10-K

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-K

(Mark One)
ý	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended: December 31, 2002,
or
o	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 (State or other jurisdiction of incorporation or organization)	81-0422894 (I.R.S. Employer Identification No.)
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
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 ý    No o

        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. o

        Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes ý    No o

        As of June 28, 2002 the aggregate market value of voting stock held by non-affiliates of the registrant was approximately $297,284,152.

        Common shares outstanding as of March 20, 2003 were 59,460,531.

DOCUMENTS INCORPORATED BY REFERENCE

        The following document is incorporated herein by reference:

Document	Parts Into Which Incorporated
Proxy Statement for the Company's 2003 Annual Meeting of Stockholders	Part III

EXHIBIT INDEX APPEARS ON PAGE 131

PART I

FORWARD-LOOKING STATEMENTS

        Certain statements contained in this Annual Report on Form 10-K constitute "forward-looking statements" within the meaning of the United States Private Securities Litigation Reform Act of 1995. In some cases, forward-looking statements can be identified by the use of forward-looking terminology such as "may," "will," "estimate," "intend," "continue," "believe," "expect" or "anticipate" or the negatives thereof, variations thereon or similar terminology. The forward-looking statements contained in this Annual Report are generally located in the material set forth under the headings "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Business," but may be found in other locations as well. These forward-looking statements generally relate to plans and objectives for future operations and are based upon management's reasonable estimates of future results or trends. Although we believe that the plans and objectives reflected in or suggested by such forward-looking statements are reasonable, such plans or objectives may not be achieved. Actual results may differ from projected results due, but not limited, to unforeseen developments, including developments relating to the following:

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the availability and adequacy of our cash flow to satisfy our obligations, including our debt service obligations and our need for additional funds required to support capital improvements, development and acquisitions;

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economic, competitive, demographic, business and other conditions in our local and regional markets;

•

changes or developments in the laws, regulations or taxes in the gaming and lottery industries;

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actions taken or omitted to be taken by third parties, including customers, suppliers, competitors, members and shareholders, as well as legislative, regulatory, judicial and other governmental authorities;

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changes in business strategy, capital improvements, development plans, including those due to environmental remediation concerns, or changes in personnel or their compensation, including federal, state and local minimum wage requirements;

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an inability to renew or early termination of our contracts;

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an inability to engage in future acquisitions;

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the loss of any license or permit, including the failure to obtain an unconditional renewal of a required gaming license on a timely basis; and

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resolution of any pending or future litigation in a manner adverse to us.

        You should read this Annual Report completely and with the understanding that actual future results may be materially different from what we expect. All subsequent written and oral forward-looking statements attributable to us or to persons acting on our behalf are expressly qualified in their entirety by the foregoing factors. These forward-looking statements speak only as of the date of the document in which they are made. We disclaim any obligation or undertaking to provide any updates or revisions to any forward-looking statement to reflect any change in our expectations or any change in events, conditions or circumstances in which the forward-looking statement is based.

        As you read this Annual Report, you should also note the following: This Annual Report contains various references to industry market data and certain industry forecasts. The industry market data and industry forecasts were obtained from publicly available information and industry publications. Industry publications generally state that the information contained therein has been obtained from sources believed to be reliable, but that the accuracy and completeness of that information is not guaranteed. Similarly, industry forecasts, while we believe them to be accurate, have not been independently verified by us and we do not make any representation as to the accuracy of that information.

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ITEM 1. BUSINESS

Overview

        Unless the context indicates otherwise, all references to "Scientific Games," "we," "our," "ours," "us" and "the Company" refer to Scientific Games Corporation and its consolidated subsidiaries after giving effect to the September 6, 2000 acquisition by Autotote Corporation of Scientific Games Holdings Corp. and to Autotote Corporation and its consolidated subsidiaries prior to the completion of the acquisition. "SGHC" refers to Scientific Games Holdings Corp. and its consolidated subsidiaries, and "Autotote" refers to Autotote Corporation and its consolidated subsidiaries, in each case prior to the completion of the acquisition of SGHC. "International" refers to non-United States jurisdictions. "On-line" lottery refers to a computerized system in which lottery terminals in retail outlets are continuously connected to a central computer system for the sale and validation of lottery tickets and related functions. "OTB" refers to off-track betting facilities, including those owned and operated by our subsidiaries Autotote Enterprises, Inc. (in Connecticut) and Autotote Nederland B.V. (in The Netherlands). "Handle" is an industry term for dollars wagered.

        On September 6, 2000, Autotote completed the acquisition of SGHC. The acquisition was completed through a merger in which SGHC became our wholly-owned subsidiary at a cost of approximately $308 million in aggregate merger consideration paid to SGHC stockholders, plus related fees and expenses. The acquisition was recorded using the purchase method of accounting, and the acquired assets and liabilities were recorded at their estimated fair value at the date of acquisition. The operating results of the SGHC businesses have been included in the consolidated statements of operations from the date of the acquisition.

        In connection with the acquisition of SGHC, we changed our fiscal year-end from an October 31 year-end to a calendar year-end, beginning with the year ending December 31, 2001. On April 27, 2001, Autotote Corporation changed its name to Scientific Games Corporation. On January 29, 2002, we transferred the listing for our Class A common stock to the Nasdaq National Market from the American Stock Exchange and changed our trading symbol to "SGMS".

        We are a leading worldwide provider of services, systems and products to both the instant ticket lottery industry and the pari-mutuel wagering industry based on revenues. We believe we offer our customers the widest array of some of the most technologically advanced products and services in each of these industries. We also believe that we are the world's only fully integrated lottery service provider, offering lottery authorities on-line lottery systems, instant tickets and related facilities management, or cooperative services, programs, which effectively enable such authorities to outsource all of their instant ticket lottery operations to us.

        We operate in four business segments: Lottery Group, Pari-mutuel Group, Venue Management Group and Telecommunications Products Group.

Lottery Group (57% of 2002 revenue)

        We are a leading worldwide provider of services, systems and products to the instant ticket lottery industry based on revenues. We believe that we are the world's only fully integrated lottery service provider, offering on-line lottery systems, instant tickets and related facilities management, or cooperative services, programs to lottery authorities.

        Our instant ticket and related services business is the industry leader in the United States, with approximately 65% of all retail sales. Our instant ticket customers include 28 of the 40 jurisdictions in the U.S. that currently sell instant lottery tickets, and we have sold instant tickets to lotteries in over 50 other countries. In addition to ticket design and manufacturing, we provide lotteries with related value-added services through our cooperative services program, including game design, sales and marketing support, inventory management and warehousing and fulfillment services. We also provide lotteries with

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licensed brand products, including Mandalay Bay, National Basketball Association ("NBA"), Harley Davidson and Wheel of Fortune, to name a few. Additionally, we provide lotteries with our probability- based instant lottery tickets, which utilize a patented electronic circuit printed in each ticket to produce a ticket with multiple possible outcomes, and probability ticket validation terminals based on our proprietary security technology. We believe that these innovative products will allow lotteries to increase retail sales of instant tickets. Our instant ticket contracts typically have an initial term of three years and frequently include multiple renewal options which our customers generally exercise for additional periods ranging from one to five years. We typically sell our instant tickets for a per unit price or are paid a fee equal to a percentage of the retail value of the instant tickets sold. Instant tickets and related services accounted for approximately 74% of the revenue of our Lottery Group in 2002.

        Our lottery systems business primarily provides sophisticated, customized computer software, equipment, and data communication services to lottery authorities for on-line and instant ticket games. In the U.S., we typically provide the necessary equipment, software and maintenance services pursuant to long-term contracts that typically have a minimum initial term of five years, under which we are generally paid a fee equal to a percentage of all dollars wagered on lottery tickets. Our U.S. systems contracts typically contain multiple renewal options that generally have been exercised by our customers. Internationally, we typically sell terminals and systems to lottery authorities outright and provide ongoing fee-based software support under long-term contracts. We currently operate on-line lottery systems for seven of the 40 on-line lottery authorities in the U.S., and we believe we are the second largest on-line lottery provider in Europe.

Pari-mutuel Group (19% of 2002 revenue)

        We are a leading worldwide provider of computerized wagering systems to the pari-mutuel wagering industry. We provide our systems and services to horse and greyhound racetracks, OTBs, casinos, jai alai frontons and other establishments where pari-mutuel wagering is permitted. In addition, we are a leading provider of ancillary services to the industry, such as race simulcasting and telecommunications services, video gaming terminals, and telephone and Internet account wagering.

        In 2002, our systems processed approximately 65% of the estimated $18 billion in pari-mutuel wagering conducted on horse racing in North America. Based on Handle, our customers include 10 of the 15 largest thoroughbred racetracks in North America and 10 of the 12 largest North American OTB networks. In our North American pari-mutuel business, we enter into service contracts, typically with an initial term of five years, pursuant to which we are paid a weighted average fee of approximately 0.32% of all wagers processed by our wagering systems, and we receive additional fees for our ancillary services, on either a per event or a monthly subscription basis. In most international markets, we sell our pari-mutuel wagering systems and terminals to pari-mutuel operators.

Venue Management Group (14% of 2002 revenue)

        We own and have the right to operate in perpetuity substantially all off-track pari-mutuel wagering in Connecticut, subject to our compliance with certain licensing requirements. Our Connecticut operations consist of 12 OTB facilities, including simulcasting at two teletheaters and four other branches, and telephone account wagering for customers in 27 states. We are also the exclusive licensed operator for all pari-mutuel wagering in The Netherlands, with five racetracks and 34 OTBs under a contract with an initial term continuing through June 2003. We are currently in negotiations regarding the extension of our license in The Netherlands and believe we will be successful in obtaining such extension. Our revenues are based on a weighted average percentage of the Handle wagered at our OTB venues, which ranges from 22% to 32%. We also provide facilities management services to the Mohegan Sun Casino racebook in Connecticut.

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Telecommunications Products Group (10% of 2002 revenue)

        We are a leading manufacturer of prepaid phone cards in Europe, which cards entitle cellular phone users to a defined value of airtime. Prepaid phone cards offer consumers worldwide a cost-effective way to purchase cellular airtime, without requiring phone companies to extend credit or consumers to commit to contracts. We have approximately 20% of the European market for prepaid cellular phone cards and are the largest supplier of paper-based prepaid phone cards in the world. To prevent fraud, our phone cards incorporate proprietary security technology originally developed for our instant lottery ticket operations. We sell our prepaid phone cards to phone companies for a per unit price.

Industry Overview

Lottery Market

        Lotteries are operated by domestic and foreign governmental authorities and their licensees in approximately 200 jurisdictions throughout the world. Currently, 40 jurisdictions in the U.S. (including the District of Columbia, Puerto Rico, and the U.S. Virgin Islands) sell instant and on-line lottery tickets. Governments typically authorize lotteries as a means of generating revenues without the imposition of additional taxes. Net lottery proceeds are frequently set aside for particular public purposes, such as education, aid to the elderly, conservation, transportation and economic development. As proceeds derived from lottery ticket sales have become a significant source of funding for such programs, many jurisdictions have come to rely on such proceeds to support some of those public purposes.

        Although there are many types of lottery games worldwide, governmentally authorized lotteries may generally be categorized into three principal groups: instant lotteries, on-line lotteries and the traditional draw-type lotteries. An instant ticket lottery is typically played by removing a coating from a preprinted ticket to determine whether it is a winner. On-line lotteries, such as Powerball, are based on a random selection of a series of numbers. On-line lottery prizes are generally based on the number of winners who share the prize pool, although fixed prizes are also offered. On-line lotteries are conducted through a computerized system in which lottery terminals in retail outlets are continuously connected to a central computer system. On-line lottery systems may also be used to validate instant tickets to confirm large prize levels and prevent duplicate payments, or separate instant ticket validation systems may be installed. Internationally, the older form of traditional draw-type lottery games, in which players purchase tickets which are manually processed for a future drawing for prizes of a fixed amount, is a popular form of play. In addition, lotteries may offer keno, video lottery, sports and other lottery games. Quick draw keno is typically played every five minutes in restricted social settings such as bars and is usually offered as an extension of on-line lottery systems. There are video lotteries played on video lottery terminals, or VLTs, featuring "line-up" and card games, typically targeted to locations such as horse and greyhound racetracks, bars, nightclubs and similar establishments. Video lotteries generally use a system different from an on-line system for accounting, security and control purposes. In addition, in Oregon, several provinces in Canada and several countries outside the U.S., lotteries offer pari-mutuel or fixed odds wagers on various sports.

        Instant ticket and on-line lottery retail sales comprise 92% of the U.S. market for lotteries. Based on industry information, 2001 U.S. on-line lottery retail sales totaled approximately $19.3 billion, and 2001 U.S. instant ticket lottery sales totaled approximately $17.5 billion. The U.S. instant ticket market grew at a compound annual growth rate of 7.4% from 1994 to 2001. Based on industry information, we estimate that 2001 international on-line lottery retail sales totaled approximately $62.5 billion and that 2001 international instant ticket lottery sales totaled approximately $13.5 billion. Industry data indicates that instant ticket retail sales have been growing faster than on-line games because of "instant" rewards rather than the delayed rewards of on-line games with periodic or weekly drawings.

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U.S. Instant Ticket and On-line Lottery Sales

Source: LaFleur's World Lottery Almanac

Pari-mutuel Market

        In pari-mutuel wagering, individuals bet against each other on horse races, greyhound races, jai alai matches and other events. Pari-mutuel wagering patrons place specific types of wagers (e.g., on a specified horse to win) and a patron's winnings are determined by dividing the total Handle wagered, less a set commission, among the winners. Wagering is generally conducted at horse and greyhound racetracks, jai alai frontons, OTBs and casino racebooks. Licenses to conduct races and/or offer pari-mutuel wagering are granted by governments to private enterprises, non-profit racing associations and occasionally government organizations, including lotteries.

        Pari-mutuel wagering is currently authorized in 43 states in the U.S., Puerto Rico, all provinces in Canada and approximately 65 other countries around the world. We estimate that total worldwide annual Handle in the pari-mutuel business is approximately $116.0 billion. According to the most recent industry statistics, pari-mutuel wagering in the U.S. on thoroughbred racing grew from $9.9 billion in 1994 to $15.1 billion in 2002, a compound annual growth rate of 5.4%. Based on industry information, we estimate that the North American market for all forms of pari-mutuel wagering is approximately $20 billion.

        Remote wagering, where customers bet on races held at another location, has caused substantial changes in the distribution channels for pari-mutuel wagering and consolidation of live racing. Wagering within the pari-mutuel industry has evolved from wagering only at a racetrack where a race is held, to wagering at a racetrack on races simulcast from other racetracks, to wagering at an OTB or other off-track venue, and now, in some jurisdictions, to wagering via the telephone and the Internet.

        In addition to favorable changes in the applicable statutes and regulations, a number of technological advances have facilitated remote wagering, including the simulcasting of live races via private satellite video networks, public broadcasting and Internet video streaming. Remote wagering has also increased Handle by enabling wagering on most racing events, facilitating virtually around the clock wagering, year-round. Increases in remote Handle have more than offset a decline in live Handle (i.e., Handle at the race or event itself). Remote wagering increased its share of the total U.S. thoroughbred pari-mutuel racing industry Handle from 15% in 1986 to 86% in 2002. The dollar volume of remote wagering in North America on thoroughbred racing has grown from $5.4 billion in 1993 to $13.0 billion in 2002, a compound annual growth rate of approximately 10.4%.

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U.S. Thoroughbred Industry Pari-Mutuel Wagering: Remote and Live Handle

Source: Equibase Company LLC; The Jockey Club

        One of the most recent developments in remote wagering is account wagering, whereby a customer deposits money with a licensed account wagering operator and uses the account balance to fund wagers and receive winnings. This enables the customer to place wagers from locations remote to the licensed facility, including via telephone or the Internet. Subject in some jurisdictions to the adoption of the necessary enabling regulations, legislation explicitly permitting account wagering on pari-mutuel wagering has been passed in 15 U.S. states: California, Connecticut, Kentucky, Louisiana, Maryland, Massachusetts, Nevada, New Hampshire, New Jersey, New York, North Dakota, Ohio, Oregon, Pennsylvania and Wyoming. Such legislation has also been passed in Canada, the United Kingdom and other countries.

Prepaid Phone Cards Market

        Prepaid phone cards offer consumers convenient cellular airtime purchases and help to increase the market for cellular services. We believe that the further growth of cellular phone penetration will expand the prepaid phone card business. It is estimated that approximately 50% of all European cellular phone subscribers use prepaid calling services. While less common in the U.S., prepaid phone cards offer consumers worldwide a cost-effective way to purchase cellular airtime, without requiring phone companies to extend credit or consumers to commit to contracts. We have approximately 20% of the European market for prepaid cellular phone cards and are the largest supplier of paper-based prepaid phone cards in the world. Because card access number theft is common, the security of the card is critical; our phone cards incorporate proprietary security technology originally developed for our instant lottery ticket operations.

Operational Overview

Lottery Group

        Our Lottery Group provides instant tickets and related services and lottery systems.

        Instant Ticket and Related Services.    In 1974, we introduced the first secure instant game ticket. Today, we remain a leading designer, manufacturer and distributor of instant tickets worldwide. We market instant tickets and related services to domestic lottery jurisdictions, foreign lottery jurisdictions and commercial customers. We presently have contracts with 28 of the 40 jurisdictions in the U.S. that currently sell instant lottery tickets. Our instant ticket contracts typically have an initial term of three years and frequently include multiple renewal options which our customers generally exercise for additional periods ranging from one to five years. We typically sell our instant tickets for a per unit price or are paid a fee equal to a percentage of the retail value of the instant tickets sold. In addition, we have sold instant lottery tickets to customers in over 50 countries internationally. In 2001 and 2002, we sold approximately 13.4 billion and 13.9 billion, respectively, 2x4 inch equivalent instant tickets, of

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which approximately 25% were sold outside the U.S. Some international customers purchase instant tickets as needed rather than through supply contracts.

        The instant tickets we manufacture are typically printed on recyclable ticket stock by a series of computer controlled presses and ink-jet imagers, which we believe incorporate the most advanced technology and security currently available in the industry. Instant tickets generally range in size from 2 inches by 3 inches to ticket sizes as large as some calendars; instant tickets are normally played by removing a coating to determine if they are winning tickets.

        The increased application of computer-based and communications technologies to the manufacturing and servicing of instant tickets continues to separate the printing of instant tickets from conventional forms of printing. We are generally recognized within the lottery industry as the leader in applying these technologies to the manufacturing and sale of instant tickets. In order to maintain our position as a leading innovator within the lottery industry, we intend to continue to explore and develop new technologies and their application to instant lottery tickets and systems. We also manufacture instant tickets for promotional games and sell pull-tab tickets to our lottery customers through a marketing agreement with International Gamco, Inc., a manufacturer of pull-tab lottery tickets.

        We pioneered the idea of privatizing lottery functions, through our cooperative services program, whereby we manage a lottery authority's instant ticket operations, as a means of reducing the operating costs of lottery authorities while increasing lottery revenues. We are the only instant ticket manufacturer to provide such complete facilities management and support services to supplement its manufacturing operations. Cooperative services contracts bundle instant tickets, systems, facilities management and/or other services, including the design and installation of game management software, telemarketing, field sales, accounting, instant ticket game design, inventory and distribution, sales staff training, managing staff, advising with respect to security, maintenance, communication network and sales agent hot-line service for lottery jurisdictions. While the majority of lottery jurisdictions to date have chosen to manage the distribution and sales of tickets, we have been successful in demonstrating to a number of jurisdictions that we can perform these functions more effectively. We expect that more state or foreign governments will decide to privatize or outsource various lottery operations. We have significant experience in these services and are well-positioned to offer this privatization or outsourcing option to lottery authorities.

        We have contracts for cooperative services with the states of Arizona (which commenced in January 2003), Delaware, Florida, Georgia, Maine, Pennsylvania and South Carolina. Under such contracts, we are paid a percentage of the lottery authority's total instant ticket revenues. Customers designate the services they want us to perform from a menu of cooperative services offered. Once our cooperative services programs are in place, replacement of these contractual arrangements may require the lottery authority to incur large conversion costs to hire and/or retrain staff and redesign and install a software system and other protocols to manage its instant ticket business.

        In June 2002, we expanded our presence in Latin America with the purchase of a 65% equity interest in Serigrafica Chilena S.A., a leading supplier of lottery tickets, prepaid phone cards and promotional games in Latin America. This purchase will enable us to expand our share of the Latin American market for both the instant ticket and the prepaid phone card businesses.

        In January 2003, we significantly expanded our offerings of licensed branded lottery products and prize fulfillment and related services with the acquisition of MDI Entertainment, Inc. ("MDI"). MDI has been successful in helping lotteries attract players to new kinds of tickets and second chance games that allow players to win merchandise, such as Harley Davidson motorcycles and trips and prizes like tickets to NBA playoff games. Our portfolio of licensed brands now includes Mandalay Bay, NBA, Harley Davidson and Wheel of Fortune, plus many others. We expect that our acquisition of MDI will

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enable us to further expand the use of branded games and prize fulfillment services to continue to help our customers generate additional revenues.

        Lottery Systems.    We are a leading provider of sophisticated, customized computer software, equipment and data communication services to government-sponsored and privately operated lotteries in the U.S. and internationally. This business includes the sale of on-line systems, instant ticket validation systems and terminals. Central computer systems, terminals and associated software are typically provided in the U.S. through facilities management contracts and internationally through outright sales, often from different vendors.

        Our lottery systems utilize proprietary technology that is similar to that used for pari-mutuel wagering, but is specialized for lottery operations. Our systems facilitate high speed processing of on-line wagers as well as validation of winning on-line and instant play tickets, including probability-based instant lottery tickets. Our lottery business includes the supply of transaction processing software that accommodates instant ticket accounting and validation and on-line lottery games, point-of-sale terminal hardware which connects to these systems, central site computers and communication hardware which run these systems, and on-going operation support and maintenance services. We also provide software, hardware and support for sports betting and credit card processing systems for non-lottery customers.

        In the U.S., we provide on-line systems and services to seven state lotteries: Connecticut, Iowa, Maine, Montana, New Hampshire, South Carolina and Vermont. We also provide Missouri with a separate instant ticket validation system. Virginia leases SciScan Technology® terminals from us and continues to receive ongoing support. Recent on-line lottery system procurements have requested the capability to support the secure validation of probability-based instant lottery tickets, and we have bid SciScan Technology® terminals both with our on-line systems and through other on-line system providers. SciScan Technology® is a keyless validation system for retailers which significantly reduces the time required for ticket validation while at the same time improving security of the game. SciScan Technology® terminals can be operated on a stand-alone basis or attached to an on-line lottery terminal to validate traditional instant tickets utilizing optical bar code technology, or our proprietary Winner's Choice™ probability-based instant lottery tickets.

        Internationally, we have systems operating in France, The Netherlands, Switzerland, Austria, Australia, Canada, Jamaica, seven states in Germany, and other countries, and we provide on-line system facilities management services to nationwide lotteries in Barbados and the Dominican Republic.

        We also sell our lottery terminals separately from our sale of complete lottery systems. Our terminal product offerings include the EXTREMA®on-line lottery terminals, SciScan Technology® terminals and STAN™ self-serve terminals. Our EXTREMA® on-line terminals utilize a standard PC architecture, graphical interface touch screens for teller input without a keyboard and high speed thermal printers. Beginning in the fourth quarter of 1998 and through August 2000, we shipped approximately 20,000 EXTREMA® terminals to Sisal Sport Italia S.p.A. SGHC sold 15,000 SciScan Technology® terminals to the French national lottery, and we have also sold such terminals to lottery authorities in Greece and Australia.

        In addition, we are part of a consortium which includes Lottomatica S.p.A., our largest equity investor, 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.

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United States Lottery Contracts

        The table below lists the U.S. lottery contracts for which we had executed agreements as of March 1, 2003 and certain information with respect thereto. We are the exclusive provider of systems in all contracts and the primary supplier of instant tickets unless otherwise noted. The commencement date of the current contract is the date we began generating revenues under such contract, which for our on-line contracts is typically the start-up date. The table also includes instant ticket or on-line retail sales, as applicable, for each state or district.

State/District	Year 2001 State Instant Ticket or On-line Retail Sales (in millions)		Type of Contract*	Commencement Date of Current Contract	Expiration Date of Current Contract (before exercise of remaining renewal options)	Current Renewal Options Remaining
Arizona	$	143.7	ITRS	January 2003	January 2008	2 one-year
Colorado		262.2	ITRS	July 2000	June 2004	1 one-year
Connecticut		526.3	ITRS	August 2002	August 2004	3 one-year
Connecticut		360.7	On-line	May 1998	May 2008	none
Delaware		20.4	ITRS	November 2000	November 2005	none
District of Columbia		32.4	ITRS	December 2001	December 2003	3 one-year
Florida		730.9	ITRS	April 1997	September 2008	none
Georgia		1,134.8	ITRS	May 1993	September 2010	none
Idaho (1)		53.7	ITRS	October 1999	October 2003	none
Illinois		613.7	ITRS	June 2002	June 2005	2 one-year
Indiana (2)		325.0	ITRS	January 2002	January 2006	2 one-year
Iowa		74.0	On-line	July 2001	June 2008	3 one-year
Kentucky (2)		282.9	ITRS	September 2002	October 2005	4 one-year
Maine		40.4	On-line	July 2001	June 2007	2 two-year
Maine		111.5	ITRS	July 2001	June 2007	2 two-year
Massachusetts		2,767.1	ITRS	August 1999	August 2003	1 one-year
Minnesota (1)		249.7	ITRS	February 2000	January 2004	1 one-year
Missouri		292.5	ITRS	April 2001	June 2005	1 two-year
Montana		24.1	On-line	March 1999	March 2006	none
New Hampshire		71.1	On-line	July 2000	June 2006	2 two-year
New Jersey (1)		717.6	ITRS	November 2001	October 2006	2 one-year
New Mexico (3)		78.0	ITRS	March 1997	March 2003	none
New York (1)		1,866.2	ITRS	November 2001	November 2004	2 one-year
Ohio		992.2	ITRS	July 2001	June 2003	2 two-year
Oregon (1)		132.4	ITRS	June 1998	June 2004	none
Pennsylvania		694.8	ITRS	April 1997	April 2005	2 one-year
South Carolina (4)		467.7	ITRS	October 2001	October 2004	2 one-year
South Carolina (4)		155.6	On-line	January 2002	December 2007	1 one-year
South Dakota		12.0	ITRS	June 2000	June 2003	2 one-year
Texas		1,718.8	ITRS	September 2002	September 2003	none
Vermont		13.2	On-line	July 2000	June 2006	2 two-year
Virginia (5)		NA	Systems	January 1997	November 2003	4 one-year
Virginia (1)		479.3	ITRS	May 2001	May 2003	5 one-year
Washington		242.5	ITRS	March 2000	March 2004	2 one-year
West Virginia		85.5	ITRS	June 2000	June 2003	2 one-year

(1)

Secondary instant ticket supplier

(2)

Pull-tab sales are included within instant ticket sales.

(3)

A new contract that extends through March 17, 2007, with three one-year renewal options, is in the process of being executed.

(4)

New contract in 2002; ticket sales/on-line retail sales data are estimated.

(5)

Support of previously sold lottery system; fee not based on Handle.

*ITRS = Instant ticket and related services

*Systems = Instant ticket validation systems

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Pari-mutuel Group

        We are a leading worldwide supplier of technologically advanced computerized wagering systems and related equipment. We also provide simulcasting and telecommunications services, video gaming terminals and telephone and Internet account wagering.

        North American Pari-mutuel Operations.    In 2002, our systems processed approximately 65% of the estimated $18 billion in pari-mutuel wagering conducted on horse racing in North America. Based on Handle, our customers include 10 of the 15 largest thoroughbred racetracks in North America and 10 of the 12 largest North American OTB networks. We typically provide, install and maintain the necessary pari-mutuel wagering systems and equipment for our North American pari-mutuel customers, and we also provide race simulcasting and telecommunications services, video gaming terminals, and telephone and Internet account wagering systems.

        The pari-mutuel wagering systems we provide in North America typically include the terminals that issue the wagering tickets, the central processing unit that calculates the betting odds of a particular event and tabulates and accounts for the Handle, the display board that indicates the betting odds of a particular event and the communication equipment necessary for additional wagering from sources outside the wagering facility. These systems utilize high volume, real-time transaction and data processing networks managed by central computers, communications equipment, special purpose microcomputer-based terminals, peripheral and display equipment and operations and applications software. The type of central processing unit and the number of ticket-issuing terminals used in a system are generally determined by the physical layout and amount of wagering at each facility. We also provide additional software and other support functions.

        In recent years, we have focused on the creation of regional networks of large and medium sized racetracks and OTB networks, rather than single facilities at smaller racetracks. Our networks link multiple racetracks, OTBs, and regional networks of racetracks and OTBs to one another via dedicated, secure, high-speed communications channels, enabling operators to capitalize on the growth of the off-track wagering market in a more cost-effective manner. Additionally, when linked to our other regional and national pari-mutuel wagering networks, these networks provide our customers with access to new markets and revenue sources by increasing the number and variety of wagering opportunities that customers can offer to their patrons. We believe our established wagering networks will give us a competitive advantage in renewing existing contracts and winning new contracts in regions where such networks exist because of our ability to offer customers greater services more efficiently than our competitors. In North America, we currently operate regional pari-mutuel wagering networks in California, Connecticut, Florida, Illinois, New Jersey, New York, Oregon, Pennsylvania, Texas, Washington, West Virginia, Puerto Rico, British Columbia and Ontario.

        Our pari-mutuel wagering system contracts typically have an initial term of five years, and we have generally been successful in renewing these contracts. Our contracts contain certain warranties regarding implementation, operation, performance and reliability of our wagering systems relating to, among other things, data accuracy, repairs and validation procedures. The terms of our warranties vary from contract to contract. We also provide the operations, maintenance and supervisory personnel necessary to operate the pari-mutuel wagering system. We maintain ownership of the pari-mutuel wagering systems, which enables us to employ such equipment in more than one racetrack at different times during the year as most customers do not operate live wagering all year long.

        We typically receive revenue for our services in North America as a varying percentage of Handle, generally ranging up to approximately 0.55% of the Handle on a particular event (with a weighted average of approximately 0.32% of the Handle), subject, in many instances, to minimum fees which are usually exceeded under normal operating conditions. Minimum fees under our service contracts are generally based on the number of days the facility operates, as well as other factors, including the type of system and number of terminals installed at the facility. In addition to the Handle-based fees and

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minimums, fees for extra equipment and services may be charged, particularly for new terminal models and equipment levels which exceed those originally contracted.

        In addition, we may also receive an "interface fee" of 0.125% or 0.15% of Handle for combining wagers into the "combined pools" of host tracks whose systems we operate, depending on whether we or another vendor provides such wagering services. We hold contracts with most of the U.S.'s premier thoroughbred venues that typically attract the greatest levels of simulcast and remote wagering, and therefore generate the highest interface revenues.

        International Pari-mutuel Operations.    In most international markets, we sell our pari-mutuel wagering systems and terminals to pari-mutuel operators; in other international markets, we provide pari-mutuel services similar to those provided by our pari-mutuel operations in North America. We provide and operate pari-mutuel wagering systems at all of the racetracks in Germany, Ireland, Turkey and Austria, as well as all of the OTBs in Germany, and in January 2003 we were awarded the contract to provide pari-mutuel services to STWK, the Poland racing organization. Our pari-mutuel wagering systems are comparable to those deployed in North America and include computer software, ticket terminals, a central processing unit, display boards and communication equipment. These services are provided under long-term contracts of five to 10 years. We have generally been successful in renewing these contracts.

        In Germany, we have been providing pari-mutuel wagering systems and services to the nine major harness racetracks since 1994, and simulcasting services since January 1998. In September 1999, we began providing both pari-mutuel and simulcasting services to Germany's 16 major thoroughbred racetracks, approximately 50 OTBs and approximately 120 bookmaker shops as a result of our acquisition of selected pari-mutuel assets of Datasport Toto Dienstleistung GmbH & Co KG. In April 1999, we sold a pari-mutuel wagering system and began to provide ongoing maintenance and operating services through 2008 to Tote Ireland Ltd., a wholly-owned subsidiary of the Irish Horseracing Authority. In France, we provide pari-mutuel systems and services to approximately 28% of the racetracks in the provinces. In Turkey, we have provided a pari-mutuel system and associated maintenance services to the Turkey Jockey Club since 1995. In 2001, we completed the installation of 1,700 terminals and an ECLIPSE™ software conversion at the Turkey Jockey Club's six racetracks and 1,500 off-track betting agencies.

        In most international markets, we sell, deliver and install pari-mutuel wagering systems in racetracks and OTBs rather than operating them pursuant to service contracts. We have systems operating in approximately 20 countries. Each of these systems is customized to meet the unique needs of our customers, including game designs, regulatory requirements, language preferences, network communication standards and other key elements. The sale of a pari-mutuel wagering system includes a license for use of our proprietary system software as well as installation, training, technical assistance, support, accessories and limited spare parts.

Other Pari-mutuel Operations

        Simulcasting.    We are one of the leading providers of simulcasts of live horse and greyhound racing and jai alai matches to racetracks, OTBs, jai alai frontons and casinos in North America and Europe. We simulcast racing events from over 60 racetracks and jai alai frontons to more than 150 racetracks and almost 1,300 OTBs throughout North America. We provide similar services in Europe, particularly in The Netherlands and Germany, where we service all 29 racetracks and more than 250 OTBs and bookmaker shops.

        Simulcasting of races entails the encryption and transmission of an audio/video signal from one of our uplink trucks located at a racetrack to one of five satellite transponders we lease pursuant to long-term contracts, and the retransmission of this signal to other racetracks, OTBs and casinos, where the race signal is received and decoded for viewing. In general, we receive a daily event fee from the

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racetracks for up-linking the video and audio signals and a monthly fee from racetracks, OTBs and casinos for the use of our decoders.

        Our encryption/transmission equipment compresses each audio/video signal so that eight signals can be transmitted via one satellite transponder. This technology maximizes the transmission capacity of each of our transponders. Any capacity that we do not use for our simulcasting contracts represents excess time that we may sell to other users of satellite communications, generally for short periods, but, from time to time, under long-term contracts.

NASRIN®. In conjunction with our 70% interest in a joint venture with Churchill Downs, we operate a national voice/data telecommunications network, known as the North American Simulcast Racing Information Network, or NASRIN®, that serves almost 150 racetracks and OTBs. Built around AT&T's international frame relay network, NASRIN® securely transmits betting data at a fraction of the cost previously paid by the racetracks and other facilities, allowing racetracks and OTBs to expand their simulcast wagering opportunities. The system is designed to link all wagering locations in North America and to serve as a platform for future technology developments. In exchange for our services, we are paid certain fees based on bandwidth and level of service.

        Video Gaming Machines.    We have developed a proprietary line of progressive video gaming machines for use at racetracks in North America. They combine full gaming functionality, such as video poker, blackjack, simulated spinning reels and keno, with full race wagering functionality, including picture-in-picture capabilities. As a result, our video gaming machines allow patrons to wager on horse races and watch simulcasted races or other televised programs on a picture-in-picture video window, while continuing to wager on selected video games. We typically collect a flat fee per terminal plus fees for software upgrades and maintenance.

Venue Management Group

        We own and have the right to operate in perpetuity substantially all off-track pari-mutuel wagering in Connecticut, subject to our compliance with certain licensing requirements. Our Connecticut operations consist of 12 OTB facilities, including simulcasting at two teletheaters and four other branches, and telephone account wagering for customers in 27 states. We are also the exclusive licensed operator for all pari-mutuel wagering in The Netherlands, with five racetracks and 34 OTBs under a contract with an initial term continuing through June 2003. We are currently in negotiations regarding the extension of our license in The Netherlands and believe we will be successful in obtaining such extension. Our revenues are based on a weighted average percentage of the Handle wagered at our OTB venues, which ranges from 22% to 32%. We also provide facilities management services to the Mohegan Sun Casino racebook in Connecticut.

        In Connecticut, approximately $221 million was wagered in fiscal 2002 on more than 60 U.S.-based thoroughbred, harness and greyhound racetracks and jai alai frontons at or through our facilities. Since we commenced operations in 1993, we have implemented several important product and service enhancements, including expanded simulcasting from across the country, common-pool wagering, seven day per week operations at nine locations and expanded telephone wagering. Our revenues are based on an allowed percentage of Handle wagered through the Connecticut OTB. The percentage of the total Handle, or commission, which we may receive is determined by the track where the event is held and varies by type of wager. Our weighted average commission, based on Handle, for our Connecticut operations is approximately 22%. In September 1998, we began providing an extension of our OTB services, including pari-mutuel wagering and simulcasting services, to the Mohegan Tribal Gaming Authority for its racebook located at the Mohegan Sun Casino in Uncasville, Connecticut under a seven-year agreement. We believe this racebook is a state-of-the-art facility which incorporates the latest wagering technology and the most advanced audio and video simulcasting signals.

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        In July 1998, we acquired the rights to, and began operating, all on-track and off-track pari-mutuel wagering in The Netherlands under a license granted by the Dutch Ministry of Agriculture which extends through June 30, 2003. We are currently in negotiations regarding the extension of our license in The Netherlands and believe we will be successful in obtaining such extension. We also received additional license approvals to allow us to modernize and expand pari-mutuel wagering in The Netherlands. These approvals allow us to open up to 10 teletheaters, increase the number of OTBs, expand into arcade shops, implement interactive account wagering, and expand national and international simulcasting of racing. We currently operate 35 OTB locations throughout The Netherlands, including three sports cafes, and four on-track OTBs, as well as at four tracks. Our weighted average commission, based on Handle, for our Dutch operations is approximately 32%.

Telecommunications Products Group

        We are a leading manufacturer of prepaid phone cards in Europe, which entitle cellular phone users to a defined value of airtime. Prepaid phone cards offer consumers worldwide a cost-effective way to purchase cellular airtime, without requiring phone companies to extend credit or consumers to commit to contracts. We have approximately 20% of the fragmented European market for prepaid cellular phone cards and are the largest supplier of paper-based prepaid phone cards in the world. To prevent fraud, our phone cards incorporate proprietary security technology originally developed for our lottery ticket operations. We expect to participate in the anticipated continued growth in the cellular market. We invested approximately $22 million in our U.K. operations, in 1999 and 2000, to modernize our facilities and increase our prepaid phone card printing capacity to approximately 700 million cards from a base of approximately 120 million cards before the investments. We sell our prepaid phone cards to phone companies for a per unit price.

        For additional information concerning our business and geographic segments, see Note 19 to the Consolidated Financial Statements.

Contract Procurement

Lottery Group

        Government operated lotteries in the U.S. typically operate under state mandated public procurement regulations. See "Government Regulation". Lotteries select an instant ticket or on-line supplier by issuing a Request for Proposal, or RFP, which outlines contractual obligations as well as products and services to be delivered. An evaluation committee frequently comprised of key lottery staff evaluates responses based on various criteria. These criteria usually include quality of product, security plan and features, experience in the industry, quality of personnel and services to be delivered and price. We believe that our product functionality, the quality of our personnel, our technical expertise and our manufacturing efficiency give us many advantages relative to the competition when responding to state lottery RFPs. However, many lotteries still award the contract to the qualified vendor with the lowest price, regardless of factors other than price. Contract awards by lottery authorities are sometimes challenged by unsuccessful competitors which can result in protracted legal proceedings. Internationally, lottery authorities do not always utilize such a formal bidding process, but rather negotiate with one or more potential vendors.

        U.S. instant ticket lottery contracts typically have an initial term of three years and frequently include multiple renewal options which our customers have generally exercised for additional periods ranging from one to five years. Our U.S. on-line lottery contracts typically have a minimum initial term of five years, with additional renewal options. The length of these lottery contracts, together with their renewal options, limits the number of contracts available for bidding in any given year.

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Pari-mutuel Group

        Contract awards by owners of horse and greyhound racetracks, OTBs and casinos and jai alai frontons, and from state and foreign governments, often involve a lengthy competitive bid process, spanning from specification development to contract negotiation and award. In recent years, there has been continued consolidation of racetrack ownership, which may increase the competitive nature of the contract procurement process. Our contracts for the provision of pari-mutuel systems services in North America are typically for terms of five years. In addition, our ancillary pari-mutuel services, such as simulcasting, are typically provided under one-year contracts. Historically, we have been successful in renewing our largest pari-mutuel contracts as they have come due for renewal.

Venue Management Group

        Our license to provide on-track and off-track services in The Netherlands expires in the year 2003. We are currently in negotiations regarding the extension of our license in The Netherlands and believe we will be successful in obtaining such extension. New venue management opportunities generally occur via the privatization of existing government operated OTBs, as in the case of Connecticut and The Netherlands, the acquisition or outsourcing of an existing private racetrack or OTB operations, or new legislation or regulation enabling new distribution channels. These opportunities occur infrequently and may be subject to public procurement bidding requirements.

Telecommunications Products Group

        Most telecommunications products customers issue purchase orders with agreed upon terms and conditions. In addition, certain customer purchase orders contain multiple delivery dates.

Research and Product Development

        We believe that our ability to attract new lottery and wagering system customers and retain existing customers depends in part on our ability to continue to incorporate technological advances into, and to improve, our products, systems and related equipment. We maintain a development program directed toward systems development as well as toward the improvement and refinement of our present products and the expansion of their uses and applications. Many of our product developments and innovations have quickly become industry standards.

Intellectual Property

        We have a number of U.S. and foreign patents that we consider, in the aggregate, to be of material importance to our business. Patents extend for varying periods of time according to the date of patent filing or grant and the legal term of patents in the various countries where patent protection is obtained. In the U.S., the term of a patent expires 20 years from the date of filing. The actual protection afforded by a patent, which can vary from country to country, depends upon the type of patent, the scope of its coverage and the availability of legal remedies in the country.

        Certain technology material to our lottery and pari-mutuel wagering products, processes and systems is the subject of patents issued, and patent applications currently pending, in the U.S. and certain other countries. In our lottery business, we utilize our patented and patent-pending technology for the production, secure printing, validation and distribution of instant lottery tickets. In our pari-mutuel business, our patent-pending systems and methods provide racing and wagering data and related information. None of our material patents is scheduled to expire until August 2006, and most of our material patents are not scheduled to expire until 2013 or later.

        We also have a number of U.S. and foreign registered trademarks and other common law trademark rights for certain of our products, including Winner's Choice™, Terra 2000®, SciScan Technology®, Aegis™, PROBE®, EXTREMA®, SGI-NET™, ECLIPSE™, NASRIN®, SAM®,

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STAN™, MAX®, TINY TIM®, On the Wire®, Autotote.com™ and others. Trademark protection continues in some countries, including the U.S., for as long as the mark is used and in other countries for as long as it is registered. Registrations generally are for fixed, but renewable, terms.

        In our lottery business, we have entered into a product development agreement pursuant to which we have an exclusive license to use certain third-party patented technology in our SciScan Technology® terminals. Subject to clauses providing for early termination, the agreement is scheduled to remain in effect until 2017. In our pari-mutuel business, we have a perpetual license to use certain software to monitor our simulcast systems, and a consortium of which we are a party has a license, scheduled to expire in 2021, to use certain software that supplies the database and various interfaces for our TrackPlay™ Internet and interactive television-based wagering platform. None of our licenses is material to our business as a whole. The software and control systems for our wagering systems are also the subject of copyright and/or trade secret laws.

        We are not aware of any pending claims of infringement regarding our patents, trademarks or other intellectual property in any of our current businesses.

Seasonality

        The first and fourth quarters of the calendar year traditionally comprise the weakest seasons for our pari-mutuel wagering businesses. As a result of inclement weather during the winter months, a number of racetracks do not operate and those that do operate often experience missed racing days. This adversely affects the amounts wagered and our corresponding service revenues. Wagering equipment sales and software license revenues usually reflect a limited number of large transactions, which do not recur on an annual basis. Consequently, revenues and operating results can vary substantially from period to period as a result of the timing of revenue recognition for major equipment sales and software license revenue. In addition, instant ticket and prepaid phone card sales may vary depending on the season and timing of contract awards, changes in customer budgets, ticket inventory levels, lottery retail sales and general economic conditions.

Production Processes; Sources and Availability of Components

        Our dedicated computer-controlled printing process is specifically designed for producing instant lottery game tickets for governmentally sanctioned lotteries and promotional games as well as prepaid phone cards. Our facilities are designed for efficient, secure production of instant game tickets and support high-speed variable image printing, packaging and storage of instant game tickets. Instant ticket games are delivered finished and ready for distribution by the lottery authority, or by us in the jurisdictions which are part of an instant ticket contract with cooperative services. Paper and ink are the principal raw materials consumed in our ticket manufacturing operations. We have a variety of sources for both paper and ink and should, therefore, not be dependent on any particular supplier.

        Production of our lottery and pari-mutuel wagering systems and related component products primarily involves the assembly of electronic components into more complex systems and products. We produce our terminal products primarily at our manufacturing facility in Ballymahon, Ireland, or on a limited basis at our Newark, Delaware administration and development facility. Other manufacturing may be contracted out to third party vendors, as needed.

        We normally have sufficient lead-time between reaching an agreement to provide a lottery or pari-mutuel wagering system and the commencement of operations so that we are able to provide the customer with a fully functioning system, customized to meet their requirements. In the event that current suppliers of central processing units were no longer available, we believe we would be able to adapt our application software to run on the then available hardware in time to allow us to meet new contractual obligations, although the price competitiveness of our products might diminish. The lead-time for obtaining most of the electronic components we use is approximately 90 days. We believe

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that this is consistent with our competitors' lead-times and is also consistent with the needs of our customers.

Competition

Lottery Group

        The instant ticket and on-line lottery business is highly competitive, and our business faces competition from a number of domestic and foreign instant ticket manufacturers, on-line lottery system providers and other competitors, some of whom have substantially greater financial resources than we do. Our business continues to operate in a period of intense price-based competition. The award of contracts by state officials is influenced by factors including price, the ability to optimize lottery revenues through game design, technical capability, marketing capability and applications, the quality, dependability and upgrade capability of the network, production capacity, the security and integrity of the vendor's production operations, the experience, financial condition and reputation of the vendor and the satisfaction of other requirements and qualifications that lottery authorities may impose. Contract awards by lottery authorities are sometimes challenged by unsuccessful competitors, which can result in protracted legal proceedings that can result in delayed implementation or cancellation of the award.

        We currently have three instant lottery ticket competitors in the U.S.: Pollard Banknote Limited, or Pollard, Oberthur Gaming Technologies, or OGT, a subsidiary of Group Francois-Charles Oberthur of France, and Creative Games International, Inc., a subsidiary of Canadian Bank Note Company, Ltd. We estimate that the retail sales value of our U.S. customer base was approximately 65% of total U.S. instant ticket retail sales in 2002. Except as permitted by the applicable provisions of the North American Free Trade Act with respect to Canada and Mexico, it is currently illegal to import lottery tickets into the U.S. from a foreign country. Our business could be adversely affected should additional foreign competitors in Canada or Mexico export their lottery products to the U.S. or should other foreign competitors establish printing facilities in the U.S., Canada or Mexico to supply the U.S. market. Internationally, there are many lottery instant ticket vendors which compete with us including, among others, Pollard, OGT, Creative Games and GPS Honsel.

        Our principal competitors in the U.S. on-line lottery systems business are GTECH Holdings Corporation (with approximately 72% of the U.S. market based on retail sales), Automated Wagering International Inc., or AWI, a subsidiary of International Game Technology, and Interlott Technologies, Inc. GTECH is also our major competitor in the international on-line market with the balance of the market being served by AWI, Interlott Technologies, Inc., EssNet AB, International Lottery and Totalizator Systems, Inc. and a few other companies.

Pari-mutuel Group

        Our pari-mutuel operations face significant competition from other operators in the pari-mutuel business, other gaming venues such as casinos and state sponsored lotteries and other forms of legal and illegal gaming. We compete primarily on the basis of the design, performance, reliability and pricing of our products as well as customer service. To effectively compete, we expect to make continued investments in product development and/or acquisitions of technology.

        Our two principal competitors in the North American pari-mutuel wagering systems business are AmTote International, Inc. and International Game Technology, which operates its pari-mutuel wagering systems business through its subsidiary United Tote. Our competition outside of North America is more fragmented, with competition being provided by several international and regional companies. In addition, we believe we are one of the leading providers in North America of video and data simulcasting services in this highly fragmented industry. Current and future competitors in Internet-based wagering include YouBet.com and TVG.

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Venue Management Group

        Our venue management business competes with other pari-mutuel operations as well as other forms of gaming and other entertainment. Competition for wagers comes from casinos, racetracks, lotteries and other forms of legal and illegal gambling. Other gaming competitors operate in our licensed markets and in surrounding areas and compete for our customers, and additional competitors could be licensed, or existing regulations could be changed, so as to adversely affect our competitive position.

Telecommunications Products Group

        The market for prepaid phone cards is highly fragmented, but competition comes from other instant ticket lottery printers utilizing similar lottery security and printing technologies, as well as alternative printing and non-printing technologies. Our telecommunications products operations compete with other printing companies on the basis of price, availability, product features and product security. There is competition within our class of products and other technologies to provide the desired functionality. There are alternative technologies such as smart cards or alternative means to provide the funding of telephone services. We are investing in new higher speed and higher capacity printing and packaging technologies that we believe, in combination with our lottery security and logistics expertise, will provide us a competitive advantage in this market. Our competitors in this area include OGT, Schlumberger Limited and Gemplus S.A.

Security

        Attempts to penetrate security measures may come from various combinations of customers, retailers, vendors, employees and others. We constantly assess the adequacy of our security systems to protect against any material loss to any of our customers.

        Notwithstanding the foregoing, our wholly owned pari-mutuel wagering subsidiary, Autotote Systems, Inc. experienced a breach of security by an employee who altered betting data on previously placed wagering tickets—the $3 million "winning" wager on the races constituting the Pick Six at the Breeders' Cup at Arlington Park in Illinois on October 26, 2002, as well as two other multiple-race wagers from earlier in the month. The employee also engaged in a scheme whereby he used his authorized access to duplicate uncashed winning tickets.

        During our review of the Breeders' Cup Pick Six wager, we discovered evidence of the employee's wrongdoing before any financial loss to bettors occurred and immediately terminated the employee. On February 13, 2003, the National Thoroughbred Racing Association's Wagering Technology Working Group and Giuliani Partners jointly issued an interim report that found no irregularities or suspicious circumstances apart from the unlawful activities of the former employee.

        Following the Breeders' Cup incident, we and the other industry totalizator companies agreed to industry-wide security improvements, including the installation of software necessary to scan all wagering pools in connection with multi-race wagers after each race of a multi-race wager. We have completed the installation of that software. We and the other totalizator companies also agreed to permit an audit of our respective computer security and procedures by Ernst & Young. We also engaged Kroll, Inc., a leading worldwide risk mitigation and security company, to conduct a separate review of our physical security, operational controls, hiring practices and internal compliance. In addition, we have independently committed to, and have begun, the deployment of a new control system to operate every one of our totalizator systems. This independent system runs in parallel with our computers, records data in real time and allows for a review by a third party of all data against the live system.

        In 2002, we incurred approximately $1.1 million of costs related to the former employee's malfeasance. Although we believe that any future losses, if any, that may arise from this matter will not

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result in a material adverse effect on our consolidated financial position or results of operations, it is not feasible to predict with certainty, and there can be no assurance that our business might not be materially affected or that other security breaches will not occur.

        In our lottery business, we employ numerous security safeguards, including bar coding and providing additional layers of protection in our instant tickets. We have effected security measures in the areas of ticket specifications, production, packaging, delivery, distribution and accounting. We also incorporate computer function safeguards, including secure ticket data, control number encryption, winner file data, and ticket stock control, in our data processing and in the computer operations phase. In addition, we also retain a major public accounting firm to perform agreed upon security procedures for each game produced before it is sent to the customer.

        As the incidence and severity of publicly reported cases of physical and computer crime continue, major lotteries periodically reassess key security questions concerning the vulnerability of lottery games. Although we have not uncovered any practical, economically feasible way to breach the security of our instant tickets or on-line lottery games that could result in a material loss to any of our customers, no assurances can be given that security breaches will not occur.

Employees

        As of December 31, 2002, we employed approximately 2,780 persons. Most of our U.S. pari-mutuel employees involved in field operations and equipment repairs are represented by the International Brotherhood of Electrical Workers under two separate contracts, extending through October 2005 and May 2004, respectively. Most of our Canadian pari-mutuel employees are represented by the Service Employees International Union. Three of our lottery employee groups are represented by a labor union: our employees in Austria are represented by a Worker's Council, which is typical of many European companies; and at the United Kingdom facility, approximately 360 employees are members of the Graphic Print and Media Union.

Government Regulation

General

        Lotteries, pari-mutuel wagering, sports wagering, and video gaming may be lawfully conducted only in jurisdictions that have enacted enabling legislation. In jurisdictions that currently permit various wagering activities, regulation is extensive and evolving but customarily includes some form of licensing of a license applicant and its subsidiaries. Regulators in those jurisdictions review many facets of an applicant for or holder of a license including, among other items, financial stability, integrity and business experience. We believe we are currently in substantial compliance with all regulatory requirements in the jurisdictions where we operate. Any failure to receive a material license or the loss of a material license that we currently hold could have a material adverse effect on our overall operations and financial condition.

        In December 2000, Congress enacted legislation authorizing patrons to place pari-mutuel wagers, where lawful in each state involved, by "telephone or other electronic media" with off track betting systems in the same or different state. Regulatory authorities continue to review and interpret this legislation, which amended the federal Interstate Horseracing Act of 1978. New legislation may be enacted that would impose other restrictions on telephone and Internet wagering operations, and we are unable to predict whether such interpretations or legislation, if any, would have a material adverse impact on us.

        While we believe that our current and planned business activities comply with all applicable laws, law enforcement authorities in certain jurisdictions have opposed the expansion of wagering via telephone and the Internet and state regulators have expressed concerns to us regarding such wagering by their citizens through racetracks serviced by our pari-mutuel wagering systems. We cannot assure

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you that our activities or the activities of our customers will not become the subject of any law enforcement proceeding or that such proceeding, if any, would not have a material adverse impact on us or our business plans. Additionally, although we believe that the December 2000 amendment to the federal Interstate Horseracing Act of 1978 clarifies that account wagering, off-track betting and inter-track simulcasting, as currently conducted by the U.S. horse racing industry, are authorized under U.S. federal law, the amendment may not be interpreted in this manner by all concerned. We cannot assure you that we can continue to conduct our pari-mutuel, account wagering, OTB and race simulcasting operations in all of the jurisdictions in which we currently operate or that a discontinuation of any of these operations would not have a material adverse impact on us or our business plans.

        We have developed and implemented an extensive internal compliance program in an effort to ensure that we comply with legal requirements imposed in connection with our wagering-related activities, as well as legal requirements generally applicable to all publicly traded corporations. The compliance program is run on a day-to-day basis by a full-time compliance officer and is overseen by the Compliance Committee authorized by our Board of Directors. While we are firmly committed to full compliance with all applicable laws, there can be no assurance that such steps will prevent the violation of one or more laws or regulations, or that a violation by us or an employee will not result in the imposition of a monetary fine or suspension or revocation of one or more of our licenses.

Lottery Operations

        At the present time, 40 jurisdictions in the U.S. (including the District of Columbia, Puerto Rico and the U.S. Virgin Islands), all the Canadian provinces, Mexico and many other foreign countries authorize lotteries. Lottery contracts and ongoing operations of lotteries both domestically and abroad are subject to extensive regulation. Although certain of the features of a lottery, such as the percentage of gross revenues that must be paid back to players in prize money, are usually fixed by legislation, the various lottery regulatory authorities generally exercise significant discretion, including the determination of the types of games played, the price of each wager, the manner in which the lottery is marketed and the selection of the vendors of equipment and services and retailers of lottery products. Furthermore, laws and regulations applicable to lotteries in the U.S. and foreign jurisdictions are subject to change, and the effect of such changes on our ongoing and potential operations cannot be predicted with certainty.

        To ensure the integrity of the contract award and wagering process, most jurisdictions require detailed background disclosure on a continuous basis from, and conduct background investigations of, the vendor, its subsidiaries and affiliates and its principal shareholders. Background investigations of the vendor's employees who will be directly responsible for the operation of the system are also generally conducted, and most states reserve the right to require the removal of employees whom they deem to be unsuitable or whose presence they believe may adversely affect the operational security or integrity of the lottery. Certain jurisdictions also require extensive personal and financial disclosure and background checks from persons and entities beneficially owning a specified percentage (typically five percent or more) of a vendor's securities. The failure of beneficial owners of our securities to submit to background checks and provide such disclosure could result in the imposition of penalties upon these beneficial owners and could jeopardize the award of a lottery contract to us or provide grounds for termination of an existing lottery contract.

        From time to time we retain governmental affairs representatives in various states of the U.S. to advise legislators and the public concerning our views on lottery legislation, to monitor such legislation and to advise us in our relations with lottery authorities. We also make campaign contributions to various state political parties and state political candidates. We believe we have complied with applicable laws and regulations concerning campaign contributions and lobbying disclosures.

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        The award of lottery contracts and ongoing operations of lotteries in international jurisdictions also are extensively regulated, although this regulation usually varies from that prevailing in the U.S. Restrictions are frequently imposed on foreign corporations seeking to do business in such jurisdictions and, as a consequence, we have, in a number of instances, allied ourselves with local companies when seeking foreign lottery contracts. Laws and regulations applicable to lotteries in the U.S. and foreign jurisdictions are subject to change, and the effect of such changes on our ongoing and potential operations cannot be predicted with certainty.

Pari—mutuel Wagering

        Forty-three states in the U.S., Puerto Rico, all of the Canadian provinces, Mexico and many other foreign countries have authorized pari-mutuel wagering on horse races, and 16 states and many foreign countries, including Mexico, conduct pari-mutuel wagering on greyhound races. In addition, Connecticut, Rhode Island, Florida and Mexico also allow pari-mutuel wagering on jai alai matches.

        Companies that manufacture, distribute and operate pari-mutuel wagering systems in these jurisdictions are subject to the regulations of the applicable regulatory authorities there. These authorities generally require a company, as well as its directors, officers, certain employees and holders of 5% or more of the company's common stock, to obtain various licenses, permits and approvals. Regulatory authorities may also conduct background investigations of the company and its key personnel and stockholders in order to ensure the integrity of the wagering system. These authorities have the power to refuse, revoke or restrict a license for any cause they deem reasonable. The loss of a license in one jurisdiction may cause the company's licensing status to come under review in other jurisdictions as well.

        In order for any of our subsidiaries to provide pari-mutuel wagering equipment and/or services to certain casinos located in Atlantic City, New Jersey, it must be licensed by the New Jersey Casino Control Commission, or Casino Commission, as a gaming related casino service industry in accordance with the New Jersey Casino Control Act, or the Casino Control Act, and by the New Jersey Racing Commission. An applicant for a gaming related casino service industry license is required to establish, by clear and convincing evidence, financial stability, integrity and responsibility; good character, honesty and integrity; and sufficient business ability and experience to conduct a successful operation. We must also qualify under the standards of the Casino Control Act. We and any of our applicant subsidiaries may also be required to produce such information, documentation and assurances as required by the regulators to establish the integrity of all our directors, officers and financial backers, who may be required to seek qualification or waiver of qualification. For affiliates of New Jersey casinos, the Casino Commission traditionally has waived the qualification requirement for investors holding less than 15% of a debt issue. For institutional investors, the Casino Commission traditionally has waived the qualification requirement for holders if their positions are not more than 20% of the issuer's overall debt and not more than 50% of the specific debt issue.

        The Casino Commission has broad discretion in licensing matters and may at any time condition a license or suspend or revoke a license or impose fines upon a finding of disqualification or non-compliance. The Casino Commission may require that persons holding five percent or more of our Class A common stock qualify under the Casino Control Act. Under the Casino Control Act, a security holder is rebuttably presumed to control a publicly traded corporation if the holder owns at least five percent of the corporation's equity securities; however, for passive institutional investors, qualification is generally not required for a position of less than 10%, and upon a showing of good cause, qualification may be excused for a position of 10% or more. Failure to qualify could jeopardize our license. In addition, the New Jersey Racing Commission also licenses our subsidiary and retains concurrent regulatory oversight over this subsidiary with the Casino Commission.

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        As a consequence of the sale of our Series A convertible preferred stock, in 2000 the Casino Control Act required our subsidiary that held a casino service industry license to relinquish said license upon the closing of that sale and apply anew for licensure. We obtained preliminary approval from the New Jersey Racing Commission and transactional waivers from the Casino Commission that allow us to continue providing services to Atlantic City casinos pending investigation of the new application that we filed and until our subsidiary is relicensed and our directors, officers and certain security holders are qualified. The purchasers of our Series A convertible preferred stock and certain of their directors, officers and shareholders may be required to seek qualification or to seek waiver of qualification. We believe that all the foregoing actions will be satisfactorily concluded in due course. However, there can be no assurance that this will be the case, and our failure to obtain any of the foregoing approvals could have a material adverse effect on us or our business plans.

        Our rights to operate the Connecticut OTB system are conditioned on our continuing to hold all licenses required for the operation of the system. In addition, our officers and directors and certain other employees must be licensed. Licensees are generally required to submit to background investigations and provide required disclosures. The Division of Special Revenue of the State of Connecticut, or the Division, may revoke the license to operate the system under certain circumstances, including a false statement in the licensing disclosure materials, a transfer of ownership of the licensed entity without Division approval and failure to meet financial obligations. The approval of the Connecticut regulatory authorities is required before any off-track betting facility is closed or relocated or any new branch or simulcast facility is established. Our telephone wagering operations, based in Connecticut, are subject to the Division's regulation. We have expanded the market for our "business-to-consumer" On the Wire® account wagering business through our Connecticut OTB from 13 states to 27 states.

        While in the past we have been the subject of enforcement proceedings instituted by one or more regulatory bodies, we have been able to consensually resolve any such proceedings upon the implementation of remedial measures and/or the payment of settlements or monetary fines to such bodies. However, there can be no assurance that similar proceedings in the future will be similarly resolved, or that such proceedings will not have a material adverse impact on our ability to retain and renew existing licenses or to obtain new licenses in other jurisdictions.

Video Gaming

        Coin or voucher operated gambling devices offering electronic, video versions of spinning reels, poker, blackjack and similar games are known as VGMs or video lottery terminals, or VLTs, depending on the jurisdiction. These devices represent a growing area in the wagering industry. We or our subsidiaries manufacture and supply terminals and wagering systems designed for use as VGMs or VLTs.

        Twenty-seven states and Puerto Rico authorize wagering on VGMs or VLTs at casinos, riverboats, racetracks and/or other licensed facilities. Although some states, such as Rhode Island, currently restrict VGMs or VLTs to already existing wagering facilities, others permit these devices to be placed at bars and restaurants as well. Several Native American tribes throughout the U.S. are also authorized to operate these devices on reservation lands. In addition, all of the Canadian provinces and various foreign countries have authorized their use.

        From time to time, government officials in other states consider proposals to legalize or expand video gaming or video lottery in their states. Many legislators have been enthusiastic about the potential of video gaming to raise significant additional revenues. Some officials, however, are reluctant to expand gaming industry opportunities or have expressed a desire to limit video gaming to established wagering facilities if video gaming is authorized in their jurisdiction at all.

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        Companies that manufacture, sell or distribute VGMs or VLTs are subject to various provincial, state, county and municipal laws and regulations. The primary purposes of these rules are (i) to ensure the responsibility, financial stability and character of equipment manufacturers and their key personnel and stockholders through licensing requirements, (ii) to ensure the integrity and randomness of the machines, and (iii) to prohibit the use of VGMs or VLTs at unauthorized locations or for the benefit of undesirable individuals or entities. The regulations governing VGMs and VLTs generally resemble the pari-mutuel and sports wagering regulations in all the basic elements described above.

        However, every jurisdiction has differing terminal design and operational requirements, and terminals generally must be certified by local regulatory authorities before being distributed in any particular jurisdiction. These requirements may require us or our subsidiaries to modify our terminals to some degree in order to achieve certification in particular locales. In addition, the intrastate movement of such devices in a jurisdiction where they will be used by the general public is usually allowed only upon prior notification and/or approval of the relevant regulatory authorities.

        The West Virginia Lottery Commission has licensed us or our subsidiaries to supply VLTs to authorized pari-mutuel racing facilities in that state in accordance with the Racetrack Video Lottery Act.

        In Canada, one of our subsidiaries has been granted registration as a casino gaming related supplier by the Alcohol and Gaming Commission of Ontario in accordance with Ontario's Gaming Control Act, 1992 and by the Alberta Gaming and Liquor Commission in accordance with its Gaming and Liquor Act of Alberta. Another subsidiary has been granted interim registration as a gaming related supplier to the Manitoba Lottery Commission by the Manitoba Gaming Control Commission. The gaming laws of Ontario, Alberta and Manitoba primarily deal with the responsibility, honesty, integrity and financial stability of gaming equipment manufacturers, distributors and operators as well as persons financially interested or involved in gaming operations. To ensure the integrity of manufacturers and suppliers of gaming supplies, gaming regulators in Ontario, Alberta and Manitoba have the authority to conduct thorough background investigations of us, our officers, directors, key personnel and significant stockholders who are required to file applications detailing their personal and financial information. The gaming regulators may at any time revoke, suspend, condition or restrict a registration for an appropriate cause as determined under the applicable gaming legislation. We believe that we are in compliance with the terms and conditions of our registrations in Ontario, Alberta and Manitoba.

        We may apply for all necessary licenses in other jurisdictions that may now or in the future authorize video gaming or video lottery operations. We cannot predict the nature of the regulatory schemes or the terminal requirements that will be adopted in any of these jurisdictions, nor whether we or any of our subsidiaries can obtain any required licenses and equipment certifications or will be found suitable.

        U.S. federal law also affects our video gaming industry activities. The Federal Gambling Devices Act of 1962, or the Devices Act, makes it unlawful for any person to manufacture, deliver or receive gambling devices, including VGMs and VLTs, across interstate lines unless that person has first registered with the Attorney General of the U.S., or to transport such devices into jurisdictions where their possession is not specifically authorized by state law. The Devices Act permits states to exempt themselves from its prohibition on transportation, and several states that authorize the manufacture or use of such devices within their jurisdictions have done so. Certain of our products, such as the PROBE® XLC terminal, are gaming devices subject to the Devices Act and state laws governing such devices. The Devices Act does not apply to machines designed for pari-mutuel wagering at a racetrack, such as our pari-mutuel wagering terminals. We have registered under the Devices Act and believe we are substantially in compliance with all of the Devices Act's record-keeping and equipment identification requirements.

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Simulcasting

        The Federal Communications Commission regulates the use and transfer of earth station licenses used to operate our domestic simulcasting operations.

        At present, 43 states, Puerto Rico, all of the Canadian provinces, Mexico and many other foreign countries authorize interstate and/or intrastate pari-mutuel wagering, which may involve the simulcasting of the races in question. Licensing and other regulatory requirements associated with such simulcasting activities are similar to those governing pari-mutuel wagering and are generally enforced by pari-mutuel regulators. In addition, contracts with host tracks whose races are simulcast by us to other facilities within or outside the jurisdictions in which such races are held may be subject to approval by regulatory authorities in the jurisdictions from and/or to which the races are simulcast. We believe that we are in substantial compliance with applicable regulations and that we, and/or the appropriate third parties, have entered into contracts and obtained the necessary regulatory approvals to conduct current simulcast operations lawfully.

Nevada Regulatory Matters

        We and certain of our wholly-owned subsidiaries are applicants or will be applicants for certain registrations, approvals, findings of suitability and licenses in the State of Nevada. There can be no assurances that the pending applications by us and our subsidiaries operating in Nevada will be approved or that, if approved, they will be approved on a timely basis or without conditions or limitations.

        The manufacture, sale and distribution of gaming devices for use or play in Nevada or for distribution outside of Nevada, the manufacture and distribution of associated equipment for use in Nevada, the operation of an off-track pari-mutuel wagering system in Nevada, the operation of an off-track pari-mutuel sports wagering system in Nevada and the operation of slot machine routes in Nevada are subject to: (i) the Nevada Gaming Control Act and the regulations promulgated thereunder, or the Nevada Act; and (ii) various local ordinances and regulations. Such activities are subject to the licensing and regulatory control of the Nevada Gaming Commission, or Nevada Commission, the Nevada State Gaming Control Board, or Nevada Board, and various local, city and county regulatory agencies.

        The laws, regulations and supervisory procedures of the Nevada gaming authorities are based upon declarations of public policy which are concerned with, among other things: (i) the prevention of unsavory or unsuitable persons from having a direct or indirect involvement with gaming, or manufacturing or distribution of gaming devices at any time or in any capacity; (ii) the strict regulation of all persons, locations, practices, associations and activities related to the operation of licensed gaming establishments and the manufacture or distribution of gaming devices and equipment; (iii) the establishment and maintenance of responsible accounting practices and procedures; (iv) the maintenance of effective controls over the financial practices of licensees, including the establishment of minimum procedures for internal fiscal affairs and the safeguarding of assets and revenues, providing reliable record keeping and requiring the filing of periodic reports with the Nevada gaming authorities; (v) the prevention of cheating and fraudulent practices; and (vi) to provide a source of state and local revenues through taxation and licensing fees. Changes in such laws, regulations and procedures could have an adverse effect on our various applications in the event they are granted. No assurances can be given that the applications will be granted by the Nevada gaming authorities. The grant or denial of the applications is within the discretion of the Nevada gaming authorities.

        We are an applicant for registration by the Nevada Commission as a publicly traded corporation and are or will be an applicant to be found suitable to own the stock, both directly and indirectly of various wholly-owned subsidiaries which are or will be applicants for approvals and licensing as a manufacturer, distributor and operator of a slot machine route, an operator of an off-track pari-mutuel

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wagering system and an operator of an off-track pari-mutuel sports wagering system. As a registered corporation, we will be required periodically to submit detailed financial and operating reports to the Nevada Commission and furnish any other information that the Nevada Commission may require. No person may become a stockholder of, or receive any percentage of profits from, our subsidiaries operating in Nevada without first obtaining licenses and approvals from the Nevada gaming authorities. We and our subsidiaries operating in Nevada have or will apply to the Nevada gaming authorities for the various registrations, approvals, permits, findings of suitability and licenses in order to engage in manufacturing, distribution, slot route activities, and off-track pari-mutuel wagering systems operations in Nevada. The following regulatory requirements will apply to us and our subsidiaries operating in Nevada if they are approved and licensed. All gaming devices and cashless wagering systems that are manufactured, sold or distributed for use or play in Nevada, or for distribution outside of Nevada, must be manufactured by licensed manufacturers and distributed or sold by licensed distributors. All gaming devices manufactured for use or play in Nevada must be approved by the Nevada Commission before distribution or exposure for play. The approval process for gaming devices includes rigorous testing by the Nevada Board, a field trial and a determination as to whether the gaming device meets strict technical standards that are set forth in the regulations of the Nevada Commission. Associated equipment must be administratively approved by the Chairman of the Nevada Board before it is distributed for use in Nevada.

        The Nevada gaming authorities may investigate any individual who has a material relationship to, or material involvement with, us or our subsidiaries operating in Nevada in order to determine whether such individual is suitable or should be licensed as a business associate of a gaming licensee. Officers, directors and certain key employees of our subsidiaries operating in Nevada are required to file applications with the Nevada gaming authorities and may be required to be licensed or found suitable by the Nevada gaming authorities. Our officers, directors and key employees who are actively and directly involved in the licensed activities of our subsidiaries operating in Nevada may be required to be licensed or found suitable by the Nevada gaming authorities. The Nevada gaming authorities may deny an application for licensing for any cause that they deem reasonable. A finding of suitability is comparable to licensing, and both require submission of detailed personal and financial information followed by a thorough investigation. The entity with which the applicant is employed or for which the applicant serves must pay all the costs of the investigation. Changes in licensed positions must be reported to the Nevada gaming authorities and in addition to their authority to deny an application for a finding of suitability or licensure, the Nevada gaming authorities have jurisdiction to disapprove a change in a corporate position.

        If the Nevada gaming authorities were to find an officer, director or key employee unsuitable for licensing or unsuitable to continue having a relationship with us or our subsidiaries operating in Nevada, the companies involved would have to sever all relationships with such person. In addition, the Nevada Commission may require us and our subsidiaries operating in Nevada to terminate the employment of any person who refuses to file appropriate applications. Determinations of suitability or of questions pertaining to licensing are not subject to judicial review in Nevada.

        We and our subsidiaries operating in Nevada will be required to submit detailed financial and operating reports to the Nevada Commission. Substantially all material loans, leases, sales of securities and similar financing transactions by our subsidiaries operating in Nevada will be required to be reported to or approved by the Nevada Commission. If we are licensed by the Nevada gaming authorities, any (i) guarantees issued by our subsidiaries operating in Nevada in connection with any public financing; (ii) hypothecation of the assets of our subsidiaries operating in Nevada as security in connection with any financing; and/or (iii) pledges of the equity securities of our subsidiaries operating in Nevada as security in connection with any public financing will require the approval of the Nevada Commission to remain effective. If it were determined that the Nevada Act was violated by us or any of our subsidiaries operating in Nevada, the licenses we or they hold could be limited, conditioned, suspended or revoked, subject to compliance with certain statutory and regulatory procedures. In

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addition, any of our subsidiaries operating in Nevada, us and the persons involved could be subject to substantial fines for each separate violation of the Nevada Act at the discretion of the Nevada Commission. Limitation, conditioning or suspension of the licenses held by us and our subsidiaries operating in Nevada could (and revocation of any license would) materially adversely affect our manufacturing, distribution and system operations in Nevada. Any beneficial holder of our voting securities, regardless of the number of shares owned, may be required to file an application, be investigated, and have his suitability determined as a beneficial holder of our voting securities if the Nevada Commission has reason to believe that such ownership would otherwise be inconsistent with the declared policies of the state of Nevada. The applicant must pay all costs of investigation incurred by the Nevada gaming authorities in conducting any such investigation. The Nevada Act requires any person who acquires beneficial ownership of more than 5% of a registered corporation's voting securities to report the acquisition to the Nevada Commission. The Nevada Act requires that beneficial owners of more than 10% of a registered corporation's voting securities apply to the Nevada Commission for a finding of suitability within thirty days after the Chairman of the Nevada Board mails the written notice requiring such filing. Under certain circumstances, an "institutional investor," as defined in the Nevada Act, which acquires more than 10%, but not more than 15%, of the registered corporation's voting securities may apply to the Nevada Commission for a waiver of such finding of suitability if such institutional investor holds the voting securities for investment purposes only. An institutional investor shall not be deemed to hold voting securities for investment purposes unless the voting securities were acquired and are held in the ordinary course of business as an institutional investor and not for the purpose of causing, directly or indirectly, the election of a majority of the members of the board of directors of the registered corporation, any change in the registered corporation's corporate charter, bylaws, management, policies or operations of the registered corporation, or any of its gaming affiliates, or any other action which the Nevada Commission finds to be inconsistent with holding the registered corporation's voting securities for investment purposes only. Activities which are not deemed to be inconsistent with holding voting securities for investment purposes only include: (i) voting on all matters voted on by stockholders; (ii) making financial and other inquiries of management of the type normally made by securities analysts for informational purposes and not to cause a change in its management, policies or operations; and (iii) such other activities as the Nevada Commission may determine to be consistent with such investment intent. If the beneficial holder of voting securities who must be licensed or found suitable is a corporation, partnership or trust, it must submit detailed business and financial information including a list of beneficial owners. The applicant is required to pay all costs of investigation.

        Also under the Nevada Act and under certain circumstances, an "institutional investor" as defined in the Nevada Act, which intends to acquire not more than 15% of any class of nonvoting securities of a privately-held corporation, limited partnership or limited liability company that is also a registered holding or intermediary company or the holder of a gaming license, may apply to the Nevada Commission for a waiver of the usual prior licensing or finding of suitability requirements if such institutional investor holds such nonvoting securities for investment purposes only. An institutional investor shall not be deemed to hold nonvoting securities for investment purposes unless the nonvoting securities were acquired and are held in the ordinary course of business as an institutional investor, do not give the institutional investor management authority, and do not, directly or indirectly, allow the institutional investor to vote for the election or appointment of members of the board of directors, a general partner or manager, cause any change in the articles of organization, operating agreement, other organic document, management, policies or operations, or cause any other action that the Nevada Commission finds to be inconsistent with holding nonvoting securities for investment purposes only. Activities that are not deemed to be inconsistent with holding nonvoting securities for investment purposes only include: (i) nominating any candidate for election or appointment to the entity's board of directors or equivalent in connection with a debt restructuring; (ii) making financial and other inquiries of management of the type normally made by securities analysts for informational purposes and not to

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cause a change in the equity's management, policies or operations; and (iii) such other activities as the Nevada Commission may determine to be consistent with such investment intent. If the beneficial holder of nonvoting securities who must be licensed or found suitable is a corporation, partnership or trust, it must submit detailed business and financial information including a list of beneficial owners. The applicant is required to pay all costs of investigation.

        Any person who fails or refuses to apply for a finding of suitability or a license within thirty days after being ordered to do so by the Nevada Commission or the Chairman of the Nevada Board, may be found unsuitable. The same restrictions apply to a record owner if the record owner, after request, fails to identify the beneficial owner. Any stockholder found unsuitable and who holds, directly or indirectly, any beneficial ownership of the common stock beyond such period of time as may be prescribed by the Nevada Commission may be guilty of a criminal offense. We will be subject to disciplinary action if, after we receive notice that a person is unsuitable to be a stockholder or to have any other relationship with us, our subsidiaries operating in Nevada or we (i) pay that person any dividend or interest upon our voting securities, (ii) allow that person to exercise, directly or indirectly, any voting right conferred through securities held by that person, (iii) pay remuneration in any form to that person for services rendered or otherwise, or (iv) fail to pursue all lawful efforts to require such unsuitable person to relinquish his voting securities including, if necessary, the immediate purchase of said voting securities for cash at fair market value.

        The Nevada Commission may, in its discretion, require the holder of any debt security of a registered corporation to file applications, be investigated and be found suitable to own the debt security of a registered corporation if the Nevada Commission has reason to believe that his acquisition of such debt security would otherwise be inconsistent with the declared policy of the State of Nevada. If the Nevada Commission determines that a person is unsuitable to own such security, then pursuant to the Nevada Act, the registered corporation can be sanctioned, including the loss of its approvals, if without the prior approval of the Nevada Commission, it: (i) pays to the unsuitable person any dividend, interest, or any distribution whatsoever; (ii) recognizes any voting right by such unsuitable person in connection with such securities; (iii) pays the unsuitable person remuneration in any form; or (iv) makes any payment to the unsuitable person by way of principal, redemption, conversion, exchange, liquidation, or similar transaction.

        We and our subsidiaries operating in Nevada will be required to maintain a current stock ledger in Nevada, which may be examined by the Nevada gaming authorities at any time. If any securities are held in trust by an agent or by a nominee, the record holder may be required to disclose the identity of the beneficial owner to the Nevada gaming authorities. A failure to make such disclosure may be grounds for finding the record holder unsuitable. We are also required to render maximum assistance in determining the identity of the beneficial owner. The Nevada Commission has the power to require our stock certificates to bear a legend indicating that the securities are subject to the Nevada Act.

        After becoming a registered corporation, we may not make a public offering of our securities without the prior approval of the Nevada Commission if the securities or proceeds from that sale are intended to be used to construct, acquire or finance gaming facilities in Nevada, or to retire or extend obligations incurred for such purposes. Such approval, if given, does not constitute a finding, recommendation or approval by the Nevada Commission or the Nevada Board as to the accuracy or adequacy of the prospectus or the investment merits of the securities offered. Any representation to the contrary is unlawful. While we are not yet subject to the provisions of the Nevada Act or the regulations of the Nevada Commission, such regulations also provide that any entity that is not an "affiliated company," as such term is defined in the Nevada Act, or which is not otherwise subject to the Nevada Act or such regulations, which plans to make a public offering of securities intending to use such securities, or the proceeds from the sale thereof, for the construction or operation of gaming facilities in Nevada, or to retire or extend obligations incurred for such purposes, may apply to the Nevada Commission for prior approval of such offering. The Nevada Commission may find an

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applicant unsuitable based solely on the fact that it did not submit such an application, unless upon a written request for a ruling, the Nevada Board Chairman has ruled that it is not necessary to submit an application.

        Changes in control of a registered corporation through merger, consolidation, stock or asset acquisitions, management or consulting agreements, or any act or conduct by a person whereby he obtains control, may not occur without the prior approval of the Nevada Commission. Entities seeking to acquire control of a registered corporation must satisfy the Nevada Board and the Nevada Commission in a variety of stringent standards prior to assuming control of such Registered Corporation. The Nevada Commission may also require controlling stockholders, officers, directors and other persons having a material relationship or involvement with the entity proposing to acquire control, to be investigated and licensed as part of the approval process relating to the transaction.

        The Nevada Legislature has declared that some corporate acquisitions opposed by management, repurchases of voting securities and corporate defense tactics affecting Nevada corporate gaming licensees, and registered corporations that are affiliated with those operations, may be injurious to stable and productive corporate gaming. The Nevada Commission has established a regulatory scheme to ameliorate the potentially adverse effects of these business practices upon Nevada's gaming industry and to further Nevada's policy to: (i) assure the financial stability of corporate gaming licensees and their affiliates; (ii) preserve the beneficial aspects of conducting business in the corporate form; and (iii) promote a neutral environment for the orderly governance of corporate affairs. Approvals are, in certain circumstances, required from the Nevada Commission before the registered corporation can make exceptional repurchases of voting securities above the current market price thereof and before a corporate acquisition opposed by management can be consummated. The Nevada Act also requires prior approval of a plan of recapitalization proposed by the registered corporation's Board of Directors in response to a tender offer made directly to the registered corporation's stockholders for the purposes of acquiring control of the registered corporation.

        License fees and taxes, computed in various ways depending on the type of gaming or activity involved, are payable to the State of Nevada and to the counties and cities in which gaming operations are to be conducted. Depending upon the particular fee or tax involved, these fees and taxes are payable either monthly, quarterly or annually and are based upon either: (i) a percentage of the gross revenues received; or (ii) the number of gaming devices operated. Annual fees are also payable to the State of Nevada for renewal of licenses as a manufacturer, distributor, operator of a slot machine route and operator of an off-track pari-mutuel wagering system.

        Any person who is licensed, required to be licensed, registered, required to be registered, or is under common control with such persons, and who proposes to become involved in a gaming venture outside of Nevada, is required to deposit with the Nevada Board, and thereafter maintain, a revolving fund in the amount of $10,000 to pay the expenses of investigation by the Nevada Board of their participation in such foreign gaming. The revolving fund is subject to increase or decrease in the discretion of the Nevada Commission. Thereafter, licensees are required to comply with certain reporting requirements imposed by the Nevada Act. A licensee is also subject to disciplinary action by the Nevada Commission if it knowingly violates any laws of the foreign jurisdiction pertaining to the foreign gaming operation, fails to conduct the foreign gaming operation in accordance with the standards of honesty and integrity required of Nevada gaming operations, engages in activities that are harmful to the state of Nevada or its ability to collect gaming taxes and fees, or employs a person in the foreign operation who has been denied a license or finding of suitability in Nevada on the ground of personal unsuitability.

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Application of Additional or Future Regulatory Requirements

        In the future, we intend to seek the necessary licenses, approvals and findings of suitability for us, our personnel and products in other jurisdictions throughout the world wherever significant sales are anticipated to be made. There can be no assurance, however, that such licenses, approvals or findings of suitability will be obtained or, if obtained, will not be conditioned, suspended or revoked or that we will be able to obtain the necessary approvals for any future products as they are developed. If a license, approval or a finding of suitability is required by a regulatory authority and we fail to obtain the necessary license, approval or finding, we may be prohibited from selling our products for use in the respective jurisdiction or may be required to sell our products through other licensed entities at a reduced profit.

Executive Officers of the Company

        Certain information concerning our executive officers is set forth below:

Name	Age	Position
A. Lorne Weil	57	Chairman of the Board, President and Chief Executive Officer
Martin E. Schloss	56	Vice President, General Counsel and Secretary
DeWayne E. Laird	55	Vice President, Chief Financial Officer and Controller
William J. Huntley	53	Vice President of Lottery Systems
Cliff O. Bickell	60	Vice President of Printed Products
Brooks Pierce	41	Vice President of Pari-mutuel Operations
Robert E. Becker	44	Vice President and Treasurer
Sally Conkright	50	Vice President of Organization Development
Richard M. Weil	48	Vice President of International Business Development

        Our Executive Officers hold office for an indefinite term, subject to the discretion of our Board of Directors.

A. Lorne Weil has served as a director since December 1989, Chairman of the Board since October 31, 1991, Chief Executive Officer since April 1992, and President since August 1997. Mr. Weil held various senior management positions with Scientific Games Corporation and its subsidiaries from October 1990 to April 1992 and was a director and consultant to Autotote Systems, Inc. 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.

Martin E. Schloss has served as Vice President and General Counsel since December 1992 and Secretary since May 1995. Mr. Schloss also serves as a Vice President and Secretary of most of our subsidiaries. From 1976 to 1992, Mr. Schloss served in various positions in the legal department of General Instrument Corporation, with the exception of a hiatus of approximately one and one-half years.

DeWayne E. Laird, has served as Vice President and Chief Financial Officer since November 1998 and corporate Controller since April 1996. From January 1992 to March 1996, Mr. Laird was President of Laird Associates, PC, a CPA firm providing financial consulting services to a variety of industries. From April 1984 to December 1991, he held various senior positions with Philadelphia Suburban Corporation, including Chief Financial Officer and Treasurer.

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William J. Huntley joined the Company in 1973 and has served as Vice President of Lottery Systems, since October 2002 and as President of Scientific Games International, Inc.'s Systems division since September 2000. Mr. Huntley served as President of Autotote Lottery Corporation from November 1997 until its merger into Scientific Games International, Inc. He served as Vice President of Autotote Systems, Inc. from June 1989 to November 1997 and as Vice President of Operations of the Company from 1991 to 1994.

Cliff O. Bickell has served as Vice President of Printed Products since October 2002 and as President of the Printed Products division of Scientific Games International, Inc. since the September 2000 acquisition of SGHC. Mr. Bickell joined SGHC in 1995 and he previously served as its Vice President, Treasurer and Chief Financial Officer. Prior to joining SGHC, Mr. Bickell was Vice President, Chief Financial Officer and Treasurer of Paragon Trade Brands, a multi-national consumer products manufacturer. In addition, Mr. Bickell has held positions as Senior Vice President, Corporate Administration—Chief Financial Officer of W.A. Krueger Co., a commercial printing company, and Treasurer of Dataproducts Corporation, a multinational electronics manufacturer.

Brooks H. Pierce has served as Vice President of Pari-mutuel Operations since October 2002, and as President of Autotote Systems, Inc. since November 1997. Mr. Pierce previously served as Vice President of Autotote Systems, Inc. from November 1991 to November 1997.

Robert C. Becker has served as Treasurer since October 1996 and as Vice President since April 2001. Prior to joining Scientific Games Corporation, Mr. Becker served as Assistant Treasurer for the Fuller Company from 1990 to 1994.

Sally L. Conkright has served as Vice President of Organizational Development since October 2002. Ms. Conkright served as Vice President of Converge, L.L.C. from 2001 to 2002, and as Director of Innovation & eLerning for Linkage, Inc. from 2000 to 2001. Ms. Conkright served as Director of Compensation and Benefits for Xerox Corporation from 1999 to 2000 and as Vice President of Human Resources and Public Relations for Xerox New Enterprises from 1997 to 1999.

Richard M. Weil has served as Vice President of International Business Development since March 2002, and he has also served as Vice President of International Business Development of Scientific Games International, Inc. since October 2000. Previously, he was in charge of international business development for Autotote Systems, Inc. where he started as Vice President of Manufacturing in 1994. Prior to joining Autotote, Mr. Weil was a consultant for strategic planning and corporate development with several firms. Richard M. Weil is the brother of A. Lorne Weil, the Chairman of the Board, President and Chief Executive Officer of the Company.

Access to Public Filings

        We file annual, quarterly, and current reports, proxy statements, and other documents with the Securities and Exchange Commission ("SEC") under the Securities Exchange Act of 1934, as amended. The public may read and copy any materials that we file with the SEC at the SEC's Public Reference Room at 450 Fifth Street, NW, Washington, DC 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. Also, the SEC maintains an Internet website that contains reports, proxy and information statements, and other information regarding issuers, including us, that file electronically with the SEC. The public can obtain any documents that we file with the SEC at http://www.sec.gov.

         We provide public access to our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to these reports which may be accessed free of charge on our website at the following address: http://www.scientificgames.com/SGCorp/investorrelations.asp. These documents are provided as soon as practicable after filing with the SEC, although not generally on the same day.

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ITEM 2. PROPERTIES

        The following is a list of facilities that we use in the operation of our business.

Business	Location	Square Feet	Owned/leased	Purposes
Corporate	New York, NY	12,000	Leased	Corporate Headquarters
	Christiana, DE	8,000	Leased	Administration
Pari-Mutuel	Newark, DE	63,000	Leased	Administration, operations, warehouse space and manufacturing
	Essen, Germany	12,000	Leased	Administration and operations
	Various	33,000	Leased	Warehouse and office space
	Paris, France	10,000	Owned	Administration and operations
Venue Management	Various cities, CT	53,000	Leased	OTB facilities
	New Haven, CT	2,000	Leased	Administration
	The Netherlands	16,000	Leased	Administration and operations
	Various cities, The Netherlands	44,000	Leased	OTB facilities
	Windsor Locks, CT	39,000	Owned	OTB facility
	New Haven, CT	55,000	Owned	OTB facility, administration and operations
Lottery	Rocky Hill, CT	17,000	Leased	Administration and operations
	Barre, VT	3,100	Leased	Administration
	Concord, NH	5,400	Leased	Administration and operations
	Helena, MT	3,900	Leased	Administration and operations
	Urbandale, IA	35,000	Leased	Administration and operations
	Gardner, ME	10,000	Leased	Administration and operations
	Orlando, FL	50,000	Leased	Administration and operations
	Norcross, GA	27,000	Leased	Warehouse space
	Blythewood, SC	20,000	Leased	Administration and operations
	Ballymahon, Ireland	10,000	Leased	Manufacturing
	Vienna, Austria	46,300	Leased	Administration and operations
	Paris, France	12,000	Leased	Administration and operations
	Various	42,000	Leased	Warehouse space, administration and operations
	Santiago, Chile	73,000	Owned	Administration, operations, warehousing and manufacturing
	Alpharetta, GA	245,000	Owned	Manufacturing
Telecommunication Products	Leeds, England	150,000	Owned	Manufacturing
	Bradford, England	33,000	Leased	Manufacturing and administration

ITEM 3.    LEGAL PROCEEDINGS

        Although we are a party to various claims and legal actions arising in the ordinary course of business, we believe, on the basis of information presently available to us, that the ultimate disposition of these matters will not likely have a material adverse effect on our consolidated financial position or results of operations.

        Our subsidiary, SGI, owned a minority interest in Wintech de Colombia S.A., or Wintech (now in liquidation), which formerly operated the Colombian national lottery under contract with Empresa Colombiana de Recursos para la Salud, S.A. ("Ecosalud"), an agency of the Colombian government. The contract projected that certain levels of lottery ticket sales would be attained and provided a penalty against Wintech, SGI and the other shareholders of Wintech of up to $5.0 million if such performance levels were not achieved. In addition, with respect to a further guarantee of performance under the contract with Ecosalud, SGI delivered to Ecosalud a $4.0 million bond issued by a Colombian surety, Seguros del Estado ("Seguros"). Wintech started the instant lottery in Colombia, but, due to difficulties beyond its control, including, among other factors, social and political unrest in

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Colombia, frequently interrupted telephone service and power outages, and competition from another lottery being operated in a province of Colombia which we believe was in violation of Wintech's exclusive license from Ecosalud, the projected sales level was not met for the year ended June 30, 1993. On July 1, 1993, Ecosalud adopted resolutions declaring, among other things, that the contract was in default and asserted various claims for compensation and penalties against Wintech, SGI and other shareholders of Wintech. Litigation is pending and/or threatened in Colombia concerning various claims among Ecosalud, Wintech and SGI, relating to the termination of the contracts with Ecosalud. Ecosalud's claims are for, among other things, realization of the full amount of the penalty, plus interest and costs of the bond.

        The Colombian surety, Seguros, paid $2.4 million to Ecosalud under its $4.0 million bond, and made demand upon SGI for that amount under the indemnity agreement between the surety and SGI. SGI declined to make or authorize any such payment and notified the surety that any payment in response to Ecosalud's demand on the bond was at the surety's risk. In a case brought in U.S. District Court in Georgia, the Colombian surety sought to recover from SGI sums paid (in SGI's view, improperly) under its surety bond, plus interest. In September 1999, the District Court granted summary judgment for the surety in the amount of approximately $7 million (which included pre-judgment interest at a rate of 38.76% per annum). On appeal, the United States Court of Appeals for the Eleventh Circuit, on August 20, 2001, affirmed the judgment for the principal amount of $2.4 million, but vacated that part of the judgment awarding approximately $4.6 million based on a pre-judgment interest rate of 38.76% with instructions to the District Court to recalculate pre-judgment interest. On February 22, 2002, SGI agreed to settle this matter upon payment of $3.7 million to the Colombian surety. On February 26, 2002, SGI drew upon a $1.5 million letter of credit posted by a former Colombian partner in order to partially fund this payment. This settlement resolves the U.S. litigation with the surety, but the claims in Colombia remain unresolved.

        In July 2002, a Colombian appellate tribunal denied SGI's motion to dismiss Ecosalud's pending lawsuit against SGI. While SGI's motion is subject to further appeal to the Colombian Council of State, the highest appellate court with jurisdiction over this matter, the proceeding in the lower court, which is in an early stage, will continue during the pendency of the appeal.

        SGI has various defenses on the merits as well as procedural defenses that we plan to assert against Ecosalud's claims. We intend to vigorously pursue these defenses as appropriate. SGI also has certain cross indemnities and undertakings from the two other privately held shareholders of Wintech for their respective shares of any liability to Ecosalud. No assurance can be given that the other shareholders of Wintech will, or have sufficient assets to, honor their indemnity undertakings to SGI when the claims by Ecosalud against SGI and Wintech are finally resolved, in the event such claims result in any final liability. Although we believe that any potential losses arising from these claims will not result in a material adverse effect on our consolidated financial position or results of operations, it is not feasible to predict the final outcome, and there can be no assurance that these claims might not be finally resolved adversely to us or result in material liability.

        On October 26, 2002, we experienced a breach of security by an employee who altered betting data on the $3 million "winning" wagering ticket on the races constituting the Pick Six at the Breeders' Cup at Arlington Park in Illinois. It was subsequently discovered that the employee, whom we terminated, also altered betting data on two other multiple-race wagers earlier in the month.

        On December 4, 2002, a class action lawsuit (Allard v. Autotote / Scientific Games Corporation, and Does 1-10 (L. A. Superior Court No. BC 286382)) was filed against us in state court in California by a professional Pick Six bettor on behalf of pari-mutuel bettors in the U.S., alleging, among other things, negligence, breach of contract and deceptive trade practices arising from our handling of multiple-race wagers. We removed the case to federal court, and moved to dismiss the lawsuit. In response, the plaintiff agreed to file an amended complaint in an attempt to address some of the deficiencies that

32

were the subject of our motion. That amended complaint has not yet been filed. We believe that the lawsuit lacks merit, and we intend to contest the suit vigorously.

        Also on December 4, 2002, a second class action lawsuit (Cheldin v. Scientific Games Corporation, Autotote Systems, Inc., and Does 1-20 (L. A. Superior Court No. BC 286417)) was filed against us in state court in California by a bettor of the Breeders' Cup Pick Six wager, on behalf of all bettors of such Pick Six wagers. The lawsuit alleged negligence and fraud with respect to our wagering systems in connection with the Breeders' Cup Pick Six. We removed the case to federal court, and our motion to dismiss the complaint is currently pending. We believe that the lawsuit lacks merit, and we intend to contest the suit vigorously.

ITEM 4.    SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

        No matters were submitted to a vote of our security holders during the fourth quarter of fiscal 2002.

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PART II

ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS

Since January 29, 2002, our outstanding common stock has been listed for trading on the Nasdaq National Market under the symbol "SGMS". Our common stock was previously traded on the American Stock Exchange. The following table sets forth, for the periods indicated, the range of high and low closing prices of our Class A common stock.

		Market Price of Scientific Games Common Stock
		High		Low
Fiscal 2001 (January 1, 2001—December 31, 2001)
	First Quarter	$	3.60	$	1.95
	Second Quarter		5.89		1.94
	Third Quarter		5.93		3.00
	Fourth Quarter		8.75		3.62
Fiscal 2002 (January 1, 2002—December 31, 2002)
	First Quarter		10.05		8.10
	Second Quarter		9.97		7.00
	Third Quarter		7.99		5.98
	Fourth Quarter		8.40		5.55
Fiscal 2003
	First Quarter through March 20, 2003		7.41		4.85

        On March 20, 2003, the last reported sale price for our common stock on the Nasdaq National Market was $5.74 per share. There were approximately 1,585 holders of record of our common stock as of March 20, 2003.

        We have never paid any cash dividends on our Class A common stock. The Board presently intends to retain all earnings, if any, for use in the business. Any future determination as to payment of dividends will depend upon our financial condition and results of operations and such other factors as are deemed relevant by the Board. Further, under the terms of the Indenture governing our 12¹/2% Senior Subordinated Notes, we and our Restricted Subsidiaries (as defined herein) are limited in our ability to pay any cash dividends or make certain other restricted payments (other than stock dividends) on our Class A common stock.

Recent Sales of Unregistered Securities; Uses of Proceeds From Registered Securities

        The terms of our outstanding Series A Convertible Preferred Stock provide for quarterly dividends at a rate equal to 6% per annum, which are payable in kind in the form of additional shares of such preferred stock until the ninth dividend payment, in September 2002, and thereafter may be paid-in-kind or in cash at the our option. In 2002, we issued an aggregate of 74,000 shares of our Series A Convertible Preferred Stock, pro rata to the holders of such outstanding preferred stock, as quarterly dividend payments on such preferred stock. The Series A Convertible Preferred Stock was originally issued in a private transaction exempt from registration under the Securities Act in reliance on Section 4(2) thereof. In July 2002, in connection with certain waivers and consents by holders of our Series A Convertible Preferred Stock relating to our 2002 Equity Offering (as defined herein), we authorized 2,000 shares and issued an aggregate of 1,237.6 shares of Series B Preferred Stock in a private transaction exempt from registration under the Securities Act in reliance on Section 4(2) thereof. In addition, in December 2002, we issued 900,313 shares of our Class A Common Stock to a

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holder of our Preferred Stock in connection with the holder's conversion of 45,916 shares of our Series A Convertible Preferred Stock originally issued in a private transaction exempt from registration under the Securities Act in reliance on Section 4(2) thereof, and without additional consideration.

        For additional information regarding our Series A Convertible Preferred Stock and our Series B Preferred Stock please see Note 13 and Exhibit 3.(i), which exhibit is hereby incorporated by this reference.

        Information on our Common Stock authorized for issuance under equity compensation plans is contained in Item 12 under the caption "Equity Compensation Plan Information". See Notes 13 and 14 to our consolidated financial statements for a description of our employee stock purchase plan and our employee stock option plans, respectively.

ITEM 6.    SELECTED FINANCIAL DATA

        Selected historical financial data presented below as of and for the years ended October 31, 1998, 1999 and 2000, the two months ended December 31, 2000 and the years ended December 31, 2001 and 2002 have been derived from our audited consolidated financial statements, which financial statements have been audited by KPMG LLP, independent auditors. The following financial information reflects the acquisitions and dispositions of certain businesses during the period 1998 through 2002, including the acquisition of SGHC since September 6, 2000 and the acquisition of 65% of the equity of Serigrafica Chilena S.A. ("SERCHI") since June 5, 2002. In connection with the acquisition of SGHC, we changed our fiscal year from an October 31 year-end to a calendar year-end, beginning with the year ended December 31, 2001. As a result, the following summary presents selected financial data for the years ended October 31, 1998, 1999 and 2000, the two-month transition period ended December 31, 2000 and the years ended December 31, 2001 and 2002. These data should be read in conjunction with Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations, and our Consolidated Financial Statements and the notes thereto, included in Item 8 of this Annual Report.

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FIVE YEAR SUMMARY OF SELECTED FINANCIAL DATA
(in thousands, except per share amounts)

										Two Months Ended		Year Ended		Year Ended
			Years Ended October 31,							December 31,
			1998			(c)1999		(e)2000		2000		2001		2002
Selected Statement of Operations Data:
Operating Revenues:
	Services		$	135,790		148,660		186,520		57,584		364,567		382,818
	Sales			23,523		62,488		46,828		9,007		75,674		72,435
				159,313		211,148		233,348		66,591		440,241		455,253
Costs and Expenses:
	Cost of services			88,916		99,496		126,601		39,592		231,285		221,038
	Cost of sales			15,739		43,937		29,299		5,547		47,158		47,412
	Amortization of service contract software(a)			1,982		2,180		1,765		517		4,366		4,930
	Selling, general and administrative			26,205		27,178		35,664		9,902		56,695		63,132	(g)
	Depreciation and amortization(k)			27,507		20,009		26,061		8,081		50,843		37,905
	Interest expense			15,521		16,177		31,231		8,790		50,363		44,842	(h)
	Other (income) expense			(1,064	)	15		(456	)	(247	)	37		636
	Loss on sale of businesses			66	(b)	1,600	(d)	—		—		—		—
		Total costs and expenses		174,872		210,592		250,165		72,182		440,747		419,895
Income (loss) before income tax expense (benefit) and extraordinary items				(15,559	)	556		(16,817	)	(5,591	)	(506	)	35,358
Income tax expense (benefit)				321		177		1,603		(677	)	78		(30,193)	(i)
Income (loss) before extraordinary items				(15,880	)	379		(18,420	)	(4,914	)	(584	)	65,551
Extraordinary losses				—		—		12,567	(f)	—		—		13,501	(j)
Net income (loss)				(15,880	)	379		(30,987	)	(4,914	)	(584	)	52,050
Convertible preferred paid-in-kind dividend				—		—		1,014		1,143		7,051		7,484
Net Income (loss) available to common stockholders			$	(15,880	)	379		(32,001	)	(6,057	)	(7,635	)	44,566
Basic and diluted income (loss) per share:
Basic income (loss) before extraordinary items available to common stockholders			$	(0.44	)	0.01		(0.53	)	(0.15	)	(0.19	)	1.16
Diluted income (loss) before extraordinary items available to common stockholders			$	(0.44	)	0.01		(0.53	)	(0.15	)	(0.19	)	0.82
Basic extraordinary items, net of tax			$	—		—		(0.34	)	—		—		(0.27)
Diluted extraordinary items, net of tax			$	—		—		(0.34	)	—		—		(0.17)
Basic net income (loss) available to common stockholders(k)			$	(0.44	)	0.01		(0.87	)	(0.15	)	(0.19	)	0.89
Diluted net income (loss) available to common stockholders(k)			$	(0.44	)	0.01		(0.87	)	(0.15	)	(0.19	)	0.65
Weighted average number of shares used in per share calculation:
	Basic shares			35,696		36,118		36,928		40,025		40,340		50,221
	Diluted shares			35,696		38,343		36,928		40,025		40,340		80,151
Selected Balance Sheet Data (End of Period):
Total assets			$	156,500		165,559		647,215		636,967		601,952		673,978
Total long-term debt, including current installments			$	158,870		157,144		443,834		440,680		439,735		360,529
Stockholders' equity (deficit)			$	(48,638	)	(48,219	)	34,319		28,153		24,078		184,926

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The following notes are an integral part of these selected historical consolidated financial data.

(a)

Reflects the reclassification of "amortization of service contract software" as a component of operating expenses, which amounts had been included in depreciation and amortization in previous filings.

(b)

Reflects $66 of unusual loss resulting from the adjustment of the prior sales of our CBS and Tele Control businesses for the fiscal year ended October 31, 1998.

(c)

Effective November 1, 1998, we lengthened the depreciable lives of pari-mutuel terminals from seven to ten years as a result of the renewal of a number of key service contracts and the realized equipment durability. The change in the depreciable lives of pari-mutuel terminals resulted in an approximate $1,100 improvement in net income (loss) and a $0.03 improvement in net income (loss) per basic and diluted share in each of the four quarters of fiscal 1999.

(d)

Reflects $1,600 of unusual loss resulting from the sale of our SJC Video business.

(e)

In the fourth quarter of fiscal year ended October 31, 2000, we recognized unusual interest expense charges in the amount of $7,511 attributable to payments, in the form of warrants to purchase 2,900 shares of common stock to certain financial advisors in connection with their services in obtaining certain financial commitments to acquire SGHC, $1,200 of additional interest expense as a result of the required prefunding of our 12¹/2% Senior Subordinated Notes, and approximately $2,300 of incremental business integration costs as a result of the acquisition of SGHC. We also recorded a $1,135 write-off of its option to purchase Atlantic City Race Course as a result of the New Jersey legislature's failure to pass the necessary legislation to allow OTB expansion in the state and recorded an extraordinary charge of $12,567 in connection with the write-off of deferred financing fees and payment of the call premium on our 10⁷/8% Series B Senior Notes due August 1, 2004.

(f)

Reflects the write-off of $12,567 of deferred financing fees and payment of the call premium on our 10⁷/8% Series B Senior Notes.

(g)

Includes approximately $1.1 million of accrued incremental costs associated with the Pick Six matter.

(h)

Includes approximately $3.3 million in debt restructuring charges related to interest rate swaps that were settled in connection with the refinancing of our 2000 Facility.

(i)

Includes an income tax benefit of $34.5 million from the recognition of net operating loss carryforwards at December 31, 2002.

(j)

Reflects the write-off of approximately $10.2 million of deferred financing fees related to the refinancing of the 2000 Facility, the payment of approximately $11.2 million of redemption premium from the repurchase of a portion of the 12¹/2% Senior Subordinated Notes and the payment of approximately $1.1 million in bank fees to permit us to use a majority of the net proceeds from the 2002 Equity Offering to redeem subordinated debt. These charges have been reduced by approximately $9.0 million in income tax benefits.

(k)

On January 1, 2002, we adopted Statement No. 142, Goodwill and Other Intangible Assets ("SFAS 142"). SFAS 142 requires that goodwill and intangible assets with indefinite useful lives no longer be amortized. Instead, they will be tested for impairment at least annually in accordance with the provisions of SFAS 142.

At December 31, 2001 we had unamortized goodwill of approximately $195 million and unamortized identifiable intangible assets in the amount of approximately $60 million, all of which were subject to the transition provisions of SFAS 142. In connection with the adoption of

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SFAS 142, we evaluated our intangible assets and determined that our Connecticut OTB operating right and our trade name with net carrying amounts at December 31, 2001 of approximately $11.7 million and $30.1 million, respectively, have indefinite useful lives and, accordingly, we ceased amortization as of January 1, 2002. In addition, as required by SFAS 142, we reclassified our employee work force intangible asset with a net carrying value of approximately $3.2 million, net of related deferred tax liabilities, to goodwill effective January 1, 2002.

The following table compares the pro forma net income (loss) available to common stockholders for the years ended October 31, 1998, 1999, and 2000, the two months ended December 31, 2000, and the year ended December 31, 2001, adjusted to reflect the adoption of SFAS 142 as if it had occurred at the beginning of the periods presented, to the reported net income available to common stockholders for the year ended December 31, 2002:

								Two Months Ended		Year Ended		Year Ended
		Years Ended October 31,						December 31,
		1998			1999	2000		2000		2001		2002
		Pro Forma			Pro Forma	Pro Forma		Pro Forma		Pro Forma		As Reported
Adjusted income available to common stockholders:
Adjusted income (loss) before extraordinary item		$	(12,539	)	2,610	(15,360	)	(3,123	)	11,240		65,551
Adjusted income (loss) before extraordinary item available to common stockholders		$	(12,539	)	2,610	(16,374	)	(4,266	)	4,189		58,067
Adjusted net income (loss) available to common stockholders		$	(12,539	)	2,610	(28,941	)	(4,266	)	4,189		44,566
Adjusted earnings per share amounts — basic and diluted:
Adjusted income before extraordinary item per share available to common stockholders:
	Basic	$	(0.35	)	0.07	(0.44	)	(0.11	)	0.10		1.16
	Diluted	$	(0.35	)	0.07	(0.44	)	(0.11	)	0.09		0.82
Adjusted net income (loss) per share available to common stockholders:
	Basic	$	(0.35	)	0.07	(0.78	)	(0.11	)	0.10		0.89
	Diluted	$	(0.35	)	0.07	(0.78	)	(0.11	)	0.09		0.65
Shares used in calculating adjusted per share amounts:
	Basic		35,696		36,118	36,928		40,025		40,340		50,221
	Diluted		35,696		38,343	36,928		40,025		45,412		80,151
Reconciliation of reported net income to adjusted net income:
	Reported net income (loss) available to common stockholders	$	(15,880	)	379	(32,001	)	(6,057	)	(7,635	)	44,566
Add back:
	Amortization of goodwill and intangible assets with indefinite lives, net of tax benefit		3,341		2,231	3,060		1,791		11,824		—
	Adjusted net income (loss) available to common stockholders	$	(12,539	)	2,610	(28,941	)	(4,266	)	4,189		44,566

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ITEM 7.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

Background

        We are a leading worldwide provider of services, systems and products to both the instant ticket lottery industry and pari-mutuel wagering industry based on revenues. We believe we offer our customers the widest array of some of the most technologically advanced products and services in each of these industries. We also believe that we are the world's only fully integrated lottery service provider, offering lottery authorities on-line lottery systems, instant tickets and cooperative services programs.

        On September 6, 2000, our predecessor company, Autotote Corporation, completed the acquisition of Scientific Games Holding Corporation ("SGHC"). The operating results of SGHC's businesses have been included in the consolidated statements of operations from the date of the acquisition.

        On June 5, 2002, we completed the acquisition of 65% of the equity of Serigrafica Chilena S.A. ("SERCHI"). Subsequent to the acquisition, we changed the name of SERCHI to Scientific Games Latino America S.A. The purchase price was approximately $3.9 million in cash and up to $4.4 million in cash or stock payable to SERCHI stockholders upon the achievement of certain financial performance levels of SERCHI over the next four years. The acquisition was recorded using the purchase method of accounting and the acquired assets and liabilities have been recorded at their estimated fair values at the date of acquisition. The operating results of the SERCHI business have been included in the consolidated statements of operations since the date of acquisition.

        Our revenues are derived from two principal sources: service revenues and sales revenues. Service revenues are generally earned pursuant to multi-year contracts to provide instant ticket and related services and on-line and pari-mutuel wagering systems and services, or are derived from wagering by customers at facilities we own or lease. We believe our service revenues are recurring in nature. Sales revenues are derived from sales of prepaid phone cards and from the sale of wagering systems, equipment, and software licenses.

        We operate primarily in four business segments: Lottery Group, Pari-mutuel Group, Venue Management Group and Telecommunications Products Group.

        Our Lottery Group derives revenues from the sale of instant lottery tickets and related services and the sale or operation of on-line lottery systems. In 2002, our Lottery Group accounted for approximately 65% of all retail sales of instant lottery tickets in the United States. In the instant ticket business, we typically sell our tickets for a per unit price or are paid a fee equal to a percentage of the retail value of the instant tickets sold by a state lottery. In the on-line lottery market in the United States, we are generally paid a fee equal to a percentage of all dollars wagered on lottery tickets; in international markets, we generally sell our lottery systems to the lottery operators. "On-line" lottery refers to a computerized system in which lottery terminals in retail outlets are continuously connected to a central computer system for the sale and validation of lottery tickets and related functions.

        Our Lottery Group provides instant tickets and related services and lottery systems. Instant ticket and related services includes ticket design and manufacturing as well as value-added services, including game design, sales and marketing support, inventory management and warehousing and fulfillment services. In addition, this division includes promotional instant tickets and pull-tab tickets that we sell to both lottery and non-lottery customers. Our lottery systems business is comprised of Autotote's historical Lottery Operations segment as well as SGHC's systems business, both of which include the supply of transaction processing software for the accounting and validation of both instant ticket and on-line lottery games, point-of-sale terminal hardware sales, central site computers and communication hardware sales, and ongoing support and maintenance services for these products. This business line also includes software, hardware and support service for sports betting and credit card processing

39

systems. We currently operate on-line lottery systems for seven of the 40 on-line lottery authorities in the United States, and we believe we are the second largest on-line lottery provider in Europe.

        Our Pari-mutuel Group is a leading worldwide provider of wagering systems to the pari-mutuel wagering industry, to which we also provide related race broadcasting and telecommunications services. Our Pari-mutuel Group is comprised of our North American and international on-track, off-track and inter-track pari-mutuel services, simulcasting and communications services, and video gaming, as well as sales of pari-mutuel systems and equipment. We provide our systems and services to thoroughbred, harness and greyhound racetracks, OTBs, casinos, jai alai frontons and other establishments where pari-mutuel wagering is permitted. We are generally paid a percentage of all racing industry wagers, or Handle, processed by our wagering systems, and we receive a service fee for our satellite communications services on a per event or a monthly subscription basis. In 2002, our systems processed approximately 65% of the estimated $18 billion in pari-mutuel wagering conducted on horse racing in North America.

        Our Venue Management Group includes our Connecticut OTB operations and our Dutch on-track and off-track betting operations.

        Our Telecommunications Products Group is comprised of our prepaid cellular phone card business.

        The first and fourth quarters of the calendar year traditionally comprise the weakest seasons for our pari-mutuel wagering businesses. As a result of inclement weather during the winter months, a number of racetracks do not operate and those that do operate often experience missed racing days. This adversely affects the amounts wagered and our corresponding service revenues. Wagering equipment sales and software license revenues usually reflect a limited number of large transactions, which do not recur on an annual basis. Consequently, revenues and operating results can vary substantially from period to period as a result of the timing of revenue recognition for major equipment sales and software license revenue. In addition, instant ticket and prepaid phone card sales may vary depending on the season and timing of contract awards, changes in customer budgets, ticket inventory levels, lottery retail sales and general economic conditions.

        Operating results may also vary significantly from period to period depending on the addition or disposition of business units in each period. The acquisition of SGHC in 2000 and, to a lesser extent, the acquisition of 65% of the equity of SERCHI in 2002, both of which were accounted for as purchases, affect the comparability of operations from period to period (see Note 3 to the Consolidated Financial Statements).

        In connection with the acquisition of SGHC, we changed our fiscal year-end from an October 31 year-end to a calendar year-end, beginning with the year ended December 31, 2001. Effective April 27, 2001, we changed our corporate name from Autotote Corporation to Scientific Games Corporation. On January 29, 2002, we transferred the listing for our Class A common stock to the Nasdaq National Market, and our trading symbol was changed to SGMS.

Critical Accounting Policies

        The SEC recently issued disclosure guidance for "critical accounting policies". The SEC defines "critical accounting policies" as those that require application of management's most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain and may change in subsequent periods.

        The following is not intended to be a comprehensive list of all of our accounting policies. Our significant accounting policies are more fully described in Note 1 to the Consolidated Financial Statements. In many cases, the accounting treatment of a particular transaction is specifically dictated by accounting principles generally accepted in the United States of America, with no need for

40

management's judgment in their application. There are also areas in which management's judgment in selecting an available alternative would not produce a materially different result.

        We have identified the following as accounting policies critical to us: revenue recognition, valuation of long-lived and intangible assets and goodwill, income taxes and management estimates.

Revenue recognition

        Almost all of our revenues, except revenues earned from the sale of wagering systems, are earned pursuant to contractual terms and conditions either as a percentage of the amount wagered or when products are shipped to the customer and the customer assumes ownership of the product. Such revenues do not involve difficult, subjective or complex judgements.

        Revenues from fixed price contracts to provide wagering systems including equipment and software licenses are recognized on the percentage of completion method of accounting based on the ratio of costs incurred to estimated total costs to complete with revisions to estimated costs reflected in the period in which changes become known. Anticipated losses on fixed price contracts are recognized when the losses can be estimated. Recognition of revenue under the percentage of completion method requires us to make estimates regarding the resources required or the scope of work to be performed. If we do not accurately estimate the extent of work to be performed, manage our projects properly or complete our contracts within the specified time period, we may experience changes in revenues and resulting reductions in margins or losses on our contracts in subsequent periods.

        At the time we enter into service or sales contracts, we assess whether the fee associated with our revenue transactions is fixed and determinable and whether or not collection is reasonably assured. We assess whether the fee is fixed and determinable based on the payment terms associated with the transaction. If a significant portion of our fee is due beyond our normal payment terms which may vary depending on the nature of the contract and location of the customer, we account for the fee as not being fixed and determinable and recognize the revenue when payments become due. We assess collection based on a number of factors, including past transaction history with the customer and the credit worthiness of the customer. For our international customers, we frequently require collateral in the form of a letter of credit for all or a portion of our fee. If we determine collection is not reasonably assured, we defer the fee and recognize the revenue at the time collection becomes reasonably assured, which is generally upon receipt of cash.

