to consult with your personal legal counsel, accountant,
financial and/or tax advisor(s) as to how the tax or other laws in your country apply to your specific situation.
Option Exchange
We believe that you will not be subject to tax as a result of the exchange of eligible options for the grant of new RSUs pursuant to
the option exchange, although there is no clear guidance from the Swedish Tax Agency.
Grant of New RSUs
You will not be subject to tax when the new RSUs are granted to you.
Vesting of New RSUs
You will be subject to income tax when the new RSUs vest on the fair market value of the shares issued to you at vesting. You will not
be required to pay social insurance contributions when the new RSUs vest, but a general pension contribution (to the extent you have not reached already the applicable contribution ceiling) will be
collected through income tax withholding.
Sale of Shares
When you subsequently sell any shares acquired at vesting of the new RSUs, you will be subject to capital gains tax on any gain you
realize at a flat tax rate of 30%. The taxable amount will be the difference between the sale price and the fair market value of the shares at vesting. Alternatively, provided that Scientific Games'
shares are listed on an exchange at vesting (
e.g.
, the Nasdaq Global Select Market), you may choose to be taxed on 80% of the sale proceeds.
62
Withholding and Reporting
Your employer will withhold and report income tax at the vesting of the new RSUs. Your employer is also required to pay an employer
social insurance contribution on the taxable amount at vesting.
You
are legally obligated to inform your employer, by no later than the end of the month following vesting, that the new RSUs have vested and disclose the taxable amount. However,
because Scientific Games will be withholding to cover your tax liability at vesting, you will not need to make this report to your employer if you resided in Sweden from the grant to the vesting date.
If you transfer out of Sweden after the date the new RSUs are granted, please notify your employer of any vesting event. You are responsible for reporting the taxable income from the vesting of the
new RSUs on your annual tax return and for paying any additional taxes due if your tax liability exceeds the amount withheld. You also are responsible for reporting and paying any tax resulting from
the sale of your shares.
63
SCHEDULE G
GUIDE TO TAX ISSUES IN CANADA
The following is a general summary of the material federal tax consequences of the voluntary cancellation of eligible options in
exchange for the grant of new RSUs pursuant to the offer for eligible employees subject to tax in Canada. This summary is based on the federal tax laws in effect in Canada as of July 2011. This
summary is general in nature and does not discuss all of the tax consequences that may be relevant to you in light of your particular circumstances, nor is it intended to be applicable in all respects
to all categories of eligible employees. In particular, you should note that, although most provinces use the same definitions of income and taxable income as is used at the federal level, Quebec
imposes its own income tax through comprehensive tax legislation. Also, please note that tax laws change frequently and occasionally on a retroactive basis. As a result, the information contained in
this summary may be out of date at grant or vesting of the new RSUs or when you sell shares acquired upon the settlement of your vested RSUs. Accordingly, you are strongly encouraged to consult with
your personal legal counsel, accountant, financial and/or tax advisor(s) regarding the tax consequences of the option exchange and grant of new RSUs in Canada.
Please
note that the information contained in this summary related to withholding and reporting requirements for any income you receive as a result of your new RSUs is based on the laws
in effect as of July 2011 and Scientific Games' current practice in relation to recharging costs of its equity awards in Canada. The withholding and reporting requirements may change in the
future due to tax law changes or to accommodate Scientific Games' recharge of its cost related to the new RSUs to the local employer.
If
you are a citizen or resident of more than one country, or are considered a resident of more than one country for local law purposes, the information contained in this summary may not
be applicable to you. Further, if you have been resident in different countries at any point since the grant of your eligible options or if you become resident in different countries between the grant
and vesting of the new RSUs, the tax information in this supplement may apply differently to you and the tax consequences of participating in the offer may be different and possibly less favorable for
you. Accordingly, you are strongly encouraged to consult with your personal legal counsel, accountant, financial and/or tax advisor(s) as to how the tax or other laws in your country apply to your
specific situation.
Option Exchange and Grant of New RSUs
The tax treatment of the exchange of eligible options for the grant of new RSUs is uncertain. The Income Tax Act of Canada provides for
a tax-free exchange if the value of the underlying securities immediately before the exchange less the exercise price is not less than the value of the underlying securities to be received
by you at the time of the exchange. Because the eligible options are underwater, it is unlikely that you will qualify for this tax-free exchange status.