Valuation of long-lived and intangible assets and goodwill

        We assess the recoverability of long-lived assets and intangible assets and goodwill whenever events or changes in circumstances indicate that the carrying value of the asset may not be recoverable. Factors we consider important which could trigger an impairment review include:

•

significant under performance relative to expected historical performance or projected future operating results;



•

significant changes in the manner of or use of the acquired assets or the strategy of our overall business;



•

significant adverse change in the legality of our business ventures or the business climate in which we operate; and



•

loss of a significant customer.

        When we determine that the carrying value of the long-lived assets, intangible assets and goodwill may not be recoverable based upon the existence of one or more of the above indicators of impairment, we measure any impairment based on the projected discounted cash flow, using a discount rate equal to a risk-free rate of return, or by a comparison to third party indications of fair market

41

value. At December 31, 2002, the net carrying value of our long-lived assets, intangible assets and goodwill amounted to approximately $487 million.

        In accordance with Statement of Financial Accounting Standards No. 142, Goodwill and Other Intangible Assets (SFAS 142), we ceased amortizing goodwill and intangible assets determined to have indefinite useful lives as of January 1, 2002. Statement of Financial Accounting Standards No. 141, Business Combinations (SFAS 141), and SFAS 142 require that we evaluate our existing goodwill and intangible assets and make any necessary reclassifications to conform with the new criteria outlined in SFAS 141 and SFAS 142. We completed our assessment of goodwill and intangible assets in the second quarter of 2002, and we made all necessary reclassifications to goodwill in accordance with the provisions of SFAS 142. No material adjustments were made to the goodwill and intangible assets balances at December 31, 2001. We also evaluated the remaining useful lives of the intangible assets that will continue to be amortized and have determined that no revision to those useful lives is necessary. We are required to test goodwill and our intangible assets with indefinite useful lives for impairment at least annually. We intend to perform this annual impairment test after the completion of our annual financial operating plan which occurs in the fourth quarter of our fiscal year. We completed our annual impairment test for fiscal 2002 with no adjustment required to the carrying value of our goodwill or intangible assets with indefinite useful lives as of December 31, 2002.

Income Taxes

        Income taxes are calculated using the asset and liability method under Statement of Financial Accounting Standards No. 109 (SFAS 109). Under this method, deferred income taxes are calculated by applying enacted statutory tax rates to cumulative temporary differences between financial statement carrying amounts and the tax basis of existing assets and liabilities. Under SFAS 109, the effect on deferred taxes of a change in tax rates is recognized in income in the period that includes the enactment date.

        We have a history of losses, which have generated sizable net operating loss carryforwards for both state and federal tax purposes. Prior to 2002, we did not recognize any income tax benefits from these losses because we were not able to demonstrate that it was more likely than not that we would generate sufficient taxable income in the future to utilize some or all of these losses, and, accordingly, we recorded a valuation allowance offsetting our deferred tax asset associated with these losses. Because of improved financial results in 2002 and anticipated taxable income in 2003 and beyond, we now believe that it is more likely than not that we will utilize our tax losses to offset future taxable income. As a result, we recorded a deferred tax asset in the fourth quarter of 2002 of approximately $42.4 million by eliminating the corresponding deferred income tax valuation allowance, and recognized an income tax benefit in income from continuing operations of approximately $34.5 million and an income tax benefit as an offset against the extraordinary charges of approximately $7.9 million. Should our expectations for future levels of taxable income not materialize or occur in amounts significantly less than what we have forecasted, some or all of our deferred tax assets may not be recoverable. A significant change in our expectations for future taxable income could have a material affect on our consolidated results of operations and financial position.

Management estimates

        The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Some of the more significant estimates made by management involve percentage of completion for contracted lottery and pari-mutuel wagering systems, as discussed above, evaluation of

42

the recoverability of assets including accounts receivable, inventories and long-lived assets and the assessment of litigation and contingencies, including income taxes.

        Management specifically evaluates the recoverability of accounts receivable by analyzing historical bad debts, customer concentrations, customer credit-worthiness, past collection experiences with specific customers, current economic trends and changes in customer payment terms. We do not require our customers to provide collateral for services provided pursuant to our service contracts. For sales of equipment and wagering systems to international customers we generally require that no less than a significant portion of the amounts to be paid be collateralized by irrevocable letters of credit. Changes in the underlying financial condition of our customers could result in a material impact to our results of operation and financial position.

        Our inventory consists principally of parts and finished goods to which we provide a reserve for obsolete and slow moving items. We continually evaluate the adequacy of our reserves by reviewing historical rates of scrap, on-hand quantities as compared to historical and projected usage levels, orders for new equipment, and contractual requirements to service our installed base of equipment.

        We record a liability pertaining to pending litigation based on our best estimate of a potential loss, if any, or at the minimum end of the range of loss in circumstances where the range of loss can be reasonably estimated. Because of uncertainties surrounding the nature of litigation and the ultimate liability to us, if any, we continually revise our estimated losses as additional facts become known.

Related Party Transactions

        Statement of Financial Accounting Standards No. 57, Related Party Disclosures, requires us to identify and describe material transactions involving related persons or entities and to disclose information necessary to understand the effects of such transactions on our consolidated financial statements. We historically have not been a party to material transactions involving related persons or entities. We are currently part of a consortium which includes Lottomatica S.p.A., our largest equity investor, 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.

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Results of Operations

Year Ended December 31, 2002 Compared to Year Ended December 31, 2001

        The following analysis compares our results of operations for the year ended December 31, 2002 to the results for the year ended December 31, 2001.

	Year Ended December 31, 2002
	Lottery Group		Pari- Mutuel Group	Venue Management Group	Telecom- munications Group	Totals
	(in thousands)
Service revenues	$	239,219	81,546	62,053	—		382,818
Sales revenues		20,721	5,692	—	46,022		72,435
Total revenues		259,940	87,238	62,053	46,022		455,253
Cost of service		131,602	46,677	42,759	—		221,038
Cost of sales		14,474	2,751	—	30,187		47,412
Amortization of service contract software		2,328	2,602	—	—		4,930
Total operating expense		148,404	52,030	42,759	30,187		273,380
Gross profit		111,536	35,208	19,294	15,835		181,873
Selling, general and administrative		26,900	10,675	2,821	4,520		44,916
Depreciation and amortization		21,646	11,679	1,789	2,241		37,355
Segment operating income	$	62,990	12,854	14,684	9,074		99,602
Unallocated corporate selling, general and administrative costs						$	18,766
Consolidated operating income						$	80,836
Interest expense						$	44,842

	Year Ended December 31, 2001
	Lottery Group		Pari- Mutuel Group	Venue Management Group	Telecom- munications Group	Totals
	(in thousands)
Service revenues	$	223,875	79,779	60,913	—		364,567
Sales revenues		13,936	19,554	—	42,184		75,674
Total revenues		237,811	99,333	60,913	42,184		440,241
Cost of service		141,442	46,663	43,180	—		231,285
Cost of sales		9,602	11,817	—	25,739		47,158
Amortization of service contract software		1,705	2,661	—	—		4,366
Total operating expenses		152,749	61,141	43,180	25,739		282,809
Gross profit		85,062	38,192	17,733	16,445		157,432
Selling, general and administrative		25,635	10,738	2,625	4,935		43,933
Depreciation and amortization		33,928	12,131	2,674	1,804		50,537
Segment operating income	$	25,499	15,323	12,434	9,706		62,962
Unallocated corporate selling, general and administrative costs						$	13,068
Consolidated operating income						$	49,894
Interest expense						$	50,363

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Revenue Analysis

        For the year ended December 31, 2002, revenues of $455.3 million improved $15.0 million or 3.4% overall as compared to the prior year, reflecting an $18.3 million or 5.0% increase in service revenue and a $3.2 million or 4.3% decrease in sales revenue.

        The increase in service revenues in 2002 is primarily attributable to a $15.3 million or 7% increase in revenues in the Lottery Group, of which approximately $5.0 million is attributable to a full year of operation of the Maine and Iowa lotteries which started in mid-2001; approximately $11.0 million is attributable to the startup of the South Carolina Educational Lottery in January 2002; approximately $2.0 million is attributable to continued growth in the instant ticket sales; and approximately $5.0 million is attributable to the acquisition of SERCHI in June 2002. These gains were partially offset by the absence of the French lottery business that was sold in the third quarter of 2001. Cooperative service revenues were down slightly for the year as increased revenues at all of our other customers helped offset the loss of approximately $9.0 million of revenues from the loss of the New York contract, which was awarded to another vendor prior to our acquisition of SGHC. Pari-mutuel Group service revenues increased $1.8 million or 2%, primarily reflecting the additional revenue from the Churchill Downs simulcasting contract in 2002 and increased service fees. Venue Management Group service revenues increased $1.1 million or 2%, of which $0.5 million is attributable to the opening of the Hartford Raceview Center in 2002, plus continued growth in telephone account wagering, partially offset by a full year reduction in the New York Racing Association take-out rate. The balance of the increase is attributable to our Dutch operation, primarily due to higher Handle and a favorable exchange rate.

        The $3.2 million decrease in sales revenues in 2002 is primarily attributable to a $13.9 million decrease in sales revenue in the Pari-mutuel Group reflecting the completion in 2001 of a systems and equipment contract to the Turkey Jockey Club. This decrease was partially offset by a $6.8 million increase in systems and equipment sales revenue in the Lottery Group and a $3.8 million or 9% increase in prepaid phone card sales in the Telecommunications Group reflecting the benefit from a 33% increase in volume, partially offset by product unit price decreases.

Gross Profit Analysis

        Gross profit increased $24.4 million or 16% in 2002 reflecting an improvement of $27.9 million on service revenues, partially offset by a decrease of $3.5 million on lower sales revenues. The increase in service revenues discussed above contributed approximately $8.0 million to this gross margin improvement, with cost control measures contributing an additional benefit of approximately $20.5 million, including benefits of approximately $1.0 million in the Pari-mutuel Group and $1.2 million in the Venue Management Group. In addition, cost control measures amounting to approximately $5.7 million, in addition to increased volume, nearly offset the effect of selling price reductions in the prepaid phone card business.

Expense Analysis

        Selling, general and administrative expenses of $63.1 million in the year ended December 31, 2002 were $6.4 million higher than in the same period in 2001, primarily due to $1.1 million of investigation and other costs attributable to the Pick Six matter (see "Business: Security"), the reversal in the prior year period of a $1.5 million litigation reserve when a lawsuit was settled, coupled with higher proposal costs, professional services and compensation.

        Depreciation and amortization expense, including amortization of service contract software, of $42.8 million in the year ended December 31, 2002 decreased $12.4 million from $55.2 million in the same period in 2001. Depreciation expense increased $1.6 million in the year ended December 31, 2002 from the same period in 2001, primarily as a result of higher depreciation on new computer systems

45

and terminals acquired in connection with the start-up of the new on-line lotteries. Amortization expense was $14.0 million lower in the year ended December 31, 2002 than in the same period in 2001, primarily as a result of the adoption of SFAS 141 and SFAS 142 effective January 1, 2002.

        Interest expense of $44.8 million in the year ended December 31, 2002 decreased $5.5 million from $50.4 million in the same period in 2001, primarily due to lower average debt levels following the third quarter 2002 repurchase of $83.0 million of our 12¹/2% Senior Subordinated Notes, plus the effect of lower average interest rates on our outstanding term loans. In addition, interest expense in the year ended December 31, 2002 included approximately $3.3 million of termination charges relating to the refinancing of our 2000 senior secured credit facility (the "2000 Facility") in December 2002. These charges resulted from the early cancellation of three interest rate swap agreements that we were required to maintain pursuant to the terms of the prior credit facility. (See "Liquidity, Capital Resources and Working Capital" for a discussion of the 2002 Offering, the repurchase of our 12¹/2% Senior Subordinated Notes and the replacement of the 2000 Facility with a new 2002 senior secured credit facility.)

Other Expense

        Other expense of $0.6 million in 2002 consists primarily of foreign currency losses.

Extraordinary Item

        In 2002, we repaid approximately $83.0 million of our outstanding 12¹/2% Senior Subordinated Notes and refinanced the 2000 Facility. As a result, we recorded extraordinary charges aggregating approximately $22.5 million related to the redemption premium paid in the amount of approximately $11.2 million on the redeemed Notes; the $1.1 million fee paid to the term loan lenders to permit us to use the majority of the net proceeds from our 2002 Equity Offering to redeem the Notes; and the write off of approximately $10.2 million of previously deferred financing costs. These extraordinary charges were partially offset by federal and state income tax benefits of approximately $9.0 million attributable to these expenses. The resultant total of approximately $13.5 million was reflected as an extraordinary expense in the accompanying consolidated financial statements.

Income Tax Expense

        We recorded an income tax benefit of approximately $39.2 million in the year ended December 31, 2002, of which approximately $9.0 million was reflected as an offset against the extraordinary charges discussed above. We have a history of losses, which have generated sizable net operating loss carryforwards for both state and federal tax purposes. Prior to 2001, we did not recognize any income tax benefits from these losses because we were not able to demonstrate that it was more likely than not that we would generate sufficient taxable income in the future to utilize some or all of these losses, and, accordingly, we recorded a valuation allowance offsetting our deferred tax asset associated with these losses. In 2001, we recognized operating loss carryforwards in the amount of $2.6 million plus the reversal of $3.7 million of deferred tax liabilities provided in connection with the acquisition of SGHC. Because of improved financial results in 2002 and anticipated taxable income in 2003 and beyond, we now believe that it is more likely than not that we will utilize our tax losses to offset future taxable income considering any limitations on the use of our tax losses imposed by the Internal Revenue Code of 1986. As a result, we recorded a deferred tax asset in the fourth quarter of 2002 of approximately $42.4 million by eliminating the corresponding deferred income tax valuation allowance, and recognized an income tax benefit in income from continuing operations of approximately $34.5 million and an income tax benefit as an offset against the extraordinary charges of approximately $7.9 million. As a result of our recognition of the income tax benefit of the net operating loss carryforward in 2002, the financial statement income tax provision is expected to increase from approximately 15% in 2002 to

46

approximately 34% in 2003; however, we anticipate that our cash tax rate in 2003 will be approximately 18% as a result of utilizing some of our tax losses to offset taxes that would otherwise be payable.

        In the year ended December 31, 2001, we recorded an income tax expense of $0.08 million. Federal, state and foreign taxes were mostly offset by the usage of existing net operating loss carryforwards in the amount of $2.6 million plus the reversal of deferred tax liabilities provided in connection with the acquisition of SGHC. No current tax benefit was recognized in the year ended December 31, 2001 on the then remaining value of the domestic net operating loss carryforwards.

Year Ended December 31, 2001 Compared to Pro Forma Year Ended December 31, 2000

        On September 6, 2000, we completed the acquisition of SGHC. The operating results of SGHC's businesses have been included in the consolidated statements of operations from the date of the acquisition. Because the acquisition of SGHC had such a significant effect on our business and because we also changed our year end reporting date, we do not believe that a comparison of the actual results for the year ended December 31, 2001 to the actual results for the year ended October 31, 2000 is meaningful. Therefore, the following analysis compares our results of operations for 2001 to the pro forma results for the year ended December 31, 2000, as if SGHC had been acquired at the beginning of 2000.

	Year Ended December 31, 2001
	Lottery Group		Pari- Mutuel Group	Venue Management Group	Telecom- munications Group	Totals
	(in thousands)
Service revenues	$	223,875	79,779	60,913	—		364,567
Sales revenues		13,936	19,554	—	42,184		75,674
Total revenues		237,811	99,333	60,913	42,184		440,241
Cost of service		141,442	46,663	43,180	—		231,285
Cost of sales		9,602	11,817	—	25,739		47,158
Amortization of service contract software		1,705	2,661	—	—		4,366
Total operating expenses		152,749	61,141	43,180	25,739		282,809
Gross profit		85,062	38,192	17,733	16,445		157,432
Selling, general and administrative		25,635	10,738	2,625	4,935		43,933
Depreciation and amortization		33,928	12,131	2,674	1,804		50,537
Segment operating income	$	25,499	15,323	12,434	9,706		62,962
Unallocated corporate selling, general and administrative costs						$	13,068
Consolidated operating income						$	49,894
Interest expense						$	50,363

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	Pro Forma Year Ended December 31, 2000 (Unaudited)
	Lottery Group		Pari- Mutuel Group	Venue Management Group	Telecom- munications Group	Totals
	(in thousands)
Service revenues	$	199,692	79,776	61,987	—		341,455
Sales revenues		26,973	16,583	—	39,646		83,202
Total revenues		226,665	96,359	61,987	39,646		424,657
Cost of service		136,464	47,413	44,937	—		228,814
Cost of sales		19,908	8,894	—	22,705		51,507
Amortization of service contract software		1,218	1,137	—	—		2,355
Total operating expenses		157,590	57,444	44,937	22,705		282,676
Gross profit		69,075	38,915	17,050	16,941		141,981
Selling, general and administrative		33,864	12,869	2,914	5,601		55,248
Depreciation and amortization		27,891	15,762	2,802	1,633		48,088
Segment operating income	$	7,320	10,284	11,334	9,707		38,645
Unallocated corporate selling, general and administrative costs						$	14,892
Consolidated operating income						$	23,753
Interest expense						$	50,978

Revenue Analysis

        For the year ended December 31, 2001, revenues of $440.2 million improved $15.6 million or 4% overall as compared to the pro forma prior year, reflecting a $23.1 million or 7% increase in service revenues which was partially offset by a $7.5 million or 9% decrease in sales revenues.

        The increase in service revenues in 2001 is primarily attributable to a $24.2 million or 12% increase in revenues in the Lottery Group of which $4.0 million is attributable to a full year operation for the Vermont and New Hampshire lotteries, $5.0 million is attributable to the start-up of the Iowa and Maine lotteries in July 2001, $2.2 million is attributable to continued solid growth in instant ticket sales and $9.6 million is attributable to increased cooperative service revenues. Pari-mutuel Group service revenues of $79.8 million were flat compared to the pro forma prior year with increases in the North American market of $2.0 million being offset by $1.2 million related to lower Handle in the European markets and $0.5 million caused by the strengthening of the dollar. The $1.1 million decline in Venue Management Group revenues to $60.9 million in 2001 as compared to pro forma 2000 is attributable to a $0.4 million decline due to the strengthening of the dollar, a $0.3 million decline due to lower revenues in Connecticut because of the reduced take-out rate implemented by the New York Racing Association in July 2001, and a $0.3 million decline due to the loss of Handle immediately following the September 11, 2001 attack.

        The $7.5 million decrease in sales revenues to $75.7 million in 2001 as compared to pro forma 2000 is primarily attributable to the completion in 2000 of the EXTREMA® terminal sales contract with Sisal Sport Italia S.p.A., which accounted for $17.5 million of sales revenues in 2000. This decrease was partially offset by $4.4 million of new lottery related equipment sales in 2001, $3.1 million of pari-mutuel equipment sales to foreign customers, plus a $2.5 million or 6% increase in prepaid phone card sales reflecting the benefit from a 22% volume growth rate, partially offset by product price decreases.

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Gross Profit Analysis

        Gross profit of $157.4 million in the year ended December 31, 2001 increased $15.5 million or 11% from the pro forma prior year. The Lottery Group revenue improvements discussed above contributed $9.7 million to gross profits and cost control measures contributed approximately $6.8 million. Cost control measures saving $0.5 million in the Pari-mutuel Group and $1.4 million in the Venue Management Group, which included the restructuring of the operations in Germany and The Netherlands, also contributed to the overall improvement in margins. In addition, cost control measures amounting to $5.8 million and volume increases of $3.7 million helped to reduce the $10.0 million effect of selling price reductions in the prepaid phone card business.

        Gross profit as a percentage of service revenues increased to 35% in the year ended December 31, 2001, compared to 32% in the pro forma prior year. This gross profit increase results primarily from revenue improvements and cost control measures across all segments of our service businesses, as discussed above. Gross profit as a percentage of sales revenues was 38% in the year ended December 31, 2001, the same as in the pro forma prior year, reflecting a comparable mix of systems and equipment sold in the periods.

Expense Analysis

        Selling, general and administrative expenses, including software development costs, of $56.7 million in the year ended December 31, 2001 were $13.4 million or 19% lower than in the pro forma prior year primarily as a result of $11.0 million in cost reduction programs and merger-related synergies.

        Depreciation and amortization expense, including amortization of service contract software, of $55.2 million in the year ended December 31, 2001 increased $4.8 million or 9% from $50.4 million in the pro forma prior year as a result of $2.8 million of depreciation on new computer systems and terminals for the expanded domestic lottery business, $3.7 million of depreciation on the year 2000 expansion of the Alpharetta, Georgia printing facility and the new Leeds, United Kingdom printing facility, partially offset by a $1.8 million reduction for pari-mutuel assets that became fully depreciated.

        Interest expense of $50.4 million in the year ended December 31, 2001 decreased $0.6 million from $51.0 million in the pro forma prior year due to lower interest rates on floating rate debt and lower average debt outstanding during the year 2001.

        Other expense of $0.04 million in the year ended December 31, 2001 consisted primarily of currency translation expense, and other income of $0.4 million in the pro forma year ended December 31, 2000 consisted primarily of interest on invested excess cash.

Income Tax Expense

        We recorded an income tax expense of $0.08 million in the year ended December 31, 2001. Federal, state and foreign taxes in the year 2001 were mostly offset by the usage of existing net operating loss carryforwards in the amount of $2.6 million plus the reversal of $3.7 million of deferred tax liabilities provided in connection with the acquisition of SGHC. No current tax benefit has been recognized on the remaining value of the domestic net operating loss carryforwards in the period.

Liquidity, Capital Resources and Working Capital

        In order to finance the acquisition of SGHC in 2000 and refinance substantially all of our then existing indebtedness, we conducted a series of financings in September 2000, which significantly changed our capital structure and significantly increased our leverage.

        In 2002, we initiated a debt reduction program. In July 2002, we completed the public offering and sale of 14.4 million shares of our Class A Common Stock at a price of $7.25 per share (the "2002

49

Offering"), and used the net proceeds of approximately $98.4 million (prior to deducting underwriting discounts, commissions and offering expenses), to redeem approximately $83.0 million of our 12¹/2% Senior Subordinated Notes. As a result of these transactions, our capital structure improved, and Standard & Poors Ratings Group and Moody's Investors Service, Inc. upgraded our credit ratings. In December 2002, we replaced our existing senior secured credit facility (the "2000 Facility"), with a new senior secured credit facility (the "2002 Facility"), consisting of a $50.0 million revolving credit facility due 2006 that can be increased to $70.0 million, and a $290.0 million Term B Loan due 2008. As a result of the 2002 debt reduction program, we expect interest expense in 2003 to total approximately $26.0 million, assuming debt levels and interest rates remain constant.

        Our financing arrangements impose certain limitations on our and our subsidiaries' operations.

        The credit agreement governing the 2002 Facility contains certain covenants that, among other things, limits our ability, and the ability of certain of our subsidiaries, to incur additional indebtedness, pay dividends or make distributions or certain other restricted payments, purchase or redeem capital stock, make investments or extend credit, engage in certain transactions with affiliates, engage in sale leaseback transactions consummate certain assets sales, effect a consolidation or merger, or sell, transfer, lease or otherwise dispose of all or substantially all assets, and create certain liens and other encumbrances on new assets. Additionally, the credit agreement governing the 2002 Facility contains the following financial covenants that are computed quarterly on a rolling four-quarter basis as applicable:

•

A maximum Consolidated Leverage Ratio of 4.00, which will be reduced on the first day of each calendar quarter through July 1, 2005, from which date until December 2008 the ratio shall be 3.00. Consolidated Leverage Ratio means the ratio of (x) the aggregate stated balance sheet amount of our indebtedness determined on a consolidated basis in accordance with GAAP as of the last day of the fiscal quarter for which such determination is being made to (y) Consolidated EBITDA for the four consecutive fiscal quarters ended on the last day of the fiscal quarter for which such determination is being made.



•

A minimum Consolidated Interest Coverage Ratio of 2.50, which will be increased on the first day of each calendar quarter through July 1, 2004, from which date until December 2008 the ratio shall be 3.75. Consolidated Interest Coverage Ratio means the ratio computed for our four most recent fiscal quarters of (x) Consolidated EBITDA to (y) total interest expense less non-cash amortization costs included in interest expense.



•

A minimum Consolidated Fixed Charge Coverage Ratio of 1.65 which will be increased on the first day of each calendar quarter through July 1, 2005, from which date until December 2008 the ratio shall be 1.85. Consolidated Fixed Charge Coverage Ratio means, as of any date of determination, the ratio computed for our four most recent fiscal quarters of (x) Consolidated EBITDA to (y) the sum of (i) total interest expense less non-cash amortization costs included in interest expense, (ii) scheduled payments of principal on indebtedness, (iii) certain restricted payments and (iv) all income taxes paid in cash.



•

A maximum Consolidated Senior Debt Ratio of 3.25, which will be reduced on the first day of each calendar quarter through July 1, 2005, from which date until December 2008 the ratio shall be 2.50. Consolidated Leverage Ratio means the ratio of (x) the aggregate stated balance sheet amount of our indebtedness, less the amount of Notes, determined on a consolidated basis in accordance with GAAP as of the last day of the fiscal quarter for which such determination is being made to (y) Consolidated EBITDA for the four consecutive fiscal quarters ended on the last day of the fiscal quarter for which such determination is being made.

        For purposes of the foregoing limitations, Consolidated EBITDA means the sum of (i) consolidated net income, (ii) consolidated interest expense with respect to all outstanding

50

indebtedness, (iii) provisions for taxes based on income, (iv) total depreciation expense, (v) total amortization expense and (vi) certain adjustments, in each case for the period being measured, all of the foregoing as determined on a consolidated basis for us and our subsidiaries in accordance with GAAP. Although we were in compliance with our loan covenants at December 31, 2002 and expect to continue to remain in compliance over the next 12 months, no assurances can be provided that we will be able to do so or that we will be able to continue to meet the covenant requirements beyond 12 months.

        The 2002 Facility provides for borrowings up to $50.0 million to be used for working capital and general corporate purpose loans and for letters of credit. At December 31, 2002, we had outstanding letters of credit of $21.8 million, but no outstanding borrowings under the 2002 Facility, leaving us with a total availability of $28.2 million as compared to $31.0 million at December 31, 2001. Our ability to continue to borrow under the Facility will depend on remaining in compliance with the limitations imposed by our lenders, including maintenance of specified financial covenants. Presently, we have not sought and, therefore, do not have any other financing commitments.

        Our contractual obligations and commercial commitments principally include obligations associated with our outstanding indebtedness and future minimum operating lease obligations as set forth in the table below.

	Cash Payments Due by Period
	Total		Within 1 Year	2-3 Years	4-5 Years	After 5 Years
	(in thousands)
Contractual Obligations:
Long term debt, 121/2% notes and 2002 Facility	$	357,043	2,900	5,800	5,800	342,543
Other long term debt		3,486	965	974	851	696
Operating leases		41,376	10,630	20,185	6,136	4,425
Total contractual cash obligations	$	401,905	14,495	26,959	12,787	347,664

        Our Series A Convertible Preferred Stock requires dividend payments at a rate of 6% per annum. To date, we have satisfied the dividend requirement using additional shares of preferred stock. The terms of the convertible preferred stock provide us with the flexibility to satisfy the dividend in cash commencing on September 30, 2002, subject to bank approval. We expect that we will continue to make such payments in-kind; accordingly, this obligation has not been reflected in the table above.

        Our pari-mutuel wagering and on-line lottery systems service contracts require us to, among other things, maintain the central computing system and related hardware in efficient working order, provide added software functionality upon request, provide on-site computer operators, and furnish necessary supplies. Our primary expenditures associated with these services are personnel and related costs, which are expensed as incurred and are included in Operating Expenses-Services in the consolidated statements of operations. Historically, the revenues we derive from our service contracts have exceeded the direct costs associated with fulfilling our obligations under these pari-mutuel wagering and lottery systems service contracts. We expect that we will continue to realize positive cash flow and operating income as we extend or renew existing service contracts. We also expect that we will enter into new contracts that are accretive to our cash flow. In addition, through advancements in technology, we are continually deploying more efficient and cost effective methods for manufacturing and delivering our products and services to our customers. We expect that technological efficiencies will continue to positively impact our future cash flows and operating results. We are not party to any other material short term or long-term obligations or commitments pursuant to these service contracts.

        Periodically, we bid on new pari-mutuel and on-line lottery contracts. Once awarded, these contracts generally require significant up-front capital expenditures for terminal assembly, customization

51

of software, software and equipment installation and telecommunications configuration. Historically we have funded these up front costs through cash flows generated from operations, available cash on hand and borrowings under our credit facilities. Our ability to continue to procure new contracts will depend on, among other things, our then present liquidity levels and/or our ability to obtain additional financing at commercially acceptable rates to finance the initial up front costs. Once operational, long term service contracts have been accretive to our operating cash flow. For fiscal 2003, we anticipate that capital expenditures and software expenditures will be approximately $35.0 million. However, the actual level of expenditures will ultimately depend on the extent to which we are successful in winning new contracts. The amount of capital expenditures in fiscal 2004 and beyond will largely depend on the extent to which we are successful in winning new contracts. Furthermore, our pari-mutuel wagering network consists of approximately 26,000 wagering terminals. Periodically, we elect to upgrade the technological capabilities of older terminals and replace terminals that have exhausted their useful lives. We presently have no commitments to replace our existing terminal base and our obligation to upgrade the terminals is discretionary. Servicing our installed terminal base requires that we maintain a supply of parts and accessories on hand. We are also required, contractually in some cases, to provide spare parts over an extended period of time, principally in connection with our systems and terminal sale transactions. To meet our contractual obligations and maintain sufficient levels of on-hand inventory quantities to service our installed base, we purchase inventory on an as needed basis. We presently have no inventory purchase obligations.

        In connection with our 2002 debt reduction program, we received approximately $96.4 million from the 2002 Offering after deducting the underwriting discounts and commissions and estimated offering expenses, and we used the net proceeds to redeem approximately $83.0 million of our 12¹/2% Senior Subordinated Notes. In connection with this redemption, we were required to pay the noteholders a premium of approximately $11.2 million and bank amendment fees of approximately $1.1 million. We also replaced our 2000 Facility with a new 2002 Facility. Of the $290.0 million in proceeds from the new 2002 Facility, $264.9 million was used to repay long term debt, $0.9 million was used to pay accrued interest, $5.4 million was used to pay related fees, and $4.8 million was used to pay amounts due on interest rate swap agreements.

        At December 31, 2002, our available cash and borrowing capacity totaled $63.1 million compared to $43.6 million at December 31, 2001. Our available cash and borrowing capacities fluctuate principally based on the timing of collections from our customers, cash expenditures associated with new and existing pari-mutuel wagering and lottery systems contracts, repayment of our outstanding debt and changes in our working capital position. The increase in our available cash and borrowing capacity from the December 31, 2001 level principally reflects the impact of the December 2002 senior secured debt refinancing, and the use of cash on hand to fund our wagering systems and other capital expenditures. Net cash provided by operating activities was $69.9 million for the year ended December 31, 2002. Of this amount, $75.6 million was provided by operations and $5.7 million was used for changes in working capital. The working capital changes occurred principally from decreases in accounts payable, accrued liabilities, and primarily accrued interest as a result of the December 2002 senior secured debt refinancing.

        For the year ended December 31, 2002, we spent $31.0 million for wagering systems and capital expenditures, $9.2 million in software and $4.1 million for a majority ownership in SERCHI. These cash expenditures were funded primarily with net cash provided by operating activities and cash on hand. In addition, we capitalized $5.4 million of fees related to the 2002 Facility.

        A portion of our cash flows from operations must be used to pay our interest expense and repay our indebtedness, which will reduce the funds that would otherwise be available to us for our operations and capital expenditures. Interest expense on our outstanding debt was approximately $44.8 million for the year ended December 31, 2002 including approximately $2.3 million of non-cash charges. As a result of the 2002 debt reduction program, we expect interest expense in 2003 to total

52

approximately $26.0 million, assuming debt levels and interest rates remain constant. Approximately, 81% of our debt is in variable rate instruments. Consequently, we are exposed to fluctuations in interest rates. The effect of a 0.125% change in the interest rates associated with our unhedged variable rate debt will result in a change of approximately $365,000 per year in our interest expense assuming no change in our outstanding borrowings. In 2002, prior to the refinancing of our 2000 Facility, we entered into three interest rate swap contracts for an aggregate notional amount of $140 million in response to the requirements of our 2000 Facility. These interest rate swaps obligated us to pay a fixed LIBOR rate and entitle us to receive a variable LIBOR rate on an aggregate $140 million notional amount of debt thereby creating the equivalent of fixed rate debt until May 30, 2003. We structured these interest rate swap agreements to qualify for hedge accounting pursuant to the provisions of SFAS 133. Changes in the fair value of interest rate swaps designated as hedging instruments that effectively offset the variability of cash flows associated with variable rate credit facility obligations are reported as a component of stockholders' equity. These amounts are subsequently reclassified into interest expense as a yield adjustment of the hedged credit facility obligation in the same period in which the related interest affects operations. These swap contracts were terminated when we refinanced the 2000 Facility, and accordingly, approximately $3.2 million of cost was charged to interest expense in 2002.

        We believe that our cash flow from operations, available cash and available borrowing capacity under our revolving credit facility will be sufficient to meet our liquidity needs, including anticipated capital expenditures, for the foreseeable future; however, we cannot assure you that this will be the case. While we are not aware of any particular trends, our lottery contracts periodically renew and we cannot assure you that we will be successful in sustaining our cash flow from operations through renewal of our existing contracts or through the addition of new contracts. In addition, lottery customers in the United States generally require service providers to provide performance bonds in connection with each state contract. Our ability to obtain performance bonds on commercially reasonable terms is subject to prevailing market conditions, which may be impacted by economic and political events. Although we have not experienced any difficulty obtaining such bonds, we cannot assure you that we will continue to be able to obtain performance bonds on commercially reasonable terms or at all. While we are not aware of any reason to do so, if we need to refinance all or part of our indebtedness, including our 12¹/2% Senior Subordinated Notes, on or before maturity, or provide letters of credit or cash in lieu of performance bonds, we cannot assure you that we will be able to obtain new financing or to refinance any of our indebtedness, including our revolving credit facility and our 12¹/2% Senior Subordinated Notes, on commercially reasonable terms or at all.

Impact of Recently Issued Accounting Standards

        In June 2001, the FASB issued Statement No. 143, Accounting for Asset Retirement Obligations ("SFAS 143"). SFAS 143 addresses financial accounting and reporting for obligations associated with the retirement of tangible long-lived assets and the associated asset retirement costs. It applies to legal obligations associated with the retirement of long-lived assets that result from the acquisition, construction, development and (or) the normal operation of a long-lived asset, except for certain obligations of lessees. This Statement amends FASB Statement No. 19, Financial Accounting and Reporting by Oil and Gas Producing Companies, and it applies to all entities. We are required to adopt SFAS 143, effective for calendar year 2003. We do not expect the adoption of SFAS 143 to have a material impact on our future consolidated operations or financial position, as we are now constituted.

        In April 2002, the FASB issued Statement No. 145, Rescission of FASB Statements No. 4, 44 and 64, Amendment of FASB Statement No. 13, and Technical Corrections ("SFAS 145"). SFAS 145 updates, clarifies and simplifies existing accounting pronouncements. SFAS 145 rescinds Statement 4, which required all gains and losses from extinguishment of debt to be aggregated and, if material, classified as an extraordinary item, net of related income tax effect. As a result, the criteria in Opinion 30 will now

53

be used to classify those gains and losses because Statement 4 has been rescinded. Statement 44 was issued to establish accounting requirements for the effects of transition to the provisions of the Motor Carrier Act of 1980. Because the transition has been completed, Statement 44 is no longer necessary.

        SFAS 145 amends Statement 13 to require that certain lease modifications that have economic effects similar to sale-leaseback transactions be accounted for in the same manner as sale-leaseback transactions. This amendment is consistent with the FASB's goal of requiring similar accounting treatment for transactions that have similar economic effects. SFAS 145 also makes technical corrections to existing pronouncements. While those corrections are not substantive in nature, in some instances, they may change accounting practice. We are required to adopt SFAS 145, effective January 1, 2003. We are currently evaluating the impact that the adoption of SFAS 145 will have on our consolidated operations and financial position, however it will be necessary in future years' reports for us to reclassify the extraordinary losses to other income/deductions, pursuant to SFAS 145.

        In July 2002, the FASB issued Statement No. 146, Accounting for Costs Associated with Exit or Disposal Activities ("SFAS 146"). SFAS 146 will spread out the reporting of expenses related to restructurings initiated after 2002 because a commitment to a plan to exit an activity or dispose of long-lived assets will no longer be enough to record a liability for the anticipated costs. Instead, companies will record exit and disposal costs when they are "incurred" and can be measured at fair value, and they will subsequently adjust the recorded liability for changes in estimated cash flows. We are required to adopt SFAS 146, prospectively for exit or disposal activities initiated after December 31, 2002. We do not expect the adoption of SFAS 146 to have a material impact on our future consolidated operations or financial position, as we are now constituted.

Recent Developments

        On February 20, 2003, the New Mexico Lottery Authority board of directors approved us as the choice for the lottery authority's instant ticket and related services contract. We anticipate that the contract will generate approximately $5.3 million of revenue over its four-year term.

        On January 17, 2003, we completed the acquisition of MDI Entertainment, Inc. ("MDI") through (i) a tender offer at $1.60 per share, in cash, (ii) the purchase of shares from MDI's President and Chief Executive Officer pursuant to a separate stock purchase agreement and (iii) a merger agreement, whereby the remaining eight percent of MDI common shares were converted into the right to receive $1.60 per share, in cash. The acquisition will be accounted for using the purchase method of accounting. Had the operating results of MDI been included as if the transaction had been consummated on January 1, 2002, our pro forma operating results for the year ended December 31, 2002 would not have been materially different from our actual reported results.

        On January 9, 2003, we announced that we were awarded the contract to provide pari-mutuel services to STWK, the Poland racing organization. We anticipate that the contract will generate approximately $4.0 million of revenue over the its ten-year term, plus up to an additional $3.0 million of revenue relating to a significant expansion of the racing organization's OTB network and simulcasting systems.

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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

        Our products and services are sold to a diverse group of customers throughout the world. As such, we are subject to certain risks and uncertainties as a result of changes in general economic conditions, sources of supply, competition, foreign exchange rates, tax reform, litigation and regulatory developments. The diversity and breadth of our products and geographic operations mitigate the risk that adverse changes from any single event would materially affect our financial position.

        Additionally, as a result of the diversity of our customer base, we do not consider ourselves exposed to concentration of credit risks. These risks are further minimized by setting credit limits, ongoing monitoring of customer account balances, and assessment of the customers' financial strengths.

        Inflation has not had an abnormal or unanticipated effect on our operations. Inflationary pressures would be significant to our business if raw materials used for instant lottery ticket production, prepaid phone card production or terminal manufacturing are significantly affected. Available supply from the paper and electronics industries tends to fluctuate and prices may be affected by supply.

        For fiscal 2002, inflation was not a significant factor in our results of operations, and we were not impacted by significant pricing changes in our costs, except for personnel related expenditures. We are unable to forecast the prices or supply of substrate, component parts or other raw materials in 2003, but we currently do not anticipate any substantial changes that will materially affect our operating results.

        In certain limited cases, our lottery contracts with our customers contain provisions to adjust for inflation on an annual basis, but we cannot be assured that this adjustment would cover raw material price increases or other costs of services. While we have long-term and generally satisfactory relationships with most of our suppliers, we also believe alternative sources to meet our raw material and production needs are available.

        In the normal course of business, we are exposed to fluctuations in interest rates and equity market risks as we seek debt and equity capital to sustain our operations. At December 31, 2002 approximately one-fifth of our debt was in fixed rate instruments. We consider the fair value of all financial instruments to be not materially different from their carrying value at year-end. The following table provides information about our financial instruments that are sensitive to changes in interest rates. The table presents principal cash flows and related weighted-average interest rates by expected maturity dates. In the third quarter of 2002 we completed the 2002 Offering and used approximately $83.0 million of the net proceeds to redeem a portion of our 12¹/2% Senior Subordinated Notes. In the fourth quarter of 2002 we replaced our senior secured credit facility with a new facility consisting of a revolving credit facility due 2006 that is initially $50.0 million and can be increased to $70.0 million and a $290.0 million Term B Loan due 2008. (See "Liquidity, Capital Resources and Working Capital.")

Principal Amount by Expected Maturity—Average Interest Rate
December 31, 2002
Expected Maturity Date
(dollars in thousands)

		2003			2004		2005		2006		2007		There after		Total		Fair value
Long-term debt:
	Fixed interest rate	$	—		—		—		—		—		67,043		67,043		77,770
	Interest rate		—		—		—		—		—		12.5	%	12.5	%
	Variable interest rate	$	3,865		3,543		3,316		3,304		3,228		276,229		293,486		293,486
	Average interest rate		5.73	%	5.32	%	4.98	%	4.99	%	4.97	%	4.92	%	4.94	%

55

        During 2002, we entered into derivative contracts to hedge part of our foreign currency exposure with respect to future cash receipts under our contract with the Ontario Lottery Commission. These instruments, which have a notional value of 47.7 million Canadian dollars at December 31, 2002, have been designated as cash flow hedges. For the year ended December 31, 2002, we recorded a credit to other comprehensive income (loss) of $0.4 million for the change in the fair value of these foreign exchange instruments.

        The following table provides notional amounts and interest rate information about our Canadian currency hedge derivative financial instruments. We do not hold any market risk instruments for trading purposes.

Notional Amount by Expected Maturity—Canadian Currency Hedge
December 31, 2002
(dollars in thousands)

		2003		2004	2005	2006	2007	There after	Total	Fair value
Canadian currency hedge:
	Notional U.S. $ amount	$	27,440	2,725	—	—	—	—	30,165	352
	Exchange rate		1.58	1.59	—	—	—	—	1.58	—

        We are also exposed to fluctuations in foreign currency exchange rates as the financial results of our foreign subsidiaries are translated into U.S. dollars in consolidation. Assets and liabilities outside the United States are primarily located in the United Kingdom, Germany, Netherlands, France and Austria. Our investment in foreign subsidiaries with a functional currency other than the U.S. dollar are generally considered long-term investments. Accordingly, we do not hedge these net investments. Translation gains and losses historically have not been material. We manage our foreign currency exchange risks on a global basis by one or more of the following: (i) securing payment from our customers in U.S. dollars, when possible, (ii) utilizing borrowings denominated in foreign currency, and (iii) entering into foreign currency exchange contracts. In addition, a significant portion of the cost attributable to our foreign operations is incurred in the local currencies. We believe that a 10% adverse change in currency exchange rates would not have a significant adverse effect on our net earnings or cash flows. We may, from time to time, enter into foreign currency exchange or other contracts to hedge the risk associated with certain firm sales commitments, anticipated revenue streams and certain assets and liabilities denominated in foreign currencies.

        Our cash and cash equivalents and investments are in high-quality securities placed with a wide array of financial institutions with high credit ratings. This investment policy limits our exposure to concentration of credit risks.

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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND
FINANCIAL STATEMENT SCHEDULE

SCIENTIFIC GAMES CORPORATION AND SUBSIDIARIES

		Form 10-K (Page)
Independent Auditors' Report		58
Consolidated Financial Statements:
	Balance Sheets as of December 31, 2001 and 2002	59
	Statements of Operations for the year ended October 31, 2000, the two months ended December 31, 2000, and the years ended December 31, 2001 and 2002	60
	Statements of Stockholders' Equity and Comprehensive Income (Loss) for the year ended October 31, 2000, the two months ended December 31, 2000, and the years ended December 31, 2001 and 2002	61
	Statements of Cash Flows for the year ended October 31, 2000, the two months ended December 31, 2000, and the years ended December 31, 2001 and 2002	62
Notes to Consolidated Financial Statements		64
Schedule:
II. Valuation and Qualifying Accounts		121

        All other schedules are omitted as the required information is inapplicable or the information is presented in the consolidated financial statements or related notes.

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INDEPENDENT AUDITORS' REPORT

The Board of Directors and Stockholders
Scientific Games Corporation:

        We have audited the consolidated financial statements of Scientific Games Corporation and subsidiaries as listed in the accompanying index. In connection with our audits of the consolidated financial statements, we have also audited the financial statement schedule as listed in the accompanying index. These consolidated financial statements and the financial statement schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements and financial statement schedule based on our audits.

        We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

        In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Scientific Games Corporation and subsidiaries as of December 31, 2001 and 2002, and the results of their operations and their cash flows for the year ended October 31, 2000, the two months ended December 31, 2000, and the years ended December 31, 2001 and 2002, in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the related financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.

        As discussed in Note 6 to the consolidated financial statements, the Company adopted the provisions of Statement of Financial Accounting Standards No. 142, "Goodwill and Other Intangible Assets" effective January 1, 2002.

	KPMG LLP
Short Hills, New Jersey February 21, 2003

58

SCIENTIFIC GAMES CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
December 31, 2001 and 2002
(in thousands, except per share amounts)

			2001			2002
ASSETS
Current assets:
	Cash and cash equivalents		$	12,649		34,929
	Accounts receivable, net of allowance for doubtful accounts of $3,889 and $3,772 in 2001 and 2002, respectively			50,410		53,260
	Inventories			19,547		20,535
	Prepaid expenses, deposits and other current assets			15,537		22,654
		Total current assets		98,143		131,378
Property and equipment, at cost				364,837		404,685
	Less accumulated depreciation			168,049		203,819
		Net property and equipment		196,788		200,866
Goodwill, net				195,255		199,926
Operating right, net				11,681		14,020
Other intangible assets, net				48,473		43,802
Other assets and investments				51,612		83,986
		Total assets	$	601,952		673,978
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
	Current installments of long-term debt		$	9,437		3,865
	Accounts payable			26,632		23,888
	Accrued liabilities			51,118		53,513
	Interest payable			8,381		3,597
		Total current liabilities		95,568		84,863
Deferred income taxes				28,568		25,207
Other long-term liabilities				23,440		22,318
Long-term debt, excluding current installments				430,298		356,664
		Total liabilities		577,874		489,052
Commitments and contingencies				—		—
Stockholders' equity:
	Series A convertible preferred stock, par value $1.00 per share, 1,600 shares authorized, 1,220 and 1,248 shares outstanding at December 31, 2001 and 2002, respectively			1,220		1,248
	Series B preferred stock, par value $1.00 per share, 2 shares authorized, none and 1.238 shares outstanding at December 31, 2001 and 2002, respectively			—		1
	Class A common stock, par value $0.01 per share, 199,300 shares authorized, 41,203 and 59,375 shares outstanding at December 31, 2001 and 2002, respectively			412		594
	Class B non-voting common stock, par value $0.01 per share, 700 shares authorized, none outstanding			—		—
	Additional paid-in capital			275,510		384,927
	Accumulated losses			(242,545	)	(197,979	)
	Treasury stock, at cost			(135	)	(3,539	)
	Accumulated other comprehensive loss			(10,384	)	(326	)
		Total stockholders' equity		24,078		184,926
Total liabilities and stockholders' equity			$	601,952		673,978

See accompanying notes to consolidated financial statements.

59

SCIENTIFIC GAMES CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS
Year Ended October 31, 2000, the Two Months Ended December 31, 2000,
and the Years Ended December 31, 2001 and 2002
(in thousands, except per share amounts)

						Two Months Ended
								Years Ended
			Year Ended October 31,
						December 31,
			2000			2000		2001		2002
Operating revenues:
	Services		$	186,520		57,584		364,567		382,818
	Sales			46,828		9,007		75,674		72,435
				233,348		66,591		440,241		455,253
Operating expenses (exclusive of depreciation and amortization shown below):
	Services			126,601		39,592		231,285		221,038
	Sales			29,299		5,547		47,158		47,412
	Amortization of service contract software			1,765		517		4,366		4,930
				157,665		45,656		282,809		273,380
		Total gross profit		75,683		20,935		157,432		181,873
Selling, general and administrative expenses				35,664		9,902		56,695		63,132
Depreciation and amortization				26,061		8,081		50,843		37,905
		Operating income		13,958		2,952		49,894		80,836
Other (income) deductions:
	Interest expense			31,231		8,790		50,363		44,842
	Other (income) expense			(456	)	(247	)	37		636
				30,775		8,543		50,400		45,478
	Income (loss) before income tax expense (benefit) and extraordinary items			(16,817	)	(5,591	)	(506	)	35,358
Income tax expense (benefit)				1,603		(677	)	78		(30,193	)
	Income (loss) before extraordinary items			(18,420	)	(4,914	)	(584	)	65,551
Extraordinary items—early retirement of debt, net of income tax benefit				12,567		—		—		13,501
	Net income (loss)			(30,987	)	(4,914	)	(584	)	52,050
Convertible preferred stock paid-in-kind dividend				1,014		1,143		7,051		7,484
Net income (loss) available to common stockholders			$	(32,001	)	(6,057	)	(7,635	)	44,566
Basic and diluted net income (loss) per share:
	Basic income (loss) before extraordinary items available to common stockholders		$	(0.53	)	(0.15	)	(0.19	)	1.16
	Diluted income (loss) before extraordinary items available to common stockholders		$	(0.53	)	(0.15	)	(0.19	)	0.82
	Basic extraordinary items, net of tax benefit		$	(0.34	)	—		—		(0.27	)
	Diluted extraordinary items, net of tax benefit		$	(0.34	)	—		—		(0.17	)
	Basic net income (loss) available to common stockholders		$	(0.87	)	(0.15	)	(0.19	)	0.89
	Diluted net income (loss) available to common stockholders		$	(0.87	)	(0.15	)	(0.19	)	0.65
Weighted average number of shares used in per share calculations:
	Basic shares			36,928		40,025		40,340		50,221
	Diluted shares			36,928		40,025		40,340		80,151

See accompanying notes to consolidated financial statements.

60

SCIENTIFIC GAMES CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
AND COMPREHENSIVE INCOME (LOSS)
Year Ended October 31, 2000, the Two Months Ended December 31, 2000,
and the Years Ended December 31, 2001 and 2002
(in thousands)

					Two Months Ended
							Years Ended
		Year Ended October 31,
					December 31,
		2000			2000		2001		2002
Common stock:
Beginning balance		$	364		399		402		412
	Issuance of Class A common stock, net of issuance expenses		—		—		—		144
	Issuance of Class A common stock in stock options and warrant exercises		35		3		10		29
	Issuance of Class A common stock on conversion of Series A and B preferred stock		—		—		—		9
Ending balance			399		402		412		594
Series A Convertible and Series B Preferred stock:
Beginning balance			—		1,132		1,149		1,220
	Issuance of 1,128 shares of Series A convertible preferred stock, net of issuance expenses		1,128		—		—		—
	Issuance of Series A convertible preferred stock as paid-in-kind dividend		4		17		71		74
	Issuance of Series B preferred stock		—		—		—		1
	Conversion of Series A and B preferred stock to Class A common stock		—		—		—		(46	)
Ending balance			1,132		1,149		1,220		1,249
Additional paid-in capital:
Beginning balance			149,622		264,959		266,888		275,510
	Issuance of Class A common stock, net of issuance expenses		1,079		188		1,070		96,336
	Issuance of Series B preferred stock		—		—		—		(1	)
	Issuance of Class A common stock on conversion of Series A and B preferred stock, net		—		—		—		37
	Issuance of Series A convertible preferred stock, net of issuance expenses		105,673		1,698		6,979		7,410
	Issuance and exercise of stock options and warrants		8,321		—		305		5,294
	Deferred compensation		264		43		268		341
Ending balance			264,959		266,888		275,510		384,927
Accumulated losses:
Beginning balance			(196,852	)	(228,853	)	(234,910	)	(242,545	)
	Net income (loss)		(30,987	)	(4,914	)	(584	)	52,050
	Convertible preferred stock paid-in-kind dividend		(1,014	)	(1,143	)	(7,051	)	(7,484	)
Ending balance			(228,853	)	(234,910	)	(242,545	)	(197,979	)
Treasury stock:
Beginning balance			(102	)	(102	)	(102	)	(135	)
	Purchases of Class A common stock		—		—		(33	)	(3,404	)
Ending balance			(102	)	(102	)	(135	)	(3,539	)
Accumulated other comprehensive loss:
Beginning balance			(1,251	)	(3,216	)	(5,274	)	(10,384	)
	Other comprehensive income (loss)		(1,965	)	(2,058	)	(5,110	)	10,058
Ending balance			(3,216	)	(5,274	)	(10,384	)	(326	)
Total stockholders' equity		$	34,319		28,153		24,078		184,926
Comprehensive income (loss):
Net income (loss)		$	(30,987	)	(4,914	)	(584	)	52,050
Other comprehensive income (loss):
	Minimum pension liability adjustment		(5	)	—		38		(2,261	)
	Foreign currency translation adjustment		(2,277	)	1,611		(296	)	4,758
	Cash flow hedges		—		(2,364	)	(7,816	)	(1,193	)
	Reclassification adjustments for (gains)/losses reclassified into operations		—		(31	)	2,962		8,654
	Unrealized gain on investments		317		(1,274	)	2		100
Other comprehensive income (loss)			(1,965	)	(2,058	)	(5,110	)	10,058
Comprehensive income (loss)		$	(32,952	)	(6,972	)	(5,694	)	62,108

See accompanying notes to consolidated financial statements.

61

SCIENTIFIC GAMES CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
Year Ended October 31, 2000, the Two Months Ended December 31, 2000,
and the Years Ended December 31, 2001 and 2002
(in thousands)

							Two Months Ended
									Years Ended
				Year Ended October 31,
							December 31,
				2000			2000		2001		2002
Cash flows from operating activities:
	Net income (loss)			$	(30,987	)	(4,914	)	(584	)	52,050
	Adjustments to reconcile net income (loss) to cash provided by operating activities:
		Depreciation and amortization			27,826		8,598		55,209		42,835
		Change in deferred income taxes, net of effects of businesses acquired			120		(1,301	)	(1,812	)	(37,302	)
		Non-cash interest expense			8,735		384		2,435		2,298
		Extraordinary items, net of income tax benefit			12,567		—		—		13,501
		Changes in operating assets and liabilities, net of effects of acquisitions:
			Accounts receivable		8,605		(1,621	)	4,030		358
			Inventories		4,681		(2,722	)	7,707		8
			Accounts payable		(4,351	)	4,601		(533	)	(4,206	)
			Accrued liabilities		764		(2,915	)	(5,620	)	(3,383	)
		Other			(2,552	)	1,918		1,579		3,695
			Total adjustments		56,395		6,942		62,995		17,804
Net cash provided by operating activities					25,408		2,028		62,411		69,854
Cash flows from investing activities:
	Capital expenditures				(6,131	)	(3,301	)	(7,398	)	(15,880	)
	Wagering systems expenditures				(28,915	)	(2,802	)	(39,095	)	(15,137	)
	Change in other assets and liabilities				(6,195	)	(2,419	)	(9,591	)	(14,131	)
	Business acquisitions, net of cash acquired				(316,242	)	—		—		(4,104	)
Net cash used in investing activities					(357,483	)	(8,522	)	(56,084	)	(49,252	)
Cash flows from financing activities:
	Net borrowings (repayments) under revolving credit facility				11,250		(2,250	)	5,750		(14,750	)
	Proceeds from issuance of long-term debt				442,522		—		—		291,335
	Payments on long-term debt				(201,362	)	(1,324	)	(6,573	)	(357,463	)
	Payment of financing fees				(16,792	)	—		—		(17,531	)
	Net proceeds from issuance of common stock				1,114		202		1,046		98,398
	Net proceeds from issuance of convertible preferred stock				106,378		—		—		—
Net cash provided by (used in) financing activities					343,110		(3,372	)	223		(11	)
Effect of exchange rate changes on cash					(794	)	1,046		(389	)	1,689
Increase (decrease) in cash and cash equivalents					10,241		(8,820	)	6,161		22,280
Cash and cash equivalents, beginning of period					5,067		15,308		6,488		12,649
Cash and cash equivalents, end of period				$	15,308		6,488		12,649		34,929

See accompanying notes to consolidated financial statements.

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Non-cash investing and financing activities

For the year ended October 31, 2000, the two months ended December 31, 2000, and the years ended December 31, 2001 and 2002

        See Notes 10, 11 and 13 for a description of the write-off of deferred financing fees, capital lease transactions and the issuance of common stock warrants to the Company's financial advisors in connection with their services in 2000.

Supplemental cash flow information

        Cash paid during the period for:

				Two Months Ended
					Years Ended
		Year Ended October 31,
				December 31,
		2000		2000	2001	2002
Interest		$	22,177	1,662	50,659	47,676
Income taxes, net of refunds		$	2,413	1,585	300	3,707
Non-cash financing activity during the period:
	Convertible preferred stock paid-in-kind dividends	$	1,014	1,143	7,051	7,484

See accompanying notes to consolidated financial statements.

63

SCIENTIFIC GAMES CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except per share amounts)

(1) Description of the Business and Summary of Significant Accounting Policies

(a) Description of the Business

        Scientific Games Corporation (the "Company") operates primarily in four business segments: Lottery Group, Pari-mutuel Group, Venue Management Group and Telecommunications Products Group.

        Lottery Group—encompasses the full range of lottery game consulting and production services, including the manufacturing, warehousing and distribution of instant lottery tickets and related instant ticket services such as game design, sales and marketing support, retailer telemarketing and field services. The Company also provides on-line lottery systems and systems-related services, including transaction processing software that accommodates instant ticket game accounting and validation and on-line lottery games, point-of-sale terminal hardware which connect to these systems, central site computer and communications hardware which runs these systems and ongoing maintenance for each of these items. The Company's lottery products and services are provided primarily to domestic and international governmentally sanctioned lotteries worldwide.

        Pari-mutuel Group—includes all aspects of the Company's pari-mutuel service business, which encompass its North American and international on-track, off-track and inter-track pari-mutuel services, simulcasting and communications services, video gaming, and sales of pari-mutuel systems and equipment. The Company is a leading worldwide provider of computerized pari-mutuel wagering. The Company is one of the leading providers of simulcasting services to the racing industry in the United States and Europe.

        Venue Management Group—the Company owns and operates off-track betting operations ("OTBs") in Connecticut and is the exclusive licensed operator of all on-track and off-track pari-mutuel wagering operations in The Netherlands.

        Telecommunication Products Group—through its United Kingdom based operations, the Company manufactures prepaid phone cards incorporating its superior lottery derived proprietary technology to create highly secure, paper-based, prepaid phone cards for the international cellular telephone markets.

        In 2000, the Company elected to change the date of its fiscal year end to December 31. As a result, a transition period for the two months ended December 31, 2000 was previously reported on a transition report on Form 10-Q and is also presented herein. The consolidated balance sheets have been prepared at December 31, 2001 and 2002. The statements of operations, stockholders' equity and comprehensive income (loss) and cash flows present information for the year ended October 31, 2000, the two months ended December 31, 2000 and the years ended December 31, 2001 and 2002.

(b) Principles of Consolidation

        The accompanying consolidated financial statements include the accounts of the Company and subsidiaries in which the Company's ownership is greater than 50%. Investments in other entities where the Company has the ability to exercise significant influence over the investee are accounted for on the equity basis. Under the equity method, investments are stated at cost plus the Company's equity in undistributed earnings after acquisition. All significant inter-company balances and transactions have been eliminated in consolidation.

(c) Cash and Cash Equivalents

        The Company considers all highly liquid debt instruments with an original maturity at the date of purchase of three months or less to be cash equivalents.

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(d) Inventories

        Inventories are stated at the lower of cost or market. Cost is determined as follows:

Item	Cost method
Parts	First-in, first-out or weighted moving average.
Work-in-process & finished goods	First-in, first-out or weighted moving average for direct material and labor; other fixed and variable production costs are allocated as a percentage of direct labor cost.

        The Company adjusts inventory accounts on a periodic basis to reflect the impact of potential obsolescence.

(e) Property and Equipment

        Property and equipment are stated at cost. Depreciation of property and equipment is calculated using the straight-line method over the estimated useful lives of the assets as follows:

Item	Estimated Life in Years
Machinery and equipment	3-10
Transportation equipment	3-7
Furniture and fixtures	5-10
Buildings and leasehold improvements	5-40

        Depreciation expense includes the amortization of capital leased assets. The Company typically depreciates the equipment and installation costs for new customers on a straight-line method over the life of the initial term of their contracts.

(f) Deferred Installation Costs

        Certain installation costs consisting of installation materials, customer contracted software and installation labor associated with leased systems are deferred and amortized over the lives of the leases unless such costs are reimbursed by the lessee, in which case such amounts are included in revenue and cost of sales. Deferred installation costs, net of accumulated depreciation, included in property and equipment were approximately $17,113 and $18,532 at December 31, 2001 and 2002, respectively.

(g) Goodwill and Acquired Intangible Assets

        Goodwill represents the excess of the purchase price over the fair value of the net assets of acquired companies. In June 2001, the Financial Accounting Standards Board ("FASB") issued Statement 141, Business Combinations ("SFAS 141"), and Statement 142, Goodwill and Other Intangible Assets ("SFAS 142"), and in August 2001 the FASB issued Statement 144, Accounting for the Impairment or Disposal of Long-Lived Assets ("SFAS 144"). SFAS 141 requires that the purchase method of accounting be used for all business combinations initiated after September 30, 2001. SFAS 142 requires, commencing January 1, 2002, that all goodwill and intangible assets with indefinite useful lives no longer be amortized, but instead, be evaluated for impairment on an annual basis. SFAS 144 requires that intangible assets with definite useful lives continue to be amortized over their useful lives, but be tested for impairment whenever events or changes in circumstances indicate that the carrying value of such asset may not be recoverable. The Company adopted these statements upon

65

issuance, thus all amortization related to goodwill and intangible assets with indefinite useful lives ceased as of January 1, 2002. The Company performs the impairment tests for goodwill and intangible assets with indefinite useful lives on an annual basis at the end of its fiscal year. (see Note 6).

(h) Other Assets and Investments

        The Company capitalizes costs associated with internally developed and/or purchased software systems for new products and enhancements to existing products and for use in its wagering service contracts that meet technological feasibility and recoverability tests. The Company also capitalizes costs associated with the procurement of long-term financing, and costs attributable to transponder leases, patents, trademarks, marketing rights, and non-competition and employment agreements arising primarily from business acquisitions. These capitalized costs are amortized on the straight-line basis over their useful lives. The Company adopted the provisions of SFAS 141, SFAS 142, and SFAS 144 upon issuance by the FASB and has performed an evaluation of the assets that have been acquired in prior business combinations. Certain reclassifications have been made to comply with the provisions of the new Statements. As a result, amortization of certain reclassified intangible assets has been ceased. In accordance with the new Statements, an evaluation is performed to determine if any impairment has occurred with respect to any amortized or non-amortized assets. See Note 6 for further details relating to the amortization, reclassification, and impairment testing of all intangible assets.

(i) Impairment of Long-Lived Assets and Acquired Intangible Assets

        The Company assesses the recoverability of long-lived assets (excluding goodwill) and identifiable acquired intangible assets with finite useful lives, whenever events or changes in circumstances indicate that the carrying value of such an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of the asset to the expected net future cash flows to be generated by that asset, or, for identifiable intangibles with finite useful lives, by determining whether the amortization of the intangible asset balance over its remaining life can be recovered through undiscounted future cash flows. The amount of impairment of identifiable intangible assets with finite useful lives, if any, to be recognized is measured based on projected discounted future cash flows. The amount of impairment of other long-lived assets (excluding goodwill) is measured by the amount by which the carrying value of the asset exceeds the fair market value of the asset. Assets to be disposed of are reported at the lower of the carrying amount or fair market value, less costs to sell.

(j) Revenue Recognition

        Revenues from pari-mutuel wagering services, on-line lottery systems services, cooperative service arrangements, certain instant ticket contracts and the operation of off-track betting venues is recognized based on a percentage of amounts wagered pursuant to the terms of the contract. Simulcasting and telecommunication service revenue is recognized as services are performed. Costs incurred in connection with the manufacture, installation, and integration of terminals, software and telecommunications configurations are initially capitalized and amortized on a straight line basis over the term of the contract. Costs of providing operating services are charged to operations in the period incurred. Revenues from sales of products including instant tickets, prepaid phone cards and stand alone terminals are recognized when shipped and the customer takes ownership and assumes risk of loss.

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        Liquidating damages assessed by the customer prior to the activation of the wagering systems are recognized as a reduction of revenue over the contract period.

        Revenues from major contracts for the sale of lottery and pari-mutuel wagering systems and revenues for contracted software development are recognized on the percentage of completion method of accounting based on the ratio of costs incurred to estimated costs to complete. Any anticipated losses on fixed price contracts are charged to operations when such losses can be estimated. The Company recognizes revenue from software licenses upon shipment if post-delivery obligations are insignificant and if the terms of the agreement are such that the payment obligation is non-cancelable and non-refundable.

(k) Income Taxes

        Income taxes are calculated using the asset and liability method under Statement of Financial Accounting Standards No. 109 ("SFAS 109"). Under this method, deferred income taxes are calculated by applying enacted statutory tax rates to cumulative temporary differences between financial statement carrying amounts and the tax basis of existing assets and liabilities. Under SFAS 109, the effect on deferred taxes of a change in tax rates is recognized in income in the period that includes the enactment date.

(l) Foreign Currency Translation

        Assets and liabilities of foreign operations are translated at year-end rates of exchange and operations are translated at the average rates of exchange for the year. Gains or losses resulting from translating the foreign currency financial statements are accumulated as a separate component of accumulated other comprehensive income (loss) in stockholders' equity. Gains or losses resulting from foreign currency transactions are included in other income (expense) in the consolidated statements of operations.

(m) Stock-Based Compensation

        In December 2002, the FASB issued Statement No. 148, Accounting for Stock-Based Compensation-Transition and Disclosure, an Amendment of FASB Statement No. 123 ("SFAS 148"). SFAS 148 amends FASB Statement No. 123, Accounting for Stock-Based Compensation ("SFAS 123"), to provide alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-based compensation. However, it allows an entity to continue to measure compensation cost for those instruments using the intrinsic-value-based method of accounting prescribed by Accounting Principles Board Opinion No. 25 ("APB 25"), Accounting for Stock Issued to Employees, provided it discloses the effect of SFAS 123, as amended by SFAS 148, in footnotes to the financial statements. The Company has chosen to continue to account for stock-based compensation using the intrinsic value method. Accordingly, no stock option related compensation expense has been recognized for a substantial majority of its stock-based compensation plans. The Company was required to adopt SFAS 148 for the year ended December 31, 2002. The adoption of SFAS 148 did not have an impact on the consolidated results of operations or financial position of the Company for fiscal 2002 and is not expected to have an impact on the consolidated results of operations or financial position of the Company in future periods as the Company expects to continue to apply the intrinsic value based method prescribed by APB 25.

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        Had the Company, however, elected to recognize compensation cost based on fair value of the stock options at the date of grant under SFAS 123, as amended by SFAS 148, such costs would have been recognized ratably over the vesting period of the underlying instruments and the Company's net income (loss) and net income (loss) per share would have changed to the pro forma amounts indicated in the table below.

        Pro forma net income (loss) and income (loss) per basic and diluted share were:

					Two Months Ended
							Years Ended
		Year Ended October 31,
					December 31,
		2000			2000		2001		2002
Net income (loss) available common stockholders as reported		$	(32,001	)	(6,057	)	(7,635	)	45,566
Add: Stock-based compensation expense included in reported net income, net of related tax effects			—		—		—		—
Deduct: Total stock-based employee compensation expense determined under fair value based method for all awards, net of related tax effects (1)			(2,263	)	(313	)	(2,611	)	(2,630	)
Pro forma net income (loss) available to common stockholders		$	(34,264	)	(6,370	)	(10,246	)	42,936
Net income (loss) available to common stockholders per basic share:
	As reported	$	(0.87	)	(0.15	)	(0.19	)	0.89
	Pro forma	$	(0.93	)	(0.16	)	(0.25	)	0.74
Net income (loss) available to common stockholders per diluted share:
	As reported	$	(0.87	)	(0.15	)	(0.19	)	0.65
	Pro forma	$	(0.93	)	(0.16	)	(0.25	)	0.61

(1)

The amounts for year 2002 are net of income tax benefit. No adjustments were made for income tax benefit in prior periods as the Company was not in a position to utilize the tax benefits of prior period operating losses.

        The fair value of the options granted was estimated using the Black-Scholes option-pricing model based on the weighted average market price at date of grant of $3.44 in fiscal 2000, $4.72 in fiscal 2001 and $6.75 in fiscal 2002 and the following weighted average assumptions: risk-free interest rate of 6.3% for fiscal 2000, 4.9% for fiscal 2001, and 4.2% for fiscal 2002; expected option life of 7.0 years for fiscal 2000, 2001 and 2002; volatility of 55% for 2000, 76% for fiscal 2001 and 74% for fiscal 2002: and no dividend yield in any year. The average fair values of options granted during fiscal years 2000, 2001, and 2002 were $2.15, $3.48 and $4.82, respectively.

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(n) Financial Statement Preparation

        The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Some of the significant estimates involve percentage of completion for contracted lottery development projects and pari-mutuel systems software development projects, capitalization of software development costs, evaluation of the recoverability of assets and assessment of litigation and contingencies, including income and other taxes. Actual results could differ from estimates.

(o) Comprehensive Income (Loss)

        Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive Income" ("SFAS 130") establishes standards for the reporting and display of comprehensive income (loss) and its components in a full set of financial statements. SFAS 130 requires that unrealized losses from the Company's foreign currency translation adjustments, interest rate derivatives, unrecognized minimum pension liability and unrealized gains (losses) on investments be included in other comprehensive income (loss).

(p) Derivative Instruments and Hedging Activities

        In June 1998, the FASB issued Statement of Financial Accounting Standards No. 133, Accounting for Derivative Instruments and Certain Hedging Activities ("SFAS 133"). In June 2000 the FASB issued Statement of Financial Accounting Standards No. 138, Accounting for Certain Derivative Instruments and Certain Hedging Activity, an Amendment of SFAS 133 ("SFAS 138"). SFAS 133 and SFAS 138 require that all derivative instruments be recorded on the balance sheet at their respective fair values. SFAS 133 and SFAS 138 are effective for all fiscal quarters of all fiscal years beginning after June 30, 2000; the Company adopted SFAS 133 and SFAS 138 on November 1, 2000.

        The Company's principal derivative instruments in 2001 were interest rate swaps which allowed the Company to reduce its exposure to variability in interest payments due to changes in interest rates on its variable rate, long-term debt obligations. These interest rate swaps were cancelled in connection with the December 2002 debt refinancing (see Note 9). During 2002, the Company entered into several derivative contracts to hedge part of the Company's foreign currency exposure with respect to future cash receipts under a contract with the Ontario Lottery Commission. These derivative instruments have been designated as cash flow hedges and recorded on the balance sheet at their respective fair values as prescribed by SFAS 133 and 138.

        All derivatives are recognized on the balance sheet at their fair value. On the date the derivative contract is entered into, the Company designates the derivative as a hedge of the variability of cash flows to be paid or received related to its long-term debt obligation or customer contract, respectively ("cash flow"). The Company formally documents all relationships between hedging instruments and hedged items, as well as its risk-management objective and strategy for undertaking various hedge transactions. This process includes linking all derivatives that are designated as cash-flow hedges to specific components of its long-term obligations and contract cash receipts. The Company also formally assesses, both at the hedge's inception and on an ongoing basis, whether the derivatives that are used

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in hedging transactions are highly effective in offsetting changes in cash flows of hedged items. When it is determined that a derivative is not highly effective as a hedge or that it has ceased to be a highly effective hedge, the Company discontinues hedge accounting prospectively.

        Changes in the fair value of a derivative that is highly effective and that is designated and qualifies as a cash-flow hedge are recorded in other comprehensive loss, until operations are affected by the variability in cash flows of the designated hedge item. Changes in the fair value of derivative trading instruments are reported in current-period operations.

        The Company discontinues hedge accounting prospectively when it is determined that the derivative is no longer effective in offsetting changes in cash flows of the hedged item, the derivative expires or is sold, terminated, or exercised. When hedge accounting is discontinued, the Company continues to carry the derivative at its fair value on the consolidated balance sheet, and recognizes any changes in its fair value in operations.

        For interest rate swaps, the differential to be paid or received is accrued and recognized in interest expense and may change as a market interest rates change. If a swap was terminated prior to its maturity, the gain or loss is recognized over the remaining original life of the swap if the item hedged remains outstanding, or immediately, if the item hedged does not remain outstanding. If the swap was not terminated prior to maturity, but the underlying hedged item is no longer outstanding, the interest rate swap was marked to market and any unrealized gain or loss is recognized immediately.

(q) Reclassification

        Certain reclassifications have been made to the prior years consolidated financial statements to conform to the current presentation. The consolidated statements of operations reflect the reclassification of "amortization of service contract software" as a component of operating expenses, which amounts had been included in depreciation and amortization in previous filings.

(2) Basic Income (Loss) Per Common Share and Diluted Income (Loss) Per Common Share

        Basic income (loss) per common share is computed by dividing income (loss) by the weighted average number of common shares outstanding during the period. Diluted income per common share gives effect to all dilutive potential common shares that were outstanding during the period. At December 31, 2002, the Company had common stock options, warrants, Performance Accelerated Restricted Stock Units (representing shares of deferred stock) and Series A convertible preferred stock which could potentially dilute basic earnings per share in the future (see Notes 13 and 14).

        The following represents a reconciliation of the numerator and denominator used in computing basic and diluted income (loss) available to common stockholders per common share for the year

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ended October 31, 2000, the two months ended December 31, 2000, and the years ended December 31, 2001 and 2002:

				Two Months ended
						Years Ended
	Year Ended October 31,
				December 31,
	2000			2000		2001		2002
Income (loss) (numerator)
Net income (loss) available to common stockholders	$	(32,001	)	(6,057	)	(7,635	)	44,566
Add back extraordinary items, net of tax benefit		12,567		—		—		13,501
Income (loss) before extraordinary items available to common stockholders (basic)		(19,434	)	(6,057	)	(7,635	)	58,067
Add back preferred stock paid-in-kind dividend (1)		—		—		—		7,484
Income (loss) before extraordinary items and preferred stock dividend available to common stockholders (diluted)	$	(19,434	)	(6,057	)	(7,635	)	65,551
Extraordinary items, net of tax benefit (basic and diluted)	$	12,567		—		—		13,501
Net income (loss) after extraordinary items available to common stockholders (basic)	$	(32,001	)	(6,057	)	(7,635	)	44,566
Add back preferred stock paid-in-kind dividend (1)		—		—		—		7,484
Net income (loss) after extraordinary items without preferred stock dividend available to common stockholders (diluted)	$	(32,001	)	(6,057	)	(7,635	)	52,050
Shares (denominator)
Basic weighted average common shares outstanding		36,928		40,025		40,340		50,221
Effect of diluted securities—stock options, convertible preferred shares and deferred shares (2)(3)		—		—		—		29,930
Diluted weighted average common shares outstanding		36,928		40,025		40,340		80,151
Basic and Diluted per share amounts
Basic income (loss) before extraordinary items available to common stockholders	$	(0.53	)	(0.15	)	(0.19	)	1.16
Diluted income (loss) before extraordinary items available to common stockholders (2)(3)	$	(0.53	)	(0.15	)	(0.19	)	0.82
Basic extraordinary items, net of tax benefit	$	(0.34	)	—		—		(0.27	)
Diluted extraordinary items, net of tax benefit (3)	$	(0.34	)	—		—		(0.17	)
Basic net income (loss) available to common stockholders	$	(0.87	)	(0.15	)	(0.19	)	0.89
Diluted net income (loss) available to common stockholders (3)	$	(0.87	)	(0.15	)	(0.19	)	0.65

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(2) Basic Income (Loss) Per Common Share and Diluted Income (Loss) Per Common Share

(1)

Series A Convertible Preferred Stock paid-in-kind dividend is included in the calculation of diluted net income per share in the year ended October 31, 2000, the two months ended December 31, 2000, and the year ended December 31, 2001 since assuming conversion of the preferred shares would be anti-dilutive.

(2)

Potential common shares are not included in the calculation of dilutive net loss per share for the year ended October 31, 2000, the two months ended December 31, 2000, and the year ended December 31, 2001 since inclusion would be anti-dilutive.

(3)

As per Statement of Financial Accounting Standards No. 128, Earnings Per Share ("SFAS 128"), whenever a company reports an extraordinary item, the same number of potential common shares used in computing the diluted per share amounts for income before extraordinary items must be used in computing all other diluted per share amounts, even if those amounts are anti-dilutive to their respective basic per share amounts.

(3) Acquisitions

        On June 5, 2002, the Company completed the purchase of 65% of the equity of Serigrafica Chilena S.A. ("SERCHI"). Subsequent to the acquisition, the Company changed the name of SERCHI to Scientific Games Latino America S.A. The purchase price was approximately $3,900 in cash and up to $4,355 in cash or stock payable to SERCHI stockholders upon the achievement of certain financial performance levels of SERCHI over the next four years. The acquisition was recorded using the purchase method of accounting and the acquired assets and liabilities have been recorded at their estimated fair values at the date of acquisition. The excess of the purchase price over the fair values of the net assets acquired is currently estimated to be approximately $3,611 and has been recorded as goodwill. This estimate is subject to revisions until the valuations of SERCHI's assets and liabilities are completed in the first quarter of 2003. The operating results of the SERCHI business have been included in the consolidated statements of operations since the date of acquisition. Had the operating results of SERCHI been included as if the transaction had been consummated on January 1, 2002, the pro forma operating results of the Company for the year ended December 31, 2002 would not have been materially different.

        On September 6, 2000, the Company completed the acquisition of Scientific Games Holdings Corp. ("SGHC"), a world-leading supplier of lottery products, integrated lottery systems and support services, and pre-paid telephone cards. The acquisition was completed through a merger in which SGHC became a wholly-owned subsidiary of the Company, at a cost of approximately $308,000 in aggregate merger consideration to SGHC stockholders, plus related fees and expenses. The acquisition was recorded using the purchase method of accounting. The acquired assets and liabilities were recorded at their preliminarily estimated fair value at the date of acquisition. The excess of the purchase price over the fair values of the net assets acquired was preliminarily estimated at $154,300, subject to finalization, and has been recorded as goodwill which is being amortized over 20 years.

        The SGHC acquisition and the refinancing of substantially all existing debt of both the Company and SGHC, along with the payment of certain related fees and expenses, was completed with funds

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provided by: (1) proceeds from the issuance of $150,000 principal amount of the Company's 12¹/2% Senior Subordinated Notes due August 15, 2010; (2) $280,000 of Term B Loan borrowings under the terms of the 2000 Facility; (3) $2,987 of borrowings under the revolving credit portion of the 2000 Facility; (4) $4,805 of cash on hand; and (5) $110,000 of gross proceeds from the sale of new convertible preferred stock (see Notes 9 and 13).

        In the third quarter of fiscal 2001, the Company finalized the allocation of the purchase price previously allocated on a preliminary basis to the estimated fair value of the assets acquired and liabilities assumed in connection with the acquisition of SGHC. The finalization of the allocation of the purchase price resulted in the reclassification of $73,870 of previously estimated identified intangible assets, including capitalized software, and $29,548 of related deferred income tax liabilities, or approximately $44,322 to goodwill. The reclassifications were the result of the consideration of additional information regarding available products and costs of services, and the refinement of certain assumptions used in the determination of the estimated fair values of the acquired assets.

        The Company has accounted for the reclassification of the intangible assets, including capitalized software, and related deferred income taxes as a change in estimate, and accordingly has reduced capitalized software by $9,825, patents by $13,901 and customer lists by $50,144 having estimated useful lives of 10, 15 and 20 years, respectively. Accordingly, the accompanying consolidated balance sheet at December 31, 2001 and the consolidated statement of operations for the period subsequent to the date of reclassification have been adjusted to reflect the reclassification and the resulting affect on operations. Had the reclassification been made at the beginning of the current year, the positive effect on net income for the period through the date of reclassification would not have been material.

        The following table presents unaudited pro forma results of operations as if the SGHC acquisition and related financing transactions had occurred at the beginning of the period presented after giving effect to certain adjustments, including amortization of goodwill and other identifiable intangible assets, additional depreciation expense, increased interest expense, convertible preferred stock dividends and related income tax effects. These unaudited pro forma results include amortization and deferred tax benefit computations based on the estimated identifiable intangible assets and related deferred income tax amounts recorded prior to the reclassifications made in the third quarter of 2001, described above, because such reclassifications would not have had a material effect on the pro forma results. Additionally, these unaudited pro forma results were presented using then current generally accepted accounting principles. In June 2001, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 141, Business Combinations ("SFAS 141"), and No. 142, Goodwill and Other Intangible Assets ("SFAS 142"). SFAS 141 became effective immediately and SFAS 142, became effective for the Company on January 1, 2002, which changed the accounting and reporting for goodwill and intangible assets. Consequently, beginning January 1, 2002, amortization of goodwill and intangibles with indefinite lives ceased.

        These pro forma results have been prepared for comparative purposes and do not purport to be indicative of what would have occurred had the acquisition been made at the beginning of the

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Company's previous fiscal years ended October 31, 1999 and 2000, or the results that may occur in the future.

	Years Ended October 31,
	1999			2000
	(unaudited)
Operating revenues	$	439,811		437,073
Operating income		40,158		29,847
Loss before income tax expense and extraordinary items		(10,084	)	(19,993	)
Net loss		(13,738	)	(24,006	)
Convertible preferred stock dividend		(6,765	)	(6,765	)
Net loss available to common stockholders	$	(20,503	)	(30,771	)
Basic and diluted net loss per share	$	(0.38	)	(0.65	)
Basic and diluted net loss per share available to common stockholders	$	(0.57	)	(0.83	)

Subsequent Event—Acquisition of MDI Entertainment, Inc.

        On January 17, 2003, the Company completed the acquisition of MDI Entertainment, Inc. ("MDI") through (i) a tender offer at $1.60 per share, in cash, (ii) the purchase of shares from MDI's President and Chief Executive Officer pursuant to a separate stock purchase agreement and (iii) a merger agreement, whereby the remaining eight percent of MDI common shares were converted into the right to receive $1.60 per share in cash. With the purchase of MDI, the Company significantly expanded its offerings of licensed branded lottery products and prize fulfillment and related services. MDI has been successful in helping lotteries attract players to new kinds of tickets and second chance games that allow players to win merchandise, such as Harley Davidson motorcycles and trips and prizes like tickets to NBA playoff games. The Company's portfolio of licensed brands now includes Mandalay Bay, NBA, Harley Davidson and Wheel of Fortune, plus many others. The Company expects that its acquisition of MDI will enable it to further expand the use of branded games and prize fulfillment services to continue to help its customers generate additional revenues. The acquisition will be accounted for using the purchase method of accounting. Had the operating results of MDI been included as if the transaction had been consummated on January 1, 2002, the Company's pro forma operating results for the year ended December 31, 2002 would not have been materially different from the actual reported results.

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(4) Inventories

        Inventories consist of the following:

	December 31,
	2001		2002
Parts and work-in-process	$	10,130	10,850
Finished goods		9,417	9,685
	$	19,547	20,535

        Point of sale terminals manufactured by the Company may be sold to customers or included as part of a long-term wagering system contract. Parts and work-in-process includes costs for equipment expected to be sold. Costs incurred for equipment associated with specific wagering system contracts not yet placed in service are classified as construction in progress in property and equipment (see Note 5).

(5) Property and Equipment

        Property and equipment, including assets under capital leases, consist of the following:

		December 31,
		2001		2002
Machinery, equipment and deferred installation costs		$	278,227	311,785
Land and buildings			47,435	49,990
Transportation equipment			2,569	4,362
Furniture and fixtures			10,213	10,995
Leasehold improvements			11,748	14,515
Construction in progress			14,645	13,038
	Property and equipment, at cost		364,837	404,685
Less: Accumulated depreciation			168,049	203,819
	Net property and equipment	$	196,788	200,866

        Depreciation expense for the year ended October 31, 2000, the two months ended December 31, 2000, and the years ended December 31, 2001 and 2002 amounted to $20,171, $5,118, $32,919 and $35,009, respectively.

        Costs for equipment associated with specific wagering systems contracts not yet placed in service are recorded as construction in progress. When the equipment is placed in service at wagering facilities, the related costs are transferred from construction in progress to machinery and equipment, and the Company commences depreciation of the costs.

(6) Goodwill and Intangible Assets, Impairment of Long-Lived Assets and Long-Lived Assets to be Disposed Of

In June 2001, the FASB issued Statement No. 141, Business Combinations ("SFAS 141"), and Statement No. 142, Goodwill and Other Intangible Assets ("SFAS 142"), and in August 2001 the FASB

75

issued Statement No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets ("SFAS 144"). SFAS 141 requires that the purchase method of accounting be used for all business combinations initiated or completed after September 30, 2001. The Company adopted the provisions of SFAS 141 upon issuance. SFAS 141 also specifies criteria that intangible assets acquired in a purchase method business combination must meet to be recognized and reported apart from goodwill. SFAS 142 requires, commencing January 1, 2002, that goodwill and intangible assets with indefinite useful lives no longer be amortized. Instead, they will be tested for impairment at least annually in accordance with the provisions of SFAS 142. SFAS 142 also requires that intangible assets with definite useful lives be amortized over their respective estimated useful lives to their estimated residual values, and reviewed for impairment in accordance with SFAS 144. Goodwill and intangible assets acquired by the Company in its business combinations completed before July 1, 2001 continued to be amortized through December 31, 2001.

        SFAS 142 requires that the Company evaluate its existing intangible assets and goodwill that were acquired in a prior purchase business combination, and make any necessary reclassifications in order to conform with the new criteria in SFAS 141 for recognition apart from goodwill. The Company also adopted SFAS 142 and, accordingly, is required to reassess the useful lives and residual values of all intangible assets acquired in purchase business combinations and to make any necessary amortization period adjustments by the end of the first interim period after adoption. In addition, to the extent an intangible asset is identified as having an indefinite useful life, the Company is required to test the intangible asset for impairment within the first interim period. Any impairment loss will be measured as of the date of adoption and recognized as the cumulative effect of a change in accounting principle in the first interim period.

        In connection with the transitional goodwill impairment evaluation, SFAS 142 and SFAS 144 require that the Company perform an assessment of whether there is an indication that goodwill is impaired as of the date of adoption. To the extent a reporting unit's carrying amount (as defined in SFAS 142) exceeds its fair value, the Company must perform the second step of the transitional impairment test. In the second step, the Company must compare the implied fair value of the reporting unit's goodwill, determined by allocating the reporting unit's fair value to all of its assets (recognized and unrecognized) and liabilities in a manner similar to a purchase price allocation in accordance with SFAS 141, to its carrying amount, both of which would be measured as of the date of adoption. This second step is required to be completed as soon as possible, but no later than the end of the year of adoption. Any transitional impairment loss will be recognized as the cumulative effect of a change in accounting principle in the Company's consolidated statement of operations.

        The Company had unamortized goodwill of approximately $195,255 and unamortized identifiable intangible assets of approximately $60,154 at December 31, 2001, all of which were subject to the transition provisions of SFAS 141 and SFAS 142. In connection with the adoption of SFAS 142, the Company evaluated its intangible assets and determined that its right to operate its Connecticut OTBs and its trade name with net carrying amounts of approximately $11,681 and $30,082, respectively, at December 31, 2001, have indefinite useful lives and, accordingly, the Company ceased amortization as of January 1, 2002. In addition, as required by SFAS 142, the Company reclassified its employee work force intangible asset with a net carrying value of approximately $3,170, net of related deferred tax

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liabilities of $2,113, to goodwill effective January 1, 2002. Amortization expense of these intangible assets and goodwill was approximately $16,909 for the year ended December 31, 2001. The Company also evaluated the remaining useful lives of its intangible assets that will continue to be amortized and has determined that no revision to the useful lives will be required. The Company completed its initial impairment review of intangible assets with indefinite useful lives during the first quarter of 2002 with no material adjustments to the December 31, 2001 balances for these assets. The Company completed its initial impairment review of goodwill during the second quarter of 2002 with no material adjustments to the December 31, 2001 balances for this asset. The annual impairment test is performed after completion of the Company's annual financial operating plan, which occurs in the fourth quarter of its fiscal year. The Company completed its annual impairment test with no adjustment to the carrying value of its intangible assets with indefinite useful lives and goodwill as of December 31, 2002. The Company has determined its reporting units to be the same as its reportable segments, and all assets including goodwill have been allocated to the reporting units.

        SFAS 144 addresses financial accounting and reporting for the impairment or disposal of long-lived assets and supersedes Statement No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of ("SFAS 121"). However, SFAS 144 retains the fundamental provisions of SFAS 121 for (a) recognition and measurement of the impairment of long-lived assets to be held and used and (b) measurement of long-lived assets to be disposed of by sale. SFAS 144 supersedes the accounting and reporting provisions of APB Opinion No. 30, Reporting the Results of Operations-Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions, for the disposal of a segment of a business. However, SFAS 144 retains the requirement of Opinion 30 to report discontinued operations separately from continuing operations and extends that reporting to a component of an entity that either has been disposed of (by sale, by abandonment, or in distribution to owners) or is classified as held for sale. SFAS 144 also amends ARB No. 51, Consolidated Financial Statements, to eliminate the exception to consolidation for a temporarily controlled subsidiary. The Company adopted SFAS 144 effective January 1, 2002. The adoption of SFAS 144 for long-lived assets held for sale had no material impact on the Company's consolidated financial statements for the year ended December 31, 2002. The provisions of this statement for assets held for sale or other disposal generally are required to be applied prospectively after the adoption date to newly initiated disposal activities and therefore, will depend on future actions initiated by management. As a result, the Company cannot determine the potential effects that adoption of SFAS 144 will have on its financial statements with respect to future disposal decisions, if any.

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        The following disclosure presents certain information on the Company's acquired intangible assets as of December 31, 2001 and 2002. Amortized intangible assets are being amortized over their estimated useful lives, as indicated below, with no estimated residual values.

Intangible Assets		Weighted Average Amortization Period	Gross Carrying Amount		Accumulated Amortization	Net Balance
Balance at December 31, 2001
Amortizable intangible assets:
	Patents	15	$	915	94	821
	Customer lists	14		14,600	2,313	12,287
	Employee work force	5		7,200	1,917	5,283
	Trade name	20		32,200	2,118	30,082
	Connecticut off-track betting system operating rights	20		20,000	8,319	11,681
Total intangible assets			$	74,915	14,761	60,154
Balance at December 31, 2002
Amortizable intangible assets:
	Patents	15	$	1,084	163	921
	Customer lists	14		14,600	4,089	10,511
	Customer service contracts	15		3,341	1,053	2,288
				19,025	5,305	13,720
Non-amortizable intangible assets:
	Trade name			32,200	2,118	30,082
	Connecticut off-track betting system operating rights			22,339	8,319	14,020
				54,539	10,437	44,102
Total intangible assets			$	73,564	15,742	57,822

        The aggregate intangible amortization expense for the year ended December 31, 2002 was approximately $2,035. The estimated intangible asset amortization expense for the year ending December 31, 2003 and for each of the subsequent four years, ending December 31, 2007, are approximately $2,050, $1,765, $1,017, $730 and $730, respectively.

        The table below reconciles the change in the carrying amount of goodwill, by reporting unit, which is the same as operating segment, for the period from December 31, 2001 to December 31, 2002. The Company recorded a $3,170 increase in goodwill at January 1, 2002 in connection with the reclassification of employee work force intangible assets of $5,283, less related deferred tax liability of $2,113 acquired prior to July 1, 2001 that did not meet the criteria for recognition apart from goodwill under SFAS 141. Goodwill in the amount of $2,110, net of amortization, which was directly related to the value of customer contracts acquired as part of the September 1, 1999 acquisition of Datasport

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assets and an interest in Datek, was reclassified to intangible assets effective January 1, 2002. Goodwill in the amount of $3,611 was recorded during 2002 in connection with the acquisition of a majority interest in SERCHI.

Goodwill		Lottery Group		Pari-Mutuel Group		Venue Management Group	Telecom- munications Group	Totals
Balance at December 31, 2001		$	192,658	2,597		—	—	195,255
Effect of adoption of SFAS 141 and SFAS 142:
	Reclassification of employee workforce intangible asset, net of tax		3,170	—		—	—	3,170
	Reclassification of customer service contract to intangible assets		—	(2,110	)	—	—	(2,110	)
	Record the goodwill acquired in the acquisition of a majority interest in SERCHI		3,611	—		—	—	3,611
Balance at December 31, 2002		$	199,439	487		—	—	199,926

        The following table compares pro forma net income (loss) available to common stockholders for the year ended October 31, 2000, the two months ended December 31, 2000, and the years ended December 31, 2001 and 2002, adjusted to reflect the adoption of SFAS 142 on November 1, 1999, to the reported net income for the year ended December 31, 2002:

		Year Ended October 31,			Two Months Ended December 31,		Years Ended December 31,
		2000			2000		2001	2002
		Pro Forma			Pro Forma		Pro Forma	As Reported
Adjusted income available to common stockholders:
Adjusted income (loss) before extraordinary item		$	(15,360	)	(3,123	)	11,240	65,551
Adjusted income (loss) before extraordinary item available to common stockholders		$	(16,374	)	(4,266	)	4,189	58,067
Adjusted net income (loss) available to common stockholders		$	(28,941	)	(4,266	)	4,189	44,566
Adjusted earnings per share amounts—basic and diluted:
Adjusted income before extraordinary item per share available to common stockholders:
	Basic	$	(0.44	)	(0.11	)	0.10	1.16
	Diluted	$	(0.44	)	(0.11	)	0.09	0.82

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Adjusted net income (loss) per share available to common stockholders:
	Basic	$	(0.78	)	(0.11	)	0.10		0.89
	Diluted	$	(0.78	)	(0.11	)	0.09		0.65
Shares used in calculating adjusted per share amounts:
	Basic		36,928		40,025		40,340		50,221
	Diluted		36,928		40,025		45,412		80,151
Reconciliation of reported net income to adjusted net income:
Reported net income (loss) available to common stockholders		$	(32,001	)	(6,057	)	(7,635	)	44,566
Add back:
Amortization of goodwill and intangible assets with indefinite lives, net of tax benefit			3,060		1,791		11,824		—
Adjusted net income (loss) available to common stockholders		$	(28,941	)	(4,266	)	4,189		44,566

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(7) Other Assets and Investments

        Other assets and investments, (net) consist of the following:

	December 31,
	2001		2002
Software systems development costs	$	25,265	28,736
Deferred financing costs		14,899	7,786
Deferred tax asset		—	33,142
Other assets		11,448	14,322
	$	51,612	83,986

        In the years ended December 31, 2001 and 2002, the Company capitalized $8,267 and $9,194, respectively, of software systems development costs related primarily to lottery and pari-mutuel wagering systems and video gaming. Capitalized costs are amortized on a straight-line basis over a period of five to ten years.

        Deferred financing costs arise in connection with the procurement of long term financing by the Company, and are amortized over the life of the financing agreements. In fiscal 2000, the Company capitalized $16,517 of financing fees incurred in connection with the SGHC acquisition transactions and wrote-off, as an extraordinary charge, $2,865 of previously deferred financing costs in connection with its repayment of the Old Facility and 1998 and 2000 Term Loans. In fiscal 2002, the Company capitalized $5,374 in connection with replacing the 2000 Facility with the 2002 Facility and wrote-off, as an extraordinary charge, $10,226 of previously deferred financing costs in connection with its refinancing of the 2000 Facility and the redemption of approximately $82,957 of the Company's 12¹/2% Senior Subordinated Notes. Amortization of deferred financing costs amounted to $1,224, $384, $2,435 and $2,261 for the fiscal year ended October 31, 2000, the two months ended December 31, 2000, and the years ended December 31, 2001 and 2002, respectively.

(8) Accrued Liabilities

        Accrued liabilities consist of the following:

	December 31,
	2001		2002
Compensation and benefits	$	15,781	20,393
Customer advances		1,948	8,376
Accrued income taxes		4,553	2,418
Taxes, other than income		2,372	2,625
Accrued acquisition costs		909	—
Accrued contract costs		6,859	1,826
Other		18,696	17,875
	$	51,118	53,513

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(9) Long-Term Debt

        Long-term debt consists of the following:

		December 31,
		2001		2002
121/2% Series B Senior Subordinated Notes due 2010		$	150,000	67,043
2000 Term A loan with varying interest rate due 2006			55,500	—
2000 Term B loan with varying interest rate due 2007			217,250	—
2002 Term B loan with varying interest rate due 2008			—	290,000
2000 Revolving credit facility with varying interest rate due September 2006			14,750	—
2002 Revolving credit facility with varying interest rate due September 2006			—	—
Capital lease obligations, payable monthly through October 2005 interest from 5.8% to 15.0%			165	567
Various loans and bank facilities, interest from 4.75% to 14.76%.			2,070	2,919
	Total long-term debt		439,735	360,529
	Less current installments		9,437	3,865
	Long-term debt, excluding current installments	$	430,298	356,664

        On December 19, 2002, the Company entered into a new $340,000 senior credit facility (the "2002 Facility") and refinanced all of the then outstanding obligations under the existing 2000 Facility. The 2002 Facility consists of: (a) a $50,000 revolving credit facility available for working capital and general corporate purpose loans and for letters of credit (the "2002 Revolver"), which matures in September 2006 with interest at the Base Rate (as defined in the credit agreement governing the 2002 Facility) plus a margin of 1.75% per annum, or at the rate of LIBOR plus a margin of 2.75% per annum, plus a commitment fee on the unused portion of 0.05% per annum, for the first six months and thereafter as determined by reference to a leverage-based pricing grid and (b) a $290,000 term loan (the "2002 Term B Loan") which matures in December 2008 with interest at the Base Rate plus a margin of 2.50% per annum, or at the rate of LIBOR plus 3.50% per annum. The 2002 Facility contains provisions permitting the 2002 Revolver to be increased to up to $70,000 at any time prior to December 19, 2004, provided that no Default or Event of Default has occurred and is continuing. The 2002 Facility is secured by a first priority, perfected lien on: (i) substantially all the property and assets (real and personal, tangible and intangible) of the Company and its wholly-owned domestic subsidiaries, (ii) 100% of the capital stock of all of the direct and indirect wholly-owned domestic subsidiaries and 65% of the capital stock of all of the wholly-owned first-tier foreign subsidiaries of the Company and (iii) all inter-company indebtedness owing between the Company and its wholly-owned domestic subsidiaries. The 2002 Facility is supported by guarantees provided by all of the Company's direct and indirect wholly-owned domestic subsidiaries.

        At December 31, 2002, available borrowing capacity under the 2002 Revolver was $28,171 net of outstanding letters of credit of $21,829. As of December 31, 2002, $290,000 of the 2002 Term B Loan and $67,043 of the 12¹/2% Senior Subordinated Notes were outstanding. The interest rate on the 2002 Term B Loan was 4.92% per annum.

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        The 2002 Term B Loan requires quarterly principal payments of $725 through December 31, 2007 and $68,875 in 2008. In addition, the 2002 Facility will be subject to the following mandatory prepayments, with certain customary exceptions: (i) 50% of the net cash proceeds from the sale or issuance of equity, (ii) 100% of the net cash proceeds from the sale or issuance of debt securities; (iii) 100% of the net proceeds from the sale of assets and casualty insurance proceeds, subject to a reinvestment exclusion limited to $20,000 per annum, and (iv) 50% of the Company's excess cash flow (as defined in the credit agreement governing the 2002 Facility), or 0% if the leverage ratio is less than 2.50 to 1.00.

        The credit agreement governing the 2002 Facility contains certain covenants that, among other things, limit the Company's ability, and the ability of certain of the Company's subsidiaries, to incur additional indebtedness, pay dividends or make distributions or certain other restricted payments, purchase or redeem capital stock, make investments or extend credit, engage in certain transactions with affiliates, engage in sale leaseback transactions, consummate certain assets sales, effect a consolidation or merger, sell, transfer, lease or otherwise dispose of all or substantially all assets, or create certain liens and other encumbrances on assets. Additionally, the credit agreement governing the 2002 Facility contains the following financial covenants that are computed quarterly on a rolling four-quarter basis as applicable:

•

A maximum Consolidated Leverage Ratio of 4.00, which will be reduced on the first day of each calendar quarter through July 1, 2005, from which date until December 2008 the ratio shall be 3.00. Consolidated Leverage Ratio means the ratio of (x) the aggregate stated balance sheet amount of the Company's indebtedness determined on a consolidated basis in accordance with GAAP as of the last day of the fiscal quarter for which such determination is being made to (y) Consolidated EBITDA for the four consecutive fiscal quarters ended on the last day of the fiscal quarter for which such determination is being made.



•

A minimum Consolidated Interest Coverage Ratio of 2.50, which will be increased on the first day of each calendar quarter through July 1, 2004, from which date until December 2008 the ratio shall be 3.75. Consolidated Interest Coverage Ratio means the ratio computed for the Company's four most recent fiscal quarters of (x) Consolidated EBITDA to (y) total interest expense less non-cash amortization costs included in interest expense.



•

A minimum Consolidated Fixed Charge Coverage Ratio of 1.65, which will be increased on the first day of each calendar quarter through July 1, 2006, from which date until December 2008 the ratio shall be 1.85. Consolidated Fixed Charge Coverage Ratio means, as of any date of determination, the ratio computed for the Company's four most recent fiscal quarters of (x) Consolidated EBITDA to (y) the sum of (i) total interest expense less non-cash amortization costs included in interest expense, (ii) scheduled payments of principal on indebtedness, (iii) certain restricted payments and (iv) all income taxes paid in cash.



•

A maximum Consolidated Senior Debt Ratio of 3.25, which will be reduced on the first day of each calendar quarter through July 1, 2005, from which date until December 2008 the ratio shall be 2.50. Consolidated Leverage Ratio means the ratio of (x) the aggregate stated balance sheet amount of the Company's indebtedness, less the amount of Notes, determined on a consolidated basis in accordance with GAAP as of the last day of the fiscal quarter for which such determination is being made to (y) Consolidated EBITDA for the four consecutive fiscal quarters ended on the last day of the fiscal quarter for which such determination is being made.

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        For purposes of the foregoing limitations, Consolidated EBITDA means the sum of (i) consolidated net income, (ii) consolidated interest expense with respect to all outstanding indebtedness, (iii) provisions for taxes based on income, (iv) total depreciation expense, (v) total amortization expense and (vi) certain adjustments, in each case for the period being measured, all of the foregoing as determined on a consolidated basis for the Company and its subsidiaries in accordance with GAAP. Although the Company was in compliance with its loan covenants at December 31, 2002 and expects to continue to remain in compliance over the next 12 months, no assurances can be provided that the Company will be able to do so or that the Company will be able to continue to meet the covenant requirements beyond 12 months.

        On September 6, 2000, contemporaneously with the payment of the acquisition consideration to the shareholders of SGHC, the Company refinanced substantially all of the then existing debt of both the Company and SGHC and paid certain related fees and expenses (collectively, the "Transactions"). In addition to cash on hand and proceeds from the sale of convertible preferred stock, the Company incurred the following debt to fund the Transactions: (i) $150,000 principal amount of 12¹/2% Senior Subordinated Notes due August 15, 2010 (the "Notes"); (ii) $280,000 of Term B Loan borrowings under the terms of a $345,000 senior credit facility (the "2000 Facility"); and (iii) $2,987 of borrowings under the revolving credit portion of the 2000 Facility.

        The Notes bear interest at the rate of 12¹/2% per annum payable semi-annually on each February 15 and August 15, commencing February 15, 2001. The Notes are senior subordinated, unsecured obligations of the Company, ranking junior to all existing and future senior debt including obligations under the 2002 Facility. The Notes are fully and unconditionally guaranteed on a senior subordinated basis by all of the Company's wholly-owned U.S. subsidiaries (see Note 24). The Notes will be redeemable, at the option of the Company, at any time on or after August 15, 2005, in whole or in part, at redemption prices equal to 106.250%, 104.167%, 102.083% and 100.000% of the principal amount thereof if redeemed during the 12-month periods commencing on August 15 of years 2005, 2006, 2007, and 2008 and thereafter, respectively. The Notes mature August 15, 2010. The indenture governing the Notes contains certain covenants that, among other things, limit the Company's ability, and the ability of certain of the Company's subsidiaries, to incur additional indebtedness, pay dividends or make distributions or certain other restricted payments, purchase or redeem capital stock, make investments or extend credit, engage in certain transactions with affiliates, engage in sale leaseback transactions, consummate certain assets sales, effect a consolidation or merger, or sell, transfer, lease or otherwise dispose of all or substantially all assets, or create certain liens and other encumbrances on new assets.

        In addition to the issuance of the Notes, the Company also entered into the 2000 Facility with certain lenders, providing for borrowings of up to $345,000. The 2000 Facility consisted of: (a) a $65,000 revolving credit facility available for working capital and general corporate purpose loans and for letters of credit (the "2000 Revolver"), which was to mature in September 2006 with interest at the Base Rate (as defined in the credit agreement that governed the 2000 Facility) plus a margin of 2.25% per annum, or at the rate of LIBOR plus a margin of 3.50% per annum, plus a commitment fee on the unused portion of 0.05% per annum, for the first six months and thereafter as determined by reference to a leverage-based pricing grid; (b) a $60,000 term loan (the "2000 Term A Loan") which was to mature in September 2006 with interest at the Base Rate plus a margin of 2.25% per annum, or at the

84

rate of LIBOR plus 3.50% per annum for the first six months and thereafter as determined by reference to a leverage-based pricing grid; and (c) a $220,000 term loan (the "2000 Term B Loan") which was to mature in September 2007 with interest at the Base Rate plus a margin of 3.00% per annum, or at the rate of LIBOR plus 4.25% per annum.

        In the third quarter of 2002, the Company sold 14,375 shares of its Class A Common Stock (the "2002 Offering") and used the net proceeds to redeem approximately $82,957 of the Notes. In connection with this redemption, the Company paid the noteholders redemption premiums aggregating approximately $11,172 and paid the term loan lenders and banks related fees of approximately $1,103, to amend the 2000 Facility to permit the Company to use the majority of the net proceeds from the 2002 Offering to redeem the subordinated debt rather than pay down the 2000 Facility. In November 2002, the Company used approximately $1,741 of the remaining proceeds to make mandatory repayments of the 2000 Term A and 2000 Term B loans. Following the mandatory repayment of the 2000 Facility, there was $50,022 outstanding under the 2000 Term A loans and $214,837 outstanding under the 2000 Term B loans.

        Prior to the September 6, 2000 Transactions, the Company's debt consisted primarily of: (a) $110,000 of 10⁷/8% Series B Senior Notes due August 1, 2004 (the "Old Notes"), which bore interest at a rate of 10⁷/8% per annum. In connection with the redemption of the Old Notes on September 6, 2000, the Company paid a call premium to the Old Note holders in the amount of $9,702. This call premium was recorded as an extraordinary item in the Company's consolidated statements of operations in fiscal 2000; (b) $35,000 of 5.5% convertible subordinated debentures due 2001 (the "Debentures"); (c) $25,000 revolving credit facility (the "Old Facility"), which bore interest at a rate of prime plus 2.50% per annum or LIBOR plus 3.50% per annum; (d) a $7,200 term loan (the "1998 Term Loan"), which bore interest at a fixed rate of 8.87%; and (e) a $9,900 term loan (the "2000 Term Loan"), which bore interest at a rate of prime plus 2.50% per annum or LIBOR plus 3.50% per annum. The Old Notes, the Debentures, borrowings under the Old Facility, the 1998 Term Loan, and the 2000 Term Loan were all repaid in full with cash on hand and with proceeds from the debt and equity financing in the Transactions.

(10) Extraordinary Items

        In 2002, the Company repaid approximately $82,957 of its outstanding Notes and refinanced the 2000 Facility. As a result, the Company recorded extraordinary charges aggregating approximately $22,501. These charges included payments related to the redemption premium in the amount of approximately $11,172 on the redeemed Notes; the $1,103 fees paid to the term loan lenders and banks to permit the Company to use the majority of the net proceeds from the 2002 Offering to redeem the subordinated debt rather than pay down the 2000 Facility; and the write off of approximately $10,226 of previously deferred financing costs and other fees. These extraordinary charges were partially offset by federal and state income tax benefits of approximately $9,000 attributable to these expenses. The resultant total of approximately $13,501 was reflected as an extraordinary expense in the accompanying consolidated financial statements.

        In connection with the 2000 acquisition of SGHC and the related financing transactions and the subsequent repayment of all amounts outstanding under the Company's previous credit facilities, the Company wrote off $2,865 of deferred financing fees and expensed $9,702 in call premium on the Old

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Notes in fiscal year 2000. There were no tax benefits recognized on the net extraordinary loss because the Company was not in a position to utilize prior year net operating loss carryforwards.

(11) Commitments

        At December 31, 2002, the Company was obligated under operating leases covering office equipment, office and warehouse space, transponders and transportation equipment expiring at various dates through 2007. Future minimum lease payments required under these leasing arrangements at December 31, 2002 are as follows: $10,630 in 2003; $10,431 in 2004; $9,754 in 2005; $3,845 in 2006; $2,291 in 2007 and thereafter $4,425. Total rental expense under these operating leases was $9,051, $1,718, $10,941 and $11,168 in the year ended October 31, 2000, the two months ended December 31, 2000, and the years ended December 31, 2001 and 2002, respectively.

        The Company acquired $805 of capitalized leases with the acquisition of 65% of the equity of SERCHI on June 5, 2002.

(12) Fair Value of Financial Instruments

        The fair value of financial instruments is determined by reference to market data and other valuation techniques as appropriate. The Company believes the fair value of its financial instruments, principally cash and cash equivalents, accounts receivable, other current assets, accounts payable, and accrued liabilities approximates their recorded values.

        The Company believes that the fair value of the Notes approximated $165,000 and $77,770 at December 31, 2001 and 2002, respectively, based on reference to dealer markets and global market prices. The 2000 Term A Loan, 2000 Term B Loan and 2000 Facility were refinanced during 2002 and therefore have zero values at December 31, 2002. The 2002 Term B Loan and 2002 Facility borrowings approximate their recorded values (see Note 9), respectively, based on their respective variable rates and currently available terms and conditions for similar debt at December 31, 2002.

(13) Capital Stock

Preferred Stock

        The Company has a total of 2,000 shares of preferred stock, $1.00 par value, authorized for issuance.

        On September 6, 2000, the Company authorized 1,600 shares and issued, for gross proceeds of $110,000, 1,100 shares of Series A Convertible Preferred Stock (the "Series A Preferred Stock"), including $100,000 of gross proceeds from the issuance to Cirmatica Gaming, S.A., an affiliate of Lottomatica S.p.A. (the state concessionaire for the Italian national lottery), and $10,000 of gross proceeds from the issuance to other investors through Ramius Securities, LLC (together with its affiliates, "Ramius"), which acted as placement agent. The Company also issued 27.5 shares of Series A Preferred Stock to Ramius in partial payment of its placement fee.

        The Series A Preferred Stock is convertible into the Company's common stock at prices of: (a) $4.63 per share if the average 30 day per share closing market price (AMP) is less than $4.63 per share; (b) current market price per share if AMP is between $4.63 and $5.09 per share; (c) $5.10 per

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share if AMP is between $5.10 and $8.93 per share; and (d) $5.56 per share if AMP is higher than $8.93 per share. The Series A Preferred Stock pays dividends at the rate of 6% per annum (payable in kind in additional shares or, at the Company's option, in cash) and will mature and become mandatorily convertible into common stock on September 6, 2005. The holders of Series A Preferred Stock also have the right to participate on an as-converted basis in any dividends with respect to the common stock. The holders of Series A Preferred Stock have the right to vote along with the holders of common stock on all matters on which the holders of common stock are entitled to vote, are entitled to vote separately as a class with respect to certain matters, and are also entitled to certain rights of first refusal with respect to future financings. The Series A Preferred Stock is subject to certain customary anti-dilution provisions. In addition, the holders of Series A Preferred Stock have the right to elect up to four members of the Company's Board of Directors (and to elect three additional Directors in the event of certain defaults by the Company). The Series A Preferred Stock has preference over common stock with regard to the distribution of assets upon a liquidation, dissolution or other winding up of the Company.

        On December 31, 2002, a holder of the Series A Preferred Stock elected to convert all 45.9 shares of Series A Preferred Stock that it owned. Based on the AMP in effect on December 31, 2002, the Series A Preferred Stock was converted at $5.10 per share, resulting in the issuance of 900.3 shares of Class A common stock. In addition, the holder's shares of Series B Preferred Stock were redeemed for a nominal cash payment.

        For the period from the date of issue through October 31, 2000, the two months ended December 31, 2000 and for the years ended December 31, 2001 and 2002, the Company issued approximately 32, 17, 71 and 74 shares of Series A Preferred Stock, respectively, as paid-in-kind dividends on such stock and as partial payment of a placement agent fee. For the year ended October 31, 2000, the Company recorded preferred stock dividends of $1,014; for the two months ended December 31, 2000, the Company recorded preferred stock dividends of $1,143; for the year ended December 31, 2001, the Company recorded preferred stock dividends of $7,051 and; for the year ended December 31, 2002, the Company recorded preferred stock dividends of $7,484. There were no unpaid dividends at December 31, 2002. Preferred stock dividends have been deducted in determining the amount of the net income (loss) available to common stockholders in the consolidated statements of operations.

        In connection with certain waivers and consents by holders of the Series A Preferred Stock relating to the 2002 Offering, the Company authorized 2.0 shares and issued an aggregate of 1.2376 shares of Series B Preferred Stock, $1.00 par value (the "Series B Preferred Stock"), pro rata, to the holders of the Series A Preferred Stock. The Series B Preferred Stock has voting rights that, together with the voting rights of the Series A Preferred Stock, effectively reduce the aggregate ownership percentage of Series A Preferred Stock (on an "as-converted" basis) that the holders are required to maintain in order to elect directors of the Company. The threshold for electing four directors was effectively reduced from 25% to 22.5% and the threshold for electing three directors was effectively reduced from 20% to 17.5%. The issuance of the Series B Preferred Stock did not affect the existing 10% and 5% thresholds for electing two directors and one director, respectively. The Series B Preferred Stock does not pay dividends and has a liquidation preference of no more than $2 in the aggregate. The Company

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considers the aggregate $1.238 book value of the Series B Preferred Stock to be a cost of raising capital, and consequently recorded that amount as a reduction of additional paid-in capital.

Common Stock

        The Company has two classes of common stock, consisting of Class A Common Stock and Class B Non-voting Common Stock (the "Class B Common Stock"). All shares of Class A Common Stock and Class B Common Stock entitle holders to the same rights and privileges except that the Class B Common Stock is non-voting. Each share of Class B Common Stock is convertible into one share of Class A Common Stock.

        In July 2002, in the 2002 Offering, the Company completed the public offering and sale of 14,375 shares of its Class A Common Stock at a price of $7.25 per share, and used the net proceeds of approximately $98,400 (prior to deducting underwriting discounts, commissions and offering expenses), to redeem approximately $82,957 of its 12¹/2% Senior Subordinated Notes (see Note 9).

Warrants

        On September 6, 2000, the Company issued warrants (the "September 2000 Warrants") to purchase up to 2,900 shares of the Company's common stock with a nominal exercise price to its financial advisors, Donaldson, Lufkin & Jenrette Securities Corporation and LBI Group, Inc. (an affiliate of Lehman Brothers), which received 80% and 20%, respectively, of the September 2000 Warrants, in connection with their services to the Company in obtaining certain financing commitments related to the 2000 Facility. The Company recorded the estimated fair value of the September 2000 Warrants at the date of issue of approximately $7,511 as interest expense, with a corresponding increase to additional paid in capital. On October 5, 2000, 2,900 shares of the Company's common stock were issued upon retirement of the September 2000 Warrants.

        On October 2, 2000, in connection with the acquisition of SGHC, the Company issued warrants (the "October 2000 Warrants") to purchase up to 250 shares of the Company's common stock to a financial advisor in connection with their services to the Company related to such acquisition. The October 2000 Warrants are exercisable until October 1, 2004 at a price of $3.58 per share, equal to the fair market value of the Company's common stock on the date of issue. The estimated fair market value of the October 2000 Warrants on the date of issue was $305, which was recorded as an increase to goodwill with a corresponding increase in additional paid-in-capital.

        During 2002, the Company issued 1,480 shares of Class A Common Stock upon exercise of certain warrants at a price of $1.69 per share. Some of these warrants were exercised pursuant to an optionable exercise provision that permitted the payment of the exercise price with Class A Common Shares in lieu of a cash payment of the exercise price.

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        At December 31, 2002, the Company had the following warrants outstanding, after giving effect to adjustments made in accordance with certain anti-dilution provisions:

		Shares	Exercise Price		Expiration
Warrants to purchase Class A Common Stock:
	2000 Class A Warrants	43	$	3.32	April 30, 2003
	October 2000 Warrants	250	$	3.58	October 1, 2004
	Total Class A Common Stock Warrants	293
Warrants to purchase Class B Common Stock		147	$	3.83	October 30, 2003

Employee Stock Purchase Plan

        In 2002, the Company adopted, and its stockholders approved, the Scientific Games Corporation 2002 Employee Stock Purchase Plan (the "ESPP") and reserved 1,000 shares of the Company's Class A Common Stock for issuance under the ESPP. The purchase price of the Common Stock issued pursuant to the exercise of an option under the ESPP will equal 85% of the fair market value of the Common Stock on (i) the first day of the offering period, or (ii) the last day of the offering period, whichever is less. The number of shares of Common Stock a participant purchases in each offering period is determined by dividing the total amount of payroll deductions withheld from the participant's compensation during that offering period by the purchase price. The first offering period under the ESPP began in January 2003.