Instead,
it is likely that the Canada Revenue Agency (the "CRA") will treat the exchange as one transaction which is a taxable exchange of employee stock options in exchange for the
grant of new RSU's. Thus, for the purposes of this summary, it is assumed that the exchange will qualify as one transaction under Canadian tax law and accordingly, you will have disposed of your
eligible options for consideration equal to the value of the RSU's.
Therefore, you will be subject to income tax and Canada Pension Plan ("CPP") contributions (to the extent you have not already reached the applicable contribution
ceiling) upon the exchange of eligible options for the grant of new RSU's.
You will be taxed on the value of the new RSUs on the grant date of the new RSUs ("new RSU grant
date"). However, if your eligible options qualify for favorable tax treatment under federal law in Canada, you may be entitled to deduct one-half of this
64
amount
when computing the taxable income. Your eligible options will generally qualify for favorable tax treatment if (i) the exercise price is equal to or greater than the fair market value of
the shares at the time the options were granted, and (ii) the shares underlying the options are considered "prescribed" shares (which should be the case). For the purpose of determining the
value of the new RSUs, we will use standard valuation techniques with which the CRA may or may not agree.
Please
note that, if you terminate your active service before the new RSUs received in the option exchange vest and, therefore, the new RSUs are forfeited, you likely will not be
entitled to a refund of the amount on which you paid tax at the time of the new RSU grant date. However, you should realize a capital loss from the disposition of your right to receive the new RSUs
and should be able to offset one-half of this loss against any capital gain realized in the same year, the preceding three years or any subsequent year. Since you will not have any
proceeds of disposition, the amount of your capital loss should be the value of the eligible options at the time of the option exchange, which is considered your cost of receiving the right to the new
RSUs.
You should note that if you do not participate in the offer, your eligible options may qualify for favorable tax treatment in Canada, in which case you would be
able to exclude one-half of the income you realize upon exercise of the eligible options (
i.e.
, one-half of the difference
between the exercise price and the fair market value of the shares at exercise) from taxation.
However, no such favorable tax treatment applies to RSUs. Therefore, before you decide to participate in the offer, you should carefully consider the difference
between how options and RSUs are taxed in Canada, as well as the fact that you will be subject to tax at the time of the new RSU grant date, as described above.
You
will be subject to income tax and CPP contributions when the new RSUs vest and shares are issued to you. You will be taxed on the fair market value of the shares issued to you, less
the value of the eligible options exchanged for the new RSUs. The value of the eligible options will be calculated using standard valuation techniques
(
e.g.
, Black Scholes) with which the CRA may or may not agree.
Sale of Shares
When you subsequently sell any shares acquired at vesting, you will be subject to tax on any gain you realize. The taxable gain should
be one-half of the amount by which the sale price exceeds the total of the adjusted cost base of the shares (
i.e.
, their value when the new
RSUs vested) and any brokerage costs you incurred on the sale.
One-half
of any loss arising from the sale of the shares may be deducted from any taxable gain for the year, the previous three years, or any subsequent tax year.
Withholding and Reporting
Your employer will withhold income tax and CPP contributions (if applicable) at the time of the new RSU grant date and at the vesting
of the new RSUs. Withholding will be made from your regular pay. Your employer will also report the income recognized at the time of the new RSU grant date and at vesting to the CRA. A copy of the T4
form containing this information will be delivered to you prior to the last day of February of the year following the year in which the taxable event occurs. It is your responsibility to report and
pay any tax resulting from the sale of shares.
65
SCHEDULE H
GUIDE TO TAX ISSUES IN AUSTRIA
The following is a general summary of the material tax consequences of the voluntary cancellation of eligible options in exchange for
the grant of new RSUs pursuant to the offer for eligible employees subject to tax in Austria. This summary is based on the tax laws in effect in Austria as of July 2011. We have not obtained a
tax ruling or other confirmation from the tax authorities in Austria with regard to this information, and it is possible that the tax authorities may take a different position. This summary is general
in nature and does not discuss all of the tax consequences that may be relevant to you in light of your particular circumstances, nor is it intended to be applicable in all respects to all categories
of eligible employees. Please note that tax laws change frequently and occasionally on a retroactive basis. As a result, the information contained in this summary may be out of date at the time the
new RSUs are granted, the new RSUs vest, or you sell shares of common stock acquired upon vesting of the new RSUs.