(14) Stock Options

        The Company has granted stock options and other stock awards to employees, officers and directors under four stock option plans: the 1984 Stock Option Plan; the 1992 Equity Incentive Plan (the "1992 Plan"); the 1995 Equity Incentive Plan (the "1995 Plan"); and the 1997 Incentive Compensation Plan (the "1997 Plan"). On occasion, the Company has also granted stock options outside of these plans.

        In May 1995, the Company offered holders of stock options with exercise prices above market value as of May 26, 1995 the right to cancel such options in exchange for Performance Accelerated Restricted Stock Units (the "PARS"). The PARS represent deferred shares of Class A Common Stock which vest in 20% increments on the sixth, seventh, eighth, ninth and tenth anniversaries of the date of grant, or, in certain circumstances, on an accelerated basis based on the Company's stock trading at certain per share prices, or at the discretion of the Board of Directors. Options to purchase 1,976 shares were exchanged for 504 PARS. In consideration for the election by certain employees to defer their scheduled vesting of PARS, additional PARS of 4 and 18 were granted for the years ended December 31, 2001 and 2002, respectively.

        Restricted shares and deferred shares with a three year vesting schedule were granted to certain non-employee directors under the 1992 Plan and 1997 Plan. A total of 40 restricted shares at a fair market value of $2.000 per share were granted in fiscal 1999, a total of 40 restricted shares at a fair market value of $2.5625 per share were granted in fiscal 2000, a total of 87 restricted shares at a fair market value of $3.10 per share were granted in the two months ended December 31, 2000, and a total

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of 31 restricted shares at a fair market value of $8.75 per share were granted in 2002. Accordingly, the Company has recorded compensation expense of $272, $264, $43, $268, and $340 in the years ended October 31, 1999 and 2000, the two months ended December 31, 2000, and the years ended December 31, 2001 and 2002, respectively, as selling, general and administrative expenses in the consolidated statements of operations. Additional compensation expense aggregating $155 will be charged to expense through fiscal 2005 as the PARS and restricted shares become fully vested.

        Stock options granted under the Company's equity incentive plans are exercisable at not less than the fair market value of the stock at the date of grant, and none may be exercised more than 10 years from the date of grant. Options are generally exercisable in four equal installments on the first, second, third and fourth anniversaries of the date of grant. The Board of Directors may, in its discretion, accelerate the exercisability, the lapsing of restrictions, or the expiration of deferral or vesting period of any award under the plans.

        Information with respect to the Company's stock options is as follows:

Stock Options		Shares	Average Price(1)
Outstanding at October 31, 1999		7,373	$	2.63
	Granted	1,892		3.44
	Canceled	237		3.40
	Exercised	377		2.41
Outstanding at October 31, 2000		8,651		2.80
	Granted	10		3.06
	Canceled	126		2.64
	Exercised	140		1.36
Outstanding at December 31, 2000		8,395		2.80
	Granted	2,015		4.73
	Canceled	305		3.99
	Exercised	578		1.86
Outstanding at December 31, 2001		9,527		3.24
	Granted	1,732		6.75
	Canceled	250		3.83
	Exercised	1,782		2.90
Outstanding at December 31, 2002		9,227		3.95

(1)

Weighted average exercise price

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Summarized information about stock options outstanding and exercisable at December 31, 2002 is as follows:

		Outstanding				Exercisable
Exercisable Price Range		Shares	Average Life(1)	Average Price(2)		Shares	Average Price(2)
$1.00 to 2.00		1,664	4.7	$	1.30	1,512	$	1.26
$2.01 to 3.00		3,214	5.9		2.75	2,149		2.74
$3.01 to 4.00		1,518	7.2		3.50	832		3.49
$4.01 to 7.00		1,543	8.5		6.17	48		4.34
	over $7.00	1,288	8.0		8.25	371		9.90
		9,227				4,912

(1)

Weighted average contractual life remaining in years.

(2)

Weighted average exercise price.

        The number of shares and weighted average exercise price per share of options exercisable at October 31, 2000, and December 31, 2001 and 2002 were 4,832 shares at $2.85, 5,111 shares at $2.76, 5,398 shares at $2.81, and 4,912 shares at $2.96, respectively. At October 31, 2000, and December 31, 2000, 2001 and 2002, 1,909 shares, 1,916 shares, 2,223 shares, and 670 shares, respectively, were available for future grants under the terms of the Company's stock option plans. Outstanding options expire prior to December 11, 2012 and are exercisable at prices ranging from $1.0625 to $17.00 per share.

(15) Service Contract Arrangements

        Service contracts for North American pari-mutuel wagering systems and lottery systems generally provide for substantial related services such as software, maintenance personnel, computer operators and certain operating supplies. The service contracts cover a five to seven year period and frequently include renewal options that have generally been exercised by the customers. Under such contracts, the Company retains ownership of all equipment. The service contracts also provide for certain warranties covering operation of the equipment, machines, display equipment and central computing equipment. The breach of such warranties could result in significant liquidated damages. The service contracts provide for revenue based on a percentage of total amounts wagered. Certain pari-mutuel wagering systems contracts provide for specified minimum levels of revenue. The Company has historically exceeded such minimums.

        Instant ticket sales contracts provide for revenue based on a fixed fee per thousand instant tickets or a percentage of instant ticket retail sales of the lottery customer. Instant ticket contracts generally run for one to five years and frequently include renewal options.

(16) Export Sales and Major Customers

        Sales to foreign customers amounted to $41,389, $1,532, $45,891 and $28,580 in the year ended October 31, 2000, the two months ended December 31, 2000 and the years ended December 31, 2001

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and 2002, respectively. No single customer represented more than 10% of revenues during the year ended December 31, 2002.

(17) Pension Plans

        The Company has a defined benefit plan for U.S. based union employees. Retirement benefits under the plan are based upon the number of years of credited service up to a maximum of thirty years for the majority of the employees. The Company also has a defined benefit plan for U.K. based employees. The defined benefit plan for U.K. employees was assumed in connection with the acquisition of SGHC. Retirement benefits under the plan are based on an average of the employee's compensation over two years preceding retirement or leave of service. The Company's policy is to fund the minimum contribution permissible by the respective tax authorities.

        In September 2000, the Company adopted a Supplemental Executive Retirement Plan, or SERP, in order to provide supplemental retirement benefits for certain 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.

        The net cost for the Company's defined benefit plans consisted of the following components:

	Pension Benefits
	U.S. Plan					U.K. Plan				SERP Plan
	December 31, 2001			December 31, 2002		December 31, 2001		December 31, 2002		December 31, 2001	December 31, 2002
Change in benefit obligation
Benefit obligation at beginning of period	$	1,921		2,102		13,926		14,246		4,567	5,320
Service cost		105		131		1,092		950		411	442
Interest cost		132		155		917		982		342	399
Participant contributions		—		—		597		805		—	—
Amendments		—		179		—		—		—	699
Actuarial (gain) loss		(3	)	184		(1,995	)	3,670		—	524
Benefits paid		(53	)	(61	)	(291	)	(241	)	—	—
Other, principally foreign exchange		—		—		—		1,400		—	—
Benefit obligation at end of period		2,102		2,690		14,246		21,812		5,320	7,384

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Change in plan assets
Fair value of plan assets at beginning of period		1,691		1,924		13,623		13,041		—		—
Actual gain (loss) on plan assets		86		61		(2,111	)	(2,543	)	—		—
Employer contributions		200		224		1,223		1,706		—		—
Plan participant contributions		—		—		597		805		—		—
Benefits paid		(53	)	(61	)	(291	)	(241	)	—		—
Other, principally foreign exchange		—		—		—		1,286		—		—
Fair value of plan assets at end of period		1,924		2,148		13,041		14,054		—		—
Funded status		(178	)	(542	)	(1,205	)	(7,758	)	(5,320	)	(7,384	)
Unrecognized actuarial loss		546		812		1,729		9,288		—		524
Unrecognized prior service cost		104		261		—		—		3,919		4,164
Unrecognized net transition obligation		23		17		—		—		—		—
Net asset (liability) amount recognized	$	495		548		524		1,530		(1,401	)	(2,696	)
Amounts recognized in the Consolidated Balance Sheet consist of:
Accrued benefit liability	$	(673	)	(542	)	—		—		(3,903	)	(5,919	)
Intangible asset		104		261		—		3,477		2,502		3,223
Accumulated other comprehensive income		569		281		—		(3,477	)	—		—
Prepaid pension cost		495		548		524		1,530		—		—
Net amount recognized	$	495		548		524		1,530		(1,401	)	(2,696	)

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Weighted-average assumptions:
Discount rate	7.000	%	6.500	%	6.250	%	5.750	%	7.500	%	6.750	%
Expected return on plan assets	8.000	%	6.500	%	8.500	%	8.000	%	None		None
Rate of compensation	None		None		3.250	%	2.500	%	4.000	%	4.000	%

	Pension Benefits
	U.S. Plan							U.K. Plan						SERP Plan
	December 31,							December 31,						December 31,
	2000			2001		2002		2000		2001		2002		2000	2001	2002
Components of net periodic benefit cost:
Service cost	$	17		105		131		209		1,092		950		64	411	442
Interest cost		22		132		155		164		917		982		54	342	399
Expected return on plan assets		(22	)	(142	)	(161	)	(179	)	(1,063	)	(1,304	)	—	—	—
Actuarial loss		—		—		—		—		—		129		—	—	—
Net amortization and deferral		7		36		45		—		160		—		75	457	—
Amortization of prior service costs		—		—		—		—		—		—			—	454
Net periodic cost	$	24		131		170		194		1,106		757		193	1,210	1,295

        The accumulated benefit obligation represents the actuarial present value of benefits based upon the benefit multiplied by the participants' historical years of service.

        The plan assets for the U.S. based plan are invested in insurance company general accounts guaranteed as to principal. The plan assets for the U.K. based plan are primarily invested in equity securities.

        As required by Financial Accounting Standards Board Statement No. 87 ("SFAS 87"), "Employers' Accounting for Pensions" for pension plans where the accumulated benefit obligation exceeds the fair value of plan assets, the Company has recognized in the consolidated balance sheet at December 31, 2001 and 2002 the additional minimum liability of the unfunded accumulated benefit obligation of $3,175 and $7,243, respectively, as a long-term liability, with a partially offsetting intangible asset and equity adjustment.

        In connection with its U.S. based collective bargaining agreements, the Company participates with other companies in a defined benefit pension plan covering union employees. Payments made to the multi-employer plan were approximately $479, $49, $259 and $244 during the year ended October 31, 2000, the two months ended December 31, 2000, and the years ended December 31, 2001 and 2002, respectively.

        The Company has a 401K plan covering all U.S. based employees who are not covered by a collective bargaining agreement. Company contributions to the plan are at the discretion of the Board

94

of Directors. Pension expense for the year ended October 31, 2000, the two months ended December 31, 2000, and the years ended December 31, 2001 and 2002 amounted to approximately $1,004, $560, $1,624 and $1,537, respectively. The Company has a 401K plan for all union employees which does not provide for Company contributions.

(18) Income Tax Expense

        The consolidated income (loss) before income tax expense and extraordinary items, by domestic and foreign source, is as follows:

	Year Ended October 31,			Two Months Ended December 31,		Years Ended December 31,
	2000			2000		2001		2002
Domestic	$	(14,488	)	(7,246	)	(14,061	)	21,055
Foreign		(2,329	)	1,655		13,555		14,303
Consolidated income (loss) before income tax expense and extraordinary items	$	(16,817	)	(5,591	)	(506	)	35,358

        Income tax expense (benefit) consists of:

		Current			Deferred		Total
Year Ended October 31, 2000
	—  Federal	$	—		—		—
	—  Foreign		1,079		143		1,222
	—  State		381		—		381
	—  Total	$	1,460		143		1,603
Two Months Ended December 31, 2000
	—  Federal	$	—		(1,341	)	(1,341	)
	—  Foreign		664		—		664
	—  State		—		—		—
	—  Total	$	664		(1,341	)	(677	)
Year Ended December 31, 2001
	—  Federal	$	(499	)	(3,717	)	(4,216	)
	—  Foreign		3,496		498		3,994
	—  State		672		(372	)	300
	—  Total	$	3,669		(3,591	)	78
Year Ended December 31, 2002
	—  Federal	$	—		(33,227	)	(33,227	)
	—  Foreign		5,069		(427	)	4,642
	—  State		775		(2,383	)	(1,608	)
	—  Total	$	5,844		(36,037	)	(30,193	)

95

        Temporary differences between the financial statement carrying amounts and tax basis of assets and liabilities that give rise to significant portions of the deferred tax liability (asset) relate to the following:

			December 31,
			2001			2002
Net Deferred Tax Liability
	Accrued vacation		$	(897	)	(754	)
	Inventory			(2,516	)	(2,726	)
	Accrued litigation expenses			(1,366	)	(828	)
	Other accrued liabilities			(1,077	)	(825	)
	Reserve for doubtful accounts			(893	)	(715	)
		Current deferred tax asset		(6,749	)	(5,848	)
	Prepaid expense			141		300
	Deferred costs			3,235		3,155
		Current deferred tax liability		3,376		3,455
	Intangible assets—difference in basis and amortization periods			23,318		22,806
	Property and equipment—differences in basis and depreciation methods			13,332		10,926
	Interest charge, Domestic International Sales Corp			6,741		6,493
		Noncurrent deferred tax liability, net		43,391		40,225
	Net operating loss carryforward			(59,093	)	(60,701	)
	Accumulated other comprehensive income items			(3,509	)	(1,323	)
	Deferred compensation			(1,134	)	(1,702	)
	Partnership investments			(353	)	(273	)
	Foreign tax credits			—		(1,600	)
	Alternative minimum tax credits			(221	)	(221	)
	Research and experimentation credits			(32	)	(32	)
		Noncurrent deferred tax asset		(64,342	)	(65,852	)
	Valuation allowance			52,892		8,992
		Noncurrent deferred tax asset, net		(11,450	)	(56,860	)
		Noncurrent deferred tax liability (asset)		31,941		(16,635	)
		Net deferred tax liability (asset) on balance sheet	$	28,568		(19,028	)
Amounts recognized in the Consolidated Balance Sheet consist of:
	Current deferred tax asset		$	—		(11,093	)
	Non-current deferred tax asset			—		(33,142	)
	Non-current deferred tax liability			28,568		25,207
	Net deferred tax liability (asset) on balance sheet		$	28,568		(19,028	)

96

        The aggregate deferred tax assets before valuation allowance at December 31, 2001 and 2002 were $71,091 and $71,700, respectively. The aggregate deferred tax liabilities at December 31, 2001 and 2002 were $46,767 and $43,680, respectively.

        The actual tax expense differs from the "expected" tax expense (computed by applying the U.S. Federal corporate rate to income (loss) before income tax expense and extraordinary item) as follows:

		Year Ended October 31,			Two Months Ended December 31,		Years Ended December 31,
		2000			2000		2001		2002
Statutory U.S. federal income tax rate			34	%	34	%	34	%	35	%
Computed "expected" tax expense (benefit)		$	(5,718	)	(1,901	)	(172	)	12,375
Increase (reduction) in income taxes resulting from:
	Change in valuation allowance		4,924		441		(2,028	)	(42,428	)
	State income tax expense		—		—		300		1,381
	Foreign tax differential		2,014		101		(615	)	(1,928	)
	Non deductible goodwill amortization and other		—		600		2,854		—
	Other, net		383		82		(261	)	407
		$	1,603		(677	)	78		(30,193	)

        The Company has regular tax net operating loss carryforwards of approximately $30,670 that expire in 2009, $40,777 that expire in 2010, $25,406 that expire in 2011, $9,150 that expire in 2012, $9,460 that expire in 2018, $34,356 that expire in 2020, and $867 that expire in 2022. In connection with the fiscal 2000 acquisition of SGHC and the concurrent sale of Series A convertible preferred stock, the Company incurred an ownership change pursuant to Section 382 of the Internal Revenue Code of 1986. As a result, the availability of tax net operating loss carryforwards realized by the Company prior to the change in ownership, totaling approximately $120,000, to offset post acquisition taxable income is limited to approximately $7,500 annually, except with respect to any taxable income, if any, attributable to sales of pre-acquisition assets.

        The Company has minimum tax credit carryforwards (which can be carried forward indefinitely) of approximately $221 and research and experimentation credit carryforwards of approximately $32. The research and experimentation credits expire through 2020.

        The net changes in the valuation allowance for deferred tax assets for the two months ended December 31, 2000 and the years ended December 31, 2001 and 2002 were a decrease of $1,066, a decrease of $115 and a decrease of $43,900, respectively.

        The Company has a history of losses, which have generated sizable net operating loss carryforwards for both state and federal tax purposes. Prior to 2001, the Company did not recognize any income tax benefits from these losses because the Company was not able to demonstrate that it was more likely than not that it would generate sufficient taxable income in the future to utilize some or all of these losses, and, accordingly, the Company recorded a valuation allowance offsetting its

97

deferred tax asset associated with these losses. In 2001, the Company recognized operating loss carryforwards in the amount of $2,600 plus the reversal of $3,700 of deferred tax liabilities provided in connection with the acquisition of SGHC. Because of improved financial results in 2002 and anticipated taxable income in 2003 and beyond, the Company now believes that it is more likely than not that it will utilize the prior tax losses to offset future taxable income considering the annual limitation of $7,500 imposed as described above. As a result, the Company recorded a deferred tax asset in the fourth quarter of 2002 of approximately $42,400 by eliminating the corresponding deferred income tax valuation allowance, and recognized an income tax benefit in income from continuing operations of approximately $34,500 and an income tax benefit as an offset against the extraordinary charges of approximately $7,900.

        Subsequently recognized tax benefits relating to the valuation allowance for deferred tax assets as of December 31, 2002 will be allocated as follows:

Income tax benefit that would be reported in the consolidated statements of operations	$	4,008
Additional capital (benefit from exercise of stock options)		4,984
	$	8,992

        U.S. income taxes have not been provided on undistributed earnings of international subsidiaries. The Company's intention is to reinvest these earnings permanently or to repatriate the earnings only when it is tax effective to do so. Accordingly, the Company believes that any U.S. tax on repatriated earnings would be substantially offset by U.S. foreign tax credits.

(19) Business and Geographic Segments

        Business segments are defined by Statement of Financial Accounting Standards No. 131, "Disclosures about Segments of an Enterprise and Related Information" ("SFAS 131") as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker assessing performance and making operating and capital decisions.

        The following tables represent revenues, profits, depreciation and amortization and assets by business and geographic segments for the year ended October 31, 2000, the two months ended December 31, 2000, and the years ended December 31, 2001 and 2002. In addition, unaudited pro forma segment information for the year ended December 31, 2000, as though SGHC had been acquired on January 1, 2000, has been included to aid in the year over year analysis. Operating revenues are allocated among geographic segments based on where the customer is located. Gross profit excludes depreciation and amortization. The accounting policies of the segments are the same as those described in the summary of significant accounting policies in Note 1. Corporate expenses including depreciation and amortization, interest expenses and other income or expenses are not allocated among business and geographic segments.

98

	Year Ended October 31, 2000
	Lottery Group		Pari-Mutuel Group	Venue Management Group	Telecom- munications/ SJC Video Group	Totals
Service revenues	$	43,219	81,563	61,411	327	186,520
Sales revenues		21,161	19,678	—	5,989	46,828
Total revenues		64,380	101,241	61,411	6,316	233,348
Cost of service		32,056	49,592	44,626	327	126,601
Cost of sales		15,188	10,764	—	3,347	29,299
Amortization of service contract software		628	1,137	—	—	1,765
Total operating expenses		47,872	61,493	44,626	3,674	157,665
Gross profit		16,508	39,748	16,785	2,642	75,683
Selling, general and administrative expenses		4,903	12,515	2,875	1,799	22,092
Depreciation and amortization		7,118	15,700	2,830	216	25,864
Segment operating income		4,487	11,533	11,080	627	27,727
Unallocated corporate selling, general and administrative costs						13,769
Consolidated operating income	$					13,958
Assets at October 31, 2000	$	350,367	227,049	34,207	35,592	647,215
Capital and wagering systems expenditures	$	11,306	20,851	2,373	516	35,046

99

	Two Months Ended December 31, 2000
	Lottery Group		Pari-Mutuel Group		Venue Management Group	Telecom- munications Group	Totals
Service revenues	$	36,630	11,680		9,274	—	57,584
Sales revenues		—	1,805		—	7,202	9,007
Total revenues		36,630	13,485		9,274	7,202	66,591
Cost of service		25,351	7,481		6,760	—	39,592
Cost of sales		3	1,312		—	4,232	5,547
Amortization of service contract software		230	287		—	—	517
Total operating expenses		25,584	9,080		6,760	4,232	45,656
Gross profit		11,046	4,405		2,514	2,970	20,935
Selling, general and administrative expenses		3,767	2,336		499	430	7,032
Depreciation and amortization		5,079	2,254		427	286	8,046
Segment operating income (loss)		2,200	(185	)	1,588	2,254	5,857
Unallocated corporate selling, general and administrative costs							2,905
Consolidated operating income	$						2,952
Assets at December 31, 2000	$	330,138	235,016		34,055	37,758	636,967
Capital and wagering systems expenditures	$	1,694	2,354		316	1,739	6,103

100

	Pro Forma Year Ended December 31, 2000 (Unaudited)
	Lottery Group		Pari-Mutuel Group	Venue Management Group	Telecom- munications/ SJC Video Group	Totals
Service revenues	$	199,692	79,776	61,987	—	341,455
Sales revenues		26,973	16,583	—	39,646	83,202
Total revenues		226,665	96,359	61,987	39,646	424,657
Cost of service		136,464	47,413	44,937	—	228,814
Cost of sales		19,908	8,894	—	22,705	51,507
Amortization of service contract software		1,218	1,137	—	—	2,355
Total operating expenses		157,590	57,444	44,937	22,705	282,676
Gross profit		69,075	38,915	17,050	16,941	141,981
Selling, general and administrative expenses		33,864	12,869	2,914	5,601	55,248
Depreciation and amortization		27,891	15,762	2,802	1,633	48,088
Segment operating income		7,320	10,284	11,334	9,707	38,645
Unallocated corporate selling, general and administrative costs						14,892
Consolidated operating income	$					23,753
Assets at December 31, 2000	$	330,138	235,016	34,055	37,758	636,967

101

	Year Ended December 31, 2001
	Lottery Group		Pari-Mutuel Group	Venue Management Group	Telecom- munications/ SJC Video Group	Totals
Service revenues	$	223,875	79,779	60,913	—		364,567
Sales revenues		13,936	19,554	—	42,184		75,674
Total revenues		237,811	99,333	60,913	42,184		440,241
Cost of service		141,442	46,663	43,180	—		231,285
Cost of sales		9,602	11,817	—	25,739		47,158
Amortization of service contract software		1,705	2,661	—	—		4,366
Total operating expenses		152,749	61,141	43,180	25,739		282,809
Gross profit		85,062	38,192	17,733	16,445		157,432
Selling, general and administrative expenses		25,635	10,738	2,625	4,935		43,933
Depreciation and amortization		33,928	12,131	2,674	1,804		50,537
Segment operating income		25,499	15,323	12,434	9,706		62,962
Unallocated corporate selling, general and administrative costs							13,068
Consolidated operating income						$	49,894
Assets at December 31, 2001	$	306,127	226,650	32,977	36,198		601,952
Capital and wagering systems expenditures	$	39,756	3,721	1,169	1,847		46,493

102

	Year Ended December 31, 2002
	Lottery Group		Pari-Mutuel Group	Venue Management Group	Telecom- munications Group	Totals
Service revenues	$	239,219	81,546	62,053	—	382,818
Sales revenues		20,721	5,692	—	46,022	72,435
Total revenues		259,940	87,238	62,053	46,022	455,253
Cost of service		131,602	46,677	42,759	—	221,038
Cost of sales		14,474	2,751	—	30,187	47,412
Amortization of service contract software		2,328	2,602	—	—	4,930
Total operating expenses		148,404	52,030	42,759	30,187	273,380
Gross profit		111,536	35,208	19,294	15,835	181,873
Selling, general and administrative expenses		26,900	10,675	2,821	4,520	44,916
Depreciation and amortization		21,646	11,679	1,789	2,241	37,355
Segment operating income		62,990	12,854	14,684	9,074	99,602
Unallocated corporate selling, general and administrative costs						18,766
Consolidated operating income	$					80,836
Assets at December 31, 2002	$	309,541	279,468	38,634	46,335	673,978
Capital and wagering systems expenditures	$	19,065	8,344	2,153	1,455	31,017

103

        The following table provides a reconciliation of segment operating income to the consolidated income (loss) before income tax expense and extraordinary items for each period:

	Year Ended October 31,			Two Months Ended December 31,		Unaudited Pro Forma Year Ended December 31,		Years Ended December 31,
	2000			2000		2000		2001		2002
Reportable segment operating income	$	27,727		5,857		38,645		62,962		99,602
Unallocated corporate expense		(13,769	)	(2,905	)	(14,892	)	(13,068	)	(18,766	)
Interest expense		(31,231	)	(8,790	)	(50,978	)	(50,363	)	(44,842	)
Other (income) expense		456		247		365		(37	)	(636	)
Income (loss) before income tax expense (benefit) and extraordinary item	$	(16,817	)	(5,591	)	(26,860	)	(506	)	35,358

		Year Ended October 31,		Two Months Ended December 31,	Years Ended December 31,
Geographic Segments		2000		2000	2001	2002
Service and Sales Revenue:
	North America	$	150,899	48,586	298,612	323,246
	Italy		29,828	2	—	5,058
	Europe, other than Italy and United Kingdom		36,964	8,598	107,401	83,282
	United Kingdom		8,835	8,829	6,691	9,788
	Other		6,822	576	27,537	33,879
		$	233,348	66,591	440,241	455,253
Long-lived assets (excluding identifiable intangibles):
	North America	$	152,201	147,391	160,952	156,746
	Europe, other than United Kingdom		8,579	9,439	6,720	7,947
	United Kingdom		25,501	27,421	26,988	30,872
	Other		373	360	2,128	5,301
		$	186,654	184,611	196,788	200,866

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(20) Selected Quarterly Financial Data—(Unaudited)

        The following quarterly financial data reflect the reclassification of "amortization of service contract software" as a component of operating expenses, which amounts had been included in depreciation and amortization in previous filings.

		Year Ended December 31, 2001
		First Quarter			Second Quarter	Third Quarter		Fourth Quarter
Total operating revenues		$	112,108		112,573	107,203		108,357
Operating expenses			72,820		69,962	66,970		68,691
Amortization of service contract software			892		1,065	1,179		1,230
Gross profit			38,396		41,546	39,054		38,436
Net income (loss)			(2,437	)	1,940	1,522		(1,609	)
Convertible preferred stock paid-in-kind dividend			1,699		1,744	1,790		1,818
Net income (loss) available to common stockholders		$	(4,136	)	196	(268	)	(3,427	)
Basic and diluted earnings per share:
Basic income (loss) before extraordinary item available to common stockholders		$	(0.10	)	—	(0.01	)	(0.08	)
Diluted income (loss) before extraordinary item available to common stockholders		$	(0.10	)	—	(0.01	)	(0.08	)
Basic net income (loss) available to common stockholders		$	(0.10	)	—	(0.01	)	(0.08	)
Diluted net income (loss) available to common stockholders		$	(0.10	)	—	(0.01	)	(0.08	)
Weighted average number of shares used in per share calculations:
	Basic shares		40,163		40,209	40,383		40,600
	Diluted shares		40,163		44,441	40,383		40,600

105

		Year Ended December 31, 2002
		First Quarter		Second Quarter	Third Quarter		Fourth Quarter
Total operating revenues		$	106,972	114,267	115,152		118,862
Operating expenses			62,487	66,913	69,079		69,971
Amortization of service contract software			1,209	1,214	1,233		1,274
Gross profit			43,276	46,140	44,840		47,617
Extraordinary items, net of tax			—	—	14,853		(1,352	)
Net income (loss)			7,205	8,356	(5,559	)	42,048
Convertible preferred stock paid-in-kind dividend			1,803	1,851	1,899		1,931
Net income (loss) available to common stockholders		$	5,402	6,505	(7,458	)	40,117
Basic and diluted earnings per share:
Basic income (loss) before extraordinary item available to common stockholders		$	0.13	0.15	0.13		0.67
Diluted income (loss) before extraordinary item available to common stockholders (1)		$	0.10	0.12	0.11		0.46
Basic extraordinary item, net of tax benefit		$	—	—	(0.26	)	0.02
Diluted extraordinary item, net of tax benefit (1)		$	—	—	(0.17	)	0.02
Basic net income (loss) available to common stockholders		$	0.13	0.15	(0.13	)	0.69
Diluted net income (loss) available to common stockholders (1)		$	0.10	0.12	(0.06	)	0.48
Weighted average number of shares used in per share calculations:
	Basic shares		42,067	43,048	57,301		58,243
	Diluted shares (1)		71,725	71,983	87,360		88,033

(1)

As per Statement of Financial Accounting Standards No. 128, Earnings Per Share ("SFAS 128"), whenever a company reports an extraordinary item, the same number of potential common shares used in computing the diluted per-share amounts for income before extraordinary items must be used in computing all other reported diluted per-share amounts, even if those amounts are antidilutive to their respective basic per-share amounts.

106

(21) Accumulated Other Comprehensive Loss

        The accumulated balances for each classification of comprehensive loss are as follows:

	Foreign Currency Items			Unrealized Gains (Losses) On Securities		Minimum Pension Liability		Cash Flow Hedges		Accumulated Other Comprehensive Loss
Beginning balance at November 1, 1999	$	(649	)	—		(602	)	—		(1,251	)
Change during period		(2,277	)	317		(5	)	—		(1,965	)
Balance at October 31, 2000	$	(2,926	)	317		(607	)	—		(3,216	)
Change during period		1,611		(1,274	)	—		(2,364	)	(2,027	)
Reclassification adjustments for gains reclassified into operations		—		—		—		(31	)	(31	)
Balance at December 31, 2000	$	(1,315	)	(957	)	(607	)	(2,395	)	(5,274	)
Change during period		(296	)	2		38		(7,816	)	(8,072	)
Reclassification adjustments for losses reclassified into operations		—		—		—		2,962		2,962
Balance at December 31, 2001	$	(1,611	)	(955	)	(569	)	(7,249	)	(10,384	)
Change during period (1)		4,758		100		(2,261	)	(1,193	)	1,404
Reclassification adjustments for losses reclassified into operations		—		—		—		8,654		8,654
Balance at December 31, 2002	$	3,147		(855	)	(2,830	)	212		(326	)

(1)

Amounts originating in 2002 are net of income taxes. No adjustments were made for income tax benefits in prior periods as the Company was not in a position to utilize the tax benefits of prior period operating losses.

107

(22) Unusual Items

        In 2002, the Company recognized unusual charges in the amount of $1,055 primarily due to investigation and other costs attributable to the Pick Six matter (see Note 23). In addition, interest expense in 2002 included approximately $3,276 of debt restructuring charges relating to the refinancing of the 2000 Facility in December 2002. These charges resulted from the early termination of three interest rate swap agreements that were required to be maintained pursuant to the terms of the 2000 Facility. (See Note 9.)

        In 2001, the Company reversed reserves of $1,500 in connection with a litigation that was settled.

        In fiscal 2000, the Company recognized unusual interest expense charges in the amount of $7,511 attributable to payments, in the form of warrants, to purchase 2,900 shares of Scientific Games common stock, to certain financial advisors in connection with their services in obtaining certain financial commitments to acquire SGHC, $1,200 of additional interest expense as a result of the required pre-funding of the Notes, and approximately $2,300 of incremental business integration costs as a result of the SGHC acquisition. The Company also recorded a $1,135 write-off of its option to purchase the Atlantic City Race Course as a result of the New Jersey legislature's failure to pass the necessary legislation to allow OTB expansion in the state and recorded an extraordinary charge of $12,567 in connection with the payment of the call premium on the Old Notes and the write-off of deferred financing fees.

(23) Litigation

        Although the Company is a party to various claims and legal actions arising in the ordinary course of business, the Company believes, on the basis of information presently available to it, that the ultimate disposition of these matters will not likely have a material adverse effect on its consolidated financial position or results of operations.

        The Company's subsidiary Scientific Games International, Inc. ("SGI") owned a minority interest in Wintech de Colombia S.A., or Wintech (now in liquidation), which formerly operated the Colombian national lottery under contract with Empresa Colombiana de Recursos para la Salud, S.A. ("Ecosalud"), an agency of the Colombian government. The contract projected that certain levels of lottery ticket sales would be attained and provided a penalty against Wintech, SGI and the other shareholders of Wintech of up to $5,000 if such performance levels were not achieved. In addition, with respect to a further guarantee of performance under the contract with Ecosalud, SGI delivered to Ecosalud a $4,000 bond issued by a Colombian surety, Seguros del Estado ("Seguros"). Wintech started the instant lottery in Colombia, but, due to difficulties beyond its control, including, among other factors, social and political unrest in Colombia, frequently interrupted telephone service and power outages, and competition from another lottery being operated in a province of Colombia which the Company believes was in violation of Wintech's exclusive license from Ecosalud, the projected sales level was not met for the year ended June 30, 1993. On July 1, 1993, Ecosalud adopted resolutions declaring, among other things, that the contract was in default and asserted various claims for compensation and penalties against Wintech, SGI and other shareholders of Wintech. Litigation is pending and/or threatened in Colombia concerning various claims among Ecosalud, Wintech and SGI, relating to the termination of the contracts with Ecosalud. Ecosalud's claims are for, among other things, realization of the full amount of the penalty, plus interest and costs of the bond.

108

        The Colombian surety, Seguros, paid $2,400 to Ecosalud under its $4,000 bond, and made demand upon SGI for that amount under the indemnity agreement between the surety and SGI. SGI declined to make or authorize any such payment and notified the surety that any payment in response to Ecosalud's demand on the bond was at the surety's risk. In a case brought in U.S. District Court in Georgia, the Colombian surety sought to recover from SGI sums paid (in SGI's view, improperly) under its surety bond, plus interest. In September 1999, the District Court granted summary judgment for the surety in the amount of approximately $7,000 (which included pre-judgment interest at a rate of 38.76% per annum). On appeal, the United States Court of Appeals for the Eleventh Circuit, on August 20, 2001, affirmed the judgment for the principal amount of $2,400, but vacated that part of the judgment awarding approximately $4,600 based on a pre-judgment interest rate of 38.76% with instructions to the District Court to recalculate pre-judgment interest. On February 22, 2002, SGI agreed to settle this matter upon payment of $3,700 to the Colombian surety. On February 26, 2002, SGI drew upon a $1,500 letter of credit posted by a former Colombian partner in order to partially fund this payment. This settlement resolves the U.S. litigation with the surety, but the claims in Colombia remain unresolved.

        In July 2002, a Colombian appellate tribunal denied SGI's motion to dismiss Ecosalud's pending lawsuit against SGI. While SGI's motion is subject to further appeal to the Colombian Council of State, the highest appellate court with jurisdiction over this matter, the proceeding in the lower court, which is in an early stage, will continue during the pendency of the appeal.

        SGI has various defenses on the merits as well as procedural defenses that it plans to assert against Ecosalud's claims. The Company intends to vigorously pursue these defenses as appropriate. SGI also has certain cross indemnities and undertakings from the two other privately held shareholders of Wintech for their respective shares of any liability to Ecosalud. No assurance can be given that the other shareholders of Wintech will, or have sufficient assets to, honor their indemnity undertakings to SGI when the claims by Ecosalud against SGI and Wintech are finally resolved, in the event such claims result in any final liability. Although the Company believes that any potential losses arising from these claims will not result in a material adverse effect on its consolidated financial position or results of operations, it is not feasible to predict the final outcome, and there can be no assurance that these claims might not be finally resolved adversely to the Company or result in material liability.

        On October 26, 2002, the Company experienced a breach of security by an employee who altered betting data on the $3,000 "winning" wagering ticket on the races constituting the Pick Six at the Breeders' Cup at Arlington Park in Illinois. It was subsequently discovered that the employee, whom the Company terminated, also altered betting data on two other multiple-race wagers earlier in the month.

        On December 4, 2002, a class action lawsuit (Allard v. Autotote / Scientific Games Corporation, and Does 1-10 (L. A. Superior Court No. BC 286382)) was filed against the Company in state court in California by a professional Pick Six bettor on behalf of pari-mutuel bettors in the U.S., alleging, among other things, negligence, breach of contract and deceptive trade practices arising from the Company's handling of multiple-race wagers. The Company removed the case to federal court, and moved to dismiss the lawsuit. In response, the plaintiff agreed to file an amended complaint in an attempt to address some of the deficiencies that were the subject of the Company's motion. That

109

amended complaint has not yet been filed. The Company believes that the lawsuit lacks merit and intends to contest the suit vigorously.

        Also on December 4, 2002, a second class action lawsuit (Cheldin v. Scientific Games Corporation, Autotote Systems, Inc., and Does 1-20 (L. A. Superior Court No. BC 286417)) was filed against the Company in state court in California by a bettor of the Breeders' Cup Pick Six wager, on behalf of all bettors of such Pick Six wagers. The lawsuit alleged negligence and fraud with respect to the Company's wagering systems in connection with the Breeders' Cup Pick Six. The Company removed the case to federal court, and its motion to dismiss the complaint is currently pending. The Company believes that the lawsuit lacks merit and intends to contest the suit vigorously.

(24) Financial Information for Guarantor Subsidiaries and Non-Guarantor Subsidiaries

        The Company conducts substantially all of its business through its domestic and foreign subsidiaries. The Notes and the 2002 Facility entered into on December 19, 2002 to refinance all obligations under the then existing 2000 Facility are fully, unconditionally and jointly and severally guaranteed by substantially all of the Company's wholly-owned domestic subsidiaries (the "Guarantor Subsidiaries").

        Presented below is condensed consolidating financial information for (i) Scientific Games Corporation (the "Parent Company"), which includes the activities of Scientific Games Management Corporation, (ii) the Guarantor Subsidiaries and (iii) the wholly-owned foreign subsidiaries and the non-wholly owned domestic and foreign subsidiaries (the "Non-Guarantor Subsidiaries") as of December 31, 2001 and December 31, 2002 and for the year ended October 31, 2000, the two months ended December 31, 2000, and the years ended December 31, 2001 and 2002. The condensed consolidating financial information has been presented to show the nature of assets held, results of operations and cash flows of the Parent Company, the Guarantor Subsidiaries and the Non-Guarantor Subsidiaries assuming the guarantee structure of the 2002 Facility and the Notes was in effect at the beginning of the periods presented. Separate financial statements for the Guarantor Subsidiaries are not presented based on management's determination that they would not provide additional information that is material to investors.

        The condensed consolidating financial information reflects the investments of the Parent Company in the Guarantor and Non-Guarantor Subsidiaries using the equity method of accounting. In addition, corporate interest and administrative expenses have not been allocated to the subsidiaries.

110

SCIENTIFIC GAMES CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL CONDENSED CONSOLIDATING BALANCE SHEET
December 31, 2001
(in thousands)

			Parent Company			Guarantor Subsidiaries		Non-Guarantor Subsidiaries	Eliminating Entries		Consolidated
ASSETS
	Cash and cash equivalents		$	7,612		(415	)	5,452	—		12,649
	Accounts receivable, net			—		34,322		16,088	—		50,410
	Inventories			—		16,524		3,558	(535	)	19,547
	Other current assets			973		9,344		5,190	30		15,537
	Property and equipment, net			2,159		156,224		38,822	(417	)	196,788
	Investment in subsidiaries			265,521		—		—	(265,521	)	—
	Goodwill			183		192,658		2,414	—		195,255
	Intangible assets			—		54,913		5,241	—		60,154
	Other assets			20,378		44,071		6,487	(19,324	)	51,612
		Total assets	$	296,826		507,641		83,252	(285,767	)	601,952
LIABILITIES AND STOCKHOLDERS' EQUITY
	Current installments of long-term debt		$	9,018		9		410	—		9,437
	Current liabilities			14,999		50,672		19,661	799		86,131
	Long-term debt, excluding current installments			429,917		10		371	—		430,298
	Other non-current liabilities			14,221		32,702		4,356	729		52,008
	Intercompany balances			(195,407	)	169,896		27,154	(1,643	)	—
	Stockholders' equity			24,078		254,352		31,300	(285,652	)	24,078
		Total liabilities and stockholders' equity	$	296,826		507,641		83,252	(285,767	)	601,952

111

SCIENTIFIC GAMES CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL CONDENSED CONSOLIDATING BALANCE SHEET
December 31, 2002
(in thousands)

			Parent Company			Guarantor Subsidiaries	Non-Guarantor Subsidiaries	Eliminating Entries		Consolidated
ASSETS
	Cash and cash equivalents		$	25,323		180	9,426	—		34,929
	Accounts receivable, net			—		35,521	17,779	(40	)	53,260
	Inventories			—		16,591	4,480	(536	)	20,535
	Other current assets			10,810		6,988	4,826	30		22,654
	Property and equipment, net			3,572		151,366	46,559	(631	)	200,866
	Investment in subsidiaries			364,741		4,240	—	(368,981	)	—
	Goodwill			183		195,828	3,915	—		199,926
	Intangible assets			—		52,892	4,930	—		57,822
	Other assets			47,817		38,693	6,001	(8,525	)	83,986
		Total assets	$	452,446		502,299	97,916	(378,683	)	673,978
LIABILITIES AND STOCKHOLDERS' EQUITY
	Current installments of long-term debt		$	3,281		9	575	—		3,865
	Current liabilities			13,342		49,047	17,970	639		80,998
	Long-term debt, excluding current installments			356,418		1	245	—		356,664
	Other non-current liabilities			7,569		28,972	10,845	139		47,525
	Intercompany balances			(113,090	)	96,751	17,822	(1,483	)	—
	Stockholders' equity			184,926		327,519	50,459	(377,978	)	184,926
		Total liabilities and stockholders' equity	$	452,446		502,299	97,916	(378,683	)	673,978

112

SCIENTIFIC GAMES CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL CONDENSED STATEMENT OF OPERATIONS
Year Ended October 31, 2000
(in thousands)

		Parent Company			Guarantor Subsidiaries		Non-Guarantor Subsidiaries		Eliminating Entries		Consolidated
Operating revenues		$	—		186,408		60,286		(13,346	)	233,348
Operating expenses			—		122,400		46,766		(13,266	)	155,900
Amortization of service contract software			—		1,765		—		—		1,765
	Gross profit		—		62,243		13,520		(80	)	75,683
Selling, general and administrative expenses			13,572		16,186		5,917		(11	)	35,664
Depreciation and amortization			291		21,445		4,428		(103	)	26,061
	Operating income (loss)		(13,863	)	24,612		3,175		34		13,958
Interest expense			30,535		531		1,037		(872	)	31,231
Other (income) deductions			(1,000	)	(275	)	(198	)	1,017		(456	)
Income (loss) before equity in income of subsidiaries, and income taxes			(43,398	)	24,356		2,336		(111	)	(16,817	)
Equity in income of subsidiaries			24,933		—		—		(24,933	)	—
Income tax expense			—		812		791		—		1,603
Income (loss) before extraordinary items			(18,465	)	23,544		1,545		(25,044	)	(18,420	)
Extraordinary items:
	Write-off of deferred financing fees and debt call premium		12,522		45		—		—		12,567
Net income (loss)		$	(30,987	)	23,499		1,545		(25,044	)	(30,987	)

113

SCIENTIFIC GAMES CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL CONDENSED STATEMENT OF OPERATIONS
Two Months Ended December 31, 2000
(in thousands)

		Parent Company			Guarantor Subsidiaries		Non-Guarantor Subsidiaries		Eliminating Entries		Consolidated
Operating revenues		$	—		57,125		22,087		(12,621	)	66,591
Operating expenses			—		41,333		16,425		(12,619	)	45,139
Amortization of service contract software			—		517		—		—		517
	Gross profit		—		15,275		5,662		(2	)	20,935
Selling, general and administrative expenses			2,872		4,896		2,136		(2	)	9,902
Depreciation and amortization			49		6,823		1,224		(15	)	8,081
	Operating income (loss)		(2,921	)	3,556		2,302		15		2,952
Interest expense			8,930		13		477		(630	)	8,790
Other (income) deductions			(87	)	(458	)	(277	)	575		(247	)
Income (loss) before equity in income of subsidiaries, and income taxes			(11,764	)	4,001		2,102		70		(5,591	)
Equity in income of subsidiaries			6,850		—		—		(6,850	)	—
Income tax expense (benefit)			—		(1,267	)	590		—		(677	)
Net income (loss)		$	(4,914	)	5,268		1,512		(6,780	)	(4,914	)

114

SCIENTIFIC GAMES CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL CONDENSED STATEMENT OF OPERATIONS
Year Ended December 31, 2001
(in thousands)

		Parent Company			Guarantor Subsidiaries		Non-Guarantor Subsidiaries	Eliminating Entries		Consolidated
Operating revenues		$	—		338,626		115,434	(13,819	)	440,241
Operating expenses			—		211,193		80,728	(13,478	)	278,443
Amortization of service contract software			—		4,366		—	—		4,366
	Gross profit		—		123,067		34,706	(341	)	157,432
Selling, general and administrative expenses			12,762		32,310		11,664	(41	)	56,695
Depreciation and amortization			306		42,578		8,032	(73	)	50,843
	Operating income (loss)		(13,068	)	48,179		15,010	(227	)	49,894
Interest expense			49,880		410		2,009	(1,936	)	50,363
Other (income) deductions			(596	)	(2,545	)	1,148	2030		37
Income (loss) before equity in income of subsidiaries, and income taxes			(62,352	)	50,314		11,853	(321	)	(506	)
Equity in income of subsidiaries			61,821		—		—	(61,821	)	—
Income tax expense (benefit)			53		(3,122	)	3,147	—		78
Net income (loss)		$	(584	)	53,436		8,706	(62,142	)	(584	)

115

SCIENTIFIC GAMES CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL CONDENSED STATEMENT OF OPERATIONS
Year Ended December 31, 2002
(in thousands)

		Parent Company			Guarantor Subsidiaries		Non-Guarantor Subsidiaries	Eliminating Entries		Consolidated
Operating revenues		$	—		347,702		118,762	(11,211	)	455,253
Operating expenses			—		199,209		80,265	(11,024	)	268,450
Amortization of service contract software			—		4,530		400	—		4,930
	Gross profit		—		143,963		38,097	(187	)	181,873
Selling, general and administrative expenses			19,271		32,590		11,283	(12	)	63,132
Depreciation and amortization			550		29,229		8,134	(8	)	37,905
	Operating income (loss)		(19,821	)	82,144		18,680	(167	)	80,836
Interest expense			44,112		776		1,291	(1,337	)	44,842
Other (income) deductions			(302	)	(2,124	)	1,841	1,221		636
Income (loss) before equity in income of subsidiaries, and income taxes			(63,631	)	83,492		15,548	(51	)	35,358
Equity in income of subsidiaries			95,434		—		—	(95,434	)	—
Income tax expense (benefit)			(33,748	)	(218	)	3,773	—		(30,193	)
Income (loss) before extraordinary items			65,551		83,710		11,775	(95,485	)	65,551
Extraordinary items:
	Early retirement of debt, net of tax benefit		13,501		—		—	—		13,501
Net income (loss)		$	52,050		83,710		11,775	(95,485	)	52,050

116

SCIENTIFIC GAMES CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL CONDENSED STATEMENT OF CASH FLOWS
Year Ended October 31, 2000
(in thousands)

		Parent Company			Guarantor Subsidiaries		Non-Guarantor Subsidiaries		Eliminating Entries		Consolidated
Net income (loss)		$	(30,987	)	23,499		1,545		(25,044	)	(30,987	)
	Depreciation and amortization		291		23,210		4,428		(103	)	27,826
	Equity in income of subsidiaries		(24,933	)	—		—		24,933		—
	Extraordinary item		12,567		—		—		—		12,567
	Non-cash interest expense		8,735		—		—		—		8,735
	Other non-cash adjustments		1,762		181		214		—		2,157
	Changes in working capital		7,208		3,323		(5,455	)	34		5,110
Net cash provided by (used in) operating activities			(25,357	)	50,213		732		(180	)	25,408
Cash flows from investing activities:
	Capital and wagering systems expenditures		(1,863	)	(27,581	)	(5,715	)	113		(35,046	)
	Business acquisition, net of cash acquired		(111,305	)	(215,091	)	73		10,081		(316,242	)
	Other assets and investments		(240,221	)	230,382		5,190		(1,546	)	(6,195	)
Net cash provided by (used in) investing activities			(353,389	)	(12,290	)	(452	)	8,648		(357,483	)
Cash flows from financing activities:
	Net borrowing under lines of credit		11,250		—		—		—		11,250
	Proceeds from issuance of long term-debt		441,501		—		1,043		(22	)	442,522
	Payments on long-term debt		(165,957	)	(34,301	)	(1,104	)	—		(201,362	)
	Net proceeds from stock issue		107,525		(547	)	993		(479	)	107,492
	Payment of finance fees		(16,792	)	—		—		—		(16,792	)
Net cash provided by (used in) financing activities			377,527		(34,848	)	932		(501	)	343,110
Effect of exchange rate changes on cash			—		370		(1,228	)	64		(794	)
Increase (decrease) in cash and cash equivalents			(1,219	)	3,445		(16	)	8,031		10,241
Cash and cash equivalents, beginning of year			1,598		4,346		7,154		(8,031	)	5,067
Cash and cash equivalents, end of year		$	379		7,791		7,138		—		15,308

117

SCIENTIFIC GAMES CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL CONDENSED STATEMENT OF CASH FLOWS
Two Months Ended December 31, 2000
(in thousands)

		Parent Company			Guarantor Subsidiaries		Non-Guarantor Subsidiaries		Eliminating Entries		Consolidated
Net income (loss)		$	(4,914	)	5,268		1,512		(6,780	)	(4,914	)
	Depreciation and amortization		49		7,340		1,224		(15	)	8,598
	Equity in income of subsidiaries		(6,850	)	—		—		6,850		—
	Non-cash interest		384		—		—		—		384
	Other non-cash adjustments		44		(1,341	)	40		—		(1,257	)
	Changes in working capital		6,078		(5,643	)	(988	)	(230	)	(783	)
Net cash provided by (used in) operating activities			(5,209	)	5,624		1,788		(175	)	2,028
Cash flows from investing activities:
	Capital and wagering systems expenditures		(13	)	(3,608	)	(2,136	)	(346	)	(6,103	)
	Other assets and investments		(3,060	)	(770	)	(93	)	1,504		(2,419	)
Net cash provided by (used in) investing activities			(3,073	)	(4,378	)	(2,229	)	1,158		(8,522	)
Cash flows from financing activities:
	Net borrowing under lines of credit		(2,250	)	—		—		—		(2,250	)
	Payments on long-term debt		(1,304	)	—		(20	)	—		(1,324	)
	Other, principally intercompany balances		12,324		(10,288	)	(851	)	(983	)	202
Net cash provided by (used in) financing activities			8,770		(10,288	)	(871	)	(983	)	(3,372	)
Effect of exchange rate changes on cash			—		1,199		(153	)	—		1,046
Increase (decrease) in cash and cash equivalents			488		(7,843	)	(1,465	)	—		(8,820	)
Cash and cash equivalents, beginning of period			379		7,792		7,137		—		15,308
Cash and cash equivalents, end of period		$	867		(51	)	5,672		—		6,488

118

SCIENTIFIC GAMES CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL CONDENSED STATEMENT OF CASH FLOWS
Year Ended December 31, 2001
(in thousands)

		Parent Company			Guarantor Subsidiaries		Non-Guarantor Subsidiaries		Eliminating Entries		Consolidated
Net income (loss)		$	(584	)	53,436		8,706		(62,142	)	(584	)
	Depreciation and amortization		306		46,944		8,032		(73	)	55,209
	Equity in income of subsidiaries		(61,821	)	—		—		61,821		—
	Non-cash interest		2,435		—		—		—		2,435
	Other non-cash adjustments		1,224		(1,819	)	(2	)	—		(597	)
	Changes in working capital		(8,426	)	12,117		1,146		1,111		5,948
Net cash provided by (used in) operating activities			(66,866	)	110,678		17,882		717		62,411
Cash flows from investing activities:
	Capital and wagering systems expenditures		(350	)	(39,726	)	(6,712	)	295		(46,493	)
	Other assets and investments		(624	)	(5,273	)	(5,202	)	1,508		(9,591	)
Net cash provided by (used in) investing activities			(974	)	(44,999	)	(11,914	)	1,803		(56,084	)
Cash flows from financing activities:
	Net borrowing under lines of credit		5,750		—		—		—		5,750
	Payments on long-term debt		(6,007	)	(8	)	(751	)	193		(6,573	)
	Net proceeds from stock issue		1,046		250		497		(747	)	1,046
	Other, principally intercompany balances		73,738		(65,779	)	(5,993	)	(1,966	)	—
Net cash provided by (used in) financing activities			74,527		(65,537	)	(6,247	)	(2,520	)	223
Effect of exchange rate changes on cash			58		(507	)	60		—		(389	)
Increase (decrease) in cash and cash equivalents			6,745		(365	)	(219	)	—		6,161
Cash and cash equivalents, beginning of year			867		(50	)	5,671		—		6,488
Cash and cash equivalents, end of year		$	7,612		(415	)	5,452		—		12,649

119

(24) Financial Information for Guarantor Subsidiaries and Non-Guarantor Subsidiaries (Continued)

SCIENTIFIC GAMES CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL CONDENSED STATEMENT OF CASH FLOWS
Year Ended December 31, 2002
(in thousands)

		Parent Company			Guarantor Subsidiaries		Non-Guarantor Subsidiaries		Eliminating Entries		Consolidated
Net income (loss)		$	52,050		83,710		11,775		(95,485	)	52,050
	Depreciation and amortization		550		33,759		8,534		(8	)	42,835
	Equity in income of subsidiaries		(95,434	)	—		—		95,434		—
	Extraordinary items		13,501		—		—		—		13,501
	Deferred income taxes		(35,339	)	(1,472	)	(491	)	—		(37,302	)
	Non-cash interest expense		2,298		—		—		—		2,298
	Other non-cash adjustments		1,541		516		118		—		2,175
	Changes in working capital		(1,385	)	(930	)	(2,172	)	(1,216	)	(5,703	)
Net cash provided by (used in) operating activities			(62,218	)	115,583		17,764		(1,275	)	69,854
Cash flows from investing activities:
	Capital and wagering systems expenditures		(1,755	)	(22,900	)	(6,583	)	221		(31,017	)
	Business acquisition, net of cash acquired		—		(4,150	)	46		—		(4,104	)
	Other assets and investments		(3,983	)	(2,913	)	1,051		(8,286	)	(14,131	)
Net cash provided by (used in) investing activities			(5,738	)	(29,963	)	(5,486	)	(8,065	)	(49,252	)
Cash flows from financing activities:
	Net borrowing under lines of credit		(14,750	)	—		—		—		(14,750	)
	Proceeds from issuance of long term debt		291,335		—		—		—		291,335
	Payments on long-term debt		(355,816	)	(9	)	(1,638	)	—		(357,463	)
	Payment of financing fees		(17,531	)	—		—		—		(17,531	)
	Net proceeds from stock issue		98,398		(11,453	)	3,370		8,083		98,398
	Other, principally intercompany balances		84,031		(74,255	)	(11,033	)	1,257		—
Net cash provided by (used in) financing activities			85,667		(85,717	)	(9,301	)	9,340		(11	)
Effect of exchange rate changes on cash			—		692		997		—		1,689
Increase (decrease) in cash and cash equivalents			17,711		595		3,974		—		22,280
Cash and cash equivalents, beginning of year			7,612		(415	)	5,452		—		12,649
Cash and cash equivalents, end of year		$	25,323		180		9,426		—		34,929

120

SCHEDULE II

SCIENTIFIC GAMES CORPORATION AND SUBSIDIARIES

Valuation and Qualifying Accounts

Year Ended October 31, 2000, the Two Months Ended December 31, 2000,
and the Years Ended December 31, 2001 and 2002
(in thousands)

			Additions
	Balance at Beginning of Period		Charged to Costs and Expenses	Other	Deductions(1)	Balance at End of Period
Year ended October 31, 2000
Allowance for doubtful accounts	$	2,789	2,077	—	558	4,308
Reserve for inventory obsolescence	$	1,846	31	—	311	1,566
Two months ended December 31, 2000
Allowance for doubtful accounts	$	4,308	329	—	468	4,169
Reserve for inventory obsolescence	$	1,566	46	—	683	929
Year ended December 31, 2001
Allowance for doubtful accounts	$	4,169	1,546	—	1,826	3,889
Reserve for inventory obsolescence	$	929	1,944	—	393	2,480
Year ended December 31, 2002
Allowance for doubtful accounts	$	3,889	1,704	—	1,821	3,772
Reserve for inventory obsolescence	$	2,480	3,782	—	1,166	5,096

(1)

Amounts written off.

121

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

        Information relating to directors of the Company and information relating to disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is incorporated herein by reference to the Company's proxy statement in connection with the year 2003 Annual Meeting of Stockholders under the caption "Election of Directors." Information relating to executive officers of the Company is included in Part I of this Form 10-K as permitted in General Instruction G(3).

ITEM 11. EXECUTIVE COMPENSATION

        Information relating to executive compensation under the caption "Executive Compensation; Certain Arrangements," in the Company's proxy statement in connection with the year 2003 Annual Meeting of Stockholders is incorporated herein by reference.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

        Information relating to security ownership of certain beneficial owners and management under the caption, "Security Ownership" in the Company's proxy statement in connection with the year 2003 Annual Meeting of Stockholders is incorporated herein by reference.

Equity Compensation Plan Information

        The following table gives information about the Company's Common Stock that may be issued upon exercise of options or other stock rights under all of the Company's compensation plans as of December 31, 2002.

Plan Category	Number of securities to be issued upon exercise of outstanding options, warrants and rights	Weighted average exercise price of outstanding options, warrants and rights		Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))
	(a)	(b)		(c)
Equity compensation plans approved by security holders	6,318,708	$	4.02	1,657,339
Equity compensation plans not approved by security holders	3,607,476	$	3.50	12,169
Total	9,926,184	$	3.83	1,669,508

        As of December 31, 2002, the equity compensation plans of the Company not submitted for stockholder approval consisted of certain stock options granted in 1993, warrants issued in 1992, 1995 and 2000, and the Company's 1995 Equity Incentive Plan, which was originally adopted by the Board of Directors in May 1995.

        Stock options granted in 1993.    The Company granted stock options to certain directors in 1993 pursuant to arrangements approved by the Board of Directors. The options permit the holders to purchase an aggregate of 90,000 shares of Common Stock at an exercise price of $13.50 per share, and each such option is scheduled to expire on the tenth anniversary of its date of grant.

        Warrants issued in 1992.    The Company issued warrants in October 1992 to lenders of the Company in connection with an amendment to a credit agreement. The warrants permit the holders to purchase an aggregate of 146,793 shares of Class B Common Stock at an exercise price of $3.83 per share and are scheduled to expire in October 2003.

122

        Warrants issued in 1995.    The Company issued warrants in September 1995 to lenders of the Company in connection with an amendment to a credit agreement. The warrants, as amended in April 2000, permit the holders to purchase an aggregate of 43,036 shares of Common Stock at an exercise price of $3.32 per share and are scheduled to expire in April 2003.

        Warrant issued in 2000.    The Company issued a warrant in October 2000 to a financial advisor for services related to the acquisition of Scientific Games Holdings Corporation. The warrant permits the holder to purchase an aggregate of 250,000 shares of Common Stock at an exercise price of $3.58 per share and is scheduled to expire in October 2004.

        The 1995 Equity Incentive Plan.    The Company's 1995 Equity Incentive Plan, as amended (the "1995 Plan"), authorizes grants of non-qualified stock options, deferred stock and other stock-related awards to employees who are not executive officers or directors of the Company. As of December 31, 2002, 3,077,647 shares were subject to outstanding awards under the 1995 Plan and 12,169 shares remained available for grant under the 1995 Plan. The 1995 Plan is administered by the Compensation Committee, which is authorized to select the participants, determine the type and number of awards to be granted and the number of shares of Common Stock to which awards will relate, specify times at which awards will be exercisable, set other terms and conditions of such awards, interpret and specify rules and regulations relating to the 1995 Plan, and make all other determinations that may be necessary or advisable for the administration of the 1995 Plan. The Committee's practice has been to award stock options which vest in four annual installments (one-quarter of the total on each of the first, second, third and fourth anniversaries of the grant date), have an exercise price equal to the fair market value of the Company's Common Stock on the grant date, and expire on the tenth anniversary of the date of grant. The Committee may, in its discretion, accelerate the exercisability, the lapsing of restrictions, or the expiration of deferral or vesting periods of any award, and such accelerated exercisability, lapse, expiration and vesting shall occur automatically in the event of a consolidation or merger of the Company or a sale of substantially all of the Company's assets. The Board may amend or terminate the 1995 Plan without stockholder approval, but no amendment or termination of the 1995 Plan may adversely affect any award previously granted under the 1995 Plan without the consent of the holders. Unless earlier terminated by the Board, the 1995 Plan will terminate at such time as no shares remain available for issuance under the 1995 Plan and the Company has no further rights or obligations with respect to outstanding awards under the 1995 Plan.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

        Information under the caption "Certain Relationships and Related Transactions" in the Company's proxy statement in connection with the year 2003 Annual Meeting of Stockholders is incorporated herein by reference.

ITEM 14. DISCLOSURE CONTROLS

(a)

Evaluation of Disclosure Controls and Procedures

        As of a date within the 90 days prior to the date of this annual report, we performed an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as such term is defined in rules 13a-14(c) and 15d-14(c) under the Securities Exchange Act of 1934, as amended, or the Exchange Act). Based upon that evaluation, our management, including our Chief Executive Officer and Chief Financial Officer, concluded that our disclosure controls and procedures were effective as of the evaluation date in ensuring that all material information required to be included in this annual report has been made known to them in a timely fashion.

(b)

Changes in Internal Controls

        There have been no significant changes in our internal controls or in other factors that could significantly affect our internal controls subsequent to the evaluation date.

123

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

(a)

1. Financial Statements—See Index to Consolidated Financial Statements attached hereto.


2.

Financial Statements Schedule—See Index to Consolidated Financial Statements attached hereto.


3.

Exhibits—The following is a list of exhibits:

Exhibit Number	Description
2.1	Agreement and Plan of Merger, dated as of May 18, 2000, among the Company, ATX Enterprises, Inc. and Scientific Games Holdings Corp. (incorporated by reference to Exhibit 2 to the Company's Current Report on Form 8-K filed on May 26, 2000).
2.2	Stock Purchase Agreement, dated June 5, 2002, among the Company, Scientific Games Chile Limitada, Epicentro S.A. and Inversiones Y Aesorias Iculpe Limitada (incorporated by reference to Exhibit 2.1 to the Company's Current Report on Form 8-K filed on June 20, 2002).
3.(i)	Restated Certificate of Incorporation of the Company, filed with the Secretary of State of the State of Delaware on March 20, 2003.(†)
3.(ii)	Amended and Restated Bylaws of the Company (incorporated by reference to Exhibit 3.(ii) to the Company's Annual Report on Form 10-K for the fiscal year ended October 31, 2000 (the "2000 10-K")).
4.1	Indenture, dated as of August 14, 2000, among the Company, the Subsidiary Guarantors and The Bank of New York, as trustee, relating to the 121/2% senior subordinated notes due 2010 (the "121/2% Senior Notes") (incorporated by reference to Exhibit 4.6 to the July 2000 10-Q).
4.2	Form of 121/2% Senior Notes (incorporated by reference to Exhibit A to Exhibit 4.6 to the Company's July 2000 10-Q).
4.3	First Supplemental Indenture, dated as of September 6, 2000, among the Company, the Guarantors, the Additional Guarantors and The Bank of New York, as trustee, supplementing the Indenture, dated as of August 14, 2000, among the Company, the Guarantors and the Trustee, relating to the 121/2% Senior Notes (incorporated by reference to Exhibit 4.8 to the Company's July 2000 10-Q).
4.4	Registration Rights Agreement by and among the Company, the Guarantors and Donaldson, Lufkin & Jenrette Securities Corporation and Lehman Brothers Inc., dated as of August 14, 2000, relating to the Series A 121/2% Senior Notes (incorporated by reference to Exhibit 4.9 to the Company's July 2000 10-Q).
10.1	Stockholders' Agreement by and among Cirmatica Gaming, S.A., The Oak Fund, Peconic Fund Ltd., Ramius Securities, LLC, Olivetti International S.A. and the Company, dated September 6, 2000, relating to the Series A Convertible Preferred Stock (incorporated by reference to Exhibit 10.38 to the Company's July 2000 10-Q).
10.2	Supplemental Stockholders Agreement, by and among the Company, Cirmatica Gaming S.A. and such persons as may become a party thereto from time to time, dated as of June 26, 2002 (incorporated by reference to Exhibit 4.2 to the June 2002 10-Q).
10.3	Purchase Agreement among the Company, Autotote Enterprises, Inc., and the State of Connecticut, Division of Special Revenue, dated June 30, 1993 (incorporated by reference to Exhibit 2.1 to the Company's Current Report on Form 8-K dated July 1, 1993).

124

10.4	Agreement between the Company and Elettronica Ingegneria Sistemi dated February 19, 1998 (incorporated by reference to Exhibit 10.28 to the Company's Quarterly Report on Form 10-Q for the quarter ended April 30, 1998 (the "April 1998 10-Q")).
10.5	General Agreement between the Company and Sisal Sport Italia SpA dated February 19, 1998. (incorporated by reference to Exhibit 10.29 to the Company's April 1998 10-Q).
10.6	Agreement between the Company and Stichting Hippo Toto dated June 29, 1998 relating to purchase of Autotote Nederland B.V. (incorporated by reference to Exhibit 10.31 to the Company's Quarterly Report on Form 10-Q for the quarter ended July 31, 1998).
10.7	Instant Ticket and Associated Products and Services Agreement dated May 4, 1993 by and between Georgia Lottery Corporation and Scientific Games Inc. (incorporated by reference to Scientific Games Holding Corp.'s Registration Statement (No. 33-75168) filed on February 11, 1994).
10.8	Instant Lottery Tickets Supply Agreement between Thomas De La Rue Limited, Scientific Games Inc. and Camelot Group plc, dated June 15, 1995 (incorporated by reference to Scientific Games Holding Corp.'s Quarterly Report on Form 10-Q for the quarter ended September 30, 1995. Portions of this Exhibit deemed confidential by Scientific Games Holdings Corp. have been omitted).
10.9	Supply Agreement for Instant Lottery Computer Management System between La Francais Des Jeux and Scientific Games Inc. (incorporated by reference to Exhibit 10.53 to Scientific Games Holding Corp.'s Quarterly Report on Form 10-Q for the quarter ended June 30, 1999. Portions of this Exhibit deemed confidential by Scientific Games Holdings Corp. have been omitted).
10.10	Agreement of Purchase and Sale, dated January 19, 1996, between Autotote Systems, Inc. and Fusco Properties, L.P. (incorporated by reference to Exhibit 10.42 to the Company's Annual Report on Form 10-K/A for the fiscal year ended October 31, 1995 (the "1995 10-K/A")).
10.11	Lease Agreement, dated as of January 19, 1996, between Fusco Properties, L.P. and Autotote Systems, Inc. (incorporated by reference to Exhibit 10.43 to the Company's 1995 10-K/A).
10.12	1984 Stock Option Plan, as amended (incorporated by reference to Exhibit 4.1 to the Company's Registration Statement on Form S-8 (Registration No. 33-46594) which became effective on March 20, 1992).*
10.13	1992 Equity Incentive Plan, as amended and restated (incorporated by reference to Exhibit 10.33 to the Company's Annual Report on Form 10-K for the fiscal year ended October 31, 1998).*
10.14	1995 Equity Incentive Plan, as amended (incorporated by reference to Exhibit 10.14 to the Company's Annual Report on Form 10-K for the fiscal year ended October 31, 1997).*
10.15	1997 Incentive Compensation Plan as amended and restated (incorporated by reference to Exhibit 10.14 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2001 (the "2001 10-K")).*

125

10.16	Form of Option dated March 3, 1992 issued to A. Lorne Weil (incorporated by reference to Exhibit 10.45 to the Company's Annual Report on Form 10-K for the fiscal year ended October 31, 1992 (the "1992 10-K") ).*
10.17	Key Executive Deferred Compensation Plan (incorporated by reference to Exhibit 10.23 to the Company's 2000 10-K).*
10.18	Supplemental Executive Retirement Plan (incorporated by reference to Exhibit 10.17 to the Company's 2001 10-K).*
10.19	2002 Employee Stock Purchase Plan (incorporated by reference to Exhibit 10.1 to the Company's September 2002 10-Q).
10.20	Amended and Restated Employment Agreement, dated as of November 1, 2000, by and between the Company and A. Lorne Weil (as further amended and restated, executed July 25, 2002) (incorporated by reference to the June 2002 10-Q).*
10.21	Letter Agreement dated January 11, 2001 between the Company and DeWayne E. Laird. (incorporated by reference to Exhibit 10.21 to the 2000 10-K).*
10.22	Letter Agreement dated January 11, 2001 between the Company and Martin E. Schloss (incorporated by reference to Exhibit 10.22 to the 2000 10-K).*
10.23	Letter Agreement dated January 9, 2003 between the Company and Richard M. Weil.(†)*
10.24	Form of Employment and Severance Benefit Agreement effective September 6, 2000 between Scientific Games International, Inc. and certain executives (including William J. Huntley and Cliff O. Bickell) (incorporated by reference to Exhibit 10.42 to the Company's July 2000 10-Q).*
10.25	Form of Letter Agreement dated December 18, 2002 between Scientific Games International and certain executives (including William Huntley and Cliff Bickell), which amended their respective Employment and Severance Benefit Agreements.(†)*
10.26	Form of Change in Control Agreement effective November 1, 1997 between the Company and certain executives (including DeWayne E. Laird, Martin E. Schloss, William J. Huntley, Brooks Pierce and Robert E. Becker) (incorporated by reference to Exhibit 10.27 to the Company's April 1998 10-Q).*
10.27	Credit Agreement, dated as of December 19, 2002, among the Company, the several banks and other financial institutions or entities from time to time parties thereto (the "Lenders"), Bear, Stearns & Co., Inc., as sole lead arranger and sole book runner, BNY Capital Markets, Inc., as co-arranger, Bear Stearns Corporate Lending Inc., as syndication agent, and The Bank of New York, as administrative agent (the "Credit Agreement").(†)
10.28	Guarantee and Collateral Agreement, dated as of December 19, 2002, made by the Company and each of the other signatories thereto in favor of The Bank of New York, as Administrative Agent for the Lenders (the "Guarantee and Collateral Agreement").(†)
10.29	Supplement No. 1, dated as of December 30, 2002, to the Credit Agreement.(†)
10.30	Supplement No. 1, dated as of December 30, 2002, to the Guarantee and Collateral Agreement.(†)

126

10.31	Warrant Registration Rights Agreement dated October 2, 2000 between the Company and Ramius Securities, LLC (incorporated by reference to Exhibit 10.30 to the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2001 (the "March 2001 10-Q").
21.1	List of Subsidiaries.(†)
23	Consent of KPMG LLP.(†)
99.1	Certification of the Chief Executive Officer of the Company pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.(†)
99.2	Certification of the Chief Financial Officer of the Company pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.(†)
99.3	Warrant to Purchase Class B Nonvoting Common Stock of the Company dated October 30, 1992 issued to various lenders (incorporated by reference to Exhibit 10.34 to the Company's 1992 10-K).
99.4	Warrant Agreement dated as of September 14, 1995 (the "1995 Warrant Agreement") (incorporated by reference to Exhibit 99.8 to the Company's Registration Statement on Form S-4/A (Registration No. 333-34465) which became effective on September 12, 1997 (the "1997 S-4/A")).
99.5	Amendment dated January 29, 1997 to the 1995 Warrant Agreement (incorporated by reference to Exhibit 99.10 to the Company's 1997 S-4/A.).
99.6	Form of Amended and Restated Warrant issued November 2, 1998 to Certain Members of Management and Several Employees (incorporated by reference to Exhibit 10.36 to the Company's Form 10-K for the fiscal year ended October 31, 1999).
99.7	Form of Warrant issued to Ramius Securities, LLC dated October 2, 2000 (incorporated by reference to Exhibit 10.29 to the Company's March 2001 10-Q).
99.8	Agreement and Plan of Merger, dated as of November 19, 2002, by and among Scientific Games International, Inc., MDI Entertainment, Inc. and Blue Suede Acquisition Corp. (incorporated by reference to Exhibit 99(d)(1) to the Company's Schedule TO-T, filed on November 26, 2002).
99.9	Stock Purchase Agreement, dated as of November 19, 2002, by and among Scientific Games International, Inc., Blue Suede Acquisition Corp. and Steven M. Saferin (incorporated by reference to Exhibit 2.2 to MDI's Current Report on Form 8-K, filed on November 20, 2002).
99.10	Amendment No. 1 to Agreement and Plan of Merger, dated December 13, 2002, by and among Scientific Games International, Inc., Blue Suede Acquisition Corp. and MDI Entertainment, Inc. (incorporated by reference to Exhibit 99(d)(1)-2 to the Company's Schedule TO-T/A-1, filed on December 13, 2002).
99.11	Amendment No. 2 to Agreement and Plan of Merger, dated December 20, 2002, by and among Scientific Games International, Inc., Blue Suede Acquisition Corp. and MDI Entertainment, Inc. (incorporated by reference to Exhibit 99(d)(1)-3 to the Company's Schedule TO-T/A-2, filed on December 20, 2002).

(†)

Filed herewith.

*

Includes management contracts and compensation plans and arrangements.

(b)

Reports on Form 8-K

        None

127

SIGNATURES

        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: March 24, 2003
	By:	/s/  A. LORNE WEIL A. Lorne Weil, Chairman of the Board, President and Chief Executive Officer

        Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of the Registrant and in the capacities indicated on March 24, 2003.

Signature	Title
/s/  A. LORNE WEIL A. Lorne Weil	Chairman of the Board, President and Chief Executive Officer, and Director (principal executive officer)
/s/  DEWAYNE E. LAIRD DeWayne E. Laird	Vice President and Chief Financial Officer (principal financial and accounting officer)
Larry J. Lawrence	Director
/s/  COLIN J. O'BRIEN Colin J. O'Brien	Director
/s/  ERIC M. TURNER Eric M. Turner	Director
Sir Brian G. Wolfson	Director
/s/  ALAN J. ZAKON Alan J. Zakon	Director
/s/  ANTONIO BELLONI Antonio Belloni	Director
/s/  ROSARIO BIFULCO Rosario Bifulco	Director
Peter A. Cohen	Director
Michael S. Immordino	Director

128

CERTIFICATIONS

I, A. Lorne Weil, certify that:

1. I have reviewed this annual report on Form 10-K of Scientific Games Corporation;

2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;

3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report;

4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

a)

Designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;



b)

Evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the "Evaluation Date"); and



c)

Presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function):

a)

All significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and



b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and

6. The registrant's other certifying officers and I have indicated in this annual report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Date: March 24, 2003

/s/ A. Lorne Weil
A. Lorne Weil
Chief Executive Officer

129

CERTIFICATIONS

I, DeWayne E. Laird, certify that:

1. I have reviewed this annual report on Form 10-K of Scientific Games Corporation;

2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;

3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report;

4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

a)

Designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;



b)

Evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the "Evaluation Date"); and



c)

Presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function):

a)

All significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and



b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and

6. The registrant's other certifying officers and I have indicated in this annual report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Date: March 24, 2003

/s/ DeWayne E. Laird
DeWayne E. Laird
Chief Financial Officer

130

EXHIBIT INDEX

Exhibit Number	Description
2.1	Agreement and Plan of Merger, dated as of May 18, 2000, among the Company, ATX Enterprises, Inc. and Scientific Games Holdings Corp. (incorporated by reference to Exhibit 2 to the Company's Current Report on Form 8-K filed on May 26, 2000).
2.2	Stock Purchase Agreement, dated June 5, 2002, among the Company, Scientific Games Chile Limitada, Epicentro S.A. and Inversiones Y Aesorias Iculpe Limitada (incorporated by reference to Exhibit 2.1 to the Company's Current Report on Form 8-K filed on June 20, 2002).
3.(i)	Restated Certificate of Incorporation of the Company, filed with the Secretary of State of the State of Delaware on March 20, 2003 (incorporated by reference to Exhibit 3.1 to the Company's Quarterly Report on Form 10-Q for the quarter ended July 31, 1995, File No. 000-13063).(†)
3.(ii)	Amended and Restated Bylaws of the Company (incorporated by reference to Exhibit 3.(ii) to the Company's Annual Report on Form 10-K for the fiscal year ended October 31, 2000 (the "2000 10-K")).
4.1	Indenture, dated as of August 14, 2000, among the Company, the Subsidiary Guarantors and The Bank of New York, as trustee, relating to the 121/2% senior subordinated notes due 2010 (the "121/2% Senior Notes") (incorporated by reference to Exhibit 4.6 to the July 2000 10-Q).
4.2	Form of 121/2% Senior Notes (incorporated by reference to Exhibit A to Exhibit 4.6 to the Company's July 2000 10-Q).
4.3	First Supplemental Indenture, dated as of September 6, 2000, among the Company, the Guarantors, the Additional Guarantors and The Bank of New York, as trustee, supplementing the Indenture, dated as of August 14, 2000, among the Company, the Guarantors and the Trustee, relating to the 121/2% Senior Notes (incorporated by reference to Exhibit 4.8 to the Company's July 2000 10-Q).
4.4	Registration Rights Agreement by and among the Company, the Guarantors and Donaldson, Lufkin & Jenrette Securities Corporation and Lehman Brothers Inc., dated as of August 14, 2000, relating to the Series A 121/2% Senior Notes (incorporated by reference to Exhibit 4.9 to the Company's July 2000 10-Q).
10.1	Stockholders' Agreement by and among Cirmatica Gaming, S.A., The Oak Fund, Peconic Fund Ltd., Ramius Securities, LLC, Olivetti International S.A. and the Company, dated September 6, 2000, relating to the Series A Convertible Preferred Stock (incorporated by reference to Exhibit 10.38 to the Company's July 2000 10-Q).
10.2	Supplemental Stockholders Agreement, by and among the Company, Cirmatica Gaming S.A. and such persons as may become a party thereto from time to time, dated as of June 26, 2002 (incorporated by reference to Exhibit 4.2 to the June 2002 10-Q).
10.3	Purchase Agreement among the Company, Autotote Enterprises, Inc., and the State of Connecticut, Division of Special Revenue, dated June 30, 1993 (incorporated by reference to Exhibit 2.1 to the Company's Current Report on Form 8-K dated July 1, 1993).

131

10.4	Agreement between the Company and Elettronica Ingegneria Sistemi dated February 19, 1998 (incorporated by reference to Exhibit 10.28 to the Company's Quarterly Report on Form 10-Q for the quarter ended April 30, 1998 (the "April 1998 10-Q")).
10.5	General Agreement between the Company and Sisal Sport Italia SpA dated February 19, 1998. (incorporated by reference to Exhibit 10.29 to the Company's April 1998 10-Q).
10.6	Agreement between the Company and Stichting Hippo Toto dated June 29, 1998 relating to purchase of Autotote Nederland B.V. (incorporated by reference to Exhibit 10.31 to the Company's Quarterly Report on Form 10-Q for the quarter ended July 31, 1998).
10.7	Instant Ticket and Associated Products and Services Agreement dated May 4, 1993 by and between Georgia Lottery Corporation and Scientific Games Inc. (incorporated by reference to Scientific Games Holding Corp.'s Registration Statement (No. 33-75168) filed on February 11, 1994).
10.8	Instant Lottery Tickets Supply Agreement between Thomas De La Rue Limited, Scientific Games Inc. and Camelot Group plc, dated June 15, 1995 (incorporated by reference to Scientific Games Holding Corp.'s Quarterly Report on Form 10-Q for the quarter ended September 30, 1995. Portions of this Exhibit deemed confidential by Scientific Games Holdings Corp. have been omitted).
10.9	Supply Agreement for Instant Lottery Computer Management System between La Francais Des Jeux and Scientific Games Inc. (incorporated by reference to Exhibit 10.53 to Scientific Games Holding Corp.'s Quarterly Report on Form 10-Q for the quarter ended June 30, 1999. Portions of this Exhibit deemed confidential by Scientific Games Holdings Corp. have been omitted).
10.10	Agreement of Purchase and Sale, dated January 19, 1996, between Autotote Systems, Inc. and Fusco Properties, L.P. (incorporated by reference to Exhibit 10.42 to the Company's Annual Report on Form 10-K/A for the fiscal year ended October 31, 1995 (the "1995 10-K/A")).
10.11	Lease Agreement, dated as of January 19, 1996, between Fusco Properties, L.P. and Autotote Systems, Inc. (incorporated by reference to Exhibit 10.43 to the Company's 1995 10-K/A).
10.12	1984 Stock Option Plan, as amended (incorporated by reference to Exhibit 4.1 to the Company's Registration Statement on Form S-8 (Registration No. 33-46594) which became effective on March 20, 1992).*
10.13	1992 Equity Incentive Plan, as amended and restated (incorporated by reference to Exhibit 10.33 to the Company's Annual Report on Form 10-K for the fiscal year ended October 31, 1998).*
10.14	1995 Equity Incentive Plan, as amended (incorporated by reference to Exhibit 10.14 to the Company's Annual Report on Form 10-K for the fiscal year ended October 31, 1997).*
10.15	1997 Incentive Compensation Plan as amended and restated (incorporated by reference to Exhibit 10.14 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2001 (the "2001 10-K")).*
10.16	Form of Option dated March 3, 1992 issued to A. Lorne Weil (incorporated by reference to Exhibit 10.45 to the Company's Annual Report on Form 10-K for the fiscal year ended October 31, 1992 (the "1992 10-K") ).*

132

10.17	Key Executive Deferred Compensation Plan (incorporated by reference to Exhibit 10.23 to the Company's 2000 10-K).*
10.18	Supplemental Executive Retirement Plan (incorporated by reference to Exhibit 10.17 to the Company's 2001 10-K).*
10.19	2002 Employee Stock Purchase Plan (incorporated by reference to Exhibit 10.1 to the Company's September 2002 10-Q).
10.20	Amended and Restated Employment Agreement, dated as of November 1, 2000, by and between the Company and A. Lorne Weil (as further amended and restated, executed July 25, 2002) (incorporated by reference to the June 2002 10-Q).*
10.21	Letter Agreement dated January 11, 2001 between the Company and DeWayne E. Laird. (incorporated by reference to Exhibit 10.21 to the 2000 10-K).*
10.22	Letter Agreement dated January 11, 2001 between the Company and Martin E. Schloss (incorporated by reference to Exhibit 10.22 to the 2000 10-K).*
10.23	Letter Agreement dated January 9, 2003 between the Company and Richard M. Weil. (†)*
10.24	Form of Employment and Severance Benefit Agreement effective September 6, 2000 between Scientific Games International, Inc. and certain executives (including William J. Huntley and Cliff O. Bickell) (incorporated by reference to Exhibit 10.42 to the Company's July 2000 10-Q).*
10.25	Form of Letter Agreement dated December 18, 2002 between Scientific Games International and certain executives (including William Huntley and Cliff Bickell), which amended their respective Employment and Severance Benefit Agreements. (†)*
10.26	Form of Change in Control Agreement effective November 1, 1997 between the Company and certain executives (including DeWayne E. Laird, Martin E. Schloss, William J. Huntley, Brooks Pierce and Robert E. Becker) (incorporated by reference to Exhibit 10.27 to the Company's April 1998 10-Q).*
10.27	Credit Agreement, dated as of December 19, 2002, among the Company, the several banks and other financial institutions or entities from time to time parties thereto (the "Lenders"), Bear, Stearns & Co., Inc., as sole lead arranger and sole book runner, BNY Capital Markets, Inc., as co-arranger, Bear Stearns Corporate Lending Inc., as syndication agent, and The Bank of New York, as administrative agent (the "Credit Agreement"). (†)
10.28	Guarantee and Collateral Agreement, dated as of December 19, 2002, made by the Company and each of the other signatories thereto in favor of The Bank of New York, as Administrative Agent for the Lenders (the "Guarantee and Collateral Agreement"). (†)
10.29	Supplement No. 1, dated as of December 30, 2002, to the Credit Agreement. (†)
10.30	Supplement No. 1, dated as of December 30, 2002, to the Guarantee and Collateral Agreement. (†)
10.31	Warrant Registration Rights Agreement dated October 2, 2000 between the Company and Ramius Securities, LLC (incorporated by reference to Exhibit 10.30 to the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2001 (the "March 2001 10-Q").
21.1	List of Subsidiaries. (†)
23	Consent of KPMG LLP. (†)

133

99.1	Certification of the Chief Executive Officer of the Company pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (†)
99.2	Certification of the Chief Financial Officer of the Company pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (†)
99.3	Warrant to Purchase Class B Nonvoting Common Stock of the Company dated October 30, 1992 issued to various lenders (incorporated by reference to Exhibit 10.34 to the Company's 1992 10-K).
99.4	Warrant Agreement dated as of September 14, 1995 (the "1995 Warrant Agreement") (incorporated by reference to Exhibit 99.8 to the Company's Registration Statement on Form S-4/A (Registration No. 333-34465) which became effective on September 12, 1997 (the "1997 S-4/A")).
99.5	Amendment dated January 29, 1997 to the 1995 Warrant Agreement (incorporated by reference to Exhibit 99.10 to the Company's 1997 S-4/A.).
99.6	Form of Amended and Restated Warrant issued November 2, 1998 to Certain Members of Management and Several Employees (incorporated by reference to Exhibit 10.36 to the Company's Form 10-K for the fiscal year ended October 31, 1999).
99.7	Form of Warrant issued to Ramius Securities, LLC dated October 2, 2000 (incorporated by reference to Exhibit 10.29 to the Company's March 2001 10-Q).
99.8	Agreement and Plan of Merger, dated as of November 19, 2002, by and among Scientific Games International, Inc., MDI Entertainment, Inc. and Blue Suede Acquisition Corp. (incorporated by reference to Exhibit 99(d)(1) to the Company's Schedule TO-T, filed on November 26, 2002).
99.9	Stock Purchase Agreement, dated as of November 19, 2002, by and among Scientific Games International, Inc., Blue Suede Acquisition Corp. and Steven M. Saferin (incorporated by reference to Exhibit 2.2 to MDI's Current Report on Form 8-K, filed on November 20, 2002).
99.10	Amendment No. 1 to Agreement and Plan of Merger, dated December 13, 2002, by and among Scientific Games International, Inc., Blue Suede Acquisition Corp. and MDI Entertainment, Inc. (incorporated by reference to Exhibit 99(d)(1)-2 to the Company's Schedule TO-T/A-1, filed on December 13, 2002).
99.11	Amendment No. 2 to Agreement and Plan of Merger, dated December 20, 2002, by and among Scientific Games International, Inc., Blue Suede Acquisition Corp. and MDI Entertainment, Inc. (incorporated by reference to Exhibit 99(d)(1)-3 to the Company's Schedule TO-T/A-2, filed on December 20, 2002).

(†)

Filed herewith.

*

Includes management contracts and compensation plans and arrangements.

134

QuickLinks

PART I FORWARD-LOOKING STATEMENTS
U.S. Instant Ticket and On-line Lottery Sales
U.S. Thoroughbred Industry Pari-Mutuel Wagering: Remote and Live Handle

ITEM 2. PROPERTIES
ITEM 3. LEGAL PROCEEDINGS
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

PART II

ITEM 6. SELECTED FINANCIAL DATA

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULE SCIENTIFIC GAMES CORPORATION AND SUBSIDIARIES
INDEPENDENT AUDITORS' REPORT
SCIENTIFIC GAMES CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS December 31, 2001 and 2002 (in thousands, except per share amounts)
SCIENTIFIC GAMES CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS Year Ended October 31, 2000, the Two Months Ended December 31, 2000, and the Years Ended December 31, 2001 and 2002 (in thousands, except per share amounts)
SCIENTIFIC GAMES CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY AND COMPREHENSIVE INCOME (LOSS) Year Ended October 31, 2000, the Two Months Ended December 31, 2000, and the Years Ended December 31, 2001 and 2002 (in thousands)
SCIENTIFIC GAMES CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS Year Ended October 31, 2000, the Two Months Ended December 31, 2000, and the Years Ended December 31, 2001 and 2002 (in thousands)
SCIENTIFIC GAMES CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (in thousands, except per share amounts)
SCIENTIFIC GAMES CORPORATION AND SUBSIDIARIES SUPPLEMENTAL CONDENSED CONSOLIDATING BALANCE SHEET December 31, 2001 (in thousands)
SCIENTIFIC GAMES CORPORATION AND SUBSIDIARIES SUPPLEMENTAL CONDENSED CONSOLIDATING BALANCE SHEET December 31, 2002 (in thousands)
SCIENTIFIC GAMES CORPORATION AND SUBSIDIARIES SUPPLEMENTAL CONDENSED STATEMENT OF OPERATIONS Year Ended October 31, 2000 (in thousands)
SCIENTIFIC GAMES CORPORATION AND SUBSIDIARIES SUPPLEMENTAL CONDENSED STATEMENT OF OPERATIONS Two Months Ended December 31, 2000 (in thousands)
SCIENTIFIC GAMES CORPORATION AND SUBSIDIARIES SUPPLEMENTAL CONDENSED STATEMENT OF OPERATIONS Year Ended December 31, 2001 (in thousands)
SCIENTIFIC GAMES CORPORATION AND SUBSIDIARIES SUPPLEMENTAL CONDENSED STATEMENT OF OPERATIONS Year Ended December 31, 2002 (in thousands)
SCIENTIFIC GAMES CORPORATION AND SUBSIDIARIES SUPPLEMENTAL CONDENSED STATEMENT OF CASH FLOWS Year Ended October 31, 2000 (in thousands)
SCIENTIFIC GAMES CORPORATION AND SUBSIDIARIES SUPPLEMENTAL CONDENSED STATEMENT OF CASH FLOWS Two Months Ended December 31, 2000 (in thousands)
SCIENTIFIC GAMES CORPORATION AND SUBSIDIARIES SUPPLEMENTAL CONDENSED STATEMENT OF CASH FLOWS Year Ended December 31, 2001 (in thousands)
SCIENTIFIC GAMES CORPORATION AND SUBSIDIARIES SUPPLEMENTAL CONDENSED STATEMENT OF CASH FLOWS Year Ended December 31, 2002 (in thousands)

SCHEDULE II

SCIENTIFIC GAMES CORPORATION AND SUBSIDIARIES Valuation and Qualifying Accounts Year Ended October 31, 2000, the Two Months Ended December 31, 2000, and the Years Ended December 31, 2001 and 2002 (in thousands)
PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
ITEM 11. EXECUTIVE COMPENSATION
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
ITEM 14. DISCLOSURE CONTROLS
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

SIGNATURES
EXHIBIT INDEX

EX-3.(I)

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Exhibit 3.(i)

RESTATED CERTIFICATE OF INCORPORATION
OF
SCIENTIFIC GAMES CORPORATION

        SCIENTIFIC GAMES CORPORATION (the "Corporation"), a corporation organized and existing under and by virtue of the General Corporation Law of the State of Delaware ("DGCL"), hereby certifies as follows:

        1.    The name of the Corporation is Scientific Games Corporation. The Corporation was originally incorporated under the name United Tote, Inc.

        2.    The original Certificate of Incorporation was filed in the Office of the Secretary of State of the State of Delaware on July 2, 1984. A Restated Certificate of Incorporation was filed in the Office of the Secretary of State of the State of Delaware on June 29, 1995.

        3.    This Restated Certificate of Incorporation was duly adopted by the Board of Directors of the Corporation without a vote of the stockholders in accordance with Section 245 of the DGCL.

        4.    This Restated Certificate of Incorporation only restates and integrates and does not further amend the provisions of the Corporation's Certificate of Incorporation, as heretofore amended and supplemented, and there is no discrepancy between the provisions of the Certificate of Incorporation, as heretofore amended and supplemented, and the provisions of this Restated Certificate of Incorporation.

        5.    The text of the Certificate of Incorporation of the Corporation is restated to read in its entirety as follows:

        FIRST: The name of the corporation (hereinafter called the corporation) is Scientific Games Corporation.

        SECOND: The address of its registered office in the State of Delaware is 1209 Orange Street, in the City of Wilmington, county of New Castle. The name of its registered agent at such address is The Corporation Trust Company.

        THIRD: The nature of the business or purposes to be conducted or promoted is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of the State of Delaware.

        FOURTH: The total number of shares of all stock which the corporation shall have authority to issue is 202,000,000 shares, consisting of: (i) 199,300,000 shares of Class A Common Stock, par value $.01 per share (herein called the "Class A Common Stock"); (ii) 700,000 shares of Class B Nonvoting Common Stock, par value $.01 per share (herein called the"Class B Common Stock"); and (iii) 2,000,000 shares, $1.00 par value, as designated Preferred Stock. All cross references in each subdivision of this ARTICLE FOURTH refer to other paragraphs in such subdivision unless otherwise indicated.

        The shares of Preferred Stock are hereby authorized to be issued from time to time in one or more series, the shares of each series to have such voting powers, full or limited, or no voting powers, and such designations, preferences and relative, participating, optional or other special rights and qualifications, limitations or restrictions as are specified in the resolution or resolutions adopted by the Board of Directors providing for the issue thereof. Such Preferred Stock may be convertible into, or exchangeable for, at the option of either the holder or the corporation or upon the happening of a specified event, shares of any other class or classes or any other series of the same or any other class or classes of capital stock of the corporation at such price or prices or at such rate or rates of exchange and with such adjustments as shall be stated and expressed in the Certificate of Incorporation or any amendment thereto or in the resolution or resolutions adopted by the Board of Directors providing for the issue thereof.

        The rights, preferences, privileges and restrictions granted to or imposed upon the respective classes or series of shares or the holders thereof are as follows:

A. PREFERRED STOCK

        Authority is hereby expressly vested in the Board of Directors of the corporation, subject to the provisions of this ARTICLE FOURTH and to the limitations prescribed by law, to authorize the issue from time to time of one or more series of Preferred stock and, with respect to each such series, to fix by resolution or resolutions adopted by the affirmative vote of a majority of the whole Board of Directors providing for the issue of such series the voting powers, full or limited, if any, of the shares of such series and the designations, preferences and relative, participating, optional or other special rights and the qualifications, limitations or restrictions thereof. The authority of the Board of Directors with respect to each series shall include, but not be limited to, the determination of the following:

        (i) The designation of such series.

        (ii) The dividend rate of such series, the conditions and dates upon which such dividends shall be payable, the relation which such dividends shall bear to the dividends payable on any other class or classes or series of the corporation's capital stock, and whether such dividends shall be cumulative or noncumulative.

        (iii) Whether the shares of such series shall be subject to redemption by the corporation at the option of either the corporation or the holder or both or upon the happening of a specified event and, if made subject to any such redemption, the times or events, prices and other terms and conditions of such redemption.

        (iv) The terms and amount of any sinking fund provided for the purchase or redemption of the shares of such series.

        (v) Whether the shares of such series shall be convertible into, or exchangeable for, at the option of either the holder or the corporation or upon the happening of a specified event, shares of any other class or classes or of any other series of the same or any other class or classes of the corporation's capital stock, and, if provision is made for conversion or exchange, the times or events, prices, rates, adjustments and other terms and conditions of such conversions or exchanges.

        (vi) The restrictions, if any, on the issue or reissue of any additional Preferred Stock.

        (vii) The rights of the holders of the shares of such series upon the voluntary or involuntary liquidation, dissolution or winding up of the corporation.

        (viii) The provisions as to voting, optional and/or other special rights and preferences, if any.

        Pursuant to the authority conferred by this ARTICLE FOURTH upon the Board of Directors of the corporation, the Board of Directors created the following:

        (i) a series of 1,600,000 shares of Preferred Stock designated as Series A Convertible Preferred Stock by filing a Certificate of Designations, Preferences and Relative, Participating, Optional and Other Special Rights of Preferred Stock and Qualifications, Limitations and Restrictions Thereof of Series A Convertible Preferred Stock of the Corporation with the Secretary of State of the State of Delaware (the "Secretary of State") on September 6, 2000, as set forth in Appendix A hereto and incorporated herein by reference; and

        (ii) a series of 2,000 shares of Preferred Stock designated as Series B Preferred Stock by filing a Certificate of Designations, Preferences and Relative, Participating, Optional and Other Special Rights of Preferred Stock and Qualifications, Limitations and Restrictions Thereof of Series B Preferred Stock of the Corporation, filed with the Secretary of State of the State of Delaware on July 1, 2002, as set forth in Appendix B hereto and incorporated herein by reference.

2

B. COMMON STOCK

        Except as otherwise provided herein, all shares of Class A Common Stock and Class B Common Stock will be identical and will entitle holders thereof to the same rights and privileges.

        1.    Voting Rights. The holders of Class A Common Stock will be entitled to notice of and to attend all meetings of the shareholders of the corporation and shall be entitled to one vote per share on all matters to be voted on by the corporation's stockholders, and except as otherwise required by law, the holders of Class B Common Stock will have no right to vote their shares of Class B Common Stock on any matters to be voted on by the corporation's stockholders.

        2.    Dividends. Subject to all provisions of this ARTICLE FOURTH, the holders of the Common Stock shall be entitled to receive dividends when and as declared by the Board of Directors of the corporation, out of any funds legally available for such purpose. When and as dividends are declared thereon, whether payable in cash, property or securities of the corporation, the holders of Class A Common Stock and the holders of Class B Common Stock will be entitled to share, ratably according to the number of shares of Class A Common Stock or Class B Common Stock held by them, in such dividends; provided, that if dividends are declared which are payable in shares of Class A Common Stock or Class B Common Stock, dividends will be declared which are payable at the same rate on both classes of Common Stock, and the dividends payable in shares of Class A Common Stock will be payable to the holders of Class A Common Stock, and the dividends payable in shares of Class B Common Stock will be payable to the holders of Class B Common Stock.

        3.    Liquidation Rights. In the event of any liquidation, dissolution or winding up of the corporation, whether voluntary or involuntary, or any distribution of any of its assets to any of its stockholders other than by dividends from funds legally available therefor, and other than payments made upon redemptions or purchases of shares of the corporation, after payment in full of the amount which the holders of Preferred Stock are entitled to receive in such event, the holders of Class A Common Stock and Class B Common Stock shall be entitled to share, ratably according to the number of shares of Class A Common Stock or Class B Common Stock held by them, in the remaining assets of the corporation available for distribution to its stockholders.

        4.    Conversion of Class B Common Stock.

(a)

At any time and from time to time, each record holder of Class B Common Stock will be entitled to convert any and all of the shares of such holder's Class B Common Stock into the same number of shares of Class A Common Stock at such holder's election.



(b)

Each conversion of shares of Class B Common Stock into shares of Class A Common Stock will be effected by the surrender of the certificate or certificates representing the shares to be converted at the principal office of the corporation (or such other office or agency of the corporation as the corporation may designate by notice in writing to the holder or holders of the Class B Common Stock) at any time during normal business hours, together with a written notice by the holder of such Class B Common Stock stating that such holder desires to convert the shares, or a stated number of the shares, of Class B Common Stock represented by such certificate or certificates into Class A Common Stock (and such statement will obligate the corporation to issue such Class A Common Stock). Such conversion will be deemed to have been effected as of the close of business on the date on which such certificate or certificates have been surrendered and such notice has been received, and at such time the rights of the holder of the converted Class B Common Stock as such holder will cease and the person or persons in whose name or names the certificate or certificates for shares of Class A Common Stock are to be issued upon such conversion will be deemed to have become the holder or holders of record of the shares of Class A Common Stock represented thereby.

3

(c)

Promptly after such surrender and the receipt of such written notice, the corporation will issue and deliver in accordance with the surrendering holder's instructions (i) the certificate or certificates for the Class A Common Stock issuable upon such conversion and (ii) a certificate representing any Class B Common Stock which was represented by the certificate or certificates delivered to the corporation in connection with such conversion but which was not converted.



(d)

If the corporation in any manner subdivides or combines the outstanding shares of one class of either Class A Common Stock or Class B Common Stock, the outstanding shares of the other class will be proportionately subdivided or combined.



(e)

In the case of, and as a condition to, any capital reorganization of, or any reclassification of the capital stock of, the corporation (other than a subdivision or combination of shares of Class A Common Stock or Class B Common Stock into a greater or lesser number of shares (whether with or without par value) or a change in the par value of Class A Common Stock or Class B Common Stock or from par value to no par value, or from no par value to par value or in the case of, and as condition to, the consolidation or merger of the corporation with or into another corporation (other than a merger in which the corporation is the continuing corporation and which does not result in any reclassification of outstanding shares of Class A Common Stock or Class B Common Stock), each share of Class B Common Stock shall be convertible into the number of shares of stock or other securities or property receivable upon such reorganization, reclassification, consolidation or merger by a holder of the number of shares of Class A Common Stock of the corporation into which such share of Class B Common Stock was convertible immediately prior to such reorganization, reclassification, consolidation or merger, and, in any such case, appropriate adjustment shall be made in the application of the provisions set forth in this ARTICLE FOURTH with respect to the rights and interests thereafter of the holders of Class B Common Stock to the end that the provisions set forth in this ARTICLE FOURTH (including provisions with respect to the conversion rate) shall thereafter be applicable, as nearly as they reasonably may be, in relation to any shares of stock or other securities or property thereafter deliverable upon the conversion of the shares of Class B Common Stock.



(f)

Shares of Class B Common Stock which are converted into shares of Class A Common Stock as provided therein shall not be reissued.



(g)

The corporation will at all times reserve and keep available out of its authorized but unissued shares of Class A Common Stock or its treasury shares, solely for the purpose of issue upon the conversion of the Class B Common Stock as provided in this ARTICLE FOURTH, such number of shares of Class A Common Stock as shall then be issuable upon the conversion of all then outstanding shares of Class B Common Stock.



(h)

The issue of certificates for Class A Common Stock upon the conversion of Class B Common Stock will be made without charge to the holders of such shares for any issuance tax in respect thereof or other cost incurred by the corporation in connection with such conversion and the related issuance of Class A Common stock issued or issuable upon the conversion of Class B Common Stock in any manner which would interfere with the timely conversion of Class B Common Stock.

        FIFTH: The corporation is to have perpetual existence.

        SIXTH: In furtherance and not in limitation of the powers conferred by statute, the Board of Directors is expressly authorized to make, alter or repeal the Bylaws of the corporation.

        SEVENTH: Elections of directors need not be by written ballot unless the Bylaws of the corporation shall so provide.

4

        Meetings of stockholders may be held within or without the State of Delaware, as the Bylaws provide. The books of the corporation may be kept (subject to any provision contained in the statutes) outside the State of Delaware at such place or places as may be designated from time to time by the Board of Directors or in the Bylaws of the corporation.

        EIGHTH: The corporation reserves the right to amend, alter, change or repeal any provision contained in this certificate of incorporation, in the manner now or hereafter prescribed by statute, and all rights conferred upon stockholders herein are granted subject to this reservation.

        NINTH: To the fullest extent permitted by the General Corporation Law of Delaware as the same exists or may hereafter be amended, a director of this corporation shall not be liable to this corporation or its stockholders for monetary damages for breach of fiduciary duty as a director. No amendment to or repeal of this ARTICLE NINTH shall apply to or have any effect on the liability or alleged liability of any director of this corporation for or with respect to any acts or omissions of such director occurring prior to such amendment or repeal.

        IN WITNESS WHEREOF, the undersigned has executed this Restated Certificate of Incorporation on March 20, 2003.

/s/ Martin E. Schloss

Martin E. Schloss
Vice President and General Counsel

5

Appendix A

        RESOLVED, that there is hereby established a series of authorized preferred stock having a par value of $1.00 per share, which series shall be designated as "Series A Convertible Preferred Stock" (the "Senior Preferred Stock"), shall consist of 1,600,000 shares and shall have the following voting powers, preferences and relative, participating, optional and other special rights, and qualifications, limitations and restrictions thereof, as follows:

        1    Certain Definitions.

        Definitions.    Unless the context otherwise requires, the terms defined in this Section 1 shall have, for all purposes of this resolution, the meanings herein specified (with terms defined in the singular having comparable meanings when used in the plural).

        "Adjusted Lowest Price" shall mean, if one or more adjustments to the Conversion Price have been made pursuant to Section 5(g), an amount equal to the Lowest Price adjusted in a manner identical to the manner in which the Conversion Price has been adjusted pursuant to Section 5(g) (so that, for example, if there is a stock split and the Conversion Price is divided in half, the Lowest Price shall be divided in half to determine the amount of the Adjusted Lowest Price).

        "Adjusted Low Trading Price" shall mean, if one or more adjustments to the Conversion Price have been made pursuant to Section 5(g), an amount equal to the Low Trading Price adjusted in a manner identical to the manner in which the Conversion Price has been adjusted pursuant to Section 5(g) (so that, for example, if there is a stock split and the Conversion Price is divided in half, the Low Trading Price shall be divided in half to determine the amount of the Adjusted Low Trading Price).

        "Adjusted Target Trading Price" shall mean, if one or more adjustments to the Conversion Price have been made pursuant to Section 5(g), an amount equal to the High Trading Price adjusted in a manner identical to the manner in which the Conversion Price has been adjusted pursuant to Section 5(g) (so that, for example, if there is a stock split and the Conversion Price is divided in half, the Target Trading Price shall be divided in half to determine the amount of the Adjusted Target Trading Price).

        "Affiliate" shall mean, with respect to any specified Person, any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person. For purposes of this definition, "control" (including, with correlative meanings, the terms "controlling," "controlled by" and "under common control with"), as used with respect to any Person, shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of such Person, whether through the ownership of voting securities, by agreement or otherwise.

        "Assets" means all of the Corporation's and its Subsidiaries' right, title and interest in and to all properties, assets and rights of any kind, whether tangible or intangible, real or personal, owned by the Corporation or any of its Subsidiaries or in which the Corporation or its Subsidiaries has any interest whatsoever.

        "Business Day" shall mean a day other than a Saturday or Sunday or a bank holiday in New York.

        "Capital Stock" shall mean, with respect to any Person, any and all shares, interests, participations, rights in, or other equivalents (however designated and whether voting and/or nonvoting) of such Person's capital stock, whether outstanding on the Initial Issue Date or issued after the Initial Issue Date, and any and all rights, warrants or options exchangeable for or convertible into such capital stock.

        "Common Equity" shall mean all shares now or hereafter authorized of any class of common stock of the Corporation, including the Common Stock, and any other stock of the Corporation, howsoever designated, authorized after the Initial Issue Date, which has the right (subject always to prior rights of any class or series of preferred stock) to participate in the distribution of the assets and earnings of the Corporation without limit as to per share amount.

        "Common Stock" shall mean the Class A Common Stock, par value $0.01 per share, of the Corporation.

        "Conversion Date" shall have the meaning set forth in Section 5(c).

        "Conversion Price" shall mean $6.00 and shall be subject to adjustment pursuant to Section 5(g) and the following provisions of this definition:

        If the Conversion Price has not been adjusted pursuant to Section 5(g) on or prior to the Conversion Date and the Current Market Price per share of the Common Stock on the Conversion Date is lower than the Target Trading Price, the Conversion Price shall equal the lesser of the Current Market Price per share on the Conversion Date and the Low Trading Price; provided, however, that in the event such Current Market Price per share on the Conversion Date is lower than the Lowest Price, the Conversion Price shall equal the Lowest Price;

        If the Conversion Price has been adjusted pursuant to Section 5(g) on or prior to the Conversion Date and the Current Market Price per share of the Common Stock on the Conversion Date is lower than the Adjusted Target Trading Price, the Conversion Price shall equal the lesser of the Current Market Price per share on the Conversion Date and the Adjusted Low Trading Price; provided, however, that in the event such Current Market Price per share on the Conversion Date is lower than the Adjusted Lowest Price, the Conversion Price shall equal the Adjusted Lowest Price.

        "Conversion Rate" shall mean, as of any date, the number of shares of Common Stock issuable upon conversion of one share of Senior Preferred Stock, determined by dividing (a) the sum of the Liquidation Preference of such share of Senior Preferred Stock plus accrued and unpaid dividends thereon by (b) the Conversion Price then in effect.

        "Current Market Price" shall mean, with respect to any particular security on any date of determination, the average over the 30 Trading Days ending on the date immediately preceding the date of such determination of the last reported sale price, or, if no such sale takes place on any such day, the closing bid price, in either case as reported for consolidated transactions on the principal national securities exchange (including the American Stock Exchange) or national quotation system on which such security is listed or admitted for trading. If the Common Stock is not listed or traded in a manner that the quotations referred to above are available for the period required hereunder, the Current Market Price per share of a share of Common Stock shall be deemed to be the fair value per share of the Common Stock as determined in good faith by the Board of Directors of the Corporation.

        "Director" shall mean a member of the Corporation's Board of Directors.

        "Dividend Payment Date" shall have the meaning set forth in Section 2(c).

        "Dividend Period" shall mean the period from, and including, the Initial Issue Date to, but not including, the first Dividend Payment Date and thereafter, each quarterly period from, and including, the Dividend Payment Date to, but not including, the next Dividend Payment Date.

        "Dividend Rate" shall mean six percent (6%) of the Liquidation Preference per annum.

        "Holder" shall mean the record holder of one or more shares of Senior Preferred Stock, as shown on the books and records of the Corporation.

        "Initial Issue Date" shall mean the date that shares of Senior Preferred Stock are first issued by the Corporation.

        "Junior Stock" shall mean, for purposes of Sections 2 and 3 below, the Common Stock (or other Capital Stock of the Corporation) and any other series of preferred stock established by the Board of Directors of the Corporation that by its terms is junior to the Preferred Stock, either as to payment of dividends or as to the distribution of assets upon liquidation, dissolution or winding up, or both.

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        "Liquidation Preference" shall mean $100.00 per share of Senior Preferred Stock.

        "Lowest Price" shall mean $5.00.

        "Low Trading Price" shall mean $5.50.

        "Person" shall mean an individual, partnership, corporation, limited liability company, business trust, joint stock company, trust, unincorporated association, joint venture, governmental authority or other entity of whatever nature.

        "PIK Dividends" shall have the meaning as set forth in Section 2(b).

        "Record Date" shall mean, with respect to any dividend, the date designated by the Board of Directors of the Corporation at the time such dividend is declared; provided, however, that such Record Date shall not be more than thirty (30) days nor less than ten (10) days prior to the respective Dividend Payment Date or such other date designated by the Board of Directors for the payment of dividends.

        "Redemption Price" shall mean a price equal to 105% of the Liquidation Preference plus accrued and unpaid dividends to the date of redemption.

        "Stockholders' Agreement" shall mean the Stockholders' Agreement, dated as of September 6, 2000, by and among the Corporation, Cermatica Gaming, S.A., Olivetti International S.A., The Oak Fund, Peconic Fund Ltd. and Ramius Securities, LLC.

        "Subsidiary" means, with respect to any Person, any other Person, whether or not incorporated, of which at least a majority of the securities or interests having, by their terms, ordinary voting power to elect members of the board of directors, or other persons performing similar functions with respect to such other Person, are held, directly or indirectly, by such first Person.

        "Target Trading Price" shall mean $9.65.

        "Trading Day" with respect to the Common Stock, shall mean any day on which any market (including, without limitation, any formal or informal over the counter market) in which the Common Stock is then traded and in which a quoted price may be ascertained is open for business.

        2    Dividends.

        (a)  The Holders of Senior Preferred Stock shall be entitled to receive dividends, when and as declared by the Board of Directors of the Corporation, out of funds legally available for payment of dividends. Such dividends shall be payable by the Corporation in an amount per share determined by multiplying the Dividend Rate (as adjusted pursuant to Section 2(c) if applicable) times a fraction the numerator of which is the number of days in such Dividend Period and the denominator of which is three hundred sixty-five (365).

        (b)  Dividends on the Senior Preferred Stock shall be paid in additional fully paid and nonassessable shares of Senior Preferred Stock legally available for such purpose (such dividends paid in kind being herein called "PIK Dividends"). The Corporation may, at the option of the Board of Directors of the Corporation, beginning on the ninth Dividend Payment Date, pay dividends on Senior Preferred Stock (including, without limitation, on Senior Preferred Stock issued as PIK Dividends) in cash, in substitute in whole or in part for additional shares of Senior Preferred Stock. In the event the Corporation elects to pay all or any portion of a dividend in cash pursuant to the second sentence of this Section 2(b), the Corporation shall provide written notice of such cash dividend election to all Holders of the Senior Preferred Stock no less than 45 days prior to the Dividend Payment Date with respect to such dividend. In no event shall the election by the Corporation to pay dividends, in whole or in part, in cash or in additional shares of Senior Preferred Stock preclude the Corporation from making a different election with respect to all or a portion of the dividends to be paid on the Senior

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Preferred Stock on any subsequent Dividend Payment Date. PIK Dividends shall be paid by delivering to the Holders of Senior Preferred Stock a number of shares of Senior Preferred Stock determined by dividing the total amount of the dividend (rounded to the nearest whole cent) such Holders are entitled to receive on the Dividend Payment Date, calculated pursuant to Section 2(a), by the Liquidation Preference. The issuance of any such PIK Dividend in such amount shall constitute full payment of such dividend. The Corporation shall not issue fractional shares of Senior Preferred Stock to which Holders may become entitled pursuant to this Section 2(b), but in lieu thereof, the Corporation shall deliver a check in an amount in cash equal to the applicable fraction of the Liquidation Preference. Any additional shares or Senior Preferred Stock issued pursuant to this Section 2(b) shall be governed by this resolution and shall be subject in all respects, except as to the date of issuance and date from which dividends accrue and cumulate as set forth below, to the same terms as the shares of Senior Preferred Stock originally issued hereunder. All dividends (whether payable in cash or in whole or in part in additional shares of Senior Preferred Stock) paid pursuant to this Section 2(b) shall be paid in equal pro rata proportions of such cash and/or shares of Senior Preferred Stock to the Holders entitled thereto, except with respect to cash payable in lieu of fractional shares which would otherwise be paid as PIK Dividends.

        (c)  Dividends on shares of Senior Preferred Stock shall accrue and be cumulative from the date of issuance of such shares. Dividends shall be payable quarterly in arrears when and as declared by the Board of Directors of the Corporation on March 31, June 30, September 30 and December 31 of each year (a "Dividend Payment Date"), commencing on September 30, 2000 and for shares paid as PIK Dividends, commencing on the first Dividend Payment Date after such shares are issued. If any Dividend Payment Date occurs on a day that is not a Business Day, any accrued dividends otherwise payable on such Dividend Payment Date shall be paid on the next succeeding Business Day. Dividends shall be paid to the Holders of record of the Senior Preferred Stock as their names shall appear on the share register of the Corporation on the Record Date for such dividend. Dividends payable in any Dividend Period which is less than a full Dividend Period in length will be computed on the basis of a ninety (90) day quarterly period and actual days elapsed in such Dividend Period. Dividends on account of arrears for any past Dividend Periods may be declared and paid at any time to Holders of record on the Record Date therefor. For any Dividend Period in which dividends are not paid in full on the Dividend Payment Date first succeeding the end of such Dividend Period, then on such Dividend Payment Date such accrued and unpaid dividends (including PIK Dividends) shall be added (solely for the purpose of calculating dividends payable on the Senior Preferred Stock) to the Liquidation Preference of the Senior Preferred Stock effective at the beginning of the Dividend Period succeeding the Dividend Period as to which such dividends were not paid and shall thereafter accrue additional dividends in respect thereof at the Dividend Rate until such accrued and unpaid dividends have been paid in full.

        (d)  So long as any shares of Senior Preferred Stock shall be outstanding, the Corporation shall not declare, pay or set apart for payment on any Junior Stock any dividends whatsoever, whether in cash, property or otherwise (other than dividends payable in shares of the class or series upon which such dividends are declared or paid, or payable in shares of Common Stock with respect to Junior Stock, or rights to acquire such stock, together with cash in lieu of fractional shares), nor shall the Corporation make any distribution on any Junior Stock, nor shall any Junior Stock be purchased, redeemed or otherwise acquired by the Corporation or any of its subsidiaries of which it owns not less than a majority of the outstanding voting power (other than a purchase, redemption or other acquisition of shares of Common Stock made for purposes of an employee incentive or benefit plan of the Corporation, including, without limitation, the acquisition upon exercise of stock options, warrants or rights to acquire capital stock if the security acquired represents a portion of the exercise price thereof and acquisitions from employees under any such employee incentive or benefit plan), nor shall any monies be paid or made available for a sinking fund for the purchase or redemption of any Junior Stock, unless all dividends to which the Holders of Senior Preferred Stock shall have been entitled for

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all previous Dividend Periods shall have been paid or declared and a sum of money or PIK Dividends sufficient for the payment thereto has been set apart.

        (e)  In the event that full dividends are not paid or made available to the Holders of all outstanding shares of Senior Preferred Stock and funds available for payment of dividends shall be insufficient to permit payment in full to Holders of all such stock of the full preferential amounts to which they are then entitled, then the entire amount available for payment of dividends shall be distributed ratably among all such Holders of Senior Preferred Stock in proportion to the full amount to which they would otherwise be respectively entitled. For purposes of this Section 2(e), the amount of legally available PIK Dividends shall be deemed funds available for payment of dividends.

        (f)    Subject to Section 2(d), in the event that the Corporation declares or pays or sets apart for payment on any Common Stock any cash dividends, the Corporation shall also declare and pay to the Holders of the Senior Preferred Stock at the same time that it declares and pays or sets apart for payment to the holders of Common Stock, the cash dividends which would have been declared and paid or set apart for payment with respect to the shares of Common Stock issuable upon conversion of the Senior Preferred Stock had all of the outstanding shares of Senior Preferred Stock been converted immediately prior to the record date for such dividend, or if no record date is fixed, the date as to which the record holders of the Junior Stock entitled to such dividends are to be determined.

        (g)  The Corporation and each Holder acknowledge and agree that it is intended that the Senior Preferred Stock not constitute "preferred stock" within the meaning of Section 305 of the Internal Revenue Code of 1986, as amended, and the Treasury Regulations promulgated thereunder, and neither the Corporation nor the Holders shall treat the Senior Preferred Stock as such. Accordingly, payment of any and all PIK Dividends to be made hereunder or under any other transaction document by the Corporation to or for the benefit of any Holder is intended to be made free and clear of, and without deduction for, U.S. federal income and withholding taxes ("U.S. Taxes"). If the Corporation shall be required by law to deduct any such U.S. Taxes from or in respect of any PIK Dividends to be paid hereunder by the Corporation to or for the benefit of any Holder, then (a) the Holder shall pay to the Corporation the amount of such U.S. Taxes not to exceed ten percent (10%) of the fair market value of such PIK Dividend on the date such PIK Dividend is distributed in accordance with this Certificate of Designations (the "Fair Market Value"), and (b) upon payment by the applicable Holder the Corporation shall pay to or for the benefit of the applicable Holder, in addition to such PIK Dividend, an additional amount (the "Tax Gross—Up Amount"), in cash, as necessary so that after making all required deductions on account of U.S. Taxes (including deductions applicable to additional sums required to be paid or deposited under this Section 2(g)) the amount received by such Holder (disregarding the payment made by such Holder to the Corporation pursuant to this sentence) shall be equal to the sum that would have been so received had no such deductions been made. If a Holder is required to pay any U.S. Taxes (other than U.S. Taxes determined on a net income basis) with respect to any PIK Dividends (as a result of the Corporation's failure to withhold such U.S. Taxes or otherwise) in excess of ten percent (10%) of the Fair Market Value of such PIK Dividends, the Corporation shall indemnify and hold harmless such Holder from any such U.S. Taxes in an amount equal to the Tax Gross—Up Amount, and if the Corporation is required to pay any such U.S. Taxes with respect to any PIK Dividends, the Holder shall indemnify and hold harmless the Corporation from any such U.S. Taxes in an amount up to ten percent (10%) of the Fair Market Value of such PIK Dividends.

        (h)  The amount to be paid by the Corporation under Section 2(g) shall be reduced by the amount of any credit, against any other tax due in any other jurisdiction, available to the Holder or its affiliates by reason of the payment of U.S. Taxes pursuant to Section 2(g). In no event shall the Corporation be liable for any U.S. Taxes required to be deducted from or in respect of any PIK Dividends by reason of any change in applicable law after the Initial Issue Date (which shall be the responsibility of the Holder), or be obligated to make any payment under Section 2(g) if, at the time of such payment, such

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payment (a "Blocked Payment") would violate, or result in a default or event of default under, the Indenture relating to the Corporation's 12¹/2% Senior Subordinated Notes due 2010 or the Corporation's Senior Credit Agreement dated as of September 6, 2000 (in each case including any amendments, modifications, extensions, refinancings or replacements thereof) (collectively, the "Financing Documents"). Notwithstanding the foregoing, in the event the Corporation does not make a payment as required by Section 2(g) because such payment would be deemed a Blocked Payment, (A) the Holder shall have no obligation to make the payment as described in clause (a) of Section 2(g), but shall pay the amount otherwise required to be deducted directly to the U.S. taxing authority, and (B) the Corporation shall be obligated to pay to the applicable Holders an amount equal to any such Blocked Payments plus interest at an annual rate of 6% starting from the date any such Blocked Payment otherwise would have been made promptly following the date in which any such previously Blocked Payments would no longer violate, or result in a default or event of default under, the Financing Documents. Each Holder shall, if requested in writing by the Corporation, promptly provide the Corporation with a properly completed Form W-8 BEN or Form W-8 IMY (or successor forms), as applicable, including, if applicable, the eligibility of such Holder for a reduced rate of withholding pursuant to an applicable treaty.

        3    Distributions Upon Liquidation, Dissolution or Winding Up.

        (a)  In the event of any voluntary or involuntary liquidation, dissolution or other winding up of the affairs of the Corporation, before any payment or distribution shall be made to the holders of Junior Stock, the Holders of Senior Preferred Stock shall be entitled to be paid out of the assets of the Corporation in cash or property at its fair market value as determined by the Board of Directors of the Corporation the Liquidation Preference per share plus an amount equal to all dividends accrued and unpaid thereon to the date of such liquidation or dissolution or such other winding up. Except as provided in this Section 3(a), Holders of Senior Preferred Stock shall not be entitled to any distribution in the event of liquidation, dissolution or winding up of the affairs of the Corporation.

        (b)  If, upon any such liquidation, dissolution or other winding up of the affairs of the Corporation, the assets of the Corporation shall be insufficient to permit the payment in full of the Liquidation Preference per share plus an amount equal to all dividends accrued and unpaid on the Senior Preferred Stock, then the assets of the Corporation shall be ratably distributed among the Holders of Senior Preferred Stock in proportion to the full amounts to which they would otherwise be respectively entitled if all amounts thereon were paid in full. Neither the consolidation or merger of the Corporation into or with another corporation or corporations, nor the sale, lease, transfer or conveyance of all or substantially all of the assets of the Corporation to another corporation or any other entity shall be deemed a liquidation, dissolution or winding up of the affairs of the Corporation within the meaning of this Section 3.

        4    Redemption by the Corporation.

        (a)  The Corporation may, in the manner hereinafter provided, redeem from and after the date that is three years after the Initial Issue Date all, but not less than all, of the outstanding shares of Senior Preferred Stock on payment of the Redemption Price for each share of Senior Preferred Stock to be redeemed so long as (i) a registration statement with respect to the Common Stock underlying the Senior Preferred Stock has been filed with the Securities and Exchange Commission, and such registration statement has been declared effective by the Securities and Exchange Commission and has been effective for at least 180 days, and (ii) the Current Market Price per share of Common Stock is higher than $10.00 on the date the written notice of redemption referred to in Section 4(b) is sent during the 180-day period set forth in clause (i).

        (b)  Before redeeming any shares of Senior Preferred Stock, the Corporation shall mail by overnight courier and fax to each person who, at the date of such mailing and fax, shall be a registered Holder of shares of Senior Preferred Stock to be redeemed, notice of the intention of the Corporation

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to redeem such shares held by such registered Holder. Such notice shall be mailed and faxed to the last address of such Holder as it appears on the records of the Corporation, or in the event of the address of any such Holder not appearing on the records of the Corporation, then to the last address of such Holder known to the Corporation, at least forty-five (45) days before the date specified for redemption. Such notice shall set out the Redemption Price and the date on which the redemption is to take place. On or after the date so specified for redemption, the Corporation shall pay or cause to be paid the Redemption Price to the registered Holders of the shares of Senior Preferred Stock on presentation and surrender of the certificates for the shares of Senior Preferred Stock so called for redemption at the registered office of the Corporation or at such other place or places as may be specified in such notice, and the certificates for such shares of Senior Preferred Stock shall thereupon be cancelled, and the shares of Senior Preferred Stock represented thereby shall thereupon be redeemed. From and after the date specified for redemption in such notice, the Holders of the shares of Senior Preferred Stock called for redemption shall cease to be entitled to dividends in respect of such shares and shall not be entitled to exercise any of the rights of the Holders thereof, except the right to receive the Redemption Price, unless payment of the Redemption Price shall not be made by the Corporation in accordance with the foregoing provisions, in which case the rights of the Holders of such shares shall remain unaffected.

        (c)  No Senior Preferred Stock may be redeemed except with funds legally available for the payment of the Redemption Price.

        (d)  All shares of Senior Preferred Stock redeemed pursuant to this Section 4 shall be retired and shall be restored to the status of authorized and unissued shares of preferred stock, without designation as to series and may thereafter be reissued as shares of any series of preferred stock.

        5    Conversion.    

        (a)  Each Holder shall have the right, at such Holder's option, to convert all or any portion of its shares of Senior Preferred Stock into shares of Common Stock at any time, at the Conversion Rate calculated as of the close of business on the Conversion Date.

        (b)  On the date five (5) years after the Initial Issue Date each share of Senior Preferred Stock will automatically convert into shares of Common Stock at the Conversion Rate calculated as of the close of business on the date five (5) years after the Initial Issue Date. On such date, each Holder's shares of Senior Preferred Stock shall represent the number of shares of Common Stock into which the Senior Preferred Stock was converted. On and after such date, each Holder will be entitled to deliver its Senior Preferred Stock certificates to the Corporation in exchange for Common Stock certificates in accordance with the terms of Section 5(c) as if such date of mandatory conversion was a Conversion Date.

        (c)  The right of conversion attaching to any share of Senior Preferred Stock may be exercised by the Holder thereof by delivering the certificate representing such share of Senior Preferred Stock to be converted to the Corporation, at its principal office or at the office or agency maintained by the Corporation for that purpose, accompanied by a duly signed and completed notice of conversion in form reasonably satisfactory to the Corporation. The "Conversion Date" will be the date on which the duly signed and completed notice of conversion are so delivered. As promptly as practicable on or after the Conversion Date (provided the certificate representing the share of Senior Preferred Stock is delivered to the Corporation), but in no event later than three days from the Conversion Date, the Corporation shall issue and deliver to the Holder (i) at the Holder's request, either a certificate or certificates or electronic shares through "DWAC" for the number of full shares of Common Stock issuable upon conversion, together with payment in cash, determined as provided below, in lieu of any fraction of a share and (ii) if less than the full number of shares of Senior Preferred Stock evidenced by the surrendered certificate or certificates are being converted, a new certificate or certificates, of like tenor, for the number of shares evidenced by such surrendered certificate or certificates less the

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number of shares converted. Such certificate or certificates shall be delivered by the Corporation to the appropriate Holder by mailing certificates evidencing the additional shares to the Holders at their respective addresses set forth in the register of Holders maintained by the Corporation. All shares of Common Stock issuable upon conversion of the Senior Preferred Stock shall be fully paid and nonassessable and shall rank pari passu with the other shares of Common Stock outstanding from time to time.

        (d)  The Corporation shall not issue a fractional share of Common Stock upon conversion of Senior Preferred Stock. Instead the Corporation shall deliver a check for an amount equal to the applicable fraction of a share multiplied by the Current Market Price calculated as of the close of business on the Conversion Date, rounded to the nearest cent.

        (e)  A Holder delivering Senior Preferred Stock for conversion will not be required to pay any taxes or duties in respect of the issue or delivery of Common Stock on conversion but will be required to pay any tax or duty that may be payable in respect of any transfer involved in the issue or delivery of the shares of Common Stock in a name other than that of the Holder of the Senior Preferred Stock. Certificates representing shares of Common Stock will not be issued or delivered unless all taxes and duties, if any, payable by the Holder have been paid.

        (f)    The Corporation has reserved and shall continue to reserve out of its authorized but unissued Common Stock or its Common Stock held in treasury enough shares of Common Stock to permit the conversion of all outstanding shares of Senior Preferred Stock in full as of the next succeeding Dividend Payment Date assuming that such conversion took place at the Conversion Price then in effect (provided that such reservation may be proportionally reduced as shares of Senior Preferred Stock are repurchased, converted, exchanged or retired) and such shares shall be fully paid and nonassessable and free of preemptive or similar rights. The Corporation shall take all commercially reasonable steps to comply with all securities laws regulating the offer and delivery of shares of Common Stock upon conversion of Senior Preferred Stock, provided, however, that the Corporation shall not be required to file a registration statement with respect to such securities, except as provided in the Stockholders' Agreement.

        (g)  The Conversion Price shall be subject to adjustment as follows:

        (i)    In case the Corporation shall (A) pay a dividend (or make a distribution) on any class of its Capital Stock in shares of its Common Stock, (B) issue shares of Common Stock to DLJ Capital Funding, Inc. and those financial institutions that will be lenders of the Corporation as contemplated by Commitment Letter dated as of May 18, 2000 by and among DLJ Capital Funding, Inc., DLJ Bridge Finance, Inc. and the Corporation either upon the exercise of rights or warrants granted to such parties or otherwise, (C) subdivide its outstanding shares of Common Stock into a greater number of shares or (D) combine its outstanding shares of Common Stock into a smaller number of shares, the Conversion Price in effect immediately prior thereto shall be adjusted (as provided below) so that Holders of shares of Senior Preferred Stock thereafter surrendered for conversion shall be entitled to receive the number of shares of Common Stock which such Holder would have owned or have been entitled to receive immediately following such action had such shares of Senior Preferred Stock been converted immediately prior to such time. The Conversion Price as adjusted shall be determined by multiplying the Conversion Price at which the shares of Senior Preferred Stock were theretofore convertible by a fraction of which the denominator shall be the number of shares of Common Stock outstanding immediately following such action and of which the numerator shall be the number of shares of Common Stock outstanding immediately prior thereto. Such adjustment shall be made whenever any event listed above shall occur and shall become effective retroactively immediately after the record date in the case of a dividend or distribution and immediately after the effective date in the case of a subdivision or combination.

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        (ii)  In case the Corporation shall pay a dividend to all holders of its Common Stock (including any dividend paid in connection with a consolidation or merger in which the Corporation is the continuing corporation) of any shares of Capital Stock of the Corporation or its Subsidiaries (other than Common Stock) or evidences of its indebtedness or assets or property (other than cash and excluding dividends or distributions in connection with the liquidation, dissolution or winding up of the Corporation) or rights or warrants to subscribe for or purchase any of its Capital Stock or those of its Subsidiaries or Capital Stock convertible or exchangeable for Common Stock, then in each such case adequate provision shall be made so that each Holder shall have the right to receive the amount and kind of assets, evidences of indebtedness, property or securities such holder would have received had such Holder converted each such share of Senior Preferred Stock immediately prior to the record date for such dividend. Such adjustment shall be made whenever any such payment is made, and shall become effective retroactively immediately after the record date for the determination of stockholders entitled to receive the payment.

        (iii)  No adjustment in the Conversion Price shall be required unless the adjustment would require an increase or decrease of at least 1% in the Conversion Price then in effect; provided, however, that any adjustments that by reason of this Section 5(g)(iii) are not required to be made shall be carried forward and taken into account in any subsequent adjustment. All calculations under this Section 5(g) shall be made to the nearest cent.

        (iv)  Whenever the Conversion Price is adjusted, as herein provided, the Corporation shall promptly send to each Holder of record by first class mail, postage pre-paid, a certificate of an officer of the Corporation setting forth the Conversion Price after the adjustment and setting forth a brief statement of the facts requiring such adjustment and a computation thereof. The certificate shall be conclusive evidence of the correctness of the adjustment. The Corporation shall promptly cause a notice of the adjusted Conversion Price to be mailed to each registered Holder.

        (v)  In case of any reclassification of the Common Stock, any consolidation of the Corporation with, or merger of the Corporation into, any other entity, any merger of another entity into the Corporation (other than a merger that does not result in any reclassification, conversion, exchange or cancellation of outstanding shares of Common Stock of the Corporation), any sale or transfer of all or substantially all of the assets of the Corporation or any compulsory share exchange pursuant to which share exchange the Common Stock is converted into other securities, cash or other property, then lawful provision shall be made as part of the terms of such transaction whereby each Holder shall have the right thereafter, during the period such shares of Senior Preferred Stock shall be convertible, to convert its shares of Senior Preferred Stock only into the kind and amount of securities, cash and other property receivable upon the reclassification, consolidation, merger, sale, transfer or share exchange of the number of shares of Common Stock of the Corporation into which such Holder's shares of Senior Preferred Stock would have been convertible immediately prior to the reclassification, consolidation, merger, sale, transfer or share exchange. The Corporation, the Person formed by the consolidation or resulting from the merger or which acquires such assets or which acquires the Corporation's shares, as the case may be, shall make provisions in its certificate or articles of incorporation or other constituent document to establish such rights and such rights shall be clearly provided for in the definitive transaction documents relating to such transaction. The certificate or articles of incorporation or other constituent document shall provide for adjustments, which, for events subsequent to the effective date of the certificate or articles of incorporation or other constituent document, shall be as nearly equivalent as may be practicable to the adjustments provided for in this Section 5. The provisions of this Section 5(g)(v) shall similarly apply to successive reclassifications, consolidations, mergers, sales, transfers or share exchanges.

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        (h)  All shares of Senior Preferred Stock converted pursuant to this Section 5 shall be retired and shall be restored to the status of authorized and unissued shares of preferred stock, without designation as to series and may thereafter be reissued as shares of any series of preferred stock other than Senior Preferred Stock.

        6    Voting Rights.

        (a)  The Holders shall not be entitled to any voting rights except as hereinafter provided in this Section 6 or as otherwise provided by law.

        (b)  The Holders shall be entitled to vote along with the holders of Common Stock on all matters on which holders of Common Stock are entitled to vote. The Holders shall participate in such votes as if the shares of Senior Preferred Stock were converted into shares of Common Stock in accordance with Section 5 hereof as of the record date for the determination of holders of Common Stock entitled to vote.

        (c)  In addition to any vote or consent of shareholders required by law, the affirmative consent of the Holders that own more than fifty percent (50%) of the then outstanding shares of Senior Preferred Stock (voting as a single class), given in person or by proxy, either in writing without a meeting or by vote at any meeting called for the purpose, shall be necessary for authorizing, effecting or validating:

        (i)    any amendment, alteration or repeal of any of the provisions of the Certificate of Designations of the Corporation;

        (ii)  any amendment, alteration or repeal of any of the provisions of the Certificate of Incorporation of the Corporation that would adversely affect the preferences, rights or powers of the Senior Preferred Stock;

        (iii)  any authorization, issuance or creation of (by reclassification or otherwise) any class or series (or any security of any class or series) of Capital Stock of the Corporation;

        (iv)  any increase in the size of the Board of Directors of the Corporation (except as required pursuant to the terms of this Certificate of Designations or the Stockholders' Agreement);

        (v)  any change in the state of incorporation of the Corporation;

        (vi)  any delisting of the Common Stock from the American Stock Exchange or listing of Common Stock on a different exchange or national quotation system; and

        (vii) any decision, or the entering into of any agreement, commitment or arrangement, to effect any of the foregoing.

        (d)  Except as provided in Section 6(e), the Board of Directors of the Corporation shall consist of ten (10) Directors, and the Holders of shares of Senior Preferred Stock, voting separately as a class, shall be entitled to elect:

        (i)    four (4) of such Directors for so long as the Holders own in the aggregate shares of Senior Preferred Stock having the right to convert into a number of shares of Common Stock that equals or exceeds twenty five percent (25%) of the sum of (i) the number of shares of Common Stock outstanding plus (ii) the number of shares of Common Stock into which or for which all outstanding securities of the Corporation convertible into or exercisable or exchangeable for Common Stock (including, without limitation, the Senior Preferred Stock) may be converted, exercised or exchanged;

        (ii)  three (3) of such Directors for so long as the Holders of own in the aggregate shares of Senior Preferred Stock having the right to convert into a number of shares of Common Stock that equals or exceeds twenty percent (20%) of the sum of (i) the number of shares of Common Stock outstanding plus (ii) the number of shares of Common Stock into which or for which all

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outstanding securities of the Corporation convertible into or exercisable or exchangeable for Common Stock (including, without limitation, the Senior Preferred Stock) may be converted, exercised or exchanged;

        (iii)  two (2) of such Directors for so long as the Holders own in the aggregate shares of Senior Preferred Stock having the right to convert into a number of shares of Common Stock that equals or exceeds ten percent (10%) of the sum of (i) the number of shares of Common Stock outstanding plus (ii) the number of shares of Common Stock into which or for which all outstanding securities of the Corporation convertible into or exercisable or exchangeable for Common Stock (including, without limitation, the Senior Preferred Stock) may be converted, exercised or exchanged; or

        (iv)  one (1) of such Directors for so long as the Holders own in the aggregate shares of Senior Preferred Stock having the right to convert into a number of shares of Common Stock that equals or exceeds five percent (5%) of the sum of (i) the number of shares of Common Stock outstanding plus (ii) the number of shares of Common Stock into which or for which all outstanding securities of the Corporation convertible into or exercisable or exchangeable for Common Stock (including, without limitation, the Senior Preferred Stock) may be converted, exercised or exchanged.

        (e)  If the Corporation shall have failed to pay any dividends on any Dividend Payment Date as provided in Section 2(a), (b) and (c) (and without regard to (i) Section 2(e) or (ii) whether the payment of such dividend is legally or otherwise permissible) or if the Corporation shall have failed to comply with any provision of Section 6(d) hereof, then for as long as such failure continues, the number of Directors of the Corporation shall be increased to a number that is equal to three (3) more than the then current number of Directors and the Holders, voting separately as a class, shall have a right to designate and have appointed immediately by the Board of Directors of the Corporation by resolution, or elect (if specified by the Holders) at the next annual meeting of the stockholders or at any special meeting, three additional Directors to the Corporation's Board of Directors, regardless of the number of shares of Preferred Stock then owned by the Holders.

        (f)    Whenever such voting right pursuant to Section 6(e) shall have vested, such right may be exercised by written consent of the Holders of a majority of the outstanding shares of Senior Preferred Stock or at a special meeting of the Holders, called as hereinafter provided, or at any annual meeting of stockholders held for the purpose of electing Directors. Such right of the Holders to elect Directors may be exercised until the Corporation has paid all theretofore accrued and unpaid dividends as provided in Section 2(a), (b) and (c) and/or, as applicable, cured any failure, at which time the right of the Holders to elect such number of Directors shall cease, the term of such Directors previously elected pursuant to Section 6(e) shall thereupon terminate, and the authorized number of Directors shall thereupon return to the number of authorized Directors otherwise in effect, but subject always to the same provisions for the renewal and divestment of such special voting rights as provided in Section 6(e).

        (g)  At any time when such voting right shall have vested in the Holders pursuant to Section 6(e) and if such right shall not already have been initially exercised by written consent or otherwise, a proper officer of the Corporation shall, upon the written request of any Holder then outstanding, addressed to the Secretary of the Corporation, call a special meeting of Holders. Such meeting shall be held at the earliest practicable date upon the notice required for annual meetings of stockholders at the place for holding annual meetings of stockholders of the Corporation or if none at a place designated by the Secretary of the Corporation. If such meeting shall not be called by the proper officers of the Corporation within thirty (30) days after the personal service of such written request upon the Secretary of the Corporation, or within thirty (30) days after mailing the same, within the United States, by registered mail, addressed to the Secretary of the Corporation at its principal office (such

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mailing to be evidenced by the registry receipt issued by the postal authorities), then the Holders of record of ten percent (10%) of the shares of Senior Preferred Stock then outstanding may designate in writing a Holder to call such meeting at the expense of the Corporation, and such meeting may be called by such person so designated upon the notice required for annual meeting of stockholders and shall be held at the place for holding annual meetings of the Corporation or, if none, at a place designated by such Holder. Any Holder of Senior Preferred Stock that would be entitled to vote at such meeting shall have access to the stock books of the Corporation for the purpose of causing a meeting of stockholders to be called pursuant to the provisions of this Section 6(g). Notwithstanding the provisions of this Section 6(g), however, no such special meeting shall be called if any such request is received less than 90 days before the date fixed for the next ensuing annual or special meeting of stockholders.

        (h)  If a Director so elected by the Holders of Senior Preferred Stock shall cease to serve as a Director for any reason before his or her term expires, the Holders may, by written consent or at a special meeting of the Holders called as provided above, elect a successor to hold office for the unexpired term of the Director whose place shall be vacant; provided that any such prospective successor Director who is to replace Peter Cohen shall be reasonably satisfactory to the Board of Directors as a whole.

        (i)    For so long as any Director has been elected by the Holders, at least one of the Directors so elected by the Holders shall serve on all committees of the Board of Directors of the Corporation.

        7    Ranking.

        With regard to rights to receive dividends, redemption payments and distributions upon liquidation, dissolution or winding up of the Corporation, the Senior Preferred Stock shall rank senior to the Common Stock and any other equity securities or other securities convertible into or exercisable or exchangeable for Common Stock or other equity securities that are issued by the Corporation after the date of this Certificate of Designation. The Senior Preferred Stock shall not be subject to the creation of any Capital Stock senior with respect to the right to receive dividends, redemption payments and distributions upon liquidation, dissolution or winding up of the Corporation.

        8    Exclusion of Other Rights.

        Except as may otherwise be required by law, the shares of Senior Preferred Stock shall not have any voting powers, preferences and relative, participating, optional or other special rights, other than those specifically set forth in this resolution and in the Certificate of Incorporation.

        9    Headings of Subdivisions.

        The headings of the various subdivisions hereof are for convenience of reference only and shall not affect the interpretation of any of the provisions hereof.

        10    Severability of Provisions.

        If any voting powers, preferences and relative, participating, optional and other special rights of the Senior Preferred Stock and qualifications, limitations and restrictions thereof set forth in this resolution is invalid, unlawful or incapable of being enforced by reason of any rule of law or public policy, all other voting powers, preferences and relative, participating, optional and other special rights of Senior Preferred Stock and qualifications, limitations and restrictions thereof set forth in this resolution which can be given effect without the invalid, unlawful or unenforceable voting powers, preferences and relative, participating, optional and other special rights of Senior Preferred Stock and qualifications, limitations and restrictions thereof shall, nevertheless, remain in full force and effect, and no voting powers, preferences and relative, participating, optional or other special rights of Senior Preferred Stock and qualifications, limitations and restrictions thereof herein set forth shall be deemed dependent upon any other such voting powers, preferences and relative, participating, optional or other

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special rights of Senior Preferred Stock and qualifications, limitations and restrictions thereof unless so expressed herein.

        11    Record Holders.

        The Corporation and the transfer agent for the Senior Preferred Stock may deem and treat the Holder of any shares of Preferred Stock as the true and lawful owner thereof for all purposes, and neither the Corporation nor the transfer agent shall be affected by any notice to the contrary.

        12    Notice.

        Except as may otherwise be provided for herein, all notices referred to herein shall be in writing, and all notices hereunder shall be deemed to have been given upon the earlier of receipt of such notice or three Business Days after the mailing of such notice if sent by registered mail (unless first-class mail shall be specifically permitted for such notice under the terms of this Certificate) with postage prepaid, addressed: if to the Corporation, to its offices at 750 Lexington Avenue, 25^th Floor, New York, NY 10022, Attention: Secretary and General Counsel or to an agent of the Corporation designated as permitted by this Certificate, or, if to any Holder of the Senior Preferred Stock, to such Holder at the address of such Holder of the Senior Preferred Stock as listed in the stock record books of the Corporation (which may include the records of any transfer agent for the Senior Preferred Stock); or to such other address as the Corporation or Holder, as the case may be, shall have designated by notice similarly given.

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Appendix B

        RESOLVED, that there is hereby established a series of authorized preferred stock having a par value of $1.00 per share, which series shall be designated as "Series B Preferred Stock" ("Series B Preferred Stock"), shall consist of 2,000 shares and shall have the following voting powers, preferences and relative, participating, optional and other special rights, and qualifications, limitations and restrictions thereof, as follows:

1 Certain Definitions.

        Unless the context otherwise requires, the terms defined in this Section 1 shall have, for all purposes of this resolution, the meanings herein specified (with terms defined in the singular having comparable meanings when used in the plural).

        "Business Day" shall mean a day other than a Saturday or Sunday or a bank holiday in New York.

        "Common Stock" shall mean the Class A Common Stock, par value $0.01 per share, of the Corporation.

        "Director" shall mean a member of the Corporation's Board of Directors.

        "Holder" shall mean the record holder of any shares of Series B Preferred Stock, including any fractional shares thereof, as shown on the books and records of the Corporation.

        "Junior Stock" shall mean the Common Stock, the Corporation's Class B Nonvoting common stock and any other series of common or preferred stock established by the Board of Directors of the Corporation that by its terms is junior to the Series B Preferred Stock, as to either redemption payments or the distribution of assets upon liquidation, dissolution or winding up, or both.

        "Liquidation Preference" shall mean $1.00 per share of Series B Preferred Stock.

        "Redemption Price" shall mean a price equal to the Liquidation Preference.

        "Senior Stock" shall mean the Series A Preferred Stock and any other series of preferred stock established by the Board of Directors of the Corporation that by its terms is senior to the Series B Preferred Stock, as to either redemption payments or the distribution of assets upon liquidation, dissolution or winding up, or both.

        "Series A Certificate" shall mean the Certificate of Designations, Preferences and Relative, Participating, Optional and Other Special Rights of Preferred Stock and Qualifications, Limitations and Restrictions Thereof of Series A Preferred Stock.

        "Series A Preferred Stock" shall mean the Series A Convertible Preferred Stock, par value $1.00, of the Corporation.

2 Dividends.

        (a)  The Holders shall be not entitled to receive dividends on their shares of Series B Preferred Stock.

        (b)  The Corporation and each Holder acknowledge and agree that it is intended that the Series B Preferred Stock not constitute "preferred stock" within the meaning of Section 305 of the Internal Revenue Code of 1986, as amended, and the Treasury Regulations promulgated thereunder, and neither the Corporation nor the Holders shall treat the Series B Preferred Stock as such.

3 Distributions Upon Liquidation, Dissolution or Winding Up.

        (a)  In the event of any voluntary or involuntary liquidation, dissolution or other winding up of the affairs of the Corporation, after required payments and distributions are made to the holders of Senior Stock and before any payment or distribution shall be made to the holders of Junior Stock, the Holders

of Series B Preferred Stock shall be entitled to be paid out of the assets of the Corporation in cash or property at its fair market value as determined by the Board of Directors of the Corporation the Liquidation Preference per share. Except as provided in this Section 3(a), Holders of Series B Preferred Stock shall not be entitled to any distribution in the event of liquidation, dissolution or winding up of the affairs of the Corporation.

        (b)  If, upon any such liquidation, dissolution or other winding up of the affairs of the Corporation, the assets of the Corporation shall be insufficient to permit the payment in full of the Liquidation Preference per share, then the assets of the Corporation shall be ratably distributed among the Holders of Series B Preferred Stock in proportion to the full amounts to which they would otherwise be respectively entitled if all amounts thereon were paid in full. Neither the consolidation or merger of the Corporation into or with another corporation or corporations, nor the sale, lease, transfer or conveyance of all or substantially all of the assets of the Corporation to another corporation or any other entity shall be deemed a liquidation, dissolution or winding up of the affairs of the Corporation within the meaning of this Section 3.

4 Redemption by the Corporation.

        (a)  Upon the redemption of the Series A Preferred Stock by the Corporation in accordance with Section 4 of the Series A Certificate, the Corporation shall concurrently redeem all, but not less than all, of the outstanding shares of Series B Preferred Stock on payment of the Redemption Price for each share of Series B Preferred Stock to be redeemed.

        (b)  Upon the conversion of the Series A Preferred Stock by any holder thereof in accordance with Section 5 of the Series A Certificate, the Corporation shall concurrently redeem, and such holder shall be deemed to have irrevocably surrendered for redemption at such time, that number of shares of Series B Preferred Stock owned by such holder equal to the product of (i) the total number of shares of Series B Preferred Stock owned by such holder immediately prior to such redemption and (ii) a fraction, the numerator of which is the number of shares of Series A Preferred Stock being converted by such holder and the denominator of which is the total number of shares of Series A Preferred Stock owned by such holder immediately prior to such conversion. Such holder shall have the right to receive from the Corporation the Redemption Price for each share of its Series B Preferred Stock so redeemed. From and after the date of redemption pursuant to this Section 4(b), such holder shall not be entitled, with respect to the shares of Series B Preferred Stock so redeemed, to exercise any of the rights of the Holders of Series B Preferred Stock, except the right to receive the Redemption Price.

        (c)  On September 6, 2005, the Corporation shall automatically redeem each share of Series B Preferred Stock on payment of the Redemption Price for each share of Series B Preferred Stock to be redeemed.

        (d)  Before redeeming any shares of Series B Preferred Stock pursuant to Section 4(a) or Section 4(c), the Corporation shall mail by overnight courier and fax to each person who, at the date of such mailing and fax, shall be a registered Holder of shares of Series B Preferred Stock to be redeemed, notice of the intention of the Corporation to redeem such shares held by such registered Holder. Such notice shall be mailed and faxed to the last address of such Holder as it appears on the records of the Corporation, or in the event of the address of any such Holder not appearing on the records of the Corporation, then to the last address of such Holder known to the Corporation, at least forty-five (45) days before the date specified for redemption. Such notice shall set out the Redemption Price and the date on which the redemption is to take place. On or after the date so specified for redemption, the Corporation shall pay or cause to be paid the Redemption Price to the registered Holders of the shares of Series B Preferred Stock on presentation and surrender of the certificates for the shares of Series B Preferred Stock so called for redemption at the registered office of the Corporation or at such other place or places as may be specified in such notice, and the certificates for

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such shares of Series B Preferred Stock shall thereupon be cancelled, and the shares of Series B Preferred Stock represented thereby shall thereupon be redeemed. From and after the date specified for redemption in such notice, the Holders of the shares of Series B Preferred Stock called for redemption shall not be entitled to exercise any of the rights of the Holders thereof, except the right to receive the Redemption Price, unless payment of the Redemption Price shall not be made by the Corporation in accordance with the foregoing provisions, in which case the rights of the Holders of such shares shall remain unaffected.

        (e)  No Series B Preferred Stock may be redeemed except with funds legally available for the payment of the Redemption Price.

        (f)    All shares of Series B Preferred Stock redeemed pursuant to this Section 4 shall be retired and shall be restored to the status of authorized and unissued shares of preferred stock, without designation as to series, and may thereafter be reissued as shares of any series of preferred stock.

5 Conversion

        .

        The Series B Preferred Stock shall not be convertible into shares of Common Stock or any other series or class of capital stock of the Corporation.

6 Voting Rights.

        (a)  The Holders shall not be entitled to any voting rights with respect to the Series B Preferred Stock except as hereinafter provided in this Section 6 or as otherwise provided by law.

        (b)  The affirmative consent of the Holders that own more than fifty percent (50%) of the then outstanding shares of Series B Preferred Stock (voting as a single class), given in person or by proxy, either in writing without a meeting or by vote at any meeting called for the purpose, shall be necessary for authorizing, effecting or validating:

        (i)    any amendment, alteration or repeal of any of the provisions of this Certificate of Designations of Series B Preferred Stock (this "Certificate of Designations"); or

        (ii)  any decision, or the entering into of any agreement, commitment or arrangement, to effect the foregoing;

and, except to the extent otherwise required by applicable law, no vote of any other class or series of stock, whether voting separately as a class or series or together with any or all other classes or series of stock, shall be required for any action described in clause (i) or clause (ii) above.

        (c)  The Holders of shares of Series B Preferred Stock, voting separately as a class, shall be entitled to elect:

        (i)    one (1) Director for so long as the Holders own in the aggregate shares of Series A Preferred Stock having the right to convert into a number of shares of Common Stock that (x) equals or exceeds twenty-two and one-half percent (22¹/2%) of the sum of (i) the number of shares of Common Stock outstanding plus (ii) the number of shares of Common Stock into which or for which all outstanding securities of the Corporation convertible into or exercisable or exchangeable for Common Stock (including, without limitation, the Series A Preferred Stock) may be converted, exercised or exchanged (such sum, the "Fully Diluted Equity") and (y) is less than twenty-five percent (25%) of the Fully Diluted Equity; or

        (ii)  one (1) Director for so long as the Holders own in the aggregate shares of Series A Preferred Stock having the right to convert into a number of shares of Common Stock that

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(x) equals or exceeds seventeen and one-half percent (17¹/2%) of the Fully Diluted Equity and (y) is less than twenty percent (20%) of the Fully Diluted Equity.

        (d)  If a Director so elected by the Holders of Series B Preferred Stock shall cease to serve as a Director for any reason before his or her term expires, the Holders may, by written consent or at a special meeting of the Holders called as provided above, elect a successor to hold office for the unexpired term of the Director whose place shall be vacant.

7 Transferability.

        (a)  Except as provided in Section 7(b), a Holder may not transfer shares of Series B Preferred Stock.

        (b)  A Holder may transfer shares of Series B Preferred Stock only upon such Holder's concurrent transfer, to the same transferee, of shares of Series A Preferred Stock and only if such Holder concurrently transfers to such transferee of Series A Preferred Stock that number of shares of Series B Preferred Stock equal to the product of (i) the total number of shares of Series B Preferred Stock owned by such Holder immediately prior to such transfer and (ii) a fraction, the numerator of which is the number of shares of Series A Preferred Stock such Holder is then transferring to such transferee and the denominator of which is the total number of shares of Series A Preferred Stock owned by such Holder immediately prior to such transfer. If a Holder transfers any shares of Series A Preferred Stock, such Holder shall also concurrently transfer to the transferee of such Series A Preferred Stock that number of shares of Series B Preferred Stock equal to the product of (y) the total number of shares of Series B Preferred Stock owned by such Holder immediately prior to such transfer and (z) a fraction, the numerator of which is the number of shares of Series A Preferred Stock such Holder is then transferring to such transferee and the denominator of which is the total number of shares of Series A Preferred Stock owned by such Holder immediately prior to such transfer.

        (c)  Any transfer or attempted transfer of Series B Preferred Stock not made in accordance with this Section 7 shall be voidable by the Company, and the Company shall not be obligated to treat the transferee as a holder of the shares of the Series B Preferred Stock subject to such purported transfer and shall not record such purported transfer on its books, and the transferee shall have no rights as a holder of Series B Preferred Stock under this Certificate of Designations or otherwise. If a Holder purports to transfer shares of Series B Preferred Stock in violation of this Section 7, such Holder thereby forfeits its voting rights as a holder of Series B Preferred Stock provided by Section 6 with respect to the number of shares of Series B Preferred Stock purported to be transferred until such time, if any, as such Holder shall have fully rescinded such purported transfer and rendered null and void any and all effects or purported effects thereof. If a Holder fails to transfer shares of Series B Preferred Stock in violation of this Section 7, such Holder thereby forfeits its voting rights as a holder of Series B Preferred Stock provided by Section 6 with respect to the number of shares of Series B Preferred Stock that such Holder has so failed to transfer until such time, if any, as (i) such Holder shall have fully rescinded the transfer of the shares of Series A Preferred Stock requiring the transfer of shares of Series B Preferred Stock that was not effected, and rendered null and void any and all effects or purported effects thereof or (ii) such Holder transfers the shares of Series B Preferred Stock in accordance with this Section 7 required to be so transferred.

8 Issuance.

        (a)  The Corporation may issue Series B Preferred Stock in any amount, including any fraction of a share thereof. When used in this Certificate of Designations, "shares of Series B Preferred Stock" means "shares or fractional shares of Series B Preferred Stock".

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        (b)  The Corporation shall issue shares of Series B Preferred Stock only to holders of Series A Preferred Stock.

        (c)  Shares of Series B Preferred Stock by the Corporation shall initially be issued proportionately to the holders of Series A Preferred Stock, whereby the Corporation shall issue to each holder of Series A Preferred Stock that number of shares of Series B Preferred Stock equal to the product of (i) the total number of shares of Series B Preferred Stock issued in such initial issuance and (ii) a fraction, the numerator of which is the number of shares of Series A Preferred Stock owned by such holder immediately prior to such issuance and the denominator of which is the total number of shares of Series A Preferred Stock outstanding immediately prior to such issuance.

        (d)  If the Corporation, at any time subsequent to the initial issuance of Series B Preferred Stock, issues additional shares of Series A Preferred Stock (other than as dividends paid in kind on the shares of Series A Preferred Stock then outstanding), the Corporation shall concurrently issue to the recipient of such additional shares of Series A Preferred Stock that number of shares of Series B Preferred Stock equal to the product of (i) the total number of shares of Series B Preferred Stock outstanding immediately prior to such issuance and (ii) a fraction, the numerator of which is the number of shares of Series A Preferred Stock the Corporation is then issuing to such recipient and the denominator of which is the total number of shares of Series A Preferred Stock outstanding immediately prior to such issuance.

        (e)  Except as set forth in this Section 8, the Corporation shall not issue shares of Series B Preferred Stock.

9 Ranking.

        With regard to rights to receive redemption payments and distributions upon liquidation, dissolution or winding up of the Corporation, the Series B Preferred Stock shall rank (x) junior to the Senior Stock and (y) senior to the Common Stock and any other Junior Stock, whether now existing or issued by the Corporation after the date of this Certificate of Designations.

10 Exclusion of Other Rights.

        Except as may otherwise be required by law, the shares of Series B Preferred Stock shall not have any voting powers, preferences and relative, participating, optional or other special rights, other than those specifically set forth in this Certificate of Designations and in the Certificate of Incorporation.

11 Headings of Subdivisions.

        The headings of the various subdivisions hereof are for convenience of reference only and shall not affect the interpretation of any of the provisions hereof.

12 Severability of Provisions.

        If any voting powers, preferences and relative, participating, optional and other special rights of the Series B Preferred Stock and qualifications, limitations and restrictions thereof set forth in this resolution are invalid, unlawful or incapable of being enforced by reason of any rule of law or public policy, all other voting powers, preferences and relative, participating, optional and other special rights of Series B Preferred Stock and qualifications, limitations and restrictions thereof set forth in this resolution which can be given effect without the invalid, unlawful or unenforceable voting powers, preferences and relative, participating, optional and other special rights of Series B Preferred Stock and qualifications, limitations and restrictions thereof shall, nevertheless, remain in full force and effect, and no voting powers, preferences and relative, participating, optional or other special rights of Series B Preferred Stock and qualifications, limitations and restrictions thereof herein set forth shall be deemed

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dependent upon any other such voting powers, preferences and relative, participating, optional or other special rights of Series B Preferred Stock and qualifications, limitations and restrictions thereof unless so expressed herein.

13 Record Holders.

        The Corporation and the transfer agent for the Series B Preferred Stock may deem and treat the Holder of any shares of Series B Preferred Stock as the true and lawful owner thereof for all purposes, and neither the Corporation nor the transfer agent shall be affected by any notice to the contrary.

14 Notice.

        Except as may otherwise be provided for herein, all notices referred to herein shall be in writing, and all notices hereunder shall be deemed to have been given upon the earlier of receipt of such notice or three (3) Business Days after the mailing of such notice if sent by registered mail (unless first-class mail shall be specifically permitted for such notice under the terms of this Certificate of Designations) with postage prepaid, addressed: if to the Corporation, to its offices at 750 Lexington Avenue, 25^th Floor, New York, NY 10022, Attention: Secretary and General Counsel, or to an agent of the Corporation designated as permitted by this Certificate of Designations, or, if to any Holder of the Series B Preferred Stock, to such Holder at the address of such Holder of the Series B Preferred Stock as listed in the stock record books of the Corporation (which may include the records of any transfer agent for the Series B Preferred Stock); or to such other address as the Corporation or Holder, as the case may be, shall have designated by notice similarly given.

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Exhibit 3.(i)

RESTATED CERTIFICATE OF INCORPORATION OF SCIENTIFIC GAMES CORPORATION
A. PREFERRED STOCK
B. COMMON STOCK

Appendix A

Appendix B

EX-10.23

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Exhibit 10.23

January 9, 2003                

Mr. Richard M. Weil
207 East 74^th St., Apt. 8L
New York, NY 10021

Dear Rick:

        This letter confirms the terms of your employment by Scientific Games Corporation (the "Company"). Those terms are as follows:

        1.    Term:    Subject to earlier termination for cause, death, or disability, the term of your employment shall be extended, effective January 1, 2003, through and until December 31, 2004 (the "Term").

        2.    Position:    During the Term, you will serve as Vice President of International Business Development of the Company. You will report directly to the Chief Executive Officer of the Company (the "CEO") and shall have such duties and authority consistent with your title as shall be reasonably assigned to you from time to time by the CEO or the Board of Directors.

        3.    Salary and Other Compensation:    Effective January 1, 2003, your annual salary will be $273,000 and will be increased annually on each succeeding January 1 thereafter by an amount not less than a percentage of your annual salary then in effect equal to the percentage increase, if any, during the preceding twelve months in the Consumer Price Index for New York, NY. In addition to your salary, you will also be entitled to receive cash bonuses and options in accordance with the Company's management incentive compensation and equity incentive plans.

        4.    Benefits:    During the Term you will be entitled to participate in any and all benefit plans and programs of the Company that are made available to its senior executives, including the Company's Supplemental Executive Retirement Plan.

        5.    Compensation upon Change in Control:    If your employment is terminated without cause within two years of a Change in Control, as defined in the agreement between you and the Company, dated as of November 1, 1997 (the "Change in Control Agreement"), you will be entitled to receive, in lieu of any payment under the Change in Control Agreement, a cash payment in an amount equal to three times the sum of (i) your annual salary on the date of such termination and (ii) the Severance Annual Incentive Amount, as defined in the Change of Control Agreement.

        6.    Earlier Agreement:    This letter replaces and supersedes in its entirety a letter covering the subject matter hereof dated January 7, 2003.

        You and the Company agree that the terms contained in this letter will be memorialized in a formal employment agreement. Please indicate your acceptance of these terms by countersigning this letter below and returning it to my attention.

                Very truly yours,

AGREED AND ACCEPTED:

Richard M. Weil Date

cc: A. Lorne Weil
DeWayne E. Laird

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Exhibit 10.23

EX-10.25

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EXHIBIT 10.27

EXECUTION COPY

$340,000,000

CREDIT AGREEMENT

among

SCIENTIFIC GAMES CORPORATION,
as Borrower,

The Several Lenders
from Time to Time Parties Hereto,

BEAR STEARNS CORPORATE LENDING INC.,
as Syndication Agent,

and

THE BANK OF NEW YORK,
as Administrative Agent

Dated as of December 19, 2002

BEAR, STEARNS & CO. INC., as Sole Lead Arranger and Sole Bookrunner

BNY CAPITAL MARKETS, INC., as Co-Arranger

TABLE OF CONTENTS

		Page
Section 1.	DEFINITIONS	1
1.1.	Defined Terms	1
1.2.	Other Definitional Provisions	21
1.3.	Currency Conversion	21
Section 2.	AMOUNT AND TERMS OF TERM COMMITMENTS	22
2.1.	Term Commitments	22
2.2.	Procedure for Term Loan Borrowing	22
2.3.	Repayment of Term Loans	22
Section 3.	AMOUNT AND TERMS OF REVOLVING COMMITMENTS	23
3.1.	Revolving Commitments	23
3.2.	Procedure for Revolving Loan Borrowing	24
3.3.	Swingline Commitment	24
3.4.	Procedure for Swingline Borrowing; Refunding of Swingline Loans	24
3.5.	Commitment Fees, etc.	26
3.6.	Termination or Reduction of Revolving Commitments	26
3.7.	L/C Commitment	26
3.8.	Procedure for Issuance of Letter of Credit	26
3.9.	Fees and Other Charges	27
3.10.	L/C Participations	27
3.11.	Reimbursement Obligation of the Borrower	28
3.12.	Obligations Absolute	29
3.13.	Letter of Credit Payments	29
3.14.	Applications	29
3.15.	Foreign Currency Subfacility	29
3.16.	Procedure for Foreign Currency Loan Borrowings	30
3.17.	Foreign Currency Loan Fees, Commissions and Other Charges	30
3.18.	Participations in Foreign Currency Loans	30
Section 4.	AMOUNTS AND TERMS OF ADDITIONAL COMMITMENTS	32
4.1.	Revolving Credit Commitment Increases	32
Section 5.	GENERAL PROVISIONS APPLICABLE TO LOANS AND LETTERS OF CREDIT	33
5.1.	Optional Prepayments	33
5.2.	Mandatory Prepayments	33
5.3.	Conversion and Continuation Options	35
5.4.	Limitations on Eurocurrency Tranches	35
5.5.	Interest Rates and Payment Dates	35
5.6.	Computation of Interest and Fees	36
5.7.	Inability to Determine Interest Rate	36
5.8.	Pro Rata Treatment and Payments	37
5.9.	Requirements of Law	38
5.10.	Taxes	40
5.11.	Indemnity	42
5.12.	Change of Lending Office	42
5.13.	Replacement of Lenders	42
5.14.	Evidence of Debt	43
5.15.	Illegality	43

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5.16.	Foreign Currency Exchange Rate	43
Section 6.	REPRESENTATIONS AND WARRANTIES	44
6.1.	Financial Condition	44
6.2.	No Change	44
6.3.	Corporate Existence; Compliance with Law	44
6.4.	Power; Authorization; Enforceable Obligations	45
6.5.	No Legal Bar	45
6.6.	Litigation	45
6.7.	No Default	45
6.8.	Ownership of Property; Liens	45
6.9.	Intellectual Property	45
6.10.	Taxes	46
6.11.	Federal Regulations	46
6.12.	Labor Matters	46
6.13.	ERISA	46
6.14.	Investment Company Act; Other Regulations	46
6.15.	Subsidiaries	46
6.16.	Use of Proceeds	47
6.17.	Environmental Matters	47
6.18.	Accuracy of Information, etc.	47
6.19.	Security Documents	48
6.20.	Solvency	48
6.21.	Senior Indebtedness	48
6.22.	Regulation H	49
6.23.	Material Contracts	49
Section 7.	CONDITIONS PRECEDENT	49
7.1.	Conditions to Initial Extension of Credit	49
7.2.	Conditions to Each Extension of Credit	52
Section 8.	AFFIRMATIVE COVENANTS	52
8.1.	Financial Statements	52
8.2.	Certificates; Other Information	52
8.3.	Payment of Obligations	53
8.4.	Maintenance of Existence; Compliance	53
8.5.	Maintenance of Property; Insurance	54
8.6.	Inspection of Property; Books and Records; Discussions	54
8.7.	Notices	54
8.8.	Environmental Laws	55
8.9.	Additional Collateral, etc.	55
8.10.	Further Assurances	57
8.11.	Connecticut Lottery Corporation	57
8.12.	Pledge of Foreign Subsidiary Stock	57
8.13.	Post-Closing Matters	57
Section 9.	NEGATIVE COVENANTS	58
9.1.	Financial Condition Covenants.	58
9.2.	Indebtedness	60
9.3.	Liens	61
9.4.	Fundamental Changes	62
9.5.	Disposition of Property	63

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9.6.	Restricted Payments	63
9.7.	Capital Expenditures	64
9.8.	Investments	65
9.9.	Optional Payments and Modifications of Certain Debt Instruments	66
9.10.	Transactions with Affiliates	67
9.11.	Sales and Leasebacks	67
9.12.	Changes in Fiscal Periods	67
9.13.	Negative Pledge Clauses	67
9.14.	Clauses Restricting Subsidiary Distributions	67
9.15.	Lines of Business	68
9.16.	Hedge Agreements	68
Section 10.	EVENTS OF DEFAULT	68
Section 11.	THE AGENTS	71
11.1.	Appointment	71
11.2.	Delegation of Duties	71
11.3.	Exculpatory Provisions	71
11.4.	Reliance by Agents	71
11.5.	Notice of Default	72
11.6.	Non-Reliance on Agents and Other Lenders	72
11.7.	Indemnification	72
11.8.	Agent in Its Individual Capacity	73
11.9.	Successor Administrative Agent	73
11.10.	Agents Generally	73
11.11.	The Lead Arranger	73
Section 12.	MISCELLANEOUS	74
12.1.	Amendments and Waivers	74
12.2.	Notices	75
12.3.	No Waiver; Cumulative Remedies	76
12.4.	Survival of Representations and Warranties	76
12.5.	Payment of Expenses and Taxes	76
12.6.	Successors and Assigns; Participations and Assignments	77
12.7.	Adjustments; Set-off	80
12.8.	Counterparts	81
12.9.	Severability	81
12.10.	Integration	81
12.11.	GOVERNING LAW	81
12.12.	Submission To Jurisdiction; Waivers	81
12.13.	Acknowledgments	82
12.14.	Releases of Guarantees and Liens	82
12.15.	Confidentiality	82
12.16.	WAIVERS OF JURY TRIAL	82
12.17.	Delivery of Addenda	83
12.18.	Conversion of Currencies	83
12.19.	Interest Rate Limitation	83

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ANNEX:
A	Pricing Grid
SCHEDULES:
1.1(a)	Mortgaged Property
1.1(b)	Specified Hedge Agreements
3.7	Existing Letters of Credit
6.4	Consents, Authorizations, Filings and Notices
6.6	Litigation
6.15(a)	Subsidiaries
6.15(b)	Outstanding Equity Commitments
6.19(a)	UCC Filing Jurisdictions
6.19(b)	Mortgage Filing Jurisdictions
6.22	Regulation H
6.23	Material Contracts
7.1(k)	Title Policy Insured Amount
9.2(d)	Existing Indebtedness
9.3(l)	Existing Liens
9.8(f)	Existing Investments
9.13(c)	Specified Contracts—Negative Pledge
9.13(d)	Specified Contracts—Prohibition of Assignment
EXHIBITS:
A	Form of Guarantee and Collateral Agreement
B	Form of Compliance Certificate
C	Form of Closing Certificate
D-1	New Lender Supplement
D-2	Commitment Increase Supplement
E	Form of Mortgage
F	Form of Assignment and Assumption
G-1	Form of Legal Opinion of Kramer Levin Naftalis & Frankel LLP
G-2	Form of Legal Opinion of Martin E. Schloss
H	Form of Exemption Certificate
I-1	Form of Term Note
I-2	Form of Revolving Note
I-3	Form Swingline Note
J	Form of Addendum

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        CREDIT AGREEMENT, dated as of December 19, 2002, among SCIENTIFIC GAMES CORPORATION, a Delaware corporation (the "Borrower"), the several banks and other financial institutions or entities from time to time parties to this Agreement (the "Lenders"), BEAR, STEARNS & CO. INC., as sole lead arranger and sole bookrunner (in such capacity, the "Lead Arranger"), BNY CAPITAL MARKETS, INC., as co-arranger (in such capacity, the "Co-Arranger"), BEAR STEARNS CORPORATE LENDING INC., as syndication agent (in such capacity, the "Syndication Agent"), and THE BANK OF NEW YORK, as administrative agent (in such capacity, the "Administrative Agent").

W I T N E S S E T H:

        WHEREAS, the Borrower is party to the Amended and Restated Credit Agreement, dated as of October 6, 2000 (as amended, supplemented or otherwise modified through the date hereof, the "Existing Credit Agreement"), among the Borrower, the financial institutions from time to time parties thereto, DLJ Capital Funding, Inc., as administrative agent, syndication agent, lead arranger and sole bookrunning manager, Lehman Commercial Paper Inc., as documentation agent, and Lehman Brothers Inc., as co-arranger;

        WHEREAS, the Borrower desires to repay the indebtedness under the Existing Credit Agreement and terminate the Existing Credit Agreement (the "Refinancing") and has requested that the Lenders hereto make available credit facilities, the proceeds of which will be used to finance the Refinancing and for general corporate purposes; and

        WHEREAS, the Lenders have agreed to make such credit facilities available upon and subject to the terms and conditions set forth herein;

        NOW, THEREFORE, in consideration of the premises and agreements set forth herein, the parties hereto hereby agree as follows:

SECTION 1. DEFINITIONS

        1.1    Defined Terms.    As used in this Agreement, the terms listed in this Section 1.1 shall have the respective meanings set forth in this Section 1.1.

        "Addendum": with respect to any initial Lender, a Lender Addendum, substantially in the form of Exhibit J, to be executed and delivered by such Lender on the Closing Date as provided in Section 12.17.

        "Adjustment Date": as defined in the Pricing Grid.

        "Administrative Agent": as defined in the preamble to this Agreement.

        "Affected Foreign Currency": as defined in Section 5.7(c).

        "Affiliate": as to any Person, any other Person that, directly or indirectly, is in control of, is controlled by, or is under common control with, such Person. For purposes of this definition, "control" (including, with correlative meanings, the terms "controlling", "controlled by" and "under common control with"), as applied to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of that Person, whether through the ownership of voting securities or by contract or otherwise.

        "Agents": the collective reference to the Syndication Agent, the Lead Arranger and the Administrative Agent, which term shall include, for purposes of Section 11 only, the Issuing Lender.

        "Aggregate Exposure": with respect to any Lender at any time, an amount equal to (a) until the Closing Date, the aggregate amount of such Lender's Commitments at such time and (b) thereafter, the sum of (i) the aggregate then unpaid principal amount of such Lender's Term Loans, (ii) the amount of such Lender's Revolving Commitment then in effect or, if the Revolving Commitments have been terminated, the amount of such Lender's Revolving Extensions of Credit then outstanding.

        "Aggregate Exposure Percentage": with respect to any Lender at any time, the ratio (expressed as a percentage) of such Lender's Aggregate Exposure at such time to the Aggregate Exposure of all Lenders at such time.

        "Agreement": this Credit Agreement.

        "Agreement Currency": as defined in Section 12.18(b).

        "Applicable Creditor": as defined in Section 12.18(b).

        "Applicable Margin": a rate per annum equal to, (i) with respect to Revolving Loans and Swingline Loans, (x) that are Eurocurrency Loans denominated in Dollars, 2.75% and (y) that are Base Rate Loans, 1.75%, and (ii) with respect to Term Loans, (A) that are Eurocurrency Loans, 3.50% and (B) that are Base Rate Loans, 2.50%; provided, that, on and after the first Adjustment Date (as defined in the Pricing Grid) occurring after the date which is six months after the Closing Date, the Applicable Margin with respect to Revolving Loans and Swingline Loans will be determined pursuant to the Pricing Grid.

        "Application": an application, in such form as the Issuing Lender may specify from time to time, requesting the Issuing Lender to open a Letter of Credit.

        "Approved Fund": with respect to any Lender that is a fund that invests in commercial loans, any other fund that invests in commercial loans and is managed or advised by the same investment advisor as such Lender or by an Affiliate of such investment advisor.

        "Asset Sale": any Disposition of Property or series of related Dispositions of Property (excluding any such Disposition permitted by clause (a), (b), (c), (d) or (f) of Section 9.5) that yields Net Cash Proceeds to any Group Member (valued at the initial principal amount thereof in the case of non-cash proceeds consisting of notes or other debt securities and valued at fair market value in the case of other non-cash proceeds) in excess of $5,000,000.

        "Assignee": as defined in Section 12.6(b).

        "Assignment and Assumption": an Assignment and Assumption, substantially in the form of Exhibit F.

        "Available Revolving Commitment": as to any Revolving Lender at any time, an amount equal to the excess, if any, of (a) such Lender's Revolving Commitment then in effect over (b) such Lender's Revolving Extensions of Credit then outstanding; provided that, in calculating any Lender's Revolving Extensions of Credit for the purpose of determining such Lender's Available Revolving Commitment pursuant to Section 3.5, the aggregate principal amount of Swingline Loans then outstanding shall be deemed to be zero.

        "Base Rate": for any day, a rate per annum (rounded upwards, if necessary, to the next ¹/16 of 1%) equal to the greater of (a) the Prime Rate in effect on such day and (b) the Federal Funds Effective Rate in effect on such day plus 0.50%. For purposes hereof: "Prime Rate" shall mean the rate of interest per annum publicly announced from time to time by the Reference Lender as its prime rate in effect at its principal office in New York City (the Prime Rate not being intended to be the lowest rate of interest charged by the Reference Lender in connection with extensions of credit to debtors). Any change in the Base Rate due to a change in the Prime Rate or the Federal Funds Effective Rate shall be effective as of the opening of business on the effective day of such change in the Prime Rate or the Federal Funds Effective Rate, respectively.

        "Base Rate Loans": Loans the rate of interest applicable to which is based upon the Base Rate.

        "Benefitted Lender": as defined in Section 12.7(a).

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        "Board": the Board of Governors of the Federal Reserve System of the United States (or any successor).

        "Borrower": as defined in the preamble to this Agreement.

        "Borrowing Date": any Business Day specified by the Borrower as a date on which the Borrower requests the relevant Lenders to make Loans hereunder.

        "Business": as defined in Section 6.17(b).

        "Business Day": a day other than a Saturday, Sunday or other day on which commercial banks in New York City are authorized or required by law to close, provided, that (a) when used in connection with a Eurocurrency Loan, the term "Business Day" shall also exclude any day on which banks are not open for dealings in deposits in the applicable currency in the London interbank market and (b) when used in connection with a Foreign Currency Loan, the term "Business Day" shall also exclude any day on which banks in (i) the jurisdiction of the account to which the proceeds of such Loan are to be disbursed and (ii) the jurisdiction in which payments of principal of and interest on such Loan are to made are authorized or required by law to close.

        "Calculation Date": with respect to each Foreign Currency, the fifteenth and last day of each calendar month (or, if such day is not a Business Day, the next succeeding Business Day), provided that (a) the second Business Day preceding each Borrowing Date with respect to any Foreign Currency Loans in a Foreign Currency shall also be a "Calculation Date" with respect to such Foreign Currency and (b) solely for purposes of determining the Dollar Equivalent of the fees payable pursuant to Section 3.17(b), the Business Day immediately preceding the date of such payment shall be a "Calculation Date" with respect to each Foreign Currency.

        "Capital Expenditures": for any period, with respect to any Person, the aggregate of all expenditures by such Person and its Subsidiaries for (a) the acquisition or leasing (pursuant to a capital lease) of fixed or capital assets or additions to equipment (including replacements, capitalized repairs and improvements during such period) that should be capitalized under GAAP on a consolidated balance sheet of such Person and its Subsidiaries, (b) the purchase or development of computer software or systems to the extent such expenditures are capitalized on the consolidated balance sheet of the Borrower and its Subsidiaries in conformity with GAAP and (c) deferred installation costs; provided that, Capital Expenditures shall not include expenditures recorded as consideration paid in connection with acquisitions permitted by Section 9.8(k) or any other related expenditure made substantially contemporaneously therewith.

        "Capital Lease Obligations": as to any Person, the obligations of such Person to pay rent or other amounts under any lease of (or other arrangement conveying the right to use) real or personal property, or a combination thereof, which obligations are required to be classified and accounted for as capital leases on a balance sheet of such Person under GAAP and, for the purposes of this Agreement, the amount of such obligations at any time shall be the capitalized amount thereof at such time determined in accordance with GAAP.

        "Capital Stock": any and all shares, interests, participations or other equivalents (however designated) of capital stock of a corporation, any and all equivalent ownership interests in a Person (other than a corporation) and any and all warrants, rights or options to purchase any of the foregoing.

        "Cash Collateral Account": as defined in Section 5.2(f).

        "Cash Equivalents": (a) marketable direct obligations issued by, or unconditionally guaranteed by, the United States government or issued by any agency thereof and backed by the full faith and credit of the United States, in each case maturing within one year from the date of acquisition; (b) certificates of deposit, time deposits, eurodollar time deposits or overnight bank deposits having maturities of six months or less from the date of acquisition issued by any Lender or by any commercial bank organized

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under the laws of the United States or any state thereof having combined capital and surplus of not less than $500,000,000; (c) commercial paper of an issuer rated at least A-1 by Standard & Poor's Ratings Services ("S&P") or P-1 by Moody's Investors Service, Inc. ("Moody's"), or carrying an equivalent rating by a nationally recognized rating agency, if both of the two named rating agencies cease publishing ratings of commercial paper issuers generally, and maturing within six months from the date of acquisition; (d) repurchase obligations of any Lender or of any commercial bank satisfying the requirements of clause (b) of this definition, having a term of not more than 30 days, with respect to securities issued or fully guaranteed or insured by the United States government; (e) securities with maturities of one year or less from the date of acquisition issued or fully guaranteed by any state, commonwealth or territory of the United States, by any political subdivision or taxing authority of any such state, commonwealth or territory or by any foreign government, the securities of which state, commonwealth, territory, political subdivision, taxing authority or foreign government (as the case may be) are rated at least A by S&P or A by Moody's; (f) securities with maturities of six months or less from the date of acquisition backed by standby letters of credit issued by any Lender or any commercial bank satisfying the requirements of clause (b) of this definition; (g) shares of Dollar denominated money market mutual or similar funds which invest exclusively in assets satisfying the requirements of clauses (a) through (f) of this definition or money market funds that (i) comply with the criteria set forth in Securities and Exchange Conversion Rule 2a-7 under the Investment Company Act of 1940, (ii) are rated AAA by S&P and Aaa by Moody's and (iii) have portfolio assets of at least $5,000,000,000 or (h) in the case of Subsidiaries doing business outside of the United States, substantially similar investments to those set forth in clauses (a) through (g) above denominated in foreign currencies; provided that, references to the United States shall be deemed to mean foreign countries having a sovereign rating of A or better from either S&P or Moody's.

        "Charges": as defined in Section 12.19.

        "Closing Date": the date on which the conditions precedent set forth in Section 7.1 shall have been satisfied, which date is December 19, 2002.

        "Code": the Internal Revenue Code of 1986, as amended from time to time.

        "Collateral": all Property of the Loan Parties, now owned or hereafter acquired, upon which a Lien is purported to be created by any Security Document.

        "Commitment": as to any Lender, the sum of the Term Commitment and the Revolving Commitment of such Lender.

        "Commitment Fee Rate": 0.50% per annum.

        "Commitment Increase Supplement": each Commitment Increase Supplement delivered pursuant to Section 4.1, substantially in the form of Exhibit D-2.

        "Commonly Controlled Entity": an entity, whether or not incorporated, that is under common control with the Borrower within the meaning of Section 4001 of ERISA or is part of a group that includes the Borrower and that is treated as a single employer under Section 414 of the Code.

        "Compliance Certificate": a certificate duly executed by a Responsible Officer substantially in the form of Exhibit B.

        "Conduit Lender": any special purpose entity organized and administered by any Lender for the purpose of making Loans otherwise required to be made by such Lender and designated by such Lender in a written instrument, subject to the consent of the Administrative Agent and the Borrower (which consent shall not be unreasonably withheld); provided, that the designation by any Lender of a Conduit Lender shall not relieve the designating Lender of any of its obligations to fund a Loan under this Agreement if, for any reason, its Conduit Lender fails to fund any such Loan, and the designating Lender (and not the Conduit Lender) shall have the sole right and responsibility to deliver all consents

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and waivers required or requested under this Agreement with respect to its Conduit Lender, and provided, further, that no Conduit Lender shall (a) be entitled to receive any greater amount pursuant to Section 5.9, 5.10, 5.11 or 12.5 than the designating Lender would have been entitled to receive in respect of the extensions of credit made by such Conduit Lender or (b) be deemed to have any Commitment.

        "Confidential Information Memorandum": the Confidential Information Memorandum dated October, 2002 and furnished to the Lenders.

        "Consolidated Current Assets": at any date, all amounts (other than cash and Cash Equivalents) that would, in conformity with GAAP, be set forth opposite the caption "total current assets" (or any like caption) on a consolidated balance sheet of the Borrower and its Subsidiaries at such date.

        "Consolidated Current Liabilities": at any date, all amounts that would, in conformity with GAAP, be set forth opposite the caption "total current liabilities" (or any like caption) on a consolidated balance sheet of the Borrower and its Subsidiaries at such date, but excluding any Indebtedness of the Borrower and its Subsidiaries.

        "Consolidated EBITDA": for any period, Consolidated Net Income for such period plus, without duplication and to the extent reflected as a charge in the statement of such Consolidated Net Income for such period, the sum of (a) income tax expense, (b) interest expense, amortization or writeoff of debt discount and debt issuance costs and commissions, discounts and other fees and charges associated with Indebtedness (including the Loans), (c) depreciation and amortization expense, (d) amortization of intangibles (including, but not limited to, goodwill) and organization costs and (e) any extraordinary charges or losses determined in accordance with GAAP and minus, to the extent included in the statement of such Consolidated Net Income for such period, the sum of (a) interest income and (b) any extraordinary income or gains determined in accordance with GAAP. For the purposes of calculating Consolidated EBITDA for any period of four consecutive fiscal quarters (each, a "Reference Period") pursuant to any determination of the Consolidated Leverage Ratio and the Consolidated Senior Debt Ratio, (i) if at any time during such Reference Period the Borrower or any Subsidiary shall have made any Material Disposition, the Consolidated EBITDA for such Reference Period shall be reduced by an amount equal to the Consolidated EBITDA (if positive) attributable to the property that is the subject of such Material Disposition for such Reference Period or increased by an amount equal to the Consolidated EBITDA (if negative) attributable thereto for such Reference Period and (ii) if during such Reference Period the Borrower or any Subsidiary shall have made a Material Acquisition, Consolidated EBITDA for such Reference Period shall be calculated after giving pro forma effect thereto as if such Material Acquisition occurred on the first day of such Reference Period. As used in this definition, "Material Acquisition" means any acquisition of property or series of related acquisitions of property that (a) constitutes assets comprising all or substantially all of an operating unit of a business or constitutes all or substantially all of the common stock of a Person and (b) involves the payment of consideration by the Borrower and its Subsidiaries in excess of $5,000,000; and "Material Disposition" means any Disposition of property or series of related Dispositions of property that yields gross proceeds to the Borrower or any of its Subsidiaries in excess of $5,000,000.

        "Consolidated Fixed Charge Coverage Ratio": for any period, the ratio of (a) Consolidated EBITDA for such period to (b) Consolidated Fixed Charges for such period.

        "Consolidated Fixed Charges": for any period, the sum (without duplication) of (a) Consolidated Interest Expense for such period, (b) scheduled payments made during such period on account of principal of Indebtedness of the Borrower or any of its Subsidiaries (including scheduled principal payments in respect of the Term Loans), (c) the amount of Restricted Payments made in cash during such period as permitted by Section 9.6 (other than Section 9.6(a) and clause (y) in Section 9.6(b)) and (d) cash taxes actually paid by the Borrower and its Subsidiaries during such period.

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        "Consolidated Interest Coverage Ratio": for any period, the ratio of (a) Consolidated EBITDA for such period to (b) Consolidated Interest Expense for such period.

        "Consolidated Interest Expense": for any period, total cash interest expense (including that attributable to Capital Lease Obligations) of the Borrower and its Subsidiaries for such period with respect to all outstanding Indebtedness of the Borrower and its Subsidiaries (including all commissions, discounts and other fees and charges owed with respect to letters of credit and bankers' acceptance financing and net costs under Hedge Agreements in respect of interest rates to the extent such net costs are allocable to such period in accordance with GAAP), provided that, Consolidated Interest Expense shall be calculated without giving effect to any interest expense resulting from (x) any write-off of deferred financing costs associated with the Refinancing recorded on or prior to December 31, 2002, (y) the write-off of premium paid and any deferred financing costs associated with the repurchase or redemption of the Senior Subordinated Notes prior to the Closing Date or, after the Closing Date, on or prior to December 31, 2002, as permitted by clause (a) of Section 9.9, and (z) any costs associated with the termination of Hedge Agreements in connection with the Refinancing recorded on or prior to December 31, 2002.

        "Consolidated Leverage Ratio": as of the last day of any period, the ratio of (a) Consolidated Total Debt on such day to (b) Consolidated EBITDA for such period.

        "Consolidated Net Income": for any period, the consolidated net income (or loss) of the Borrower and its Subsidiaries, determined on a consolidated basis in accordance with GAAP (prior to giving effect to the payment of any dividends paid on the Convertible Preferred Stock), provided that Consolidated Net Income shall be calculated without giving effect to (x) any write-off of deferred financing costs associated with the Refinancing recorded on or prior to December 31, 2002, (y) the write-off of premium paid and any deferred financing costs associated with the repurchase or redemption of the Senior Subordinated Notes prior to the Closing Date or, after the Closing Date, on or prior to December 31, 2002 as permitted by clause (a) of Section 9.9, and (z) any costs associated with the termination of Hedge Agreements in connection with the Refinancing recorded on or prior to December 31, 2002; provided, further, that there shall be excluded (a) the income (or deficit) of any Person accrued prior to the date it becomes a Subsidiary of the Borrower or is merged into or consolidated with the Borrower or any of its Subsidiaries, (b) the income (or deficit) of any Person (other than a Subsidiary of the Borrower) in which the Borrower or any of its Subsidiaries has an ownership interest, except to the extent that any such income is actually received by the Borrower or such Subsidiary in the form of dividends or similar distributions and (c) the undistributed earnings of any Subsidiary of the Borrower to the extent that the declaration or payment of dividends or similar distributions by such Subsidiary is not at the time permitted by the terms of any Contractual Obligation (other than under any Loan Document) or Requirement of Law applicable to such Subsidiary.

        "Consolidated Senior Debt": all Consolidated Total Debt other than the Senior Subordinated Notes.

        "Consolidated Senior Debt Ratio": as of the last day of any period, the ratio of (a) Consolidated Senior Debt on such day to (b) Consolidated EBITDA for such period.

        "Consolidated Total Debt": at any date, the aggregate principal amount of all Indebtedness of the Borrower and its Subsidiaries at such date, determined on a consolidated basis and required to be reflected on the Borrower's balance sheet in accordance with GAAP.

        "Consolidated Working Capital": at any date, the excess of Consolidated Current Assets on such date over Consolidated Current Liabilities on such date.

        "Continuing Directors": the directors of the Borrower on the Closing Date and each other director, if, in each case, such other director's nomination for election to the board of directors of the Borrower is recommended by a majority of the then Continuing Directors.

6

        "Contractual Obligation": as to any Person, any provision of any security issued by such Person or of any agreement, instrument or other undertaking to which such Person is a party or by which it or any of its property is bound.

        "Conversion Date": any date on which either (a) an Event of Default under Section 10(f) has occurred or (b) the Commitments shall have been terminated prior to the Revolving Termination Date and/or the Loans shall have been declared immediately due and payable, in either case pursuant to Section 10.

        "Convertible Preferred Stock": the Borrower's Series A Convertible Preferred Stock outstanding as of the Closing Date.

        "Default": any of the events specified in Section 10, whether or not any requirement for the giving of notice, the lapse of time, or both, has been satisfied.

        "Disposition": with respect to any Property, any sale, lease, sale and leaseback, assignment, conveyance, transfer or other disposition thereof. The terms "Dispose" and "Disposed of" shall have correlative meanings.

        "Dollar Equivalent": at any time as to any amount denominated in a Foreign Currency, the equivalent amount in Dollars as determined by the Administrative Agent at such time on the basis of the Exchange Rate for the purchase of Dollars with such Foreign Currency on the most recent Calculation Date for such Foreign Currency.

        "Dollars" and "$": dollars in lawful currency of the United States.

        "Domestic Subsidiary": any Subsidiary of the Borrower organized under the laws of any jurisdiction within the United States.

        "ECF Percentage": 50%; provided, that, with respect to any fiscal year of the Borrower, the ECF Percentage shall be reduced to 0% if the Consolidated Leverage Ratio as of the last day of such fiscal year is not greater than 2.5 to 1.0.

        "Environmental Laws": any and all laws, rules, orders, regulations, statutes, ordinances, codes, decrees, requirements of any Governmental Authority or other Requirements of Law (including common law) regulating, relating to or imposing liability or standards of conduct concerning protection of human health or the environment, as have been, are now, or may at any time hereafter be in effect.

        "ERISA": the Employee Retirement Income Security Act of 1974, as amended from time to time.

        "Eurocurrency Base Rate": with respect to each day during each Interest Period pertaining to a Eurocurrency Loan, the rate per annum determined on the basis of the rate for deposits in Dollars (or, in the case of a Eurocurrency Loan that is a Foreign Currency Loan, the applicable Foreign Currency) for a period equal to such Interest Period commencing on the first day of such Interest Period appearing on Page 3750 (or on the Page for the applicable Foreign Currency) of the Telerate screen as of 11:00 A.M., New York City time, two Business Days prior to the beginning of such Interest Period. In the event that such rate does not appear on Page 3750 (or on the Page for the applicable Foreign Currency) of the Telerate screen (or otherwise on such screen), the "Eurocurrency Base Rate" shall be determined by reference to such other comparable publicly available service for displaying Eurocurrency rates as may be selected by the Administrative Agent or, in the absence of such availability, by reference to the rate at which the Administrative Agent is offered Dollar deposits (or, in the case of a Eurocurrency Loan that is a Foreign Currency Loan, deposits in the applicable Foreign Currency) at or about 11:00 A.M., local time, two Business Days prior to the beginning of such Interest Period in the interbank eurocurrency market where its eurocurrency and foreign currency and exchange operations are then being conducted for delivery on the first day of such Interest Period for the number of days comprised therein.

7

        "Eurocurrency Loans": Loans the rate of interest applicable to which is based upon the Eurocurrency Rate.

        "Eurocurrency Rate": with respect to each day during each Interest Period pertaining to a Eurocurrency Loan, a rate per annum determined for such day in accordance with the following formula (rounded upward to the nearest 1/100th of 1%):

                Eurocurrency Base Rate                
1.00 – Eurocurrency Reserve Requirements

        "Eurocurrency Reserve Requirements": for any day as applied to a Eurocurrency Loan, the aggregate (without duplication) of the maximum rates (expressed as a decimal fraction) of reserve requirements in effect on such day (including basic, supplemental, marginal and emergency reserves) under any regulations of the Board or other Governmental Authority having jurisdiction with respect thereto dealing with reserve requirements prescribed for eurocurrency funding (currently referred to as "Eurocurrency liabilities" in Regulation D of the Board) maintained by a member bank of the Federal Reserve System.

        "Eurocurrency Tranche": with respect to any Facility, the collective reference to Eurocurrency Loans in the same currency under such Facility the then current Interest Periods with respect to all of which begin on the same date and end on the same later date (whether or not such Loans shall originally have been made on the same day).

        "Event of Default": any of the events specified in Section 10, provided that any requirement for the giving of notice, the lapse of time, or both, has been satisfied.

        "Excess Cash Flow": for any fiscal year of the Borrower, the excess, if any, of (a) the sum, without duplication, of (i) Consolidated Net Income for such fiscal year, (ii) the amount of all non-cash charges (including depreciation and amortization) deducted in arriving at such Consolidated Net Income, (iii) decreases in Consolidated Working Capital for such fiscal year, (iv) the aggregate net amount of non-cash loss on the Disposition of Property by the Borrower and its Subsidiaries during such fiscal year (other than sales of inventory in the ordinary course of business), to the extent deducted in arriving at such Consolidated Net Income, (v) the aggregate amount of increases in consolidated long-term liabilities, other than increases in non-cash liabilities for which the offsetting debit is reflected in the other comprehensive income component of consolidated stockholders' equity in accordance with GAAP and (vi) the aggregate amount of decreases in consolidated long-term assets, other than (A) decreases attributable to amortization of capitalized costs to purchase or develop computer software and systems and (B) decreases attributable to cash consideration received for any Dispositions of Property by the Borrower and its Subsidiaries during such period over (b) the sum, without duplication, of (i) the amount of all non-cash credits included in arriving at such Consolidated Net Income, (ii) the aggregate amount of Capital Expenditures incurred by the Borrower and its Subsidiaries during such fiscal year (excluding the principal amount of Indebtedness incurred to finance such expenditures (but including repayments of any such Indebtedness incurred during such period or any prior period) and any such expenditures financed with the proceeds of any Reinvestment Deferred Amount), (iii) the aggregate amount of all prepayments of Revolving Loans, Foreign Currency Loans and Swingline Loans during such fiscal year to the extent accompanying permanent optional reductions of the Revolving Commitments and all optional prepayments of the Term Loans during such fiscal year, (iv) the aggregate amount of all regularly scheduled principal payments of Funded Debt (including the Term Loans) of the Borrower and its Subsidiaries made during such fiscal year (other than in respect of any revolving credit facility to the extent there is not an equivalent permanent reduction in commitments thereunder), (v) increases in Consolidated Working Capital for such fiscal year, (vi) the aggregate net amount of non-cash gain on the Disposition of Property by the Borrower and its Subsidiaries during such fiscal year (other than sales of inventory in the ordinary course of business), to the extent included in arriving at such Consolidated Net Income, (vii) the aggregate amount of cash

8

consideration paid for any acquisitions during such period pursuant to Section 9.8(k), (viii) Restricted Payments paid in cash during such period to the extent permitted by Section 9.6(d), (ix) the aggregate amount of decreases in consolidated long-term liabilities, other than decreases in non-cash liabilities for which the offsetting debit is reflected in the other comprehensive income component of consolidated stockholders' equity in accordance with GAAP, and (x) the aggregate amount of increases in consolidated long-term assets, other than (A) increases attributable to cash consideration paid for any acquisitions during such period pursuant to Section 9.8(k) and (B) the costs to purchase or develop computer software or systems to the extent such expenditures are capitalized in conformity with GAAP.

        "Excess Cash Flow Application Date": as defined in Section 5.2(d).

        "Exchange Act": as defined in Section 10(k).

        "Exchange Rate": on any day, with respect to any currency, the rate at which such currency may be exchanged into any other currency, as set forth at approximately 11:00 A.M., New York City time, on such date on the Reuters World Currency Page for such currency. In the event that such rate does not appear on any Reuters World Currency Page, the Exchange Rate shall be determined by reference to such other publicly available service for displaying exchange rates as may be agreed upon by the Administrative Agent and the Borrower, or, in the absence of such agreement, such Exchange Rate shall instead be the arithmetic average of the spot rates of exchange of the Administrative Agent in the market where its foreign currency exchange operations in respect of such currency are then being conducted, at or about 10:00 A.M., local time, on such date for the purchase of Dollars with the relevant currency for delivery two Business Days later; provided that if at the time of any such determination, for any reason, no such spot rate is being quoted, the Administrative Agent, after consultation with the Borrower, may use any reasonable method it deems appropriate to determine such rate, and such determination shall be presumed correct absent manifest error.

        "Excluded Indebtedness": all Indebtedness permitted by clauses (a), (b), (c), (d), (e), (f), (g), (h), (i), (j) and (k) of Section 9.2.

        "Existing Credit Agreement": as defined in the recitals to this Agreement.

        "Existing Letters of Credit": as defined in Section 3.7(c).

        "Expenditure Use Amounts": at any date, the amount equal to the sum of (a) all amounts utilized by the Borrower and its Subsidiaries on and after the Closing Date to make Capital Expenditures pursuant to Section 9.7(b) in excess of $30,000,000 for any New Contract, (b) all amounts utilized by the Borrower and its Subsidiaries on and after the Closing Date to make Restricted Payments pursuant to Section 9.6(d) and (c) all amounts utilized by the Borrower on and after the Closing Date to pay principal, premium and fees relating to the repurchase or redemption of the Senior Subordinated Notes pursuant to Section 9.9(a).

        "Facility": each of (a) the Term Commitments and the Term Loans made thereunder (the "Term Facility") and (b) the Revolving Commitments and the extensions of credit made thereunder (the "Revolving Facility").

        "Federal Funds Effective Rate": for any day, the weighted average of the rates on overnight federal funds transactions with members of the Federal Reserve System arranged by federal funds brokers, as published on the next succeeding Business Day by the Federal Reserve Bank of New York, or, if such rate is not so published for any day that is a Business Day, the average of the quotations for the day of such transactions received by the Reference Lender from three federal funds brokers of recognized standing selected by it.

9

        "Fee Payment Date": the last day of each March, June, September and December and the last day of the Revolving Commitment Period (or on such earlier date as the Revolving Commitments shall terminate as provided herein).

        "Foreign Currency": (a) with respect to any Loan, each of British Pounds Sterling, the Euro and any other currency approved by the relevant Foreign Currency Lenders, Issuing Bank and the Administrative Agent, provided that, the Eurocurrency Base Rate applicable to Foreign Currency Loans in any other currency approved after the Closing Date may be amended as agreed by the relevant Foreign Currency Lenders, the Administrative Agent and the Borrower and (b) solely with respect to any Letter of Credit issued by The Bank of New York, each of British Pounds Sterling, the Euro, Canadian Dollar, Chilean Peso, Swiss Franc, New Israeli Shekel, Turkish Lira and Indian Rupee.

        "Foreign Currency Equivalent": at any time as to any amount denominated in Dollars, the equivalent amount in the relevant Foreign Currency or Currencies as determined by the Administrative Agent at such time on the basis of the Exchange Rate for the purchase of such Foreign Currency or Currencies with Dollars on the date of determination thereof.

        "Foreign Currency Lender": each Lender that has a Foreign Currency Commitment or that holds a Foreign Currency Loan.

        "Foreign Currency Loans": as defined in Section 3.15.

        "Foreign Currency Participants": with respect to each Foreign Currency Loan, the collective reference to all the Revolving Lenders.

        "Foreign Currency Sublimit": $15,000,000.

        "Foreign Holdco": as defined in Section 9.8(j).

        "Foreign Holdco Subsidiary": as defined in Section 9.8(j).

        "Foreign Subsidiary": any Subsidiary of the Borrower that is not a Domestic Subsidiary.

        "Funded Debt": as to any Person, all Indebtedness of such Person that matures more than one year from the date of its creation or matures within one year from such date but is renewable or extendible, at the option of such Person, to a date more than one year from such date or arises under a revolving credit or similar agreement that obligates the lender or lenders to extend credit during a period of more than one year from such date, including all current maturities and current sinking fund payments in respect of such Indebtedness whether or not required to be paid within one year from the date of its creation and, in the case of the Borrower, Indebtedness in respect of the Loans.

        "Funding Office": the office of the Administrative Agent specified in Section 12.2 or such other office as may be specified from time to time by the Administrative Agent as its funding office by written notice to the Borrower and the Lenders.

        "GAAP": generally accepted accounting principles in the United States as in effect from time to time. In the event that any Accounting Change (as defined below) shall occur and such change results in a change in the method of calculation of financial covenants, standards or terms in this Agreement, then the Borrower, the Administrative Agent and the Syndication Agent agree to enter into negotiations in order to amend such provisions of this Agreement so as to equitably reflect such Accounting Changes with the desired result that the criteria for evaluating the Borrower's financial condition shall be the same after such Accounting Changes as if such Accounting Changes had not been made. Until such time as such an amendment shall have been executed and delivered by the Borrower, Administrative Agent, the Syndication Agent and the Required Lenders, all financial covenants, standards and terms in this Agreement shall continue to be calculated or construed as if such Accounting Changes had not occurred. "Accounting Changes" refers to changes in accounting principles required by the promulgation of any rule, regulation, pronouncement or opinion by the

10

Financial Accounting Standards Board of the American Institute of Certified Public Accountants or, if applicable, the SEC.

        "Gaming Approval": any and all approvals, authorizations, consents, rulings, orders or directives of any Governmental Authority (i) necessary, as of the Closing Date, to enable the Group Members to engage in the lottery, gambling, horse racing or gaming business or otherwise continue to conduct its business as it is conducted on the Closing Date, (ii) that regulates gaming in any jurisdiction in which the Group Members conduct gaming activities and has jurisdiction over such persons (including any successors to any of them) or (iii) necessary, as of the Closing Date, to accomplish the Refinancing and other transactions contemplated hereby.

        "Gaming Authority": as to any Person, any governmental agency, authority, board, bureau, commission, department, office or instrumentality with regulatory, licensing or permitting authority or jurisdiction over any gaming business or enterprise or any Gaming Facility, or with regulatory, licensing or permitting authority or jurisdiction over any gaming operation (or proposed gaming operation) owned, managed or operated by any Group Member.

        "Gaming Facility": as to any Person, any lottery operation, gaming establishment and other property or assets directly ancillary thereto or used in connection therewith, including, without limitation, any casinos, hotels, resorts, race tracks, off-track wagering sites and other recreation and entertainment facilities owned, managed or operated by any Group Member.

        "Gaming Laws": as to any Person, (a) constitutions, treaties, statutes or laws governing Gaming Facilities (including, without limitation, pari mutuel race tracks) and rules, regulations, codes and ordinances of, and all administrative or judicial orders or decrees or other laws pursuant to which, any Gaming Authority possesses regulatory, licensing or permit authority over gambling, gaming or Gaming Facility activities conducted by any Group Member within its jurisdiction, (b) Gaming Approvals, and (c) orders, decisions, determinations, judgments, awards and decrees of any Gaming Authority.

        "Governmental Authority": any nation or government, any state or other political subdivision thereof, any agency, authority, instrumentality, regulatory body, court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative functions of or pertaining to government, any securities exchange and any self-regulatory organization (including the National Association of Insurance Commissioners).

        "Group Members": the collective reference to the Borrower and its Subsidiaries.

        "Guarantee and Collateral Agreement": the Guarantee and Collateral Agreement to be executed and delivered by the Borrower and each Subsidiary Guarantor, substantially in the form of Exhibit A.

        "Guarantee Obligation": as to any Person (the "guaranteeing person"), any obligation of (a) the guaranteeing person or (b) another Person (including any bank under any letter of credit) to induce the creation of which the guaranteeing person has issued a reimbursement, counterindemnity or similar obligation, in either case guaranteeing or in effect guaranteeing any Indebtedness, leases, dividends or other obligations (the "primary obligations") of any other third Person (the "primary obligor") in any manner, whether directly or indirectly, including any obligation of the guaranteeing person, whether or not contingent, (i) to purchase any such primary obligation or any property constituting direct or indirect security therefor, (ii) to advance or supply funds (1) for the purchase or payment of any such primary obligation or (2) to maintain working capital or equity capital of the primary obligor or otherwise to maintain the net worth or solvency of the primary obligor, (iii) to purchase property, securities or services primarily for the purpose of assuring the owner of any such primary obligation of the ability of the primary obligor to make payment of such primary obligation or (iv) otherwise to assure or hold harmless the owner of any such primary obligation against loss in respect thereof; provided, however, that the term Guarantee Obligation shall not include endorsements of instruments for deposit or collection in the ordinary course of business. The amount of any Guarantee Obligation

11

of any guaranteeing person shall be deemed to be the lower of (a) an amount equal to the stated or determinable amount of the primary obligation in respect of which such Guarantee Obligation is made and (b) the maximum amount for which such guaranteeing person may be liable pursuant to the terms of the instrument embodying such Guarantee Obligation, unless such primary obligation and the maximum amount for which such guaranteeing person may be liable are not stated or determinable, in which case the amount of such Guarantee Obligation shall be such guaranteeing person's maximum reasonably anticipated liability in respect thereof as determined by the Borrower in good faith.

        "Hedge Agreements": any agreement with respect to any swap, forward, future or derivative transaction or option or similar agreement involving, or settled by reference to, one or more rates, currencies, commodities, equity or debt instruments or securities, or economic, financial or pricing indices or measures of economic, financial or pricing risk or value or any similar transaction or any combination of these transactions; provided that no phantom stock or similar plan providing for payments only on account of services provided by current or former directors, officers, employees or consultants of the Borrower or the Subsidiaries shall be a Hedge Agreement.

        "Increase Effective Date": the date on which the Administrative Agent shall have received a Revolving Commitment Increase Notice and all conditions precedent to the effectiveness of any such Revolving Commitment increase set forth in Section 4.1 shall have been satisfied, which date shall occur no later than the second anniversary of the Closing Date.

        "Increase Option Period": the period beginning on the Closing Date to, but excluding, the date that is the second anniversary of the Closing Date.

        "Indebtedness": of any Person at any date, without duplication, (a) all indebtedness of such Person for borrowed money, (b) all obligations of such Person for the deferred purchase price of property or services (other than current trade payables incurred in the ordinary course of such Person's business), (c) all obligations of such Person evidenced by notes, bonds, debentures or other similar instruments, (d) all indebtedness created or arising under any conditional sale or other title retention agreement with respect to property acquired by such Person (even though the rights and remedies of the seller or lender under such agreement in the event of default are limited to repossession or sale of such property), (e) all Capital Lease Obligations of such Person, (f) all obligations of such Person, contingent or otherwise, as an account party or applicant under or in respect of acceptances, letters of credit, surety bonds or similar arrangements, (g) the liquidation value of all mandatorily redeemable preferred Capital Stock of such Person (other than the Convertible Preferred Stock), (h) all Guarantee Obligations of such Person in respect of obligations of the kind referred to in clauses (a) through (g) above, (i) all obligations of the kind referred to in clauses (a) through (h) above secured by (or for which the holder of such obligation has an existing right, contingent or otherwise, to be secured by) any Lien on property (including accounts and contract rights) owned by such Person, whether or not such Person has assumed or become liable for the payment of such obligation, and (j) for the purposes of Section 9.2 and Section 10(e) only, all obligations of such Person in respect of Hedge Agreements. The Indebtedness of any Person shall include the Indebtedness of any other entity (including any partnership in which such Person is a general partner) to the extent such Person is liable therefor as a result of such Person's ownership interest in or other relationship with such entity, except to the extent the terms of such Indebtedness expressly provide that such Person is not liable therefor.

        "Indemnified Liabilities": as defined in Section 12.5.

        "Indemnitee": as defined in Section 12.5.

        "Ineligible Assignee": any Person that is (a) to the extent required under applicable Gaming Laws, a Person who is not registered or licensed with, approved, qualified or found suitable by, or has been disapproved, denied a license, qualification or approval or found unsuitable (whichever may be required

12

under applicable Gaming Law) or (b) a competitor of the Borrower or an affiliate or related entity of any such competitor.

        "Insolvency": with respect to any Multiemployer Plan, the condition that such Plan is insolvent within the meaning of Section 4245 of ERISA.

        "Insolvent": pertaining to a condition of Insolvency.

        "Intellectual Property": the collective reference to all rights, priorities and privileges relating to intellectual property, whether arising under United States, multinational or foreign laws or otherwise, including copyrights, copyright licenses, patents, patent licenses, trademarks, trademark licenses, technology, know-how and processes, and all rights to sue at law or in equity for any infringement or other impairment thereof, including the right to receive all proceeds and damages therefrom.

        "Interest Payment Date": (a) as to any Base Rate Loan (other than a Swingline Loan), the last day of each March, June, September and December to occur while such Loan is outstanding and the final maturity date of such Loan, (b) as to any Eurocurrency Loan having an Interest Period of three months or less, the last day of such Interest Period, (c) as to any Eurocurrency Loan having an Interest Period longer than three months, each day that is three months, or a whole multiple thereof, after the first day of such Interest Period and the last day of such Interest Period, (d) as to any Loan (other than any Revolving Loan that is a Base Rate Loan and any Swingline Loan), the date of any repayment or prepayment made in respect thereof and (e) as to any Swingline Loan, the day that such Loan is required to be repaid.

        "Interest Period": as to any Eurocurrency Loan, (a) initially, the period commencing on the borrowing or conversion date, as the case may be, with respect to such Eurocurrency Loan and ending one, two, three or six months thereafter, as selected by the Borrower in its notice of borrowing or notice of conversion, as the case may be, given with respect thereto; and (b) thereafter, each period commencing on the last day of the next preceding Interest Period applicable to such Eurocurrency Loan and ending one, two, three or six months thereafter, as selected by the Borrower by irrevocable notice to the Administrative Agent not later than 11:00 A.M., New York City time, three Business Days prior to the last day of the then current Interest Period with respect thereto; provided that, all of the foregoing provisions relating to Interest Periods are subject to the following:

(i)

if any Interest Period would otherwise end on a day that is not a Business Day, such Interest Period shall be extended to the next succeeding Business Day unless the result of such extension would be to carry such Interest Period into another calendar month in which event such Interest Period shall end on the immediately preceding Business Day;



(ii)

the Borrower may not select an Interest Period under a particular Facility that would extend beyond the Revolving Termination Date (in the case of the Revolving Facility) or beyond the date final payment is due on the Term Loans, as the case may be;



(iii)

any Interest Period that begins on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall end on the last Business Day of a calendar month; and



(iv)

the Borrower shall select Interest Periods so as not to require any foreseeable payment or prepayment of any Eurocurrency Loan during an Interest Period for such Loan.

        "Investments": as defined in Section 9.8.

        "Issuing Lender": any Revolving Lender from time to time designated by the Borrower as an Issuing Lender with the consent of such Revolving Lender and the Administrative Agent.

        "Judgment Currency": as defined in Section 12.18(b).

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        "L/C Commitment": $50,000,000.

        "L/C Fee Payment Date": the last day of each March, June, September and December and the last day of the Revolving Commitment Period.

        "L/C Obligations": at any time, an amount equal to the sum of (a) the aggregate then undrawn and unexpired amount of the then outstanding Letters of Credit (including the Dollar Equivalent of Letters of Credit issued in Foreign Currencies) and (b) the aggregate amount of drawings under Letters of Credit (including the Dollar Equivalent of Letters of Credit issued in Foreign Currencies to the extent such amounts have not been converted to Dollars in accordance with the terms hereof) that have not then been reimbursed pursuant to Section 3.11.

        "L/C Participants": the collective reference to all the Revolving Lenders other than the Issuing Lender that issued the relevant Letter of Credit.

        "Lead Arranger": as defined in the recitals to this Agreement.

        "Lender Affiliate": (a) any Affiliate of any Lender, (b) any Person that is administered or managed by any Lender and that is engaged in making, purchasing, holding or otherwise investing in commercial loans and similar extensions of credit in the ordinary course of its business and (c) with respect to any Lender which is a fund that invests in commercial loans and similar extensions of credit, any other fund that invests in commercial loans and similar extensions of credit and is managed or advised by the same investment advisor as such Lender or by an Affiliate of such Lender or investment advisor.

        "Lenders": as defined in the preamble hereto; provided, that unless the context otherwise requires, each reference herein to the Lenders shall be deemed to include any Conduit Lender; provided, further, that, for purposes of Sections 5.9, 5.10 and 5.11, all Foreign Currency Lenders shall be deemed to be "Lenders."

        "Letters of Credit": as defined in Section 3.7(a).

        "Lien": any mortgage, pledge, hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or other), charge or other security interest or any preference, priority or other security agreement or preferential arrangement of any kind or nature whatsoever (including any conditional sale or other title retention agreement and any capital lease having substantially the same economic effect as any of the foregoing).

        "Loan": any loan made by any Lender pursuant to this Agreement.

        "Loan Documents": this Agreement, the Security Documents, the Notes, each New Lender Supplement and each Commitment Increase Supplement.

        "Loan Parties": each Group Member that is a party to a Loan Document.

        "Lottomatica": Lottomatica S.p.A.

        "Majority Facility Lenders": with respect to any Facility, the holders of more than 50% of the aggregate unpaid principal amount of the Term Loans or the Total Revolving Extensions of Credit, as the case may be, outstanding under such Facility (or, in the case of the Revolving Facility, prior to any termination of the Revolving Commitments, the holders of more than 50% of the Total Revolving Commitments).

        "Material Adverse Effect": a material adverse effect on (a) the business, assets, property, condition (financial or otherwise), results of operations or prospects of the Borrower and its Subsidiaries, taken as a whole or (b) the validity or enforceability of this Agreement or any of the other Loan Documents or the rights or remedies of the Agents or the Lenders hereunder or thereunder.

        "Material Contract": each contract of the Group Members described on Schedule 6.23.

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        "Materials of Environmental Concern": any gasoline or petroleum (including crude oil or any fraction thereof) or petroleum products, asbestos, polychlorinated biphenyls, urea-formaldehyde insulation, any hazardous or toxic substances, materials or wastes, defined as such or regulated in or under any applicable Environmental Laws, and any other substances that could reasonably be expected to result in liability under any applicable Environmental Laws.

        "Maximum Rate": as defined in Section 12.19.

        "Mortgaged Properties": the real properties listed on Schedule 1.1(a), as to which the Administrative Agent for the benefit of the Lenders shall be granted a Lien pursuant to the Mortgages.

        "Mortgages": each of the mortgages and deeds of trust made by any Loan Party in favor of, or for the benefit of, the Administrative Agent for the benefit of the Lenders, substantially in the form of Exhibit E (with such changes thereto as shall be advisable under the law of the jurisdiction in which such mortgage or deed of trust is to be recorded).

        "Multiemployer Plan": a Plan that is a multiemployer plan as defined in Section 4001(a)(3) of ERISA.

        "Net Cash Proceeds": (a) in connection with any Asset Sale or any Recovery Event, the proceeds thereof in the form of cash and Cash Equivalents (including any such proceeds received by way of deferred payment of principal pursuant to a note or installment receivable or purchase price adjustment receivable or by the Disposition of any non-cash consideration received in connection therewith or otherwise, but only as and when received) of such Asset Sale or Recovery Event, net of attorneys' fees, accountants' fees, investment banking fees, brokers' fees, amounts required to be applied to the repayment of Indebtedness secured by a Lien expressly permitted hereunder on any asset that is the subject of such Asset Sale or Recovery Event (other than any Lien pursuant to a Security Document) and other customary fees and expenses actually incurred in connection therewith and net of taxes paid or reasonably estimated to be payable as a result thereof (after taking into account any available tax credits or deductions and any tax sharing arrangements) and (b) in connection with any issuance or sale of Capital Stock or any incurrence of Indebtedness, the cash proceeds received from such issuance or incurrence, net of attorneys' fees, investment banking fees, accountants' fees, underwriting discounts and commissions and other customary fees and expenses actually incurred in connection therewith.

        "New Contract": (a) any new contract relating to the establishment and operation of an on-line lottery system with a customer for whom neither the Borrower nor any of its Subsidiaries operated an on-line lottery system on or prior to the date such contract is entered into or any new contract relating to an on-line lottery system with an existing customer of the Borrower or any of its Subsidiaries that was entered into in accordance with normal jurisdictional laws regarding "request for proposal" procedures; provided that, such contract shall cease to be a New Contract on the date on which the Borrower or such Subsidiary commences "commercial operations" under such contract and (b) any new contract between the Borrower and the Georgia Lottery Corporation concerning the instant ticket lottery in the State of Georgia as approved by the Georgia Lottery Corporation in the GLC Resolution No. 03-11: (LEG 03) dated November 15, 2002; provided that such contract shall be deemed a "New Contract" solely for purposes of Section 9.7(b) only for the fiscal year 2003.

        "New Lender Supplement": each New Lender Supplement delivered pursuant to Section 4.1, substantially in the form of Exhibit D-1.

        "New Revolving Lender": as defined in Section 4.1(b).

        "Non-Excluded Taxes": as defined in Section 5.10(a).

        "Non-Guarantor Subsidiary": any Subsidiary that is not a Subsidiary Guarantor.

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        "Non-U.S. Lender": as defined in Section 5.10(d).

        "Notes": the collective reference to any promissory note evidencing Loans.

        "Obligations": the unpaid principal of and interest on (including interest accruing after the maturity of the Loans and Reimbursement Obligations and interest accruing after the filing of any petition in bankruptcy, or the commencement of any insolvency, reorganization or like proceeding, relating to the Borrower, whether or not a claim for post-filing or post-petition interest is allowed in such proceeding) the Loans and all other obligations and liabilities of the Borrower to any Agent or to any Lender (or, in the case of Specified Hedge Agreements, any affiliate of any Lender), whether direct or indirect, absolute or contingent, due or to become due, or now existing or hereafter incurred, which may arise under, out of, or in connection with, this Agreement, any other Loan Document, the Letters of Credit, any Specified Hedge Agreement or any other document made, delivered or given in connection herewith or therewith, whether on account of principal, interest, reimbursement obligations, fees, indemnities, costs, expenses (including all fees, charges and disbursements of counsel to any Agent or to any Lender that are required to be paid by the Borrower pursuant hereto) or otherwise; provided, that (i) obligations of the Borrower or any Subsidiary under any Specified Hedge Agreement shall be secured and guaranteed pursuant to the Security Documents only to the extent that, and for so long as, the other Obligations are so secured and guaranteed and (ii) any release of Collateral or Subsidiary Guarantors effected in the manner permitted by this Agreement shall not require the consent of holders of obligations under Specified Hedge Agreements.

        "Olivetti": Olivetti S.p.A.

        "Other Taxes": any and all present or future stamp or documentary taxes or any other excise or property taxes, charges or similar levies arising from any payment made hereunder or from the execution, delivery or enforcement of, or otherwise with respect to, this Agreement or any other Loan Document.

        "Participant": as defined in Section 12.6(c).

        "PBGC": the Pension Benefit Guaranty Corporation established pursuant to Subtitle A of Title IV of ERISA (or any successor).

        "Permitted Acquisition": as to any Person, (a) the acquisition by such Person of the Capital Stock another Person which is primarily engaged in the same or related line of business of the Borrower and its Subsidiaries (or any other Person that is engaged in a business that is a reasonable extension of the business of the Borrower and its Subsidiaries and that utilizes the same or similar technology as that used by the Borrower and its Subsidiaries immediately prior to such acquisition) so long as following such acquisition such other Person becomes a Subsidiary of such Person or (b) the acquisition by such Person of all or substantially all of the assets of another Person or all or substantially all of the assets constituting a division or business unit of another person.

        "Permitted Expenditure Amount": at any date, the amount equal to the sum of (a) 50% of the amount of Consolidated Net Income for each quarterly period ended after the Closing Date for which financial statements have been delivered pursuant to Section 8.1 to the extent the Consolidated Net Income for such period is positive, (b) 50% of the Net Cash Proceeds received by the Borrower from the sale of Capital Stock of the Borrower (other than to a Group Member) during the period beginning on the Closing Date and ending on such date which is not required to be applied to prepay the Loans pursuant to Section 5.2(a) and (c) $5,000,000 minus the sum of (x) 100% of the amount of Consolidated Net Income for each quarterly period ended after the Closing Date for which financial statements have been delivered pursuant to Section 8.1 to the extent the Consolidated Net Income for such period is negative and (y) the aggregate amount of Expenditure Use Amounts as of such date.

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        "Permitted Investors": Olivetti, Lottomatica or any Affiliate thereof or group in which Olivetti, Lottomatica or an Affiliate thereof is the largest beneficial owner of shares of the voting Capital Stock of such group.

        "Person": an individual, partnership, corporation, limited liability company, business trust, joint stock company, trust, unincorporated association, joint venture, Governmental Authority or other entity of whatever nature.

        "Plan": at a particular time, any employee benefit plan that is covered by ERISA and in respect of which the Borrower or a Commonly Controlled Entity is (or, if such plan were terminated at such time, would under Section 4069 of ERISA be deemed to be) an "employer" as defined in Section 3(5) of ERISA.

        "Preferred Stock Purchase Agreement": the Preferred Stock Purchase Agreement, dated as of September 6, 2000, among the Borrower, Cirmatica Gaming, S.A., The Oak Fund, Peconic Fund Ltd., Ramius Securities, LLC and Olivetti International S.A., as purchasers, providing for the aggregate purchase and sale of shares of the Convertible Preferred Stock in an amount not to exceed $112,750,000.

        "Pricing Grid": the pricing grid attached hereto as Annex A.

        "Projections": as defined in Section 8.2(c).

        "Property": any right or interest in or to property of any kind whatsoever, whether real, personal or mixed and whether tangible or intangible, including, without limitation, Capital Stock.

        "Recovery Event": any settlement of or payment in respect of any property or casualty insurance claim or any condemnation proceeding relating to any asset of any Group Member.

        "Reference Lender": The Bank of New York.

        "Refinancing": as defined in the recitals to this Agreement.

        "Refunded Swingline Loans": as defined in Section 3.4.

        "Refunding Date": as defined in Section 3.4.

        "Register": as defined in Section 12.6(b).

        "Regulation U": Regulation U of the Board as in effect from time to time.

        "Reimbursement Obligation": the obligation of the Borrower to reimburse each Issuing Lender pursuant to Section 3.11 for amounts drawn under Letters of Credit issued by such Issuing Lender.

        "Reinvestment Deferred Amount": with respect to any Reinvestment Event, the aggregate Net Cash Proceeds received by any Group Member in connection therewith that are not applied to prepay the Term Loans pursuant to Section 5.2(c) as a result of the delivery of a Reinvestment Notice.

        "Reinvestment Event": any Asset Sale or Recovery Event in respect of which the Borrower has delivered a Reinvestment Notice.

        "Reinvestment Notice": a written notice executed by a Responsible Officer stating that no Event of Default has occurred and is continuing and that the Borrower (directly or indirectly through a Subsidiary) intends and expects to use all or a specified portion of the Net Cash Proceeds of an Asset Sale or Recovery Event to make a Permitted Acquisition or to acquire or repair fixed or capital assets or develop software useful in its business, provided that the cost of any such software development is capitalized on the Borrower's balance sheet in accordance with GAAP.

        "Reinvestment Prepayment Amount": with respect to any Reinvestment Event, the Reinvestment Deferred Amount relating thereto less any amount expended prior to the relevant Reinvestment

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Prepayment Date to make a Permitted Acquisition or to acquire or repair fixed or capital assets or develop software useful in its business, provided that the cost of any such software development is capitalized on the Borrower's balance sheet in accordance with GAAP.

        "Reinvestment Prepayment Date": with respect to any Reinvestment Event, the earlier of (a) the date occurring twelve months after such Reinvestment Event and (b) the date on which the Borrower shall have determined not to, or shall have otherwise ceased to, acquire or repair fixed or capital assets or develop software useful in its business, provided that the cost of such software development is capitalized on the Borrower's balance sheet in accordance with GAAP, or make a Permitted Acquisition with all or any portion of the relevant Reinvestment Deferred Amount.

        "Reorganization": with respect to any Multiemployer Plan, the condition that such plan is in reorganization within the meaning of Section 4241 of ERISA.

        "Reportable Event": any of the events set forth in Section 4043(c) of ERISA, other than those events as to which the 30 day notice period is waived under subsections .27, .28, .29, .30, .31, .32, .34 or .35 of PBGC Reg. § 4043.

        "Required Lenders": at any time, (a) until the Closing Date, (x) the holders of more than 50% of the Term Loan Commitments then in effect and (y) the holders of more than 50% of the Total Revolving Commitments then in effect and (b) thereafter, (1) the holders of more than 50% of the aggregate unpaid principal amount of the Term Loans then outstanding and (2) the holders of more than 50% of the Total Revolving Commitments then in effect or, if the Revolving Commitments have been terminated, the Total Revolving Extensions of Credit then outstanding.

        "Requirement of Law": as to any Person, the Certificate of Incorporation and By-Laws or other organizational or governing documents of such Person, and any law, treaty, rule or regulation or determination of an arbitrator or a court or other Governmental Authority, in each case applicable to or binding upon such Person or any of its property or to which such Person or any of its property is subject.

        "Reset Date": as defined in Section 5.16(a).

        "Responsible Officer": the chief executive officer, president, general counsel, chief financial officer or the treasurer of the Borrower, but in any event, with respect to financial matters, the chief financial officer or the treasurer of the Borrower.

        "Restricted Payments": as defined in Section 9.6.

        "Revolving Commitment": as to any Lender, the obligation of such Lender, if any, to make Revolving Loans and participate in Swingline Loans, Letters of Credit and Foreign Currency Loans in an aggregate principal and/or face amount not to exceed the amount set forth under the heading "Revolving Commitment" under such Lender's name on such Lender's Addendum or in the Assignment and Assumption pursuant to which such Lender became a party hereto, as the same may be changed from time to time pursuant to the terms hereof. The original amount of the Total Revolving Commitments is $50,000,000.

        "Revolving Commitment Increase Notice": as defined in Section 4.1(a).

        "Revolving Commitment Period": the period from and including the Closing Date to the Revolving Termination Date.

        "Revolving Extensions of Credit": as to any Revolving Lender at any time, an amount equal to the sum of (a) the aggregate principal amount of all Revolving Loans held by such Lender then outstanding, (b) such Lender's Revolving Percentage of the L/C Obligations then outstanding, (c) such Lender's Revolving Percentage of the aggregate principal amount of Swingline Loans then outstanding

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and (d) such Lender's Revolving Percentage of the Dollar Equivalent of the aggregate principal amount of Foreign Currency Loans then outstanding.

        "Revolving Lender": each Lender that has a Revolving Commitment or that holds Revolving Loans.

        "Revolving Loans": as defined in Section 3.1(a).

        "Revolving Offered Increase Amount": as defined in Section 4.1(a).

        "Revolving Percentage": as to any Revolving Lender at any time, the percentage which such Lender's Revolving Commitment then constitutes of the Total Revolving Commitments (or, at any time after the Revolving Commitments shall have expired or terminated, the percentage which the aggregate principal amount of such Lender's Revolving Loans then outstanding constitutes of the aggregate principal amount of the Revolving Loans then outstanding).

        "Revolving Termination Date": September 30, 2006.

        "SEC": the Securities and Exchange Commission, any successor thereto and any analogous Governmental Authority.

        "Security Documents": the collective reference to the Guarantee and Collateral Agreement, the Mortgages and all other security documents hereafter delivered to the Administrative Agent granting a Lien on any property of any Person to secure the obligations and liabilities of any Loan Party under any Loan Document.

        "Senior Subordinated Note Indenture": the Indenture dated as of August 14, 2000 entered into by the Borrower and certain of its Subsidiaries in connection with the issuance of the Senior Subordinated Notes as amended by the First Supplemental Indenture, dated as of September 6, 2000, together with all instruments and other agreements entered into by the Borrower or such Subsidiaries in connection therewith.

        "Senior Subordinated Notes": the unsecured Senior Subordinated Notes due 2010 of the Borrower issued on August 14, 2000 pursuant to the Senior Subordinated Note Indenture.

        "Single Employer Plan": any Plan that is covered by Title IV of ERISA, but that is not a Multiemployer Plan.

        "Solvent": when used with respect to any Person, means that, as of any date of determination, (a) the amount of the "present fair saleable value" of the assets of such Person will, as of such date, exceed the amount of all "liabilities of such Person, contingent or otherwise", as of such date, as such quoted terms are determined in accordance with applicable federal and state laws governing determinations of the insolvency of debtors, (b) the present fair saleable value of the assets of such Person will, as of such date, be greater than the amount that will be required to pay the liability of such Person on its debts as such debts become absolute and matured, (c) such Person will not have, as of such date, an unreasonably small amount of capital with which to conduct its business, and (d) such Person will be able to pay its debts as they mature. For purposes of this definition, (i) "debt" means liability on a "claim", and (ii) "claim" means any (x) right to payment, whether or not such a right is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured or unsecured or (y) right to an equitable remedy for breach of performance if such breach gives rise to a right to payment, whether or not such right to an equitable remedy is reduced to judgment, fixed, contingent, matured or unmatured, disputed, undisputed, secured or unsecured.

        "Specified Change of Control": a "Change of Control" (or any other defined term having a similar purpose) as defined in the Senior Subordinated Note Indenture.

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        "Specified Hedge Agreement": any Hedge Agreement (a) entered into by (i) the Borrower or any of its Subsidiaries and (ii) any Agent or Lender or any affiliate thereof, as counterparty and (b) that has been designated by such Agent or Lender, as the case may be, and the Borrower, by notice to the Administrative Agent, as a Specified Hedge Agreement, and any other Hedge Agreements listed on Schedule 1.1(b) without given effect to any extension of the termination or maturity date thereof. The designation of any Hedge Agreement as a Specified Hedge Agreement shall not create in favor of the Agent, Lender or affiliate thereof that is a party thereto any rights in connection with the management or release of any Collateral or of the obligations of any Subsidiary Guarantor under the Guarantee and Collateral Agreement.

        "Subject Properties": as defined in Section 6.17(a).

        "Subsidiary": as to any Person, a corporation, partnership, limited liability company or other entity of which shares of stock or other ownership interests having ordinary voting power (other than stock or such other ownership interests having such power only by reason of the happening of a contingency) to elect a majority of the board of directors or other managers of such corporation, partnership or other entity are at the time owned, or the management of which is otherwise controlled, directly or indirectly through one or more intermediaries, or both, by such Person. Unless otherwise qualified, all references to a "Subsidiary" or to "Subsidiaries" in this Agreement shall refer to a direct or indirect Subsidiary or Subsidiaries of the Borrower.

        "Subsidiary Guarantor": a Subsidiary that (i) is a Domestic Subsidiary that is a Wholly Owned Subsidiary, (ii) provides a guarantee of any Indebtedness of the Borrower (other than the Loans) or (iii) becomes a party to the Loan Documents pursuant to Section 8.9(c).

        "Swingline Commitment": the obligation of the Swingline Lender to make Swingline Loans pursuant to Section 3.3 in an aggregate principal amount at any one time outstanding not to exceed $10,000,000.

        "Swingline Lender": The Bank of New York, in its capacity as the lender of Swingline Loans.

        "Swingline Loans": as defined in Section 3.3.

        "Swingline Participation Amount": as defined in Section 3.4.

        "Syndication Agent": as defined in the preamble to this Agreement.

        "Term Commitment": as to any Lender, the obligation of such Lender, if any, to make a Term Loan to the Borrower hereunder in a principal amount not to exceed the amount set forth under the heading "Term Commitment" under such Lender's name on such Lender's Addendum. The original aggregate amount of the Term Commitments is $290,000,000.

        "Term Lender": each Lender that has a Term Commitment or that holds a Term Loan.

        "Term Loan": as defined in Section 2.1.

        "Term Percentage": as to any Term Lender at any time, the percentage which such Lender's Term Commitment then constitutes of the aggregate Term Commitments (or, at any time after the Closing Date, the percentage which the aggregate principal amount of such Lender's Term Loans then outstanding constitutes of the aggregate principal amount of the Term Loans then outstanding).