If
you are a citizen or resident of more than one country, or are considered a resident of more than one country for local law purposes, the information contained in this summary may not
be applicable to you. In addition, if you received the eligible options when you resided in or were otherwise subject to tax in another country (the "original grant country"), but you now reside in or
are otherwise subject to tax in a different country (the "new country"), you may be subject to tax in connection with the new RSUs granted pursuant to the option exchange in the original grant
country, as well as in the new country. Accordingly, you are strongly advised to seek appropriate professional advice as to how the tax or other laws in your country apply to your specific situation.
Option Exchange
You likely will not be subject to tax as a result of the exchange of eligible options for the grant of new RSUs pursuant to the option
exchange.
Grant of New RSUs
You will not be subject to tax when the new RSUs are granted to you.
Vesting of New RSUs
You will be subject to income tax and social insurance contributions (to the extent you have not exceeded the applicable contribution
ceiling) when the new RSUs vest on the fair market value of the shares issued to you at vesting. You may also be subject to other payroll taxes when the new RSUs vest, including contributions to the
fund for the promotion of house building and contributions to the chamber of commerce.
Please
note that the Austrian Income Tax Act provides favorable tax treatment if certain conditions are met. Please contact your personal tax advisor to determine if this treatment
applies to your specific situation.
Sale of Shares
Regardless of the holding period, the sale of the shares is subject to 25% income tax and upon application half your income tax rate.
Income
that is not subject to wage tax withholding is exempt from income tax provided it does not exceed €730 per annum (see below).
Income
derived from investments is exempt from income tax provided it does not exceed €22 per annum (see below).
66
Withholding and Reporting
Your employer is required to withhold and report income tax and social insurance contributions (to the extent you have not exceeded the
applicable contribution ceiling) when the new RSUs vest and shares are issued to you. If your actual tax liability differs from the amount withheld, you are responsible for paying any additional tax.
You are also responsible for reporting and paying any tax resulting from the sale of your shares or the receipt of any dividends by the end of April in the year following the year of sale/receipt.
67
SCHEDULE I
GUIDE TO TAX ISSUES IN HUNGARY
The following is a general summary of the material tax consequences of the voluntary cancellation of eligible options in exchange for
the grant of new RSUs pursuant to the offer for eligible employees subject to tax in Hungary. This summary is based on the tax laws in effect in Hungary as of July 2011. This summary is general
in nature and does not discuss all of the tax consequences that may be relevant to you in light of your particular circumstances, nor is it intended to be applicable in all respects to all categories
of eligible employees. Please note that tax laws change frequently and occasionally on a retroactive basis. As a result, the information contained in this summary may be
out-of-date at the time of the exchange of your eligible options or the grant or vesting of the new RSUs or when you sell shares acquired upon settlement of your new RSUs.
Accordingly, you are strongly encouraged to consult with your personal legal counsel, accountant, financial and/or tax advisor(s) regarding the tax consequences of the option exchange and grant of new
RSUs.
If
you are a citizen or resident of more than one country or are considered a resident of more than one country for local law purposes, or if you are not treated as resident in Hungary,
the information contained in this summary may not be applicable to you. Accordingly, you are strongly encouraged to consult with your personal legal counsel, accountant, financial and/or tax
advisor(s) as to how the tax or other laws in your country apply to your specific situation.
Option Exchange
We believe that you will not be subject to tax as a result of the exchange of eligible options for the grant of new RSUs pursuant to
the option exchange, although there is no clear guidance set forth by the Hungarian tax authorities.
Grant of New RSUs
You will not be subject to tax when the new RSUs are granted to you.
Vesting of New RSUs
You will be subject to personal income tax at the rate of 16% when the new RSUs vest and the shares are issued to you. If the new RSUs
vest in 2012, the taxable amount will be 113.5% of the fair market value of the shares issued to you at vesting. After 2012, only 100% of the fair market value of the shares issued to
you at vesting shall be taxed at the rate of 16% (if tax laws do not change by then).
In
addition, you will be subject to health care contributions of 27%.
Sale of Shares
When you subsequently sell any shares acquired at vesting of the new RSUs, you will be subject to capital gains tax on the difference
between the sale price and the market value of the disposed shares at vesting. The capital gain is taxable at a rate of 16% and, depending on the form of such disposal, health care contribution may
apply up to a yearly amount of HUF 450,000.
Withholding and Reporting
Please note that you will receive taxable income from a non-Hungarian entity at vesting; consequently, the tax and health
care charges referred to under the heading "—Vesting of New RSUs" will not be withheld and you will be responsible for paying them as set out above. You should also keep all receipts in
connection with the transaction for five years, as these receipts must be presented to the Hungarian tax authorities upon request.