        "Title Insurance Company": as defined in Section 7.1(k)(ii).

        "Title Policy": as defined in Section 7.1(k)(iii).

        "Title Policy Insured Amount": as defined in Section 7.1(k)(iii).

        "Total Revolving Commitments": at any time, the aggregate amount of the Revolving Commitments of all the Lenders.

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        "Total Revolving Extensions of Credit": at any time, the aggregate amount of the Revolving Extensions of Credit of the Revolving Lenders outstanding at such time.

        "Transferee": any Assignee or Participant.

        "Type": as to any Loan, its nature as a Base Rate Loan or a Eurocurrency Loan.

        "UK Property": as defined in Section 9.2(i).

        "United States": the United States of America.

        "Wholly Owned Subsidiary": as to any Person, any other Person all of the Capital Stock of which (other than directors' qualifying shares required by law) is owned by such Person directly and/or through other Wholly Owned Subsidiaries.

        1.2    Other Definitional Provisions.    (a) Unless otherwise specified therein, all terms defined in this Agreement shall have the defined meanings when used in the other Loan Documents or any certificate or other document made or delivered pursuant hereto or thereto.

        (b)    As used herein and in the other Loan Documents, and any certificate or other document made or delivered pursuant hereto or thereto, (i) accounting terms relating to any Group Member not defined in Section 1.1 and accounting terms partly defined in Section 1.1, to the extent not defined, shall have the respective meanings given to them under GAAP, (ii) the words "include", "includes" and "including" shall be deemed to be followed by the phrase "without limitation", (iii) the word "incur" shall be construed to mean incur, create, issue, assume, become liable in respect of or suffer to exist (and the words "incurred" and "incurrence" shall have correlative meanings), (iv) the words "asset" and "property" shall be construed to have the same meaning and effect and to refer to any and all tangible and intangible assets and properties, including cash, Capital Stock, securities, revenues, accounts, leasehold interests and contract rights, and (v) references to agreements or other Contractual Obligations shall, unless otherwise specified, be deemed to refer to such agreements or Contractual Obligations as amended, supplemented, restated or otherwise modified from time to time (subject to any applicable restrictions hereunder).

        (c)    The words "hereof", "herein" and "hereunder" and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement, and Section, Schedule and Exhibit references are to this Agreement unless otherwise specified.

        (d)    The meanings given to terms defined herein shall be equally applicable to both the singular and plural forms of such terms.

        1.3    Currency Conversion.    (a) If more than one currency or currency unit are at the same time recognized by the central bank of any country as the lawful currency of that country, then (i) any reference in the Loan Documents to, and any obligations arising under the Loan Documents in, the currency of that country shall be translated into or paid in the currency or currency unit of that country designated by the Administrative Agent and (ii) any translation from one currency or currency unit to another shall be at the official rate of exchange recognized by the central bank for conversion of that currency or currency unit into the other, rounded up or down by the Administrative Agent as it deems appropriate.

        (b)    If a change in any currency of a country occurs, this Agreement shall be amended (and each party hereto agrees to enter into any supplemental agreement necessary to effect any such amendment) to the extent that the Administrative Agent determines such amendment to be necessary to reflect the change in currency and to put the Lenders in the same position, so far as possible, that they would have been in if no change in currency had occurred.

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SECTION 2.    AMOUNT AND TERMS OF TERM COMMITMENTS

        2.1    Term Commitments.    Subject to the terms and conditions hereof, each Term Lender severally agrees to make a term loan denominated in Dollars (a "Term Loan") to the Borrower on the Closing Date in an amount not to exceed the amount of the Term Commitment of such Lender. The Term Loans may from time to time be Eurocurrency Loans or Base Rate Loans, as determined by the Borrower and notified to the Administrative Agent in accordance with Sections 2.2 and 5.3.

        2.2    Procedure for Term Loan Borrowing.    The Borrower shall give the Administrative Agent irrevocable notice (which notice must be received by the Administrative Agent prior to 10:00 A.M., New York City time, one Business Day prior to the anticipated Closing Date) requesting that the Term Lenders make the Term Loans on the Closing Date and specifying the amount to be borrowed. The Term Loans made on the Closing Date shall initially be Base Rate Loans and shall not be converted to Eurocurrency Loans prior to the date which is three Business Days after the Closing Date. Upon receipt of such notice the Administrative Agent shall promptly notify each Term Lender thereof. Not later than 12:00 Noon, New York City time, on the Closing Date each Term Lender shall make available to the Administrative Agent at the Funding Office an amount in immediately available funds equal to the Term Loan or Term Loans to be made by such Lender. The Administrative Agent shall credit the account of the Borrower on the books of such office of the Administrative Agent with the aggregate of the amounts made available to the Administrative Agent by the Term Lenders in immediately available funds.

        2.3    Repayment of Term Loans.    The Term Loan of each Lender shall mature in 24 consecutive quarterly installments, commencing on March 31, 2003, each of which shall be in an amount equal to the product of (i) such Lender's Term Percentage multiplied by (ii) an amount equal to the aggregate

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amount of Term Loans outstanding on the Closing Date multiplied by (iii) the percentage set forth below opposite such installment:

Installment	Percentage of Principal Amount
March 31, 2003	0.25	%
June 30, 2003	0.25	%
September 30, 2003	0.25	%
December 31, 2003	0.25	%
March 31, 2004	0.25	%
June 30, 2004	0.25	%
September 30, 2004	0.25	%
December 31, 2004	0.25	%
March 31, 2005	0.25	%
June 30, 2005	0.25	%
September 30, 2005	0.25	%
December 31, 2005	0.25	%
March 31, 2006	0.25	%
June 30, 2006	0.25	%
September 30, 2006	0.25	%
December 31, 2006	0.25	%
March 31, 2007	0.25	%
June 30, 2007	0.25	%
September 30, 2007	0.25	%
December 31, 2007	0.25	%
March 31, 2008	23.75	%
June 30, 2008	23.75	%
September 30, 2008	23.75	%
December 31, 2008	23.75	%

SECTION 3.    AMOUNT AND TERMS OF REVOLVING COMMITMENTS

        3.1    Revolving Commitments.    a) Subject to the terms and conditions hereof, each Revolving Lender severally agrees to make revolving credit loans denominated in Dollars ("Revolving Loans") to the Borrower from time to time during the Revolving Commitment Period in an aggregate principal amount at any one time outstanding which, when added to such Lender's Revolving Percentage of the sum of (i) the L/C Obligations then outstanding, (ii) the aggregate principal amount of the Swingline Loans then outstanding and (iii) the Dollar Equivalent of the aggregate principal amount of the Foreign Currency Loans then outstanding, does not exceed the amount of such Lender's Revolving Commitment. During the Revolving Commitment Period, the Borrower may use the Revolving Commitments by borrowing, prepaying and reborrowing the Revolving Loans, in whole or in part, all in accordance with the terms and conditions hereof. The Revolving Loans may from time to time be Eurocurrency Loans or Base Rate Loans, as determined by the Borrower and notified to the Administrative Agent in accordance with Sections 3.2 and 5.3.

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        (b)    The Borrower shall repay all outstanding Revolving Loans on the Revolving Termination Date.

        3.2    Procedure for Revolving Loan Borrowing.    The Borrower may borrow under Section 3.1 during the Revolving Commitment Period on any Business Day, provided that the Borrower shall give the Administrative Agent irrevocable notice (which notice must be received by the Administrative Agent prior to 12:00 Noon, New York City time, (a) three Business Days prior to the requested Borrowing Date, in the case of Eurocurrency Loans, or (b) one Business Day prior to the requested Borrowing Date, in the case of Base Rate Loans), specifying (i) the amount and Type of Revolving Loans to be borrowed, (ii) the requested Borrowing Date and (iii) in the case of Eurocurrency Loans, the respective amounts of each such Type of Loan and the respective lengths of the initial Interest Period therefor. Any Revolving Loans made on the Closing Date shall initially be Base Rate Loans. Each borrowing under the Revolving Commitments shall be in an amount equal to (x) in the case of Base Rate Loans, $1,000,000 or a whole multiple of $100,000 in excess thereof (or, if the then aggregate Available Revolving Commitments are less than $100,000, such lesser amount) and (y) in the case of Eurocurrency Loans denominated in Dollars, $3,000,000 or a whole multiple of $500,000 in excess thereof; provided, that the Swingline Lender may request, on behalf of the Borrower, borrowings under the Revolving Commitments that are Base Rate Loans in other amounts pursuant to Section 3.4. Upon receipt of any such notice from the Borrower, the Administrative Agent shall promptly notify each Revolving Lender thereof. Each Revolving Lender will make the amount of its pro rata share of each such borrowing available to the Administrative Agent for the account of the Borrower at the Funding Office prior to 12:00 Noon, New York City time, on the Borrowing Date requested by the Borrower in funds immediately available to the Administrative Agent. Such borrowing will then be made available to the Borrower by the Administrative Agent crediting the account of the Borrower on the books of such office with the aggregate of the amounts made available to the Administrative Agent by the Revolving Lenders and in like funds as received by the Administrative Agent.

        3.3    Swingline Commitment.    (a) Subject to the terms and conditions hereof, the Swingline Lender agrees to make a portion of the credit otherwise available to the Borrower under the Revolving Commitments from time to time during the Revolving Commitment Period by making swing line loans denominated in Dollars ("Swingline Loans") to the Borrower; provided that (i) the aggregate principal amount of Swingline Loans outstanding at any time shall not exceed the Swingline Commitment then in effect (notwithstanding that the Swingline Loans outstanding at any time, when aggregated with the Swingline Lender's other outstanding Revolving Extensions of Credit hereunder, may exceed the Swingline Commitment then in effect) and (ii) the Borrower shall not request, and the Swingline Lender shall not make, any Swingline Loan if, after giving effect to the making of such Swingline Loan, the aggregate amount of the Available Revolving Commitments would be less than zero. During the Revolving Commitment Period, the Borrower may use the Swingline Commitment by borrowing, repaying and reborrowing, all in accordance with the terms and conditions hereof. Swingline Loans shall be Base Rate Loans only.

        (b)    The Borrower shall repay to the Swingline Lender the then unpaid principal amount of each Swingline Loan on the earlier of the Revolving Termination Date and the 30th day after such Swingline Loan is made; provided that, during each calendar month, there shall be at least two consecutive Business Days during which the outstanding balance of the Swingline Loans shall be zero.

        3.4    Procedure for Swingline Borrowing; Refunding of Swingline Loans.    (a) Whenever the Borrower desires that the Swingline Lender make Swingline Loans it shall give the Swingline Lender irrevocable telephonic notice confirmed promptly in writing (which telephonic notice must be received by the Swingline Lender not later than 1:00 P.M., New York City time, on the proposed Borrowing Date), specifying (i) the amount to be borrowed and (ii) the requested Borrowing Date (which shall be a Business Day during the Revolving Commitment Period). Each borrowing under the Swingline Commitment shall be in an amount equal to $250,000 or a whole multiple of $100,000 in excess

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thereof. Not later than 3:00 P.M., New York City time, on the Borrowing Date specified in a notice in respect of Swingline Loans, the Swingline Lender shall make available to the Administrative Agent at the Funding Office an amount in immediately available funds equal to the amount of the Swingline Loan to be made by the Swingline Lender. The Administrative Agent shall make the proceeds of such Swingline Loan available to the Borrower on such Borrowing Date by depositing such proceeds in the account of the Borrower with the Administrative Agent on such Borrowing Date in immediately available funds.

        (b)    The Swingline Lender, at any time and from time to time in its sole and absolute discretion may, on behalf of the Borrower (which hereby irrevocably directs the Swingline Lender to act on its behalf), on one Business Day's notice given by the Swingline Lender no later than 12:00 Noon, New York City time, request each Revolving Lender to make, and each Revolving Lender hereby agrees to make, a Revolving Loan, in an amount equal to such Revolving Lender's Revolving Percentage of the aggregate amount of the Swingline Loans (the "Refunded Swingline Loans") outstanding on the date of such notice, to repay the Swingline Lender. Each Revolving Lender shall make the amount of such Revolving Loan available to the Administrative Agent at the Funding Office in immediately available funds, not later than 10:00 A.M., New York City time, one Business Day after the date of such notice. The proceeds of such Revolving Loans shall be immediately made available by the Administrative Agent to the Swingline Lender for application by the Swingline Lender to the repayment of the Refunded Swingline Loans. The Borrower irrevocably authorizes the Swingline Lender to charge the Borrower's accounts with the Administrative Agent (up to the amount available in each such account) in order to immediately pay the amount of such Refunded Swingline Loans to the extent amounts received from the Revolving Lenders are not sufficient to repay in full such Refunded Swingline Loans.

        (c)    If prior to the time a Revolving Loan would have otherwise been made pursuant to Section 3.4(b), one of the events described in Section 10(f) shall have occurred and be continuing with respect to the Borrower or if for any other reason, as determined by the Swingline Lender in its sole discretion, Revolving Loans may not be made as contemplated by Section 3.4(b), each Revolving Lender shall, on the date such Revolving Loan was to have been made pursuant to the notice referred to in Section 3.4(b) (the "Refunding Date"), purchase for cash an undivided participating interest in the then outstanding Swingline Loans by paying to the Swingline Lender an amount (the "Swingline Participation Amount") equal to (i) such Revolving Lender's Revolving Percentage times (ii) the sum of the aggregate principal amount of Swingline Loans then outstanding that were to have been repaid with such Revolving Loans.

        (d)    Whenever, at any time after the Swingline Lender has received from any Revolving Lender such Lender's Swingline Participation Amount, the Swingline Lender receives any payment on account of the Swingline Loans, the Swingline Lender will distribute to such Lender its Swingline Participation Amount (appropriately adjusted, in the case of interest payments, to reflect the period of time during which such Lender's participating interest was outstanding and funded and, in the case of principal and interest payments, to reflect such Lender's pro rata portion of such payment if such payment is not sufficient to pay the principal of and interest on all Swingline Loans then due); provided, however, that in the event that such payment received by the Swingline Lender is required to be returned, such Revolving Lender will return to the Swingline Lender any portion thereof previously distributed to it by the Swingline Lender.

        (e)    Each Revolving Lender's obligation to make the Loans referred to in Section 3.4(b) and to purchase participating interests pursuant to Section 3.4(c) shall be absolute and unconditional and shall not be affected by any circumstance, including (i) any setoff, counterclaim, recoupment, defense or other right that such Revolving Lender or the Borrower may have against the Swingline Lender, the Borrower or any other Person for any reason whatsoever; (ii) the occurrence or continuance of a Default or an Event of Default or the failure to satisfy any of the other conditions specified in Section 7; (iii) any adverse change in the condition (financial or otherwise) of the Borrower; (iv) any

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breach of this Agreement or any other Loan Document by the Borrower, any other Loan Party or any other Revolving Lender; or (v) any other circumstance, happening or event whatsoever, whether or not similar to any of the foregoing.

        3.5    Commitment Fees, etc.    (a) The Borrower agrees to pay to the Administrative Agent for the account of each Revolving Lender a commitment fee for the period from and including the Closing Date to the last day of the Revolving Commitment Period, computed at the Commitment Fee Rate on the average daily amount of the Available Revolving Commitment of such Lender during the period for which payment is made, payable quarterly in arrears on each Fee Payment Date, commencing on the first of such dates to occur after the date hereof.

        (b)    The Borrower agrees to pay to the Administrative Agent the fees in the amounts and on the dates previously agreed to in writing by the Borrower and the Administrative Agent.

        3.6    Termination or Reduction of Revolving Commitments.    The Borrower shall have the right, upon not less than three Business Days' notice to the Administrative Agent, to terminate the Revolving Commitments or, from time to time, to reduce the amount of the Revolving Commitments; provided that no such termination or reduction of Revolving Commitments shall be permitted if, after giving effect thereto and to any prepayments of the Revolving Loans, Swingline Loans and Foreign Currency Loans made on the effective date thereof, the Total Revolving Extensions of Credit would exceed the Total Revolving Commitments. Any such reduction shall be in an amount equal to $1,000,000, or a whole multiple thereof, and shall reduce permanently the Revolving Commitments then in effect.

        3.7    L/C Commitment.    (a) Subject to the terms and conditions hereof, each Issuing Lender, in reliance on the agreements of the other Revolving Lenders set forth in Section 3.10(a), agrees to issue letters of credit ("Letters of Credit") for the account of the Borrower on any Business Day during the Revolving Commitment Period in such form as may be approved from time to time by such Issuing Lender; provided that no Issuing Lender shall have any obligation to issue any Letter of Credit if, after giving effect to such issuance, (i) the L/C Obligations would exceed the L/C Commitment or (ii) the aggregate amount of the Available Revolving Commitments would be less than zero. Each Letter of Credit shall (i) be denominated in Dollars or a Foreign Currency and (ii) expire no later than the earlier of (x) the first anniversary of its date of issuance and (y) the date that is five Business Days prior to the Revolving Termination Date, provided that any Letter of Credit with a one-year term may provide for the renewal thereof for additional one-year periods (which shall in no event extend beyond the date referred to in clause (y) above).

        (b)    No Issuing Lender shall at any time be obligated to issue any Letter of Credit hereunder if such issuance would conflict with, or cause such Issuing Lender or any L/C Participant to exceed any limits imposed by, any applicable Requirement of Law.

        (c)    The Letters of Credit listed on Schedule 3.7 (the "Existing Letters of Credit") were issued under the Existing Credit Agreement by The Bank of New York, as Issuing Lender, and, from and after the Closing Date, such Existing Letters of Credit shall for all purposes constitute Letters of Credit hereunder.

        3.8    Procedure for Issuance of Letter of Credit.    The Borrower may from time to time request that an Issuing Lender issue a Letter of Credit by delivering to such Issuing Lender at its address for notices specified herein an Application therefor, completed to the satisfaction of such Issuing Lender, and such other certificates, documents and other papers and information as such Issuing Lender may request. Upon receipt of any Application, an Issuing Lender will notify the Administrative Agent of the amount, the beneficiary and the requested expiration of the requested Letter of Credit, and upon receipt of confirmation from the Administrative Agent that after giving effect to the requested issuance, the Available Revolving Commitments would not be less than zero, such Issuing Lender will process such Application and the certificates, documents and other papers and information delivered to it in connection therewith in accordance with its customary procedures and shall promptly issue the Letter

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of Credit requested thereby (but in no event shall such Issuing Lender be required to issue any Letter of Credit earlier than three Business Days after its receipt of the Application therefor and all such other certificates, documents and other papers and information relating thereto) by issuing the original of such Letter of Credit to the beneficiary thereof or as otherwise may be agreed to by such Issuing Lender and the Borrower. Each Issuing Lender shall furnish a copy of such Letter of Credit to the Borrower (with a copy to the Administrative Agent) promptly following the issuance thereof. Each Issuing Lender shall promptly furnish to the Administrative Agent, which shall in turn promptly furnish to the Lenders, notice of the issuance of each Letter of Credit issued by such Issuing Lender (including the amount thereof).

        3.9    Fees and Other Charges.    (a) The Borrower will pay a fee on all outstanding Letters of Credit at a per annum rate equal to the Applicable Margin then in effect with respect to Eurocurrency Loans under the Revolving Facility, shared ratably among the Revolving Lenders and payable quarterly in arrears on each L/C Fee Payment Date after the issuance date. In addition, the Borrower shall pay to the relevant Issuing Lender for its own account a fronting fee on the undrawn and unexpired amount of each Letter of Credit as agreed by the Borrower and the Issuing Lender, payable quarterly in arrears on each L/C Fee Payment Date after the Issuance Date.

        (b)    In addition to the foregoing fees, the Borrower shall pay or reimburse each Issuing Lender for such normal and customary costs and expenses as are incurred or charged by such Issuing Lender in issuing, negotiating, effecting payment under, amending or otherwise administering any Letter of Credit to the extent that the fees and expenses associated with the issuance of such Letter of Credit exceed the fronting fee therefore as specified in Section 3.9(a).

        3.10    L/C Participations.    (a) Each Issuing Lender irrevocably agrees to grant and hereby grants to each L/C Participant, and, to induce such Issuing Lender to issue Letters of Credit hereunder, each L/C Participant irrevocably agrees to accept and purchase and hereby accepts and purchases from such Issuing Lender, on the terms and conditions set forth below, for such L/C Participant's own account and risk an undivided interest equal to such L/C Participant's Revolving Percentage in each Issuing Lender's obligations and rights under and in respect of each Letter of Credit issued by such Issuing Lender hereunder and the amount of each draft paid by such Issuing Lender thereunder. Each L/C Participant unconditionally and irrevocably agrees with each Issuing Lender that, if a draft is paid under any Letter of Credit issued by such Issuing Lender for which such Issuing Lender is not reimbursed in full by the Borrower in accordance with the terms of this Agreement, the related Reimbursement Obligation shall be converted to Dollars pursuant to Section 3.11 and such L/C Participant shall pay to the Administrative Agent upon demand of such Issuing Lender an amount equal to such L/C Participant's Revolving Percentage of the amount of such draft, or any part thereof, that is not so reimbursed. The Administrative Agent shall promptly forward such amounts to the relevant Issuing Lender.

        (b)    If any amount required to be paid by any L/C Participant to the Administrative Agent for the account of such Issuing Lender pursuant to Section 3.10(a) in respect of any unreimbursed portion of any payment made by such Issuing Lender under any Letter of Credit is paid to the Administrative Agent for the account of such Issuing Lender within three Business Days after the date such payment is due, such L/C Participant shall pay to the Administrative Agent for the account of such Issuing Lender on demand an amount equal to the product of (i) such amount, times (ii) the daily average Federal Funds Effective Rate during the period from and including the date such payment is required to the date on which such payment is immediately available to such Issuing Lender, times (iii) a fraction the numerator of which is the number of days that elapse during such period and the denominator of which is 360. If any such amount required to be paid by any L/C Participant pursuant to Section 3.10(a) is not made available to the Administrative Agent for the account of the relevant Issuing Lender by such L/C Participant within three Business Days after the date such payment is due, such Issuing Lender shall be entitled to recover from such L/C Participant, on demand, such amount

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with interest thereon calculated from such due date at the rate per annum applicable to Base Rate Loans under the Revolving Facility. A certificate of such Issuing Lender submitted to any L/C Participant with respect to any amounts owing under this Section shall be conclusive in the absence of manifest error.

        (c)    Whenever, at any time after an Issuing Lender has made payment under any Letter of Credit and has received from any L/C Participant its pro rata share of such payment in accordance with Section 3.10(a), the Administrative Agent or such Issuing Lender receives any payment related to such Letter of Credit (whether directly from the Borrower or otherwise, including proceeds of Collateral applied thereto by such Issuing Lender), or any payment of interest on account thereof, the Administrative Agent or such Issuing Lender, as the case may be, will distribute to such L/C Participant its pro rata share thereof; provided, however, that in the event that any such payment received by Administrative Agent or such Issuing Lender, as the case may be, shall be required to be returned by the Administrative Agent or such Issuing Lender, such L/C Participant shall return to the Administrative Agent for the account of such Issuing Lender the portion thereof previously distributed by the Administrative Agent or such Issuing Lender, as the case may be, to it.

        (d)    Each L/C Participant's obligation to purchase participating interests pursuant to Section 3.10(b) shall be absolute and unconditional and shall not be affected by any circumstance, including (i) any setoff, counterclaim, recoupment, defense or other right that such L/C Participant or the Borrower may have against any Issuing Lender, the Borrower or any other Person for any reason whatsoever; (ii) the occurrence or continuance of a Default or an Event of Default or the failure to satisfy any of the other conditions specified in Section 7; (iii) any adverse change in the condition (financial or otherwise) of the Borrower; (iv) any breach of this Agreement or any other Loan Document by the Borrower, any other Loan Party or any other L/C Participant; or (v) any other circumstance, happening or event whatsoever, whether or not similar to any of the foregoing.

        3.11    Reimbursement Obligation of the Borrower.    The Borrower agrees to reimburse each Issuing Lender on the Business Day (or the third Business Day in the event of a Foreign Currency draft) next succeeding the Business Day on which such Issuing Lender notifies the Borrower of the date and amount of a draft presented under any Letter of Credit and paid by such Issuing Lender for the amount of (a) such draft so paid and (b) any taxes, fees, charges or other reasonable costs or expenses incurred by such Issuing Lender in connection with such payment. Each such payment shall be made to the relevant Issuing Lender at its address for notices referred to herein in Dollars and in immediately available funds, provided that if the Borrower does not reimburse such Issuing Lender for any draft paid by such Issuing Lender under any Letter of Credit issued by such Issuing Lender in a Foreign Currency on the date required pursuant to the first sentence of this Section 3.11, such Issuing Lender shall convert such Reimbursement Obligation into Dollars at the rate of exchange then available to such Issuing Lender in the interbank market where its foreign currency exchange operations in respect of such Foreign Currency are then being conducted and the Borrower shall thereafter be required to reimburse such Issuing Lender in Dollars for such Reimbursement Obligation (in the amount so converted). Interest shall be payable on any such amounts denominated in Dollars from the date on which the relevant draft is paid until the relevant Issuing Lender receives payment in full at the rate set forth in (i) until the Business Day next succeeding the date of the relevant notice, Section 5.5(b) and (ii) thereafter, Section 5.5(c). Interest shall be payable on any such amounts denominated in a Foreign Currency from the date on which the relevant draft is paid until the relevant Issuing Lender receives payment in full or conversion to Dollars as provided herein at the rate determined by the relevant Issuing Lender as its cost of funding such payment. Each drawing under any Letter of Credit shall (unless an event of the type described in clause (i) or (ii) of Section 10(f) shall have occurred and be continuing with respect to the Borrower, in which case the procedures specified in Section 3.10 for funding by L/C Participants shall apply) constitute a request by the Borrower to the Administrative Agent for a borrowing pursuant to Section 3.2 of Base Rate Loans (or, at the option of the Administrative Agent and the Swingline Lender in their sole discretion, a borrowing pursuant to

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Section 3.4 of Swingline Loans) in the amount of such drawing except that, in such event, Borrower is not deemed to have given any representations and warranties pursuant to Section 7.2. The Borrowing Date with respect to such borrowing shall be the first date on which a borrowing of Revolving Loans (or, if applicable, Swingline Loans) could be made, pursuant to Section 3.2 or, if applicable, Section 3.4), if the Administrative Agent had received a notice of such borrowing at the time the Administrative Agent receives notice from such Issuing Lender of such drawing under such Letter of Credit.

        3.12    Obligations Absolute.    The Borrower's obligations under Section 3.11 shall be absolute and unconditional under any and all circumstances and irrespective of any setoff, counterclaim or defense to payment that the Borrower may have or have had against any Issuing Lender, any beneficiary of a Letter of Credit or any other Person. The Borrower also agrees with each Issuing Lender that such Issuing Lender not shall be responsible for, and the Borrower's Reimbursement Obligations under Section 3.11 shall not be affected by, among other things, the validity or genuineness of documents or of any endorsements thereon, even though such documents shall in fact prove to be invalid, fraudulent or forged, or any dispute between or among the Borrower and any beneficiary of any Letter of Credit or any other party to which such Letter of Credit may be transferred or any claims whatsoever of the Borrower against any beneficiary of such Letter of Credit or any such transferee. No Issuing Lender shall be liable for any error, omission, interruption or delay in transmission, dispatch or delivery of any message or advice, however transmitted, in connection with any Letter of Credit, except for errors or omissions found by a final and nonappealable decision of a court of competent jurisdiction to have resulted from the gross negligence or willful misconduct of such Issuing Lender. The Borrower agrees that any action taken or omitted by an Issuing Lender under or in connection with any Letter of Credit or the related drafts or documents, if done in the absence of gross negligence or willful misconduct and in accordance with the standards of care specified in the Uniform Commercial Code of the State of New York and UCP 500, shall be binding on the Borrower and shall not result in any liability of such Issuing Lender to the Borrower.

        3.13    Letter of Credit Payments.    If any draft shall be presented for payment under any Letter of Credit, the relevant Issuing Lender shall promptly notify the Borrower of the date and amount thereof. The responsibility of the relevant Issuing Lender to the Borrower in connection with any draft presented for payment under any Letter of Credit issued by such Issuing Lender shall, in addition to any payment obligation expressly provided for in such Letter of Credit, be limited to determining in compliance with UCP 500 that the documents (including each draft) delivered under such Letter of Credit in connection with such presentment are substantially in conformity with the requirements of such Letter of Credit.

        3.14    Applications.    To the extent that any provision of any Application related to any Letter of Credit is inconsistent with the provisions of this Section 3, the provisions of this Section 3 shall apply.

        3.15    Foreign Currency Subfacility.    (a) Subject to the terms and conditions hereof, the Foreign Currency Lenders agree to make loans (each, a "Foreign Currency Loan") in one or more Foreign Currencies to the Borrower from time to time during the Revolving Commitment Period, provided that, (i) after giving effect to any such Foreign Currency Loan, the Total Revolving Extensions of Credit at such time do not exceed the Total Revolving Commitments at such time and (ii) after giving effect to such Foreign Currency Loan and the use of proceeds thereof, the Dollar Equivalent of the aggregate outstanding principal amount of Foreign Currency Loans does not exceed the Foreign Currency Sublimit. During the Revolving Commitment Period, the Borrower may borrow, prepay and reborrow Foreign Currency Loans in whole or in part, all in accordance with the terms and conditions hereof.

        (b)    The Borrower shall repay all outstanding Foreign Currency Loans on the Revolving Termination Date.

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        3.16    Procedure for Foreign Currency Loan Borrowings.    The Borrower may borrow under Section 3.15 during the Revolving Commitment Period on any Business Day, provided that, the Borrower shall give the Administrative Agent irrevocable notice (which notice must be received by the Administrative Agent prior to 10:00 A.M., New York City time, three Business Days prior to the requested Borrowing Date) specifying (a) the amount to be borrowed and the Foreign Currency with respect thereto, (b) the requested Borrowing Date and (c) the initial Interest Periods with respect thereto. Upon receipt of such notice, the Administrative Agent shall promptly notify each Foreign Currency Lender thereof and of the amount of such Foreign Currency Lender's Loan to be made as part of the requested borrowing. Each borrowing of Foreign Currency Loans shall be a Eurocurrency Loan in a minimum amount equal to the Foreign Currency Equivalent of $3,000,000 in the relevant Foreign Currency or a whole multiple of $1,000,000. Each Foreign Currency Lender shall make each Foreign Currency Loan to be made by it hereunder on the proposed date thereof by wire transfer of immediately available funds by 11:00 A.M., New York City time, to the account of the Administrative Agent most recently designated by it for such purposes for Foreign Currency Loans by notice to the Foreign Currency Lenders. The Administrative Agent will make such Foreign Currency Loans available to the Borrower by promptly crediting the amounts so received, in like funds, to an account in accordance with instructions provided by the Borrower to the Administrative Agent.

        3.17    Foreign Currency Loan Fees, Commissions and Other Charges.    (a) The Borrower shall pay to each Foreign Currency Lender with respect to each Foreign Currency Loan made by such Foreign Currency Lender, for the account of such Foreign Currency Lender, a fronting fee with respect to the period from and including the date of such Foreign Currency Loan to but excluding the date of repayment thereof computed at a rate per annum to be agreed upon by such Foreign Currency Lender and the Borrower on the average daily principal amount of such Foreign Currency Loan outstanding during the period for which such fee is calculated. Such fronting fee shall be payable in the applicable Foreign Currency in arrears on each Fee Payment Date to occur after the making of such Foreign Currency Loan and shall be nonrefundable.

        (b)    The Borrower shall pay to the Administrative Agent for the account of the Foreign Currency Participants, a participation fee with respect to each Foreign Currency Loan for the period from and including the date of such Foreign Currency Loan to but excluding the date of repayment thereof, computed at a rate per annum equal to the Applicable Margin in respect of Eurocurrency Loans that are Revolving Loans from time to time in effect on the average daily principal amount of such Foreign Currency Loan outstanding during the period for which such fee is calculated. Such fee shall be shared ratably among the Foreign Currency Participants in accordance with their respective Revolving Percentages. Such commission shall be payable in Dollars (based on the Dollar Equivalent of the amount calculated as set forth in Section 3.2) in arrears on each Fee Payment Date to occur after the making of such Foreign Currency Loan and shall be nonrefundable.

        (c)    The Administrative Agent shall, promptly following its receipt thereof, distribute to each Foreign Currency Lender and the Foreign Currency Participants all fees received by the Administrative Agent for their respective accounts pursuant to this Section 3.17.

        (d)    In addition to the foregoing fees, the Borrower shall pay or reimburse each Foreign Currency Lender and the Administrative Agent for such normal and customary costs and expenses as are incurred or charged by such Foreign Currency Lender or the Administrative Agent in connection with the conversion of any Foreign Currency into Dollars pursuant to Section 3.18.

        3.18    Participations in Foreign Currency Loans.    (a) Each Foreign Currency Lender irrevocably agrees to grant and hereby grants to each Foreign Currency Participant, and, to induce such Foreign Currency Lender to make Foreign Currency Loans hereunder, each such Foreign Currency Participant irrevocably agrees to accept and purchase and hereby accepts and purchases from such Foreign Currency Lender, on the terms and conditions set forth below, for such Foreign Currency Participant's own account and risk, an undivided interest equal to such Foreign Currency Participant's Revolving

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Percentage in such Foreign Currency Lender's obligations and rights under and in respect of each Foreign Currency Loan made by such Foreign Currency Lender hereunder. On any Conversion Date or on any other date if any amount in respect of the principal, interest or fees owing to such Foreign Currency Lender in respect of a Foreign Currency Loan is not paid when due in accordance with the terms of this Agreement, such unpaid amount shall be converted into an amount denominated in Dollars at the applicable Exchange Rate on the date of such conversion, as determined by the Administrative Agent in accordance with the terms hereof (and shall thereafter be denominated in Dollars for purposes of this Agreement), and each such Foreign Currency Participant hereby unconditionally and irrevocably agrees to pay to the Administrative Agent for the account of such Foreign Currency Lender upon demand an amount in Dollars equal to such Foreign Currency Participant's Revolving Percentage of such unpaid amount denominated in Dollars. The Administrative Agent shall promptly forward such amounts to the relevant Foreign Currency Lender. Each Foreign Currency Participant's obligation to make the payment referred to in the immediately preceding sentence shall be absolute and unconditional and shall not be affected by any circumstance, including, without limitation, (i) any set-off, counterclaim, recoupment, defense or other right which such Foreign Currency Participant or the Borrower may have against any Foreign Currency Lender, the Borrower or any other Person for any reason whatsoever, (ii) the occurrence or continuance of a Default or an Event of Default, (iii) any adverse change in the condition (financial or otherwise) of the Borrower, (iv) any breach of this Agreement or any other Loan Document by any Loan Party or any other Lender or (v) any other circumstance, happening or event whatsoever, whether or not similar to any of the foregoing. Each Lender shall pay the purchase price of its undivided participating interests (as determined by the Administrative Agent) by wire transfer of immediately available funds to the Administrative Agent (and the Administrative Agent shall promptly distribute such funds to the relevant Foreign Currency Lenders).

        (b)    If any amount required to be paid by any Foreign Currency Participant to any Foreign Currency Lender pursuant to Section 3.18(a) is not paid to such Foreign Currency Lender when due but is paid within three Business Days after the date such payment is due, such Foreign Currency Participant shall pay to such Foreign Currency Lender on demand an amount equal to the product of (i) such amount, times (ii) the Eurocurrency Rate for Loans denominated in Dollars during the period from and including the date such payment is required to the date on which such payment is immediately available to such Foreign Currency Lender, times (iii) a fraction the numerator of which is the number of days that elapse during such period and the denominator of which is 360. If any such amount required to be paid by any Foreign Currency Participant pursuant to Section 3.18(a) is not in fact made available to any Foreign Currency Lender by such Foreign Currency Participant within three Business Days after the date such payment is due, such Foreign Currency Lender shall be entitled to recover from such Foreign Currency Participant, on demand, such amount with interest thereon calculated from such due date at the rate per annum equal to the rate applicable thereto in accordance with the preceding sentence plus the Applicable Margin in respect of Revolving Loans which are Base Rate Loans. A certificate of any Foreign Currency Lender submitted to any Foreign Currency Participant with respect to any amounts owing under this Section shall be conclusive in the absence of manifest error.

        (c)    Whenever, at any time after any Foreign Currency Lender has received from any Foreign Currency Participant the full amount owing by such Foreign Currency Participant pursuant to and in accordance with Section 3.18(a) in respect of any Foreign Currency Loan, such Foreign Currency Lender receives any payment related to such Foreign Currency Loan (whether directly from the Borrower or otherwise, as the case may be, including proceeds of Collateral applied thereto by such Foreign Currency Lender), or any payment of interest on account thereof, such Foreign Currency Lender will distribute to such Foreign Currency Participant its pro rata share thereof; provided, however, that if any such payment received by any Foreign Currency Lender shall be required to be returned by such Foreign Currency Lender, each Foreign Currency Participant shall return to such Foreign Currency Lender the portion thereof previously distributed by such Foreign Currency Lender to it.

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SECTION 4.    AMOUNTS AND TERMS OF ADDITIONAL COMMITMENTS

        4.1    Revolving Credit Commitment Increases.    (a) In the event that the Borrower wishes to increase the Total Revolving Commitments at any time during the Increase Option Period when no Default or Event of Default has occurred and is continuing, it shall notify the Administrative Agent in writing of the amount (the "Revolving Offered Increase Amount") of such proposed increase (such notice, a "Revolving Commitment Increase Notice") in a minimum amount equal to at least $10,000,000. The Borrower may, at its election, (i) offer one or more of the Lenders the opportunity to provide all or a portion of any Revolving Offered Increase Amount pursuant to paragraph (c) below and/or (ii) with the consent of the Syndication Agent, the Swingline Lender, each Issuing Lender, each Foreign Currency Lender and the Administrative Agent (which consent shall not be unreasonably withheld), offer one or more additional banks, financial institutions or other entities the opportunity to provide all or a portion of such Revolving Offered Increase Amount pursuant to paragraph (b) below. Each Revolving Commitment Increase Notice shall specify which Lenders and/or banks, financial institutions or other entities the Borrower desires to provide such Revolving Offered Increase Amount. The Borrower or, if requested by the Borrower, the Administrative Agent will notify such Lenders, and/or banks, financial institutions or other entities of such offer.

        (b)    Any additional bank, financial institution or other entity which the Borrower selects to offer participation in any increased Total Revolving Commitments and which elects to become a party to this Agreement and provide a Revolving Commitment in an amount so offered and accepted by it pursuant to clause (ii) of Section 4.1(a) shall execute a New Lender Supplement with the Borrower and the Administrative Agent, substantially in the form of Exhibit D-1, whereupon such bank, financial institution or other entity (herein called a "New Revolving Lender") shall become a Lender for all purposes and to the same extent as if originally a party hereto and shall be bound by and entitled to the benefits of this Agreement, provided that the Revolving Commitment of any such New Revolving Lender shall be in an amount not less than $2,500,000.

        (c)    Any Lender which accepts an offer to it by the Borrower to increase its Revolving Commitment pursuant to clause (i) of Section 4.1(a) shall, in each case, execute a Commitment Increase Supplement with the Borrower, the Syndication Agent, the Issuing Bank and the Administrative Agent, substantially in the form of Exhibit D-2, whereupon such Lender shall be bound by and entitled to the benefits of this Agreement with respect to the full amount of its Revolving Commitment as so increased.

        (d)    On any Increase Effective Date pursuant to Section 4.1, (i) each bank, financial institution or other entity that is a New Revolving Lender pursuant to Section 4.1(b) or any Lender which has increased its Revolving Commitment pursuant to Section 4.1(c) shall make available to the Administrative Agent such amounts in immediately available funds as the Administrative Agent shall determine, for the benefit of the other relevant Lenders, as being required in order to cause, after giving effect to such increase and the use of such amounts to make payments to such other relevant Lenders, each Lender's portion of the outstanding Revolving Loans of all the Lenders to equal its Revolving Percentage of such outstanding Revolving Loans and (ii) the Borrower shall be deemed to have repaid and reborrowed all outstanding Revolving Loans as of the date of any increase in the Revolving Commitments (with such reborrowing to consist of the Types of Loans, with related Interest Periods if applicable, specified in a notice delivered by the Borrower in accordance with the requirements of Section 3.2). The deemed payments made pursuant to clause (ii) of the immediately preceding sentence in respect of each Eurocurrency Loan denominated in Dollars shall be subject to indemnification by the Borrower pursuant to the provisions of Section 5.11 if the deemed payment occurs other than on the last day of the related Interest Periods.

        (e)    Notwithstanding anything to the contrary in this Section 4.1, (i) in no event shall any transaction effected pursuant to this Section 4.1 cause the sum of Total Revolving Commitments and

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Term Commitments to exceed $360,000,000, (ii) in no event may the Borrower deliver more than two Revolving Commitment Increase Notices, (iii) in no event shall there be more than two Increase Effective Dates and (iv) no Lender shall have any obligation to increase its Revolving Credit Commitment unless it agrees to do so in its sole discretion.

        (f)    The Administrative Agent shall have received on or prior to each Increase Effective Date, for the benefit of the Lenders, (i) a legal opinion of counsel to the Borrower covering such matters as are customary for transactions of this type and such other matters as may be reasonably requested by the Administrative Agent and (ii) certified copies of resolutions of the Borrower authorizing such Revolving Offered Increase Amount.

SECTION 5.    GENERAL PROVISIONS APPLICABLE TO LOANS AND LETTERS OF CREDIT

        5.1    Optional Prepayments.    (a) The Borrower may at any time and from time to time prepay the Loans (other than Foreign Currency Loans), in whole or in part, without premium or penalty, upon irrevocable notice delivered to the Administrative Agent at least three Business Days prior thereto in the case of Eurocurrency Loans denominated in Dollars and at least one Business Day prior thereto in the case of Base Rate Loans, which notice shall specify the date and amount of prepayment and whether the prepayment is of Eurocurrency Loans denominated in Dollars or Base Rate Loans; provided, that if a Eurocurrency Loan denominated in Dollars is prepaid on any day other than the last day of the Interest Period applicable thereto, the Borrower shall also pay any amounts owing pursuant to Section 5.11. Upon receipt of any such notice the Administrative Agent shall promptly notify each relevant Lender thereof. If any such notice is given, the amount specified in such notice shall be due and payable on the date specified therein, together with (except in the case of Revolving Loans that are Base Rate Loans and Swingline Loans) accrued interest to such date on the amount prepaid. Partial prepayments of Term Loans and Revolving Loans shall be in an aggregate principal amount of $1,000,000 or a whole multiple thereof. Partial prepayments of Swingline Loans shall be in an aggregate principal amount of $100,000 or a whole multiple thereof.

        (b)    The Borrower may at any time and from time to time prepay Foreign Currency Loans, in whole or in part, without premium or penalty except as specified in Section 5.11, upon irrevocable notice (which notice must be received by the Administrative Agent prior to 11:00 A.M., New York City time, three Business Days before the date of prepayment) specifying the date and amount of prepayment. If any such notice is given, the amount specified in such notice shall be due and payable on the date specified therein, together with any amounts payable pursuant to Section 5.11 and accrued interest to such date on the amount prepaid. Partial prepayments of Foreign Currency Loans shall be in a minimum principal amount equal to the Foreign Currency Equivalent of $1,000,000 in the relevant Foreign Currency or a multiple of the Foreign Currency Equivalent of $100,000 in the relevant Foreign Currency in excess thereof.

        5.2    Mandatory Prepayments.    (a) If any Capital Stock shall be issued by any Group Member (other than to any other Group Member), an amount equal to 50% of the Net Cash Proceeds thereof shall be applied no later than one Business Day following the date of such issuance toward the prepayment of the Term Loans as set forth in Section 5.2(e).

        (b)    If any Indebtedness shall be incurred by any Group Member (other than Excluded Indebtedness), an amount equal to 100% of the Net Cash Proceeds thereof shall be applied no later than one Business Day following the date of such incurrence toward the prepayment of the Term Loans as set forth in Section 5.2(e).

        (c)    If on any date any Group Member shall receive Net Cash Proceeds from any Asset Sale or Recovery Event then, unless a Reinvestment Notice shall be delivered in respect thereof, such Net Cash Proceeds shall be applied no later than one Business Day following such date toward the

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prepayment of the Term Loans as set forth in Section 5.2(e); provided, that, notwithstanding the foregoing, (i) the aggregate Net Cash Proceeds of Asset Sales and Recovery Events that may be excluded from the foregoing requirement pursuant to a Reinvestment Notice shall not exceed $20,000,000 in any fiscal year of the Borrower and (ii) on each Reinvestment Prepayment Date, an amount equal to the Reinvestment Prepayment Amount with respect to the relevant Reinvestment Event shall be applied toward the prepayment of the Term Loans as set forth in Section 5.2(e).

        (d)    If, for any fiscal year of the Borrower commencing with the fiscal year ending December 31, 2003, there shall be Excess Cash Flow, the Borrower shall, on the relevant Excess Cash Flow Application Date, apply the ECF Percentage of such Excess Cash Flow toward the prepayment of the Term Loans as set forth in Section 5.2(e). Each such prepayment shall be made on a date (an "Excess Cash Flow Application Date") no later than five days after the earlier of (i) the date on which the financial statements of the Borrower referred to in Section 8.1(a), for the fiscal year with respect to which such prepayment is made, are required to be delivered to the Lenders and (ii) the date such financial statements are actually delivered.

        (e)    Amounts to be applied in connection with prepayments made pursuant to Section 5.2 shall be applied to the prepayment of the Term Loans in accordance with Section 5.8(b). The application of any prepayment pursuant to Section 5.2 shall be made, first, to Base Rate Loans and, second, to Eurocurrency Loans. Each prepayment of the Loans under Section 5.2 shall be accompanied by accrued interest to the date of such prepayment on the amount prepaid.

        (f)    If, on any Calculation Date, (i) the Dollar Equivalent of the aggregate outstanding principal amount of Foreign Currency Loans exceeds an amount equal to 105% of the Foreign Currency Sublimit or (ii) the Total Revolving Extensions of Credit exceed the Total Revolving Commitments on such date, the Borrower shall, without notice or demand, immediately repay such of the outstanding Loans in an aggregate principal amount such that, after giving effect thereto, (x) the Dollar Equivalent of the aggregate outstanding principal amount of Foreign Currency Loans does not exceed the Foreign Currency Sublimit and (y) the Total Revolving Extensions of Credit do not exceed the Total Revolving Commitments, together with interest accrued to the date of such payment or prepayment on the principal so prepaid if required hereby and any amounts payable under Section 5.11 in connection therewith. Any prepayment of Revolving Loans shall first be applied to prepay any outstanding Swingline Loans. The Borrower may in lieu of prepaying Foreign Currency Loans in order to comply with this paragraph deposit amounts in the relevant Foreign Currency Currencies in a Cash Collateral Account in accordance with the next succeeding sentence equal to the aggregate principal amount of Foreign Currency Loans required to be prepaid. To the extent that after giving effect to any prepayment of Loans required by this paragraph, the Total Revolving Extensions of Credit at such time exceed the Total Revolving Commitments at such time, the Borrower shall, without notice or demand, immediately deposit in a Cash Collateral Account upon terms reasonably satisfactory to the Administrative Agent an amount equal to the amount by which Total Revolving Extensions of Credit exceed the Total Revolving Commitments. The Administrative Agent shall apply any cash deposited in the Cash Collateral Account (to the extent thereof) to pay any Reimbursement Obligations which are or become due thereafter and/or to repay Foreign Currency Loans at the end of the Interest Periods therefor, provided that, (x) the Administrative Agent shall release to the Borrower from time to time such portion of the amount on deposit in the Cash Collateral Account to the extent such amount is not required to be so deposited in order for the Borrower to be in compliance with this paragraph and (y) the Administrative Agent may so apply such cash at any time after the occurrence and during the continuation of an Event of Default. "Cash Collateral Account" means an account specifically established by the Borrower with the Administrative Agent for purposes of this Section 5.2 and hereby pledged to the Administrative Agent and over which the Administrative Agent shall have exclusive dominion and control, including the right of withdrawal for application in accordance with this Section 5.2.

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        5.3    Conversion and Continuation Options.    (a) The Borrower may elect from time to time to convert Eurocurrency Loans denominated in Dollars to Base Rate Loans by giving the Administrative Agent at least two Business Days' prior irrevocable notice of such election, provided that any such conversion of Eurocurrency Loans denominated in Dollars may only be made on the last day of an Interest Period with respect thereto. The Borrower may elect from time to time to convert Base Rate Loans to Eurocurrency Loans denominated in Dollars by giving the Administrative Agent at least three Business Days' prior irrevocable notice of such election (which notice shall specify the length of the initial Interest Period therefor), provided that no Base Rate Loan under a particular Facility may be converted into a Eurocurrency Loan denominated in Dollars when any Event of Default has occurred and is continuing and the Administrative Agent or the Majority Facility Lenders in respect of such Facility have determined in its or their sole discretion not to permit such conversions. Upon receipt of any such notice the Administrative Agent shall promptly notify each relevant Lender thereof.

        (b)    Any Eurocurrency Loan may be continued as such upon the expiration of the then current Interest Period with respect thereto by the Borrower giving irrevocable notice to the Administrative Agent, in accordance with the applicable provisions of the term "Interest Period" set forth in Section 1.1, of the length of the next Interest Period to be applicable to such Loans, provided that no Eurocurrency Loan denominated in Dollars under a particular Facility may be continued as such when any Event of Default has occurred and is continuing and the Administrative Agent has or the Majority Facility Lenders in respect of such Facility have determined in its or their sole discretion not to permit such continuations, and provided, further, that if the Borrower shall fail to give any required notice as described above in this paragraph or if such continuation is not permitted pursuant to the preceding proviso such Eurocurrency Loans denominated in Dollars shall be automatically converted to Base Rate Loans on the last day of such then expiring Interest Period and, if the Borrower shall fail to give such notice of continuation of a Foreign Currency Loan, such Foreign Currency Loan shall be automatically continued for an Interest Period of one month. Upon receipt of any such notice the Administrative Agent shall promptly notify each relevant Lender thereof.

        5.4.    Limitations on Eurocurrency Tranches.    Notwithstanding anything to the contrary in this Agreement, all borrowings, conversions and continuations of Eurocurrency Loans hereunder and all selections of Interest Periods hereunder shall be in such amounts and be made pursuant to such elections so that, (a) after giving effect thereto, the aggregate principal amount of the Eurocurrency Loans comprising each Eurocurrency Tranche shall be equal to $3,000,000 or a whole multiple of $1,000,000 in excess thereof and (b) no more than ten Eurocurrency Tranches shall be outstanding at any one time.

        5.5.    Interest Rates and Payment Dates.    (a) Each Eurocurrency Loan shall bear interest for each day during each Interest Period with respect thereto at a rate per annum equal to the Eurocurrency Rate determined for such day plus, in the case of Eurocurrency Loans denominated in Dollars, the Applicable Margin.

        (b)    Each Base Rate Loan shall bear interest at a rate per annum equal to the Base Rate plus the Applicable Margin.

        (c)    (i) If all or a portion of the principal amount of any Loan or Reimbursement Obligation shall not be paid when due (whether at the stated maturity, by acceleration or otherwise), such overdue amount shall bear interest at a rate per annum equal to (x) in the case of the Loans, the rate that would otherwise be applicable thereto pursuant to the foregoing provisions of this Section plus 2% or (y) in the case of Reimbursement Obligations, the rate applicable to Base Rate Loans under the Revolving Facility plus 2%, and (ii) if all or a portion of any interest payable on any Loan or Reimbursement Obligation or any commitment fee or other amount payable hereunder shall not be paid when due (whether at the stated maturity, by acceleration or otherwise), such overdue amount shall bear interest at a rate per annum equal to (A) the rate then applicable to Base Rate Loans under

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the relevant Facility plus 2% (or, in the case of any such other amounts that do not relate to a particular Facility, the rate then applicable to Base Rate Loans under the Revolving Facility plus2%), in the case of amounts that are owing in Dollars, or (B)(I) the Eurocurrency Rate in respect of the relevant Foreign Currency plus (II) 2%, in the case of amounts owing that are denominated in Foreign Currencies, in each case, with respect to clauses (i) and (ii) above, from the date of such non-payment until such amount is paid in full (as well after as before judgment).

        (d)    Interest shall be payable in arrears on each Interest Payment Date, provided that interest accruing pursuant to paragraph (c) of this Section shall be payable from time to time on demand.

        5.6.    Computation of Interest and Fees.    (a) Interest and fees payable pursuant hereto shall be calculated on the basis of a 360-day year for the actual days elapsed, except that, with respect to (i) Base Rate Loans the rate of interest on which is calculated on the basis of the Prime Rate and (ii) Foreign Currency Loans denominated in British Pounds Sterling, the interest thereon shall be calculated on the basis of a 365- (or 366-, as the case may be) day year for the actual days elapsed. The Administrative Agent shall as soon as practicable notify the Borrower and the relevant Lenders of each determination of a Eurocurrency Rate. Any change in the interest rate on a Loan resulting from a change in the Base Rate or the Eurocurrency Reserve Requirements shall become effective as of the opening of business on the day on which such change becomes effective. The Administrative Agent shall as soon as practicable notify the Borrower and the relevant Lenders of the effective date and the amount of each such change in interest rate.

        (b)    Each determination of an interest rate by the Administrative Agent pursuant to any provision of this Agreement shall be conclusive and binding on the Borrower and the Lenders in the absence of manifest error. The Administrative Agent shall, at the request of the Borrower, deliver to the Borrower a statement showing the quotations used by the Administrative Agent in determining any interest rate pursuant to Section 5.5(a).

        5.7.    Inability to Determine Interest Rate.    If prior to the first day of any Interest Period:

        (a)    the Administrative Agent shall have determined (which determination shall be conclusive and binding upon the Borrower absent manifest error) that, by reason of circumstances affecting the relevant market, adequate and reasonable means do not exist for ascertaining the Eurocurrency Rate for such Interest Period, or

        (b)    the Administrative Agent shall have received notice from the Majority Facility Lenders in respect of the relevant Facility or any Foreign Currency Lender that the Eurocurrency Rate determined or to be determined for such Interest Period will not adequately and fairly reflect the cost to such Lenders (as conclusively certified by such Lenders) of making or maintaining their affected Loans during such Interest Period, or

        (c)    a Foreign Currency Lender shall have determined (which determination shall be conclusive and binding upon the Borrower, absent manifest error) that, by reason of circumstances affecting the relevant market, adequate and reasonable means do not exist for ascertaining the Eurocurrency Rate for such Interest Period in respect of any Foreign Currency (any such Foreign Currency is referred to as an "Affected Foreign Currency"),

the Administrative Agent (or the relevant Foreign Currency Lender in the case of clause (c) above) shall give telecopy or telephonic notice thereof to the Borrower and the relevant Lenders (and, in the case of any notice by a Foreign Currency Lender, the Administrative Agent) as soon as practicable thereafter. If such notice is given (x) pursuant to clause (a) or (b) of this Section 5.7 in respect of Eurocurrency Loans denominated in Dollars, then (i) any Eurocurrency Loans denominated in Dollars under the relevant Facility requested to be made on the first day of such Interest Period shall be made as Base Rate Loans, (ii) any Loans under the relevant Facility that were to have been converted on the first day of such Interest Period to Eurocurrency Loans denominated in Dollars shall be continued as

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Base Rate Loans and (iii) any outstanding Eurocurrency Loans denominated in Dollars under the relevant Facility shall be converted, on the last day of the then-current Interest Period, to Base Rate Loans and (y) in respect of any Foreign Currency Loans, then (i) any Foreign Currency Loans in an Affected Foreign Currency requested to be made on the first day of such Interest Period shall not be made and (ii) any outstanding Foreign Currency Loans in an Affected Foreign Currency shall be due and payable on the first day of such Interest Period. Until such notice has been withdrawn by the Administrative Agent (or the relevant Foreign Currency Lender in the case of clause (c) above), no further Eurocurrency Loans denominated in Dollars under the relevant Facility or Foreign Currency Loans in an Affected Foreign Currency shall be made or continued as such, nor shall the Borrower have the right to convert Loans under the relevant Facility to Eurocurrency Loans.

        5.8.    Pro Rata Treatment and Payments.    (a) Each borrowing by the Borrower from the Lenders hereunder (other than the Foreign Currency Lenders), each payment by the Borrower on account of any commitment fee and any reduction of the Commitments of the Lenders shall be made pro rata according to the respective Term Percentages or Revolving Percentages, as the case may be, of the relevant Lenders. Each borrowing by the Borrower from the Foreign Currency Lenders, each payment by the Borrower on account of any fronting fee and any reduction of the Foreign Currency Sublimit shall be made pro rata to the Foreign Currency Lenders.

        (b)    Each payment (including each prepayment) by the Borrower on account of principal of and interest on the Term Loans shall be made pro rata according to the respective outstanding principal amounts of the Term Loans then held by the Term Lenders. The amount of each principal prepayment of the Term Loans shall be applied to reduce the then remaining installments of the Term Loans pro rata based upon the then remaining principal amount thereof. Amounts repaid or prepaid on account of the Term Loans may not be reborrowed.

        (c)    Each payment (including each prepayment) by the Borrower on account of principal of and interest on the Revolving Loans shall be made pro rata according to the respective outstanding principal amounts of the Revolving Loans then held by the Revolving Lenders. Each payment in respect of Reimbursement Obligations in respect of any Letter of Credit shall be made to the Issuing Lender that issued such Letters of Credit. Each payment (including each prepayment) by the Borrower on account of principal of and interest on the Foreign Currency Loans shall be made pro rata according to the respective outstanding principal amounts of the Foreign Currency Loans then held by the Foreign Currency Lenders.

        (d)    All payments (including prepayments) to be made by the Borrower hereunder, whether on account of principal, interest, fees or otherwise, shall be made without setoff or counterclaim and shall be made prior to 12:00 Noon, New York City time, on the due date thereof to the Administrative Agent, for the account of the Lenders, at the Funding Office, in Dollars and in immediately available funds. The Administrative Agent shall distribute such payments to the Lenders or the Foreign Currency Lenders, as applicable, promptly upon receipt in like funds as received. If any payment hereunder (other than payments on the Eurocurrency Loans) becomes due and payable on a day other than a Business Day, such payment shall be extended to the next succeeding Business Day. If any payment on a Eurocurrency Loan becomes due and payable on a day other than a Business Day, the maturity thereof shall be extended to the next succeeding Business Day unless the result of such extension would be to extend such payment into another calendar month, in which event such payment shall be made on the immediately preceding Business Day. In the case of any extension of any payment of principal pursuant to the preceding two sentences, interest thereon shall be payable at the then applicable rate during such extension.

        (e)    Unless the Administrative Agent shall have been notified in writing by any Lender or Foreign Currency Lender prior to a borrowing that such Lender or Foreign Currency Lender will not make the amount that would constitute its share of such borrowing available to the Administrative Agent, the

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Administrative Agent may assume that such Lender or Foreign Currency Lender is making such amount available to the Administrative Agent, and the Administrative Agent may, in reliance upon such assumption, make available to the Borrower a corresponding amount. If such amount is not made available to the Administrative Agent by the required time on the Borrowing Date therefor, such Lender shall pay to the Administrative Agent, on demand, such amount with interest thereon at a rate equal to the daily average Federal Funds Effective Rate for the period until such Lender makes such amount immediately available to the Administrative Agent. If such amount is not made available to the Administrative Agent by the required time on the Borrowing Date therefor, such Foreign Currency Lender shall pay to the Administrative Agent, on demand, such amount with interest thereon at a rate per annum reasonably determined by the Administrative Agent to be the cost to it of funding such amount for the period until such Lender makes such amount immediately available to the Administrative Agent. A certificate of the Administrative Agent submitted to any Lender or Foreign Currency Lender with respect to any amounts owing under this paragraph shall be conclusive in the absence of manifest error. If such Lender's share of such borrowing is not made available to the Administrative Agent by such Lender within three Business Days of such Borrowing Date, the Administrative Agent shall also be entitled to recover such amount with interest thereon at the rate per annum applicable to Base Rate Loans under the relevant Facility, on demand, from the Borrower. If such Foreign Currency Lender's share of such borrowing is not made available to the Administrative Agent by such Foreign Currency Lender within three Business Days of such Borrowing Date, the Administrative Agent shall also be entitled to recover such amount with interest thereon at a rate per annum reasonably determined by the Administrative Agent to be the cost to it of funding such amount, on demand, from the Borrower.

        (f)    Unless the Administrative Agent shall have been notified in writing by the Borrower prior to the date of any payment due to be made by the Borrower hereunder that the Borrower will not make such payment to the Administrative Agent, the Administrative Agent may assume that the Borrower is making such payment, and the Administrative Agent may, but shall not be required to, in reliance upon such assumption, make available to the Lenders or the Foreign Currency Lenders their respective pro rata shares of a corresponding amount. If such payment is not made to the Administrative Agent by the Borrower within three Business Days after such due date, the Administrative Agent shall be entitled to recover, on demand, from each Lender to which any amount which was made available pursuant to the preceding sentence, such amount with interest thereon at the rate per annum equal to the daily average Federal Funds Effective Rate. If such payment is not made to the Administrative Agent by the Borrower within three Business Days after such due date, the Administrative Agent shall be entitled to recover, on demand, from each Foreign Currency Lender to which any amount which was made available pursuant to the preceding sentence, such amount with interest thereon at a rate per annum reasonably determined by the Administrative Agent to be the cost to it of funding such amount. Nothing herein shall be deemed to limit the rights of the Administrative Agent, any Lender or any Foreign Currency Lender against the Borrower.

        5.9.    Requirements of Law.    (a) If the adoption of or any change in any Requirement of Law or in the interpretation or application thereof or compliance by any Lender with any request or directive (whether or not having the force of law) from any central bank or other Governmental Authority made subsequent to the date hereof:

        (i)    shall subject any Lender to any tax of any kind whatsoever with respect to this Agreement, any Letter of Credit, any Application or any Eurocurrency Loan made by it, or change the basis of taxation of payments to such Lender in respect thereof (except for Non-Excluded Taxes covered by Section 5.10 and changes in the rate of tax on the overall net income of such Lender);

        (ii)    shall impose, modify or hold applicable any reserve, special deposit, compulsory loan or similar requirement against assets held by, deposits or other liabilities in or for the account of, advances, loans or other extensions of credit by, or any other acquisition of funds by, any office of such Lender that is not otherwise included in the determination of the Eurocurrency Rate hereunder; or

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        (iii)    shall impose on such Lender any other condition;

and the result of any of the foregoing is to increase the cost to such Lender, by an amount that such Lender deems to be material, of making, converting into, continuing or maintaining Eurocurrency Loans or issuing or participating in Letters of Credit or participating in Foreign Currency Loans, or to reduce any amount receivable hereunder in respect thereof, then, in any such case, the Borrower shall promptly pay such Lender, upon its demand, any additional amounts necessary to compensate such Lender for such increased cost or reduced amount receivable. If any Lender becomes entitled to claim any additional amounts pursuant to this paragraph, it shall promptly notify the Borrower (with a copy to the Administrative Agent) of the event by reason of which it has become so entitled.

        (b)    If any Lender shall have determined that the adoption of or any change in any Requirement of Law regarding capital adequacy or in the interpretation or application thereof or compliance by such Lender or any corporation controlling such Lender with any request or directive regarding capital adequacy (whether or not having the force of law) from any Governmental Authority made subsequent to the date hereof shall have the effect of reducing the rate of return on such Lender's or such corporation's capital as a consequence of its obligations hereunder or under or in respect of any Letter of Credit to a level below that which such Lender or such corporation could have achieved but for such adoption, change or compliance (taking into consideration such Lender's or such corporation's policies with respect to capital adequacy) by an amount deemed by such Lender to be material, then from time to time, after submission by such Lender to the Borrower (with a copy to the Administrative Agent) of a written request therefor, the Borrower shall pay to such Lender such additional amount or amounts as will compensate such Lender or such corporation for such reduction; provided that the Borrower shall not be required to compensate a Lender pursuant to this paragraph for any amounts incurred more than six months prior to the date that such Lender notifies the Borrower of such Lender's intention to claim compensation therefor; and provided, further, that, if the circumstances giving rise to such claim have a retroactive effect, then such six-month period shall be extended to include the period of such retroactive effect.

        (c)    If any Governmental Authority of the jurisdiction of any Foreign Currency (or any other jurisdiction in which the funding operations of any Foreign Currency Lender shall be conducted with respect to such Foreign Currency) shall have in effect any reserve, liquid asset or similar requirement with respect to any category of deposits or liabilities customarily used to fund loans in such Foreign Currency, or by reference to which interest rates applicable to loans in such Foreign Currency are determined, and the result of such requirement shall be to increase the cost to such Foreign Currency Lender of making or maintaining any Foreign Currency Loan in such Foreign Currency, and such Foreign Currency Lender shall deliver to the Borrower a notice requesting compensation under this paragraph, then the Borrower will pay to such Foreign Currency Lender on each Interest Payment Date with respect to each affected Foreign Currency Loan an amount that will compensate such Foreign Currency Lender for such additional cost.

        (d)    A certificate as to any additional amounts payable pursuant to this Section submitted by any Lender to the Borrower (with a copy to the Administrative Agent) setting forth the basis of calculation of such additional amounts shall be conclusive in the absence of manifest error. The obligations of the Borrower pursuant to this Section shall survive the termination of this Agreement and the payment of the Loans and all other amounts payable hereunder.

        (e)    Notwithstanding any other provision of this Agreement, if, (i) (A) the adoption of any law, rule or regulation after the date of this Agreement, (B) any change in any law, rule or regulation or in the interpretation or application thereof by any Governmental Authority after the date of this Agreement or (C) compliance by any Lender with any request, guideline or directive (whether or not having the force of law) of any Governmental Authority made or issued after the date of this Agreement, shall make it unlawful for any such Foreign Currency Lender to make or maintain any

39

Foreign Currency Loan or to give effect to its obligations as contemplated hereby with respect to any Foreign Currency Loan, or (ii) there shall have occurred any change in national or international financial, political or economic conditions (including the imposition of or any change in exchange controls, but excluding conditions otherwise covered by this Section 5.9) which would make it impracticable for any Foreign Currency Lenders to make or maintain Foreign Currency Loans denominated in the relevant currency after the date hereof to, or for the account of, the Borrower, then:

        (i)    by written notice to the Borrower and to the Administrative Agent, such Foreign Currency Lender or Foreign Currency Lenders may declare that Foreign Currency Loans (in the affected currency or currencies) will not thereafter (for the duration of such unlawfulness) be made by such Foreign Currency Lender or Foreign Currency Lenders hereunder (or be continued for additional Interest Periods), whereupon any request for a Foreign Currency Loan (in the affected currency or currencies) or to continue a Foreign Currency Loan (in the affected currency or currencies), as the case may be, for an additional Interest Period) shall, as to such Foreign Currency Lender or Foreign Currency Lenders only, be of no force and effect, unless such declaration shall be subsequently withdrawn; and

        (ii)    all outstanding Foreign Currency Loans (in the affected currency or currencies), made by such Foreign Currency Lender or Foreign Currency Lenders shall be repaid on the last day of the then current Interest Period with respect thereto or, if earlier, the date on which the applicable notice becomes effective.

        (f)    For purposes of Section 5.9(e), a notice to the Borrower by any Foreign Currency Lender shall be effective as to each Foreign Currency Loan made by such Foreign Currency Lender, if lawful, on the last day of the Interest Period currently applicable to such Foreign Currency Loan; in all other cases such notice shall be effective on the date of receipt thereof by the Borrower.

        5.10    Taxes.    (a) All payments made by the Borrower under this Agreement shall be made free and clear of, and without deduction or withholding for or on account of, any present or future income, stamp or other taxes, levies, imposts, duties, charges, fees, deductions or withholdings, now or hereafter imposed, levied, collected, withheld or assessed by any Governmental Authority, excluding net income taxes and franchise taxes (imposed in lieu of net income taxes) imposed on any Agent or any Lender as a result of a present or former connection between such Agent or such Lender and the jurisdiction of the Governmental Authority imposing such tax or any political subdivision or taxing authority thereof or therein (other than any such connection arising solely from such Agent or such Lender having executed, delivered or performed its obligations or received a payment under, or enforced, this Agreement or any other Loan Document). If any such non-excluded taxes, levies, imposts, duties, charges, fees, deductions or withholdings ("Non-Excluded Taxes") or Other Taxes are required to be withheld from any amounts payable to any Agent or any Lender hereunder, the amounts so payable to such Agent or such Lender shall be increased to the extent necessary to yield to such Agent or such Lender (after payment of all Non-Excluded Taxes and Other Taxes) interest or any such other amounts payable hereunder at the rates or in the amounts specified in this Agreement, provided, however, that the Borrower shall not be required to increase any such amounts payable to any Lender with respect to any Non-Excluded Taxes (i) that are attributable to such Lender's failure to comply with the requirements of paragraph (d) or (e) of this Section or (ii) that are United States withholding taxes imposed on amounts payable to such Lender at the time such Lender becomes a party to this Agreement or designates a new lending office, except to the extent that such Lender's assignor (if any) was entitled, at the time of assignment, to receive additional amounts from the Borrower with respect to such Non-Excluded Taxes pursuant to this paragraph.

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        (b)    In addition, the Borrower shall pay any Other Taxes to the relevant Governmental Authority in accordance with applicable law.

        (c)    Whenever any Non-Excluded Taxes or Other Taxes are payable by the Borrower, as promptly as possible thereafter the Borrower shall send to the Administrative Agent for its own account or for the account of the relevant Agent or Lender, as the case may be, a certified copy of an original official receipt received by the Borrower showing payment thereof. If the Borrower fails to pay any Non-Excluded Taxes or Other Taxes when due to the appropriate taxing authority or fails to remit to the Administrative Agent the required receipts or other required documentary evidence, the Borrower shall indemnify the Agents and the Lenders for any incremental taxes, interest or penalties that may become payable by any Agent or any Lender as a result of any such failure.

        (d)    Each Lender (or Transferee) that is not a "U.S. Person" as defined in Section 7701(a)(30) of the Code (a "Non-U.S. Lender") shall deliver to the Borrower and the Administrative Agent (or, in the case of a Participant, to the Lender from which the related participation shall have been purchased) two copies of either U.S. Internal Revenue Service Form W-8BEN or Form W-8ECI, or, in the case of a Non-U.S. Lender claiming exemption from U.S. federal withholding tax under Section 871(h) or 881(c) of the Code with respect to payments of "portfolio interest", a statement substantially in the form of Exhibit H and a Form W-8BEN, or any subsequent versions thereof or successors thereto, properly completed and duly executed by such Non-U.S. Lender claiming complete exemption from, or a reduced rate of, U.S. federal withholding tax on all payments by the Borrower under this Agreement and the other Loan Documents. Such forms shall be delivered by each Non-U.S. Lender on or before the date it becomes a party to this Agreement (or, in the case of any Participant, on or before the date such Participant purchases the related participation). In addition, each Non-U.S. Lender shall deliver such forms promptly upon the obsolescence or invalidity of any form previously delivered by such Non-U.S. Lender. Each Non-U.S. Lender shall promptly notify the Borrower at any time it determines that it is no longer in a position to provide any previously delivered certificate to the Borrower (or any other form of certification adopted by the U.S. taxing authorities for such purpose). Notwithstanding any other provision of this paragraph, a Non-U.S. Lender shall not be required to deliver any form pursuant to this paragraph that such Non-U.S. Lender is not legally able to deliver.

        (e)    A Lender that is entitled to an exemption from or reduction of non-U.S. withholding tax under the law of the jurisdiction in which the Borrower is located, or any treaty to which such jurisdiction is a party, with respect to payments under this Agreement shall deliver to the Borrower (with a copy to the Administrative Agent), at the time or times prescribed by applicable law or reasonably requested by the Borrower, such properly completed and executed documentation prescribed by applicable law as will permit such payments to be made without withholding or at a reduced rate, provided that such Lender is legally entitled to complete, execute and deliver such documentation and in such Lender's judgment such completion, execution or submission would not materially prejudice the legal position of such Lender.

        (f)    The agreements in this Section 5.10 shall survive the termination of this Agreement and the payment of the Loans and all other amounts payable hereunder.

        (g)    If any Lender or the Administrative Agent receives a refund attributable to any Non-Excluded Taxes or Other Taxes paid by the Borrower or for which the Lender or the Administrative Agent has received payment from the Borrower hereunder, such Lender or the Administrative Agent, within 30 days of such receipt, shall deliver to the Borrower the amount of such refund (including any interest paid by the relevant Governmental Authority with respect to such refund); provided however, that the Borrower agrees to repay the amount paid over to the Borrower (plus any penalties, interest or other charges imposed by the relevant Governmental Authority) to such Lender or the Administrative Agent in the event that such Lender or the Administrative Agent is required to repay such refund to such Governmental Authority. In addition, upon a written request by

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the Borrower, any Lender and the Administrative Agent shall timely execute and deliver to the Borrower such certificates, forms or other documents which can be reasonably furnished consistent with the facts to assist the Borrower in applying for refunds of Non-Excluded Taxes or Other Taxes remitted hereunder, unless to do so will unduly prejudice or cause undue hardship to such Lender or the Administrative Agent (as determined in the reasonable discretion of such Lender or the Administrative Agent). This paragraph shall not be construed to require any Lender or the Administrative Agent to make available its tax returns (or any other information relating to its Taxes that it deems confidential) to the Borrower or any other Person.

        5.11.    Indemnity.    The Borrower agrees to indemnify each Lender and to hold each Lender harmless from any loss or expense that such Lender may sustain or incur as a consequence of (a) default by the Borrower in making a borrowing of, conversion into or continuation of Eurocurrency Loans after the Borrower has given a notice requesting the same in accordance with the provisions of this Agreement, (b) default by the Borrower in making any prepayment of or conversion from Eurocurrency Loans after the Borrower has given a notice thereof in accordance with the provisions of this Agreement or (c) the making of a prepayment of Eurocurrency Loans or the conversion of Eurocurrency Loans pursuant to Section 3.18(a), in each case, on a day that is not the last day of an Interest Period with respect thereto. Such indemnification may include an amount equal to the excess, if any, of (i) the amount of interest that would have accrued on the amount so prepaid, or not so borrowed, converted or continued, for the period from the date of such prepayment or of such failure to borrow, convert or continue to the last day of such Interest Period (or, in the case of a failure to borrow, convert or continue, the Interest Period that would have commenced on the date of such failure) in each case at the applicable rate of interest for such Loans provided for herein (excluding, however, the Applicable Margin included therein, if any) over (ii) the amount of interest (as reasonably determined by such Lender) that would have accrued to such Lender on such amount by placing such amount on deposit for a comparable period with leading banks in the interbank Eurocurrency market. A certificate as to any amounts payable pursuant to this Section submitted to the Borrower by any Lender shall be conclusive in the absence of manifest error. This covenant shall survive the termination of this Agreement and the payment of the Loans and all other amounts payable hereunder.

        5.12.    Change of Lending Office.    Each Lender agrees that, upon the occurrence of any event giving rise to the operation of Section 5.9, 5.10(a) or 5.10(b) with respect to such Lender, it will, if requested by the Borrower, use reasonable efforts (subject to overall policy considerations of such Lender) to designate another lending office for any Loans affected by such event with the object of avoiding the consequences of such event; provided, that such designation is made on terms that, in the sole judgment of such Lender, cause such Lender and its lending office(s) to suffer no economic, legal or regulatory disadvantage, and provided, further, that nothing in this Section shall affect or postpone any of the obligations of the Borrower or the rights of any Lender pursuant to Section 5.9, 5.10(a) or 5.10(b).

        5.13.    Replacement of Lenders.    The Borrower shall be permitted to replace any Lender that (a) requests reimbursement for amounts owing pursuant to Section 5.9, 5.10(a) or 5.10(b) or (b) defaults in its obligation to make Loans hereunder, with a replacement financial institution; provided that (i) such replacement does not conflict with any Requirement of Law, (ii) no Event of Default shall have occurred and be continuing at the time of such replacement, (iii) prior to any such replacement, such Lender shall have taken no action under Section 5.12 so as to eliminate the continued need for payment of amounts owing pursuant to Section 5.9, 5.10(a) or 5.10(b), (iv) the replacement financial institution shall purchase, at par, all Loans and other amounts owing to such replaced Lender on or prior to the date of replacement, (v) the Borrower shall be liable to such replaced Lender under Section 5.11 if any Eurocurrency Loan owing to such replaced Lender shall be purchased other than on the last day of the Interest Period relating thereto, (vi) the replacement financial institution, if not already a Lender, shall be reasonably satisfactory to the Administrative

42

Agent, (vii) the replaced Lender shall be obligated to make such replacement in accordance with the provisions of Section 12.6, (viii) until such time as such replacement shall be consummated, the Borrower shall pay all additional amounts (if any) required pursuant to Section 5.9, 5.10(a) or 5.10(b), as the case may be, and (ix) any such replacement shall not be deemed to be a waiver of any rights that the Borrower, the Administrative Agent or any other Lender shall have against the replaced Lender.

        5.14.    Evidence of Debt.    (a) Each Lender shall maintain in accordance with its usual practice an account or accounts evidencing indebtedness of the Borrower to such Lender resulting from each Loan of such Lender from time to time, including the amounts of principal and interest payable and paid to such Lender from time to time under this Agreement.

        (b)    The Administrative Agent, on behalf of the Borrower, shall maintain the Register pursuant to Section 12.6(b), and a subaccount therein for each Lender, in which shall be recorded (i) the amount of each Loan made hereunder and any Note evidencing such Loan, the Type of such Loan and each Interest Period applicable thereto, (ii) the amount of any principal or interest due and payable or to become due and payable from the Borrower to each Lender hereunder and (iii) both the amount of any sum received by the Administrative Agent hereunder from the Borrower and each Lender's share thereof.

        (c)    The entries made in the Register and the accounts of each Lender maintained pursuant to Section 5.14(a) shall, to the extent permitted by applicable law, be prima facie evidence of the existence and amounts of the obligations of the Borrower therein recorded; provided, however, that the failure of any Lender or the Administrative Agent to maintain the Register or any such account, or any error therein, shall not in any manner affect the obligation of the Borrower to repay (with applicable interest) the Loans made to the Borrower by such Lender in accordance with the terms of this Agreement.

        (d)    The Borrower agrees that, upon the request to the Administrative Agent by any Lender, the Borrower will execute and deliver to such Lender a promissory note of the Borrower evidencing any Term Loans, Revolving Credit Loans or Swingline Loans, as the case may be, of such Lender, substantially in the forms of Exhibit I-1, I-2 or I-3, respectively, with appropriate insertions as to date and principal amount.

        5.15.    Illegality.    Notwithstanding any other provision herein, if the adoption of or any change in any Requirement of Law or in the interpretation or application thereof shall make it unlawful for any Lender to make or maintain Eurocurrency Loans as contemplated by this Agreement, (a) the commitment of such Lender hereunder to make Eurocurrency Loans, continue Eurocurrency Loans as such and convert Base Rate Loans to Eurocurrency Loans shall forthwith be canceled and (b) such Lender's Loans then outstanding as Eurocurrency Loans, if any, shall be converted automatically to Base Rate Loans on the respective last days of the then current Interest Periods with respect to such Loans or within such earlier period as required by law. If any such conversion of a Eurocurrency Loan occurs on a day which is not the last day of the then current Interest Period with respect thereto, the Borrower shall pay to such Lender such amounts, if any, as may be required pursuant to Section 5.11.

        5.16.    Foreign Currency Exchange Rate.    (a) No later than 1:00 P.M., New York City time, on each Calculation Date with respect to a Foreign Currency, the Administrative Agent shall determine the Exchange Rate as of such Calculation Date with respect to such Foreign Currency, provided that, upon receipt of a borrowing request pursuant to Section 3.16 or a request for a Letter of Credit denominated in a Foreign Currency pursuant to Section 3.8, the Administrative Agent shall determine the Exchange Rate with respect to the relevant Foreign Currency in accordance with the foregoing (it being acknowledged and agreed that the Administrative Agent shall use such Exchange Rate for the purposes of determining compliance with Section 3.15 with respect to such borrowing request or Application). The Exchange Rates so determined shall become effective on the first Business Day

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immediately following the relevant Calculation Date (a "Reset Date"), shall remain effective until the next succeeding Reset Date and shall for all purposes of this Agreement (other than Section 3.18(a), 5.7, 12.18 or any other provision expressly requiring the use of a current Exchange Rate) be the Exchange Rates employed in converting any amounts between Dollars and Foreign Currencies.

        (b)    No later than 5:00 P.M., New York City time, on each Reset Date and each Borrowing Date with respect to Foreign Currency Loans, the Administrative Agent shall determine the aggregate amount of the Dollar Equivalents of the principal amounts of the Foreign Currency Loans then outstanding (after giving effect to any Foreign Currency Loans to be made or repaid on such date and the aggregate amount of the L/C Obligations then outstanding).

        (c)    The Administrative Agent shall promptly notify the Borrower of each determination of an Exchange Rate hereunder.

SECTION 6.    REPRESENTATIONS AND WARRANTIES

        To induce the Agents and the Lenders to enter into this Agreement and to make the Loans and issue or participate in the Letters of Credit, the Borrower hereby represents and warrants to each Agent and each Lender that:

        6.1.    Financial Condition.    The audited consolidated balance sheets of the Borrower and its consolidated Subsidiaries as at December 31, 2000 and December 31, 2001, and the related consolidated statements of income and of cash flows for the fiscal years ended on such dates, reported on by and accompanied by an unqualified report from KPMG LLP, present fairly the consolidated financial condition of the Borrower and its consolidated Subsidiaries as at such date, and the consolidated results of its operations and its consolidated cash flows for the respective fiscal years then ended. The unaudited consolidated balance sheet of the Borrower and its consolidated Subsidiaries as at September 30, 2002, and the related unaudited consolidated statements of income and cash flows for the nine-month period ended on such date, present fairly the consolidated financial condition of the Borrower and its consolidated Subsidiaries as at such date, and the consolidated results of its operations and its consolidated cash flows for the nine-month period then ended (subject to normal year-end audit adjustments). All such financial statements, including the related schedules and notes thereto, have been prepared in accordance with GAAP applied consistently throughout the periods involved (except as approved by the aforementioned firm of accountants and disclosed therein). No Group Member has any material Guarantee Obligations, contingent liabilities and liabilities for taxes, or any long-term leases or unusual forward or long-term commitments, including any interest rate or foreign currency swap or exchange transaction or other obligation in respect of derivatives, that are not reflected in the most recent financial statements referred to in this paragraph or disclosed in Sections 6.2 through 6.22. During the period from December 31, 2001 to and including the date hereof there has been no Disposition by the Borrower and its consolidated Subsidiaries of any material part of its business or property.

        6.2.    No Change.    Since December 31, 2001 there has been no development or event that has had or could reasonably be expected to have a Material Adverse Effect.

        6.3.    Corporate Existence; Compliance with Law.    Each Group Member (a) is duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization, (b) has the power and authority, and the legal right, to own and operate its property, to lease the property it operates as lessee and to conduct the business in which it is currently engaged, (c) is duly qualified as a foreign corporation and in good standing under the laws of each jurisdiction where its ownership, lease or operation of property or the conduct of its business requires such qualification, except to the extent that the failure to so qualify could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect and (d) is in compliance with all Requirements of Law except to the extent

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that the failure to comply therewith could not, in the aggregate, reasonably be expected to have a Material Adverse Effect.

        6.4.    Power; Authorization; Enforceable Obligations.    Each Loan Party has the power and authority, and the legal right, to make, deliver and perform the Loan Documents to which it is a party and, in the case of the Borrower, to obtain extensions of credit hereunder. Each Loan Party has taken all necessary organizational action to authorize the execution, delivery and performance of the Loan Documents to which it is a party and, in the case of the Borrower, to authorize the extensions of credit on the terms and conditions of this Agreement. No consent or authorization of, filing with, notice to or other act by or in respect of, any Governmental Authority or any other Person is required in connection with the Refinancing and the extensions of credit hereunder or with the execution, delivery, performance, validity or enforceability of this Agreement or any of the Loan Documents, except (i) consents, authorizations, filings and notices described in Schedule 6.4, which consents, authorizations, filings and notices have been obtained or made and are in full force and effect and (ii) the filings referred to in Section 6.19. Each Loan Document has been duly executed and delivered on behalf of each Loan Party party thereto. This Agreement constitutes, and each other Loan Document upon execution will constitute, a legal, valid and binding obligation of each Loan Party party thereto, enforceable against each such Loan Party in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors' rights generally and by general equitable principles (whether enforcement is sought by proceedings in equity or at law).

        6.5.    No Legal Bar.    The execution, delivery and performance of this Agreement and the other Loan Documents, the issuance of Letters of Credit, the borrowings hereunder and the use of the proceeds thereof will not violate any Requirement of Law or any Contractual Obligation of any Group Member and will not result in, or require, the creation or imposition of any Lien on any of their respective properties or revenues pursuant to any Requirement of Law or any such Contractual Obligation (other than the Liens created by the Security Documents). No Requirement of Law or Contractual Obligation applicable to the Borrower or any of its Subsidiaries could reasonably be expected to have a Material Adverse Effect.

        6.6.    Litigation.    Except as described on Schedule 6.6, no litigation, investigation or proceeding of or before any arbitrator or Governmental Authority is pending or, to the knowledge of the Borrower, threatened by or against any Group Member or against any of their respective properties or revenues (a) with respect to any of the Loan Documents or any of the transactions contemplated hereby or thereby, or (b) that could reasonably be expected to have a Material Adverse Effect.

        6.7.    No Default.    No Group Member is in default under or with respect to any of its Contractual Obligations in any respect that could reasonably be expected to have a Material Adverse Effect. No Default or Event of Default has occurred and is continuing.

        6.8.    Ownership of Property; Liens.    Each Group Member has title in fee simple to, or a valid leasehold interest in, all its real property material to its business, and, to its knowledge, good title to, or a valid leasehold interest in, all its other property, and none of such property is subject to any Lien except as permitted by Section 9.3, and as set forth on Schedule B to each Title Policy.

        6.9.    Intellectual Property.    Each Group Member owns, or is licensed to use, all material Intellectual Property necessary for the conduct of its business as currently conducted. No claim has been asserted and is pending by any Person challenging or questioning the use of any Intellectual Property or the validity or effectiveness of any Intellectual Property, nor does the Borrower know of any valid basis for any such claim, except such claims that, individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect. To the knowledge of the Borrower, the use of Intellectual Property by each Group Member does not infringe on the rights of any Person in any material respect.

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        6.10.    Taxes.    Each Group Member has filed or caused to be filed all Federal, state and other material tax returns that are required to be filed and has paid all taxes shown to be due and payable on said returns or on any assessments made against it or any of its property and all other taxes, fees or other charges imposed on it or any of its property by any Governmental Authority (other than any taxes the amount or validity of which are currently being contested in good faith by appropriate proceedings and with respect to which reserves in conformity with GAAP have been provided on the books of the relevant Group Member); no tax Lien has been filed, and, to the knowledge of the Borrower, no claim is being asserted, with respect to any such tax, fee or other charge.

        6.11.    Federal Regulations.    No part of the proceeds of any Loans, and no other extensions of credit hereunder, will be used for "buying" or "carrying" any "margin stock" within the respective meanings of each of the quoted terms under Regulation U as now and from time to time hereafter in effect or for any purpose that violates the provisions of the Regulations of the Board. If requested by any Lender or the Administrative Agent, the Borrower will furnish to the Administrative Agent and each Lender a statement to the foregoing effect in conformity with the requirements of FR Form G-3 or FR Form U-1, as applicable, referred to in Regulation U.

        6.12.    Labor Matters.    Except as, in the aggregate, could not reasonably be expected to have a Material Adverse Effect: (a) there are no strikes or other labor disputes against any Group Member pending or, to the knowledge of the Borrower, threatened; (b) hours worked by and payment made to employees each Group Member have not been in violation of the Fair Labor Standards Act or any other applicable Requirement of Law dealing with such matters; and (c) all payments due from any Group Member on account of employee health and welfare insurance have been paid or accrued as a liability on the books of the relevant Group Member.

        6.13.    ERISA.    Neither a Reportable Event nor an "accumulated funding deficiency" (within the meaning of Section 412 of the Code or Section 302 of ERISA) has occurred during the five-year period prior to the date on which this representation is made or deemed made with respect to any Plan, and each Plan has complied in all material respects with the applicable provisions of ERISA and the Code. No termination of a Single Employer Plan has occurred, and no Lien in favor of the PBGC or a Plan has arisen, during such five-year period that would result in a material liability. The present value of all accrued benefits under each Single Employer Plan (based on those assumptions used to fund such Plans) did not, as of the last annual valuation date prior to the date on which this representation is made or deemed made, exceed the value of the assets of such Plan allocable to such accrued benefits by a material amount in relation to the business of the Borrower. Neither the Borrower nor any Commonly Controlled Entity has had a complete or partial withdrawal from any Multiemployer Plan that has resulted or could reasonably be expected to result in a material liability under ERISA, and neither the Borrower nor any Commonly Controlled Entity would become subject to any material liability under ERISA if the Borrower or any such Commonly Controlled Entity were to withdraw completely from all Multiemployer Plans as of the valuation date most closely preceding the date on which this representation is made or deemed made. No such Multiemployer Plan is in Reorganization or Insolvent.

        6.14.    Investment Company Act; Other Regulations.    No Loan Party is an "investment company", or a company "controlled" by an "investment company", within the meaning of the Investment Company Act of 1940, as amended. No Loan Party is subject to regulation under any Requirement of Law (other than Regulation X of the Board) that limits its ability to incur Indebtedness.

        6.15.    Subsidiaries.    Except as disclosed to the Administrative Agent by the Borrower in writing from time to time after the Closing Date, (a) Schedule 6.15(a) sets forth the name and jurisdiction of incorporation of each Subsidiary and, as to each such Subsidiary, the percentage of each class of Capital Stock owned by any Loan Party and (b) there are no outstanding subscriptions, options, warrants, calls, rights or other agreements or commitments (other than stock options granted to

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employees, directors or other persons and directors' qualifying shares) of any nature relating to any Capital Stock of the Borrower or any Subsidiary, except as created by the Loan Documents or, as of the Closing Date, except as disclosed on Schedule 6.15(b).

        6.16.    Use of Proceeds.    The proceeds of the Term Loans shall be used to finance the Refinancing, to pay fees and expenses related to the Refinancing and for general corporate purposes of the Borrower and its Subsidiaries. The proceeds of the Revolving Loans shall be used, together with the proceeds of the Swingline Loans and the Letters of Credit, for general corporate purposes of the Borrower and its Subsidiaries. The proceeds of the Foreign Currency Loans shall be used for general corporate purposes of the Borrower and its Subsidiaries.

        6.17.    Environmental Matters.    Except as, in the aggregate, could not reasonably be expected to have a Material Adverse Effect:

        (a)    the facilities and properties owned, leased or operated by any Group Member (the "Subject Properties") do not contain, and have not previously contained, any Materials of Environmental Concern in amounts or concentrations or under circumstances that constitute or constituted a violation of, or could reasonably be expected to give rise to liability under, any applicable Environmental Law;

        (b)    no Group Member has received or is aware of any notice of violation, alleged violation, non-compliance, liability or potential liability regarding environmental matters or compliance with Environmental Laws with regard to any of the Subject Properties or the business operated by any Group Member (the "Business"), nor does the Borrower have knowledge or reason to believe that any such notice will be received or is being threatened;

        (c)    Materials of Environmental Concern have not been transported or disposed of from the Subject Properties in violation of, or in a manner or to a location that could reasonably be expected to give rise to liability under, any applicable Environmental Law, nor have any Materials of Environmental Concern been generated, treated, stored or disposed of at, on or under any of the Subject Properties in violation of, or in a manner that could reasonably be expected to give rise to liability under, any applicable Environmental Law;

        (d)    no judicial proceeding or governmental or administrative action is pending or, to the knowledge of the Borrower, threatened, under any Environmental Law to which any Group Member is or, to the knowledge of the Borrower, will be named as a party with respect to the Subject Properties or the Business, nor are there any consent decrees or other decrees, consent orders, administrative orders or other orders, or other administrative or judicial requirements outstanding under any Environmental Law with respect to the Subject Properties or the Business;

        (e)    there has been no release or threat of release of Materials of Environmental Concern at or from the Subject Properties, or arising from or related to the operations of any Group Member in connection with the Subject Properties or otherwise in connection with the Business, in violation of or in amounts or in a manner that could reasonably be expected to give rise to liability under any applicable Environmental Laws;

        (f)    the Subject Properties and all operations at the Subject Properties are in compliance, and have in the last five years been in compliance, with all applicable Environmental Laws, and there is no violation of any applicable Environmental Law with respect to the Subject Properties or the Business; and

        (g)    no Group Member has assumed or retained any liability of any other Person under Environmental Laws.

        6.18.    Accuracy of Information, etc.    No statement or information contained in this Agreement, any other Loan Document, the Confidential Information Memorandum or any other document,

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certificate or statement furnished by or on behalf of any Loan Party to the Administrative Agent or the Lenders, or any of them, for use in connection with the transactions contemplated by this Agreement or the other Loan Documents, contained as of the date such statement, information, document or certificate was so furnished (or, in the case of the Confidential Information Memorandum, as of the date of this Agreement), any untrue statement of a material fact or omitted to state a material fact necessary to make the statements contained herein or therein not misleading. The projections contained in the materials referenced above are based upon good faith estimates and assumptions believed by management of the Borrower to be reasonable at the time made, it being recognized by the Lenders that such financial information as it relates to future events is not to be viewed as fact and that actual results during the period or periods covered by such financial information may differ from the projected results set forth therein by a material amount. There is no fact known to any Loan Party that could reasonably be expected to have a Material Adverse Effect that has not been expressly disclosed herein, in the other Loan Documents, in the Confidential Information Memorandum or in any other documents, certificates and statements furnished to the Administrative Agent and the Lenders for use in connection with the transactions contemplated hereby and by the other Loan Documents.

        6.19.    Security Documents.    (a) The Guarantee and Collateral Agreement is effective to create in favor of the Administrative Agent, for the benefit of the Lenders, a legal, valid and enforceable security interest in the Collateral described therein and proceeds thereof. In the case of the Pledged Stock described in the Guarantee and Collateral Agreement, when stock certificates representing such Pledged Stock are delivered to the Administrative Agent or such other action is taken with respect to Pledged Stock of Foreign Subsidiaries as specified in the Guarantee and Collateral Agreement, and in the case of the other Collateral described in the Guarantee and Collateral Agreement, when financing statements and other filings specified on Schedule 6.19(a) in appropriate form are filed in the offices specified on Schedule 6.19(a), the Guarantee and Collateral Agreement shall constitute a fully perfected Lien on, and security interest in, all right, title and interest of the Loan Parties in such Collateral and the proceeds thereof, as security for the Obligations (as defined in the Guarantee and Collateral Agreement), in each case prior and superior in right to any other Person (except, in the case of Collateral other than Pledged Stock, Liens permitted by Section 9.3).

        (b)    Each of the Mortgages is effective to create in favor of the Administrative Agent, for the benefit of the Lenders, a legal, valid and enforceable Lien on the Mortgaged Properties described therein and proceeds thereof, and when the Mortgages, together with the appropriate UCC financing statements filed in connection therewith, are filed in the offices specified on Schedule 6.19(b), each such Mortgage, together with the appropriate UCC financing statements filed in connection therewith, shall, at the time of such filings, constitute a fully perfected Lien on, and security interest in, all right, title and interest of the Loan Parties in the Mortgaged Properties and the proceeds thereof, as security for the Obligations (as defined in the relevant Mortgage), in each case prior and superior in right to any other Person, subject to the exceptions set forth on Schedule B to the applicable Title Policy and the Liens permitted under Section 9.3. Schedule 1.1(a) lists each parcel of real property in the United States owned in fee simple by the Borrower or any of its Subsidiaries as of the Closing Date.

        6.20.    Solvency.    Each Loan Party is, and after giving effect to the Refinancing and the incurrence of all Indebtedness and obligations being incurred in connection herewith and therewith will be and will continue to be, Solvent.

        6.21.    Senior Indebtedness.    The Obligations (x) constitute "Senior Debt" and "Designated Senior Debt" of the Borrower under and as defined in the Senior Subordinated Note Indenture and (y) are the only existing "Designated Senior Debt" under the Senior Subordinated Note Indenture. The obligations of each Subsidiary Guarantor under the Guarantee and Collateral Agreement constitute "Guarantor Senior Debt" of such Subsidiary Guarantor under and as defined in the Senior Subordinated Note Indenture.

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        6.22    Regulation H.    As of the Closing Date, except as specified on Schedule 6.22, no Mortgage encumbers improved real property that is located in an area that has been identified by the Secretary of Housing and Urban Development as an area having special flood hazards and in which flood insurance has been made available under the National Flood Insurance Act of 1968.

        6.23.    Material Contracts.    (a) As of the Closing Date, (i) each Material Contract is in full force and effect and is a legal, valid and binding obligation of each party thereto enforceable in accordance with its terms and (ii) no Group Member is in default of any material provision of any Material Contract.

        (b)    To the best knowledge of the Borrower, (i) there has been no default, breach or other violation of any Material Contract and (ii) no Governmental Authority has any basis for terminating any Material Contract other than customary termination provisions relating to convenience and other similar provisions, except, in each case, as could not reasonably be expected to have a Material Adverse Effect.

        (c)    To the best knowledge of the Borrower, no Governmental Authority has delivered notice of or otherwise demonstrated its intention to exercise its option to terminate a Material Contract on the basis of clause (b)(ii) above between itself and any of the Group Members, except for any such termination that could not reasonably be expected to have a Material Adverse Effect.

        (d)    Schedule 6.23 sets forth each material contract between any Group Member and any Governmental Authority in effect on the Closing Date.

SECTION 7.    CONDITIONS PRECEDENT

        7.1.    Conditions to Initial Extension of Credit.    The agreement of each Lender to make the initial extension of credit requested to be made by it is subject to the satisfaction, prior to or concurrently with the making of such extension of credit on the Closing Date (but in any event no later than December 31, 2002), of the following conditions precedent:

        (a)    Credit Agreement; Guarantee and Collateral Agreement.    The Syndication Agent shall have received (i) this Agreement executed and delivered by each Agent and the Borrower, (ii) the Guarantee and Collateral Agreement, executed and delivered by the Borrower and each Subsidiary Guarantor, (iii) an Acknowledgment and Consent in the form attached to the Guarantee and Collateral Agreement, executed and delivered by each Issuer (as defined therein), if any, that is not a Loan Party and (iv) an Addendum executed and delivered by each Lender and accepted by the Borrower.

        (b)    (i) The Syndication Agent shall have received satisfactory evidence that the Existing Credit Agreement shall have been terminated and all amounts thereunder shall have been paid in full and (ii) satisfactory arrangements shall have been made for the termination of all Liens granted in connection therewith.

        (c)    Financial Statements.    The Lenders shall have received (i) audited consolidated financial statements of the Borrower and its consolidated Subsidiaries for the 2000 and 2001 fiscal years and (ii) unaudited interim consolidated financial statements of the Borrower and its consolidated Subsidiaries for each quarterly period ended subsequent to the date of the latest applicable financial statements delivered pursuant to clause (i) of this paragraph as to which such financial statements are available, and such financial statements shall not, in the reasonable judgment of the Lenders, reflect any material adverse change in the consolidated financial condition of the Borrower and its consolidated Subsidiaries, as reflected in the financial statements or projections contained in the Confidential Information Memorandum (such receipt and judgment to be evidenced by such Lender's execution of this Agreement).

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        (d)    Approvals.    All governmental and third party approvals (including landlords' and other consents) necessary or advisable in connection with the Refinancing and the transactions contemplated hereby shall have been obtained and be in full force and effect, and all applicable waiting periods shall have expired without any action being taken or threatened by any competent authority that would restrain, prevent or otherwise impose material adverse conditions on the Refinancing or the financing contemplated hereby.

        (e)    Lien Searches.    The Syndication Agent and the Administrative Agent shall have received the results of a recent lien search in each of the jurisdictions where assets of the Loan Parties are located, and such search shall reveal no liens on any of the assets of the Loan Parties except for liens permitted by Section 9.3 or discharged on or prior to the Closing Date pursuant to documentation satisfactory to the Syndication Agent and the Administrative Agent.

        (f)    Fees.    The Lenders and the Agents shall have received all fees required to be paid in respect of this Agreement, and all expenses for which invoices have been presented (including the reasonable fees and expenses of legal counsel) in respect of this Agreement, on or before the Closing Date. All such amounts will be paid with proceeds of Loans made on the Closing Date and will be reflected in the funding instructions given by the Borrower to the Syndication Agent on or before the Closing Date.

        (g)    Closing Certificates.    The Syndication Agent shall have received (i) a certificate of each Loan Party, dated the Closing Date, substantially in the form of Exhibit C, with appropriate insertions and attachments and (ii) a certificate of the Borrower, dated the Closing Date, certifying that the representations set forth in Section 6.23 are true and correct on and as of the Closing Date without giving effect to the Material Adverse Effect qualifications set forth therein.

        (h)    Legal Opinions.    The Syndication Agent shall have received the following executed legal opinions:

        (i)    the legal opinion of Kramer Levin Naftalis & Frankel LLP, counsel to the Borrower and its Subsidiaries, substantially in the form of Exhibit G-1;

        (ii)    the legal opinion of Martin E. Schloss, general counsel of the Borrower and its Subsidiaries, substantially in the form of Exhibit G-2;

        (iii)    the legal opinion of local counsel in each of Georgia and Connecticut and of such other special and local counsel as may be required by the Syndication Agent.

Each such legal opinion shall cover such other matters incident to the transactions contemplated by this Agreement as the Syndication Agent may reasonably require.

        (i)    Pledged Stock; Stock Powers; Pledged Notes.    The Administrative Agent shall have received (i) the certificates representing the shares of Capital Stock pledged pursuant to the Guarantee and Collateral Agreement, together with an undated stock power for each such certificate executed in blank by a duly authorized officer of the pledgor thereof and (ii) each promissory note (if any) pledged to the Administrative Agent pursuant to the Guarantee and Collateral Agreement endorsed (without recourse) in blank (or accompanied by an executed transfer form in blank) by the pledgor thereof or such other action is taken with respect to Pledged Stock of Foreign Subsidiaries as specified in the Guarantee and Collateral Agreement.

        (j)    Filings, Registrations and Recordings.    Subject to Section 8.12, each document (including any Uniform Commercial Code financing statement) required by the Security Documents or under law or reasonably requested by the Syndication Agent or the Administrative Agent to be filed, registered or recorded in order to create in favor of the Administrative Agent, for the benefit of the Lenders, a perfected Lien on the Collateral described therein, prior and superior in right to

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any other Person (other than with respect to Liens expressly permitted by Section 9.3), shall be in proper form for filing, registration or recordation.

        (k)    Mortgages, etc.    (i) The Syndication Agent shall have received a Mortgage with respect to each Mortgaged Property, executed and delivered by a duly authorized officer of each party thereto.

        (ii)    If requested by the Syndication Agent, the Syndication Agent shall have received, and the title insurance company issuing the Title Policy (the "Title Insurance Company") shall have received, maps or plats of an as-built survey of the sites of the Mortgaged Properties certified to the Administrative Agent and the Title Insurance Company in a manner satisfactory to them, dated a date satisfactory to the Syndication Agent and the Title Insurance Company by an independent professional licensed land surveyor satisfactory to the Syndication Agent and the Title Insurance Company, which maps or plats and the surveys on which they are based shall be made in accordance with the Minimum Standard Detail Requirements for Land Title Surveys jointly established and adopted by the American Land Title Association and the American Congress on Surveying and Mapping in 1992, and, without limiting the generality of the foregoing, there shall be surveyed and shown on such maps, plats or surveys the following: (A) the locations on such sites of all the buildings, structures and other improvements and the established building setback lines; (B) the lines of streets abutting the sites and width thereof; (C) all access and other easements appurtenant to the sites; (D) all roadways, driveways, easements, encroachments and overhanging projections and similar encumbrances affecting the site, whether recorded or apparent from a physical inspection of the sites; (E) any encroachments on any adjoining property by the building structures and improvements on the sites; (F) if the site is described as being on a filed map, a legend relating the survey to said map; and (G) the flood zone designations, if any, in which the Mortgaged Properties are located.

        (iii)    The Syndication Agent shall have received in respect of each Mortgaged Property a mortgagee's title insurance policy (or policies) or marked up unconditional binder for such insurance (the "Title Policy"). Each such policy shall (A) be in the amount set forth on Schedule 7.1(k) (the "Title Policy Insured Amount"); (B) insure that the Mortgage insured thereby creates a valid first Lien on such Mortgaged Property free and clear of all defects and encumbrances, except as disclosed therein; (C) name the Administrative Agent for the benefit of the Lenders as the insured thereunder; (D) be in the form of ALTA Loan Policy—1992; (E) contain such endorsements and affirmative coverage as the Syndication Agent may reasonably request and (F) be issued by title companies satisfactory to the Syndication Agent (including any such title companies acting as co-insurers or reinsurers, at the option of the Syndication Agent). The Syndication Agent shall have received evidence satisfactory to it that all premiums in respect of each such policy, all charges for mortgage recording tax, and all related expenses, if any, have been paid.

        (iv)    If requested by the Syndication Agent, the Syndication Agent shall have received (A) confirmation that the Borrower has received the notice required pursuant to Section 208(e)(3) of Regulation H of the Board and (B) a policy of flood insurance that (1) covers any parcel of improved real property that is encumbered by any Mortgage and located in a flood zone and (2) is written in an amount not less than the Title Policy Insured Amount or the maximum limit of coverage made available with respect to the particular type of property under the National Flood Insurance Act of 1968, whichever is less. Borrower shall maintain or cause to be maintained the flood insurance required under this Section until the maturity of the Indebtedness secured by the Mortgages.

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        (v)    The Syndication Agent shall have received a copy of all recorded documents referred to, or listed as exceptions to title in each Title Policy.

        (l)    Insurance.    The Syndication Agent shall have received insurance certificates satisfying the requirements of Section 5.3(b) of the Guarantee and Collateral Agreement.

        7.2.    Conditions to Each Extension of Credit.    The agreement of each Lender to make any extension of credit requested to be made by it on any date (including its initial extension of credit) is subject to the satisfaction of the following conditions precedent:

        (a)    Representations and Warranties.    Each of the representations and warranties made by any Loan Party in or pursuant to the Loan Documents shall be true and correct on and as of such date as if made on and as of such date.

        (b)    No Default.    No Default or Event of Default shall have occurred and be continuing on such date or after giving effect to the extensions of credit requested to be made on such date.

Each borrowing by and issuance of a Letter of Credit on behalf of the Borrower hereunder shall constitute a representation and warranty by the Borrower as of the date of such extension of credit that the conditions contained in this Section 7.2 have been satisfied.

SECTION 8.    AFFIRMATIVE COVENANTS

        The Borrower hereby agrees that, so long as the Commitments remain in effect, any Letter of Credit remains outstanding or any Loan or other amount is owing to any Lender or Agent hereunder, the Borrower shall and shall cause each of its Subsidiaries to:

        8.1.    Financial Statements.    Furnish to the Administrative Agent for distribution to each Lender:

        (a)    as soon as available, but in any event within 90 days after the end of each fiscal year of the Borrower, a copy of the audited consolidated balance sheet of the Borrower and its consolidated Subsidiaries as at the end of such year and the related audited consolidated statements of income and of cash flows for such year, setting forth in each case in comparative form the figures for the previous year, reported on without a "going concern" or like qualification or exception, or qualification arising out of the scope of the audit, by KPMG LLC or other independent certified public accountants of nationally recognized standing; and

        (b)    as soon as available, but in any event not later than 45 days after the end of each of the first three quarterly periods of each fiscal year of the Borrower, the unaudited consolidated balance sheet of the Borrower and its consolidated Subsidiaries as at the end of such quarter and the related unaudited consolidated statements of income and of cash flows for such quarter and the portion of the fiscal year through the end of such quarter, setting forth in each case in comparative form the figures for the previous year, certified by a Responsible Officer as being fairly stated in all material respects (subject to normal year-end audit adjustments).

All such financial statements shall be complete and correct in all material respects and shall be prepared in reasonable detail and in accordance with GAAP.

        8.2.    Certificates; Other Information.    Furnish to the Administrative Agent for distribution to each Lender (or, in the case of clause (g), to the relevant Lender):

        (a)    concurrently with the delivery of the financial statements referred to in Section 8.1(a), a certificate of the independent certified public accountants reporting on such financial statements stating that in making the examination necessary therefor no knowledge was obtained of any Default or Event of Default, except as specified in such certificate;

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        (b)    concurrently with the delivery of any financial statements pursuant to Section 8.1, (i) a certificate of a Responsible Officer stating that, to the best of each such Responsible Officer's knowledge, each Loan Party during such period has observed or performed all of its covenants and other agreements, and satisfied every condition, contained in this Agreement and the other Loan Documents to which it is a party to be observed, performed or satisfied by it, and that such Responsible Officer has obtained no knowledge of any Default or Event of Default except as specified in such certificate and (ii) a Compliance Certificate containing all information and calculations necessary for determining compliance by each Group Member with the provisions of this Agreement referred to therein as of the last day of the fiscal quarter or fiscal year of the Borrower, as the case may be, and, if applicable, for determining the Applicable Margins and Commitment Fee Rate, and (iii) to the extent not previously disclosed to the Administrative Agent, a listing of any Intellectual Property acquired by any Loan Party since the date of the most recent list delivered pursuant to this clause (iii) (or, in the case of the first such list so delivered, since the Closing Date);

        (c)    as soon as available, and in any event no later than 30 days after the end of each fiscal year of the Borrower, a detailed consolidated budget for the following fiscal year (including a projected consolidated balance sheet of the Borrower and its Subsidiaries as of the end of the following fiscal year, the related consolidated statements of projected cash flow, projected changes in financial position and projected income and a description of the underlying assumptions applicable thereto) (collectively, the "Projections"), which Projections shall in each case be accompanied by a certificate of a Responsible Officer stating that such Projections are based on reasonable estimates, information and assumptions and that such Responsible Officer has no reason to believe that such Projections are incorrect in any material respect in light of the circumstances under which such estimates and assumptions were made;

        (d)    if at any time the Borrower is not required to file periodic reports with the SEC pursuant to Section 13 or 15(d) of the Exchange Act, within 90 days after the end of each fiscal year of the Borrower and within 45 days after the end of each other fiscal quarter of the Borrower, a narrative discussion and analysis of the financial condition and results of operations of the Borrower and its Subsidiaries for such fiscal quarter and for the period from the beginning of the then current fiscal year to the end of such fiscal quarter, as compared to the comparable periods of the previous year;

        (e)    no later than ten Business Days prior to the effectiveness thereof, copies of substantially final drafts of any proposed amendment, supplement, waiver or other modification with respect to the Senior Subordinated Note Indenture;

        (f)    within five days after the same are sent, copies of all financial statements and reports that the Borrower sends to the holders of any class of its debt securities or public equity securities and, within five days after the same are filed, copies of all financial statements and reports the Borrower may make to, or file with, the SEC; and

        (g)    promptly, such additional financial and other information as any Lender through the Administrative Agent may from time to time reasonably request.

        8.3.    Payment of Obligations.    Pay, discharge or otherwise satisfy at or before maturity or before they become delinquent, as the case may be, all its material obligations of whatever nature, except where the amount or validity thereof is currently being contested in good faith by appropriate proceedings and reserves in conformity with GAAP with respect thereto have been provided on the books of the relevant Group Member.

        8.4.    Maintenance of Existence; Compliance.    (a) (i) Preserve, renew and keep in full force and effect its corporate existence and (ii) take all reasonable action to maintain all rights, privileges and

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franchises necessary or desirable in the normal conduct of its business, except, in each case, as otherwise permitted by Section 9.4 and except, in the case of clause (ii) above, to the extent that failure to do so could not reasonably be expected to have a Material Adverse Effect; and (b) comply with all Contractual Obligations and Requirements of Law except to the extent that failure to comply therewith could not, in the aggregate, reasonably be expected to have a Material Adverse Effect.

        8.5.    Maintenance of Property; Insurance.    (a) Keep all Property material to the conduct of its business in good working order and condition, ordinary wear and tear excepted and (b) maintain with financially sound and reputable insurance companies insurance on all its property in at least such amounts and against at least such risks (but including in any event public liability, product liability and business interruption) as are usually insured against in the same general area by companies engaged in the same or a similar business.

        8.6.    Inspection of Property; Books and Records; Discussions.    (a) Keep proper books of records and account in which full, true and correct entries in conformity with GAAP and all material Requirements of Law shall be made of all dealings and transactions in relation to its business and activities and (b) permit representatives of any Lender to visit and inspect any of its properties and examine and make abstracts from any of its books and records at any reasonable time during regular business hours upon reasonable notice and as often as may reasonably be desired and to discuss the business, operations, properties and financial and other condition of the Group Members with responsible officers of the Group Members and with their independent certified public accountants, provided that, so long as no Default or Event of Default has occurred and is continuing, such visits, inspections and examinations by any such Lender shall be coordinated through the Administrative Agent and shall not exceed two visits each year.

        8.7.    Notices.    Promptly give notice to the Administrative Agent, the Syndication Agent and each Lender of:

        (a)    the occurrence of any Default or Event of Default;

        (b)    any (i) default or event of default under any Contractual Obligation of any Group Member of which any Group Member has knowledge or notice or (ii) litigation, investigation or proceeding that may exist at any time between any Group Member and any Governmental Authority of which any Group Member has knowledge or notice, which in either case, if not cured or if adversely determined, as the case may be, could reasonably be expected to have a Material Adverse Effect;

        (c)    any litigation or proceeding affecting any Group Member of which any Group Member has knowledge or notice (i) in which the amount involved is $2,000,000 or more and not covered by insurance, (ii) in which injunctive or similar relief is sought, which, if adversely determined, could reasonably be expected to have a Material Adverse Effect or (iii) which relates to any Loan Document;

        (d)    the following events, as soon as possible and in any event within 30 days after the Borrower knows or has reason to know thereof: (i) the occurrence of any Reportable Event with respect to any Plan, a failure to make any required contribution to a Plan, the creation of any Lien in favor of the PBGC or a Plan or any withdrawal from, or the termination, Reorganization or Insolvency of, any Multiemployer Plan if the Borrower could reasonably be expected to incur any material liabilities as a result of any such event or (ii) the institution of proceedings or the taking of any other action by the PBGC or the Borrower or any Commonly Controlled Entity or any Multiemployer Plan with respect to the withdrawal from, or the termination, Reorganization or Insolvency of, any Plan if the Borrower could reasonably be expected to incur any material liabilities as a result of any such event; and

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        (e)    any development or event that has had or could reasonably be expected to have a Material Adverse Effect.

Each notice pursuant to this Section 8.7 shall be accompanied by a statement of a Responsible Officer setting forth details of the occurrence referred to therein and stating what action the Borrower or the relevant Subsidiary proposes to take with respect thereto.

        8.8.    Environmental Laws.    (a) Comply in all material respects with, and use reasonable efforts to ensure compliance in all material respects by all tenants and subtenants, if any, with, all applicable Environmental Laws, and obtain and comply in all material respects with and maintain, and use reasonable efforts to ensure that all tenants and subtenants obtain and comply in all material respects with and maintain, any and all licenses, approvals, notifications, registrations or permits required by applicable Environmental Laws.

        (b)    Conduct and complete all investigations, studies, sampling and testing, and all remedial, removal and other actions required under applicable Environmental Laws and promptly comply in all respects with all orders and directives of all Governmental Authorities regarding Environmental Laws, provided, however, that the Borrower shall not be deemed in violation of this clause (b) if it promptly challenges any such order or directive of any Governmental Authorities in a manner consistent with Environmental Laws and pursues such challenge or challenges diligently and the pendency of such challenges, in the aggregate, could not reasonably be expected to have a Material Adverse Effect.

        (c)    Generate, use, treat, store, release, dispose of, and otherwise manage Materials of Environmental Concern in a manner that would not reasonably be expected to result in a material liability to, or to materially affect any real property owned or operated by, any Group Member; and take reasonable efforts to prevent any other person from generating, using, treating, storing, releasing, disposing of, or otherwise managing Hazardous Materials in a manner that could reasonably be expected to result in a material liability to, or materially affect any real property owned or operated by, any Group Member.

        8.9.    Additional Collateral, etc.    (a) With respect to any property acquired after the Closing Date by any Group Member (other than (x) any property described in paragraph (b), (c), (d), or (e) below, (y) any property subject to a Lien expressly permitted by Section 9.3(m) or 9.3(p)) and (z) property acquired by any Foreign Subsidiary) as to which the Administrative Agent, for the benefit of the Lenders, does not have a perfected Lien, promptly (i) execute and deliver to the Administrative Agent such amendments to the Guarantee and Collateral Agreement or such other documents as the Administrative Agent reasonably deems necessary or advisable to grant to the Administrative Agent, for the benefit of the Lenders, a security interest in such property and (ii) take all actions necessary or advisable to grant to the Administrative Agent, for the benefit of the Lenders, a perfected first priority security interest in such property, including the filing of Uniform Commercial Code financing statements in such jurisdictions as may be required by the Guarantee and Collateral Agreement or by law or as may be requested by the Administrative Agent.

        (b)    With respect to any fee interest in any real property having a value (together with improvements thereof) of at least $500,000 acquired after the Closing Date by any Group Member (other than (x) any such real property subject to a Lien expressly permitted by Section 9.3(m) and (z) real property acquired by any Foreign Subsidiary), promptly (i) execute and deliver a first priority Mortgage, in favor of the Administrative Agent, for the benefit of the Lenders, covering such real property, (ii) if requested by the Administrative Agent, provide the Lenders with (x) title insurance covering such real property in an amount at least equal to the purchase price of such real property (or such other amount as shall be reasonably specified by the Administrative Agent) as well as a current ALTA survey thereof, together with a surveyor's certificate and (y) any consents or estoppels reasonably deemed necessary or advisable by the Administrative Agent in connection with such Mortgage, each of the foregoing in form and substance reasonably satisfactory to the Administrative Agent and (iii) if

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requested by the Administrative Agent, deliver to the Administrative Agent legal opinions relating to the matters described above, which opinions shall be in form and substance, and from counsel, reasonably satisfactory to the Administrative Agent.

        (c)    With respect to any new Subsidiary (other than a Foreign Subsidiary or a non-Wholly Owned Subsidiary) created or acquired after the Closing Date by any Group Member (which, for the purposes of this paragraph (c), shall include any existing Subsidiary that ceases to be a Foreign Subsidiary or any non-Wholly Owned Subsidiary that provides a guarantee of any Indebtedness of the Borrower or any of its Subsidiaries (other than the Loans) after the Closing Date), promptly (i) execute and deliver to the Administrative Agent such amendments to the Guarantee and Collateral Agreement as the Administrative Agent deems necessary or advisable to grant to the Administrative Agent, for the benefit of the Lenders, a perfected first priority security interest in the Capital Stock of such new Subsidiary that is owned by any Group Member, (ii) deliver to the Administrative Agent the certificates representing such Capital Stock, together with undated stock powers, in blank, executed and delivered by a duly authorized officer of the relevant Group Member or take such other action with respect to Pledged Stock of Foreign Subsidiaries necessary to perfect the first priority security interest of the Administrative Agent in such Pledged Stock, (iii) cause such new Subsidiary (A) to become a party to the Guarantee and Collateral Agreement, (B) to take such actions necessary or advisable to grant to the Administrative Agent for the benefit of the Lenders a perfected first priority security interest in the Collateral described in the Guarantee and Collateral Agreement with respect to such new Subsidiary, including the filing of Uniform Commercial Code financing statements in such jurisdictions as may be required by the Guarantee and Collateral Agreement or by law or as may be requested by the Administrative Agent and (C) to deliver to the Administrative Agent a certificate of such Subsidiary, substantially in the form of Exhibit C, with appropriate insertions and attachments, and (iv) if requested by the Administrative Agent, deliver to the Administrative Agent legal opinions relating to the matters described above, which opinions shall be in form and substance, and from counsel, reasonably satisfactory to the Administrative Agent.

        (d)    With respect to any Domestic Subsidiary created or acquired after the Closing Date by any Group Member that does not become a Subsidiary Guarantor pursuant to Section 8.9(c), promptly (i) execute and deliver to the Administrative Agent such amendments to the Guarantee and Collateral Agreement as the Administrative Agent deems necessary or advisable to grant to the Administrative Agent, for the benefit of the Lenders, a perfected first priority security interest in the Capital Stock of such new Subsidiary that is owned by any such Group Member, (ii) deliver to the Administrative Agent the certificates representing such Capital Stock, together with undated stock powers, in blank, executed and delivered by a duly authorized officer of the relevant Group Member, as the case may be, and take such other action as may be necessary or, in the opinion of the Administrative Agent, desirable to perfect the Administrative Agent's security interest therein, and (iii) if requested by the Administrative Agent, deliver to the Administrative Agent legal opinions relating to the matters described above, which opinions shall be in form and substance, and from counsel, reasonably satisfactory to the Administrative Agent.

        (e)    With respect to any new Foreign Subsidiary created or acquired after the Closing Date by any Group Member, promptly (i) execute and deliver to the Administrative Agent such amendments to the Guarantee and Collateral Agreement as the Administrative Agent deems necessary or advisable to grant to the Administrative Agent, for the benefit of the Lenders, a perfected first priority security interest in the Capital Stock of such new Subsidiary that is owned by any such Group Member (provided that in no event shall more than 65% of the total outstanding Capital Stock of any such new Subsidiary be required to be so pledged), (ii) deliver to the Administrative Agent the certificates representing such Capital Stock, together with undated stock powers, in blank, executed and delivered by a duly authorized officer of the relevant Group Member, or take such other action with respect to Pledged Stock of Foreign Subsidiaries necessary to perfect the first priority security interest of the

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Administrative Agent in such Pledged Stock, as the case may be, and take such other action as may be necessary or, in the reasonable opinion of the Administrative Agent, desirable to perfect the Administrative Agent's security interest therein, and (iii) if requested by the Administrative Agent, deliver to the Administrative Agent legal opinions relating to the matters described above, which opinions shall be in form and substance, and from counsel, reasonably satisfactory to the Administrative Agent.

        8.10.    Further Assurances.    From time to time execute and deliver, or cause to be executed and delivered, such additional instruments, certificates or documents, and take all such actions, as the Administrative Agent may reasonably request for the purposes of implementing or effectuating the provisions of this Agreement and the other Loan Documents, or of more fully perfecting or renewing the rights of the Administrative Agent and the Lenders with respect to the Collateral (or with respect to any additions thereto or replacements or proceeds thereof or with respect to any other property or assets hereafter acquired by the Borrower or any Subsidiary which may be deemed to be part of the Collateral) pursuant hereto or thereto. Upon the exercise by the Administrative Agent or any Lender of any power, right, privilege or remedy pursuant to this Agreement or the other Loan Documents which requires any consent, approval, recording qualification or authorization of any Governmental Authority, the Borrower will execute and deliver, or will cause the execution and delivery of, all applications, certifications, instruments and other documents and papers that the Administrative Agent or such Lenders may be required to obtain from the Borrower or any of its Subsidiaries for such governmental consent, approval, recording, qualification or authorization.

        8.11.    Connecticut Lottery Corporation.    Use its commercially reasonable efforts to procure, within 60 days after the Closing Date, an agreement among the Borrower, the Connecticut Lottery Corporation ("CLC") and the Administrative Agent substantially similar to that certain agreement, dated as of December 22, 2000, among CLC, the Borrower, Autotote Lottery Corporation and DLJ Capital Funding, Inc. and otherwise reasonably satisfactory in form and substance to the Administrative Agent.

        8.12.    Pledge of Foreign Subsidiary Stock.    To the extent not otherwise satisfied on the Closing Date with respect to the Foreign Subsidiaries of the Borrower and each Subsidiary Guarantor, no later than 120 days after the Closing Date, the Borrower shall, and shall cause each of its Subsidiary Guarantors directly owning a Foreign Subsidiary to, deliver to the Administrative Agent pledge documents executed with respect to the Capital Stock of each such Foreign Subsidiary and any other document or instrument reasonably requested by the Administrative Agent and take any other actions specified in the Guarantee and Collateral Agreement necessary to grant to the Administrative Agent a perfected Lien on such Capital Stock, all in form and substance reasonably satisfactory to the Administrative Agent.

        8.13.    Post-Closing Matters.    (a) No later than 10 Business Days after the Closing Date, Borrower shall cause Scientific Games International, Inc. ("SGII") (i) to deliver to the Administrative Agent a certificate of a responsible officer of SGII (w) attaching a true and complete copy of the agreement between SGII and Bridgeport Jai Alai, Inc. d/b/a Shoreline Star Greyhound Park and Entertainment Complex ("Shoreline") pursuant to which Shoreline has agreed to be responsible for a certain portion of SGII's personal property taxes, (x) certifying the aggregate amount of tax owed to the City of Bridgeport, Tax Collector as evidenced by UCC financing statement file number 2148563, filed with the Secretary of State of the State of Connecticut on July 15, 2002 (the "CT UCC"), (y) certifying as to the aggregate amount of tax for which each of Shoreline and SGII is responsible pursuant to the agreement referred to in clause (w) and (z) attaching a true and correct copy of the order permitting Shoreline to pay such taxes on a deferred basis and (ii) to use its best efforts to cause a termination statement to be filed terminating the CT UCC.

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        (b)    No later than 15 Business Days after the Closing Date, (i) the Borrower shall deliver to the Administrative Agent a certificate representing the Capital Stock of Scientific Games Holdings Corp., a Delaware corporation ("SGHC"), (ii) the Borrower shall cause SGHC to deliver to the Administrative Agent a certificate representing the Capital Stock of Scientific Games UK Holdings LTD, a corporation organized under the laws of the United Kingdom, and (iii) the Borrower shall cause SGII to deliver to the Administrative Agent a certificate representing the Capital Stock of Scientific Connections India Private Limited, a corporation organized under the laws of India, in each case, as described in Schedule 2 to the Guarantee and Collateral Agreement, together with undated stock powers, in blank, executed and delivered by a duly authorized officer of the Borrower, SGHC or SGII, as the case may be.

SECTION 9.    NEGATIVE COVENANTS

        The Borrower hereby agrees that, so long as the Commitments remain in effect, any Letter of Credit remains outstanding or any Loan or other amount is owing to any Lender or Agent hereunder, the Borrower shall not, and shall not permit any of its Subsidiaries to, directly or indirectly:

        9.1.    Financial Condition Covenants.

        (a)    Consolidated Leverage Ratio.    Permit the Consolidated Leverage Ratio as at the last day of any period of four consecutive fiscal quarters of the Borrower ending with any fiscal quarter set forth below to exceed the ratio set forth below opposite such fiscal quarter:

Fiscal Quarter	Consolidated Leverage Ratio
December 31, 2002	4.00 to 1.00
March 31, 2003	4.00 to 1.00
June 30, 2003	4.00 to 1.00
September 30, 2003	3.75 to 1.00
December 31, 2003	3.75 to 1.00
March 31, 2004	3.50 to 1.00
June 30, 2004	3.50 to 1.00
September 30, 2004	3.25 to 1.00
December 31, 2004	3.25 to 1.00
March 31, 2005	3.25 to 1.00
June 30, 2005	3.25 to 1.00
September 30, 2005	3.00 to 1.00
December 31, 2005	3.00 to 1.00
March 31, 2006	3.00 to 1.00
June 30, 2006	3.00 to 1.00
September 30, 2006	3.00 to 1.00
December 31, 2006 and thereafter	3.00 to 1.00

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        (b)    Consolidated Interest Coverage Ratio.    Permit the Consolidated Interest Coverage Ratio for any period of four consecutive fiscal quarters of the Borrower ending with any fiscal quarter set forth below to be less than the ratio set forth below opposite such fiscal quarter:

Fiscal Quarter	Consolidated Interest Leverage Ratio
December 31, 2002	2.50 to 1.00
March 31, 2003	2.75 to 1.00
June 30, 2003	3.00 to 1.00
September 30, 2003	3.25 to 1.00
December 31, 2003	3.50 to 1.00
March 31, 2004	3.50 to 1.00
June 30, 2004	3.50 to 1.00
September 30, 2004	3.75 to 1.00
December 31, 2004	3.75 to 1.00
March 31, 2005	3.75 to 1.00
June 30, 2005	3.75 to 1.00
September 30, 2005	3.75 to 1.00
December 31, 2005	3.75 to 1.00
March 31, 2006	3.75 to 1.00
June 30, 2006	3.75 to 1.00
September 30, 2006	3.75 to 1.00
December 31, 2006 and thereafter	3.75 to 1.00

        (c)    Consolidated Fixed Charge Coverage Ratio.    Permit the Consolidated Fixed Charge Coverage Ratio for any period of four consecutive fiscal quarters of the Borrower ending with any fiscal quarter set forth below to be less than the ratio set forth below opposite such fiscal quarter:

Fiscal Quarter	Charge Coverage Ratio
December 31, 2002	1.65 to 1.00
March 31, 2003	1.65 to 1.00
June 30, 2003	1.65 to 1.00
September 30, 2003	1.70 to 1.00
December 31, 2003	1.70 to 1.00
March 31, 2004	1.70 to 1.00
June 30, 2004	1.70 to 1.00
September 30, 2004	1.75 to 1.00
December 31, 2004	1.75 to 1.00
March 31, 2005	1.75 to 1.00
June 30, 2005	1.75 to 1.00
September 30, 2005	1.80 to 1.00
December 31, 2005	1.80 to 1.00
March 31, 2006	1.80 to 1.00
June 30, 2006	1.80 to 1.00
September 30, 2006	1.85 to 1.00
December 31, 2006 and thereafter	1.85 to 1.00

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        (d)    Consolidated Senior Debt Ratio.    Permit the Consolidated Senior Debt Ratio as at the last day of any period of four consecutive fiscal quarters of the Borrower ending with any fiscal quarter set forth below to exceed the ratio set forth below opposite such fiscal quarter:

Fiscal Quarter	Consolidated Senior Debt Ratio
December 31, 2002	3.25 to 1.00
March 31, 2003	3.25 to 1.00
June 30, 2003	3.25 to 1.00
September 30, 2003	3.00 to 1.00
December 31, 2003	3.00 to 1.00
March 31, 2004	3.00 to 1.00
June 30, 2004	3.00 to 1.00
September 30, 2004	2.75 to 1.00
December 31, 2004	2.75 to 1.00
March 31, 2005	2.75 to 1.00
June 30, 2005	2.75 to 1.00
September 30, 2005	2.50 to 1.00
December 31, 2005	2.50 to 1.00
March 31, 2006	2.50 to 1.00
June 30, 2006	2.50 to 1.00
September 30, 2006	2.50 to 1.00
December 31, 2006 and thereafter	2.50 to 1.00

        9.2.    Indebtedness.    Create, issue, incur, assume, become liable in respect of or suffer to exist any Indebtedness, except:

        (a)    Indebtedness of any Loan Party pursuant to any Loan Document;

        (b)    Indebtedness (i) of the Borrower to any Subsidiary, (ii) of any Subsidiary Guarantor to the Borrower or any other Subsidiary, (iii) of any Non-Guarantor Subsidiary to any other Non-Guarantor Subsidiary and (iv) subject to Section 9.8(j), of any Non-Guarantor Subsidiary to the Borrower or any Subsidiary Guarantor;

        (c)    Guarantee Obligations incurred in the ordinary course of business by the Borrower or any of its Subsidiaries of obligations of the Borrower, any Subsidiary Guarantor and, subject to Section 9.8(j), of any Non-Guarantor Subsidiary;

        (d)    Indebtedness outstanding on the date hereof and listed on Schedule 9.2(d) and any refinancings, refundings, renewals or extensions thereof (without increasing, or shortening the maturity of, the principal amount thereof);

        (e)    Indebtedness (including, without limitation, Capital Lease Obligations) secured by Liens permitted by Section 9.3(m) in an aggregate principal amount not to exceed $20,000,000 at any one time outstanding;

        (f)    (i) Indebtedness of the Borrower in respect of the Senior Subordinated Notes in an aggregate principal amount not to exceed $67,043,125 and (ii) Guarantee Obligations of any Subsidiary Guarantor in respect of such Indebtedness, provided that such Guarantee Obligations

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are subordinated to the same extent as the obligations of the Borrower in respect of the Senior Subordinated Notes;

        (g)    Hedge Agreements permitted by Section 9.16.

        (h)    additional Indebtedness of the Borrower or any of the Subsidiary Guarantors in an aggregate principal amount (for the Borrower and all Subsidiary Guarantors) not to exceed $20,000,000 at any one time outstanding;

        (i)    Indebtedness of Scientific Games International Limited ("SGIL")in respect of mortgage financing of real property and improvements located in Quayside Thwaitgate, Leeds LS10, England (the "UK Property") and any equipment located on the UK Property, including costs, fees and expenses related to such Indebtedness in an aggregate amount not to exceed $20,000,000 at any one time outstanding, provided that, such Indebtedness is recourse solely to the UK Property and the equipment located on the UK Property;

        (j)    additional Indebtedness of Foreign Subsidiaries and Non-Guarantor Subsidiaries in an aggregate principal amount (for all such Foreign Subsidiaries) not to exceed $15,000,000 at any one time outstanding, provided that, any such Indebtedness is non-recourse to the Borrower and its Domestic Subsidiaries; and

        (k)    Indebtedness consisting of indemnities relating to surety bonds issued in the ordinary course of business.

        9.3.    Liens.    Create, incur, assume or suffer to exist any Lien upon any of its property, whether now owned or hereafter acquired, except for:

        (a)    Liens for taxes, assessments, governmental charges or claims not yet due or that are being contested in good faith by appropriate proceedings, provided that adequate reserves with respect thereto are maintained on the books of the Borrower or its Subsidiaries, as the case may be, in conformity with GAAP;

        (b)    carriers', warehousemen's, mechanics', materialmen's, repairmen's, statutory bank liens, rights of set-off or other like Liens arising in the ordinary course of business that are not overdue for a period of more than 30 days or that are being contested in good faith by appropriate proceedings;

        (c)    pledges or deposits in connection with workers' compensation, unemployment insurance and other social security legislation and letters of credit issued in lieu of such deposits in the ordinary course of business;

        (d)    deposits to secure the performance of bids, trade contracts (other than for borrowed money), leases, statutory obligations, surety and appeal bonds, performance bonds and other obligations of a like nature incurred in the ordinary course of business;

        (e)    easements, rights-of-way, restrictions and other similar encumbrances incurred in the ordinary course of business that, in the aggregate, are not substantial in amount and that do not in any case materially detract from the value of the property subject thereto or materially interfere with the ordinary conduct of the business of the Borrower or any of its Subsidiaries;

        (f)    attachment or judgment Liens not constituting an Event of Default under Section 10; provided that such Lien is released within 60 days after the entry thereof;

        (g)    Liens in favor of customs and revenue authorities to secure payment of customs duties in connection with the importation of goods that are not overdue for a period of more than 30 days or that are being contested in good faith by appropriate proceedings; provided that, such Liens do not encumber any property other than the goods subject to such customs duties;

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        (h)    zoning or similar laws or right reserved to or vested in any Governmental Authority to control or regulate the use of any real property;

        (i)    Liens securing obligations (other than obligations representing Indebtedness for borrowed money) under operating, reciprocal easement or similar agreements entered into in the ordinary course of business of the Borrower and its Subsidiaries;

        (j)    licenses of Intellectual Property granted by the Borrower or any of its Subsidiaries in the ordinary course of business which do not interfere in any material respect with the ordinary conduct of the business of the Borrower or such Subsidiary;

        (k)    Liens securing Indebtedness of any Non-Guarantor Subsidiary permitted by (i) Section 9.2(i), to the extent such Lien encumbers only the UK Property and the equipment located on the UK Property and (ii) Section 9.2(j), to the extent such Lien does not at any time encumber any property other than the property of such Non-Guarantor Subsidiary;

        (l)    Liens in existence on the date hereof listed on Schedule 9.3(l), securing Indebtedness permitted by Section 9.2(d), provided that no such Lien is spread to cover any additional property after the Closing Date and that the amount of Indebtedness secured thereby is not increased;

        (m)    Liens securing Indebtedness of the Borrower or any other Subsidiary incurred pursuant to Section 9.2(e) to finance the acquisition or manufacture of fixed or capital assets, provided that (i) such Liens shall be created within 90 days of the acquisition or manufacture of such fixed or capital assets, (ii) such Liens do not at any time encumber any property other than the property financed by such Indebtedness and (iii) the amount of Indebtedness secured thereby is not subsequently increased;

        (n)    Liens created pursuant to the Security Documents;

        (o)    any interest or title of a lessor under any lease entered into by the Borrower or any other Subsidiary in the ordinary course of its business and covering only the assets so leased; and

        (p)    Liens securing Indebtedness of the Borrower or any Subsidiary Guarantors incurred pursuant to Section 9.2(h) so long as neither (i) the aggregate outstanding principal amount of the obligations secured thereby nor (ii) the aggregate fair market value (determined as of the date such Lien is incurred) of the assets subject thereto exceeds (as to the Borrower and all Subsidiaries) $15,000,000 at any one time.

        9.4.    Fundamental Changes.    Enter into any merger, consolidation or amalgamation, or liquidate, wind up or dissolve itself (or suffer any liquidation or dissolution), or Dispose of, all or substantially all of its property or business, except that:

        (a)    any Subsidiary of the Borrower may be merged or consolidated with or into the Borrower (provided that the Borrower shall be the continuing or surviving Person) or with or into any Subsidiary Guarantor (provided that the Subsidiary Guarantor shall be the continuing or surviving corporation) or, subject to Section 9.8(j), with or into any Foreign Subsidiary or Non-Guarantor Subsidiary; notwithstanding the foregoing, any Non-Guarantor Subsidiary may be merged or consolidated with another Non-Guarantor Subsidiary without limitation;

        (b)    any Subsidiary of the Borrower may Dispose of any or all of its assets (upon voluntary liquidation or otherwise) to the Borrower or any Subsidiary Guarantor or, subject to Section 9.8(j), any Non-Guarantor Subsidiary; notwithstanding the foregoing, any Non-Guarantor Subsidiary may Dispose of any or all of its assets (upon voluntary liquidation or otherwise) to another Non-Guarantor Subsidiary without limitation; and

        (c)    any Subsidiary may liquidate, wind up or dissolve after the Disposition of all of its assets as set forth in Section 9.4(b).

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        9.5.    Disposition of Property.    Dispose of any of its Property, whether now owned or hereafter acquired, or, in the case of any Subsidiary, issue or sell any shares of such Subsidiary's Capital Stock to any Person, except:

        (a)    the Disposition of obsolete or worn out Property in the ordinary course of business;

        (b)    the sale of inventory in the ordinary course of business;

        (c)    Dispositions permitted by Section 9.4(b);

        (d)    the sale or issuance of any Subsidiary's Capital Stock to the Borrower or any Subsidiary Guarantor;

        (e)    (i) the Disposition of other Property (other than any sale of less than all of the Capital Stock of any Subsidiary then owned by the Group Members) or (ii) the Disposition of minority interests in joint ventures or any Non-Guarantor Subsidiary, having a fair market value not to exceed $20,000,000 in the aggregate for any fiscal year of the Borrower, provided that, (A) the aggregate amount of all such Dispositions shall not exceed $60,000,000 during the term of this Agreement, (B) the consideration received in any such Disposition shall be in an amount at least equal to the fair market value of such Property, (C) at least 80% of the consideration received in any such Disposition shall be in cash, provided that the amount of such consideration required to be paid in cash may be reduced to 50% so long as the remaining portion of such consideration is comprised of debt or equity securities of the acquiring Person; and provided further that Dispositions of other Property for an amount of up to $2,000,000 in any fiscal year shall not be subject to this clause (C) and (D) the Net Cash Proceeds of any such Dispositions shall be applied to prepay Term Loans to the extent required pursuant to Section 5.2(c); and

        (f)    (i) the shares of Scientific Games International GmbH may be transferred to Scientific Games International Holdings LTD ("SGIH") in exchange for shares of SGIH and a promissory note and (ii) Scientific Games Holding Corp. may sell all of the shares of Scientific Games UK Holdings LTD to SGIH in exchange for shares of SGIH and a promissory note (each, a "Tax Reorganization"), provided that, (w) prior to any Tax Reorganization, the Borrower shall have delivered, and shall have caused the related Subsidiaries to deliver, to the Administrative Agent copies or originals, as applicable, of all documents and certificates necessary, or in the reasonable opinion of the Administrative Agent, desirable to consummate such Tax Reorganization, including (1) new schedules to this Agreement and the Guarantee and Collateral Agreement necessary to give effect to such Tax Reorganization which will replace the related existing schedules upon the consummation of such Tax Reorganization, (2) a pledge of all Indebtedness under each intercompany promissory note, if any, entered into in connection with such Tax Reorganization, (3) certified copies of all organizational documents and constitutional documents of each applicable Subsidiary (to the extent not previously delivered), (4) certified copies of all board resolutions and shareholder resolutions (if applicable), and all approvals and consents applicable or required to consummate such Tax Reorganization in England, Wales or Austria, as the case may be and (5) such other documents as the Administrative Agent may reasonably request, (x) concurrently with the consummation of any Tax Reorganization, the Borrower shall have delivered, and shall have caused the related Subsidiaries to deliver, to the Administrative Agent executed copies of all documents and certificates required to be delivered pursuant to Section 8.9, (y) all such documents and certificates shall be in form and substance reasonably satisfactory to the Administrative Agent and (z) the Borrower shall, and shall cause its Subsidiaries to, comply in all respects with the requirements of Section 8.9 to the extent such Section relates to such Tax Reorganization and the Subsidiaries affected thereby.

        9.6.    Restricted Payments.    Declare or pay any dividend (other than dividends payable solely in common stock of the Person making such dividend) on, or make any payment on account of, or set

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apart assets for a sinking or other analogous fund for, the purchase, redemption, defeasance, retirement or other acquisition of, any Capital Stock of any Group Member, whether now or hereafter outstanding, or make any other distribution in respect thereof, either directly or indirectly, whether in cash or property or in obligations of any Group Member (collectively, "Restricted Payments"), except that:

        (a)    any Subsidiary may make Restricted Payments to the Borrower or any Subsidiary Guarantor;

        (b)    the Borrower may repurchase (x) shares of its Capital Stock to the extent that such repurchase is deemed to occur upon the exercise of stock options to acquire the Borrower's common stock or similar arrangements to acquire common stock; provided that, such repurchased Capital Stock represent a portion of the exercise price thereof and, provided further, that, no cash is expended (or obligation to expend cash is incurred) by the Borrower or any of its subsidiaries pursuant to this clause (x), and (y) shares of the Borrower's Capital Stock held by directors, executive officers, members of management or employees of the Borrower or any of its Subsidiaries upon the death, disability, retirement or termination of employment of such directors, executive officers, members of management or employees, so long as (1) immediately prior to, and after giving effect to such repurchase, no Default or Event of Default shall have occurred or is continuing and (2) the aggregate amount of cash expended by the Borrower pursuant to this clause (y) does not exceed $2,000,000 in any fiscal year of the Borrower;

        (c)    the Borrower may make withholding tax payments on behalf of the holders of the Convertible Preferred Stock solely to the extent required in connection with the payment by the Borrower of payment-in-kind dividends on the Convertible Preferred Stock; provided that, the aggregate amount of such withholding tax payments made by the Borrower shall not exceed (x) $1,000,000 during any fiscal year of the Borrower or (y) $5,000,000 during the period from the Closing Date through and including December 31, 2005, and, provided further, that prior to the Borrower making any such withholding tax payments in any fiscal year, the holders of the Convertible Preferred Stock shall have previously made, or transferred to the Borrower adequate funds so that the Borrower may make on behalf of the holders of the Convertible Preferred Stock, withholding tax payments in an amount equal to at least 10% of the fair market value of such payment-in-kind dividends;

        (d)    the Borrower may pay cash dividends on its Convertible Preferred Stock in an aggregate amount not to exceed the then unused Permitted Expenditure Amount at such time (after giving effect to any concurrent uses thereof), provided that, (x) no Default or Event of Default shall have occurred and be continuing immediately prior to and after giving effect to such Restricted Payment and (y) after giving effect to the proposed Restricted Payment and any repurchase or redemption of the Senior Subordinated Notes pursuant to Section 9.9(a) on the date of such Restricted Payment, if applicable, the Consolidated Senior Debt Ratio on a pro forma basis shall be at least 0.5 below the then current level required by Section 9.1(d); and

        (e)    the Borrower may make Restricted Payments to pay payment-in-kind dividends on its Convertible Preferred Stock.

        9.7.    Capital Expenditures.    Make any Capital Expenditure, except:

        (a)    Capital Expenditures of the Borrower and its Subsidiaries in the ordinary course of business (other than Capital Expenditures permitted by Section 9.7(b)) in an aggregate amount not exceeding $25,000,000 in any fiscal year of the Borrower commencing on or after January 1, 2003; provided, that (i) 50% of any amount not so expended in the fiscal year for which it is permitted, may be carried over for expenditure in the next succeeding fiscal year and (ii) Capital Expenditures made pursuant to this clause (a) during any fiscal year shall be deemed made, first, in

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respect of amounts permitted for such fiscal year as provided above and, second, in respect of amounts carried over from the prior fiscal year pursuant to subclause (i) above;

        (b)    Capital Expenditures of the Borrower and its Subsidiaries in connection with any New Contract in an aggregate amount not exceeding the sum of (i) $30,000,000 plus (ii) the then unused Permitted Expenditure Amount at such time (after giving effect to any concurrent uses thereof) for each contract, provided that, no Default or Event of Default shall have occurred and be continuing at the time the Borrower and its Subsidiaries enters into such new contract; and

        (c)    Capital Expenditures made with the proceeds of any Reinvestment Deferred Amount.

        9.8.    Investments.    Make any advance, loan, extension of credit (by way of guaranty or otherwise) or capital contribution to, or purchase any Capital Stock, bonds, notes, debentures or other debt securities of, or any assets constituting a business unit of, or make any other investment in, any Person (all of the foregoing, "Investments"), except:

        (a)    extensions of trade credit in the ordinary course of business;

        (b)    (i) Investments in Cash Equivalents and (ii) other Investments in Foreign Currencies held in the ordinary course of business in the aggregate amount not to exceed the Dollar Equivalent of $1,000,000 at any time, which Investments would otherwise constitute Cash Equivalents but for the sovereign debt rating of the country issuing such Foreign Currency;

        (c)    Guarantee Obligations permitted by Section 9.2;

        (d)    loans and advances to employees of any Group Member of the Borrower in the ordinary course of business (including for travel, entertainment and relocation expenses) in an aggregate amount for all Group Members not to exceed $2,000,000 at any one time outstanding;

        (e)    Investments consisting of Capital Expenditures permitted by Section 9.7;

        (f)    Investments outstanding on the date hereof and listed on Schedule 9.8(f);

        (g)    Investments consisting of non-cash consideration received by the Borrower and its Subsidiaries in connection with any Disposition of assets permitted under Section 9.5(e) in an aggregate amount not to exceed $15,000,000 at any one time outstanding (determined without regard to any write-downs or write-offs thereof);

        (h)    Investments in assets useful in the business of the Borrower and its Subsidiaries made by the Borrower or any of its Subsidiaries with the proceeds of any Reinvestment Deferred Amount;

        (i)    intercompany Investments by any Group Member in the Borrower or any Person that, prior to such Investment, is a Subsidiary Guarantor;

        (j)    intercompany Investments by the Borrower or any of its Subsidiaries in any Person, that, prior to such Investment, is a Non-Guarantor Subsidiary (including, without limitation, Guarantee Obligations with respect to obligations of any such Non-Guarantor Subsidiary, loans made to any such Non-Guarantor Subsidiary and Investments resulting from mergers with or sales of assets to any such Non-Guarantor Subsidiary) in an aggregate amount (valued at cost) not to exceed $25,000,000 at any one time outstanding during the term of this Agreement, excluding the amount of any such Investment in a Foreign Subsidiary that is a holding company with no material assets, liabilities or operations (a "Foreign Holdco") other than an equity Investment in another Foreign Subsidiary that is a direct, wholly-owned Subsidiary of such Foreign Holdco ("Foreign Holdco Subsidiary") to the extent such Investment by the Borrower or such Subsidiaries in Foreign Holdco is equal to or less than the equity Investment of Foreign Holdco in such Foreign Holdco Subsidiary;

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        (k)    Investments consisting of acquisitions of Capital Stock or assets pursuant to a Permitted Acquisition, provided that, (x) the aggregate amount of cash consideration paid for all such acquisitions shall not exceed $100,000,000 during the term of this Agreement, (y) the aggregate amount of any such Investment or series of Investments in any Domestic Subsidiary shall not exceed $60,000,000 and (z) the aggregate amount of all such Investments in Non-Guarantor Subsidiaries shall not exceed $30,000,000 during the term of this Agreement;

        (l)    Investments in joint ventures (other than pursuant to Section 9.8(j)) in an aggregate amount not to exceed $10,000,000 in any fiscal year of the Borrower; provided that, (i) 50% of any amount not so expended in the fiscal year for which it is permitted, may be carried over for use in the next succeeding fiscal year and (ii) Investments made pursuant to this clause (l) during any fiscal year shall be deemed made, first, in respect of amounts permitted for such fiscal year as provided above and, second, in respect of amounts carried over from the prior fiscal year pursuant to subclause (i) above;

        (m)    minority Investments in the securities of any trade creditor, wholesaler, supplier or customer received pursuant to any plan of reorganization or similar arrangement of such trade creditor, wholesaler, supplier or customer, as applicable;

        (n)    in addition to Investments otherwise expressly permitted by this Section, Investments by the Borrower or any of its Subsidiaries in an aggregate amount (valued at cost) not to exceed $15,000,000 during the term of this Agreement; and

        (o)    the acquisition (the "MDI Acquisition") of all the outstanding Capital Stock of MDI Entertainment, Inc. ("MDI"), provided that, (i) the aggregate amount of cash consideration paid in the MDI Acquisition shall not exceed $18,500,000 and (ii) upon consummation of the MDI Acquisition, (x) MDI shall become a Wholly Owned Subsidiary of the Borrower and (y) the Borrower has performed, or has caused to be performed, all actions necessary to comply with Section 8.9 herein, including, but not limited to, promptly executing and delivering to the Administrative Agent an amendment or supplement to the Guarantee and Collateral Agreement, in each case, in form and substance reasonably satisfactory to the Administrative Agent.

        9.9    Optional Payments and Modifications of Certain Debt Instruments.    (a) Make or offer to make any optional or voluntary payment, prepayment, repurchase or redemption of or otherwise optionally or voluntarily defease or segregate funds with respect to the Senior Subordinated Notes or the Convertible Preferred Stock, provided that, the Borrower may repurchase or redeem Senior Subordinated Notes in an aggregate principal amount not to exceed an amount equal to the then unused Permitted Expenditure Amount at such time (after giving effect to any concurrent uses thereof) so long as, (x) no Default or Event of Default shall have occurred and be continuing or would result therefrom and (y) after giving effect to the proposed repurchase or redemption of the Senior Subordinated Notes or any Restricted Payment made pursuant to Section 9.6(d) on the date of such repurchase or redemption, if applicable, the Consolidated Senior Debt Ratio on a pro forma basis shall be at least 0.5 below the then current level required by Section 9.1(d), (b) amend, modify, waive or otherwise change, or consent or agree to any amendment, modification, waiver or other change to, any of the terms of the Senior Subordinated Notes (other than any such amendment, modification, waiver or other change that (i) would extend the maturity or reduce the amount of any payment of principal thereof or reduce the rate or extend any date for payment of interest thereon or would eliminate any covenant or make any covenant less restrictive and (ii) does not involve the payment of a consent fee), (c) amend, modify, waive or otherwise change, or consent or agree to any amendment, modification, waiver or other change to, any of the terms of the Convertible Preferred Stock (other than any such amendment, modification, waiver or other change that (x) (i) would extend the scheduled redemption date or reduce the amount of any scheduled redemption payment or reduce the rate or extend any date for payment of dividends thereon or would eliminate any covenant or make any covenant less restrictive

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and (ii) does not involve the payment of a consent fee or (y) is otherwise not material or adverse to the Lenders as determined by the Administrative Agent in its sole discretion), (d) designate any Indebtedness (other than obligations of the Loan Parties pursuant to the Loan Documents) as "Designated Senior Debt" (or any other defined term having a similar purpose) for the purposes of the Senior Subordinated Note Indenture or (e) amend, modify, waive or otherwise change, or consent or agree to any amendment, modification, waiver or other change to, any of the terms of the Preferred Stock Purchase Agreement, other than any amendment, modification, waiver or other change that is neither material or adverse to the Lenders.

        9.10.    Transactions with Affiliates.    Enter into any transaction, including any purchase, sale, lease or exchange of property, the rendering of any service or the payment of any management, advisory or similar fees, with any Affiliate (other than the Borrower or any Subsidiary Guarantor) unless such transaction is (a) otherwise permitted under this Agreement, (b) in the ordinary course of business of the relevant Group Member, and (c) upon fair and reasonable terms no less favorable to the relevant Group Member, than it would obtain in a comparable arm's length transaction with a Person that is not an Affiliate.

        9.11.    Sales and Leasebacks.    Enter into any arrangement with any Person providing for the leasing by any Group Member of real or personal property that has been or is to be sold or transferred by such Group Member to such Person or to any other Person to whom funds have been or are to be advanced by such Person on the security of such property or rental obligations of such Group Member, other than any such arrangement that (i) if such arrangement is a Capital Lease Obligation, is permitted pursuant to Section 9.2(e), (ii) the consideration received from such arrangement is at least equal to the fair market value of the property sold as determined in good faith by the Borrower's board of directors, provided that prior consent of the board of directors shall be obtained if such fair market value was determined to be in excess of $1,000,000 and (iii) the Net Cash Proceeds derived from such arrangement shall be applied toward the prepayment of the Term Loans as set forth in Section 5.2(c).

        9.12.    Changes in Fiscal Periods.    Permit the fiscal year of the Borrower to end on a day other than December 31 or change the Borrower's method of determining fiscal quarters.

        9.13.    Negative Pledge Clauses.    Enter into or suffer to exist or become effective any agreement that prohibits or limits the ability of any Group Member to create, incur, assume or suffer to exist any Lien upon any of its property or revenues, whether now owned or hereafter acquired, to secure its obligations under the Loan Documents to which it is a party other than (a) this Agreement and the other Loan Documents, (b) any agreements governing any Liens or Capital Lease Obligations otherwise permitted under Sections 9.3(l), (m) and (o), provided that, in each case, any prohibition or limitation shall only be effective against the assets financed thereby, (c) to the extent existing on the Closing Date, contracts with customers prohibiting Liens on any equipment used in the performance of any such contracts set forth on Schedule 9.13(c), (d) to the extent existing on the Closing Date, contracts with customers prohibiting the assignment of such contracts or proceeds owing thereunder set forth on Schedule 9.13(d) and (e) to the extent contracts of the type described in clause (c) or (d) hereof are entered into after the Closing Date, any such contracts (and any renewals thereof) so long as the aggregate value of the assets subject to such prohibitions, in each case as set forth on the most recent consolidated balance sheet of the Borrower and its consolidated Subsidiaries in accordance with GAAP, shall not exceed 5% of the aggregate value of all assets set forth on the most recent consolidated balance sheet of the Borrower and its consolidated Subsidiaries in accordance with GAAP.

        9.14.    Clauses Restricting Subsidiary Distributions.    Enter into or suffer to exist or become effective any consensual encumbrance or restriction on the ability of any Subsidiary of the Borrower to (a) make Restricted Payments in respect of any Capital Stock of such Subsidiary held by, or pay any Indebtedness owed to, the Borrower or any other Subsidiary of the Borrower, (b) make loans or

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advances to, or other Investments in, the Borrower or any other Subsidiary of the Borrower or (c) transfer any of its assets to the Borrower or any other Subsidiary of the Borrower, except for such encumbrances or restrictions existing under or by reason of (i) any restrictions existing under the Loan Documents and (ii) any restrictions with respect to a Subsidiary imposed pursuant to an agreement that has been entered into in connection with the Disposition of all or substantially all of the Capital Stock or assets of such Subsidiary.

        9.15.    Lines of Business.    Enter into any business, either directly or through any Subsidiary, except for those businesses in which the Borrower and its Subsidiaries are engaged on the date of this Agreement or that are reasonably related thereto and business utilizing the same or similar technology.

        9.16.    Hedge Agreements.    Enter into any Hedge Agreement, except (a) Hedge Agreements entered into by the Borrower to hedge or mitigate risks to which the Borrower or any Subsidiary has actual exposure (other than those in respect of Capital Stock or the Senior Subordinated Notes) and (b) Hedge Agreements entered into in order to effectively cap, collar or exchange interest or currency rates (from fixed to floating rates, from one floating rate to another floating rate or otherwise) with respect to any interest-bearing liability or investment of the Borrower or any Subsidiary.

SECTION 10.    EVENTS OF DEFAULT

        If any of the following events shall occur and be continuing:

        (a)    the Borrower shall fail to pay any principal of any Loan or Reimbursement Obligation when due in accordance with the terms hereof; or the Borrower shall fail to pay any interest on any Loan or Reimbursement Obligation, or any other amount payable hereunder or under any other Loan Document, within five days after any such interest or other amount becomes due in accordance with the terms hereof; or

        (b)    any representation or warranty made or deemed made by any Loan Party herein or in any other Loan Document or that is contained in any certificate, document or financial or other statement furnished by it at any time under or in connection with this Agreement or any such other Loan Document shall prove to have been inaccurate in any material respect on or as of the date made or deemed made; or

        (c)    (i) any Loan Party shall default in the observance or performance of any agreement contained in clause (i) or (ii) of Section 8.4(a) (with respect to the Borrower only), Section 8.7(a) or Section 9 of this Agreement or Sections 5.5 and 5.7(b) of the Guarantee and Collateral Agreement or (ii) an "Event of Default" under and as defined in any Mortgage shall have occurred and be continuing; or

        (d)    any Loan Party shall default in the observance or performance of any other agreement contained in this Agreement or any other Loan Document (other than as provided in paragraphs (a) through (c) of this Section), and such default shall continue unremedied for a period of 30 days after notice to the Borrower from the Administrative Agent or the Required Lenders; or

        (e)    any Group Member (i) defaults in making any payment of any principal of any Indebtedness (including any Guarantee Obligation, but excluding the Loans) on the scheduled or original due date with respect thereto; or (ii) defaults in making any payment of any interest on any such Indebtedness beyond the period of grace, if any, provided in the instrument or agreement under which such Indebtedness was created; or (iii) defaults in the observance or performance of any other agreement or condition relating to any such Indebtedness or contained in any instrument or agreement evidencing, securing or relating thereto, or any other event shall occur or condition exist, the effect of which default or other event or condition is to cause, or to permit the holder or beneficiary of such Indebtedness (or a trustee or agent on behalf of such holder or beneficiary) to cause, with the giving of notice if required, such Indebtedness to become due prior to its stated

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maturity or to become subject to a mandatory offer to purchase by the obligor thereunder or (in the case of any such Indebtedness constituting a Guarantee Obligation) to become payable; provided, that a default, event or condition described in clause (i), (ii) or (iii) of this paragraph (e) shall not at any time constitute an Event of Default unless, at such time, one or more defaults, events or conditions of the type described in clauses (i), (ii) and (iii) of this paragraph (e) shall have occurred and be continuing with respect to Indebtedness the outstanding principal amount of which exceeds in the aggregate $5,000,000; or

        (f)    (i) any Group Member shall commence any case, proceeding or other action (A) under any existing or future law of any jurisdiction, domestic or foreign, relating to bankruptcy, insolvency, reorganization or relief of debtors, seeking to have an order for relief entered with respect to it, or seeking to adjudicate it a bankrupt or insolvent, or seeking reorganization, arrangement, adjustment, winding-up, liquidation, dissolution, composition or other relief with respect to it or its debts, or (B) seeking appointment of a receiver, trustee, custodian, conservator or other similar official for it or for all or any substantial part of its assets, or any Group Member shall make a general assignment for the benefit of its creditors; or (ii) there shall be commenced against any Group Member any case, proceeding or other action of a nature referred to in clause (i) above that (A) results in the entry of an order for relief or any such adjudication or appointment or (B) remains undismissed, undischarged or unbonded for a period of 60 days; or (iii) there shall be commenced against any Group Member any case, proceeding or other action seeking issuance of a warrant of attachment, execution, distraint or similar process against all or any substantial part of its assets that results in the entry of an order for any such relief that shall not have been vacated, discharged, or stayed or bonded pending appeal within 60 days from the entry thereof; or (iv) any Group Member shall take any action in furtherance of, or indicating its consent to, approval of, or acquiescence in, any of the acts set forth in clause (i), (ii), or (iii) above; or (v) any Group Member shall generally not, or shall be unable to, or shall admit in writing its inability to, pay its debts as they become due; or

        (g)    (i) any Person shall engage in any "prohibited transaction" (as defined in Section 406 of ERISA or Section 4975 of the Code) involving any Plan, (ii) any "accumulated funding deficiency" (as defined in Section 302 of ERISA), whether or not waived, shall exist with respect to any Plan or any Lien in favor of the PBGC or a Plan shall arise on the assets of the Borrower or any Commonly Controlled Entity, (iii) a Reportable Event shall occur with respect to, or proceedings shall commence to have a trustee appointed, or a trustee shall be appointed, to administer or to terminate, any Single Employer Plan, which Reportable Event or commencement of proceedings or appointment of a trustee is, in the reasonable opinion of the Required Lenders, likely to result in the termination of such Plan for purposes of Title IV of ERISA, (iv) any Single Employer Plan shall terminate for purposes of Title IV of ERISA, (v) the Borrower or any Commonly Controlled Entity shall, or in the reasonable opinion of the Required Lenders is likely to, incur any liability in connection with a withdrawal from, or the Insolvency or Reorganization of, a Multiemployer Plan or (vi) any other similar event or condition shall occur or exist with respect to a Plan; and in each case in clauses (i) through (vi) above, such event or condition, together with all other such events or conditions, if any, could, in the reasonable judgment of the Required Lenders, reasonably be expected to have a Material Adverse Effect; or

        (h)    one or more judgments or decrees shall be entered against any Group Member involving in the aggregate a liability (not paid or fully covered by insurance as to which the relevant insurance company has acknowledged coverage) of $2,000,000 or more, and all such judgments or decrees shall not have been vacated, discharged, stayed or bonded pending appeal within 30 days from the entry thereof; or

        (i)    any of the Security Documents shall cease, for any reason, to be in full force and effect, or any Loan Party or any Affiliate of any Loan Party shall so assert, or any Lien created by any of the Security Documents shall cease to be enforceable and of the same effect and priority purported to be created thereby; or

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        (j)    the guarantee contained in Section 2 of the Guarantee and Collateral Agreement shall cease, for any reason, to be in full force and effect or any Loan Party or any Affiliate of any Loan Party shall so assert; or

        (k)    (i) any "person" or "group" (as such terms are used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")), excluding the Permitted Investors, shall become, or obtain rights (whether by means or warrants, options or otherwise) to become, the "beneficial owner" (as defined in Rules 13(d)-3 and 13(d)-5 under the Exchange Act), directly or indirectly, of more than 35% of the outstanding common stock of the Borrower; (ii) the board of directors of the Borrower shall cease to consist of a majority of Continuing Directors; or (iii) a Specified Change of Control shall occur; or

        (l)    the Senior Subordinated Notes or the guarantees thereof shall cease, for any reason, to be validly subordinated to the Obligations or the obligations of the Subsidiary Guarantors under the Guarantee and Collateral Agreement, as the case may be, as provided in the Senior Subordinated Note Indenture, or any Loan Party, any Affiliate of any Loan Party, the trustee in respect of the Senior Subordinated Notes or the holders of at least 25% in aggregate principal amount of the Senior Subordinated Notes shall so assert in writing;

then, and in any such event, (A) if such event is an Event of Default specified in clause (i) or (ii) of paragraph (f) above with respect to the Borrower, automatically the Commitments shall immediately terminate and the Loans hereunder (with accrued interest thereon) and all other amounts owing under this Agreement and the other Loan Documents (including all amounts of L/C Obligations, whether or not the beneficiaries of the then outstanding Letters of Credit shall have presented the documents required thereunder) shall immediately become due and payable, and (B) if such event is any other Event of Default, either or both of the following actions may be taken: (i) with the consent of the Required Lenders, the Administrative Agent may, or upon the request of the Required Lenders, the Administrative Agent shall, by notice to the Borrower declare the Revolving Commitments to be terminated forthwith, whereupon the Revolving Commitments shall immediately terminate; and (ii) with the consent of the Required Lenders, the Administrative Agent may, or upon the request of the Required Lenders, the Administrative Agent shall, by notice to the Borrower, declare the Loans hereunder (with accrued interest thereon) and all other amounts owing under this Agreement and the other Loan Documents (including all amounts of L/C Obligations, whether or not the beneficiaries of the then outstanding Letters of Credit shall have presented the documents required thereunder) to be due and payable forthwith, whereupon the same shall immediately become due and payable. With respect to all Letters of Credit with respect to which presentment for honor shall not have occurred at the time of an acceleration pursuant to this paragraph, the Borrower shall at such time deposit in a cash collateral account opened by the Administrative Agent an amount equal to the aggregate then undrawn and unexpired amount of such Letters of Credit. Amounts held in such cash collateral account shall be applied by the Administrative Agent to the payment of drafts drawn under such Letters of Credit, and the unused portion thereof after all such Letters of Credit shall have expired or been fully drawn upon, if any, shall be applied to repay other obligations of the Borrower hereunder and under the other Loan Documents. After all such Letters of Credit shall have expired or been fully drawn upon, all Reimbursement Obligations shall have been satisfied and all other obligations of the Borrower hereunder and under the other Loan Documents shall have been paid in full, the balance, if any, in such cash collateral account shall be returned to the Borrower (or such other Person as may be lawfully entitled thereto). Except as expressly provided above in this Section, presentment, demand, protest and all other notices of any kind are hereby expressly waived by the Borrower.

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SECTION 11.    THE AGENTS

        11.1    Appointment.    (a) Each Lender hereby irrevocably designates and appoints each Agent as the agent of such Lender under this Agreement and the other Loan Documents, and each such Lender irrevocably authorizes such Agent, in such capacity, to take such action on its behalf under the provisions of this Agreement and the other Loan Documents and to exercise such powers and perform such duties as are expressly delegated to such Agent by the terms of this Agreement and the other Loan Documents, together with such other powers as are reasonably incidental thereto. Notwithstanding any provision to the contrary elsewhere in this Agreement, no Agent shall have any duties or responsibilities, except those expressly set forth herein, or any fiduciary relationship with any Lender, and no implied covenants, functions, responsibilities, duties, obligations or liabilities shall be read into this Agreement or any other Loan Document or otherwise exist against any Agent.

        (b)    The Issuing Lender and the Foreign Currency Lenders shall act on behalf of the Revolving Lenders with respect to Letters of Credit and Foreign Currency Loans issued or made under this Agreement and the documents associated therewith. It is understood and agreed that the Issuing Lender and the Foreign Currency Lenders (i) shall have all of the benefits and immunities (x) provided to the Agents in this Section 11 with respect to acts taken or omissions suffered by the Issuing Lender and Foreign Currency Lenders in connection with Letters of Credit and Foreign Currency Loans issued or made under this Agreement and the documents associated therewith as fully as if the term "Agents", as used in this Section 11, included the Issuing Lender and the Foreign Currency Lenders with respect to such acts or omissions and (y) as additionally provided in this Agreement and (ii) shall have all of the benefits of the provisions of Section 11.7 as fully as if the term "Agents", as used in Section 11.7, included the Issuing Lender and the Foreign Currency Lenders.

        11.2.    Delegation of Duties.    Each Agent may execute any of its duties under this Agreement and the other Loan Documents by or through agents or attorneys-in-fact and shall be entitled to advice of counsel concerning all matters pertaining to such duties. No Agent shall be responsible for the negligence or misconduct of any agents or attorneys-in-fact selected by it with reasonable care.

        11.3.    Exculpatory Provisions.    Neither any Agent nor any of their respective officers, directors, employees, agents, attorneys-in-fact or affiliates shall be (i) liable for any action lawfully taken or omitted to be taken by it or such Person under or in connection with this Agreement or any other Loan Document (except to the extent that any of the foregoing are found by a final and nonappealable decision of a court of competent jurisdiction to have resulted from its or such Person's own gross negligence or willful misconduct) or (ii) responsible in any manner to any of the Lenders for any recitals, statements, representations or warranties made by any Loan Party or any officer thereof contained in this Agreement or any other Loan Document or in any certificate, report, statement or other document referred to or provided for in, or received by the Agents under or in connection with, this Agreement or any other Loan Document or for the value, validity, effectiveness, genuineness, enforceability or sufficiency of this Agreement or any other Loan Document or for any failure of any Loan Party a party thereto to perform its obligations hereunder or thereunder. The Agents shall not be under any obligation to any Lender to ascertain or to inquire as to the observance or performance of any of the agreements contained in, or conditions of, this Agreement or any other Loan Document, or to inspect the properties, books or records of any Loan Party.

        11.4.    Reliance by Agents.    Each Agent shall be entitled to rely, and shall be fully protected in relying, upon any instrument, writing, resolution, notice, consent, certificate, affidavit, letter, telecopy, telex or teletype message, statement, order or other document or conversation believed by it to be genuine and correct and to have been signed, sent or made by the proper Person or Persons and upon advice and statements of legal counsel (including counsel to the Borrower), independent accountants and other experts selected by such Agent. The Administrative Agent may deem and treat the payee of any Note as the owner thereof for all purposes unless a written notice of assignment, negotiation or

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transfer thereof shall have been filed with the Administrative Agent. Each Agent shall be fully justified in failing or refusing to take any action under this Agreement or any other Loan Document unless it shall first receive such advice or concurrence of the Required Lenders (or, if so specified by this Agreement, all Lenders) as it deems appropriate or it shall first be indemnified to its satisfaction by the Lenders against any and all liability and expense that may be incurred by it by reason of taking or continuing to take any such action. The Agents shall in all cases be fully protected in acting, or in refraining from acting, under this Agreement and the other Loan Documents in accordance with a request of the Required Lenders (or, if so specified by this Agreement, all Lenders), and such request and any action taken or failure to act pursuant thereto shall be binding upon all the Lenders and all future holders of the Loans.

        11.5.    Notice of Default.    No Agent shall be deemed to have knowledge or notice of the occurrence of any Default or Event of Default hereunder unless such Agent has received notice from a Lender or the Borrower referring to this Agreement, describing such Default or Event of Default and stating that such notice is a "notice of default." In the event that the Administrative Agent receives such a notice, the Administrative Agent shall give notice thereof to the Lenders. The Administrative Agent shall take such action with respect to such Default or Event of Default as shall be reasonably directed by the Required Lenders (or, if so specified by this Agreement, all Lenders or any other instructing group of Lenders specified by this Agreement); provided that unless and until the Administrative Agent shall have received such directions, the Administrative Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to such Default or Event of Default as it shall deem advisable in the best interests of the Lenders.

        11.6.    Non-Reliance on Agents and Other Lenders.    Each Lender expressly acknowledges that neither the Agents nor any of their respective officers, directors, employees, agents, attorneys-in-fact or affiliates have made any representations or warranties to it and that no act by any Agent hereafter taken, including any review of the affairs of a Loan Party or any affiliate of a Loan Party, shall be deemed to constitute any representation or warranty by any Agent to any Lender. Each Lender represents to the Agents that it has, independently and without reliance upon any Agent or any other Lender, and based on such documents and information as it has deemed appropriate, made its own appraisal of and investigation into the business, operations, property, financial and other condition and creditworthiness of the Loan Parties and their affiliates and made its own decision to make its Loans hereunder and enter into this Agreement. Each Lender also represents that it will, independently and without reliance upon any Agent or any other Lender, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit analysis, appraisals and decisions in taking or not taking action under this Agreement and the other Loan Documents, and to make such investigation as it deems necessary to inform itself as to the business, operations, property, financial and other condition and creditworthiness of the Loan Parties and their affiliates. Except for notices, reports and other documents expressly required to be furnished to the Lenders by the Administrative Agent hereunder, the Administrative Agent shall not have any duty or responsibility to provide any Lender with any credit or other information concerning the business, operations, property, condition (financial or otherwise), prospects or creditworthiness of any Loan Party or any affiliate of a Loan Party that may come into the possession of the Administrative Agent or any of its officers, directors, employees, agents, attorneys-in-fact or affiliates.

        11.7.    Indemnification.    The Lenders agree to indemnify each Agent in its capacity as such (to the extent not reimbursed by the Borrower and without limiting the obligation of the Borrower to do so), ratably according to their respective Aggregate Exposure Percentages in effect on the date on which indemnification is sought under this Section (or, if indemnification is sought after the date upon which the Commitments shall have terminated and the Loans shall have been paid in full, ratably in accordance with such Aggregate Exposure Percentages immediately prior to such date), from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs,

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expenses or disbursements of any kind whatsoever that may at any time (whether before or after the payment of the Loans) be imposed on, incurred by or asserted against such Agent in any way relating to or arising out of, the Commitments, this Agreement, any of the other Loan Documents or any documents contemplated by or referred to herein or therein or the transactions contemplated hereby or thereby or any action taken or omitted by such Agent under or in connection with any of the foregoing; provided that no Lender shall be liable for the payment of any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements that are found by a final and nonappealable decision of a court of competent jurisdiction to have resulted from such Agent's gross negligence or willful misconduct. The agreements in this Section shall survive the payment of the Loans and all other amounts payable hereunder.

        11.8.    Agent in Its Individual Capacity.    Each Agent and its affiliates may make loans to, accept deposits from and generally engage in any kind of business with any Loan Party as though such Agent were not an Agent. With respect to its Loans made or renewed by it and with respect to any Letter of Credit issued or participated in by it, each Agent shall have the same rights and powers under this Agreement and the other Loan Documents as any Lender and may exercise the same as though it were not an Agent, and the terms "Lender" and "Lenders" shall include each Agent in its individual capacity.

        11.9.    Successor Administrative Agent.    The Administrative Agent may resign as Administrative Agent upon ten days' notice to the Lenders and the Borrower. If the Administrative Agent shall resign as Administrative Agent under this Agreement and the other Loan Documents, then the Required Lenders shall appoint from among the Lenders a successor agent for the Lenders, which successor agent shall (unless an Event of Default under Section 10(a) or Section 10(f) with respect to the Borrower shall have occurred and be continuing) be subject to approval by the Borrower (which approval shall not be unreasonably withheld or delayed), whereupon such successor agent shall succeed to the rights, powers and duties of the Administrative Agent, and the term "Administrative Agent" shall mean such successor agent effective upon such appointment and approval, and the former Administrative Agent's rights, powers and duties as Administrative Agent shall be terminated, without any other or further act or deed on the part of such former Administrative Agent or any of the parties to this Agreement or any holders of the Loans. If no successor agent has accepted appointment as Administrative Agent by the date that is ten days following a retiring Administrative Agent's notice of resignation, the retiring Administrative Agent's resignation shall nevertheless thereupon become effective and the Lenders shall assume and perform all of the duties of the Administrative Agent hereunder until such time, if any, as the Required Lenders appoint a successor agent, which agent shall be (a) a bank organized and doing business under the laws of the United States or any state thereof, subject to supervision or examination by federal or state authority and having a total shareholder equity aggregating at least $1,000,000,000 and (b) unless an Event of Default under Section 10(a) or Section 10(f) with respect to the Borrower shall have occurred and be continuing, be subject to approval by the Borrower (which approval shall not be unreasonably withheld or delayed). The Syndication Agent may, at any time, by notice to the Lenders and the Administrative Agent, resign as Syndication Agent hereunder, whereupon the duties, rights, obligations and responsibilities of the Syndication Agent hereunder shall automatically be assumed by, and inure to the benefit of, the Administrative Agent, without any further act by the Syndication Agent, the Administrative Agent or any Lender. After any retiring Administrative Agent's resignation as Administrative Agent, the provisions of this Section 11 shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Administrative Agent under this Agreement and the other Loan Documents.

        11.10.    Agents Generally.    Except as expressly set forth herein, no Agent shall have any duties or responsibilities hereunder in its capacity as such.

        11.11.    The Lead Arranger.    The Lead Arranger, in its capacity as such, shall have no duties or responsibilities, and shall incur no liability, under this Agreement and other Loan Documents.

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SECTION 12.    MISCELLANEOUS

        12.1.    Amendments and Waivers.    Neither this Agreement, any other Loan Document, nor any terms hereof or thereof may be amended, supplemented or modified except in accordance with the provisions of this Section 12.1. The Required Lenders and each Loan Party party to the relevant Loan Document may, or, with the written consent of the Required Lenders, the Administrative Agent and each Loan Party party to the relevant Loan Document may, from time to time, (a) enter into written amendments, consents, supplements or modifications hereto and to the other Loan Documents for the purpose of adding any provisions to this Agreement or the other Loan Documents or changing in any manner the rights of the Lenders or of the Loan Parties hereunder or thereunder or (b) waive, on such terms and conditions as the Required Lenders or the Administrative Agent, as the case may be, may specify in such instrument, any of the requirements of this Agreement or the other Loan Documents or any Default or Event of Default and its consequences; provided, however that no such waiver and no such amendment, supplement or modification shall (i) forgive the principal amount or extend the final scheduled date of maturity of any Loan, extend the scheduled date of any amortization payment in respect of any Term Loan, reduce the stated rate of any interest or fee payable hereunder (except (x) in connection with the waiver of applicability of any post-default increase in interest rates, which waiver shall be effective with the consent of the Majority Facility Lenders of each adversely affected Facility and (y) that any amendment or modification of defined terms used in the financial covenants in this Agreement shall not constitute a reduction in the rate of interest or fees for purposes of this clause (i)) or extend the scheduled date of any payment thereof, or increase the amount or extend the expiration date of any Lender's Revolving Commitment, in each case without the written consent of each Lender directly affected thereby; (ii) eliminate or reduce the voting rights of any Lender under this Section 12.1 without the written consent of such Lender; (iii) reduce any percentage specified in the definition of Required Lenders, consent to the assignment or transfer by the Borrower of any of its rights and obligations under this Agreement and the other Loan Documents, release all or substantially all of the Collateral or release all or substantially all of the Subsidiary Guarantors from their obligations under the Guarantee and Collateral Agreement, in each case without the written consent of all Lenders; (iv) amend, modify or waive any condition precedent to any extension of credit under the Revolving Facility set forth in Section 7.2 (including in connection with any waiver of an existing Default or Event of Default) without the written consent of the Majority Facility Lenders with respect to the Revolving Facility; (v) amend, modify or waive any provision of Sections 3.15 through 3.18 without the written consent of all the Foreign Currency Lenders; (vi) amend, modify or waive any provision of Section 5.8 without the written consent of the Majority Facility Lenders in respect of each Facility adversely affected thereby; (vii) reduce the amount of Net Cash Proceeds or Excess Cash Flow required to be applied to prepay Loans under this Agreement without the written consent of the Majority Facility Lenders with respect to each Facility that are scheduled to be prepaid; (viii) reduce the percentage specified in the definition of Majority Facility Lenders with respect to any Facility without the written consent of all Lenders under such Facility; (ix) amend, modify or waive any provision of Section 11 without the written consent of each Agent adversely affected thereby; (x) amend, modify or waive any provision of Section 3.3 or 3.4 without the written consent of the Swingline Lender; or (xi) amend, modify or waive any provision of Sections 3.7 to 3.14 without the written consent of each Issuing Lender. Any such waiver and any such amendment, supplement or modification shall apply equally to each of the Lenders and shall be binding upon the Loan Parties, the Lenders, the Agents and all future holders of the Loans. In the case of any waiver, the Loan Parties, the Lenders and the Agents shall be restored to their former position and rights hereunder and under the other Loan Documents, and any Default or Event of Default waived shall be deemed to be cured and not continuing; but no such waiver shall extend to any subsequent or other Default or Event of Default, or impair any right consequent thereon.

        Notwithstanding the foregoing, this Agreement may be amended (or amended and restated) with the written consent of the Required Lenders, the Administrative Agent, the Syndication Agent and the

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Borrower (a) to add one or more additional credit facilities to this Agreement and to permit the extensions of credit from time to time outstanding thereunder and the accrued interest and fees in respect thereof to share ratably in the benefits of this Agreement and the other Loan Documents with the Term Loans and Revolving Extensions of Credit and the accrued interest and fees in respect thereof and (b) to include appropriately the Lenders holding such credit facilities in any determination of the Required Lenders and Majority Facility Lenders.

        In addition, notwithstanding the foregoing, this Agreement may be amended with the written consent of the Administrative Agent, the Syndication Agent, the Borrower and the Lenders providing the relevant Replacement Term Loans (as defined below) to permit the refinancing of all outstanding Term Loans ("Refinanced Term Loans") with a replacement term loan tranche hereunder ("Replacement Term Loans"), provided that (a) the aggregate principal amount of such Replacement Term Loans shall not exceed the aggregate principal amount of such Refinanced Term Loans, (b) the Applicable Margin for such Replacement Term Loans shall not be higher than the Applicable Margin for such Refinanced Term Loans, (c) the weighted average life to maturity of such Replacement Term Loans shall not be shorter than the weighted average life to maturity of such Refinanced Term Loans at the time of such refinancing and (d) all other terms applicable to such Replacement Term Loans shall be substantially identical to, or less favorable to the Lenders providing such Replacement Term Loans than, those applicable to such Refinanced Term Loans, except to the extent necessary to provide for covenants and other terms applicable to any period after the latest final maturity of the Term Loans in effect immediately prior to such refinancing.

        12.2.    Notices.    All notices, requests and demands to or upon the respective parties hereto to be effective shall be in writing (including by telecopy), and, unless otherwise expressly provided herein, shall be deemed to have been duly given or made when delivered, or three Business Days after being deposited in the mail, postage prepaid, or, in the case of telecopy notice, when received, addressed as follows in the case of the Borrower and the Agents, and as set forth in an administrative questionnaire

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delivered to the Administrative Agent in the case of the Lenders, or to such other address as may be hereafter notified by the respective parties hereto:

The Borrower:	Scientific Games Corporation 220 Continental Drive Suite 407 Newark, Delaware 19713 Attention: Robert C. Becker Telecopy: (302) 452-5382 Telephone: (302) 452-5227
The Administrative Agent:	The Bank of New York Attention: Sandra E. Morgan, Assistant Treasurer Telecopy: (212) 635-6365/6367 Telephone: (212) 635-4692
The Syndication Agent:	Bear Stearns Corporate Lending Inc. 383 Madison Avenue New York, NY 10179 Attention: Stephen O'Keefe Telecopy: (212) 272-9184 Telephone: (212) 272-9430
Issuing Lender:	As notified by such Issuing Lender to the Administrative Agent and the Borrower

provided that any notice, request or demand to or upon any Agent, the Issuing Lender or the Lenders shall not be effective until received.

        12.3.    No Waiver; Cumulative Remedies.    No failure to exercise and no delay in exercising, on the part of any Agent or any Lender, any right, remedy, power or privilege hereunder or under the other Loan Documents shall operate as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege. The rights, remedies, powers and privileges herein provided are cumulative and not exclusive of any rights, remedies, powers and privileges provided by law.

        12.4.    Survival of Representations and Warranties.    All representations and warranties made hereunder, in the other Loan Documents and in any document, certificate or statement delivered pursuant hereto or in connection herewith shall survive the execution and delivery of this Agreement and the making of the Loans and other extensions of credit hereunder.

        12.5.    Payment of Expenses and Taxes.    The Borrower agrees (a) to pay or reimburse the Syndication Agent and the Administrative Agent for all its reasonable out-of-pocket costs and expenses incurred in connection with the development, preparation and execution of, and any amendment, supplement or modification to, this Agreement and the other Loan Documents and any other documents prepared in connection herewith or therewith, and the consummation and administration of the transactions contemplated hereby and thereby, including the reasonable fees and disbursements of counsel to such Agent and filing and recording fees and expenses, with statements with respect to the foregoing to be submitted to the Borrower prior to the Closing Date (in the case of amounts to be paid on the Closing Date) and from time to time thereafter on a quarterly basis or such other periodic basis as such Agent shall deem appropriate, (b) to pay or reimburse each Lender and Agent for all its costs and reasonable expenses incurred in connection with the enforcement or preservation of any

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rights under this Agreement, the other Loan Documents and any such other documents, including the fees and disbursements of counsel (including the allocated fees and expenses of in-house counsel) to each Lender and of counsel to such Agent, provided that, the fees and disbursements of counsel to any such Lender shall only be paid or reimbursed to the extent incurred in connection with a Default or an Event of Default, (c) to pay, indemnify, and hold each Lender and Agent harmless from, any and all recording and filing fees and any and all liabilities with respect to, or resulting from any delay in paying, stamp, excise and other taxes, if any, that may be payable or determined to be payable in connection with the execution and delivery of, or consummation or administration of any of the transactions contemplated by, or any amendment, supplement or modification of, or any waiver or consent under or in respect of, this Agreement, the other Loan Documents and any such other documents, (d) to pay or reimburse the Issuing Lender and each Foreign Currency Lender for all its reasonable out-of-pocket costs and expenses incurred in connection with the conversion of any Letter of Credit denominated in a Foreign Currency or any Foreign Currency pursuant to the terms of this Agreement, and (e) to pay, indemnify, and hold each Lender and Agent and their respective officers, directors, employees, affiliates, agents, trustees, advisors and controlling persons (each, an "Indemnitee") harmless from and against any and all other liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever with respect to the execution, delivery, enforcement, performance and administration of this Agreement, the other Loan Documents and any such other documents, including any of the foregoing relating to the use of proceeds of the Loans or the violation of, noncompliance with or liability under, any Environmental Law applicable to the operations of any Group Member or any of the Properties and the reasonable fees and expenses of legal counsel in connection with claims, actions or proceedings by any Indemnitee against any Loan Party under any Loan Document (all the foregoing in this clause (e), collectively, the "Indemnified Liabilities"), provided, that the Borrower shall have no obligation hereunder to any Indemnitee with respect to Indemnified Liabilities to the extent such Indemnified Liabilities are found by a final and nonappealable decision of a court of competent jurisdiction to have resulted from the gross negligence or willful misconduct of such Indemnitee. Without limiting the foregoing, and to the extent permitted by applicable law, the Borrower agrees not to assert and to cause its Subsidiaries not to assert, and hereby waives and agrees to cause its Subsidiaries to waive, all rights for contribution or any other rights of recovery with respect to all claims, demands, penalties, fines, liabilities, settlements, damages, costs and expenses of whatever kind or nature, under or related to Environmental Laws, that any of them may have by statute or otherwise against any Indemnitee, except to the extent resulting from the gross negligence or willful misconduct of such Indemnitee. All amounts due under this Section 12.5 shall be payable not later than ten days after written demand therefor. Statements payable by the Borrower pursuant to this Section 12.5 shall be submitted to Robert C. Becker (Telephone No. (302) 452-5227) (Telecopy No. (302) 452-5382), at the address of the Borrower set forth in Section 12.2, or to such other Person or address as may be hereafter designated by the Borrower in a written notice to the Administrative Agent. The agreements in this Section 12.5 shall survive repayment of the Loans and all other amounts payable hereunder.

        12.6.    Successors and Assigns; Participations and Assignments.    (a) The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns permitted hereby (including any affiliate of the Issuing Lender that issues any Letter of Credit), except that (i) the Borrower may not assign or otherwise transfer any of its rights or obligations hereunder without the prior written consent of each Lender (and any attempted assignment or transfer by the Borrower without such consent shall be null and void) and (ii) no Lender may assign or otherwise transfer its rights or obligations hereunder except in accordance with this Section.

        (b)    (i) Subject to the conditions set forth in paragraph (ii) below, any Lender may assign to one or more assignees (each, an "Assignee") all or a portion of its rights and obligations under this

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Agreement (including all or a portion of its Commitments and the Loans at the time owing to it) with the prior written consent (such consent not to be unreasonably withheld) of:

        (A)    the Borrower, provided that, no consent of the Borrower shall be required for (x) any assignment to a Lender, an affiliate of a Lender or an Approved Fund (as defined below), (y) any assignment of the Revolving Commitments or the Revolving Loans if an Event of Default has occurred and is continuing and (z) any assignment of the Term Loans;

        (B)    the Administrative Agent, provided that no consent of the Administrative Agent shall be required for (x) an assignment to an Assignee that is a Lender immediately prior to giving effect to such assignment, except in the case of an assignment of a Revolving Commitment to an Assignee that does not already have a Revolving Commitment and (y) any assignment of Term Loans; and

        (C)    in the case of any assignment of a Revolving Commitment, each Issuing Lender and the Swingline Lender; and

in the case of all such assignments, subject to notice to the Syndication Agent.

        (ii)    Assignments shall be subject to the following additional conditions:

        (A)    no assignment may be made to an Ineligible Assignee;

        (B)    except in the case of an assignment to a Lender, an affiliate of a Lender or an Approved Fund or an assignment of the entire remaining amount of the assigning Lender's Commitments or Loans under any Facility, the amount of the Commitments or Loans of the assigning Lender subject to each such assignment (determined as of the date the Assignment and Assumption with respect to such assignment is delivered to the Administrative Agent) shall not be less than $1,000,000 unless each of the Borrower and the Administrative Agent otherwise consent, provided that (1) no such consent of the Borrower shall be required if an Event of Default has occurred and is continuing and (2) such amounts shall be aggregated in respect of each Lender and its affiliates or Approved Funds, if any;

        (C)    the parties to each assignment shall execute and deliver to the Administrative Agent an Assignment and Assumption, together with a processing and recordation fee of $1,500 (treating simultaneous assignments by a Lender to two or more Approved Funds of such Lender as a single assignment);

        (D)    the Assignee, if it shall not be a Lender, shall deliver to the Administrative Agent an administrative questionnaire; and

        (E)    in the case of an assignment by a Lender to a CLO (as defined below) managed or administered by such Lender or an Affiliate of such Lender, the assigning Lender shall retain the sole right to approve any amendment, modification or waiver of any provision of this Agreement and the other Loan Documents, provided that the Assignment and Assumption between such Lender and such CLO may provide that such Lender will not, without the consent of such CLO, agree to any amendment, modification or waiver that (1) requires the consent of each Lender directly affected thereby pursuant to the proviso to the second sentence of Section 12.1 and (2) directly affects such CLO.

For the purposes of this Section 12.6, the terms "Approved Fund" and "CLO" have the following meanings:

        "Approved Fund" means (a) with respect to any Lender, a CLO managed by such Lender or an Affiliate of such Lender and (b) with respect to any Lender that is a fund which invests in bank loans and similar extensions of credit, any other fund that invests in bank loans and similar

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extensions of credit and is managed by the same investment advisor as such Lender or by an affiliate of such investment advisor.

        "CLO" means any entity (whether a corporation, partnership, trust or otherwise) that is engaged in making, purchasing, holding or otherwise investing in bank loans and similar extensions of credit in the ordinary course of its business and is administered or managed by a Lender or an affiliate of such Lender.

        (iii)    Subject to acceptance and recording thereof pursuant to paragraph (b)(iv) below, from and after the effective date specified in each Assignment and Assumption the Assignee thereunder shall be a party hereto and, to the extent of the interest assigned by such Assignment and Assumption, have the rights and obligations of a Lender under this Agreement, and the assigning Lender thereunder shall, to the extent of the interest assigned by such Assignment and Assumption, be released from its obligations under this Agreement (and, in the case of an Assignment and Assumption covering all of the assigning Lender's rights and obligations under this Agreement, such Lender shall cease to be a party hereto but shall continue to be entitled to the benefits of Sections 5.9, 5.10, 5.11 and 12.5 relating to the period during which it was a Lender). Any assignment or transfer by a Lender of rights or obligations under this Agreement that does not comply with this Section 12.6 shall be treated for purposes of this Agreement as a sale by such Lender of a participation in such rights and obligations in accordance with paragraph (c) of this Section.

        (iv)    The Administrative Agent, acting for this purpose as an agent of the Borrower, shall maintain at one of its offices a copy of each Assignment and Assumption delivered to it and a register for the recordation of the names and addresses of the Lenders, and the Commitments of, and principal amount of the Loans and L/C Obligations owing to, each Lender pursuant to the terms hereof from time to time (the "Register"). The entries in the Register shall be conclusive, and the Borrower, the Administrative Agent, the Issuing Lender and the Lenders may treat each Person whose name is recorded in the Register pursuant to the terms hereof as a Lender hereunder for all purposes of this Agreement, notwithstanding notice to the contrary.

        (v)    Upon its receipt of a duly completed Assignment and Assumption executed by an assigning Lender and an Assignee, the Assignee's completed administrative questionnaire (unless the Assignee shall already be a Lender hereunder) and any written consent to such assignment required by paragraph (b) of this Section, the Administrative Agent shall accept such Assignment and Assumption and record the information contained therein in the Register. No assignment shall be effective for purposes of this Agreement unless it has been recorded in the Register as provided in this paragraph.

        (c)    (i) Any Lender may, without the consent of the Borrower or the Administrative Agent, sell participations to one or more banks or other entities (a "Participant") in all or a portion of such Lender's rights and obligations under this Agreement (including all or a portion of its Commitments and the Loans owing to it); provided that (A) such Lender's obligations under this Agreement shall remain unchanged, (B) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations and (C) the Borrower, the Agents, the Issuing Lender and the other Lenders shall continue to deal solely and directly with such Lender in connection with such Lender's rights and obligations under this Agreement. Any agreement pursuant to which a Lender sells such a participation shall provide that such Lender shall retain the sole right to enforce this Agreement and to approve any amendment, modification or waiver of any provision of this Agreement; provided that such agreement may provide that such Lender will not, without the consent of the Participant, agree to any amendment, modification or waiver that (1) requires the consent of each Lender directly affected thereby pursuant to the proviso to the second sentence of Section 12.1 and (2) directly affects such Participant. Subject to paragraph (c)(ii) of this Section, the Borrower agrees that each Participant shall be entitled to the benefits of Sections 5.9, 5.10 and 5.11 to the same extent as if it were a Lender and had acquired its interest by assignment pursuant to paragraph (b) of this Section. To the extent

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permitted by law, each Participant also shall be entitled to the benefits of Section 12.7(b) as though it were a Lender, provided such Participant shall be subject to Section 12.7(a) as though it were a Lender.

        (ii)    A Participant shall not be entitled to receive any greater payment under Section 5.9, 5.10 or 5.11 than the applicable Lender would have been entitled to receive with respect to the participation sold to such Participant, unless the sale of the participation to such Participant is made with the Borrower's prior written consent. Any Participant that is a Non-U.S. Lender shall not be entitled to the benefits of Section 5.10 unless such Participant complies with Section 5.10(d).

        (d)    Any Lender may, without the consent of the Borrower or the Administrative Agent, at any time pledge or assign a security interest in all or any portion of its rights under this Agreement to secure obligations of such Lender, including any pledge or assignment to secure obligations to a Federal Reserve Bank, and this Section shall not apply to any such pledge or assignment of a security interest; provided that no such pledge or assignment of a security interest shall release a Lender from any of its obligations hereunder or substitute any such pledgee or Assignee for such Lender as a party hereto. In the case of any Lender that is a fund that invests in bank loans, such Lender may, without the consent of the Borrower or the Administrative Agent, assign or pledge all or any portion of its rights under this Agreement, including the Term Loans and Notes representing such Term Loans or any other instrument evidencing its rights as a Lender under this Agreement, to any holder or, trustee for, or any other representative of holders of, obligations owed or securities issued, by such fund, as security for such obligations or securities; provided that any foreclosure or similar action by such trustee or representative shall be subject to the provisions of this Section concerning assignments.

        (e)    The Borrower, upon receipt of written notice from the relevant Lender, agrees to issue Notes to any Lender requiring Notes to facilitate transactions of the type described in paragraph (d) above.

        (f)    Notwithstanding the foregoing, any Conduit Lender may assign any or all of the Loans it may have funded hereunder to its designating Lender without the consent of the Borrower or the Administrative Agent and without regard to the limitations set forth in Section 12.6(b). The Borrower, each Lender and the Agents hereby confirms that it will not institute against a Conduit Lender or join any other Person in instituting against a Conduit Lender any bankruptcy, reorganization, arrangement, insolvency or liquidation proceeding under any state bankruptcy or similar law, for one year and one day after the payment in full of the latest maturing commercial paper note issued by such Conduit Lender; provided, however, that each Lender designating any Conduit Lender hereby agrees to indemnify, save and hold harmless each other party hereto for any loss, cost, damage or expense arising out of its inability to institute such a proceeding against such Conduit Lender during such period of forbearance.

        12.7.    Adjustments; Set-off.    (a) Except to the extent that this Agreement expressly provides for payments to be allocated to a particular Lender or to the Lenders under a particular Facility, if any Lender (a "Benefitted Lender") shall, at any time after the Loans and other amounts payable hereunder shall immediately become due and payable pursuant to Section 10, receive any payment of all or part of the Obligations owing to it, or receive any collateral in respect thereof (whether voluntarily or involuntarily, by set-off, pursuant to events or proceedings of the nature referred to in Section 10(f), or otherwise), in a greater proportion than any such payment to or collateral received by any other Lender, if any, in respect of the Obligations owing to such other Lender, such Benefitted Lender shall purchase for cash from the other Lenders a participating interest in such portion of the Obligations owing to each such other Lender, or shall provide such other Lenders with the benefits of any such collateral, as shall be necessary to cause such Benefitted Lender to share the excess payment or benefits of such collateral ratably with each of the Lenders; provided, however, that if all or any portion of such excess payment or benefits is thereafter recovered from such Benefitted Lender, such purchase shall be rescinded, and the purchase price and benefits returned, to the extent of such recovery, but without interest.

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        (b)    In addition to any rights and remedies of the Lenders provided by law, each Lender shall have the right, without prior notice to the Borrower, any such notice being expressly waived by the Borrower to the extent permitted by applicable law, upon any amount becoming due and payable by the Borrower hereunder (whether at the stated maturity, by acceleration or otherwise), to set off and appropriate and apply against such amount any and all deposits (general or special, time or demand, provisional or final), in any currency, and any other credits, indebtedness or claims, in any currency, in each case whether direct or indirect, absolute or contingent, matured or unmatured, at any time held or owing by such Lender or any branch or agency thereof to or for the credit or the account of the Borrower. Each Lender agrees promptly to notify the Borrower and the Administrative Agent after any such setoff and application made by such Lender, provided that the failure to give such notice shall not affect the validity of such setoff and application.

        12.8.    Counterparts.    This Agreement may be executed by one or more of the parties to this Agreement on any number of separate counterparts, and all of said counterparts taken together shall be deemed to constitute one and the same instrument. Delivery of an executed signature page of this Agreement by facsimile transmission shall be effective as delivery of a manually executed counterpart hereof. A set of the copies of this Agreement signed by all the parties shall be lodged with the Borrower and the Administrative Agent.

        12.9.    Severability.    Any provision of this Agreement that is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.

        12.10.    Integration.    This Agreement and the other Loan Documents represent the entire agreement of the Borrower, the Agents and the Lenders with respect to the subject matter hereof and thereof, and there are no promises, undertakings, representations or warranties by any Agent or any Lender relative to subject matter hereof not expressly set forth or referred to herein or in the other Loan Documents.

        12.11.GOVERNING LAW.THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES UNDER THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.

        12.12.    Submission To Jurisdiction; Waivers.    The Borrower hereby irrevocably and unconditionally:

        (a)    submits for itself and its property in any legal action or proceeding relating to this Agreement and the other Loan Documents to which it is a party, or for recognition and enforcement of any judgment in respect thereof, to the non-exclusive general jurisdiction of the courts of the State of New York, the courts of the United States for the Southern District of New York, and appellate courts from any thereof;

        (b)    consents that any such action or proceeding may be brought in such courts and waives any objection that it may now or hereafter have to the venue of any such action or proceeding in any such court or that such action or proceeding was brought in an inconvenient court and agrees not to plead or claim the same;

        (c)    agrees that service of process in any such action or proceeding may be effected by mailing a copy thereof by registered or certified mail (or any substantially similar form of mail), postage prepaid, to the Borrower at its address set forth in Section 12.2 or at such other address of which the Administrative Agent shall have been notified pursuant thereto;

        (d)    agrees that nothing herein shall affect the right to effect service of process in any other manner permitted by law or shall limit the right to sue in any other jurisdiction; and

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        (e)    waives, to the maximum extent not prohibited by law, any right it may have to claim or recover in any legal action or proceeding referred to in this Section any special, exemplary, punitive or consequential damages.

        12.13.    Acknowledgments.    The Borrower hereby acknowledges that:

        (a)    it has been advised by counsel in the negotiation, execution and delivery of this Agreement and the other Loan Documents;

        (b)    no Agent or Lender has any fiduciary relationship with or duty to the Borrower arising out of or in connection with this Agreement or any of the other Loan Documents, and the relationship between the Agents and Lenders, on one hand, and the Borrower, on the other hand, in connection herewith or therewith is solely that of debtor and creditor; and

        (c)    no joint venture is created hereby or by the other Loan Documents or otherwise exists by virtue of the transactions contemplated hereby among the Lenders or among the Borrower and the Lenders.

        12.14.    Releases of Guarantees and Liens.    (a) Notwithstanding anything to the contrary contained herein or in any other Loan Document, the Administrative Agent is hereby irrevocably authorized by each Lender (without requirement of notice to or consent of any Lender except as expressly required by Section 12.1) to take any action requested by the Borrower having the effect of releasing any Collateral or guarantee obligations (i) to the extent necessary to permit consummation of any transaction not prohibited by any Loan Document, including any Tax Reorganization, or that has been consented to in accordance with Section 12.1 or (ii) under the circumstances described in paragraph (b) below.

        (b)    At such time as the Loans, the Reimbursement Obligations and the other obligations under the Loan Documents (other than obligations under or in respect of Hedge Agreements) shall have been paid in full, the Commitments have been terminated and no Letters of Credit shall be outstanding, the Collateral shall be released from the Liens created by the Security Documents, and the Security Documents and all obligations (other than those expressly stated to survive such termination) of the Administrative Agent and each Loan Party under the Security Documents shall terminate, all without delivery of any instrument or performance of any act by any Person.

        12.15.    Confidentiality.    Each Agent and each Lender agrees to keep confidential all non-public information provided to it by any Loan Party pursuant to this Agreement that is designated by such Loan Party as confidential; provided that nothing herein shall prevent any Agent or any Lender from disclosing any such information (a) to any Agent, any other Lender or any Lender Affiliate, (b) subject to an agreement to comply with the provisions of this Section, to any actual or prospective Transferee or any direct or indirect counterparty to any Hedge Agreement (or any professional advisor to such counterparty), (c) to its employees, directors, agents, attorneys, accountants and other professional advisors or those of any of its affiliates, (d) upon the request or demand of any Governmental Authority, (e) in response to any order of any court or other Governmental Authority or as may otherwise be required pursuant to any Requirement of Law, (f) if requested or required to do so in connection with any litigation or similar proceeding, (g) that has been publicly disclosed, (h) to the National Association of Insurance Commissioners or any similar organization or any nationally recognized rating agency that requires access to information about a Lender's investment portfolio in connection with ratings issued with respect to such Lender, or (i) in connection with the exercise of any remedy hereunder or under any other Loan Document.

        12.16.WAIVERS OF JURY TRIAL.THE BORROWER, THE AGENTS AND THE LENDERS HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVE TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT AND FOR ANY COUNTERCLAIM THEREIN.

82

        12.17.    Delivery of Addenda.    Each initial Lender shall become a party to this Agreement by delivering to the Administrative Agent an Addendum duly executed by such Lender.

        12.18.    Conversion of Currencies.    (a) If, for the purpose of obtaining judgment in any court, it is necessary to convert a sum owing hereunder in one currency into another currency, each party hereto agrees, to the fullest extent that it may effectively do so, that the rate of exchange used shall be that at which, in accordance with normal banking procedures in the relevant jurisdiction, the first currency could be purchased with such other currency on the Business Day immediately preceding the day on which final judgment is given.

        (b)    The obligations of the Borrower in respect of any sum due to any party hereto or any holder of the obligations owing hereunder (the "Applicable Creditor") shall, notwithstanding any judgment in a currency (the "Judgment Currency") other than the currency in which such sum is stated to be due hereunder (the "Agreement Currency"), be discharged only to the extent that, on the Business Day following receipt by the Applicable Creditor of any sum adjudged to be so due in the Judgment Currency, the Applicable Creditor may in accordance with normal banking procedures in the relevant jurisdiction purchase the Agreement Currency with the Judgment Currency; if the amount of the Agreement Currency so purchased is less than the sum originally due to the Applicable Creditor in the Agreement Currency, the Borrower agrees, as a separate obligation and notwithstanding any such judgment, to indemnify the Applicable Creditor against such loss. The obligations of the Borrower contained in this Section 12.18 shall survive the termination of this Agreement and the payment of all other amounts owing hereunder.

        12.19.    Interest Rate Limitation.    Notwithstanding anything herein to the contrary, if at any time the interest rate applicable to any Loan, together with all fees, charges and other amounts which are treated as interest on such Loan under applicable law (collectively the "Charges"), shall exceed the maximum lawful rate (the "Maximum Rate") which may be contracted for, charged, taken, received or reserved by the Lender holding such Loan in accordance with applicable law, the rate of interest payable in respect of such Loan hereunder, together with all Charges payable in respect thereof, shall be limited to the Maximum Rate and, to the extent lawful, the interest and Charges that would have been payable in respect of such Loan but were not payable as a result of the operation of this Section shall be cumulated and the interest and Charges payable to such Lender in respect of other Loans or periods shall be increased (but not above the Maximum Rate therefor) until such cumulated amount, together with interest thereon at the Federal Funds Effective Rate to the date of repayment, shall have been received by such Lender.

83

        IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered by their proper and duly authorized officers as of the day and year first above written.

SCIENTIFIC GAMES CORPORATION
By:
	Name: Title:
BEAR, STEARNS & CO. INC., as Sole Lead Arranger and Sole Bookrunner
By:
	Name: Title:
BEAR STEARNS CORPORATE LENDING INC., as Syndication Agent and as a Lender
By:
	Name: Title:
THE BANK OF NEW YORK, as Administrative Agent
By:
	Name: Title:

84

Annex A

PRICING GRID FOR REVOLVING LOANS AND SWINGLINE LOANS

Pricing Level	Applicable Margin for Eurocurrency Loans		Applicable Margin for Base Rate Loans
I	3.00	%	2.00	%
II	2.75	%	1.75	%
III	2.50	%	1.50	%
IV	2.25	%	1.25	%
V	2.00	%	1.00	%

The Applicable Margin for Revolving Loans and Swingline Loans and the Commitment Fee Rate shall be adjusted, on and after the first Adjustment Date (as defined below) occurring after the date which is six months after the Closing Date, based on changes in the Consolidated Leverage Ratio, with such adjustments to become effective on the date (the "Adjustment Date") that is three Business Days after the date on which the relevant financial statements are delivered to the Lenders pursuant to Section 8.1 and to remain in effect until the next adjustment to be effected pursuant to this paragraph. If any financial statements referred to above are not delivered within the time periods specified in Section 8.1, then, until the date that is three Business Days after the date on which such financial statements are delivered, the highest rate set forth in each column of the Pricing Grid shall apply. On each Adjustment Date, the Applicable Margin for Revolving Loans and Swingline Loans and the Commitment Fee Rate shall be adjusted to be equal to the Applicable Margins and Commitment Fee Rate opposite the Pricing Level determined to exist on such Adjustment Date from the financial statements relating to such Adjustment Date.

        As used herein, the following rules shall govern the determination of Pricing Levels on each Adjustment Date:

        "Pricing Level I" shall exist on an Adjustment Date if the Consolidated Leverage Ratio for the relevant period is greater than or equal to 3.50 to 1.00.

        "Pricing Level II" shall exist on an Adjustment Date if the Consolidated Leverage Ratio for the relevant period is less than 3.50 to 1.00 but greater than or equal to 3.00 to 1.00.

        "Pricing Level III" shall exist on an Adjustment Date if the Consolidated Leverage Ratio for the relevant period is less than 3.00 to 1.00 but greater than or equal to 2.50 to 1.00.

        "Pricing Level IV" shall exist on an Adjustment Date if the Consolidated Leverage Ratio for the relevant period is less than 2.50 to 1.00 but greater than or equal to 2.00 to 1.00.

        "Pricing Level V" shall exist on an Adjustment Date if the Consolidated Leverage Ratio for the relevant period is less than 2.00 to 1.00.

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EXHIBIT 10.27

TABLE OF CONTENTS

Annex A

PRICING GRID FOR REVOLVING LOANS AND SWINGLINE LOANS

EX-10.27

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EXHIBIT 10.27

EXECUTION COPY

$340,000,000

CREDIT AGREEMENT

among

SCIENTIFIC GAMES CORPORATION,
as Borrower,

The Several Lenders
from Time to Time Parties Hereto,

BEAR STEARNS CORPORATE LENDING INC.,
as Syndication Agent,

and

THE BANK OF NEW YORK,
as Administrative Agent

Dated as of December 19, 2002

BEAR, STEARNS & CO. INC., as Sole Lead Arranger and Sole Bookrunner

BNY CAPITAL MARKETS, INC., as Co-Arranger

TABLE OF CONTENTS

		Page
Section 1.	DEFINITIONS	1
1.1.	Defined Terms	1
1.2.	Other Definitional Provisions	21
1.3.	Currency Conversion	21
Section 2.	AMOUNT AND TERMS OF TERM COMMITMENTS	22
2.1.	Term Commitments	22
2.2.	Procedure for Term Loan Borrowing	22
2.3.	Repayment of Term Loans	22
Section 3.	AMOUNT AND TERMS OF REVOLVING COMMITMENTS	23
3.1.	Revolving Commitments	23
3.2.	Procedure for Revolving Loan Borrowing	24
3.3.	Swingline Commitment	24
3.4.	Procedure for Swingline Borrowing; Refunding of Swingline Loans	24
3.5.	Commitment Fees, etc.	26
3.6.	Termination or Reduction of Revolving Commitments	26
3.7.	L/C Commitment	26
3.8.	Procedure for Issuance of Letter of Credit	26
3.9.	Fees and Other Charges	27
3.10.	L/C Participations	27
3.11.	Reimbursement Obligation of the Borrower	28
3.12.	Obligations Absolute	29
3.13.	Letter of Credit Payments	29
3.14.	Applications	29
3.15.	Foreign Currency Subfacility	29
3.16.	Procedure for Foreign Currency Loan Borrowings	30
3.17.	Foreign Currency Loan Fees, Commissions and Other Charges	30
3.18.	Participations in Foreign Currency Loans	30
Section 4.	AMOUNTS AND TERMS OF ADDITIONAL COMMITMENTS	32
4.1.	Revolving Credit Commitment Increases	32
Section 5.	GENERAL PROVISIONS APPLICABLE TO LOANS AND LETTERS OF CREDIT	33
5.1.	Optional Prepayments	33
5.2.	Mandatory Prepayments	33
5.3.	Conversion and Continuation Options	35
5.4.	Limitations on Eurocurrency Tranches	35
5.5.	Interest Rates and Payment Dates	35
5.6.	Computation of Interest and Fees	36
5.7.	Inability to Determine Interest Rate	36
5.8.	Pro Rata Treatment and Payments	37
5.9.	Requirements of Law	38
5.10.	Taxes	40
5.11.	Indemnity	42
5.12.	Change of Lending Office	42
5.13.	Replacement of Lenders	42
5.14.	Evidence of Debt	43
5.15.	Illegality	43

i

5.16.	Foreign Currency Exchange Rate	43
Section 6.	REPRESENTATIONS AND WARRANTIES	44
6.1.	Financial Condition	44
6.2.	No Change	44
6.3.	Corporate Existence; Compliance with Law	44
6.4.	Power; Authorization; Enforceable Obligations	45
6.5.	No Legal Bar	45
6.6.	Litigation	45
6.7.	No Default	45
6.8.	Ownership of Property; Liens	45
6.9.	Intellectual Property	45
6.10.	Taxes	46
6.11.	Federal Regulations	46
6.12.	Labor Matters	46
6.13.	ERISA	46
6.14.	Investment Company Act; Other Regulations	46
6.15.	Subsidiaries	46
6.16.	Use of Proceeds	47
6.17.	Environmental Matters	47
6.18.	Accuracy of Information, etc.	47
6.19.	Security Documents	48
6.20.	Solvency	48
6.21.	Senior Indebtedness	48
6.22.	Regulation H	49
6.23.	Material Contracts	49
Section 7.	CONDITIONS PRECEDENT	49
7.1.	Conditions to Initial Extension of Credit	49
7.2.	Conditions to Each Extension of Credit	52
Section 8.	AFFIRMATIVE COVENANTS	52
8.1.	Financial Statements	52
8.2.	Certificates; Other Information	52
8.3.	Payment of Obligations	53
8.4.	Maintenance of Existence; Compliance	53
8.5.	Maintenance of Property; Insurance	54
8.6.	Inspection of Property; Books and Records; Discussions	54
8.7.	Notices	54
8.8.	Environmental Laws	55
8.9.	Additional Collateral, etc.	55
8.10.	Further Assurances	57
8.11.	Connecticut Lottery Corporation	57
8.12.	Pledge of Foreign Subsidiary Stock	57
8.13.	Post-Closing Matters	57
Section 9.	NEGATIVE COVENANTS	58
9.1.	Financial Condition Covenants.	58
9.2.	Indebtedness	60
9.3.	Liens	61
9.4.	Fundamental Changes	62
9.5.	Disposition of Property	63

ii

9.6.	Restricted Payments	63
9.7.	Capital Expenditures	64
9.8.	Investments	65
9.9.	Optional Payments and Modifications of Certain Debt Instruments	66
9.10.	Transactions with Affiliates	67
9.11.	Sales and Leasebacks	67
9.12.	Changes in Fiscal Periods	67
9.13.	Negative Pledge Clauses	67
9.14.	Clauses Restricting Subsidiary Distributions	67
9.15.	Lines of Business	68
9.16.	Hedge Agreements	68
Section 10.	EVENTS OF DEFAULT	68
Section 11.	THE AGENTS	71
11.1.	Appointment	71
11.2.	Delegation of Duties	71
11.3.	Exculpatory Provisions	71
11.4.	Reliance by Agents	71
11.5.	Notice of Default	72
11.6.	Non-Reliance on Agents and Other Lenders	72
11.7.	Indemnification	72
11.8.	Agent in Its Individual Capacity	73
11.9.	Successor Administrative Agent	73
11.10.	Agents Generally	73
11.11.	The Lead Arranger	73
Section 12.	MISCELLANEOUS	74
12.1.	Amendments and Waivers	74
12.2.	Notices	75
12.3.	No Waiver; Cumulative Remedies	76
12.4.	Survival of Representations and Warranties	76
12.5.	Payment of Expenses and Taxes	76
12.6.	Successors and Assigns; Participations and Assignments	77
12.7.	Adjustments; Set-off	80
12.8.	Counterparts	81
12.9.	Severability	81
12.10.	Integration	81
12.11.	GOVERNING LAW	81
12.12.	Submission To Jurisdiction; Waivers	81
12.13.	Acknowledgments	82
12.14.	Releases of Guarantees and Liens	82
12.15.	Confidentiality	82
12.16.	WAIVERS OF JURY TRIAL	82
12.17.	Delivery of Addenda	83
12.18.	Conversion of Currencies	83
12.19.	Interest Rate Limitation	83

iii

ANNEX:
A	Pricing Grid
SCHEDULES:
1.1(a)	Mortgaged Property
1.1(b)	Specified Hedge Agreements
3.7	Existing Letters of Credit
6.4	Consents, Authorizations, Filings and Notices
6.6	Litigation
6.15(a)	Subsidiaries
6.15(b)	Outstanding Equity Commitments
6.19(a)	UCC Filing Jurisdictions
6.19(b)	Mortgage Filing Jurisdictions
6.22	Regulation H
6.23	Material Contracts
7.1(k)	Title Policy Insured Amount
9.2(d)	Existing Indebtedness
9.3(l)	Existing Liens
9.8(f)	Existing Investments
9.13(c)	Specified Contracts—Negative Pledge
9.13(d)	Specified Contracts—Prohibition of Assignment
EXHIBITS:
A	Form of Guarantee and Collateral Agreement
B	Form of Compliance Certificate
C	Form of Closing Certificate
D-1	New Lender Supplement
D-2	Commitment Increase Supplement
E	Form of Mortgage
F	Form of Assignment and Assumption
G-1	Form of Legal Opinion of Kramer Levin Naftalis & Frankel LLP
G-2	Form of Legal Opinion of Martin E. Schloss
H	Form of Exemption Certificate
I-1	Form of Term Note
I-2	Form of Revolving Note
I-3	Form Swingline Note
J	Form of Addendum

iv

        CREDIT AGREEMENT, dated as of December 19, 2002, among SCIENTIFIC GAMES CORPORATION, a Delaware corporation (the "Borrower"), the several banks and other financial institutions or entities from time to time parties to this Agreement (the "Lenders"), BEAR, STEARNS & CO. INC., as sole lead arranger and sole bookrunner (in such capacity, the "Lead Arranger"), BNY CAPITAL MARKETS, INC., as co-arranger (in such capacity, the "Co-Arranger"), BEAR STEARNS CORPORATE LENDING INC., as syndication agent (in such capacity, the "Syndication Agent"), and THE BANK OF NEW YORK, as administrative agent (in such capacity, the "Administrative Agent").

W I T N E S S E T H:

        WHEREAS, the Borrower is party to the Amended and Restated Credit Agreement, dated as of October 6, 2000 (as amended, supplemented or otherwise modified through the date hereof, the "Existing Credit Agreement"), among the Borrower, the financial institutions from time to time parties thereto, DLJ Capital Funding, Inc., as administrative agent, syndication agent, lead arranger and sole bookrunning manager, Lehman Commercial Paper Inc., as documentation agent, and Lehman Brothers Inc., as co-arranger;

        WHEREAS, the Borrower desires to repay the indebtedness under the Existing Credit Agreement and terminate the Existing Credit Agreement (the "Refinancing") and has requested that the Lenders hereto make available credit facilities, the proceeds of which will be used to finance the Refinancing and for general corporate purposes; and

        WHEREAS, the Lenders have agreed to make such credit facilities available upon and subject to the terms and conditions set forth herein;

        NOW, THEREFORE, in consideration of the premises and agreements set forth herein, the parties hereto hereby agree as follows:

SECTION 1. DEFINITIONS

        1.1    Defined Terms.    As used in this Agreement, the terms listed in this Section 1.1 shall have the respective meanings set forth in this Section 1.1.

        "Addendum": with respect to any initial Lender, a Lender Addendum, substantially in the form of Exhibit J, to be executed and delivered by such Lender on the Closing Date as provided in Section 12.17.

        "Adjustment Date": as defined in the Pricing Grid.

        "Administrative Agent": as defined in the preamble to this Agreement.

        "Affected Foreign Currency": as defined in Section 5.7(c).

        "Affiliate": as to any Person, any other Person that, directly or indirectly, is in control of, is controlled by, or is under common control with, such Person. For purposes of this definition, "control" (including, with correlative meanings, the terms "controlling", "controlled by" and "under common control with"), as applied to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of that Person, whether through the ownership of voting securities or by contract or otherwise.

        "Agents": the collective reference to the Syndication Agent, the Lead Arranger and the Administrative Agent, which term shall include, for purposes of Section 11 only, the Issuing Lender.

        "Aggregate Exposure": with respect to any Lender at any time, an amount equal to (a) until the Closing Date, the aggregate amount of such Lender's Commitments at such time and (b) thereafter, the sum of (i) the aggregate then unpaid principal amount of such Lender's Term Loans, (ii) the amount of such Lender's Revolving Commitment then in effect or, if the Revolving Commitments have been terminated, the amount of such Lender's Revolving Extensions of Credit then outstanding.

        "Aggregate Exposure Percentage": with respect to any Lender at any time, the ratio (expressed as a percentage) of such Lender's Aggregate Exposure at such time to the Aggregate Exposure of all Lenders at such time.

        "Agreement": this Credit Agreement.

        "Agreement Currency": as defined in Section 12.18(b).

        "Applicable Creditor": as defined in Section 12.18(b).

        "Applicable Margin": a rate per annum equal to, (i) with respect to Revolving Loans and Swingline Loans, (x) that are Eurocurrency Loans denominated in Dollars, 2.75% and (y) that are Base Rate Loans, 1.75%, and (ii) with respect to Term Loans, (A) that are Eurocurrency Loans, 3.50% and (B) that are Base Rate Loans, 2.50%; provided, that, on and after the first Adjustment Date (as defined in the Pricing Grid) occurring after the date which is six months after the Closing Date, the Applicable Margin with respect to Revolving Loans and Swingline Loans will be determined pursuant to the Pricing Grid.

        "Application": an application, in such form as the Issuing Lender may specify from time to time, requesting the Issuing Lender to open a Letter of Credit.

        "Approved Fund": with respect to any Lender that is a fund that invests in commercial loans, any other fund that invests in commercial loans and is managed or advised by the same investment advisor as such Lender or by an Affiliate of such investment advisor.

        "Asset Sale": any Disposition of Property or series of related Dispositions of Property (excluding any such Disposition permitted by clause (a), (b), (c), (d) or (f) of Section 9.5) that yields Net Cash Proceeds to any Group Member (valued at the initial principal amount thereof in the case of non-cash proceeds consisting of notes or other debt securities and valued at fair market value in the case of other non-cash proceeds) in excess of $5,000,000.

        "Assignee": as defined in Section 12.6(b).

        "Assignment and Assumption": an Assignment and Assumption, substantially in the form of Exhibit F.

        "Available Revolving Commitment": as to any Revolving Lender at any time, an amount equal to the excess, if any, of (a) such Lender's Revolving Commitment then in effect over (b) such Lender's Revolving Extensions of Credit then outstanding; provided that, in calculating any Lender's Revolving Extensions of Credit for the purpose of determining such Lender's Available Revolving Commitment pursuant to Section 3.5, the aggregate principal amount of Swingline Loans then outstanding shall be deemed to be zero.

        "Base Rate": for any day, a rate per annum (rounded upwards, if necessary, to the next ¹/16 of 1%) equal to the greater of (a) the Prime Rate in effect on such day and (b) the Federal Funds Effective Rate in effect on such day plus 0.50%. For purposes hereof: "Prime Rate" shall mean the rate of interest per annum publicly announced from time to time by the Reference Lender as its prime rate in effect at its principal office in New York City (the Prime Rate not being intended to be the lowest rate of interest charged by the Reference Lender in connection with extensions of credit to debtors). Any change in the Base Rate due to a change in the Prime Rate or the Federal Funds Effective Rate shall be effective as of the opening of business on the effective day of such change in the Prime Rate or the Federal Funds Effective Rate, respectively.

        "Base Rate Loans": Loans the rate of interest applicable to which is based upon the Base Rate.

        "Benefitted Lender": as defined in Section 12.7(a).

2

        "Board": the Board of Governors of the Federal Reserve System of the United States (or any successor).

        "Borrower": as defined in the preamble to this Agreement.

        "Borrowing Date": any Business Day specified by the Borrower as a date on which the Borrower requests the relevant Lenders to make Loans hereunder.

        "Business": as defined in Section 6.17(b).

        "Business Day": a day other than a Saturday, Sunday or other day on which commercial banks in New York City are authorized or required by law to close, provided, that (a) when used in connection with a Eurocurrency Loan, the term "Business Day" shall also exclude any day on which banks are not open for dealings in deposits in the applicable currency in the London interbank market and (b) when used in connection with a Foreign Currency Loan, the term "Business Day" shall also exclude any day on which banks in (i) the jurisdiction of the account to which the proceeds of such Loan are to be disbursed and (ii) the jurisdiction in which payments of principal of and interest on such Loan are to made are authorized or required by law to close.

        "Calculation Date": with respect to each Foreign Currency, the fifteenth and last day of each calendar month (or, if such day is not a Business Day, the next succeeding Business Day), provided that (a) the second Business Day preceding each Borrowing Date with respect to any Foreign Currency Loans in a Foreign Currency shall also be a "Calculation Date" with respect to such Foreign Currency and (b) solely for purposes of determining the Dollar Equivalent of the fees payable pursuant to Section 3.17(b), the Business Day immediately preceding the date of such payment shall be a "Calculation Date" with respect to each Foreign Currency.

        "Capital Expenditures": for any period, with respect to any Person, the aggregate of all expenditures by such Person and its Subsidiaries for (a) the acquisition or leasing (pursuant to a capital lease) of fixed or capital assets or additions to equipment (including replacements, capitalized repairs and improvements during such period) that should be capitalized under GAAP on a consolidated balance sheet of such Person and its Subsidiaries, (b) the purchase or development of computer software or systems to the extent such expenditures are capitalized on the consolidated balance sheet of the Borrower and its Subsidiaries in conformity with GAAP and (c) deferred installation costs; provided that, Capital Expenditures shall not include expenditures recorded as consideration paid in connection with acquisitions permitted by Section 9.8(k) or any other related expenditure made substantially contemporaneously therewith.

        "Capital Lease Obligations": as to any Person, the obligations of such Person to pay rent or other amounts under any lease of (or other arrangement conveying the right to use) real or personal property, or a combination thereof, which obligations are required to be classified and accounted for as capital leases on a balance sheet of such Person under GAAP and, for the purposes of this Agreement, the amount of such obligations at any time shall be the capitalized amount thereof at such time determined in accordance with GAAP.

        "Capital Stock": any and all shares, interests, participations or other equivalents (however designated) of capital stock of a corporation, any and all equivalent ownership interests in a Person (other than a corporation) and any and all warrants, rights or options to purchase any of the foregoing.

        "Cash Collateral Account": as defined in Section 5.2(f).

        "Cash Equivalents": (a) marketable direct obligations issued by, or unconditionally guaranteed by, the United States government or issued by any agency thereof and backed by the full faith and credit of the United States, in each case maturing within one year from the date of acquisition; (b) certificates of deposit, time deposits, eurodollar time deposits or overnight bank deposits having maturities of six months or less from the date of acquisition issued by any Lender or by any commercial bank organized

3

under the laws of the United States or any state thereof having combined capital and surplus of not less than $500,000,000; (c) commercial paper of an issuer rated at least A-1 by Standard & Poor's Ratings Services ("S&P") or P-1 by Moody's Investors Service, Inc. ("Moody's"), or carrying an equivalent rating by a nationally recognized rating agency, if both of the two named rating agencies cease publishing ratings of commercial paper issuers generally, and maturing within six months from the date of acquisition; (d) repurchase obligations of any Lender or of any commercial bank satisfying the requirements of clause (b) of this definition, having a term of not more than 30 days, with respect to securities issued or fully guaranteed or insured by the United States government; (e) securities with maturities of one year or less from the date of acquisition issued or fully guaranteed by any state, commonwealth or territory of the United States, by any political subdivision or taxing authority of any such state, commonwealth or territory or by any foreign government, the securities of which state, commonwealth, territory, political subdivision, taxing authority or foreign government (as the case may be) are rated at least A by S&P or A by Moody's; (f) securities with maturities of six months or less from the date of acquisition backed by standby letters of credit issued by any Lender or any commercial bank satisfying the requirements of clause (b) of this definition; (g) shares of Dollar denominated money market mutual or similar funds which invest exclusively in assets satisfying the requirements of clauses (a) through (f) of this definition or money market funds that (i) comply with the criteria set forth in Securities and Exchange Conversion Rule 2a-7 under the Investment Company Act of 1940, (ii) are rated AAA by S&P and Aaa by Moody's and (iii) have portfolio assets of at least $5,000,000,000 or (h) in the case of Subsidiaries doing business outside of the United States, substantially similar investments to those set forth in clauses (a) through (g) above denominated in foreign currencies; provided that, references to the United States shall be deemed to mean foreign countries having a sovereign rating of A or better from either S&P or Moody's.

        "Charges": as defined in Section 12.19.

        "Closing Date": the date on which the conditions precedent set forth in Section 7.1 shall have been satisfied, which date is December 19, 2002.

        "Code": the Internal Revenue Code of 1986, as amended from time to time.

        "Collateral": all Property of the Loan Parties, now owned or hereafter acquired, upon which a Lien is purported to be created by any Security Document.

        "Commitment": as to any Lender, the sum of the Term Commitment and the Revolving Commitment of such Lender.

        "Commitment Fee Rate": 0.50% per annum.

        "Commitment Increase Supplement": each Commitment Increase Supplement delivered pursuant to Section 4.1, substantially in the form of Exhibit D-2.

        "Commonly Controlled Entity": an entity, whether or not incorporated, that is under common control with the Borrower within the meaning of Section 4001 of ERISA or is part of a group that includes the Borrower and that is treated as a single employer under Section 414 of the Code.

        "Compliance Certificate": a certificate duly executed by a Responsible Officer substantially in the form of Exhibit B.

        "Conduit Lender": any special purpose entity organized and administered by any Lender for the purpose of making Loans otherwise required to be made by such Lender and designated by such Lender in a written instrument, subject to the consent of the Administrative Agent and the Borrower (which consent shall not be unreasonably withheld); provided, that the designation by any Lender of a Conduit Lender shall not relieve the designating Lender of any of its obligations to fund a Loan under this Agreement if, for any reason, its Conduit Lender fails to fund any such Loan, and the designating Lender (and not the Conduit Lender) shall have the sole right and responsibility to deliver all consents

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and waivers required or requested under this Agreement with respect to its Conduit Lender, and provided, further, that no Conduit Lender shall (a) be entitled to receive any greater amount pursuant to Section 5.9, 5.10, 5.11 or 12.5 than the designating Lender would have been entitled to receive in respect of the extensions of credit made by such Conduit Lender or (b) be deemed to have any Commitment.

        "Confidential Information Memorandum": the Confidential Information Memorandum dated October, 2002 and furnished to the Lenders.

        "Consolidated Current Assets": at any date, all amounts (other than cash and Cash Equivalents) that would, in conformity with GAAP, be set forth opposite the caption "total current assets" (or any like caption) on a consolidated balance sheet of the Borrower and its Subsidiaries at such date.

        "Consolidated Current Liabilities": at any date, all amounts that would, in conformity with GAAP, be set forth opposite the caption "total current liabilities" (or any like caption) on a consolidated balance sheet of the Borrower and its Subsidiaries at such date, but excluding any Indebtedness of the Borrower and its Subsidiaries.

        "Consolidated EBITDA": for any period, Consolidated Net Income for such period plus, without duplication and to the extent reflected as a charge in the statement of such Consolidated Net Income for such period, the sum of (a) income tax expense, (b) interest expense, amortization or writeoff of debt discount and debt issuance costs and commissions, discounts and other fees and charges associated with Indebtedness (including the Loans), (c) depreciation and amortization expense, (d) amortization of intangibles (including, but not limited to, goodwill) and organization costs and (e) any extraordinary charges or losses determined in accordance with GAAP and minus, to the extent included in the statement of such Consolidated Net Income for such period, the sum of (a) interest income and (b) any extraordinary income or gains determined in accordance with GAAP. For the purposes of calculating Consolidated EBITDA for any period of four consecutive fiscal quarters (each, a "Reference Period") pursuant to any determination of the Consolidated Leverage Ratio and the Consolidated Senior Debt Ratio, (i) if at any time during such Reference Period the Borrower or any Subsidiary shall have made any Material Disposition, the Consolidated EBITDA for such Reference Period shall be reduced by an amount equal to the Consolidated EBITDA (if positive) attributable to the property that is the subject of such Material Disposition for such Reference Period or increased by an amount equal to the Consolidated EBITDA (if negative) attributable thereto for such Reference Period and (ii) if during such Reference Period the Borrower or any Subsidiary shall have made a Material Acquisition, Consolidated EBITDA for such Reference Period shall be calculated after giving pro forma effect thereto as if such Material Acquisition occurred on the first day of such Reference Period. As used in this definition, "Material Acquisition" means any acquisition of property or series of related acquisitions of property that (a) constitutes assets comprising all or substantially all of an operating unit of a business or constitutes all or substantially all of the common stock of a Person and (b) involves the payment of consideration by the Borrower and its Subsidiaries in excess of $5,000,000; and "Material Disposition" means any Disposition of property or series of related Dispositions of property that yields gross proceeds to the Borrower or any of its Subsidiaries in excess of $5,000,000.

        "Consolidated Fixed Charge Coverage Ratio": for any period, the ratio of (a) Consolidated EBITDA for such period to (b) Consolidated Fixed Charges for such period.

        "Consolidated Fixed Charges": for any period, the sum (without duplication) of (a) Consolidated Interest Expense for such period, (b) scheduled payments made during such period on account of principal of Indebtedness of the Borrower or any of its Subsidiaries (including scheduled principal payments in respect of the Term Loans), (c) the amount of Restricted Payments made in cash during such period as permitted by Section 9.6 (other than Section 9.6(a) and clause (y) in Section 9.6(b)) and (d) cash taxes actually paid by the Borrower and its Subsidiaries during such period.

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        "Consolidated Interest Coverage Ratio": for any period, the ratio of (a) Consolidated EBITDA for such period to (b) Consolidated Interest Expense for such period.

        "Consolidated Interest Expense": for any period, total cash interest expense (including that attributable to Capital Lease Obligations) of the Borrower and its Subsidiaries for such period with respect to all outstanding Indebtedness of the Borrower and its Subsidiaries (including all commissions, discounts and other fees and charges owed with respect to letters of credit and bankers' acceptance financing and net costs under Hedge Agreements in respect of interest rates to the extent such net costs are allocable to such period in accordance with GAAP), provided that, Consolidated Interest Expense shall be calculated without giving effect to any interest expense resulting from (x) any write-off of deferred financing costs associated with the Refinancing recorded on or prior to December 31, 2002, (y) the write-off of premium paid and any deferred financing costs associated with the repurchase or redemption of the Senior Subordinated Notes prior to the Closing Date or, after the Closing Date, on or prior to December 31, 2002, as permitted by clause (a) of Section 9.9, and (z) any costs associated with the termination of Hedge Agreements in connection with the Refinancing recorded on or prior to December 31, 2002.

        "Consolidated Leverage Ratio": as of the last day of any period, the ratio of (a) Consolidated Total Debt on such day to (b) Consolidated EBITDA for such period.