68
SCHEDULE J
GUIDE TO TAX ISSUES IN AUSTRALIA
The following is a general summary of the material tax consequences of the voluntary cancellation of eligible options in exchange for
the grant of new RSUs pursuant to the offer for eligible employees subject to tax in Australia. This summary is based on the tax laws in effect in Australia as of July 2011. This summary is
necessarily general in nature and does not discuss all of the tax consequences that may be relevant to you in light of your particular circumstances, nor is it intended to be applicable in all
respects to all categories of eligible employees. Also, please note that tax laws change frequently and occasionally on a retrospective basis. As a result, the information contained in this summary
may be outdated at the time that the new RSUs are granted, the RSUs vest or when you sell shares acquired upon settlement of your new RSUs.
If
you are a citizen or resident of more than one country, or are considered a resident of more than one country for local law purposes, or your employment with the Company or its
subsidiaries is provided in more than one country, the information contained in this summary may not be applicable to you. Further if you have been a resident in different countries at any point since
the grant of your eligible options or if you become a resident in different countries between the grant and vesting of the new RSUs, the tax information in this section may apply differently to you
and the tax consequences of participating in the offer may be different and possibly less favourable for you.
You
are strongly advised to seek appropriate professional advice as to how the tax or other laws in your country apply to your specific situation. In the discussion below, we assume you
hold the new RSUs and any shares for the long term and not as a share trader.
Cancellation of eligible options in exchange for new RSUs
If you have previously paid tax in relation to the issue of your eligible options, the cancellation of the options can give rise to a
capital loss for you, equal to the cost base that you have in the option (generally the amount of tax you have paid on the option plus any legal costs to acquire the option). This capital loss can be
offset against other Australian capital gains you make in the tax year when the options are cancelled or in a later year. If you have not previously paid tax in relation to the issue of your eligible
options, you will not pay any tax on the cancellation of your eligible options.
Grant of new RSUs
You will not be subject to tax when the new RSUs are granted to you.
Vesting of new RSUs
You will be subject to income tax in the income year when the new RSUs vest and you are no longer at risk of losing the RSUs. Tax is
payable on the market value of the RSU at the time it vests. Once the RSU has been taxed under the employee share scheme rules, the RSU is taken to have been acquired (or re-acquired) at
its market value and it is then taxed under the capital gains tax ("CGT") regime.
Disposal of shares
If you sell shares received as a result of the settlement of RSUs, you will be subject to capital gains tax if the amount received for
the sale is more than your cost base in the shares.
If
you hold the shares in your name for 12 months you may be eligible for the 50% CGT discount.
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The
RSU is taken to have been re-acquired immediately after the time it vested. This resets the cost base of the RSU to its market value at this time, and resets the
acquisition time, which will be relevant to your eligibility for the 50% CGT discount.
Withholding and reporting
The employer is required to give a statement to the Australian Taxation Office and to each eligible employee which sets out information
about RSUs issued during the year.
You
must give the employer your Tax File Number or an Australian Business Number or the employer will be required to withhold tax at a rate of 46.5% of the amount which is taxable to
you.
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QuickLinks
IMPORTANT
OFFER TO EXCHANGE CERTAIN OUTSTANDING STOCK OPTIONS FOR RESTRICTED STOCK UNITS TABLE OF CONTENTS
SUMMARY TERM SHEET AND QUESTIONS AND ANSWERS
RISKS OF PARTICIPATING IN THE OFFER
THE OFFER TO EXCHANGE
SCHEDULE A INFORMATION CONCERNING THE EXECUTIVE OFFICERS AND DIRECTORS OF SCIENTIFIC GAMES CORPORATION
SCHEDULE B SUMMARY FINANCIAL INFORMATION OF SCIENTIFIC GAMES CORPORATION
SCHEDULE C GUIDE TO TAX ISSUES IN THE UNITED KINGDOM
SCHEDULE D GUIDE TO TAX ISSUES IN GERMANY
SCHEDULE E GUIDE TO TAX ISSUES IN IRELAND
SCHEDULE F GUIDE TO TAX ISSUES IN SWEDEN
SCHEDULE G GUIDE TO TAX ISSUES IN CANADA
SCHEDULE H GUIDE TO TAX ISSUES IN AUSTRIA
SCHEDULE I GUIDE TO TAX ISSUES IN HUNGARY
SCHEDULE J GUIDE TO TAX ISSUES IN AUSTRALIA