        "Consolidated Net Income": for any period, the consolidated net income (or loss) of the Borrower and its Subsidiaries, determined on a consolidated basis in accordance with GAAP (prior to giving effect to the payment of any dividends paid on the Convertible Preferred Stock), provided that Consolidated Net Income shall be calculated without giving effect to (x) any write-off of deferred financing costs associated with the Refinancing recorded on or prior to December 31, 2002, (y) the write-off of premium paid and any deferred financing costs associated with the repurchase or redemption of the Senior Subordinated Notes prior to the Closing Date or, after the Closing Date, on or prior to December 31, 2002 as permitted by clause (a) of Section 9.9, and (z) any costs associated with the termination of Hedge Agreements in connection with the Refinancing recorded on or prior to December 31, 2002; provided, further, that there shall be excluded (a) the income (or deficit) of any Person accrued prior to the date it becomes a Subsidiary of the Borrower or is merged into or consolidated with the Borrower or any of its Subsidiaries, (b) the income (or deficit) of any Person (other than a Subsidiary of the Borrower) in which the Borrower or any of its Subsidiaries has an ownership interest, except to the extent that any such income is actually received by the Borrower or such Subsidiary in the form of dividends or similar distributions and (c) the undistributed earnings of any Subsidiary of the Borrower to the extent that the declaration or payment of dividends or similar distributions by such Subsidiary is not at the time permitted by the terms of any Contractual Obligation (other than under any Loan Document) or Requirement of Law applicable to such Subsidiary.

        "Consolidated Senior Debt": all Consolidated Total Debt other than the Senior Subordinated Notes.

        "Consolidated Senior Debt Ratio": as of the last day of any period, the ratio of (a) Consolidated Senior Debt on such day to (b) Consolidated EBITDA for such period.

        "Consolidated Total Debt": at any date, the aggregate principal amount of all Indebtedness of the Borrower and its Subsidiaries at such date, determined on a consolidated basis and required to be reflected on the Borrower's balance sheet in accordance with GAAP.

        "Consolidated Working Capital": at any date, the excess of Consolidated Current Assets on such date over Consolidated Current Liabilities on such date.

        "Continuing Directors": the directors of the Borrower on the Closing Date and each other director, if, in each case, such other director's nomination for election to the board of directors of the Borrower is recommended by a majority of the then Continuing Directors.

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        "Contractual Obligation": as to any Person, any provision of any security issued by such Person or of any agreement, instrument or other undertaking to which such Person is a party or by which it or any of its property is bound.

        "Conversion Date": any date on which either (a) an Event of Default under Section 10(f) has occurred or (b) the Commitments shall have been terminated prior to the Revolving Termination Date and/or the Loans shall have been declared immediately due and payable, in either case pursuant to Section 10.

        "Convertible Preferred Stock": the Borrower's Series A Convertible Preferred Stock outstanding as of the Closing Date.

        "Default": any of the events specified in Section 10, whether or not any requirement for the giving of notice, the lapse of time, or both, has been satisfied.

        "Disposition": with respect to any Property, any sale, lease, sale and leaseback, assignment, conveyance, transfer or other disposition thereof. The terms "Dispose" and "Disposed of" shall have correlative meanings.

        "Dollar Equivalent": at any time as to any amount denominated in a Foreign Currency, the equivalent amount in Dollars as determined by the Administrative Agent at such time on the basis of the Exchange Rate for the purchase of Dollars with such Foreign Currency on the most recent Calculation Date for such Foreign Currency.

        "Dollars" and "$": dollars in lawful currency of the United States.

        "Domestic Subsidiary": any Subsidiary of the Borrower organized under the laws of any jurisdiction within the United States.

        "ECF Percentage": 50%; provided, that, with respect to any fiscal year of the Borrower, the ECF Percentage shall be reduced to 0% if the Consolidated Leverage Ratio as of the last day of such fiscal year is not greater than 2.5 to 1.0.

        "Environmental Laws": any and all laws, rules, orders, regulations, statutes, ordinances, codes, decrees, requirements of any Governmental Authority or other Requirements of Law (including common law) regulating, relating to or imposing liability or standards of conduct concerning protection of human health or the environment, as have been, are now, or may at any time hereafter be in effect.

        "ERISA": the Employee Retirement Income Security Act of 1974, as amended from time to time.

        "Eurocurrency Base Rate": with respect to each day during each Interest Period pertaining to a Eurocurrency Loan, the rate per annum determined on the basis of the rate for deposits in Dollars (or, in the case of a Eurocurrency Loan that is a Foreign Currency Loan, the applicable Foreign Currency) for a period equal to such Interest Period commencing on the first day of such Interest Period appearing on Page 3750 (or on the Page for the applicable Foreign Currency) of the Telerate screen as of 11:00 A.M., New York City time, two Business Days prior to the beginning of such Interest Period. In the event that such rate does not appear on Page 3750 (or on the Page for the applicable Foreign Currency) of the Telerate screen (or otherwise on such screen), the "Eurocurrency Base Rate" shall be determined by reference to such other comparable publicly available service for displaying Eurocurrency rates as may be selected by the Administrative Agent or, in the absence of such availability, by reference to the rate at which the Administrative Agent is offered Dollar deposits (or, in the case of a Eurocurrency Loan that is a Foreign Currency Loan, deposits in the applicable Foreign Currency) at or about 11:00 A.M., local time, two Business Days prior to the beginning of such Interest Period in the interbank eurocurrency market where its eurocurrency and foreign currency and exchange operations are then being conducted for delivery on the first day of such Interest Period for the number of days comprised therein.

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        "Eurocurrency Loans": Loans the rate of interest applicable to which is based upon the Eurocurrency Rate.

        "Eurocurrency Rate": with respect to each day during each Interest Period pertaining to a Eurocurrency Loan, a rate per annum determined for such day in accordance with the following formula (rounded upward to the nearest 1/100th of 1%):

                Eurocurrency Base Rate                
1.00 – Eurocurrency Reserve Requirements

        "Eurocurrency Reserve Requirements": for any day as applied to a Eurocurrency Loan, the aggregate (without duplication) of the maximum rates (expressed as a decimal fraction) of reserve requirements in effect on such day (including basic, supplemental, marginal and emergency reserves) under any regulations of the Board or other Governmental Authority having jurisdiction with respect thereto dealing with reserve requirements prescribed for eurocurrency funding (currently referred to as "Eurocurrency liabilities" in Regulation D of the Board) maintained by a member bank of the Federal Reserve System.

        "Eurocurrency Tranche": with respect to any Facility, the collective reference to Eurocurrency Loans in the same currency under such Facility the then current Interest Periods with respect to all of which begin on the same date and end on the same later date (whether or not such Loans shall originally have been made on the same day).

        "Event of Default": any of the events specified in Section 10, provided that any requirement for the giving of notice, the lapse of time, or both, has been satisfied.

        "Excess Cash Flow": for any fiscal year of the Borrower, the excess, if any, of (a) the sum, without duplication, of (i) Consolidated Net Income for such fiscal year, (ii) the amount of all non-cash charges (including depreciation and amortization) deducted in arriving at such Consolidated Net Income, (iii) decreases in Consolidated Working Capital for such fiscal year, (iv) the aggregate net amount of non-cash loss on the Disposition of Property by the Borrower and its Subsidiaries during such fiscal year (other than sales of inventory in the ordinary course of business), to the extent deducted in arriving at such Consolidated Net Income, (v) the aggregate amount of increases in consolidated long-term liabilities, other than increases in non-cash liabilities for which the offsetting debit is reflected in the other comprehensive income component of consolidated stockholders' equity in accordance with GAAP and (vi) the aggregate amount of decreases in consolidated long-term assets, other than (A) decreases attributable to amortization of capitalized costs to purchase or develop computer software and systems and (B) decreases attributable to cash consideration received for any Dispositions of Property by the Borrower and its Subsidiaries during such period over (b) the sum, without duplication, of (i) the amount of all non-cash credits included in arriving at such Consolidated Net Income, (ii) the aggregate amount of Capital Expenditures incurred by the Borrower and its Subsidiaries during such fiscal year (excluding the principal amount of Indebtedness incurred to finance such expenditures (but including repayments of any such Indebtedness incurred during such period or any prior period) and any such expenditures financed with the proceeds of any Reinvestment Deferred Amount), (iii) the aggregate amount of all prepayments of Revolving Loans, Foreign Currency Loans and Swingline Loans during such fiscal year to the extent accompanying permanent optional reductions of the Revolving Commitments and all optional prepayments of the Term Loans during such fiscal year, (iv) the aggregate amount of all regularly scheduled principal payments of Funded Debt (including the Term Loans) of the Borrower and its Subsidiaries made during such fiscal year (other than in respect of any revolving credit facility to the extent there is not an equivalent permanent reduction in commitments thereunder), (v) increases in Consolidated Working Capital for such fiscal year, (vi) the aggregate net amount of non-cash gain on the Disposition of Property by the Borrower and its Subsidiaries during such fiscal year (other than sales of inventory in the ordinary course of business), to the extent included in arriving at such Consolidated Net Income, (vii) the aggregate amount of cash

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consideration paid for any acquisitions during such period pursuant to Section 9.8(k), (viii) Restricted Payments paid in cash during such period to the extent permitted by Section 9.6(d), (ix) the aggregate amount of decreases in consolidated long-term liabilities, other than decreases in non-cash liabilities for which the offsetting debit is reflected in the other comprehensive income component of consolidated stockholders' equity in accordance with GAAP, and (x) the aggregate amount of increases in consolidated long-term assets, other than (A) increases attributable to cash consideration paid for any acquisitions during such period pursuant to Section 9.8(k) and (B) the costs to purchase or develop computer software or systems to the extent such expenditures are capitalized in conformity with GAAP.

        "Excess Cash Flow Application Date": as defined in Section 5.2(d).

        "Exchange Act": as defined in Section 10(k).

        "Exchange Rate": on any day, with respect to any currency, the rate at which such currency may be exchanged into any other currency, as set forth at approximately 11:00 A.M., New York City time, on such date on the Reuters World Currency Page for such currency. In the event that such rate does not appear on any Reuters World Currency Page, the Exchange Rate shall be determined by reference to such other publicly available service for displaying exchange rates as may be agreed upon by the Administrative Agent and the Borrower, or, in the absence of such agreement, such Exchange Rate shall instead be the arithmetic average of the spot rates of exchange of the Administrative Agent in the market where its foreign currency exchange operations in respect of such currency are then being conducted, at or about 10:00 A.M., local time, on such date for the purchase of Dollars with the relevant currency for delivery two Business Days later; provided that if at the time of any such determination, for any reason, no such spot rate is being quoted, the Administrative Agent, after consultation with the Borrower, may use any reasonable method it deems appropriate to determine such rate, and such determination shall be presumed correct absent manifest error.

        "Excluded Indebtedness": all Indebtedness permitted by clauses (a), (b), (c), (d), (e), (f), (g), (h), (i), (j) and (k) of Section 9.2.

        "Existing Credit Agreement": as defined in the recitals to this Agreement.

        "Existing Letters of Credit": as defined in Section 3.7(c).

        "Expenditure Use Amounts": at any date, the amount equal to the sum of (a) all amounts utilized by the Borrower and its Subsidiaries on and after the Closing Date to make Capital Expenditures pursuant to Section 9.7(b) in excess of $30,000,000 for any New Contract, (b) all amounts utilized by the Borrower and its Subsidiaries on and after the Closing Date to make Restricted Payments pursuant to Section 9.6(d) and (c) all amounts utilized by the Borrower on and after the Closing Date to pay principal, premium and fees relating to the repurchase or redemption of the Senior Subordinated Notes pursuant to Section 9.9(a).

        "Facility": each of (a) the Term Commitments and the Term Loans made thereunder (the "Term Facility") and (b) the Revolving Commitments and the extensions of credit made thereunder (the "Revolving Facility").

        "Federal Funds Effective Rate": for any day, the weighted average of the rates on overnight federal funds transactions with members of the Federal Reserve System arranged by federal funds brokers, as published on the next succeeding Business Day by the Federal Reserve Bank of New York, or, if such rate is not so published for any day that is a Business Day, the average of the quotations for the day of such transactions received by the Reference Lender from three federal funds brokers of recognized standing selected by it.

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        "Fee Payment Date": the last day of each March, June, September and December and the last day of the Revolving Commitment Period (or on such earlier date as the Revolving Commitments shall terminate as provided herein).

        "Foreign Currency": (a) with respect to any Loan, each of British Pounds Sterling, the Euro and any other currency approved by the relevant Foreign Currency Lenders, Issuing Bank and the Administrative Agent, provided that, the Eurocurrency Base Rate applicable to Foreign Currency Loans in any other currency approved after the Closing Date may be amended as agreed by the relevant Foreign Currency Lenders, the Administrative Agent and the Borrower and (b) solely with respect to any Letter of Credit issued by The Bank of New York, each of British Pounds Sterling, the Euro, Canadian Dollar, Chilean Peso, Swiss Franc, New Israeli Shekel, Turkish Lira and Indian Rupee.

        "Foreign Currency Equivalent": at any time as to any amount denominated in Dollars, the equivalent amount in the relevant Foreign Currency or Currencies as determined by the Administrative Agent at such time on the basis of the Exchange Rate for the purchase of such Foreign Currency or Currencies with Dollars on the date of determination thereof.

        "Foreign Currency Lender": each Lender that has a Foreign Currency Commitment or that holds a Foreign Currency Loan.

        "Foreign Currency Loans": as defined in Section 3.15.

        "Foreign Currency Participants": with respect to each Foreign Currency Loan, the collective reference to all the Revolving Lenders.

        "Foreign Currency Sublimit": $15,000,000.

        "Foreign Holdco": as defined in Section 9.8(j).

        "Foreign Holdco Subsidiary": as defined in Section 9.8(j).

        "Foreign Subsidiary": any Subsidiary of the Borrower that is not a Domestic Subsidiary.

        "Funded Debt": as to any Person, all Indebtedness of such Person that matures more than one year from the date of its creation or matures within one year from such date but is renewable or extendible, at the option of such Person, to a date more than one year from such date or arises under a revolving credit or similar agreement that obligates the lender or lenders to extend credit during a period of more than one year from such date, including all current maturities and current sinking fund payments in respect of such Indebtedness whether or not required to be paid within one year from the date of its creation and, in the case of the Borrower, Indebtedness in respect of the Loans.

        "Funding Office": the office of the Administrative Agent specified in Section 12.2 or such other office as may be specified from time to time by the Administrative Agent as its funding office by written notice to the Borrower and the Lenders.

        "GAAP": generally accepted accounting principles in the United States as in effect from time to time. In the event that any Accounting Change (as defined below) shall occur and such change results in a change in the method of calculation of financial covenants, standards or terms in this Agreement, then the Borrower, the Administrative Agent and the Syndication Agent agree to enter into negotiations in order to amend such provisions of this Agreement so as to equitably reflect such Accounting Changes with the desired result that the criteria for evaluating the Borrower's financial condition shall be the same after such Accounting Changes as if such Accounting Changes had not been made. Until such time as such an amendment shall have been executed and delivered by the Borrower, Administrative Agent, the Syndication Agent and the Required Lenders, all financial covenants, standards and terms in this Agreement shall continue to be calculated or construed as if such Accounting Changes had not occurred. "Accounting Changes" refers to changes in accounting principles required by the promulgation of any rule, regulation, pronouncement or opinion by the

10

Financial Accounting Standards Board of the American Institute of Certified Public Accountants or, if applicable, the SEC.

        "Gaming Approval": any and all approvals, authorizations, consents, rulings, orders or directives of any Governmental Authority (i) necessary, as of the Closing Date, to enable the Group Members to engage in the lottery, gambling, horse racing or gaming business or otherwise continue to conduct its business as it is conducted on the Closing Date, (ii) that regulates gaming in any jurisdiction in which the Group Members conduct gaming activities and has jurisdiction over such persons (including any successors to any of them) or (iii) necessary, as of the Closing Date, to accomplish the Refinancing and other transactions contemplated hereby.

        "Gaming Authority": as to any Person, any governmental agency, authority, board, bureau, commission, department, office or instrumentality with regulatory, licensing or permitting authority or jurisdiction over any gaming business or enterprise or any Gaming Facility, or with regulatory, licensing or permitting authority or jurisdiction over any gaming operation (or proposed gaming operation) owned, managed or operated by any Group Member.

        "Gaming Facility": as to any Person, any lottery operation, gaming establishment and other property or assets directly ancillary thereto or used in connection therewith, including, without limitation, any casinos, hotels, resorts, race tracks, off-track wagering sites and other recreation and entertainment facilities owned, managed or operated by any Group Member.

        "Gaming Laws": as to any Person, (a) constitutions, treaties, statutes or laws governing Gaming Facilities (including, without limitation, pari mutuel race tracks) and rules, regulations, codes and ordinances of, and all administrative or judicial orders or decrees or other laws pursuant to which, any Gaming Authority possesses regulatory, licensing or permit authority over gambling, gaming or Gaming Facility activities conducted by any Group Member within its jurisdiction, (b) Gaming Approvals, and (c) orders, decisions, determinations, judgments, awards and decrees of any Gaming Authority.

        "Governmental Authority": any nation or government, any state or other political subdivision thereof, any agency, authority, instrumentality, regulatory body, court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative functions of or pertaining to government, any securities exchange and any self-regulatory organization (including the National Association of Insurance Commissioners).

        "Group Members": the collective reference to the Borrower and its Subsidiaries.

        "Guarantee and Collateral Agreement": the Guarantee and Collateral Agreement to be executed and delivered by the Borrower and each Subsidiary Guarantor, substantially in the form of Exhibit A.

        "Guarantee Obligation": as to any Person (the "guaranteeing person"), any obligation of (a) the guaranteeing person or (b) another Person (including any bank under any letter of credit) to induce the creation of which the guaranteeing person has issued a reimbursement, counterindemnity or similar obligation, in either case guaranteeing or in effect guaranteeing any Indebtedness, leases, dividends or other obligations (the "primary obligations") of any other third Person (the "primary obligor") in any manner, whether directly or indirectly, including any obligation of the guaranteeing person, whether or not contingent, (i) to purchase any such primary obligation or any property constituting direct or indirect security therefor, (ii) to advance or supply funds (1) for the purchase or payment of any such primary obligation or (2) to maintain working capital or equity capital of the primary obligor or otherwise to maintain the net worth or solvency of the primary obligor, (iii) to purchase property, securities or services primarily for the purpose of assuring the owner of any such primary obligation of the ability of the primary obligor to make payment of such primary obligation or (iv) otherwise to assure or hold harmless the owner of any such primary obligation against loss in respect thereof; provided, however, that the term Guarantee Obligation shall not include endorsements of instruments for deposit or collection in the ordinary course of business. The amount of any Guarantee Obligation

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of any guaranteeing person shall be deemed to be the lower of (a) an amount equal to the stated or determinable amount of the primary obligation in respect of which such Guarantee Obligation is made and (b) the maximum amount for which such guaranteeing person may be liable pursuant to the terms of the instrument embodying such Guarantee Obligation, unless such primary obligation and the maximum amount for which such guaranteeing person may be liable are not stated or determinable, in which case the amount of such Guarantee Obligation shall be such guaranteeing person's maximum reasonably anticipated liability in respect thereof as determined by the Borrower in good faith.

        "Hedge Agreements": any agreement with respect to any swap, forward, future or derivative transaction or option or similar agreement involving, or settled by reference to, one or more rates, currencies, commodities, equity or debt instruments or securities, or economic, financial or pricing indices or measures of economic, financial or pricing risk or value or any similar transaction or any combination of these transactions; provided that no phantom stock or similar plan providing for payments only on account of services provided by current or former directors, officers, employees or consultants of the Borrower or the Subsidiaries shall be a Hedge Agreement.

        "Increase Effective Date": the date on which the Administrative Agent shall have received a Revolving Commitment Increase Notice and all conditions precedent to the effectiveness of any such Revolving Commitment increase set forth in Section 4.1 shall have been satisfied, which date shall occur no later than the second anniversary of the Closing Date.

        "Increase Option Period": the period beginning on the Closing Date to, but excluding, the date that is the second anniversary of the Closing Date.

        "Indebtedness": of any Person at any date, without duplication, (a) all indebtedness of such Person for borrowed money, (b) all obligations of such Person for the deferred purchase price of property or services (other than current trade payables incurred in the ordinary course of such Person's business), (c) all obligations of such Person evidenced by notes, bonds, debentures or other similar instruments, (d) all indebtedness created or arising under any conditional sale or other title retention agreement with respect to property acquired by such Person (even though the rights and remedies of the seller or lender under such agreement in the event of default are limited to repossession or sale of such property), (e) all Capital Lease Obligations of such Person, (f) all obligations of such Person, contingent or otherwise, as an account party or applicant under or in respect of acceptances, letters of credit, surety bonds or similar arrangements, (g) the liquidation value of all mandatorily redeemable preferred Capital Stock of such Person (other than the Convertible Preferred Stock), (h) all Guarantee Obligations of such Person in respect of obligations of the kind referred to in clauses (a) through (g) above, (i) all obligations of the kind referred to in clauses (a) through (h) above secured by (or for which the holder of such obligation has an existing right, contingent or otherwise, to be secured by) any Lien on property (including accounts and contract rights) owned by such Person, whether or not such Person has assumed or become liable for the payment of such obligation, and (j) for the purposes of Section 9.2 and Section 10(e) only, all obligations of such Person in respect of Hedge Agreements. The Indebtedness of any Person shall include the Indebtedness of any other entity (including any partnership in which such Person is a general partner) to the extent such Person is liable therefor as a result of such Person's ownership interest in or other relationship with such entity, except to the extent the terms of such Indebtedness expressly provide that such Person is not liable therefor.

        "Indemnified Liabilities": as defined in Section 12.5.

        "Indemnitee": as defined in Section 12.5.

        "Ineligible Assignee": any Person that is (a) to the extent required under applicable Gaming Laws, a Person who is not registered or licensed with, approved, qualified or found suitable by, or has been disapproved, denied a license, qualification or approval or found unsuitable (whichever may be required

12

under applicable Gaming Law) or (b) a competitor of the Borrower or an affiliate or related entity of any such competitor.

        "Insolvency": with respect to any Multiemployer Plan, the condition that such Plan is insolvent within the meaning of Section 4245 of ERISA.

        "Insolvent": pertaining to a condition of Insolvency.

        "Intellectual Property": the collective reference to all rights, priorities and privileges relating to intellectual property, whether arising under United States, multinational or foreign laws or otherwise, including copyrights, copyright licenses, patents, patent licenses, trademarks, trademark licenses, technology, know-how and processes, and all rights to sue at law or in equity for any infringement or other impairment thereof, including the right to receive all proceeds and damages therefrom.

        "Interest Payment Date": (a) as to any Base Rate Loan (other than a Swingline Loan), the last day of each March, June, September and December to occur while such Loan is outstanding and the final maturity date of such Loan, (b) as to any Eurocurrency Loan having an Interest Period of three months or less, the last day of such Interest Period, (c) as to any Eurocurrency Loan having an Interest Period longer than three months, each day that is three months, or a whole multiple thereof, after the first day of such Interest Period and the last day of such Interest Period, (d) as to any Loan (other than any Revolving Loan that is a Base Rate Loan and any Swingline Loan), the date of any repayment or prepayment made in respect thereof and (e) as to any Swingline Loan, the day that such Loan is required to be repaid.

        "Interest Period": as to any Eurocurrency Loan, (a) initially, the period commencing on the borrowing or conversion date, as the case may be, with respect to such Eurocurrency Loan and ending one, two, three or six months thereafter, as selected by the Borrower in its notice of borrowing or notice of conversion, as the case may be, given with respect thereto; and (b) thereafter, each period commencing on the last day of the next preceding Interest Period applicable to such Eurocurrency Loan and ending one, two, three or six months thereafter, as selected by the Borrower by irrevocable notice to the Administrative Agent not later than 11:00 A.M., New York City time, three Business Days prior to the last day of the then current Interest Period with respect thereto; provided that, all of the foregoing provisions relating to Interest Periods are subject to the following:

(i)

if any Interest Period would otherwise end on a day that is not a Business Day, such Interest Period shall be extended to the next succeeding Business Day unless the result of such extension would be to carry such Interest Period into another calendar month in which event such Interest Period shall end on the immediately preceding Business Day;



(ii)

the Borrower may not select an Interest Period under a particular Facility that would extend beyond the Revolving Termination Date (in the case of the Revolving Facility) or beyond the date final payment is due on the Term Loans, as the case may be;



(iii)

any Interest Period that begins on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall end on the last Business Day of a calendar month; and



(iv)

the Borrower shall select Interest Periods so as not to require any foreseeable payment or prepayment of any Eurocurrency Loan during an Interest Period for such Loan.

        "Investments": as defined in Section 9.8.

        "Issuing Lender": any Revolving Lender from time to time designated by the Borrower as an Issuing Lender with the consent of such Revolving Lender and the Administrative Agent.

        "Judgment Currency": as defined in Section 12.18(b).

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        "L/C Commitment": $50,000,000.

        "L/C Fee Payment Date": the last day of each March, June, September and December and the last day of the Revolving Commitment Period.

        "L/C Obligations": at any time, an amount equal to the sum of (a) the aggregate then undrawn and unexpired amount of the then outstanding Letters of Credit (including the Dollar Equivalent of Letters of Credit issued in Foreign Currencies) and (b) the aggregate amount of drawings under Letters of Credit (including the Dollar Equivalent of Letters of Credit issued in Foreign Currencies to the extent such amounts have not been converted to Dollars in accordance with the terms hereof) that have not then been reimbursed pursuant to Section 3.11.

        "L/C Participants": the collective reference to all the Revolving Lenders other than the Issuing Lender that issued the relevant Letter of Credit.

        "Lead Arranger": as defined in the recitals to this Agreement.

        "Lender Affiliate": (a) any Affiliate of any Lender, (b) any Person that is administered or managed by any Lender and that is engaged in making, purchasing, holding or otherwise investing in commercial loans and similar extensions of credit in the ordinary course of its business and (c) with respect to any Lender which is a fund that invests in commercial loans and similar extensions of credit, any other fund that invests in commercial loans and similar extensions of credit and is managed or advised by the same investment advisor as such Lender or by an Affiliate of such Lender or investment advisor.

        "Lenders": as defined in the preamble hereto; provided, that unless the context otherwise requires, each reference herein to the Lenders shall be deemed to include any Conduit Lender; provided, further, that, for purposes of Sections 5.9, 5.10 and 5.11, all Foreign Currency Lenders shall be deemed to be "Lenders."

        "Letters of Credit": as defined in Section 3.7(a).

        "Lien": any mortgage, pledge, hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or other), charge or other security interest or any preference, priority or other security agreement or preferential arrangement of any kind or nature whatsoever (including any conditional sale or other title retention agreement and any capital lease having substantially the same economic effect as any of the foregoing).

        "Loan": any loan made by any Lender pursuant to this Agreement.

        "Loan Documents": this Agreement, the Security Documents, the Notes, each New Lender Supplement and each Commitment Increase Supplement.

        "Loan Parties": each Group Member that is a party to a Loan Document.

        "Lottomatica": Lottomatica S.p.A.

        "Majority Facility Lenders": with respect to any Facility, the holders of more than 50% of the aggregate unpaid principal amount of the Term Loans or the Total Revolving Extensions of Credit, as the case may be, outstanding under such Facility (or, in the case of the Revolving Facility, prior to any termination of the Revolving Commitments, the holders of more than 50% of the Total Revolving Commitments).

        "Material Adverse Effect": a material adverse effect on (a) the business, assets, property, condition (financial or otherwise), results of operations or prospects of the Borrower and its Subsidiaries, taken as a whole or (b) the validity or enforceability of this Agreement or any of the other Loan Documents or the rights or remedies of the Agents or the Lenders hereunder or thereunder.

        "Material Contract": each contract of the Group Members described on Schedule 6.23.

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        "Materials of Environmental Concern": any gasoline or petroleum (including crude oil or any fraction thereof) or petroleum products, asbestos, polychlorinated biphenyls, urea-formaldehyde insulation, any hazardous or toxic substances, materials or wastes, defined as such or regulated in or under any applicable Environmental Laws, and any other substances that could reasonably be expected to result in liability under any applicable Environmental Laws.

        "Maximum Rate": as defined in Section 12.19.

        "Mortgaged Properties": the real properties listed on Schedule 1.1(a), as to which the Administrative Agent for the benefit of the Lenders shall be granted a Lien pursuant to the Mortgages.

        "Mortgages": each of the mortgages and deeds of trust made by any Loan Party in favor of, or for the benefit of, the Administrative Agent for the benefit of the Lenders, substantially in the form of Exhibit E (with such changes thereto as shall be advisable under the law of the jurisdiction in which such mortgage or deed of trust is to be recorded).

        "Multiemployer Plan": a Plan that is a multiemployer plan as defined in Section 4001(a)(3) of ERISA.

        "Net Cash Proceeds": (a) in connection with any Asset Sale or any Recovery Event, the proceeds thereof in the form of cash and Cash Equivalents (including any such proceeds received by way of deferred payment of principal pursuant to a note or installment receivable or purchase price adjustment receivable or by the Disposition of any non-cash consideration received in connection therewith or otherwise, but only as and when received) of such Asset Sale or Recovery Event, net of attorneys' fees, accountants' fees, investment banking fees, brokers' fees, amounts required to be applied to the repayment of Indebtedness secured by a Lien expressly permitted hereunder on any asset that is the subject of such Asset Sale or Recovery Event (other than any Lien pursuant to a Security Document) and other customary fees and expenses actually incurred in connection therewith and net of taxes paid or reasonably estimated to be payable as a result thereof (after taking into account any available tax credits or deductions and any tax sharing arrangements) and (b) in connection with any issuance or sale of Capital Stock or any incurrence of Indebtedness, the cash proceeds received from such issuance or incurrence, net of attorneys' fees, investment banking fees, accountants' fees, underwriting discounts and commissions and other customary fees and expenses actually incurred in connection therewith.

        "New Contract": (a) any new contract relating to the establishment and operation of an on-line lottery system with a customer for whom neither the Borrower nor any of its Subsidiaries operated an on-line lottery system on or prior to the date such contract is entered into or any new contract relating to an on-line lottery system with an existing customer of the Borrower or any of its Subsidiaries that was entered into in accordance with normal jurisdictional laws regarding "request for proposal" procedures; provided that, such contract shall cease to be a New Contract on the date on which the Borrower or such Subsidiary commences "commercial operations" under such contract and (b) any new contract between the Borrower and the Georgia Lottery Corporation concerning the instant ticket lottery in the State of Georgia as approved by the Georgia Lottery Corporation in the GLC Resolution No. 03-11: (LEG 03) dated November 15, 2002; provided that such contract shall be deemed a "New Contract" solely for purposes of Section 9.7(b) only for the fiscal year 2003.

        "New Lender Supplement": each New Lender Supplement delivered pursuant to Section 4.1, substantially in the form of Exhibit D-1.

        "New Revolving Lender": as defined in Section 4.1(b).

        "Non-Excluded Taxes": as defined in Section 5.10(a).

        "Non-Guarantor Subsidiary": any Subsidiary that is not a Subsidiary Guarantor.

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        "Non-U.S. Lender": as defined in Section 5.10(d).

        "Notes": the collective reference to any promissory note evidencing Loans.

        "Obligations": the unpaid principal of and interest on (including interest accruing after the maturity of the Loans and Reimbursement Obligations and interest accruing after the filing of any petition in bankruptcy, or the commencement of any insolvency, reorganization or like proceeding, relating to the Borrower, whether or not a claim for post-filing or post-petition interest is allowed in such proceeding) the Loans and all other obligations and liabilities of the Borrower to any Agent or to any Lender (or, in the case of Specified Hedge Agreements, any affiliate of any Lender), whether direct or indirect, absolute or contingent, due or to become due, or now existing or hereafter incurred, which may arise under, out of, or in connection with, this Agreement, any other Loan Document, the Letters of Credit, any Specified Hedge Agreement or any other document made, delivered or given in connection herewith or therewith, whether on account of principal, interest, reimbursement obligations, fees, indemnities, costs, expenses (including all fees, charges and disbursements of counsel to any Agent or to any Lender that are required to be paid by the Borrower pursuant hereto) or otherwise; provided, that (i) obligations of the Borrower or any Subsidiary under any Specified Hedge Agreement shall be secured and guaranteed pursuant to the Security Documents only to the extent that, and for so long as, the other Obligations are so secured and guaranteed and (ii) any release of Collateral or Subsidiary Guarantors effected in the manner permitted by this Agreement shall not require the consent of holders of obligations under Specified Hedge Agreements.

        "Olivetti": Olivetti S.p.A.

        "Other Taxes": any and all present or future stamp or documentary taxes or any other excise or property taxes, charges or similar levies arising from any payment made hereunder or from the execution, delivery or enforcement of, or otherwise with respect to, this Agreement or any other Loan Document.

        "Participant": as defined in Section 12.6(c).

        "PBGC": the Pension Benefit Guaranty Corporation established pursuant to Subtitle A of Title IV of ERISA (or any successor).

        "Permitted Acquisition": as to any Person, (a) the acquisition by such Person of the Capital Stock another Person which is primarily engaged in the same or related line of business of the Borrower and its Subsidiaries (or any other Person that is engaged in a business that is a reasonable extension of the business of the Borrower and its Subsidiaries and that utilizes the same or similar technology as that used by the Borrower and its Subsidiaries immediately prior to such acquisition) so long as following such acquisition such other Person becomes a Subsidiary of such Person or (b) the acquisition by such Person of all or substantially all of the assets of another Person or all or substantially all of the assets constituting a division or business unit of another person.

        "Permitted Expenditure Amount": at any date, the amount equal to the sum of (a) 50% of the amount of Consolidated Net Income for each quarterly period ended after the Closing Date for which financial statements have been delivered pursuant to Section 8.1 to the extent the Consolidated Net Income for such period is positive, (b) 50% of the Net Cash Proceeds received by the Borrower from the sale of Capital Stock of the Borrower (other than to a Group Member) during the period beginning on the Closing Date and ending on such date which is not required to be applied to prepay the Loans pursuant to Section 5.2(a) and (c) $5,000,000 minus the sum of (x) 100% of the amount of Consolidated Net Income for each quarterly period ended after the Closing Date for which financial statements have been delivered pursuant to Section 8.1 to the extent the Consolidated Net Income for such period is negative and (y) the aggregate amount of Expenditure Use Amounts as of such date.

16

        "Permitted Investors": Olivetti, Lottomatica or any Affiliate thereof or group in which Olivetti, Lottomatica or an Affiliate thereof is the largest beneficial owner of shares of the voting Capital Stock of such group.

        "Person": an individual, partnership, corporation, limited liability company, business trust, joint stock company, trust, unincorporated association, joint venture, Governmental Authority or other entity of whatever nature.

        "Plan": at a particular time, any employee benefit plan that is covered by ERISA and in respect of which the Borrower or a Commonly Controlled Entity is (or, if such plan were terminated at such time, would under Section 4069 of ERISA be deemed to be) an "employer" as defined in Section 3(5) of ERISA.

        "Preferred Stock Purchase Agreement": the Preferred Stock Purchase Agreement, dated as of September 6, 2000, among the Borrower, Cirmatica Gaming, S.A., The Oak Fund, Peconic Fund Ltd., Ramius Securities, LLC and Olivetti International S.A., as purchasers, providing for the aggregate purchase and sale of shares of the Convertible Preferred Stock in an amount not to exceed $112,750,000.

        "Pricing Grid": the pricing grid attached hereto as Annex A.

        "Projections": as defined in Section 8.2(c).

        "Property": any right or interest in or to property of any kind whatsoever, whether real, personal or mixed and whether tangible or intangible, including, without limitation, Capital Stock.

        "Recovery Event": any settlement of or payment in respect of any property or casualty insurance claim or any condemnation proceeding relating to any asset of any Group Member.

        "Reference Lender": The Bank of New York.

        "Refinancing": as defined in the recitals to this Agreement.

        "Refunded Swingline Loans": as defined in Section 3.4.

        "Refunding Date": as defined in Section 3.4.

        "Register": as defined in Section 12.6(b).

        "Regulation U": Regulation U of the Board as in effect from time to time.

        "Reimbursement Obligation": the obligation of the Borrower to reimburse each Issuing Lender pursuant to Section 3.11 for amounts drawn under Letters of Credit issued by such Issuing Lender.

        "Reinvestment Deferred Amount": with respect to any Reinvestment Event, the aggregate Net Cash Proceeds received by any Group Member in connection therewith that are not applied to prepay the Term Loans pursuant to Section 5.2(c) as a result of the delivery of a Reinvestment Notice.

        "Reinvestment Event": any Asset Sale or Recovery Event in respect of which the Borrower has delivered a Reinvestment Notice.

        "Reinvestment Notice": a written notice executed by a Responsible Officer stating that no Event of Default has occurred and is continuing and that the Borrower (directly or indirectly through a Subsidiary) intends and expects to use all or a specified portion of the Net Cash Proceeds of an Asset Sale or Recovery Event to make a Permitted Acquisition or to acquire or repair fixed or capital assets or develop software useful in its business, provided that the cost of any such software development is capitalized on the Borrower's balance sheet in accordance with GAAP.

        "Reinvestment Prepayment Amount": with respect to any Reinvestment Event, the Reinvestment Deferred Amount relating thereto less any amount expended prior to the relevant Reinvestment

17

Prepayment Date to make a Permitted Acquisition or to acquire or repair fixed or capital assets or develop software useful in its business, provided that the cost of any such software development is capitalized on the Borrower's balance sheet in accordance with GAAP.

        "Reinvestment Prepayment Date": with respect to any Reinvestment Event, the earlier of (a) the date occurring twelve months after such Reinvestment Event and (b) the date on which the Borrower shall have determined not to, or shall have otherwise ceased to, acquire or repair fixed or capital assets or develop software useful in its business, provided that the cost of such software development is capitalized on the Borrower's balance sheet in accordance with GAAP, or make a Permitted Acquisition with all or any portion of the relevant Reinvestment Deferred Amount.

        "Reorganization": with respect to any Multiemployer Plan, the condition that such plan is in reorganization within the meaning of Section 4241 of ERISA.

        "Reportable Event": any of the events set forth in Section 4043(c) of ERISA, other than those events as to which the 30 day notice period is waived under subsections .27, .28, .29, .30, .31, .32, .34 or .35 of PBGC Reg. § 4043.

        "Required Lenders": at any time, (a) until the Closing Date, (x) the holders of more than 50% of the Term Loan Commitments then in effect and (y) the holders of more than 50% of the Total Revolving Commitments then in effect and (b) thereafter, (1) the holders of more than 50% of the aggregate unpaid principal amount of the Term Loans then outstanding and (2) the holders of more than 50% of the Total Revolving Commitments then in effect or, if the Revolving Commitments have been terminated, the Total Revolving Extensions of Credit then outstanding.

        "Requirement of Law": as to any Person, the Certificate of Incorporation and By-Laws or other organizational or governing documents of such Person, and any law, treaty, rule or regulation or determination of an arbitrator or a court or other Governmental Authority, in each case applicable to or binding upon such Person or any of its property or to which such Person or any of its property is subject.

        "Reset Date": as defined in Section 5.16(a).

        "Responsible Officer": the chief executive officer, president, general counsel, chief financial officer or the treasurer of the Borrower, but in any event, with respect to financial matters, the chief financial officer or the treasurer of the Borrower.

        "Restricted Payments": as defined in Section 9.6.

        "Revolving Commitment": as to any Lender, the obligation of such Lender, if any, to make Revolving Loans and participate in Swingline Loans, Letters of Credit and Foreign Currency Loans in an aggregate principal and/or face amount not to exceed the amount set forth under the heading "Revolving Commitment" under such Lender's name on such Lender's Addendum or in the Assignment and Assumption pursuant to which such Lender became a party hereto, as the same may be changed from time to time pursuant to the terms hereof. The original amount of the Total Revolving Commitments is $50,000,000.

        "Revolving Commitment Increase Notice": as defined in Section 4.1(a).

        "Revolving Commitment Period": the period from and including the Closing Date to the Revolving Termination Date.

        "Revolving Extensions of Credit": as to any Revolving Lender at any time, an amount equal to the sum of (a) the aggregate principal amount of all Revolving Loans held by such Lender then outstanding, (b) such Lender's Revolving Percentage of the L/C Obligations then outstanding, (c) such Lender's Revolving Percentage of the aggregate principal amount of Swingline Loans then outstanding

18

and (d) such Lender's Revolving Percentage of the Dollar Equivalent of the aggregate principal amount of Foreign Currency Loans then outstanding.

        "Revolving Lender": each Lender that has a Revolving Commitment or that holds Revolving Loans.

        "Revolving Loans": as defined in Section 3.1(a).

        "Revolving Offered Increase Amount": as defined in Section 4.1(a).

        "Revolving Percentage": as to any Revolving Lender at any time, the percentage which such Lender's Revolving Commitment then constitutes of the Total Revolving Commitments (or, at any time after the Revolving Commitments shall have expired or terminated, the percentage which the aggregate principal amount of such Lender's Revolving Loans then outstanding constitutes of the aggregate principal amount of the Revolving Loans then outstanding).

        "Revolving Termination Date": September 30, 2006.

        "SEC": the Securities and Exchange Commission, any successor thereto and any analogous Governmental Authority.

        "Security Documents": the collective reference to the Guarantee and Collateral Agreement, the Mortgages and all other security documents hereafter delivered to the Administrative Agent granting a Lien on any property of any Person to secure the obligations and liabilities of any Loan Party under any Loan Document.

        "Senior Subordinated Note Indenture": the Indenture dated as of August 14, 2000 entered into by the Borrower and certain of its Subsidiaries in connection with the issuance of the Senior Subordinated Notes as amended by the First Supplemental Indenture, dated as of September 6, 2000, together with all instruments and other agreements entered into by the Borrower or such Subsidiaries in connection therewith.

        "Senior Subordinated Notes": the unsecured Senior Subordinated Notes due 2010 of the Borrower issued on August 14, 2000 pursuant to the Senior Subordinated Note Indenture.

        "Single Employer Plan": any Plan that is covered by Title IV of ERISA, but that is not a Multiemployer Plan.

        "Solvent": when used with respect to any Person, means that, as of any date of determination, (a) the amount of the "present fair saleable value" of the assets of such Person will, as of such date, exceed the amount of all "liabilities of such Person, contingent or otherwise", as of such date, as such quoted terms are determined in accordance with applicable federal and state laws governing determinations of the insolvency of debtors, (b) the present fair saleable value of the assets of such Person will, as of such date, be greater than the amount that will be required to pay the liability of such Person on its debts as such debts become absolute and matured, (c) such Person will not have, as of such date, an unreasonably small amount of capital with which to conduct its business, and (d) such Person will be able to pay its debts as they mature. For purposes of this definition, (i) "debt" means liability on a "claim", and (ii) "claim" means any (x) right to payment, whether or not such a right is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured or unsecured or (y) right to an equitable remedy for breach of performance if such breach gives rise to a right to payment, whether or not such right to an equitable remedy is reduced to judgment, fixed, contingent, matured or unmatured, disputed, undisputed, secured or unsecured.

        "Specified Change of Control": a "Change of Control" (or any other defined term having a similar purpose) as defined in the Senior Subordinated Note Indenture.

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        "Specified Hedge Agreement": any Hedge Agreement (a) entered into by (i) the Borrower or any of its Subsidiaries and (ii) any Agent or Lender or any affiliate thereof, as counterparty and (b) that has been designated by such Agent or Lender, as the case may be, and the Borrower, by notice to the Administrative Agent, as a Specified Hedge Agreement, and any other Hedge Agreements listed on Schedule 1.1(b) without given effect to any extension of the termination or maturity date thereof. The designation of any Hedge Agreement as a Specified Hedge Agreement shall not create in favor of the Agent, Lender or affiliate thereof that is a party thereto any rights in connection with the management or release of any Collateral or of the obligations of any Subsidiary Guarantor under the Guarantee and Collateral Agreement.

        "Subject Properties": as defined in Section 6.17(a).

        "Subsidiary": as to any Person, a corporation, partnership, limited liability company or other entity of which shares of stock or other ownership interests having ordinary voting power (other than stock or such other ownership interests having such power only by reason of the happening of a contingency) to elect a majority of the board of directors or other managers of such corporation, partnership or other entity are at the time owned, or the management of which is otherwise controlled, directly or indirectly through one or more intermediaries, or both, by such Person. Unless otherwise qualified, all references to a "Subsidiary" or to "Subsidiaries" in this Agreement shall refer to a direct or indirect Subsidiary or Subsidiaries of the Borrower.

        "Subsidiary Guarantor": a Subsidiary that (i) is a Domestic Subsidiary that is a Wholly Owned Subsidiary, (ii) provides a guarantee of any Indebtedness of the Borrower (other than the Loans) or (iii) becomes a party to the Loan Documents pursuant to Section 8.9(c).

        "Swingline Commitment": the obligation of the Swingline Lender to make Swingline Loans pursuant to Section 3.3 in an aggregate principal amount at any one time outstanding not to exceed $10,000,000.

        "Swingline Lender": The Bank of New York, in its capacity as the lender of Swingline Loans.

        "Swingline Loans": as defined in Section 3.3.

        "Swingline Participation Amount": as defined in Section 3.4.

        "Syndication Agent": as defined in the preamble to this Agreement.

        "Term Commitment": as to any Lender, the obligation of such Lender, if any, to make a Term Loan to the Borrower hereunder in a principal amount not to exceed the amount set forth under the heading "Term Commitment" under such Lender's name on such Lender's Addendum. The original aggregate amount of the Term Commitments is $290,000,000.

        "Term Lender": each Lender that has a Term Commitment or that holds a Term Loan.

        "Term Loan": as defined in Section 2.1.

        "Term Percentage": as to any Term Lender at any time, the percentage which such Lender's Term Commitment then constitutes of the aggregate Term Commitments (or, at any time after the Closing Date, the percentage which the aggregate principal amount of such Lender's Term Loans then outstanding constitutes of the aggregate principal amount of the Term Loans then outstanding).

        "Title Insurance Company": as defined in Section 7.1(k)(ii).

        "Title Policy": as defined in Section 7.1(k)(iii).

        "Title Policy Insured Amount": as defined in Section 7.1(k)(iii).

        "Total Revolving Commitments": at any time, the aggregate amount of the Revolving Commitments of all the Lenders.

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        "Total Revolving Extensions of Credit": at any time, the aggregate amount of the Revolving Extensions of Credit of the Revolving Lenders outstanding at such time.

        "Transferee": any Assignee or Participant.

        "Type": as to any Loan, its nature as a Base Rate Loan or a Eurocurrency Loan.

        "UK Property": as defined in Section 9.2(i).

        "United States": the United States of America.

        "Wholly Owned Subsidiary": as to any Person, any other Person all of the Capital Stock of which (other than directors' qualifying shares required by law) is owned by such Person directly and/or through other Wholly Owned Subsidiaries.

        1.2    Other Definitional Provisions.    (a) Unless otherwise specified therein, all terms defined in this Agreement shall have the defined meanings when used in the other Loan Documents or any certificate or other document made or delivered pursuant hereto or thereto.

        (b)    As used herein and in the other Loan Documents, and any certificate or other document made or delivered pursuant hereto or thereto, (i) accounting terms relating to any Group Member not defined in Section 1.1 and accounting terms partly defined in Section 1.1, to the extent not defined, shall have the respective meanings given to them under GAAP, (ii) the words "include", "includes" and "including" shall be deemed to be followed by the phrase "without limitation", (iii) the word "incur" shall be construed to mean incur, create, issue, assume, become liable in respect of or suffer to exist (and the words "incurred" and "incurrence" shall have correlative meanings), (iv) the words "asset" and "property" shall be construed to have the same meaning and effect and to refer to any and all tangible and intangible assets and properties, including cash, Capital Stock, securities, revenues, accounts, leasehold interests and contract rights, and (v) references to agreements or other Contractual Obligations shall, unless otherwise specified, be deemed to refer to such agreements or Contractual Obligations as amended, supplemented, restated or otherwise modified from time to time (subject to any applicable restrictions hereunder).

        (c)    The words "hereof", "herein" and "hereunder" and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement, and Section, Schedule and Exhibit references are to this Agreement unless otherwise specified.

        (d)    The meanings given to terms defined herein shall be equally applicable to both the singular and plural forms of such terms.

        1.3    Currency Conversion.    (a) If more than one currency or currency unit are at the same time recognized by the central bank of any country as the lawful currency of that country, then (i) any reference in the Loan Documents to, and any obligations arising under the Loan Documents in, the currency of that country shall be translated into or paid in the currency or currency unit of that country designated by the Administrative Agent and (ii) any translation from one currency or currency unit to another shall be at the official rate of exchange recognized by the central bank for conversion of that currency or currency unit into the other, rounded up or down by the Administrative Agent as it deems appropriate.

        (b)    If a change in any currency of a country occurs, this Agreement shall be amended (and each party hereto agrees to enter into any supplemental agreement necessary to effect any such amendment) to the extent that the Administrative Agent determines such amendment to be necessary to reflect the change in currency and to put the Lenders in the same position, so far as possible, that they would have been in if no change in currency had occurred.

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SECTION 2.    AMOUNT AND TERMS OF TERM COMMITMENTS

        2.1    Term Commitments.    Subject to the terms and conditions hereof, each Term Lender severally agrees to make a term loan denominated in Dollars (a "Term Loan") to the Borrower on the Closing Date in an amount not to exceed the amount of the Term Commitment of such Lender. The Term Loans may from time to time be Eurocurrency Loans or Base Rate Loans, as determined by the Borrower and notified to the Administrative Agent in accordance with Sections 2.2 and 5.3.

        2.2    Procedure for Term Loan Borrowing.    The Borrower shall give the Administrative Agent irrevocable notice (which notice must be received by the Administrative Agent prior to 10:00 A.M., New York City time, one Business Day prior to the anticipated Closing Date) requesting that the Term Lenders make the Term Loans on the Closing Date and specifying the amount to be borrowed. The Term Loans made on the Closing Date shall initially be Base Rate Loans and shall not be converted to Eurocurrency Loans prior to the date which is three Business Days after the Closing Date. Upon receipt of such notice the Administrative Agent shall promptly notify each Term Lender thereof. Not later than 12:00 Noon, New York City time, on the Closing Date each Term Lender shall make available to the Administrative Agent at the Funding Office an amount in immediately available funds equal to the Term Loan or Term Loans to be made by such Lender. The Administrative Agent shall credit the account of the Borrower on the books of such office of the Administrative Agent with the aggregate of the amounts made available to the Administrative Agent by the Term Lenders in immediately available funds.

        2.3    Repayment of Term Loans.    The Term Loan of each Lender shall mature in 24 consecutive quarterly installments, commencing on March 31, 2003, each of which shall be in an amount equal to the product of (i) such Lender's Term Percentage multiplied by (ii) an amount equal to the aggregate

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amount of Term Loans outstanding on the Closing Date multiplied by (iii) the percentage set forth below opposite such installment:

Installment	Percentage of Principal Amount
March 31, 2003	0.25	%
June 30, 2003	0.25	%
September 30, 2003	0.25	%
December 31, 2003	0.25	%
March 31, 2004	0.25	%
June 30, 2004	0.25	%
September 30, 2004	0.25	%
December 31, 2004	0.25	%
March 31, 2005	0.25	%
June 30, 2005	0.25	%
September 30, 2005	0.25	%
December 31, 2005	0.25	%
March 31, 2006	0.25	%
June 30, 2006	0.25	%
September 30, 2006	0.25	%
December 31, 2006	0.25	%
March 31, 2007	0.25	%
June 30, 2007	0.25	%
September 30, 2007	0.25	%
December 31, 2007	0.25	%
March 31, 2008	23.75	%
June 30, 2008	23.75	%
September 30, 2008	23.75	%
December 31, 2008	23.75	%

SECTION 3.    AMOUNT AND TERMS OF REVOLVING COMMITMENTS

        3.1    Revolving Commitments.    a) Subject to the terms and conditions hereof, each Revolving Lender severally agrees to make revolving credit loans denominated in Dollars ("Revolving Loans") to the Borrower from time to time during the Revolving Commitment Period in an aggregate principal amount at any one time outstanding which, when added to such Lender's Revolving Percentage of the sum of (i) the L/C Obligations then outstanding, (ii) the aggregate principal amount of the Swingline Loans then outstanding and (iii) the Dollar Equivalent of the aggregate principal amount of the Foreign Currency Loans then outstanding, does not exceed the amount of such Lender's Revolving Commitment. During the Revolving Commitment Period, the Borrower may use the Revolving Commitments by borrowing, prepaying and reborrowing the Revolving Loans, in whole or in part, all in accordance with the terms and conditions hereof. The Revolving Loans may from time to time be Eurocurrency Loans or Base Rate Loans, as determined by the Borrower and notified to the Administrative Agent in accordance with Sections 3.2 and 5.3.

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        (b)    The Borrower shall repay all outstanding Revolving Loans on the Revolving Termination Date.

        3.2    Procedure for Revolving Loan Borrowing.    The Borrower may borrow under Section 3.1 during the Revolving Commitment Period on any Business Day, provided that the Borrower shall give the Administrative Agent irrevocable notice (which notice must be received by the Administrative Agent prior to 12:00 Noon, New York City time, (a) three Business Days prior to the requested Borrowing Date, in the case of Eurocurrency Loans, or (b) one Business Day prior to the requested Borrowing Date, in the case of Base Rate Loans), specifying (i) the amount and Type of Revolving Loans to be borrowed, (ii) the requested Borrowing Date and (iii) in the case of Eurocurrency Loans, the respective amounts of each such Type of Loan and the respective lengths of the initial Interest Period therefor. Any Revolving Loans made on the Closing Date shall initially be Base Rate Loans. Each borrowing under the Revolving Commitments shall be in an amount equal to (x) in the case of Base Rate Loans, $1,000,000 or a whole multiple of $100,000 in excess thereof (or, if the then aggregate Available Revolving Commitments are less than $100,000, such lesser amount) and (y) in the case of Eurocurrency Loans denominated in Dollars, $3,000,000 or a whole multiple of $500,000 in excess thereof; provided, that the Swingline Lender may request, on behalf of the Borrower, borrowings under the Revolving Commitments that are Base Rate Loans in other amounts pursuant to Section 3.4. Upon receipt of any such notice from the Borrower, the Administrative Agent shall promptly notify each Revolving Lender thereof. Each Revolving Lender will make the amount of its pro rata share of each such borrowing available to the Administrative Agent for the account of the Borrower at the Funding Office prior to 12:00 Noon, New York City time, on the Borrowing Date requested by the Borrower in funds immediately available to the Administrative Agent. Such borrowing will then be made available to the Borrower by the Administrative Agent crediting the account of the Borrower on the books of such office with the aggregate of the amounts made available to the Administrative Agent by the Revolving Lenders and in like funds as received by the Administrative Agent.

        3.3    Swingline Commitment.    (a) Subject to the terms and conditions hereof, the Swingline Lender agrees to make a portion of the credit otherwise available to the Borrower under the Revolving Commitments from time to time during the Revolving Commitment Period by making swing line loans denominated in Dollars ("Swingline Loans") to the Borrower; provided that (i) the aggregate principal amount of Swingline Loans outstanding at any time shall not exceed the Swingline Commitment then in effect (notwithstanding that the Swingline Loans outstanding at any time, when aggregated with the Swingline Lender's other outstanding Revolving Extensions of Credit hereunder, may exceed the Swingline Commitment then in effect) and (ii) the Borrower shall not request, and the Swingline Lender shall not make, any Swingline Loan if, after giving effect to the making of such Swingline Loan, the aggregate amount of the Available Revolving Commitments would be less than zero. During the Revolving Commitment Period, the Borrower may use the Swingline Commitment by borrowing, repaying and reborrowing, all in accordance with the terms and conditions hereof. Swingline Loans shall be Base Rate Loans only.

        (b)    The Borrower shall repay to the Swingline Lender the then unpaid principal amount of each Swingline Loan on the earlier of the Revolving Termination Date and the 30th day after such Swingline Loan is made; provided that, during each calendar month, there shall be at least two consecutive Business Days during which the outstanding balance of the Swingline Loans shall be zero.

        3.4    Procedure for Swingline Borrowing; Refunding of Swingline Loans.    (a) Whenever the Borrower desires that the Swingline Lender make Swingline Loans it shall give the Swingline Lender irrevocable telephonic notice confirmed promptly in writing (which telephonic notice must be received by the Swingline Lender not later than 1:00 P.M., New York City time, on the proposed Borrowing Date), specifying (i) the amount to be borrowed and (ii) the requested Borrowing Date (which shall be a Business Day during the Revolving Commitment Period). Each borrowing under the Swingline Commitment shall be in an amount equal to $250,000 or a whole multiple of $100,000 in excess

24

thereof. Not later than 3:00 P.M., New York City time, on the Borrowing Date specified in a notice in respect of Swingline Loans, the Swingline Lender shall make available to the Administrative Agent at the Funding Office an amount in immediately available funds equal to the amount of the Swingline Loan to be made by the Swingline Lender. The Administrative Agent shall make the proceeds of such Swingline Loan available to the Borrower on such Borrowing Date by depositing such proceeds in the account of the Borrower with the Administrative Agent on such Borrowing Date in immediately available funds.

        (b)    The Swingline Lender, at any time and from time to time in its sole and absolute discretion may, on behalf of the Borrower (which hereby irrevocably directs the Swingline Lender to act on its behalf), on one Business Day's notice given by the Swingline Lender no later than 12:00 Noon, New York City time, request each Revolving Lender to make, and each Revolving Lender hereby agrees to make, a Revolving Loan, in an amount equal to such Revolving Lender's Revolving Percentage of the aggregate amount of the Swingline Loans (the "Refunded Swingline Loans") outstanding on the date of such notice, to repay the Swingline Lender. Each Revolving Lender shall make the amount of such Revolving Loan available to the Administrative Agent at the Funding Office in immediately available funds, not later than 10:00 A.M., New York City time, one Business Day after the date of such notice. The proceeds of such Revolving Loans shall be immediately made available by the Administrative Agent to the Swingline Lender for application by the Swingline Lender to the repayment of the Refunded Swingline Loans. The Borrower irrevocably authorizes the Swingline Lender to charge the Borrower's accounts with the Administrative Agent (up to the amount available in each such account) in order to immediately pay the amount of such Refunded Swingline Loans to the extent amounts received from the Revolving Lenders are not sufficient to repay in full such Refunded Swingline Loans.

        (c)    If prior to the time a Revolving Loan would have otherwise been made pursuant to Section 3.4(b), one of the events described in Section 10(f) shall have occurred and be continuing with respect to the Borrower or if for any other reason, as determined by the Swingline Lender in its sole discretion, Revolving Loans may not be made as contemplated by Section 3.4(b), each Revolving Lender shall, on the date such Revolving Loan was to have been made pursuant to the notice referred to in Section 3.4(b) (the "Refunding Date"), purchase for cash an undivided participating interest in the then outstanding Swingline Loans by paying to the Swingline Lender an amount (the "Swingline Participation Amount") equal to (i) such Revolving Lender's Revolving Percentage times (ii) the sum of the aggregate principal amount of Swingline Loans then outstanding that were to have been repaid with such Revolving Loans.

        (d)    Whenever, at any time after the Swingline Lender has received from any Revolving Lender such Lender's Swingline Participation Amount, the Swingline Lender receives any payment on account of the Swingline Loans, the Swingline Lender will distribute to such Lender its Swingline Participation Amount (appropriately adjusted, in the case of interest payments, to reflect the period of time during which such Lender's participating interest was outstanding and funded and, in the case of principal and interest payments, to reflect such Lender's pro rata portion of such payment if such payment is not sufficient to pay the principal of and interest on all Swingline Loans then due); provided, however, that in the event that such payment received by the Swingline Lender is required to be returned, such Revolving Lender will return to the Swingline Lender any portion thereof previously distributed to it by the Swingline Lender.

        (e)    Each Revolving Lender's obligation to make the Loans referred to in Section 3.4(b) and to purchase participating interests pursuant to Section 3.4(c) shall be absolute and unconditional and shall not be affected by any circumstance, including (i) any setoff, counterclaim, recoupment, defense or other right that such Revolving Lender or the Borrower may have against the Swingline Lender, the Borrower or any other Person for any reason whatsoever; (ii) the occurrence or continuance of a Default or an Event of Default or the failure to satisfy any of the other conditions specified in Section 7; (iii) any adverse change in the condition (financial or otherwise) of the Borrower; (iv) any

25

breach of this Agreement or any other Loan Document by the Borrower, any other Loan Party or any other Revolving Lender; or (v) any other circumstance, happening or event whatsoever, whether or not similar to any of the foregoing.

        3.5    Commitment Fees, etc.    (a) The Borrower agrees to pay to the Administrative Agent for the account of each Revolving Lender a commitment fee for the period from and including the Closing Date to the last day of the Revolving Commitment Period, computed at the Commitment Fee Rate on the average daily amount of the Available Revolving Commitment of such Lender during the period for which payment is made, payable quarterly in arrears on each Fee Payment Date, commencing on the first of such dates to occur after the date hereof.

        (b)    The Borrower agrees to pay to the Administrative Agent the fees in the amounts and on the dates previously agreed to in writing by the Borrower and the Administrative Agent.

        3.6    Termination or Reduction of Revolving Commitments.    The Borrower shall have the right, upon not less than three Business Days' notice to the Administrative Agent, to terminate the Revolving Commitments or, from time to time, to reduce the amount of the Revolving Commitments; provided that no such termination or reduction of Revolving Commitments shall be permitted if, after giving effect thereto and to any prepayments of the Revolving Loans, Swingline Loans and Foreign Currency Loans made on the effective date thereof, the Total Revolving Extensions of Credit would exceed the Total Revolving Commitments. Any such reduction shall be in an amount equal to $1,000,000, or a whole multiple thereof, and shall reduce permanently the Revolving Commitments then in effect.

        3.7    L/C Commitment.    (a) Subject to the terms and conditions hereof, each Issuing Lender, in reliance on the agreements of the other Revolving Lenders set forth in Section 3.10(a), agrees to issue letters of credit ("Letters of Credit") for the account of the Borrower on any Business Day during the Revolving Commitment Period in such form as may be approved from time to time by such Issuing Lender; provided that no Issuing Lender shall have any obligation to issue any Letter of Credit if, after giving effect to such issuance, (i) the L/C Obligations would exceed the L/C Commitment or (ii) the aggregate amount of the Available Revolving Commitments would be less than zero. Each Letter of Credit shall (i) be denominated in Dollars or a Foreign Currency and (ii) expire no later than the earlier of (x) the first anniversary of its date of issuance and (y) the date that is five Business Days prior to the Revolving Termination Date, provided that any Letter of Credit with a one-year term may provide for the renewal thereof for additional one-year periods (which shall in no event extend beyond the date referred to in clause (y) above).

        (b)    No Issuing Lender shall at any time be obligated to issue any Letter of Credit hereunder if such issuance would conflict with, or cause such Issuing Lender or any L/C Participant to exceed any limits imposed by, any applicable Requirement of Law.

        (c)    The Letters of Credit listed on Schedule 3.7 (the "Existing Letters of Credit") were issued under the Existing Credit Agreement by The Bank of New York, as Issuing Lender, and, from and after the Closing Date, such Existing Letters of Credit shall for all purposes constitute Letters of Credit hereunder.

        3.8    Procedure for Issuance of Letter of Credit.    The Borrower may from time to time request that an Issuing Lender issue a Letter of Credit by delivering to such Issuing Lender at its address for notices specified herein an Application therefor, completed to the satisfaction of such Issuing Lender, and such other certificates, documents and other papers and information as such Issuing Lender may request. Upon receipt of any Application, an Issuing Lender will notify the Administrative Agent of the amount, the beneficiary and the requested expiration of the requested Letter of Credit, and upon receipt of confirmation from the Administrative Agent that after giving effect to the requested issuance, the Available Revolving Commitments would not be less than zero, such Issuing Lender will process such Application and the certificates, documents and other papers and information delivered to it in connection therewith in accordance with its customary procedures and shall promptly issue the Letter

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of Credit requested thereby (but in no event shall such Issuing Lender be required to issue any Letter of Credit earlier than three Business Days after its receipt of the Application therefor and all such other certificates, documents and other papers and information relating thereto) by issuing the original of such Letter of Credit to the beneficiary thereof or as otherwise may be agreed to by such Issuing Lender and the Borrower. Each Issuing Lender shall furnish a copy of such Letter of Credit to the Borrower (with a copy to the Administrative Agent) promptly following the issuance thereof. Each Issuing Lender shall promptly furnish to the Administrative Agent, which shall in turn promptly furnish to the Lenders, notice of the issuance of each Letter of Credit issued by such Issuing Lender (including the amount thereof).

        3.9    Fees and Other Charges.    (a) The Borrower will pay a fee on all outstanding Letters of Credit at a per annum rate equal to the Applicable Margin then in effect with respect to Eurocurrency Loans under the Revolving Facility, shared ratably among the Revolving Lenders and payable quarterly in arrears on each L/C Fee Payment Date after the issuance date. In addition, the Borrower shall pay to the relevant Issuing Lender for its own account a fronting fee on the undrawn and unexpired amount of each Letter of Credit as agreed by the Borrower and the Issuing Lender, payable quarterly in arrears on each L/C Fee Payment Date after the Issuance Date.

        (b)    In addition to the foregoing fees, the Borrower shall pay or reimburse each Issuing Lender for such normal and customary costs and expenses as are incurred or charged by such Issuing Lender in issuing, negotiating, effecting payment under, amending or otherwise administering any Letter of Credit to the extent that the fees and expenses associated with the issuance of such Letter of Credit exceed the fronting fee therefore as specified in Section 3.9(a).

        3.10    L/C Participations.    (a) Each Issuing Lender irrevocably agrees to grant and hereby grants to each L/C Participant, and, to induce such Issuing Lender to issue Letters of Credit hereunder, each L/C Participant irrevocably agrees to accept and purchase and hereby accepts and purchases from such Issuing Lender, on the terms and conditions set forth below, for such L/C Participant's own account and risk an undivided interest equal to such L/C Participant's Revolving Percentage in each Issuing Lender's obligations and rights under and in respect of each Letter of Credit issued by such Issuing Lender hereunder and the amount of each draft paid by such Issuing Lender thereunder. Each L/C Participant unconditionally and irrevocably agrees with each Issuing Lender that, if a draft is paid under any Letter of Credit issued by such Issuing Lender for which such Issuing Lender is not reimbursed in full by the Borrower in accordance with the terms of this Agreement, the related Reimbursement Obligation shall be converted to Dollars pursuant to Section 3.11 and such L/C Participant shall pay to the Administrative Agent upon demand of such Issuing Lender an amount equal to such L/C Participant's Revolving Percentage of the amount of such draft, or any part thereof, that is not so reimbursed. The Administrative Agent shall promptly forward such amounts to the relevant Issuing Lender.

        (b)    If any amount required to be paid by any L/C Participant to the Administrative Agent for the account of such Issuing Lender pursuant to Section 3.10(a) in respect of any unreimbursed portion of any payment made by such Issuing Lender under any Letter of Credit is paid to the Administrative Agent for the account of such Issuing Lender within three Business Days after the date such payment is due, such L/C Participant shall pay to the Administrative Agent for the account of such Issuing Lender on demand an amount equal to the product of (i) such amount, times (ii) the daily average Federal Funds Effective Rate during the period from and including the date such payment is required to the date on which such payment is immediately available to such Issuing Lender, times (iii) a fraction the numerator of which is the number of days that elapse during such period and the denominator of which is 360. If any such amount required to be paid by any L/C Participant pursuant to Section 3.10(a) is not made available to the Administrative Agent for the account of the relevant Issuing Lender by such L/C Participant within three Business Days after the date such payment is due, such Issuing Lender shall be entitled to recover from such L/C Participant, on demand, such amount

27

with interest thereon calculated from such due date at the rate per annum applicable to Base Rate Loans under the Revolving Facility. A certificate of such Issuing Lender submitted to any L/C Participant with respect to any amounts owing under this Section shall be conclusive in the absence of manifest error.

        (c)    Whenever, at any time after an Issuing Lender has made payment under any Letter of Credit and has received from any L/C Participant its pro rata share of such payment in accordance with Section 3.10(a), the Administrative Agent or such Issuing Lender receives any payment related to such Letter of Credit (whether directly from the Borrower or otherwise, including proceeds of Collateral applied thereto by such Issuing Lender), or any payment of interest on account thereof, the Administrative Agent or such Issuing Lender, as the case may be, will distribute to such L/C Participant its pro rata share thereof; provided, however, that in the event that any such payment received by Administrative Agent or such Issuing Lender, as the case may be, shall be required to be returned by the Administrative Agent or such Issuing Lender, such L/C Participant shall return to the Administrative Agent for the account of such Issuing Lender the portion thereof previously distributed by the Administrative Agent or such Issuing Lender, as the case may be, to it.

        (d)    Each L/C Participant's obligation to purchase participating interests pursuant to Section 3.10(b) shall be absolute and unconditional and shall not be affected by any circumstance, including (i) any setoff, counterclaim, recoupment, defense or other right that such L/C Participant or the Borrower may have against any Issuing Lender, the Borrower or any other Person for any reason whatsoever; (ii) the occurrence or continuance of a Default or an Event of Default or the failure to satisfy any of the other conditions specified in Section 7; (iii) any adverse change in the condition (financial or otherwise) of the Borrower; (iv) any breach of this Agreement or any other Loan Document by the Borrower, any other Loan Party or any other L/C Participant; or (v) any other circumstance, happening or event whatsoever, whether or not similar to any of the foregoing.

        3.11    Reimbursement Obligation of the Borrower.    The Borrower agrees to reimburse each Issuing Lender on the Business Day (or the third Business Day in the event of a Foreign Currency draft) next succeeding the Business Day on which such Issuing Lender notifies the Borrower of the date and amount of a draft presented under any Letter of Credit and paid by such Issuing Lender for the amount of (a) such draft so paid and (b) any taxes, fees, charges or other reasonable costs or expenses incurred by such Issuing Lender in connection with such payment. Each such payment shall be made to the relevant Issuing Lender at its address for notices referred to herein in Dollars and in immediately available funds, provided that if the Borrower does not reimburse such Issuing Lender for any draft paid by such Issuing Lender under any Letter of Credit issued by such Issuing Lender in a Foreign Currency on the date required pursuant to the first sentence of this Section 3.11, such Issuing Lender shall convert such Reimbursement Obligation into Dollars at the rate of exchange then available to such Issuing Lender in the interbank market where its foreign currency exchange operations in respect of such Foreign Currency are then being conducted and the Borrower shall thereafter be required to reimburse such Issuing Lender in Dollars for such Reimbursement Obligation (in the amount so converted). Interest shall be payable on any such amounts denominated in Dollars from the date on which the relevant draft is paid until the relevant Issuing Lender receives payment in full at the rate set forth in (i) until the Business Day next succeeding the date of the relevant notice, Section 5.5(b) and (ii) thereafter, Section 5.5(c). Interest shall be payable on any such amounts denominated in a Foreign Currency from the date on which the relevant draft is paid until the relevant Issuing Lender receives payment in full or conversion to Dollars as provided herein at the rate determined by the relevant Issuing Lender as its cost of funding such payment. Each drawing under any Letter of Credit shall (unless an event of the type described in clause (i) or (ii) of Section 10(f) shall have occurred and be continuing with respect to the Borrower, in which case the procedures specified in Section 3.10 for funding by L/C Participants shall apply) constitute a request by the Borrower to the Administrative Agent for a borrowing pursuant to Section 3.2 of Base Rate Loans (or, at the option of the Administrative Agent and the Swingline Lender in their sole discretion, a borrowing pursuant to

28

Section 3.4 of Swingline Loans) in the amount of such drawing except that, in such event, Borrower is not deemed to have given any representations and warranties pursuant to Section 7.2. The Borrowing Date with respect to such borrowing shall be the first date on which a borrowing of Revolving Loans (or, if applicable, Swingline Loans) could be made, pursuant to Section 3.2 or, if applicable, Section 3.4), if the Administrative Agent had received a notice of such borrowing at the time the Administrative Agent receives notice from such Issuing Lender of such drawing under such Letter of Credit.

        3.12    Obligations Absolute.    The Borrower's obligations under Section 3.11 shall be absolute and unconditional under any and all circumstances and irrespective of any setoff, counterclaim or defense to payment that the Borrower may have or have had against any Issuing Lender, any beneficiary of a Letter of Credit or any other Person. The Borrower also agrees with each Issuing Lender that such Issuing Lender not shall be responsible for, and the Borrower's Reimbursement Obligations under Section 3.11 shall not be affected by, among other things, the validity or genuineness of documents or of any endorsements thereon, even though such documents shall in fact prove to be invalid, fraudulent or forged, or any dispute between or among the Borrower and any beneficiary of any Letter of Credit or any other party to which such Letter of Credit may be transferred or any claims whatsoever of the Borrower against any beneficiary of such Letter of Credit or any such transferee. No Issuing Lender shall be liable for any error, omission, interruption or delay in transmission, dispatch or delivery of any message or advice, however transmitted, in connection with any Letter of Credit, except for errors or omissions found by a final and nonappealable decision of a court of competent jurisdiction to have resulted from the gross negligence or willful misconduct of such Issuing Lender. The Borrower agrees that any action taken or omitted by an Issuing Lender under or in connection with any Letter of Credit or the related drafts or documents, if done in the absence of gross negligence or willful misconduct and in accordance with the standards of care specified in the Uniform Commercial Code of the State of New York and UCP 500, shall be binding on the Borrower and shall not result in any liability of such Issuing Lender to the Borrower.

        3.13    Letter of Credit Payments.    If any draft shall be presented for payment under any Letter of Credit, the relevant Issuing Lender shall promptly notify the Borrower of the date and amount thereof. The responsibility of the relevant Issuing Lender to the Borrower in connection with any draft presented for payment under any Letter of Credit issued by such Issuing Lender shall, in addition to any payment obligation expressly provided for in such Letter of Credit, be limited to determining in compliance with UCP 500 that the documents (including each draft) delivered under such Letter of Credit in connection with such presentment are substantially in conformity with the requirements of such Letter of Credit.

        3.14    Applications.    To the extent that any provision of any Application related to any Letter of Credit is inconsistent with the provisions of this Section 3, the provisions of this Section 3 shall apply.

        3.15    Foreign Currency Subfacility.    (a) Subject to the terms and conditions hereof, the Foreign Currency Lenders agree to make loans (each, a "Foreign Currency Loan") in one or more Foreign Currencies to the Borrower from time to time during the Revolving Commitment Period, provided that, (i) after giving effect to any such Foreign Currency Loan, the Total Revolving Extensions of Credit at such time do not exceed the Total Revolving Commitments at such time and (ii) after giving effect to such Foreign Currency Loan and the use of proceeds thereof, the Dollar Equivalent of the aggregate outstanding principal amount of Foreign Currency Loans does not exceed the Foreign Currency Sublimit. During the Revolving Commitment Period, the Borrower may borrow, prepay and reborrow Foreign Currency Loans in whole or in part, all in accordance with the terms and conditions hereof.

        (b)    The Borrower shall repay all outstanding Foreign Currency Loans on the Revolving Termination Date.

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        3.16    Procedure for Foreign Currency Loan Borrowings.    The Borrower may borrow under Section 3.15 during the Revolving Commitment Period on any Business Day, provided that, the Borrower shall give the Administrative Agent irrevocable notice (which notice must be received by the Administrative Agent prior to 10:00 A.M., New York City time, three Business Days prior to the requested Borrowing Date) specifying (a) the amount to be borrowed and the Foreign Currency with respect thereto, (b) the requested Borrowing Date and (c) the initial Interest Periods with respect thereto. Upon receipt of such notice, the Administrative Agent shall promptly notify each Foreign Currency Lender thereof and of the amount of such Foreign Currency Lender's Loan to be made as part of the requested borrowing. Each borrowing of Foreign Currency Loans shall be a Eurocurrency Loan in a minimum amount equal to the Foreign Currency Equivalent of $3,000,000 in the relevant Foreign Currency or a whole multiple of $1,000,000. Each Foreign Currency Lender shall make each Foreign Currency Loan to be made by it hereunder on the proposed date thereof by wire transfer of immediately available funds by 11:00 A.M., New York City time, to the account of the Administrative Agent most recently designated by it for such purposes for Foreign Currency Loans by notice to the Foreign Currency Lenders. The Administrative Agent will make such Foreign Currency Loans available to the Borrower by promptly crediting the amounts so received, in like funds, to an account in accordance with instructions provided by the Borrower to the Administrative Agent.

        3.17    Foreign Currency Loan Fees, Commissions and Other Charges.    (a) The Borrower shall pay to each Foreign Currency Lender with respect to each Foreign Currency Loan made by such Foreign Currency Lender, for the account of such Foreign Currency Lender, a fronting fee with respect to the period from and including the date of such Foreign Currency Loan to but excluding the date of repayment thereof computed at a rate per annum to be agreed upon by such Foreign Currency Lender and the Borrower on the average daily principal amount of such Foreign Currency Loan outstanding during the period for which such fee is calculated. Such fronting fee shall be payable in the applicable Foreign Currency in arrears on each Fee Payment Date to occur after the making of such Foreign Currency Loan and shall be nonrefundable.

        (b)    The Borrower shall pay to the Administrative Agent for the account of the Foreign Currency Participants, a participation fee with respect to each Foreign Currency Loan for the period from and including the date of such Foreign Currency Loan to but excluding the date of repayment thereof, computed at a rate per annum equal to the Applicable Margin in respect of Eurocurrency Loans that are Revolving Loans from time to time in effect on the average daily principal amount of such Foreign Currency Loan outstanding during the period for which such fee is calculated. Such fee shall be shared ratably among the Foreign Currency Participants in accordance with their respective Revolving Percentages. Such commission shall be payable in Dollars (based on the Dollar Equivalent of the amount calculated as set forth in Section 3.2) in arrears on each Fee Payment Date to occur after the making of such Foreign Currency Loan and shall be nonrefundable.

        (c)    The Administrative Agent shall, promptly following its receipt thereof, distribute to each Foreign Currency Lender and the Foreign Currency Participants all fees received by the Administrative Agent for their respective accounts pursuant to this Section 3.17.

        (d)    In addition to the foregoing fees, the Borrower shall pay or reimburse each Foreign Currency Lender and the Administrative Agent for such normal and customary costs and expenses as are incurred or charged by such Foreign Currency Lender or the Administrative Agent in connection with the conversion of any Foreign Currency into Dollars pursuant to Section 3.18.

        3.18    Participations in Foreign Currency Loans.    (a) Each Foreign Currency Lender irrevocably agrees to grant and hereby grants to each Foreign Currency Participant, and, to induce such Foreign Currency Lender to make Foreign Currency Loans hereunder, each such Foreign Currency Participant irrevocably agrees to accept and purchase and hereby accepts and purchases from such Foreign Currency Lender, on the terms and conditions set forth below, for such Foreign Currency Participant's own account and risk, an undivided interest equal to such Foreign Currency Participant's Revolving

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Percentage in such Foreign Currency Lender's obligations and rights under and in respect of each Foreign Currency Loan made by such Foreign Currency Lender hereunder. On any Conversion Date or on any other date if any amount in respect of the principal, interest or fees owing to such Foreign Currency Lender in respect of a Foreign Currency Loan is not paid when due in accordance with the terms of this Agreement, such unpaid amount shall be converted into an amount denominated in Dollars at the applicable Exchange Rate on the date of such conversion, as determined by the Administrative Agent in accordance with the terms hereof (and shall thereafter be denominated in Dollars for purposes of this Agreement), and each such Foreign Currency Participant hereby unconditionally and irrevocably agrees to pay to the Administrative Agent for the account of such Foreign Currency Lender upon demand an amount in Dollars equal to such Foreign Currency Participant's Revolving Percentage of such unpaid amount denominated in Dollars. The Administrative Agent shall promptly forward such amounts to the relevant Foreign Currency Lender. Each Foreign Currency Participant's obligation to make the payment referred to in the immediately preceding sentence shall be absolute and unconditional and shall not be affected by any circumstance, including, without limitation, (i) any set-off, counterclaim, recoupment, defense or other right which such Foreign Currency Participant or the Borrower may have against any Foreign Currency Lender, the Borrower or any other Person for any reason whatsoever, (ii) the occurrence or continuance of a Default or an Event of Default, (iii) any adverse change in the condition (financial or otherwise) of the Borrower, (iv) any breach of this Agreement or any other Loan Document by any Loan Party or any other Lender or (v) any other circumstance, happening or event whatsoever, whether or not similar to any of the foregoing. Each Lender shall pay the purchase price of its undivided participating interests (as determined by the Administrative Agent) by wire transfer of immediately available funds to the Administrative Agent (and the Administrative Agent shall promptly distribute such funds to the relevant Foreign Currency Lenders).

        (b)    If any amount required to be paid by any Foreign Currency Participant to any Foreign Currency Lender pursuant to Section 3.18(a) is not paid to such Foreign Currency Lender when due but is paid within three Business Days after the date such payment is due, such Foreign Currency Participant shall pay to such Foreign Currency Lender on demand an amount equal to the product of (i) such amount, times (ii) the Eurocurrency Rate for Loans denominated in Dollars during the period from and including the date such payment is required to the date on which such payment is immediately available to such Foreign Currency Lender, times (iii) a fraction the numerator of which is the number of days that elapse during such period and the denominator of which is 360. If any such amount required to be paid by any Foreign Currency Participant pursuant to Section 3.18(a) is not in fact made available to any Foreign Currency Lender by such Foreign Currency Participant within three Business Days after the date such payment is due, such Foreign Currency Lender shall be entitled to recover from such Foreign Currency Participant, on demand, such amount with interest thereon calculated from such due date at the rate per annum equal to the rate applicable thereto in accordance with the preceding sentence plus the Applicable Margin in respect of Revolving Loans which are Base Rate Loans. A certificate of any Foreign Currency Lender submitted to any Foreign Currency Participant with respect to any amounts owing under this Section shall be conclusive in the absence of manifest error.

        (c)    Whenever, at any time after any Foreign Currency Lender has received from any Foreign Currency Participant the full amount owing by such Foreign Currency Participant pursuant to and in accordance with Section 3.18(a) in respect of any Foreign Currency Loan, such Foreign Currency Lender receives any payment related to such Foreign Currency Loan (whether directly from the Borrower or otherwise, as the case may be, including proceeds of Collateral applied thereto by such Foreign Currency Lender), or any payment of interest on account thereof, such Foreign Currency Lender will distribute to such Foreign Currency Participant its pro rata share thereof; provided, however, that if any such payment received by any Foreign Currency Lender shall be required to be returned by such Foreign Currency Lender, each Foreign Currency Participant shall return to such Foreign Currency Lender the portion thereof previously distributed by such Foreign Currency Lender to it.

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SECTION 4.    AMOUNTS AND TERMS OF ADDITIONAL COMMITMENTS

        4.1    Revolving Credit Commitment Increases.    (a) In the event that the Borrower wishes to increase the Total Revolving Commitments at any time during the Increase Option Period when no Default or Event of Default has occurred and is continuing, it shall notify the Administrative Agent in writing of the amount (the "Revolving Offered Increase Amount") of such proposed increase (such notice, a "Revolving Commitment Increase Notice") in a minimum amount equal to at least $10,000,000. The Borrower may, at its election, (i) offer one or more of the Lenders the opportunity to provide all or a portion of any Revolving Offered Increase Amount pursuant to paragraph (c) below and/or (ii) with the consent of the Syndication Agent, the Swingline Lender, each Issuing Lender, each Foreign Currency Lender and the Administrative Agent (which consent shall not be unreasonably withheld), offer one or more additional banks, financial institutions or other entities the opportunity to provide all or a portion of such Revolving Offered Increase Amount pursuant to paragraph (b) below. Each Revolving Commitment Increase Notice shall specify which Lenders and/or banks, financial institutions or other entities the Borrower desires to provide such Revolving Offered Increase Amount. The Borrower or, if requested by the Borrower, the Administrative Agent will notify such Lenders, and/or banks, financial institutions or other entities of such offer.

        (b)    Any additional bank, financial institution or other entity which the Borrower selects to offer participation in any increased Total Revolving Commitments and which elects to become a party to this Agreement and provide a Revolving Commitment in an amount so offered and accepted by it pursuant to clause (ii) of Section 4.1(a) shall execute a New Lender Supplement with the Borrower and the Administrative Agent, substantially in the form of Exhibit D-1, whereupon such bank, financial institution or other entity (herein called a "New Revolving Lender") shall become a Lender for all purposes and to the same extent as if originally a party hereto and shall be bound by and entitled to the benefits of this Agreement, provided that the Revolving Commitment of any such New Revolving Lender shall be in an amount not less than $2,500,000.

        (c)    Any Lender which accepts an offer to it by the Borrower to increase its Revolving Commitment pursuant to clause (i) of Section 4.1(a) shall, in each case, execute a Commitment Increase Supplement with the Borrower, the Syndication Agent, the Issuing Bank and the Administrative Agent, substantially in the form of Exhibit D-2, whereupon such Lender shall be bound by and entitled to the benefits of this Agreement with respect to the full amount of its Revolving Commitment as so increased.

        (d)    On any Increase Effective Date pursuant to Section 4.1, (i) each bank, financial institution or other entity that is a New Revolving Lender pursuant to Section 4.1(b) or any Lender which has increased its Revolving Commitment pursuant to Section 4.1(c) shall make available to the Administrative Agent such amounts in immediately available funds as the Administrative Agent shall determine, for the benefit of the other relevant Lenders, as being required in order to cause, after giving effect to such increase and the use of such amounts to make payments to such other relevant Lenders, each Lender's portion of the outstanding Revolving Loans of all the Lenders to equal its Revolving Percentage of such outstanding Revolving Loans and (ii) the Borrower shall be deemed to have repaid and reborrowed all outstanding Revolving Loans as of the date of any increase in the Revolving Commitments (with such reborrowing to consist of the Types of Loans, with related Interest Periods if applicable, specified in a notice delivered by the Borrower in accordance with the requirements of Section 3.2). The deemed payments made pursuant to clause (ii) of the immediately preceding sentence in respect of each Eurocurrency Loan denominated in Dollars shall be subject to indemnification by the Borrower pursuant to the provisions of Section 5.11 if the deemed payment occurs other than on the last day of the related Interest Periods.

        (e)    Notwithstanding anything to the contrary in this Section 4.1, (i) in no event shall any transaction effected pursuant to this Section 4.1 cause the sum of Total Revolving Commitments and

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Term Commitments to exceed $360,000,000, (ii) in no event may the Borrower deliver more than two Revolving Commitment Increase Notices, (iii) in no event shall there be more than two Increase Effective Dates and (iv) no Lender shall have any obligation to increase its Revolving Credit Commitment unless it agrees to do so in its sole discretion.

        (f)    The Administrative Agent shall have received on or prior to each Increase Effective Date, for the benefit of the Lenders, (i) a legal opinion of counsel to the Borrower covering such matters as are customary for transactions of this type and such other matters as may be reasonably requested by the Administrative Agent and (ii) certified copies of resolutions of the Borrower authorizing such Revolving Offered Increase Amount.

SECTION 5.    GENERAL PROVISIONS APPLICABLE TO LOANS AND LETTERS OF CREDIT

        5.1    Optional Prepayments.    (a) The Borrower may at any time and from time to time prepay the Loans (other than Foreign Currency Loans), in whole or in part, without premium or penalty, upon irrevocable notice delivered to the Administrative Agent at least three Business Days prior thereto in the case of Eurocurrency Loans denominated in Dollars and at least one Business Day prior thereto in the case of Base Rate Loans, which notice shall specify the date and amount of prepayment and whether the prepayment is of Eurocurrency Loans denominated in Dollars or Base Rate Loans; provided, that if a Eurocurrency Loan denominated in Dollars is prepaid on any day other than the last day of the Interest Period applicable thereto, the Borrower shall also pay any amounts owing pursuant to Section 5.11. Upon receipt of any such notice the Administrative Agent shall promptly notify each relevant Lender thereof. If any such notice is given, the amount specified in such notice shall be due and payable on the date specified therein, together with (except in the case of Revolving Loans that are Base Rate Loans and Swingline Loans) accrued interest to such date on the amount prepaid. Partial prepayments of Term Loans and Revolving Loans shall be in an aggregate principal amount of $1,000,000 or a whole multiple thereof. Partial prepayments of Swingline Loans shall be in an aggregate principal amount of $100,000 or a whole multiple thereof.

        (b)    The Borrower may at any time and from time to time prepay Foreign Currency Loans, in whole or in part, without premium or penalty except as specified in Section 5.11, upon irrevocable notice (which notice must be received by the Administrative Agent prior to 11:00 A.M., New York City time, three Business Days before the date of prepayment) specifying the date and amount of prepayment. If any such notice is given, the amount specified in such notice shall be due and payable on the date specified therein, together with any amounts payable pursuant to Section 5.11 and accrued interest to such date on the amount prepaid. Partial prepayments of Foreign Currency Loans shall be in a minimum principal amount equal to the Foreign Currency Equivalent of $1,000,000 in the relevant Foreign Currency or a multiple of the Foreign Currency Equivalent of $100,000 in the relevant Foreign Currency in excess thereof.

        5.2    Mandatory Prepayments.    (a) If any Capital Stock shall be issued by any Group Member (other than to any other Group Member), an amount equal to 50% of the Net Cash Proceeds thereof shall be applied no later than one Business Day following the date of such issuance toward the prepayment of the Term Loans as set forth in Section 5.2(e).

        (b)    If any Indebtedness shall be incurred by any Group Member (other than Excluded Indebtedness), an amount equal to 100% of the Net Cash Proceeds thereof shall be applied no later than one Business Day following the date of such incurrence toward the prepayment of the Term Loans as set forth in Section 5.2(e).

        (c)    If on any date any Group Member shall receive Net Cash Proceeds from any Asset Sale or Recovery Event then, unless a Reinvestment Notice shall be delivered in respect thereof, such Net Cash Proceeds shall be applied no later than one Business Day following such date toward the

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prepayment of the Term Loans as set forth in Section 5.2(e); provided, that, notwithstanding the foregoing, (i) the aggregate Net Cash Proceeds of Asset Sales and Recovery Events that may be excluded from the foregoing requirement pursuant to a Reinvestment Notice shall not exceed $20,000,000 in any fiscal year of the Borrower and (ii) on each Reinvestment Prepayment Date, an amount equal to the Reinvestment Prepayment Amount with respect to the relevant Reinvestment Event shall be applied toward the prepayment of the Term Loans as set forth in Section 5.2(e).

        (d)    If, for any fiscal year of the Borrower commencing with the fiscal year ending December 31, 2003, there shall be Excess Cash Flow, the Borrower shall, on the relevant Excess Cash Flow Application Date, apply the ECF Percentage of such Excess Cash Flow toward the prepayment of the Term Loans as set forth in Section 5.2(e). Each such prepayment shall be made on a date (an "Excess Cash Flow Application Date") no later than five days after the earlier of (i) the date on which the financial statements of the Borrower referred to in Section 8.1(a), for the fiscal year with respect to which such prepayment is made, are required to be delivered to the Lenders and (ii) the date such financial statements are actually delivered.

        (e)    Amounts to be applied in connection with prepayments made pursuant to Section 5.2 shall be applied to the prepayment of the Term Loans in accordance with Section 5.8(b). The application of any prepayment pursuant to Section 5.2 shall be made, first, to Base Rate Loans and, second, to Eurocurrency Loans. Each prepayment of the Loans under Section 5.2 shall be accompanied by accrued interest to the date of such prepayment on the amount prepaid.

        (f)    If, on any Calculation Date, (i) the Dollar Equivalent of the aggregate outstanding principal amount of Foreign Currency Loans exceeds an amount equal to 105% of the Foreign Currency Sublimit or (ii) the Total Revolving Extensions of Credit exceed the Total Revolving Commitments on such date, the Borrower shall, without notice or demand, immediately repay such of the outstanding Loans in an aggregate principal amount such that, after giving effect thereto, (x) the Dollar Equivalent of the aggregate outstanding principal amount of Foreign Currency Loans does not exceed the Foreign Currency Sublimit and (y) the Total Revolving Extensions of Credit do not exceed the Total Revolving Commitments, together with interest accrued to the date of such payment or prepayment on the principal so prepaid if required hereby and any amounts payable under Section 5.11 in connection therewith. Any prepayment of Revolving Loans shall first be applied to prepay any outstanding Swingline Loans. The Borrower may in lieu of prepaying Foreign Currency Loans in order to comply with this paragraph deposit amounts in the relevant Foreign Currency Currencies in a Cash Collateral Account in accordance with the next succeeding sentence equal to the aggregate principal amount of Foreign Currency Loans required to be prepaid. To the extent that after giving effect to any prepayment of Loans required by this paragraph, the Total Revolving Extensions of Credit at such time exceed the Total Revolving Commitments at such time, the Borrower shall, without notice or demand, immediately deposit in a Cash Collateral Account upon terms reasonably satisfactory to the Administrative Agent an amount equal to the amount by which Total Revolving Extensions of Credit exceed the Total Revolving Commitments. The Administrative Agent shall apply any cash deposited in the Cash Collateral Account (to the extent thereof) to pay any Reimbursement Obligations which are or become due thereafter and/or to repay Foreign Currency Loans at the end of the Interest Periods therefor, provided that, (x) the Administrative Agent shall release to the Borrower from time to time such portion of the amount on deposit in the Cash Collateral Account to the extent such amount is not required to be so deposited in order for the Borrower to be in compliance with this paragraph and (y) the Administrative Agent may so apply such cash at any time after the occurrence and during the continuation of an Event of Default. "Cash Collateral Account" means an account specifically established by the Borrower with the Administrative Agent for purposes of this Section 5.2 and hereby pledged to the Administrative Agent and over which the Administrative Agent shall have exclusive dominion and control, including the right of withdrawal for application in accordance with this Section 5.2.

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        5.3    Conversion and Continuation Options.    (a) The Borrower may elect from time to time to convert Eurocurrency Loans denominated in Dollars to Base Rate Loans by giving the Administrative Agent at least two Business Days' prior irrevocable notice of such election, provided that any such conversion of Eurocurrency Loans denominated in Dollars may only be made on the last day of an Interest Period with respect thereto. The Borrower may elect from time to time to convert Base Rate Loans to Eurocurrency Loans denominated in Dollars by giving the Administrative Agent at least three Business Days' prior irrevocable notice of such election (which notice shall specify the length of the initial Interest Period therefor), provided that no Base Rate Loan under a particular Facility may be converted into a Eurocurrency Loan denominated in Dollars when any Event of Default has occurred and is continuing and the Administrative Agent or the Majority Facility Lenders in respect of such Facility have determined in its or their sole discretion not to permit such conversions. Upon receipt of any such notice the Administrative Agent shall promptly notify each relevant Lender thereof.

        (b)    Any Eurocurrency Loan may be continued as such upon the expiration of the then current Interest Period with respect thereto by the Borrower giving irrevocable notice to the Administrative Agent, in accordance with the applicable provisions of the term "Interest Period" set forth in Section 1.1, of the length of the next Interest Period to be applicable to such Loans, provided that no Eurocurrency Loan denominated in Dollars under a particular Facility may be continued as such when any Event of Default has occurred and is continuing and the Administrative Agent has or the Majority Facility Lenders in respect of such Facility have determined in its or their sole discretion not to permit such continuations, and provided, further, that if the Borrower shall fail to give any required notice as described above in this paragraph or if such continuation is not permitted pursuant to the preceding proviso such Eurocurrency Loans denominated in Dollars shall be automatically converted to Base Rate Loans on the last day of such then expiring Interest Period and, if the Borrower shall fail to give such notice of continuation of a Foreign Currency Loan, such Foreign Currency Loan shall be automatically continued for an Interest Period of one month. Upon receipt of any such notice the Administrative Agent shall promptly notify each relevant Lender thereof.

        5.4.    Limitations on Eurocurrency Tranches.    Notwithstanding anything to the contrary in this Agreement, all borrowings, conversions and continuations of Eurocurrency Loans hereunder and all selections of Interest Periods hereunder shall be in such amounts and be made pursuant to such elections so that, (a) after giving effect thereto, the aggregate principal amount of the Eurocurrency Loans comprising each Eurocurrency Tranche shall be equal to $3,000,000 or a whole multiple of $1,000,000 in excess thereof and (b) no more than ten Eurocurrency Tranches shall be outstanding at any one time.

        5.5.    Interest Rates and Payment Dates.    (a) Each Eurocurrency Loan shall bear interest for each day during each Interest Period with respect thereto at a rate per annum equal to the Eurocurrency Rate determined for such day plus, in the case of Eurocurrency Loans denominated in Dollars, the Applicable Margin.

        (b)    Each Base Rate Loan shall bear interest at a rate per annum equal to the Base Rate plus the Applicable Margin.

        (c)    (i) If all or a portion of the principal amount of any Loan or Reimbursement Obligation shall not be paid when due (whether at the stated maturity, by acceleration or otherwise), such overdue amount shall bear interest at a rate per annum equal to (x) in the case of the Loans, the rate that would otherwise be applicable thereto pursuant to the foregoing provisions of this Section plus 2% or (y) in the case of Reimbursement Obligations, the rate applicable to Base Rate Loans under the Revolving Facility plus 2%, and (ii) if all or a portion of any interest payable on any Loan or Reimbursement Obligation or any commitment fee or other amount payable hereunder shall not be paid when due (whether at the stated maturity, by acceleration or otherwise), such overdue amount shall bear interest at a rate per annum equal to (A) the rate then applicable to Base Rate Loans under

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the relevant Facility plus 2% (or, in the case of any such other amounts that do not relate to a particular Facility, the rate then applicable to Base Rate Loans under the Revolving Facility plus2%), in the case of amounts that are owing in Dollars, or (B)(I) the Eurocurrency Rate in respect of the relevant Foreign Currency plus (II) 2%, in the case of amounts owing that are denominated in Foreign Currencies, in each case, with respect to clauses (i) and (ii) above, from the date of such non-payment until such amount is paid in full (as well after as before judgment).

        (d)    Interest shall be payable in arrears on each Interest Payment Date, provided that interest accruing pursuant to paragraph (c) of this Section shall be payable from time to time on demand.

        5.6.    Computation of Interest and Fees.    (a) Interest and fees payable pursuant hereto shall be calculated on the basis of a 360-day year for the actual days elapsed, except that, with respect to (i) Base Rate Loans the rate of interest on which is calculated on the basis of the Prime Rate and (ii) Foreign Currency Loans denominated in British Pounds Sterling, the interest thereon shall be calculated on the basis of a 365- (or 366-, as the case may be) day year for the actual days elapsed. The Administrative Agent shall as soon as practicable notify the Borrower and the relevant Lenders of each determination of a Eurocurrency Rate. Any change in the interest rate on a Loan resulting from a change in the Base Rate or the Eurocurrency Reserve Requirements shall become effective as of the opening of business on the day on which such change becomes effective. The Administrative Agent shall as soon as practicable notify the Borrower and the relevant Lenders of the effective date and the amount of each such change in interest rate.

        (b)    Each determination of an interest rate by the Administrative Agent pursuant to any provision of this Agreement shall be conclusive and binding on the Borrower and the Lenders in the absence of manifest error. The Administrative Agent shall, at the request of the Borrower, deliver to the Borrower a statement showing the quotations used by the Administrative Agent in determining any interest rate pursuant to Section 5.5(a).

        5.7.    Inability to Determine Interest Rate.    If prior to the first day of any Interest Period:

        (a)    the Administrative Agent shall have determined (which determination shall be conclusive and binding upon the Borrower absent manifest error) that, by reason of circumstances affecting the relevant market, adequate and reasonable means do not exist for ascertaining the Eurocurrency Rate for such Interest Period, or

        (b)    the Administrative Agent shall have received notice from the Majority Facility Lenders in respect of the relevant Facility or any Foreign Currency Lender that the Eurocurrency Rate determined or to be determined for such Interest Period will not adequately and fairly reflect the cost to such Lenders (as conclusively certified by such Lenders) of making or maintaining their affected Loans during such Interest Period, or

        (c)    a Foreign Currency Lender shall have determined (which determination shall be conclusive and binding upon the Borrower, absent manifest error) that, by reason of circumstances affecting the relevant market, adequate and reasonable means do not exist for ascertaining the Eurocurrency Rate for such Interest Period in respect of any Foreign Currency (any such Foreign Currency is referred to as an "Affected Foreign Currency"),

the Administrative Agent (or the relevant Foreign Currency Lender in the case of clause (c) above) shall give telecopy or telephonic notice thereof to the Borrower and the relevant Lenders (and, in the case of any notice by a Foreign Currency Lender, the Administrative Agent) as soon as practicable thereafter. If such notice is given (x) pursuant to clause (a) or (b) of this Section 5.7 in respect of Eurocurrency Loans denominated in Dollars, then (i) any Eurocurrency Loans denominated in Dollars under the relevant Facility requested to be made on the first day of such Interest Period shall be made as Base Rate Loans, (ii) any Loans under the relevant Facility that were to have been converted on the first day of such Interest Period to Eurocurrency Loans denominated in Dollars shall be continued as

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Base Rate Loans and (iii) any outstanding Eurocurrency Loans denominated in Dollars under the relevant Facility shall be converted, on the last day of the then-current Interest Period, to Base Rate Loans and (y) in respect of any Foreign Currency Loans, then (i) any Foreign Currency Loans in an Affected Foreign Currency requested to be made on the first day of such Interest Period shall not be made and (ii) any outstanding Foreign Currency Loans in an Affected Foreign Currency shall be due and payable on the first day of such Interest Period. Until such notice has been withdrawn by the Administrative Agent (or the relevant Foreign Currency Lender in the case of clause (c) above), no further Eurocurrency Loans denominated in Dollars under the relevant Facility or Foreign Currency Loans in an Affected Foreign Currency shall be made or continued as such, nor shall the Borrower have the right to convert Loans under the relevant Facility to Eurocurrency Loans.

        5.8.    Pro Rata Treatment and Payments.    (a) Each borrowing by the Borrower from the Lenders hereunder (other than the Foreign Currency Lenders), each payment by the Borrower on account of any commitment fee and any reduction of the Commitments of the Lenders shall be made pro rata according to the respective Term Percentages or Revolving Percentages, as the case may be, of the relevant Lenders. Each borrowing by the Borrower from the Foreign Currency Lenders, each payment by the Borrower on account of any fronting fee and any reduction of the Foreign Currency Sublimit shall be made pro rata to the Foreign Currency Lenders.

        (b)    Each payment (including each prepayment) by the Borrower on account of principal of and interest on the Term Loans shall be made pro rata according to the respective outstanding principal amounts of the Term Loans then held by the Term Lenders. The amount of each principal prepayment of the Term Loans shall be applied to reduce the then remaining installments of the Term Loans pro rata based upon the then remaining principal amount thereof. Amounts repaid or prepaid on account of the Term Loans may not be reborrowed.

        (c)    Each payment (including each prepayment) by the Borrower on account of principal of and interest on the Revolving Loans shall be made pro rata according to the respective outstanding principal amounts of the Revolving Loans then held by the Revolving Lenders. Each payment in respect of Reimbursement Obligations in respect of any Letter of Credit shall be made to the Issuing Lender that issued such Letters of Credit. Each payment (including each prepayment) by the Borrower on account of principal of and interest on the Foreign Currency Loans shall be made pro rata according to the respective outstanding principal amounts of the Foreign Currency Loans then held by the Foreign Currency Lenders.

        (d)    All payments (including prepayments) to be made by the Borrower hereunder, whether on account of principal, interest, fees or otherwise, shall be made without setoff or counterclaim and shall be made prior to 12:00 Noon, New York City time, on the due date thereof to the Administrative Agent, for the account of the Lenders, at the Funding Office, in Dollars and in immediately available funds. The Administrative Agent shall distribute such payments to the Lenders or the Foreign Currency Lenders, as applicable, promptly upon receipt in like funds as received. If any payment hereunder (other than payments on the Eurocurrency Loans) becomes due and payable on a day other than a Business Day, such payment shall be extended to the next succeeding Business Day. If any payment on a Eurocurrency Loan becomes due and payable on a day other than a Business Day, the maturity thereof shall be extended to the next succeeding Business Day unless the result of such extension would be to extend such payment into another calendar month, in which event such payment shall be made on the immediately preceding Business Day. In the case of any extension of any payment of principal pursuant to the preceding two sentences, interest thereon shall be payable at the then applicable rate during such extension.

        (e)    Unless the Administrative Agent shall have been notified in writing by any Lender or Foreign Currency Lender prior to a borrowing that such Lender or Foreign Currency Lender will not make the amount that would constitute its share of such borrowing available to the Administrative Agent, the

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Administrative Agent may assume that such Lender or Foreign Currency Lender is making such amount available to the Administrative Agent, and the Administrative Agent may, in reliance upon such assumption, make available to the Borrower a corresponding amount. If such amount is not made available to the Administrative Agent by the required time on the Borrowing Date therefor, such Lender shall pay to the Administrative Agent, on demand, such amount with interest thereon at a rate equal to the daily average Federal Funds Effective Rate for the period until such Lender makes such amount immediately available to the Administrative Agent. If such amount is not made available to the Administrative Agent by the required time on the Borrowing Date therefor, such Foreign Currency Lender shall pay to the Administrative Agent, on demand, such amount with interest thereon at a rate per annum reasonably determined by the Administrative Agent to be the cost to it of funding such amount for the period until such Lender makes such amount immediately available to the Administrative Agent. A certificate of the Administrative Agent submitted to any Lender or Foreign Currency Lender with respect to any amounts owing under this paragraph shall be conclusive in the absence of manifest error. If such Lender's share of such borrowing is not made available to the Administrative Agent by such Lender within three Business Days of such Borrowing Date, the Administrative Agent shall also be entitled to recover such amount with interest thereon at the rate per annum applicable to Base Rate Loans under the relevant Facility, on demand, from the Borrower. If such Foreign Currency Lender's share of such borrowing is not made available to the Administrative Agent by such Foreign Currency Lender within three Business Days of such Borrowing Date, the Administrative Agent shall also be entitled to recover such amount with interest thereon at a rate per annum reasonably determined by the Administrative Agent to be the cost to it of funding such amount, on demand, from the Borrower.

        (f)    Unless the Administrative Agent shall have been notified in writing by the Borrower prior to the date of any payment due to be made by the Borrower hereunder that the Borrower will not make such payment to the Administrative Agent, the Administrative Agent may assume that the Borrower is making such payment, and the Administrative Agent may, but shall not be required to, in reliance upon such assumption, make available to the Lenders or the Foreign Currency Lenders their respective pro rata shares of a corresponding amount. If such payment is not made to the Administrative Agent by the Borrower within three Business Days after such due date, the Administrative Agent shall be entitled to recover, on demand, from each Lender to which any amount which was made available pursuant to the preceding sentence, such amount with interest thereon at the rate per annum equal to the daily average Federal Funds Effective Rate. If such payment is not made to the Administrative Agent by the Borrower within three Business Days after such due date, the Administrative Agent shall be entitled to recover, on demand, from each Foreign Currency Lender to which any amount which was made available pursuant to the preceding sentence, such amount with interest thereon at a rate per annum reasonably determined by the Administrative Agent to be the cost to it of funding such amount. Nothing herein shall be deemed to limit the rights of the Administrative Agent, any Lender or any Foreign Currency Lender against the Borrower.

        5.9.    Requirements of Law.    (a) If the adoption of or any change in any Requirement of Law or in the interpretation or application thereof or compliance by any Lender with any request or directive (whether or not having the force of law) from any central bank or other Governmental Authority made subsequent to the date hereof:

        (i)    shall subject any Lender to any tax of any kind whatsoever with respect to this Agreement, any Letter of Credit, any Application or any Eurocurrency Loan made by it, or change the basis of taxation of payments to such Lender in respect thereof (except for Non-Excluded Taxes covered by Section 5.10 and changes in the rate of tax on the overall net income of such Lender);

        (ii)    shall impose, modify or hold applicable any reserve, special deposit, compulsory loan or similar requirement against assets held by, deposits or other liabilities in or for the account of, advances, loans or other extensions of credit by, or any other acquisition of funds by, any office of such Lender that is not otherwise included in the determination of the Eurocurrency Rate hereunder; or

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        (iii)    shall impose on such Lender any other condition;

and the result of any of the foregoing is to increase the cost to such Lender, by an amount that such Lender deems to be material, of making, converting into, continuing or maintaining Eurocurrency Loans or issuing or participating in Letters of Credit or participating in Foreign Currency Loans, or to reduce any amount receivable hereunder in respect thereof, then, in any such case, the Borrower shall promptly pay such Lender, upon its demand, any additional amounts necessary to compensate such Lender for such increased cost or reduced amount receivable. If any Lender becomes entitled to claim any additional amounts pursuant to this paragraph, it shall promptly notify the Borrower (with a copy to the Administrative Agent) of the event by reason of which it has become so entitled.

        (b)    If any Lender shall have determined that the adoption of or any change in any Requirement of Law regarding capital adequacy or in the interpretation or application thereof or compliance by such Lender or any corporation controlling such Lender with any request or directive regarding capital adequacy (whether or not having the force of law) from any Governmental Authority made subsequent to the date hereof shall have the effect of reducing the rate of return on such Lender's or such corporation's capital as a consequence of its obligations hereunder or under or in respect of any Letter of Credit to a level below that which such Lender or such corporation could have achieved but for such adoption, change or compliance (taking into consideration such Lender's or such corporation's policies with respect to capital adequacy) by an amount deemed by such Lender to be material, then from time to time, after submission by such Lender to the Borrower (with a copy to the Administrative Agent) of a written request therefor, the Borrower shall pay to such Lender such additional amount or amounts as will compensate such Lender or such corporation for such reduction; provided that the Borrower shall not be required to compensate a Lender pursuant to this paragraph for any amounts incurred more than six months prior to the date that such Lender notifies the Borrower of such Lender's intention to claim compensation therefor; and provided, further, that, if the circumstances giving rise to such claim have a retroactive effect, then such six-month period shall be extended to include the period of such retroactive effect.

        (c)    If any Governmental Authority of the jurisdiction of any Foreign Currency (or any other jurisdiction in which the funding operations of any Foreign Currency Lender shall be conducted with respect to such Foreign Currency) shall have in effect any reserve, liquid asset or similar requirement with respect to any category of deposits or liabilities customarily used to fund loans in such Foreign Currency, or by reference to which interest rates applicable to loans in such Foreign Currency are determined, and the result of such requirement shall be to increase the cost to such Foreign Currency Lender of making or maintaining any Foreign Currency Loan in such Foreign Currency, and such Foreign Currency Lender shall deliver to the Borrower a notice requesting compensation under this paragraph, then the Borrower will pay to such Foreign Currency Lender on each Interest Payment Date with respect to each affected Foreign Currency Loan an amount that will compensate such Foreign Currency Lender for such additional cost.

        (d)    A certificate as to any additional amounts payable pursuant to this Section submitted by any Lender to the Borrower (with a copy to the Administrative Agent) setting forth the basis of calculation of such additional amounts shall be conclusive in the absence of manifest error. The obligations of the Borrower pursuant to this Section shall survive the termination of this Agreement and the payment of the Loans and all other amounts payable hereunder.

        (e)    Notwithstanding any other provision of this Agreement, if, (i) (A) the adoption of any law, rule or regulation after the date of this Agreement, (B) any change in any law, rule or regulation or in the interpretation or application thereof by any Governmental Authority after the date of this Agreement or (C) compliance by any Lender with any request, guideline or directive (whether or not having the force of law) of any Governmental Authority made or issued after the date of this Agreement, shall make it unlawful for any such Foreign Currency Lender to make or maintain any

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Foreign Currency Loan or to give effect to its obligations as contemplated hereby with respect to any Foreign Currency Loan, or (ii) there shall have occurred any change in national or international financial, political or economic conditions (including the imposition of or any change in exchange controls, but excluding conditions otherwise covered by this Section 5.9) which would make it impracticable for any Foreign Currency Lenders to make or maintain Foreign Currency Loans denominated in the relevant currency after the date hereof to, or for the account of, the Borrower, then:

        (i)    by written notice to the Borrower and to the Administrative Agent, such Foreign Currency Lender or Foreign Currency Lenders may declare that Foreign Currency Loans (in the affected currency or currencies) will not thereafter (for the duration of such unlawfulness) be made by such Foreign Currency Lender or Foreign Currency Lenders hereunder (or be continued for additional Interest Periods), whereupon any request for a Foreign Currency Loan (in the affected currency or currencies) or to continue a Foreign Currency Loan (in the affected currency or currencies), as the case may be, for an additional Interest Period) shall, as to such Foreign Currency Lender or Foreign Currency Lenders only, be of no force and effect, unless such declaration shall be subsequently withdrawn; and

        (ii)    all outstanding Foreign Currency Loans (in the affected currency or currencies), made by such Foreign Currency Lender or Foreign Currency Lenders shall be repaid on the last day of the then current Interest Period with respect thereto or, if earlier, the date on which the applicable notice becomes effective.

        (f)    For purposes of Section 5.9(e), a notice to the Borrower by any Foreign Currency Lender shall be effective as to each Foreign Currency Loan made by such Foreign Currency Lender, if lawful, on the last day of the Interest Period currently applicable to such Foreign Currency Loan; in all other cases such notice shall be effective on the date of receipt thereof by the Borrower.

        5.10    Taxes.    (a) All payments made by the Borrower under this Agreement shall be made free and clear of, and without deduction or withholding for or on account of, any present or future income, stamp or other taxes, levies, imposts, duties, charges, fees, deductions or withholdings, now or hereafter imposed, levied, collected, withheld or assessed by any Governmental Authority, excluding net income taxes and franchise taxes (imposed in lieu of net income taxes) imposed on any Agent or any Lender as a result of a present or former connection between such Agent or such Lender and the jurisdiction of the Governmental Authority imposing such tax or any political subdivision or taxing authority thereof or therein (other than any such connection arising solely from such Agent or such Lender having executed, delivered or performed its obligations or received a payment under, or enforced, this Agreement or any other Loan Document). If any such non-excluded taxes, levies, imposts, duties, charges, fees, deductions or withholdings ("Non-Excluded Taxes") or Other Taxes are required to be withheld from any amounts payable to any Agent or any Lender hereunder, the amounts so payable to such Agent or such Lender shall be increased to the extent necessary to yield to such Agent or such Lender (after payment of all Non-Excluded Taxes and Other Taxes) interest or any such other amounts payable hereunder at the rates or in the amounts specified in this Agreement, provided, however, that the Borrower shall not be required to increase any such amounts payable to any Lender with respect to any Non-Excluded Taxes (i) that are attributable to such Lender's failure to comply with the requirements of paragraph (d) or (e) of this Section or (ii) that are United States withholding taxes imposed on amounts payable to such Lender at the time such Lender becomes a party to this Agreement or designates a new lending office, except to the extent that such Lender's assignor (if any) was entitled, at the time of assignment, to receive additional amounts from the Borrower with respect to such Non-Excluded Taxes pursuant to this paragraph.

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        (b)    In addition, the Borrower shall pay any Other Taxes to the relevant Governmental Authority in accordance with applicable law.

        (c)    Whenever any Non-Excluded Taxes or Other Taxes are payable by the Borrower, as promptly as possible thereafter the Borrower shall send to the Administrative Agent for its own account or for the account of the relevant Agent or Lender, as the case may be, a certified copy of an original official receipt received by the Borrower showing payment thereof. If the Borrower fails to pay any Non-Excluded Taxes or Other Taxes when due to the appropriate taxing authority or fails to remit to the Administrative Agent the required receipts or other required documentary evidence, the Borrower shall indemnify the Agents and the Lenders for any incremental taxes, interest or penalties that may become payable by any Agent or any Lender as a result of any such failure.

        (d)    Each Lender (or Transferee) that is not a "U.S. Person" as defined in Section 7701(a)(30) of the Code (a "Non-U.S. Lender") shall deliver to the Borrower and the Administrative Agent (or, in the case of a Participant, to the Lender from which the related participation shall have been purchased) two copies of either U.S. Internal Revenue Service Form W-8BEN or Form W-8ECI, or, in the case of a Non-U.S. Lender claiming exemption from U.S. federal withholding tax under Section 871(h) or 881(c) of the Code with respect to payments of "portfolio interest", a statement substantially in the form of Exhibit H and a Form W-8BEN, or any subsequent versions thereof or successors thereto, properly completed and duly executed by such Non-U.S. Lender claiming complete exemption from, or a reduced rate of, U.S. federal withholding tax on all payments by the Borrower under this Agreement and the other Loan Documents. Such forms shall be delivered by each Non-U.S. Lender on or before the date it becomes a party to this Agreement (or, in the case of any Participant, on or before the date such Participant purchases the related participation). In addition, each Non-U.S. Lender shall deliver such forms promptly upon the obsolescence or invalidity of any form previously delivered by such Non-U.S. Lender. Each Non-U.S. Lender shall promptly notify the Borrower at any time it determines that it is no longer in a position to provide any previously delivered certificate to the Borrower (or any other form of certification adopted by the U.S. taxing authorities for such purpose). Notwithstanding any other provision of this paragraph, a Non-U.S. Lender shall not be required to deliver any form pursuant to this paragraph that such Non-U.S. Lender is not legally able to deliver.

        (e)    A Lender that is entitled to an exemption from or reduction of non-U.S. withholding tax under the law of the jurisdiction in which the Borrower is located, or any treaty to which such jurisdiction is a party, with respect to payments under this Agreement shall deliver to the Borrower (with a copy to the Administrative Agent), at the time or times prescribed by applicable law or reasonably requested by the Borrower, such properly completed and executed documentation prescribed by applicable law as will permit such payments to be made without withholding or at a reduced rate, provided that such Lender is legally entitled to complete, execute and deliver such documentation and in such Lender's judgment such completion, execution or submission would not materially prejudice the legal position of such Lender.

        (f)    The agreements in this Section 5.10 shall survive the termination of this Agreement and the payment of the Loans and all other amounts payable hereunder.

        (g)    If any Lender or the Administrative Agent receives a refund attributable to any Non-Excluded Taxes or Other Taxes paid by the Borrower or for which the Lender or the Administrative Agent has received payment from the Borrower hereunder, such Lender or the Administrative Agent, within 30 days of such receipt, shall deliver to the Borrower the amount of such refund (including any interest paid by the relevant Governmental Authority with respect to such refund); provided however, that the Borrower agrees to repay the amount paid over to the Borrower (plus any penalties, interest or other charges imposed by the relevant Governmental Authority) to such Lender or the Administrative Agent in the event that such Lender or the Administrative Agent is required to repay such refund to such Governmental Authority. In addition, upon a written request by

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the Borrower, any Lender and the Administrative Agent shall timely execute and deliver to the Borrower such certificates, forms or other documents which can be reasonably furnished consistent with the facts to assist the Borrower in applying for refunds of Non-Excluded Taxes or Other Taxes remitted hereunder, unless to do so will unduly prejudice or cause undue hardship to such Lender or the Administrative Agent (as determined in the reasonable discretion of such Lender or the Administrative Agent). This paragraph shall not be construed to require any Lender or the Administrative Agent to make available its tax returns (or any other information relating to its Taxes that it deems confidential) to the Borrower or any other Person.

        5.11.    Indemnity.    The Borrower agrees to indemnify each Lender and to hold each Lender harmless from any loss or expense that such Lender may sustain or incur as a consequence of (a) default by the Borrower in making a borrowing of, conversion into or continuation of Eurocurrency Loans after the Borrower has given a notice requesting the same in accordance with the provisions of this Agreement, (b) default by the Borrower in making any prepayment of or conversion from Eurocurrency Loans after the Borrower has given a notice thereof in accordance with the provisions of this Agreement or (c) the making of a prepayment of Eurocurrency Loans or the conversion of Eurocurrency Loans pursuant to Section 3.18(a), in each case, on a day that is not the last day of an Interest Period with respect thereto. Such indemnification may include an amount equal to the excess, if any, of (i) the amount of interest that would have accrued on the amount so prepaid, or not so borrowed, converted or continued, for the period from the date of such prepayment or of such failure to borrow, convert or continue to the last day of such Interest Period (or, in the case of a failure to borrow, convert or continue, the Interest Period that would have commenced on the date of such failure) in each case at the applicable rate of interest for such Loans provided for herein (excluding, however, the Applicable Margin included therein, if any) over (ii) the amount of interest (as reasonably determined by such Lender) that would have accrued to such Lender on such amount by placing such amount on deposit for a comparable period with leading banks in the interbank Eurocurrency market. A certificate as to any amounts payable pursuant to this Section submitted to the Borrower by any Lender shall be conclusive in the absence of manifest error. This covenant shall survive the termination of this Agreement and the payment of the Loans and all other amounts payable hereunder.

        5.12.    Change of Lending Office.    Each Lender agrees that, upon the occurrence of any event giving rise to the operation of Section 5.9, 5.10(a) or 5.10(b) with respect to such Lender, it will, if requested by the Borrower, use reasonable efforts (subject to overall policy considerations of such Lender) to designate another lending office for any Loans affected by such event with the object of avoiding the consequences of such event; provided, that such designation is made on terms that, in the sole judgment of such Lender, cause such Lender and its lending office(s) to suffer no economic, legal or regulatory disadvantage, and provided, further, that nothing in this Section shall affect or postpone any of the obligations of the Borrower or the rights of any Lender pursuant to Section 5.9, 5.10(a) or 5.10(b).

        5.13.    Replacement of Lenders.    The Borrower shall be permitted to replace any Lender that (a) requests reimbursement for amounts owing pursuant to Section 5.9, 5.10(a) or 5.10(b) or (b) defaults in its obligation to make Loans hereunder, with a replacement financial institution; provided that (i) such replacement does not conflict with any Requirement of Law, (ii) no Event of Default shall have occurred and be continuing at the time of such replacement, (iii) prior to any such replacement, such Lender shall have taken no action under Section 5.12 so as to eliminate the continued need for payment of amounts owing pursuant to Section 5.9, 5.10(a) or 5.10(b), (iv) the replacement financial institution shall purchase, at par, all Loans and other amounts owing to such replaced Lender on or prior to the date of replacement, (v) the Borrower shall be liable to such replaced Lender under Section 5.11 if any Eurocurrency Loan owing to such replaced Lender shall be purchased other than on the last day of the Interest Period relating thereto, (vi) the replacement financial institution, if not already a Lender, shall be reasonably satisfactory to the Administrative

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Agent, (vii) the replaced Lender shall be obligated to make such replacement in accordance with the provisions of Section 12.6, (viii) until such time as such replacement shall be consummated, the Borrower shall pay all additional amounts (if any) required pursuant to Section 5.9, 5.10(a) or 5.10(b), as the case may be, and (ix) any such replacement shall not be deemed to be a waiver of any rights that the Borrower, the Administrative Agent or any other Lender shall have against the replaced Lender.

        5.14.    Evidence of Debt.    (a) Each Lender shall maintain in accordance with its usual practice an account or accounts evidencing indebtedness of the Borrower to such Lender resulting from each Loan of such Lender from time to time, including the amounts of principal and interest payable and paid to such Lender from time to time under this Agreement.

        (b)    The Administrative Agent, on behalf of the Borrower, shall maintain the Register pursuant to Section 12.6(b), and a subaccount therein for each Lender, in which shall be recorded (i) the amount of each Loan made hereunder and any Note evidencing such Loan, the Type of such Loan and each Interest Period applicable thereto, (ii) the amount of any principal or interest due and payable or to become due and payable from the Borrower to each Lender hereunder and (iii) both the amount of any sum received by the Administrative Agent hereunder from the Borrower and each Lender's share thereof.

        (c)    The entries made in the Register and the accounts of each Lender maintained pursuant to Section 5.14(a) shall, to the extent permitted by applicable law, be prima facie evidence of the existence and amounts of the obligations of the Borrower therein recorded; provided, however, that the failure of any Lender or the Administrative Agent to maintain the Register or any such account, or any error therein, shall not in any manner affect the obligation of the Borrower to repay (with applicable interest) the Loans made to the Borrower by such Lender in accordance with the terms of this Agreement.

        (d)    The Borrower agrees that, upon the request to the Administrative Agent by any Lender, the Borrower will execute and deliver to such Lender a promissory note of the Borrower evidencing any Term Loans, Revolving Credit Loans or Swingline Loans, as the case may be, of such Lender, substantially in the forms of Exhibit I-1, I-2 or I-3, respectively, with appropriate insertions as to date and principal amount.

        5.15.    Illegality.    Notwithstanding any other provision herein, if the adoption of or any change in any Requirement of Law or in the interpretation or application thereof shall make it unlawful for any Lender to make or maintain Eurocurrency Loans as contemplated by this Agreement, (a) the commitment of such Lender hereunder to make Eurocurrency Loans, continue Eurocurrency Loans as such and convert Base Rate Loans to Eurocurrency Loans shall forthwith be canceled and (b) such Lender's Loans then outstanding as Eurocurrency Loans, if any, shall be converted automatically to Base Rate Loans on the respective last days of the then current Interest Periods with respect to such Loans or within such earlier period as required by law. If any such conversion of a Eurocurrency Loan occurs on a day which is not the last day of the then current Interest Period with respect thereto, the Borrower shall pay to such Lender such amounts, if any, as may be required pursuant to Section 5.11.

        5.16.    Foreign Currency Exchange Rate.    (a) No later than 1:00 P.M., New York City time, on each Calculation Date with respect to a Foreign Currency, the Administrative Agent shall determine the Exchange Rate as of such Calculation Date with respect to such Foreign Currency, provided that, upon receipt of a borrowing request pursuant to Section 3.16 or a request for a Letter of Credit denominated in a Foreign Currency pursuant to Section 3.8, the Administrative Agent shall determine the Exchange Rate with respect to the relevant Foreign Currency in accordance with the foregoing (it being acknowledged and agreed that the Administrative Agent shall use such Exchange Rate for the purposes of determining compliance with Section 3.15 with respect to such borrowing request or Application). The Exchange Rates so determined shall become effective on the first Business Day

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immediately following the relevant Calculation Date (a "Reset Date"), shall remain effective until the next succeeding Reset Date and shall for all purposes of this Agreement (other than Section 3.18(a), 5.7, 12.18 or any other provision expressly requiring the use of a current Exchange Rate) be the Exchange Rates employed in converting any amounts between Dollars and Foreign Currencies.

        (b)    No later than 5:00 P.M., New York City time, on each Reset Date and each Borrowing Date with respect to Foreign Currency Loans, the Administrative Agent shall determine the aggregate amount of the Dollar Equivalents of the principal amounts of the Foreign Currency Loans then outstanding (after giving effect to any Foreign Currency Loans to be made or repaid on such date and the aggregate amount of the L/C Obligations then outstanding).

        (c)    The Administrative Agent shall promptly notify the Borrower of each determination of an Exchange Rate hereunder.

SECTION 6.    REPRESENTATIONS AND WARRANTIES

        To induce the Agents and the Lenders to enter into this Agreement and to make the Loans and issue or participate in the Letters of Credit, the Borrower hereby represents and warrants to each Agent and each Lender that:

        6.1.    Financial Condition.    The audited consolidated balance sheets of the Borrower and its consolidated Subsidiaries as at December 31, 2000 and December 31, 2001, and the related consolidated statements of income and of cash flows for the fiscal years ended on such dates, reported on by and accompanied by an unqualified report from KPMG LLP, present fairly the consolidated financial condition of the Borrower and its consolidated Subsidiaries as at such date, and the consolidated results of its operations and its consolidated cash flows for the respective fiscal years then ended. The unaudited consolidated balance sheet of the Borrower and its consolidated Subsidiaries as at September 30, 2002, and the related unaudited consolidated statements of income and cash flows for the nine-month period ended on such date, present fairly the consolidated financial condition of the Borrower and its consolidated Subsidiaries as at such date, and the consolidated results of its operations and its consolidated cash flows for the nine-month period then ended (subject to normal year-end audit adjustments). All such financial statements, including the related schedules and notes thereto, have been prepared in accordance with GAAP applied consistently throughout the periods involved (except as approved by the aforementioned firm of accountants and disclosed therein). No Group Member has any material Guarantee Obligations, contingent liabilities and liabilities for taxes, or any long-term leases or unusual forward or long-term commitments, including any interest rate or foreign currency swap or exchange transaction or other obligation in respect of derivatives, that are not reflected in the most recent financial statements referred to in this paragraph or disclosed in Sections 6.2 through 6.22. During the period from December 31, 2001 to and including the date hereof there has been no Disposition by the Borrower and its consolidated Subsidiaries of any material part of its business or property.

        6.2.    No Change.    Since December 31, 2001 there has been no development or event that has had or could reasonably be expected to have a Material Adverse Effect.

        6.3.    Corporate Existence; Compliance with Law.    Each Group Member (a) is duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization, (b) has the power and authority, and the legal right, to own and operate its property, to lease the property it operates as lessee and to conduct the business in which it is currently engaged, (c) is duly qualified as a foreign corporation and in good standing under the laws of each jurisdiction where its ownership, lease or operation of property or the conduct of its business requires such qualification, except to the extent that the failure to so qualify could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect and (d) is in compliance with all Requirements of Law except to the extent

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that the failure to comply therewith could not, in the aggregate, reasonably be expected to have a Material Adverse Effect.

        6.4.    Power; Authorization; Enforceable Obligations.    Each Loan Party has the power and authority, and the legal right, to make, deliver and perform the Loan Documents to which it is a party and, in the case of the Borrower, to obtain extensions of credit hereunder. Each Loan Party has taken all necessary organizational action to authorize the execution, delivery and performance of the Loan Documents to which it is a party and, in the case of the Borrower, to authorize the extensions of credit on the terms and conditions of this Agreement. No consent or authorization of, filing with, notice to or other act by or in respect of, any Governmental Authority or any other Person is required in connection with the Refinancing and the extensions of credit hereunder or with the execution, delivery, performance, validity or enforceability of this Agreement or any of the Loan Documents, except (i) consents, authorizations, filings and notices described in Schedule 6.4, which consents, authorizations, filings and notices have been obtained or made and are in full force and effect and (ii) the filings referred to in Section 6.19. Each Loan Document has been duly executed and delivered on behalf of each Loan Party party thereto. This Agreement constitutes, and each other Loan Document upon execution will constitute, a legal, valid and binding obligation of each Loan Party party thereto, enforceable against each such Loan Party in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors' rights generally and by general equitable principles (whether enforcement is sought by proceedings in equity or at law).

        6.5.    No Legal Bar.    The execution, delivery and performance of this Agreement and the other Loan Documents, the issuance of Letters of Credit, the borrowings hereunder and the use of the proceeds thereof will not violate any Requirement of Law or any Contractual Obligation of any Group Member and will not result in, or require, the creation or imposition of any Lien on any of their respective properties or revenues pursuant to any Requirement of Law or any such Contractual Obligation (other than the Liens created by the Security Documents). No Requirement of Law or Contractual Obligation applicable to the Borrower or any of its Subsidiaries could reasonably be expected to have a Material Adverse Effect.

        6.6.    Litigation.    Except as described on Schedule 6.6, no litigation, investigation or proceeding of or before any arbitrator or Governmental Authority is pending or, to the knowledge of the Borrower, threatened by or against any Group Member or against any of their respective properties or revenues (a) with respect to any of the Loan Documents or any of the transactions contemplated hereby or thereby, or (b) that could reasonably be expected to have a Material Adverse Effect.

        6.7.    No Default.    No Group Member is in default under or with respect to any of its Contractual Obligations in any respect that could reasonably be expected to have a Material Adverse Effect. No Default or Event of Default has occurred and is continuing.

        6.8.    Ownership of Property; Liens.    Each Group Member has title in fee simple to, or a valid leasehold interest in, all its real property material to its business, and, to its knowledge, good title to, or a valid leasehold interest in, all its other property, and none of such property is subject to any Lien except as permitted by Section 9.3, and as set forth on Schedule B to each Title Policy.

        6.9.    Intellectual Property.    Each Group Member owns, or is licensed to use, all material Intellectual Property necessary for the conduct of its business as currently conducted. No claim has been asserted and is pending by any Person challenging or questioning the use of any Intellectual Property or the validity or effectiveness of any Intellectual Property, nor does the Borrower know of any valid basis for any such claim, except such claims that, individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect. To the knowledge of the Borrower, the use of Intellectual Property by each Group Member does not infringe on the rights of any Person in any material respect.

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        6.10.    Taxes.    Each Group Member has filed or caused to be filed all Federal, state and other material tax returns that are required to be filed and has paid all taxes shown to be due and payable on said returns or on any assessments made against it or any of its property and all other taxes, fees or other charges imposed on it or any of its property by any Governmental Authority (other than any taxes the amount or validity of which are currently being contested in good faith by appropriate proceedings and with respect to which reserves in conformity with GAAP have been provided on the books of the relevant Group Member); no tax Lien has been filed, and, to the knowledge of the Borrower, no claim is being asserted, with respect to any such tax, fee or other charge.

        6.11.    Federal Regulations.    No part of the proceeds of any Loans, and no other extensions of credit hereunder, will be used for "buying" or "carrying" any "margin stock" within the respective meanings of each of the quoted terms under Regulation U as now and from time to time hereafter in effect or for any purpose that violates the provisions of the Regulations of the Board. If requested by any Lender or the Administrative Agent, the Borrower will furnish to the Administrative Agent and each Lender a statement to the foregoing effect in conformity with the requirements of FR Form G-3 or FR Form U-1, as applicable, referred to in Regulation U.

        6.12.    Labor Matters.    Except as, in the aggregate, could not reasonably be expected to have a Material Adverse Effect: (a) there are no strikes or other labor disputes against any Group Member pending or, to the knowledge of the Borrower, threatened; (b) hours worked by and payment made to employees each Group Member have not been in violation of the Fair Labor Standards Act or any other applicable Requirement of Law dealing with such matters; and (c) all payments due from any Group Member on account of employee health and welfare insurance have been paid or accrued as a liability on the books of the relevant Group Member.

        6.13.    ERISA.    Neither a Reportable Event nor an "accumulated funding deficiency" (within the meaning of Section 412 of the Code or Section 302 of ERISA) has occurred during the five-year period prior to the date on which this representation is made or deemed made with respect to any Plan, and each Plan has complied in all material respects with the applicable provisions of ERISA and the Code. No termination of a Single Employer Plan has occurred, and no Lien in favor of the PBGC or a Plan has arisen, during such five-year period that would result in a material liability. The present value of all accrued benefits under each Single Employer Plan (based on those assumptions used to fund such Plans) did not, as of the last annual valuation date prior to the date on which this representation is made or deemed made, exceed the value of the assets of such Plan allocable to such accrued benefits by a material amount in relation to the business of the Borrower. Neither the Borrower nor any Commonly Controlled Entity has had a complete or partial withdrawal from any Multiemployer Plan that has resulted or could reasonably be expected to result in a material liability under ERISA, and neither the Borrower nor any Commonly Controlled Entity would become subject to any material liability under ERISA if the Borrower or any such Commonly Controlled Entity were to withdraw completely from all Multiemployer Plans as of the valuation date most closely preceding the date on which this representation is made or deemed made. No such Multiemployer Plan is in Reorganization or Insolvent.

        6.14.    Investment Company Act; Other Regulations.    No Loan Party is an "investment company", or a company "controlled" by an "investment company", within the meaning of the Investment Company Act of 1940, as amended. No Loan Party is subject to regulation under any Requirement of Law (other than Regulation X of the Board) that limits its ability to incur Indebtedness.

        6.15.    Subsidiaries.    Except as disclosed to the Administrative Agent by the Borrower in writing from time to time after the Closing Date, (a) Schedule 6.15(a) sets forth the name and jurisdiction of incorporation of each Subsidiary and, as to each such Subsidiary, the percentage of each class of Capital Stock owned by any Loan Party and (b) there are no outstanding subscriptions, options, warrants, calls, rights or other agreements or commitments (other than stock options granted to

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employees, directors or other persons and directors' qualifying shares) of any nature relating to any Capital Stock of the Borrower or any Subsidiary, except as created by the Loan Documents or, as of the Closing Date, except as disclosed on Schedule 6.15(b).

        6.16.    Use of Proceeds.    The proceeds of the Term Loans shall be used to finance the Refinancing, to pay fees and expenses related to the Refinancing and for general corporate purposes of the Borrower and its Subsidiaries. The proceeds of the Revolving Loans shall be used, together with the proceeds of the Swingline Loans and the Letters of Credit, for general corporate purposes of the Borrower and its Subsidiaries. The proceeds of the Foreign Currency Loans shall be used for general corporate purposes of the Borrower and its Subsidiaries.

        6.17.    Environmental Matters.    Except as, in the aggregate, could not reasonably be expected to have a Material Adverse Effect:

        (a)    the facilities and properties owned, leased or operated by any Group Member (the "Subject Properties") do not contain, and have not previously contained, any Materials of Environmental Concern in amounts or concentrations or under circumstances that constitute or constituted a violation of, or could reasonably be expected to give rise to liability under, any applicable Environmental Law;

        (b)    no Group Member has received or is aware of any notice of violation, alleged violation, non-compliance, liability or potential liability regarding environmental matters or compliance with Environmental Laws with regard to any of the Subject Properties or the business operated by any Group Member (the "Business"), nor does the Borrower have knowledge or reason to believe that any such notice will be received or is being threatened;

        (c)    Materials of Environmental Concern have not been transported or disposed of from the Subject Properties in violation of, or in a manner or to a location that could reasonably be expected to give rise to liability under, any applicable Environmental Law, nor have any Materials of Environmental Concern been generated, treated, stored or disposed of at, on or under any of the Subject Properties in violation of, or in a manner that could reasonably be expected to give rise to liability under, any applicable Environmental Law;

        (d)    no judicial proceeding or governmental or administrative action is pending or, to the knowledge of the Borrower, threatened, under any Environmental Law to which any Group Member is or, to the knowledge of the Borrower, will be named as a party with respect to the Subject Properties or the Business, nor are there any consent decrees or other decrees, consent orders, administrative orders or other orders, or other administrative or judicial requirements outstanding under any Environmental Law with respect to the Subject Properties or the Business;

        (e)    there has been no release or threat of release of Materials of Environmental Concern at or from the Subject Properties, or arising from or related to the operations of any Group Member in connection with the Subject Properties or otherwise in connection with the Business, in violation of or in amounts or in a manner that could reasonably be expected to give rise to liability under any applicable Environmental Laws;

        (f)    the Subject Properties and all operations at the Subject Properties are in compliance, and have in the last five years been in compliance, with all applicable Environmental Laws, and there is no violation of any applicable Environmental Law with respect to the Subject Properties or the Business; and

        (g)    no Group Member has assumed or retained any liability of any other Person under Environmental Laws.

        6.18.    Accuracy of Information, etc.    No statement or information contained in this Agreement, any other Loan Document, the Confidential Information Memorandum or any other document,

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certificate or statement furnished by or on behalf of any Loan Party to the Administrative Agent or the Lenders, or any of them, for use in connection with the transactions contemplated by this Agreement or the other Loan Documents, contained as of the date such statement, information, document or certificate was so furnished (or, in the case of the Confidential Information Memorandum, as of the date of this Agreement), any untrue statement of a material fact or omitted to state a material fact necessary to make the statements contained herein or therein not misleading. The projections contained in the materials referenced above are based upon good faith estimates and assumptions believed by management of the Borrower to be reasonable at the time made, it being recognized by the Lenders that such financial information as it relates to future events is not to be viewed as fact and that actual results during the period or periods covered by such financial information may differ from the projected results set forth therein by a material amount. There is no fact known to any Loan Party that could reasonably be expected to have a Material Adverse Effect that has not been expressly disclosed herein, in the other Loan Documents, in the Confidential Information Memorandum or in any other documents, certificates and statements furnished to the Administrative Agent and the Lenders for use in connection with the transactions contemplated hereby and by the other Loan Documents.

        6.19.    Security Documents.    (a) The Guarantee and Collateral Agreement is effective to create in favor of the Administrative Agent, for the benefit of the Lenders, a legal, valid and enforceable security interest in the Collateral described therein and proceeds thereof. In the case of the Pledged Stock described in the Guarantee and Collateral Agreement, when stock certificates representing such Pledged Stock are delivered to the Administrative Agent or such other action is taken with respect to Pledged Stock of Foreign Subsidiaries as specified in the Guarantee and Collateral Agreement, and in the case of the other Collateral described in the Guarantee and Collateral Agreement, when financing statements and other filings specified on Schedule 6.19(a) in appropriate form are filed in the offices specified on Schedule 6.19(a), the Guarantee and Collateral Agreement shall constitute a fully perfected Lien on, and security interest in, all right, title and interest of the Loan Parties in such Collateral and the proceeds thereof, as security for the Obligations (as defined in the Guarantee and Collateral Agreement), in each case prior and superior in right to any other Person (except, in the case of Collateral other than Pledged Stock, Liens permitted by Section 9.3).

        (b)    Each of the Mortgages is effective to create in favor of the Administrative Agent, for the benefit of the Lenders, a legal, valid and enforceable Lien on the Mortgaged Properties described therein and proceeds thereof, and when the Mortgages, together with the appropriate UCC financing statements filed in connection therewith, are filed in the offices specified on Schedule 6.19(b), each such Mortgage, together with the appropriate UCC financing statements filed in connection therewith, shall, at the time of such filings, constitute a fully perfected Lien on, and security interest in, all right, title and interest of the Loan Parties in the Mortgaged Properties and the proceeds thereof, as security for the Obligations (as defined in the relevant Mortgage), in each case prior and superior in right to any other Person, subject to the exceptions set forth on Schedule B to the applicable Title Policy and the Liens permitted under Section 9.3. Schedule 1.1(a) lists each parcel of real property in the United States owned in fee simple by the Borrower or any of its Subsidiaries as of the Closing Date.

        6.20.    Solvency.    Each Loan Party is, and after giving effect to the Refinancing and the incurrence of all Indebtedness and obligations being incurred in connection herewith and therewith will be and will continue to be, Solvent.

        6.21.    Senior Indebtedness.    The Obligations (x) constitute "Senior Debt" and "Designated Senior Debt" of the Borrower under and as defined in the Senior Subordinated Note Indenture and (y) are the only existing "Designated Senior Debt" under the Senior Subordinated Note Indenture. The obligations of each Subsidiary Guarantor under the Guarantee and Collateral Agreement constitute "Guarantor Senior Debt" of such Subsidiary Guarantor under and as defined in the Senior Subordinated Note Indenture.

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        6.22    Regulation H.    As of the Closing Date, except as specified on Schedule 6.22, no Mortgage encumbers improved real property that is located in an area that has been identified by the Secretary of Housing and Urban Development as an area having special flood hazards and in which flood insurance has been made available under the National Flood Insurance Act of 1968.

        6.23.    Material Contracts.    (a) As of the Closing Date, (i) each Material Contract is in full force and effect and is a legal, valid and binding obligation of each party thereto enforceable in accordance with its terms and (ii) no Group Member is in default of any material provision of any Material Contract.

        (b)    To the best knowledge of the Borrower, (i) there has been no default, breach or other violation of any Material Contract and (ii) no Governmental Authority has any basis for terminating any Material Contract other than customary termination provisions relating to convenience and other similar provisions, except, in each case, as could not reasonably be expected to have a Material Adverse Effect.

        (c)    To the best knowledge of the Borrower, no Governmental Authority has delivered notice of or otherwise demonstrated its intention to exercise its option to terminate a Material Contract on the basis of clause (b)(ii) above between itself and any of the Group Members, except for any such termination that could not reasonably be expected to have a Material Adverse Effect.

        (d)    Schedule 6.23 sets forth each material contract between any Group Member and any Governmental Authority in effect on the Closing Date.

SECTION 7.    CONDITIONS PRECEDENT

        7.1.    Conditions to Initial Extension of Credit.    The agreement of each Lender to make the initial extension of credit requested to be made by it is subject to the satisfaction, prior to or concurrently with the making of such extension of credit on the Closing Date (but in any event no later than December 31, 2002), of the following conditions precedent:

        (a)    Credit Agreement; Guarantee and Collateral Agreement.    The Syndication Agent shall have received (i) this Agreement executed and delivered by each Agent and the Borrower, (ii) the Guarantee and Collateral Agreement, executed and delivered by the Borrower and each Subsidiary Guarantor, (iii) an Acknowledgment and Consent in the form attached to the Guarantee and Collateral Agreement, executed and delivered by each Issuer (as defined therein), if any, that is not a Loan Party and (iv) an Addendum executed and delivered by each Lender and accepted by the Borrower.

        (b)    (i) The Syndication Agent shall have received satisfactory evidence that the Existing Credit Agreement shall have been terminated and all amounts thereunder shall have been paid in full and (ii) satisfactory arrangements shall have been made for the termination of all Liens granted in connection therewith.

        (c)    Financial Statements.    The Lenders shall have received (i) audited consolidated financial statements of the Borrower and its consolidated Subsidiaries for the 2000 and 2001 fiscal years and (ii) unaudited interim consolidated financial statements of the Borrower and its consolidated Subsidiaries for each quarterly period ended subsequent to the date of the latest applicable financial statements delivered pursuant to clause (i) of this paragraph as to which such financial statements are available, and such financial statements shall not, in the reasonable judgment of the Lenders, reflect any material adverse change in the consolidated financial condition of the Borrower and its consolidated Subsidiaries, as reflected in the financial statements or projections contained in the Confidential Information Memorandum (such receipt and judgment to be evidenced by such Lender's execution of this Agreement).

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        (d)    Approvals.    All governmental and third party approvals (including landlords' and other consents) necessary or advisable in connection with the Refinancing and the transactions contemplated hereby shall have been obtained and be in full force and effect, and all applicable waiting periods shall have expired without any action being taken or threatened by any competent authority that would restrain, prevent or otherwise impose material adverse conditions on the Refinancing or the financing contemplated hereby.

        (e)    Lien Searches.    The Syndication Agent and the Administrative Agent shall have received the results of a recent lien search in each of the jurisdictions where assets of the Loan Parties are located, and such search shall reveal no liens on any of the assets of the Loan Parties except for liens permitted by Section 9.3 or discharged on or prior to the Closing Date pursuant to documentation satisfactory to the Syndication Agent and the Administrative Agent.

        (f)    Fees.    The Lenders and the Agents shall have received all fees required to be paid in respect of this Agreement, and all expenses for which invoices have been presented (including the reasonable fees and expenses of legal counsel) in respect of this Agreement, on or before the Closing Date. All such amounts will be paid with proceeds of Loans made on the Closing Date and will be reflected in the funding instructions given by the Borrower to the Syndication Agent on or before the Closing Date.

        (g)    Closing Certificates.    The Syndication Agent shall have received (i) a certificate of each Loan Party, dated the Closing Date, substantially in the form of Exhibit C, with appropriate insertions and attachments and (ii) a certificate of the Borrower, dated the Closing Date, certifying that the representations set forth in Section 6.23 are true and correct on and as of the Closing Date without giving effect to the Material Adverse Effect qualifications set forth therein.

        (h)    Legal Opinions.    The Syndication Agent shall have received the following executed legal opinions:

        (i)    the legal opinion of Kramer Levin Naftalis & Frankel LLP, counsel to the Borrower and its Subsidiaries, substantially in the form of Exhibit G-1;

        (ii)    the legal opinion of Martin E. Schloss, general counsel of the Borrower and its Subsidiaries, substantially in the form of Exhibit G-2;

        (iii)    the legal opinion of local counsel in each of Georgia and Connecticut and of such other special and local counsel as may be required by the Syndication Agent.

Each such legal opinion shall cover such other matters incident to the transactions contemplated by this Agreement as the Syndication Agent may reasonably require.

        (i)    Pledged Stock; Stock Powers; Pledged Notes.    The Administrative Agent shall have received (i) the certificates representing the shares of Capital Stock pledged pursuant to the Guarantee and Collateral Agreement, together with an undated stock power for each such certificate executed in blank by a duly authorized officer of the pledgor thereof and (ii) each promissory note (if any) pledged to the Administrative Agent pursuant to the Guarantee and Collateral Agreement endorsed (without recourse) in blank (or accompanied by an executed transfer form in blank) by the pledgor thereof or such other action is taken with respect to Pledged Stock of Foreign Subsidiaries as specified in the Guarantee and Collateral Agreement.

        (j)    Filings, Registrations and Recordings.    Subject to Section 8.12, each document (including any Uniform Commercial Code financing statement) required by the Security Documents or under law or reasonably requested by the Syndication Agent or the Administrative Agent to be filed, registered or recorded in order to create in favor of the Administrative Agent, for the benefit of the Lenders, a perfected Lien on the Collateral described therein, prior and superior in right to

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any other Person (other than with respect to Liens expressly permitted by Section 9.3), shall be in proper form for filing, registration or recordation.

        (k)    Mortgages, etc.    (i) The Syndication Agent shall have received a Mortgage with respect to each Mortgaged Property, executed and delivered by a duly authorized officer of each party thereto.

        (ii)    If requested by the Syndication Agent, the Syndication Agent shall have received, and the title insurance company issuing the Title Policy (the "Title Insurance Company") shall have received, maps or plats of an as-built survey of the sites of the Mortgaged Properties certified to the Administrative Agent and the Title Insurance Company in a manner satisfactory to them, dated a date satisfactory to the Syndication Agent and the Title Insurance Company by an independent professional licensed land surveyor satisfactory to the Syndication Agent and the Title Insurance Company, which maps or plats and the surveys on which they are based shall be made in accordance with the Minimum Standard Detail Requirements for Land Title Surveys jointly established and adopted by the American Land Title Association and the American Congress on Surveying and Mapping in 1992, and, without limiting the generality of the foregoing, there shall be surveyed and shown on such maps, plats or surveys the following: (A) the locations on such sites of all the buildings, structures and other improvements and the established building setback lines; (B) the lines of streets abutting the sites and width thereof; (C) all access and other easements appurtenant to the sites; (D) all roadways, driveways, easements, encroachments and overhanging projections and similar encumbrances affecting the site, whether recorded or apparent from a physical inspection of the sites; (E) any encroachments on any adjoining property by the building structures and improvements on the sites; (F) if the site is described as being on a filed map, a legend relating the survey to said map; and (G) the flood zone designations, if any, in which the Mortgaged Properties are located.

        (iii)    The Syndication Agent shall have received in respect of each Mortgaged Property a mortgagee's title insurance policy (or policies) or marked up unconditional binder for such insurance (the "Title Policy"). Each such policy shall (A) be in the amount set forth on Schedule 7.1(k) (the "Title Policy Insured Amount"); (B) insure that the Mortgage insured thereby creates a valid first Lien on such Mortgaged Property free and clear of all defects and encumbrances, except as disclosed therein; (C) name the Administrative Agent for the benefit of the Lenders as the insured thereunder; (D) be in the form of ALTA Loan Policy—1992; (E) contain such endorsements and affirmative coverage as the Syndication Agent may reasonably request and (F) be issued by title companies satisfactory to the Syndication Agent (including any such title companies acting as co-insurers or reinsurers, at the option of the Syndication Agent). The Syndication Agent shall have received evidence satisfactory to it that all premiums in respect of each such policy, all charges for mortgage recording tax, and all related expenses, if any, have been paid.

        (iv)    If requested by the Syndication Agent, the Syndication Agent shall have received (A) confirmation that the Borrower has received the notice required pursuant to Section 208(e)(3) of Regulation H of the Board and (B) a policy of flood insurance that (1) covers any parcel of improved real property that is encumbered by any Mortgage and located in a flood zone and (2) is written in an amount not less than the Title Policy Insured Amount or the maximum limit of coverage made available with respect to the particular type of property under the National Flood Insurance Act of 1968, whichever is less. Borrower shall maintain or cause to be maintained the flood insurance required under this Section until the maturity of the Indebtedness secured by the Mortgages.

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        (v)    The Syndication Agent shall have received a copy of all recorded documents referred to, or listed as exceptions to title in each Title Policy.

        (l)    Insurance.    The Syndication Agent shall have received insurance certificates satisfying the requirements of Section 5.3(b) of the Guarantee and Collateral Agreement.

        7.2.    Conditions to Each Extension of Credit.    The agreement of each Lender to make any extension of credit requested to be made by it on any date (including its initial extension of credit) is subject to the satisfaction of the following conditions precedent:

        (a)    Representations and Warranties.    Each of the representations and warranties made by any Loan Party in or pursuant to the Loan Documents shall be true and correct on and as of such date as if made on and as of such date.

        (b)    No Default.    No Default or Event of Default shall have occurred and be continuing on such date or after giving effect to the extensions of credit requested to be made on such date.

Each borrowing by and issuance of a Letter of Credit on behalf of the Borrower hereunder shall constitute a representation and warranty by the Borrower as of the date of such extension of credit that the conditions contained in this Section 7.2 have been satisfied.

SECTION 8.    AFFIRMATIVE COVENANTS

        The Borrower hereby agrees that, so long as the Commitments remain in effect, any Letter of Credit remains outstanding or any Loan or other amount is owing to any Lender or Agent hereunder, the Borrower shall and shall cause each of its Subsidiaries to:

        8.1.    Financial Statements.    Furnish to the Administrative Agent for distribution to each Lender:

        (a)    as soon as available, but in any event within 90 days after the end of each fiscal year of the Borrower, a copy of the audited consolidated balance sheet of the Borrower and its consolidated Subsidiaries as at the end of such year and the related audited consolidated statements of income and of cash flows for such year, setting forth in each case in comparative form the figures for the previous year, reported on without a "going concern" or like qualification or exception, or qualification arising out of the scope of the audit, by KPMG LLC or other independent certified public accountants of nationally recognized standing; and

        (b)    as soon as available, but in any event not later than 45 days after the end of each of the first three quarterly periods of each fiscal year of the Borrower, the unaudited consolidated balance sheet of the Borrower and its consolidated Subsidiaries as at the end of such quarter and the related unaudited consolidated statements of income and of cash flows for such quarter and the portion of the fiscal year through the end of such quarter, setting forth in each case in comparative form the figures for the previous year, certified by a Responsible Officer as being fairly stated in all material respects (subject to normal year-end audit adjustments).

All such financial statements shall be complete and correct in all material respects and shall be prepared in reasonable detail and in accordance with GAAP.

        8.2.    Certificates; Other Information.    Furnish to the Administrative Agent for distribution to each Lender (or, in the case of clause (g), to the relevant Lender):

        (a)    concurrently with the delivery of the financial statements referred to in Section 8.1(a), a certificate of the independent certified public accountants reporting on such financial statements stating that in making the examination necessary therefor no knowledge was obtained of any Default or Event of Default, except as specified in such certificate;

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        (b)    concurrently with the delivery of any financial statements pursuant to Section 8.1, (i) a certificate of a Responsible Officer stating that, to the best of each such Responsible Officer's knowledge, each Loan Party during such period has observed or performed all of its covenants and other agreements, and satisfied every condition, contained in this Agreement and the other Loan Documents to which it is a party to be observed, performed or satisfied by it, and that such Responsible Officer has obtained no knowledge of any Default or Event of Default except as specified in such certificate and (ii) a Compliance Certificate containing all information and calculations necessary for determining compliance by each Group Member with the provisions of this Agreement referred to therein as of the last day of the fiscal quarter or fiscal year of the Borrower, as the case may be, and, if applicable, for determining the Applicable Margins and Commitment Fee Rate, and (iii) to the extent not previously disclosed to the Administrative Agent, a listing of any Intellectual Property acquired by any Loan Party since the date of the most recent list delivered pursuant to this clause (iii) (or, in the case of the first such list so delivered, since the Closing Date);

        (c)    as soon as available, and in any event no later than 30 days after the end of each fiscal year of the Borrower, a detailed consolidated budget for the following fiscal year (including a projected consolidated balance sheet of the Borrower and its Subsidiaries as of the end of the following fiscal year, the related consolidated statements of projected cash flow, projected changes in financial position and projected income and a description of the underlying assumptions applicable thereto) (collectively, the "Projections"), which Projections shall in each case be accompanied by a certificate of a Responsible Officer stating that such Projections are based on reasonable estimates, information and assumptions and that such Responsible Officer has no reason to believe that such Projections are incorrect in any material respect in light of the circumstances under which such estimates and assumptions were made;

        (d)    if at any time the Borrower is not required to file periodic reports with the SEC pursuant to Section 13 or 15(d) of the Exchange Act, within 90 days after the end of each fiscal year of the Borrower and within 45 days after the end of each other fiscal quarter of the Borrower, a narrative discussion and analysis of the financial condition and results of operations of the Borrower and its Subsidiaries for such fiscal quarter and for the period from the beginning of the then current fiscal year to the end of such fiscal quarter, as compared to the comparable periods of the previous year;

        (e)    no later than ten Business Days prior to the effectiveness thereof, copies of substantially final drafts of any proposed amendment, supplement, waiver or other modification with respect to the Senior Subordinated Note Indenture;

        (f)    within five days after the same are sent, copies of all financial statements and reports that the Borrower sends to the holders of any class of its debt securities or public equity securities and, within five days after the same are filed, copies of all financial statements and reports the Borrower may make to, or file with, the SEC; and

        (g)    promptly, such additional financial and other information as any Lender through the Administrative Agent may from time to time reasonably request.

        8.3.    Payment of Obligations.    Pay, discharge or otherwise satisfy at or before maturity or before they become delinquent, as the case may be, all its material obligations of whatever nature, except where the amount or validity thereof is currently being contested in good faith by appropriate proceedings and reserves in conformity with GAAP with respect thereto have been provided on the books of the relevant Group Member.

        8.4.    Maintenance of Existence; Compliance.    (a) (i) Preserve, renew and keep in full force and effect its corporate existence and (ii) take all reasonable action to maintain all rights, privileges and

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franchises necessary or desirable in the normal conduct of its business, except, in each case, as otherwise permitted by Section 9.4 and except, in the case of clause (ii) above, to the extent that failure to do so could not reasonably be expected to have a Material Adverse Effect; and (b) comply with all Contractual Obligations and Requirements of Law except to the extent that failure to comply therewith could not, in the aggregate, reasonably be expected to have a Material Adverse Effect.

        8.5.    Maintenance of Property; Insurance.    (a) Keep all Property material to the conduct of its business in good working order and condition, ordinary wear and tear excepted and (b) maintain with financially sound and reputable insurance companies insurance on all its property in at least such amounts and against at least such risks (but including in any event public liability, product liability and business interruption) as are usually insured against in the same general area by companies engaged in the same or a similar business.

        8.6.    Inspection of Property; Books and Records; Discussions.    (a) Keep proper books of records and account in which full, true and correct entries in conformity with GAAP and all material Requirements of Law shall be made of all dealings and transactions in relation to its business and activities and (b) permit representatives of any Lender to visit and inspect any of its properties and examine and make abstracts from any of its books and records at any reasonable time during regular business hours upon reasonable notice and as often as may reasonably be desired and to discuss the business, operations, properties and financial and other condition of the Group Members with responsible officers of the Group Members and with their independent certified public accountants, provided that, so long as no Default or Event of Default has occurred and is continuing, such visits, inspections and examinations by any such Lender shall be coordinated through the Administrative Agent and shall not exceed two visits each year.

        8.7.    Notices.    Promptly give notice to the Administrative Agent, the Syndication Agent and each Lender of:

        (a)    the occurrence of any Default or Event of Default;

        (b)    any (i) default or event of default under any Contractual Obligation of any Group Member of which any Group Member has knowledge or notice or (ii) litigation, investigation or proceeding that may exist at any time between any Group Member and any Governmental Authority of which any Group Member has knowledge or notice, which in either case, if not cured or if adversely determined, as the case may be, could reasonably be expected to have a Material Adverse Effect;

        (c)    any litigation or proceeding affecting any Group Member of which any Group Member has knowledge or notice (i) in which the amount involved is $2,000,000 or more and not covered by insurance, (ii) in which injunctive or similar relief is sought, which, if adversely determined, could reasonably be expected to have a Material Adverse Effect or (iii) which relates to any Loan Document;

        (d)    the following events, as soon as possible and in any event within 30 days after the Borrower knows or has reason to know thereof: (i) the occurrence of any Reportable Event with respect to any Plan, a failure to make any required contribution to a Plan, the creation of any Lien in favor of the PBGC or a Plan or any withdrawal from, or the termination, Reorganization or Insolvency of, any Multiemployer Plan if the Borrower could reasonably be expected to incur any material liabilities as a result of any such event or (ii) the institution of proceedings or the taking of any other action by the PBGC or the Borrower or any Commonly Controlled Entity or any Multiemployer Plan with respect to the withdrawal from, or the termination, Reorganization or Insolvency of, any Plan if the Borrower could reasonably be expected to incur any material liabilities as a result of any such event; and

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        (e)    any development or event that has had or could reasonably be expected to have a Material Adverse Effect.

Each notice pursuant to this Section 8.7 shall be accompanied by a statement of a Responsible Officer setting forth details of the occurrence referred to therein and stating what action the Borrower or the relevant Subsidiary proposes to take with respect thereto.

        8.8.    Environmental Laws.    (a) Comply in all material respects with, and use reasonable efforts to ensure compliance in all material respects by all tenants and subtenants, if any, with, all applicable Environmental Laws, and obtain and comply in all material respects with and maintain, and use reasonable efforts to ensure that all tenants and subtenants obtain and comply in all material respects with and maintain, any and all licenses, approvals, notifications, registrations or permits required by applicable Environmental Laws.

        (b)    Conduct and complete all investigations, studies, sampling and testing, and all remedial, removal and other actions required under applicable Environmental Laws and promptly comply in all respects with all orders and directives of all Governmental Authorities regarding Environmental Laws, provided, however, that the Borrower shall not be deemed in violation of this clause (b) if it promptly challenges any such order or directive of any Governmental Authorities in a manner consistent with Environmental Laws and pursues such challenge or challenges diligently and the pendency of such challenges, in the aggregate, could not reasonably be expected to have a Material Adverse Effect.

        (c)    Generate, use, treat, store, release, dispose of, and otherwise manage Materials of Environmental Concern in a manner that would not reasonably be expected to result in a material liability to, or to materially affect any real property owned or operated by, any Group Member; and take reasonable efforts to prevent any other person from generating, using, treating, storing, releasing, disposing of, or otherwise managing Hazardous Materials in a manner that could reasonably be expected to result in a material liability to, or materially affect any real property owned or operated by, any Group Member.

        8.9.    Additional Collateral, etc.    (a) With respect to any property acquired after the Closing Date by any Group Member (other than (x) any property described in paragraph (b), (c), (d), or (e) below, (y) any property subject to a Lien expressly permitted by Section 9.3(m) or 9.3(p)) and (z) property acquired by any Foreign Subsidiary) as to which the Administrative Agent, for the benefit of the Lenders, does not have a perfected Lien, promptly (i) execute and deliver to the Administrative Agent such amendments to the Guarantee and Collateral Agreement or such other documents as the Administrative Agent reasonably deems necessary or advisable to grant to the Administrative Agent, for the benefit of the Lenders, a security interest in such property and (ii) take all actions necessary or advisable to grant to the Administrative Agent, for the benefit of the Lenders, a perfected first priority security interest in such property, including the filing of Uniform Commercial Code financing statements in such jurisdictions as may be required by the Guarantee and Collateral Agreement or by law or as may be requested by the Administrative Agent.

        (b)    With respect to any fee interest in any real property having a value (together with improvements thereof) of at least $500,000 acquired after the Closing Date by any Group Member (other than (x) any such real property subject to a Lien expressly permitted by Section 9.3(m) and (z) real property acquired by any Foreign Subsidiary), promptly (i) execute and deliver a first priority Mortgage, in favor of the Administrative Agent, for the benefit of the Lenders, covering such real property, (ii) if requested by the Administrative Agent, provide the Lenders with (x) title insurance covering such real property in an amount at least equal to the purchase price of such real property (or such other amount as shall be reasonably specified by the Administrative Agent) as well as a current ALTA survey thereof, together with a surveyor's certificate and (y) any consents or estoppels reasonably deemed necessary or advisable by the Administrative Agent in connection with such Mortgage, each of the foregoing in form and substance reasonably satisfactory to the Administrative Agent and (iii) if

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requested by the Administrative Agent, deliver to the Administrative Agent legal opinions relating to the matters described above, which opinions shall be in form and substance, and from counsel, reasonably satisfactory to the Administrative Agent.

        (c)    With respect to any new Subsidiary (other than a Foreign Subsidiary or a non-Wholly Owned Subsidiary) created or acquired after the Closing Date by any Group Member (which, for the purposes of this paragraph (c), shall include any existing Subsidiary that ceases to be a Foreign Subsidiary or any non-Wholly Owned Subsidiary that provides a guarantee of any Indebtedness of the Borrower or any of its Subsidiaries (other than the Loans) after the Closing Date), promptly (i) execute and deliver to the Administrative Agent such amendments to the Guarantee and Collateral Agreement as the Administrative Agent deems necessary or advisable to grant to the Administrative Agent, for the benefit of the Lenders, a perfected first priority security interest in the Capital Stock of such new Subsidiary that is owned by any Group Member, (ii) deliver to the Administrative Agent the certificates representing such Capital Stock, together with undated stock powers, in blank, executed and delivered by a duly authorized officer of the relevant Group Member or take such other action with respect to Pledged Stock of Foreign Subsidiaries necessary to perfect the first priority security interest of the Administrative Agent in such Pledged Stock, (iii) cause such new Subsidiary (A) to become a party to the Guarantee and Collateral Agreement, (B) to take such actions necessary or advisable to grant to the Administrative Agent for the benefit of the Lenders a perfected first priority security interest in the Collateral described in the Guarantee and Collateral Agreement with respect to such new Subsidiary, including the filing of Uniform Commercial Code financing statements in such jurisdictions as may be required by the Guarantee and Collateral Agreement or by law or as may be requested by the Administrative Agent and (C) to deliver to the Administrative Agent a certificate of such Subsidiary, substantially in the form of Exhibit C, with appropriate insertions and attachments, and (iv) if requested by the Administrative Agent, deliver to the Administrative Agent legal opinions relating to the matters described above, which opinions shall be in form and substance, and from counsel, reasonably satisfactory to the Administrative Agent.

        (d)    With respect to any Domestic Subsidiary created or acquired after the Closing Date by any Group Member that does not become a Subsidiary Guarantor pursuant to Section 8.9(c), promptly (i) execute and deliver to the Administrative Agent such amendments to the Guarantee and Collateral Agreement as the Administrative Agent deems necessary or advisable to grant to the Administrative Agent, for the benefit of the Lenders, a perfected first priority security interest in the Capital Stock of such new Subsidiary that is owned by any such Group Member, (ii) deliver to the Administrative Agent the certificates representing such Capital Stock, together with undated stock powers, in blank, executed and delivered by a duly authorized officer of the relevant Group Member, as the case may be, and take such other action as may be necessary or, in the opinion of the Administrative Agent, desirable to perfect the Administrative Agent's security interest therein, and (iii) if requested by the Administrative Agent, deliver to the Administrative Agent legal opinions relating to the matters described above, which opinions shall be in form and substance, and from counsel, reasonably satisfactory to the Administrative Agent.

        (e)    With respect to any new Foreign Subsidiary created or acquired after the Closing Date by any Group Member, promptly (i) execute and deliver to the Administrative Agent such amendments to the Guarantee and Collateral Agreement as the Administrative Agent deems necessary or advisable to grant to the Administrative Agent, for the benefit of the Lenders, a perfected first priority security interest in the Capital Stock of such new Subsidiary that is owned by any such Group Member (provided that in no event shall more than 65% of the total outstanding Capital Stock of any such new Subsidiary be required to be so pledged), (ii) deliver to the Administrative Agent the certificates representing such Capital Stock, together with undated stock powers, in blank, executed and delivered by a duly authorized officer of the relevant Group Member, or take such other action with respect to Pledged Stock of Foreign Subsidiaries necessary to perfect the first priority security interest of the

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Administrative Agent in such Pledged Stock, as the case may be, and take such other action as may be necessary or, in the reasonable opinion of the Administrative Agent, desirable to perfect the Administrative Agent's security interest therein, and (iii) if requested by the Administrative Agent, deliver to the Administrative Agent legal opinions relating to the matters described above, which opinions shall be in form and substance, and from counsel, reasonably satisfactory to the Administrative Agent.

        8.10.    Further Assurances.    From time to time execute and deliver, or cause to be executed and delivered, such additional instruments, certificates or documents, and take all such actions, as the Administrative Agent may reasonably request for the purposes of implementing or effectuating the provisions of this Agreement and the other Loan Documents, or of more fully perfecting or renewing the rights of the Administrative Agent and the Lenders with respect to the Collateral (or with respect to any additions thereto or replacements or proceeds thereof or with respect to any other property or assets hereafter acquired by the Borrower or any Subsidiary which may be deemed to be part of the Collateral) pursuant hereto or thereto. Upon the exercise by the Administrative Agent or any Lender of any power, right, privilege or remedy pursuant to this Agreement or the other Loan Documents which requires any consent, approval, recording qualification or authorization of any Governmental Authority, the Borrower will execute and deliver, or will cause the execution and delivery of, all applications, certifications, instruments and other documents and papers that the Administrative Agent or such Lenders may be required to obtain from the Borrower or any of its Subsidiaries for such governmental consent, approval, recording, qualification or authorization.

        8.11.    Connecticut Lottery Corporation.    Use its commercially reasonable efforts to procure, within 60 days after the Closing Date, an agreement among the Borrower, the Connecticut Lottery Corporation ("CLC") and the Administrative Agent substantially similar to that certain agreement, dated as of December 22, 2000, among CLC, the Borrower, Autotote Lottery Corporation and DLJ Capital Funding, Inc. and otherwise reasonably satisfactory in form and substance to the Administrative Agent.

        8.12.    Pledge of Foreign Subsidiary Stock.    To the extent not otherwise satisfied on the Closing Date with respect to the Foreign Subsidiaries of the Borrower and each Subsidiary Guarantor, no later than 120 days after the Closing Date, the Borrower shall, and shall cause each of its Subsidiary Guarantors directly owning a Foreign Subsidiary to, deliver to the Administrative Agent pledge documents executed with respect to the Capital Stock of each such Foreign Subsidiary and any other document or instrument reasonably requested by the Administrative Agent and take any other actions specified in the Guarantee and Collateral Agreement necessary to grant to the Administrative Agent a perfected Lien on such Capital Stock, all in form and substance reasonably satisfactory to the Administrative Agent.

        8.13.    Post-Closing Matters.    (a) No later than 10 Business Days after the Closing Date, Borrower shall cause Scientific Games International, Inc. ("SGII") (i) to deliver to the Administrative Agent a certificate of a responsible officer of SGII (w) attaching a true and complete copy of the agreement between SGII and Bridgeport Jai Alai, Inc. d/b/a Shoreline Star Greyhound Park and Entertainment Complex ("Shoreline") pursuant to which Shoreline has agreed to be responsible for a certain portion of SGII's personal property taxes, (x) certifying the aggregate amount of tax owed to the City of Bridgeport, Tax Collector as evidenced by UCC financing statement file number 2148563, filed with the Secretary of State of the State of Connecticut on July 15, 2002 (the "CT UCC"), (y) certifying as to the aggregate amount of tax for which each of Shoreline and SGII is responsible pursuant to the agreement referred to in clause (w) and (z) attaching a true and correct copy of the order permitting Shoreline to pay such taxes on a deferred basis and (ii) to use its best efforts to cause a termination statement to be filed terminating the CT UCC.

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        (b)    No later than 15 Business Days after the Closing Date, (i) the Borrower shall deliver to the Administrative Agent a certificate representing the Capital Stock of Scientific Games Holdings Corp., a Delaware corporation ("SGHC"), (ii) the Borrower shall cause SGHC to deliver to the Administrative Agent a certificate representing the Capital Stock of Scientific Games UK Holdings LTD, a corporation organized under the laws of the United Kingdom, and (iii) the Borrower shall cause SGII to deliver to the Administrative Agent a certificate representing the Capital Stock of Scientific Connections India Private Limited, a corporation organized under the laws of India, in each case, as described in Schedule 2 to the Guarantee and Collateral Agreement, together with undated stock powers, in blank, executed and delivered by a duly authorized officer of the Borrower, SGHC or SGII, as the case may be.

SECTION 9.    NEGATIVE COVENANTS

        The Borrower hereby agrees that, so long as the Commitments remain in effect, any Letter of Credit remains outstanding or any Loan or other amount is owing to any Lender or Agent hereunder, the Borrower shall not, and shall not permit any of its Subsidiaries to, directly or indirectly:

        9.1.    Financial Condition Covenants.

        (a)    Consolidated Leverage Ratio.    Permit the Consolidated Leverage Ratio as at the last day of any period of four consecutive fiscal quarters of the Borrower ending with any fiscal quarter set forth below to exceed the ratio set forth below opposite such fiscal quarter:

Fiscal Quarter	Consolidated Leverage Ratio
December 31, 2002	4.00 to 1.00
March 31, 2003	4.00 to 1.00
June 30, 2003	4.00 to 1.00
September 30, 2003	3.75 to 1.00
December 31, 2003	3.75 to 1.00
March 31, 2004	3.50 to 1.00
June 30, 2004	3.50 to 1.00
September 30, 2004	3.25 to 1.00
December 31, 2004	3.25 to 1.00
March 31, 2005	3.25 to 1.00
June 30, 2005	3.25 to 1.00
September 30, 2005	3.00 to 1.00
December 31, 2005	3.00 to 1.00
March 31, 2006	3.00 to 1.00
June 30, 2006	3.00 to 1.00
September 30, 2006	3.00 to 1.00
December 31, 2006 and thereafter	3.00 to 1.00

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        (b)    Consolidated Interest Coverage Ratio.    Permit the Consolidated Interest Coverage Ratio for any period of four consecutive fiscal quarters of the Borrower ending with any fiscal quarter set forth below to be less than the ratio set forth below opposite such fiscal quarter:

Fiscal Quarter	Consolidated Interest Leverage Ratio
December 31, 2002	2.50 to 1.00
March 31, 2003	2.75 to 1.00
June 30, 2003	3.00 to 1.00
September 30, 2003	3.25 to 1.00
December 31, 2003	3.50 to 1.00
March 31, 2004	3.50 to 1.00
June 30, 2004	3.50 to 1.00
September 30, 2004	3.75 to 1.00
December 31, 2004	3.75 to 1.00
March 31, 2005	3.75 to 1.00
June 30, 2005	3.75 to 1.00
September 30, 2005	3.75 to 1.00
December 31, 2005	3.75 to 1.00
March 31, 2006	3.75 to 1.00
June 30, 2006	3.75 to 1.00
September 30, 2006	3.75 to 1.00
December 31, 2006 and thereafter	3.75 to 1.00

        (c)    Consolidated Fixed Charge Coverage Ratio.    Permit the Consolidated Fixed Charge Coverage Ratio for any period of four consecutive fiscal quarters of the Borrower ending with any fiscal quarter set forth below to be less than the ratio set forth below opposite such fiscal quarter:

Fiscal Quarter	Charge Coverage Ratio
December 31, 2002	1.65 to 1.00
March 31, 2003	1.65 to 1.00
June 30, 2003	1.65 to 1.00
September 30, 2003	1.70 to 1.00
December 31, 2003	1.70 to 1.00
March 31, 2004	1.70 to 1.00
June 30, 2004	1.70 to 1.00
September 30, 2004	1.75 to 1.00
December 31, 2004	1.75 to 1.00
March 31, 2005	1.75 to 1.00
June 30, 2005	1.75 to 1.00
September 30, 2005	1.80 to 1.00
December 31, 2005	1.80 to 1.00
March 31, 2006	1.80 to 1.00
June 30, 2006	1.80 to 1.00
September 30, 2006	1.85 to 1.00
December 31, 2006 and thereafter	1.85 to 1.00

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        (d)    Consolidated Senior Debt Ratio.    Permit the Consolidated Senior Debt Ratio as at the last day of any period of four consecutive fiscal quarters of the Borrower ending with any fiscal quarter set forth below to exceed the ratio set forth below opposite such fiscal quarter:

Fiscal Quarter	Consolidated Senior Debt Ratio
December 31, 2002	3.25 to 1.00
March 31, 2003	3.25 to 1.00
June 30, 2003	3.25 to 1.00
September 30, 2003	3.00 to 1.00
December 31, 2003	3.00 to 1.00
March 31, 2004	3.00 to 1.00
June 30, 2004	3.00 to 1.00
September 30, 2004	2.75 to 1.00
December 31, 2004	2.75 to 1.00
March 31, 2005	2.75 to 1.00
June 30, 2005	2.75 to 1.00
September 30, 2005	2.50 to 1.00
December 31, 2005	2.50 to 1.00
March 31, 2006	2.50 to 1.00
June 30, 2006	2.50 to 1.00
September 30, 2006	2.50 to 1.00
December 31, 2006 and thereafter	2.50 to 1.00

        9.2.    Indebtedness.    Create, issue, incur, assume, become liable in respect of or suffer to exist any Indebtedness, except:

        (a)    Indebtedness of any Loan Party pursuant to any Loan Document;

        (b)    Indebtedness (i) of the Borrower to any Subsidiary, (ii) of any Subsidiary Guarantor to the Borrower or any other Subsidiary, (iii) of any Non-Guarantor Subsidiary to any other Non-Guarantor Subsidiary and (iv) subject to Section 9.8(j), of any Non-Guarantor Subsidiary to the Borrower or any Subsidiary Guarantor;

        (c)    Guarantee Obligations incurred in the ordinary course of business by the Borrower or any of its Subsidiaries of obligations of the Borrower, any Subsidiary Guarantor and, subject to Section 9.8(j), of any Non-Guarantor Subsidiary;

        (d)    Indebtedness outstanding on the date hereof and listed on Schedule 9.2(d) and any refinancings, refundings, renewals or extensions thereof (without increasing, or shortening the maturity of, the principal amount thereof);

        (e)    Indebtedness (including, without limitation, Capital Lease Obligations) secured by Liens permitted by Section 9.3(m) in an aggregate principal amount not to exceed $20,000,000 at any one time outstanding;

        (f)    (i) Indebtedness of the Borrower in respect of the Senior Subordinated Notes in an aggregate principal amount not to exceed $67,043,125 and (ii) Guarantee Obligations of any Subsidiary Guarantor in respect of such Indebtedness, provided that such Guarantee Obligations

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are subordinated to the same extent as the obligations of the Borrower in respect of the Senior Subordinated Notes;

        (g)    Hedge Agreements permitted by Section 9.16.

        (h)    additional Indebtedness of the Borrower or any of the Subsidiary Guarantors in an aggregate principal amount (for the Borrower and all Subsidiary Guarantors) not to exceed $20,000,000 at any one time outstanding;

        (i)    Indebtedness of Scientific Games International Limited ("SGIL")in respect of mortgage financing of real property and improvements located in Quayside Thwaitgate, Leeds LS10, England (the "UK Property") and any equipment located on the UK Property, including costs, fees and expenses related to such Indebtedness in an aggregate amount not to exceed $20,000,000 at any one time outstanding, provided that, such Indebtedness is recourse solely to the UK Property and the equipment located on the UK Property;

        (j)    additional Indebtedness of Foreign Subsidiaries and Non-Guarantor Subsidiaries in an aggregate principal amount (for all such Foreign Subsidiaries) not to exceed $15,000,000 at any one time outstanding, provided that, any such Indebtedness is non-recourse to the Borrower and its Domestic Subsidiaries; and

        (k)    Indebtedness consisting of indemnities relating to surety bonds issued in the ordinary course of business.

        9.3.    Liens.    Create, incur, assume or suffer to exist any Lien upon any of its property, whether now owned or hereafter acquired, except for:

        (a)    Liens for taxes, assessments, governmental charges or claims not yet due or that are being contested in good faith by appropriate proceedings, provided that adequate reserves with respect thereto are maintained on the books of the Borrower or its Subsidiaries, as the case may be, in conformity with GAAP;

        (b)    carriers', warehousemen's, mechanics', materialmen's, repairmen's, statutory bank liens, rights of set-off or other like Liens arising in the ordinary course of business that are not overdue for a period of more than 30 days or that are being contested in good faith by appropriate proceedings;

        (c)    pledges or deposits in connection with workers' compensation, unemployment insurance and other social security legislation and letters of credit issued in lieu of such deposits in the ordinary course of business;

        (d)    deposits to secure the performance of bids, trade contracts (other than for borrowed money), leases, statutory obligations, surety and appeal bonds, performance bonds and other obligations of a like nature incurred in the ordinary course of business;

        (e)    easements, rights-of-way, restrictions and other similar encumbrances incurred in the ordinary course of business that, in the aggregate, are not substantial in amount and that do not in any case materially detract from the value of the property subject thereto or materially interfere with the ordinary conduct of the business of the Borrower or any of its Subsidiaries;

        (f)    attachment or judgment Liens not constituting an Event of Default under Section 10; provided that such Lien is released within 60 days after the entry thereof;

        (g)    Liens in favor of customs and revenue authorities to secure payment of customs duties in connection with the importation of goods that are not overdue for a period of more than 30 days or that are being contested in good faith by appropriate proceedings; provided that, such Liens do not encumber any property other than the goods subject to such customs duties;

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        (h)    zoning or similar laws or right reserved to or vested in any Governmental Authority to control or regulate the use of any real property;

        (i)    Liens securing obligations (other than obligations representing Indebtedness for borrowed money) under operating, reciprocal easement or similar agreements entered into in the ordinary course of business of the Borrower and its Subsidiaries;

        (j)    licenses of Intellectual Property granted by the Borrower or any of its Subsidiaries in the ordinary course of business which do not interfere in any material respect with the ordinary conduct of the business of the Borrower or such Subsidiary;

        (k)    Liens securing Indebtedness of any Non-Guarantor Subsidiary permitted by (i) Section 9.2(i), to the extent such Lien encumbers only the UK Property and the equipment located on the UK Property and (ii) Section 9.2(j), to the extent such Lien does not at any time encumber any property other than the property of such Non-Guarantor Subsidiary;

        (l)    Liens in existence on the date hereof listed on Schedule 9.3(l), securing Indebtedness permitted by Section 9.2(d), provided that no such Lien is spread to cover any additional property after the Closing Date and that the amount of Indebtedness secured thereby is not increased;

        (m)    Liens securing Indebtedness of the Borrower or any other Subsidiary incurred pursuant to Section 9.2(e) to finance the acquisition or manufacture of fixed or capital assets, provided that (i) such Liens shall be created within 90 days of the acquisition or manufacture of such fixed or capital assets, (ii) such Liens do not at any time encumber any property other than the property financed by such Indebtedness and (iii) the amount of Indebtedness secured thereby is not subsequently increased;

        (n)    Liens created pursuant to the Security Documents;

        (o)    any interest or title of a lessor under any lease entered into by the Borrower or any other Subsidiary in the ordinary course of its business and covering only the assets so leased; and

        (p)    Liens securing Indebtedness of the Borrower or any Subsidiary Guarantors incurred pursuant to Section 9.2(h) so long as neither (i) the aggregate outstanding principal amount of the obligations secured thereby nor (ii) the aggregate fair market value (determined as of the date such Lien is incurred) of the assets subject thereto exceeds (as to the Borrower and all Subsidiaries) $15,000,000 at any one time.

        9.4.    Fundamental Changes.    Enter into any merger, consolidation or amalgamation, or liquidate, wind up or dissolve itself (or suffer any liquidation or dissolution), or Dispose of, all or substantially all of its property or business, except that:

        (a)    any Subsidiary of the Borrower may be merged or consolidated with or into the Borrower (provided that the Borrower shall be the continuing or surviving Person) or with or into any Subsidiary Guarantor (provided that the Subsidiary Guarantor shall be the continuing or surviving corporation) or, subject to Section 9.8(j), with or into any Foreign Subsidiary or Non-Guarantor Subsidiary; notwithstanding the foregoing, any Non-Guarantor Subsidiary may be merged or consolidated with another Non-Guarantor Subsidiary without limitation;

        (b)    any Subsidiary of the Borrower may Dispose of any or all of its assets (upon voluntary liquidation or otherwise) to the Borrower or any Subsidiary Guarantor or, subject to Section 9.8(j), any Non-Guarantor Subsidiary; notwithstanding the foregoing, any Non-Guarantor Subsidiary may Dispose of any or all of its assets (upon voluntary liquidation or otherwise) to another Non-Guarantor Subsidiary without limitation; and

        (c)    any Subsidiary may liquidate, wind up or dissolve after the Disposition of all of its assets as set forth in Section 9.4(b).

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        9.5.    Disposition of Property.    Dispose of any of its Property, whether now owned or hereafter acquired, or, in the case of any Subsidiary, issue or sell any shares of such Subsidiary's Capital Stock to any Person, except:

        (a)    the Disposition of obsolete or worn out Property in the ordinary course of business;

        (b)    the sale of inventory in the ordinary course of business;

        (c)    Dispositions permitted by Section 9.4(b);

        (d)    the sale or issuance of any Subsidiary's Capital Stock to the Borrower or any Subsidiary Guarantor;

        (e)    (i) the Disposition of other Property (other than any sale of less than all of the Capital Stock of any Subsidiary then owned by the Group Members) or (ii) the Disposition of minority interests in joint ventures or any Non-Guarantor Subsidiary, having a fair market value not to exceed $20,000,000 in the aggregate for any fiscal year of the Borrower, provided that, (A) the aggregate amount of all such Dispositions shall not exceed $60,000,000 during the term of this Agreement, (B) the consideration received in any such Disposition shall be in an amount at least equal to the fair market value of such Property, (C) at least 80% of the consideration received in any such Disposition shall be in cash, provided that the amount of such consideration required to be paid in cash may be reduced to 50% so long as the remaining portion of such consideration is comprised of debt or equity securities of the acquiring Person; and provided further that Dispositions of other Property for an amount of up to $2,000,000 in any fiscal year shall not be subject to this clause (C) and (D) the Net Cash Proceeds of any such Dispositions shall be applied to prepay Term Loans to the extent required pursuant to Section 5.2(c); and

        (f)    (i) the shares of Scientific Games International GmbH may be transferred to Scientific Games International Holdings LTD ("SGIH") in exchange for shares of SGIH and a promissory note and (ii) Scientific Games Holding Corp. may sell all of the shares of Scientific Games UK Holdings LTD to SGIH in exchange for shares of SGIH and a promissory note (each, a "Tax Reorganization"), provided that, (w) prior to any Tax Reorganization, the Borrower shall have delivered, and shall have caused the related Subsidiaries to deliver, to the Administrative Agent copies or originals, as applicable, of all documents and certificates necessary, or in the reasonable opinion of the Administrative Agent, desirable to consummate such Tax Reorganization, including (1) new schedules to this Agreement and the Guarantee and Collateral Agreement necessary to give effect to such Tax Reorganization which will replace the related existing schedules upon the consummation of such Tax Reorganization, (2) a pledge of all Indebtedness under each intercompany promissory note, if any, entered into in connection with such Tax Reorganization, (3) certified copies of all organizational documents and constitutional documents of each applicable Subsidiary (to the extent not previously delivered), (4) certified copies of all board resolutions and shareholder resolutions (if applicable), and all approvals and consents applicable or required to consummate such Tax Reorganization in England, Wales or Austria, as the case may be and (5) such other documents as the Administrative Agent may reasonably request, (x) concurrently with the consummation of any Tax Reorganization, the Borrower shall have delivered, and shall have caused the related Subsidiaries to deliver, to the Administrative Agent executed copies of all documents and certificates required to be delivered pursuant to Section 8.9, (y) all such documents and certificates shall be in form and substance reasonably satisfactory to the Administrative Agent and (z) the Borrower shall, and shall cause its Subsidiaries to, comply in all respects with the requirements of Section 8.9 to the extent such Section relates to such Tax Reorganization and the Subsidiaries affected thereby.

        9.6.    Restricted Payments.    Declare or pay any dividend (other than dividends payable solely in common stock of the Person making such dividend) on, or make any payment on account of, or set

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apart assets for a sinking or other analogous fund for, the purchase, redemption, defeasance, retirement or other acquisition of, any Capital Stock of any Group Member, whether now or hereafter outstanding, or make any other distribution in respect thereof, either directly or indirectly, whether in cash or property or in obligations of any Group Member (collectively, "Restricted Payments"), except that:

        (a)    any Subsidiary may make Restricted Payments to the Borrower or any Subsidiary Guarantor;

        (b)    the Borrower may repurchase (x) shares of its Capital Stock to the extent that such repurchase is deemed to occur upon the exercise of stock options to acquire the Borrower's common stock or similar arrangements to acquire common stock; provided that, such repurchased Capital Stock represent a portion of the exercise price thereof and, provided further, that, no cash is expended (or obligation to expend cash is incurred) by the Borrower or any of its subsidiaries pursuant to this clause (x), and (y) shares of the Borrower's Capital Stock held by directors, executive officers, members of management or employees of the Borrower or any of its Subsidiaries upon the death, disability, retirement or termination of employment of such directors, executive officers, members of management or employees, so long as (1) immediately prior to, and after giving effect to such repurchase, no Default or Event of Default shall have occurred or is continuing and (2) the aggregate amount of cash expended by the Borrower pursuant to this clause (y) does not exceed $2,000,000 in any fiscal year of the Borrower;

        (c)    the Borrower may make withholding tax payments on behalf of the holders of the Convertible Preferred Stock solely to the extent required in connection with the payment by the Borrower of payment-in-kind dividends on the Convertible Preferred Stock; provided that, the aggregate amount of such withholding tax payments made by the Borrower shall not exceed (x) $1,000,000 during any fiscal year of the Borrower or (y) $5,000,000 during the period from the Closing Date through and including December 31, 2005, and, provided further, that prior to the Borrower making any such withholding tax payments in any fiscal year, the holders of the Convertible Preferred Stock shall have previously made, or transferred to the Borrower adequate funds so that the Borrower may make on behalf of the holders of the Convertible Preferred Stock, withholding tax payments in an amount equal to at least 10% of the fair market value of such payment-in-kind dividends;

        (d)    the Borrower may pay cash dividends on its Convertible Preferred Stock in an aggregate amount not to exceed the then unused Permitted Expenditure Amount at such time (after giving effect to any concurrent uses thereof), provided that, (x) no Default or Event of Default shall have occurred and be continuing immediately prior to and after giving effect to such Restricted Payment and (y) after giving effect to the proposed Restricted Payment and any repurchase or redemption of the Senior Subordinated Notes pursuant to Section 9.9(a) on the date of such Restricted Payment, if applicable, the Consolidated Senior Debt Ratio on a pro forma basis shall be at least 0.5 below the then current level required by Section 9.1(d); and

        (e)    the Borrower may make Restricted Payments to pay payment-in-kind dividends on its Convertible Preferred Stock.

        9.7.    Capital Expenditures.    Make any Capital Expenditure, except:

        (a)    Capital Expenditures of the Borrower and its Subsidiaries in the ordinary course of business (other than Capital Expenditures permitted by Section 9.7(b)) in an aggregate amount not exceeding $25,000,000 in any fiscal year of the Borrower commencing on or after January 1, 2003; provided, that (i) 50% of any amount not so expended in the fiscal year for which it is permitted, may be carried over for expenditure in the next succeeding fiscal year and (ii) Capital Expenditures made pursuant to this clause (a) during any fiscal year shall be deemed made, first, in

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respect of amounts permitted for such fiscal year as provided above and, second, in respect of amounts carried over from the prior fiscal year pursuant to subclause (i) above;

        (b)    Capital Expenditures of the Borrower and its Subsidiaries in connection with any New Contract in an aggregate amount not exceeding the sum of (i) $30,000,000 plus (ii) the then unused Permitted Expenditure Amount at such time (after giving effect to any concurrent uses thereof) for each contract, provided that, no Default or Event of Default shall have occurred and be continuing at the time the Borrower and its Subsidiaries enters into such new contract; and

        (c)    Capital Expenditures made with the proceeds of any Reinvestment Deferred Amount.

        9.8.    Investments.    Make any advance, loan, extension of credit (by way of guaranty or otherwise) or capital contribution to, or purchase any Capital Stock, bonds, notes, debentures or other debt securities of, or any assets constituting a business unit of, or make any other investment in, any Person (all of the foregoing, "Investments"), except:

        (a)    extensions of trade credit in the ordinary course of business;

        (b)    (i) Investments in Cash Equivalents and (ii) other Investments in Foreign Currencies held in the ordinary course of business in the aggregate amount not to exceed the Dollar Equivalent of $1,000,000 at any time, which Investments would otherwise constitute Cash Equivalents but for the sovereign debt rating of the country issuing such Foreign Currency;

        (c)    Guarantee Obligations permitted by Section 9.2;

        (d)    loans and advances to employees of any Group Member of the Borrower in the ordinary course of business (including for travel, entertainment and relocation expenses) in an aggregate amount for all Group Members not to exceed $2,000,000 at any one time outstanding;

        (e)    Investments consisting of Capital Expenditures permitted by Section 9.7;

        (f)    Investments outstanding on the date hereof and listed on Schedule 9.8(f);

        (g)    Investments consisting of non-cash consideration received by the Borrower and its Subsidiaries in connection with any Disposition of assets permitted under Section 9.5(e) in an aggregate amount not to exceed $15,000,000 at any one time outstanding (determined without regard to any write-downs or write-offs thereof);

        (h)    Investments in assets useful in the business of the Borrower and its Subsidiaries made by the Borrower or any of its Subsidiaries with the proceeds of any Reinvestment Deferred Amount;

        (i)    intercompany Investments by any Group Member in the Borrower or any Person that, prior to such Investment, is a Subsidiary Guarantor;

        (j)    intercompany Investments by the Borrower or any of its Subsidiaries in any Person, that, prior to such Investment, is a Non-Guarantor Subsidiary (including, without limitation, Guarantee Obligations with respect to obligations of any such Non-Guarantor Subsidiary, loans made to any such Non-Guarantor Subsidiary and Investments resulting from mergers with or sales of assets to any such Non-Guarantor Subsidiary) in an aggregate amount (valued at cost) not to exceed $25,000,000 at any one time outstanding during the term of this Agreement, excluding the amount of any such Investment in a Foreign Subsidiary that is a holding company with no material assets, liabilities or operations (a "Foreign Holdco") other than an equity Investment in another Foreign Subsidiary that is a direct, wholly-owned Subsidiary of such Foreign Holdco ("Foreign Holdco Subsidiary") to the extent such Investment by the Borrower or such Subsidiaries in Foreign Holdco is equal to or less than the equity Investment of Foreign Holdco in such Foreign Holdco Subsidiary;

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        (k)    Investments consisting of acquisitions of Capital Stock or assets pursuant to a Permitted Acquisition, provided that, (x) the aggregate amount of cash consideration paid for all such acquisitions shall not exceed $100,000,000 during the term of this Agreement, (y) the aggregate amount of any such Investment or series of Investments in any Domestic Subsidiary shall not exceed $60,000,000 and (z) the aggregate amount of all such Investments in Non-Guarantor Subsidiaries shall not exceed $30,000,000 during the term of this Agreement;

        (l)    Investments in joint ventures (other than pursuant to Section 9.8(j)) in an aggregate amount not to exceed $10,000,000 in any fiscal year of the Borrower; provided that, (i) 50% of any amount not so expended in the fiscal year for which it is permitted, may be carried over for use in the next succeeding fiscal year and (ii) Investments made pursuant to this clause (l) during any fiscal year shall be deemed made, first, in respect of amounts permitted for such fiscal year as provided above and, second, in respect of amounts carried over from the prior fiscal year pursuant to subclause (i) above;

        (m)    minority Investments in the securities of any trade creditor, wholesaler, supplier or customer received pursuant to any plan of reorganization or similar arrangement of such trade creditor, wholesaler, supplier or customer, as applicable;

        (n)    in addition to Investments otherwise expressly permitted by this Section, Investments by the Borrower or any of its Subsidiaries in an aggregate amount (valued at cost) not to exceed $15,000,000 during the term of this Agreement; and

        (o)    the acquisition (the "MDI Acquisition") of all the outstanding Capital Stock of MDI Entertainment, Inc. ("MDI"), provided that, (i) the aggregate amount of cash consideration paid in the MDI Acquisition shall not exceed $18,500,000 and (ii) upon consummation of the MDI Acquisition, (x) MDI shall become a Wholly Owned Subsidiary of the Borrower and (y) the Borrower has performed, or has caused to be performed, all actions necessary to comply with Section 8.9 herein, including, but not limited to, promptly executing and delivering to the Administrative Agent an amendment or supplement to the Guarantee and Collateral Agreement, in each case, in form and substance reasonably satisfactory to the Administrative Agent.

        9.9    Optional Payments and Modifications of Certain Debt Instruments.    (a) Make or offer to make any optional or voluntary payment, prepayment, repurchase or redemption of or otherwise optionally or voluntarily defease or segregate funds with respect to the Senior Subordinated Notes or the Convertible Preferred Stock, provided that, the Borrower may repurchase or redeem Senior Subordinated Notes in an aggregate principal amount not to exceed an amount equal to the then unused Permitted Expenditure Amount at such time (after giving effect to any concurrent uses thereof) so long as, (x) no Default or Event of Default shall have occurred and be continuing or would result therefrom and (y) after giving effect to the proposed repurchase or redemption of the Senior Subordinated Notes or any Restricted Payment made pursuant to Section 9.6(d) on the date of such repurchase or redemption, if applicable, the Consolidated Senior Debt Ratio on a pro forma basis shall be at least 0.5 below the then current level required by Section 9.1(d), (b) amend, modify, waive or otherwise change, or consent or agree to any amendment, modification, waiver or other change to, any of the terms of the Senior Subordinated Notes (other than any such amendment, modification, waiver or other change that (i) would extend the maturity or reduce the amount of any payment of principal thereof or reduce the rate or extend any date for payment of interest thereon or would eliminate any covenant or make any covenant less restrictive and (ii) does not involve the payment of a consent fee), (c) amend, modify, waive or otherwise change, or consent or agree to any amendment, modification, waiver or other change to, any of the terms of the Convertible Preferred Stock (other than any such amendment, modification, waiver or other change that (x) (i) would extend the scheduled redemption date or reduce the amount of any scheduled redemption payment or reduce the rate or extend any date for payment of dividends thereon or would eliminate any covenant or make any covenant less restrictive

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and (ii) does not involve the payment of a consent fee or (y) is otherwise not material or adverse to the Lenders as determined by the Administrative Agent in its sole discretion), (d) designate any Indebtedness (other than obligations of the Loan Parties pursuant to the Loan Documents) as "Designated Senior Debt" (or any other defined term having a similar purpose) for the purposes of the Senior Subordinated Note Indenture or (e) amend, modify, waive or otherwise change, or consent or agree to any amendment, modification, waiver or other change to, any of the terms of the Preferred Stock Purchase Agreement, other than any amendment, modification, waiver or other change that is neither material or adverse to the Lenders.

        9.10.    Transactions with Affiliates.    Enter into any transaction, including any purchase, sale, lease or exchange of property, the rendering of any service or the payment of any management, advisory or similar fees, with any Affiliate (other than the Borrower or any Subsidiary Guarantor) unless such transaction is (a) otherwise permitted under this Agreement, (b) in the ordinary course of business of the relevant Group Member, and (c) upon fair and reasonable terms no less favorable to the relevant Group Member, than it would obtain in a comparable arm's length transaction with a Person that is not an Affiliate.

        9.11.    Sales and Leasebacks.    Enter into any arrangement with any Person providing for the leasing by any Group Member of real or personal property that has been or is to be sold or transferred by such Group Member to such Person or to any other Person to whom funds have been or are to be advanced by such Person on the security of such property or rental obligations of such Group Member, other than any such arrangement that (i) if such arrangement is a Capital Lease Obligation, is permitted pursuant to Section 9.2(e), (ii) the consideration received from such arrangement is at least equal to the fair market value of the property sold as determined in good faith by the Borrower's board of directors, provided that prior consent of the board of directors shall be obtained if such fair market value was determined to be in excess of $1,000,000 and (iii) the Net Cash Proceeds derived from such arrangement shall be applied toward the prepayment of the Term Loans as set forth in Section 5.2(c).

        9.12.    Changes in Fiscal Periods.    Permit the fiscal year of the Borrower to end on a day other than December 31 or change the Borrower's method of determining fiscal quarters.

        9.13.    Negative Pledge Clauses.    Enter into or suffer to exist or become effective any agreement that prohibits or limits the ability of any Group Member to create, incur, assume or suffer to exist any Lien upon any of its property or revenues, whether now owned or hereafter acquired, to secure its obligations under the Loan Documents to which it is a party other than (a) this Agreement and the other Loan Documents, (b) any agreements governing any Liens or Capital Lease Obligations otherwise permitted under Sections 9.3(l), (m) and (o), provided that, in each case, any prohibition or limitation shall only be effective against the assets financed thereby, (c) to the extent existing on the Closing Date, contracts with customers prohibiting Liens on any equipment used in the performance of any such contracts set forth on Schedule 9.13(c), (d) to the extent existing on the Closing Date, contracts with customers prohibiting the assignment of such contracts or proceeds owing thereunder set forth on Schedule 9.13(d) and (e) to the extent contracts of the type described in clause (c) or (d) hereof are entered into after the Closing Date, any such contracts (and any renewals thereof) so long as the aggregate value of the assets subject to such prohibitions, in each case as set forth on the most recent consolidated balance sheet of the Borrower and its consolidated Subsidiaries in accordance with GAAP, shall not exceed 5% of the aggregate value of all assets set forth on the most recent consolidated balance sheet of the Borrower and its consolidated Subsidiaries in accordance with GAAP.

        9.14.    Clauses Restricting Subsidiary Distributions.    Enter into or suffer to exist or become effective any consensual encumbrance or restriction on the ability of any Subsidiary of the Borrower to (a) make Restricted Payments in respect of any Capital Stock of such Subsidiary held by, or pay any Indebtedness owed to, the Borrower or any other Subsidiary of the Borrower, (b) make loans or

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advances to, or other Investments in, the Borrower or any other Subsidiary of the Borrower or (c) transfer any of its assets to the Borrower or any other Subsidiary of the Borrower, except for such encumbrances or restrictions existing under or by reason of (i) any restrictions existing under the Loan Documents and (ii) any restrictions with respect to a Subsidiary imposed pursuant to an agreement that has been entered into in connection with the Disposition of all or substantially all of the Capital Stock or assets of such Subsidiary.

        9.15.    Lines of Business.    Enter into any business, either directly or through any Subsidiary, except for those businesses in which the Borrower and its Subsidiaries are engaged on the date of this Agreement or that are reasonably related thereto and business utilizing the same or similar technology.

        9.16.    Hedge Agreements.    Enter into any Hedge Agreement, except (a) Hedge Agreements entered into by the Borrower to hedge or mitigate risks to which the Borrower or any Subsidiary has actual exposure (other than those in respect of Capital Stock or the Senior Subordinated Notes) and (b) Hedge Agreements entered into in order to effectively cap, collar or exchange interest or currency rates (from fixed to floating rates, from one floating rate to another floating rate or otherwise) with respect to any interest-bearing liability or investment of the Borrower or any Subsidiary.

SECTION 10.    EVENTS OF DEFAULT

        If any of the following events shall occur and be continuing:

        (a)    the Borrower shall fail to pay any principal of any Loan or Reimbursement Obligation when due in accordance with the terms hereof; or the Borrower shall fail to pay any interest on any Loan or Reimbursement Obligation, or any other amount payable hereunder or under any other Loan Document, within five days after any such interest or other amount becomes due in accordance with the terms hereof; or

        (b)    any representation or warranty made or deemed made by any Loan Party herein or in any other Loan Document or that is contained in any certificate, document or financial or other statement furnished by it at any time under or in connection with this Agreement or any such other Loan Document shall prove to have been inaccurate in any material respect on or as of the date made or deemed made; or

        (c)    (i) any Loan Party shall default in the observance or performance of any agreement contained in clause (i) or (ii) of Section 8.4(a) (with respect to the Borrower only), Section 8.7(a) or Section 9 of this Agreement or Sections 5.5 and 5.7(b) of the Guarantee and Collateral Agreement or (ii) an "Event of Default" under and as defined in any Mortgage shall have occurred and be continuing; or

        (d)    any Loan Party shall default in the observance or performance of any other agreement contained in this Agreement or any other Loan Document (other than as provided in paragraphs (a) through (c) of this Section), and such default shall continue unremedied for a period of 30 days after notice to the Borrower from the Administrative Agent or the Required Lenders; or

        (e)    any Group Member (i) defaults in making any payment of any principal of any Indebtedness (including any Guarantee Obligation, but excluding the Loans) on the scheduled or original due date with respect thereto; or (ii) defaults in making any payment of any interest on any such Indebtedness beyond the period of grace, if any, provided in the instrument or agreement under which such Indebtedness was created; or (iii) defaults in the observance or performance of any other agreement or condition relating to any such Indebtedness or contained in any instrument or agreement evidencing, securing or relating thereto, or any other event shall occur or condition exist, the effect of which default or other event or condition is to cause, or to permit the holder or beneficiary of such Indebtedness (or a trustee or agent on behalf of such holder or beneficiary) to cause, with the giving of notice if required, such Indebtedness to become due prior to its stated

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maturity or to become subject to a mandatory offer to purchase by the obligor thereunder or (in the case of any such Indebtedness constituting a Guarantee Obligation) to become payable; provided, that a default, event or condition described in clause (i), (ii) or (iii) of this paragraph (e) shall not at any time constitute an Event of Default unless, at such time, one or more defaults, events or conditions of the type described in clauses (i), (ii) and (iii) of this paragraph (e) shall have occurred and be continuing with respect to Indebtedness the outstanding principal amount of which exceeds in the aggregate $5,000,000; or

        (f)    (i) any Group Member shall commence any case, proceeding or other action (A) under any existing or future law of any jurisdiction, domestic or foreign, relating to bankruptcy, insolvency, reorganization or relief of debtors, seeking to have an order for relief entered with respect to it, or seeking to adjudicate it a bankrupt or insolvent, or seeking reorganization, arrangement, adjustment, winding-up, liquidation, dissolution, composition or other relief with respect to it or its debts, or (B) seeking appointment of a receiver, trustee, custodian, conservator or other similar official for it or for all or any substantial part of its assets, or any Group Member shall make a general assignment for the benefit of its creditors; or (ii) there shall be commenced against any Group Member any case, proceeding or other action of a nature referred to in clause (i) above that (A) results in the entry of an order for relief or any such adjudication or appointment or (B) remains undismissed, undischarged or unbonded for a period of 60 days; or (iii) there shall be commenced against any Group Member any case, proceeding or other action seeking issuance of a warrant of attachment, execution, distraint or similar process against all or any substantial part of its assets that results in the entry of an order for any such relief that shall not have been vacated, discharged, or stayed or bonded pending appeal within 60 days from the entry thereof; or (iv) any Group Member shall take any action in furtherance of, or indicating its consent to, approval of, or acquiescence in, any of the acts set forth in clause (i), (ii), or (iii) above; or (v) any Group Member shall generally not, or shall be unable to, or shall admit in writing its inability to, pay its debts as they become due; or

        (g)    (i) any Person shall engage in any "prohibited transaction" (as defined in Section 406 of ERISA or Section 4975 of the Code) involving any Plan, (ii) any "accumulated funding deficiency" (as defined in Section 302 of ERISA), whether or not waived, shall exist with respect to any Plan or any Lien in favor of the PBGC or a Plan shall arise on the assets of the Borrower or any Commonly Controlled Entity, (iii) a Reportable Event shall occur with respect to, or proceedings shall commence to have a trustee appointed, or a trustee shall be appointed, to administer or to terminate, any Single Employer Plan, which Reportable Event or commencement of proceedings or appointment of a trustee is, in the reasonable opinion of the Required Lenders, likely to result in the termination of such Plan for purposes of Title IV of ERISA, (iv) any Single Employer Plan shall terminate for purposes of Title IV of ERISA, (v) the Borrower or any Commonly Controlled Entity shall, or in the reasonable opinion of the Required Lenders is likely to, incur any liability in connection with a withdrawal from, or the Insolvency or Reorganization of, a Multiemployer Plan or (vi) any other similar event or condition shall occur or exist with respect to a Plan; and in each case in clauses (i) through (vi) above, such event or condition, together with all other such events or conditions, if any, could, in the reasonable judgment of the Required Lenders, reasonably be expected to have a Material Adverse Effect; or

        (h)    one or more judgments or decrees shall be entered against any Group Member involving in the aggregate a liability (not paid or fully covered by insurance as to which the relevant insurance company has acknowledged coverage) of $2,000,000 or more, and all such judgments or decrees shall not have been vacated, discharged, stayed or bonded pending appeal within 30 days from the entry thereof; or

        (i)    any of the Security Documents shall cease, for any reason, to be in full force and effect, or any Loan Party or any Affiliate of any Loan Party shall so assert, or any Lien created by any of the Security Documents shall cease to be enforceable and of the same effect and priority purported to be created thereby; or

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        (j)    the guarantee contained in Section 2 of the Guarantee and Collateral Agreement shall cease, for any reason, to be in full force and effect or any Loan Party or any Affiliate of any Loan Party shall so assert; or

        (k)    (i) any "person" or "group" (as such terms are used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")), excluding the Permitted Investors, shall become, or obtain rights (whether by means or warrants, options or otherwise) to become, the "beneficial owner" (as defined in Rules 13(d)-3 and 13(d)-5 under the Exchange Act), directly or indirectly, of more than 35% of the outstanding common stock of the Borrower; (ii) the board of directors of the Borrower shall cease to consist of a majority of Continuing Directors; or (iii) a Specified Change of Control shall occur; or

        (l)    the Senior Subordinated Notes or the guarantees thereof shall cease, for any reason, to be validly subordinated to the Obligations or the obligations of the Subsidiary Guarantors under the Guarantee and Collateral Agreement, as the case may be, as provided in the Senior Subordinated Note Indenture, or any Loan Party, any Affiliate of any Loan Party, the trustee in respect of the Senior Subordinated Notes or the holders of at least 25% in aggregate principal amount of the Senior Subordinated Notes shall so assert in writing;

then, and in any such event, (A) if such event is an Event of Default specified in clause (i) or (ii) of paragraph (f) above with respect to the Borrower, automatically the Commitments shall immediately terminate and the Loans hereunder (with accrued interest thereon) and all other amounts owing under this Agreement and the other Loan Documents (including all amounts of L/C Obligations, whether or not the beneficiaries of the then outstanding Letters of Credit shall have presented the documents required thereunder) shall immediately become due and payable, and (B) if such event is any other Event of Default, either or both of the following actions may be taken: (i) with the consent of the Required Lenders, the Administrative Agent may, or upon the request of the Required Lenders, the Administrative Agent shall, by notice to the Borrower declare the Revolving Commitments to be terminated forthwith, whereupon the Revolving Commitments shall immediately terminate; and (ii) with the consent of the Required Lenders, the Administrative Agent may, or upon the request of the Required Lenders, the Administrative Agent shall, by notice to the Borrower, declare the Loans hereunder (with accrued interest thereon) and all other amounts owing under this Agreement and the other Loan Documents (including all amounts of L/C Obligations, whether or not the beneficiaries of the then outstanding Letters of Credit shall have presented the documents required thereunder) to be due and payable forthwith, whereupon the same shall immediately become due and payable. With respect to all Letters of Credit with respect to which presentment for honor shall not have occurred at the time of an acceleration pursuant to this paragraph, the Borrower shall at such time deposit in a cash collateral account opened by the Administrative Agent an amount equal to the aggregate then undrawn and unexpired amount of such Letters of Credit. Amounts held in such cash collateral account shall be applied by the Administrative Agent to the payment of drafts drawn under such Letters of Credit, and the unused portion thereof after all such Letters of Credit shall have expired or been fully drawn upon, if any, shall be applied to repay other obligations of the Borrower hereunder and under the other Loan Documents. After all such Letters of Credit shall have expired or been fully drawn upon, all Reimbursement Obligations shall have been satisfied and all other obligations of the Borrower hereunder and under the other Loan Documents shall have been paid in full, the balance, if any, in such cash collateral account shall be returned to the Borrower (or such other Person as may be lawfully entitled thereto). Except as expressly provided above in this Section, presentment, demand, protest and all other notices of any kind are hereby expressly waived by the Borrower.

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SECTION 11.    THE AGENTS

        11.1    Appointment.    (a) Each Lender hereby irrevocably designates and appoints each Agent as the agent of such Lender under this Agreement and the other Loan Documents, and each such Lender irrevocably authorizes such Agent, in such capacity, to take such action on its behalf under the provisions of this Agreement and the other Loan Documents and to exercise such powers and perform such duties as are expressly delegated to such Agent by the terms of this Agreement and the other Loan Documents, together with such other powers as are reasonably incidental thereto. Notwithstanding any provision to the contrary elsewhere in this Agreement, no Agent shall have any duties or responsibilities, except those expressly set forth herein, or any fiduciary relationship with any Lender, and no implied covenants, functions, responsibilities, duties, obligations or liabilities shall be read into this Agreement or any other Loan Document or otherwise exist against any Agent.

        (b)    The Issuing Lender and the Foreign Currency Lenders shall act on behalf of the Revolving Lenders with respect to Letters of Credit and Foreign Currency Loans issued or made under this Agreement and the documents associated therewith. It is understood and agreed that the Issuing Lender and the Foreign Currency Lenders (i) shall have all of the benefits and immunities (x) provided to the Agents in this Section 11 with respect to acts taken or omissions suffered by the Issuing Lender and Foreign Currency Lenders in connection with Letters of Credit and Foreign Currency Loans issued or made under this Agreement and the documents associated therewith as fully as if the term "Agents", as used in this Section 11, included the Issuing Lender and the Foreign Currency Lenders with respect to such acts or omissions and (y) as additionally provided in this Agreement and (ii) shall have all of the benefits of the provisions of Section 11.7 as fully as if the term "Agents", as used in Section 11.7, included the Issuing Lender and the Foreign Currency Lenders.

        11.2.    Delegation of Duties.    Each Agent may execute any of its duties under this Agreement and the other Loan Documents by or through agents or attorneys-in-fact and shall be entitled to advice of counsel concerning all matters pertaining to such duties. No Agent shall be responsible for the negligence or misconduct of any agents or attorneys-in-fact selected by it with reasonable care.

        11.3.    Exculpatory Provisions.    Neither any Agent nor any of their respective officers, directors, employees, agents, attorneys-in-fact or affiliates shall be (i) liable for any action lawfully taken or omitted to be taken by it or such Person under or in connection with this Agreement or any other Loan Document (except to the extent that any of the foregoing are found by a final and nonappealable decision of a court of competent jurisdiction to have resulted from its or such Person's own gross negligence or willful misconduct) or (ii) responsible in any manner to any of the Lenders for any recitals, statements, representations or warranties made by any Loan Party or any officer thereof contained in this Agreement or any other Loan Document or in any certificate, report, statement or other document referred to or provided for in, or received by the Agents under or in connection with, this Agreement or any other Loan Document or for the value, validity, effectiveness, genuineness, enforceability or sufficiency of this Agreement or any other Loan Document or for any failure of any Loan Party a party thereto to perform its obligations hereunder or thereunder. The Agents shall not be under any obligation to any Lender to ascertain or to inquire as to the observance or performance of any of the agreements contained in, or conditions of, this Agreement or any other Loan Document, or to inspect the properties, books or records of any Loan Party.

        11.4.    Reliance by Agents.    Each Agent shall be entitled to rely, and shall be fully protected in relying, upon any instrument, writing, resolution, notice, consent, certificate, affidavit, letter, telecopy, telex or teletype message, statement, order or other document or conversation believed by it to be genuine and correct and to have been signed, sent or made by the proper Person or Persons and upon advice and statements of legal counsel (including counsel to the Borrower), independent accountants and other experts selected by such Agent. The Administrative Agent may deem and treat the payee of any Note as the owner thereof for all purposes unless a written notice of assignment, negotiation or

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transfer thereof shall have been filed with the Administrative Agent. Each Agent shall be fully justified in failing or refusing to take any action under this Agreement or any other Loan Document unless it shall first receive such advice or concurrence of the Required Lenders (or, if so specified by this Agreement, all Lenders) as it deems appropriate or it shall first be indemnified to its satisfaction by the Lenders against any and all liability and expense that may be incurred by it by reason of taking or continuing to take any such action. The Agents shall in all cases be fully protected in acting, or in refraining from acting, under this Agreement and the other Loan Documents in accordance with a request of the Required Lenders (or, if so specified by this Agreement, all Lenders), and such request and any action taken or failure to act pursuant thereto shall be binding upon all the Lenders and all future holders of the Loans.

        11.5.    Notice of Default.    No Agent shall be deemed to have knowledge or notice of the occurrence of any Default or Event of Default hereunder unless such Agent has received notice from a Lender or the Borrower referring to this Agreement, describing such Default or Event of Default and stating that such notice is a "notice of default." In the event that the Administrative Agent receives such a notice, the Administrative Agent shall give notice thereof to the Lenders. The Administrative Agent shall take such action with respect to such Default or Event of Default as shall be reasonably directed by the Required Lenders (or, if so specified by this Agreement, all Lenders or any other instructing group of Lenders specified by this Agreement); provided that unless and until the Administrative Agent shall have received such directions, the Administrative Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to such Default or Event of Default as it shall deem advisable in the best interests of the Lenders.

        11.6.    Non-Reliance on Agents and Other Lenders.    Each Lender expressly acknowledges that neither the Agents nor any of their respective officers, directors, employees, agents, attorneys-in-fact or affiliates have made any representations or warranties to it and that no act by any Agent hereafter taken, including any review of the affairs of a Loan Party or any affiliate of a Loan Party, shall be deemed to constitute any representation or warranty by any Agent to any Lender. Each Lender represents to the Agents that it has, independently and without reliance upon any Agent or any other Lender, and based on such documents and information as it has deemed appropriate, made its own appraisal of and investigation into the business, operations, property, financial and other condition and creditworthiness of the Loan Parties and their affiliates and made its own decision to make its Loans hereunder and enter into this Agreement. Each Lender also represents that it will, independently and without reliance upon any Agent or any other Lender, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit analysis, appraisals and decisions in taking or not taking action under this Agreement and the other Loan Documents, and to make such investigation as it deems necessary to inform itself as to the business, operations, property, financial and other condition and creditworthiness of the Loan Parties and their affiliates. Except for notices, reports and other documents expressly required to be furnished to the Lenders by the Administrative Agent hereunder, the Administrative Agent shall not have any duty or responsibility to provide any Lender with any credit or other information concerning the business, operations, property, condition (financial or otherwise), prospects or creditworthiness of any Loan Party or any affiliate of a Loan Party that may come into the possession of the Administrative Agent or any of its officers, directors, employees, agents, attorneys-in-fact or affiliates.

        11.7.    Indemnification.    The Lenders agree to indemnify each Agent in its capacity as such (to the extent not reimbursed by the Borrower and without limiting the obligation of the Borrower to do so), ratably according to their respective Aggregate Exposure Percentages in effect on the date on which indemnification is sought under this Section (or, if indemnification is sought after the date upon which the Commitments shall have terminated and the Loans shall have been paid in full, ratably in accordance with such Aggregate Exposure Percentages immediately prior to such date), from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs,

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expenses or disbursements of any kind whatsoever that may at any time (whether before or after the payment of the Loans) be imposed on, incurred by or asserted against such Agent in any way relating to or arising out of, the Commitments, this Agreement, any of the other Loan Documents or any documents contemplated by or referred to herein or therein or the transactions contemplated hereby or thereby or any action taken or omitted by such Agent under or in connection with any of the foregoing; provided that no Lender shall be liable for the payment of any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements that are found by a final and nonappealable decision of a court of competent jurisdiction to have resulted from such Agent's gross negligence or willful misconduct. The agreements in this Section shall survive the payment of the Loans and all other amounts payable hereunder.

        11.8.    Agent in Its Individual Capacity.    Each Agent and its affiliates may make loans to, accept deposits from and generally engage in any kind of business with any Loan Party as though such Agent were not an Agent. With respect to its Loans made or renewed by it and with respect to any Letter of Credit issued or participated in by it, each Agent shall have the same rights and powers under this Agreement and the other Loan Documents as any Lender and may exercise the same as though it were not an Agent, and the terms "Lender" and "Lenders" shall include each Agent in its individual capacity.

        11.9.    Successor Administrative Agent.    The Administrative Agent may resign as Administrative Agent upon ten days' notice to the Lenders and the Borrower. If the Administrative Agent shall resign as Administrative Agent under this Agreement and the other Loan Documents, then the Required Lenders shall appoint from among the Lenders a successor agent for the Lenders, which successor agent shall (unless an Event of Default under Section 10(a) or Section 10(f) with respect to the Borrower shall have occurred and be continuing) be subject to approval by the Borrower (which approval shall not be unreasonably withheld or delayed), whereupon such successor agent shall succeed to the rights, powers and duties of the Administrative Agent, and the term "Administrative Agent" shall mean such successor agent effective upon such appointment and approval, and the former Administrative Agent's rights, powers and duties as Administrative Agent shall be terminated, without any other or further act or deed on the part of such former Administrative Agent or any of the parties to this Agreement or any holders of the Loans. If no successor agent has accepted appointment as Administrative Agent by the date that is ten days following a retiring Administrative Agent's notice of resignation, the retiring Administrative Agent's resignation shall nevertheless thereupon become effective and the Lenders shall assume and perform all of the duties of the Administrative Agent hereunder until such time, if any, as the Required Lenders appoint a successor agent, which agent shall be (a) a bank organized and doing business under the laws of the United States or any state thereof, subject to supervision or examination by federal or state authority and having a total shareholder equity aggregating at least $1,000,000,000 and (b) unless an Event of Default under Section 10(a) or Section 10(f) with respect to the Borrower shall have occurred and be continuing, be subject to approval by the Borrower (which approval shall not be unreasonably withheld or delayed). The Syndication Agent may, at any time, by notice to the Lenders and the Administrative Agent, resign as Syndication Agent hereunder, whereupon the duties, rights, obligations and responsibilities of the Syndication Agent hereunder shall automatically be assumed by, and inure to the benefit of, the Administrative Agent, without any further act by the Syndication Agent, the Administrative Agent or any Lender. After any retiring Administrative Agent's resignation as Administrative Agent, the provisions of this Section 11 shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Administrative Agent under this Agreement and the other Loan Documents.

        11.10.    Agents Generally.    Except as expressly set forth herein, no Agent shall have any duties or responsibilities hereunder in its capacity as such.

        11.11.    The Lead Arranger.    The Lead Arranger, in its capacity as such, shall have no duties or responsibilities, and shall incur no liability, under this Agreement and other Loan Documents.

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SECTION 12.    MISCELLANEOUS

        12.1.    Amendments and Waivers.    Neither this Agreement, any other Loan Document, nor any terms hereof or thereof may be amended, supplemented or modified except in accordance with the provisions of this Section 12.1. The Required Lenders and each Loan Party party to the relevant Loan Document may, or, with the written consent of the Required Lenders, the Administrative Agent and each Loan Party party to the relevant Loan Document may, from time to time, (a) enter into written amendments, consents, supplements or modifications hereto and to the other Loan Documents for the purpose of adding any provisions to this Agreement or the other Loan Documents or changing in any manner the rights of the Lenders or of the Loan Parties hereunder or thereunder or (b) waive, on such terms and conditions as the Required Lenders or the Administrative Agent, as the case may be, may specify in such instrument, any of the requirements of this Agreement or the other Loan Documents or any Default or Event of Default and its consequences; provided, however that no such waiver and no such amendment, supplement or modification shall (i) forgive the principal amount or extend the final scheduled date of maturity of any Loan, extend the scheduled date of any amortization payment in respect of any Term Loan, reduce the stated rate of any interest or fee payable hereunder (except (x) in connection with the waiver of applicability of any post-default increase in interest rates, which waiver shall be effective with the consent of the Majority Facility Lenders of each adversely affected Facility and (y) that any amendment or modification of defined terms used in the financial covenants in this Agreement shall not constitute a reduction in the rate of interest or fees for purposes of this clause (i)) or extend the scheduled date of any payment thereof, or increase the amount or extend the expiration date of any Lender's Revolving Commitment, in each case without the written consent of each Lender directly affected thereby; (ii) eliminate or reduce the voting rights of any Lender under this Section 12.1 without the written consent of such Lender; (iii) reduce any percentage specified in the definition of Required Lenders, consent to the assignment or transfer by the Borrower of any of its rights and obligations under this Agreement and the other Loan Documents, release all or substantially all of the Collateral or release all or substantially all of the Subsidiary Guarantors from their obligations under the Guarantee and Collateral Agreement, in each case without the written consent of all Lenders; (iv) amend, modify or waive any condition precedent to any extension of credit under the Revolving Facility set forth in Section 7.2 (including in connection with any waiver of an existing Default or Event of Default) without the written consent of the Majority Facility Lenders with respect to the Revolving Facility; (v) amend, modify or waive any provision of Sections 3.15 through 3.18 without the written consent of all the Foreign Currency Lenders; (vi) amend, modify or waive any provision of Section 5.8 without the written consent of the Majority Facility Lenders in respect of each Facility adversely affected thereby; (vii) reduce the amount of Net Cash Proceeds or Excess Cash Flow required to be applied to prepay Loans under this Agreement without the written consent of the Majority Facility Lenders with respect to each Facility that are scheduled to be prepaid; (viii) reduce the percentage specified in the definition of Majority Facility Lenders with respect to any Facility without the written consent of all Lenders under such Facility; (ix) amend, modify or waive any provision of Section 11 without the written consent of each Agent adversely affected thereby; (x) amend, modify or waive any provision of Section 3.3 or 3.4 without the written consent of the Swingline Lender; or (xi) amend, modify or waive any provision of Sections 3.7 to 3.14 without the written consent of each Issuing Lender. Any such waiver and any such amendment, supplement or modification shall apply equally to each of the Lenders and shall be binding upon the Loan Parties, the Lenders, the Agents and all future holders of the Loans. In the case of any waiver, the Loan Parties, the Lenders and the Agents shall be restored to their former position and rights hereunder and under the other Loan Documents, and any Default or Event of Default waived shall be deemed to be cured and not continuing; but no such waiver shall extend to any subsequent or other Default or Event of Default, or impair any right consequent thereon.

        Notwithstanding the foregoing, this Agreement may be amended (or amended and restated) with the written consent of the Required Lenders, the Administrative Agent, the Syndication Agent and the

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Borrower (a) to add one or more additional credit facilities to this Agreement and to permit the extensions of credit from time to time outstanding thereunder and the accrued interest and fees in respect thereof to share ratably in the benefits of this Agreement and the other Loan Documents with the Term Loans and Revolving Extensions of Credit and the accrued interest and fees in respect thereof and (b) to include appropriately the Lenders holding such credit facilities in any determination of the Required Lenders and Majority Facility Lenders.

        In addition, notwithstanding the foregoing, this Agreement may be amended with the written consent of the Administrative Agent, the Syndication Agent, the Borrower and the Lenders providing the relevant Replacement Term Loans (as defined below) to permit the refinancing of all outstanding Term Loans ("Refinanced Term Loans") with a replacement term loan tranche hereunder ("Replacement Term Loans"), provided that (a) the aggregate principal amount of such Replacement Term Loans shall not exceed the aggregate principal amount of such Refinanced Term Loans, (b) the Applicable Margin for such Replacement Term Loans shall not be higher than the Applicable Margin for such Refinanced Term Loans, (c) the weighted average life to maturity of such Replacement Term Loans shall not be shorter than the weighted average life to maturity of such Refinanced Term Loans at the time of such refinancing and (d) all other terms applicable to such Replacement Term Loans shall be substantially identical to, or less favorable to the Lenders providing such Replacement Term Loans than, those applicable to such Refinanced Term Loans, except to the extent necessary to provide for covenants and other terms applicable to any period after the latest final maturity of the Term Loans in effect immediately prior to such refinancing.

        12.2.    Notices.    All notices, requests and demands to or upon the respective parties hereto to be effective shall be in writing (including by telecopy), and, unless otherwise expressly provided herein, shall be deemed to have been duly given or made when delivered, or three Business Days after being deposited in the mail, postage prepaid, or, in the case of telecopy notice, when received, addressed as follows in the case of the Borrower and the Agents, and as set forth in an administrative questionnaire

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delivered to the Administrative Agent in the case of the Lenders, or to such other address as may be hereafter notified by the respective parties hereto:

The Borrower:	Scientific Games Corporation 220 Continental Drive Suite 407 Newark, Delaware 19713 Attention: Robert C. Becker Telecopy: (302) 452-5382 Telephone: (302) 452-5227
The Administrative Agent:	The Bank of New York Attention: Sandra E. Morgan, Assistant Treasurer Telecopy: (212) 635-6365/6367 Telephone: (212) 635-4692
The Syndication Agent:	Bear Stearns Corporate Lending Inc. 383 Madison Avenue New York, NY 10179 Attention: Stephen O'Keefe Telecopy: (212) 272-9184 Telephone: (212) 272-9430
Issuing Lender:	As notified by such Issuing Lender to the Administrative Agent and the Borrower

provided that any notice, request or demand to or upon any Agent, the Issuing Lender or the Lenders shall not be effective until received.

        12.3.    No Waiver; Cumulative Remedies.    No failure to exercise and no delay in exercising, on the part of any Agent or any Lender, any right, remedy, power or privilege hereunder or under the other Loan Documents shall operate as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege. The rights, remedies, powers and privileges herein provided are cumulative and not exclusive of any rights, remedies, powers and privileges provided by law.

        12.4.    Survival of Representations and Warranties.    All representations and warranties made hereunder, in the other Loan Documents and in any document, certificate or statement delivered pursuant hereto or in connection herewith shall survive the execution and delivery of this Agreement and the making of the Loans and other extensions of credit hereunder.

        12.5.    Payment of Expenses and Taxes.    The Borrower agrees (a) to pay or reimburse the Syndication Agent and the Administrative Agent for all its reasonable out-of-pocket costs and expenses incurred in connection with the development, preparation and execution of, and any amendment, supplement or modification to, this Agreement and the other Loan Documents and any other documents prepared in connection herewith or therewith, and the consummation and administration of the transactions contemplated hereby and thereby, including the reasonable fees and disbursements of counsel to such Agent and filing and recording fees and expenses, with statements with respect to the foregoing to be submitted to the Borrower prior to the Closing Date (in the case of amounts to be paid on the Closing Date) and from time to time thereafter on a quarterly basis or such other periodic basis as such Agent shall deem appropriate, (b) to pay or reimburse each Lender and Agent for all its costs and reasonable expenses incurred in connection with the enforcement or preservation of any

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rights under this Agreement, the other Loan Documents and any such other documents, including the fees and disbursements of counsel (including the allocated fees and expenses of in-house counsel) to each Lender and of counsel to such Agent, provided that, the fees and disbursements of counsel to any such Lender shall only be paid or reimbursed to the extent incurred in connection with a Default or an Event of Default, (c) to pay, indemnify, and hold each Lender and Agent harmless from, any and all recording and filing fees and any and all liabilities with respect to, or resulting from any delay in paying, stamp, excise and other taxes, if any, that may be payable or determined to be payable in connection with the execution and delivery of, or consummation or administration of any of the transactions contemplated by, or any amendment, supplement or modification of, or any waiver or consent under or in respect of, this Agreement, the other Loan Documents and any such other documents, (d) to pay or reimburse the Issuing Lender and each Foreign Currency Lender for all its reasonable out-of-pocket costs and expenses incurred in connection with the conversion of any Letter of Credit denominated in a Foreign Currency or any Foreign Currency pursuant to the terms of this Agreement, and (e) to pay, indemnify, and hold each Lender and Agent and their respective officers, directors, employees, affiliates, agents, trustees, advisors and controlling persons (each, an "Indemnitee") harmless from and against any and all other liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever with respect to the execution, delivery, enforcement, performance and administration of this Agreement, the other Loan Documents and any such other documents, including any of the foregoing relating to the use of proceeds of the Loans or the violation of, noncompliance with or liability under, any Environmental Law applicable to the operations of any Group Member or any of the Properties and the reasonable fees and expenses of legal counsel in connection with claims, actions or proceedings by any Indemnitee against any Loan Party under any Loan Document (all the foregoing in this clause (e), collectively, the "Indemnified Liabilities"), provided, that the Borrower shall have no obligation hereunder to any Indemnitee with respect to Indemnified Liabilities to the extent such Indemnified Liabilities are found by a final and nonappealable decision of a court of competent jurisdiction to have resulted from the gross negligence or willful misconduct of such Indemnitee. Without limiting the foregoing, and to the extent permitted by applicable law, the Borrower agrees not to assert and to cause its Subsidiaries not to assert, and hereby waives and agrees to cause its Subsidiaries to waive, all rights for contribution or any other rights of recovery with respect to all claims, demands, penalties, fines, liabilities, settlements, damages, costs and expenses of whatever kind or nature, under or related to Environmental Laws, that any of them may have by statute or otherwise against any Indemnitee, except to the extent resulting from the gross negligence or willful misconduct of such Indemnitee. All amounts due under this Section 12.5 shall be payable not later than ten days after written demand therefor. Statements payable by the Borrower pursuant to this Section 12.5 shall be submitted to Robert C. Becker (Telephone No. (302) 452-5227) (Telecopy No. (302) 452-5382), at the address of the Borrower set forth in Section 12.2, or to such other Person or address as may be hereafter designated by the Borrower in a written notice to the Administrative Agent. The agreements in this Section 12.5 shall survive repayment of the Loans and all other amounts payable hereunder.

        12.6.    Successors and Assigns; Participations and Assignments.    (a) The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns permitted hereby (including any affiliate of the Issuing Lender that issues any Letter of Credit), except that (i) the Borrower may not assign or otherwise transfer any of its rights or obligations hereunder without the prior written consent of each Lender (and any attempted assignment or transfer by the Borrower without such consent shall be null and void) and (ii) no Lender may assign or otherwise transfer its rights or obligations hereunder except in accordance with this Section.

        (b)    (i) Subject to the conditions set forth in paragraph (ii) below, any Lender may assign to one or more assignees (each, an "Assignee") all or a portion of its rights and obligations under this

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Agreement (including all or a portion of its Commitments and the Loans at the time owing to it) with the prior written consent (such consent not to be unreasonably withheld) of:

        (A)    the Borrower, provided that, no consent of the Borrower shall be required for (x) any assignment to a Lender, an affiliate of a Lender or an Approved Fund (as defined below), (y) any assignment of the Revolving Commitments or the Revolving Loans if an Event of Default has occurred and is continuing and (z) any assignment of the Term Loans;

        (B)    the Administrative Agent, provided that no consent of the Administrative Agent shall be required for (x) an assignment to an Assignee that is a Lender immediately prior to giving effect to such assignment, except in the case of an assignment of a Revolving Commitment to an Assignee that does not already have a Revolving Commitment and (y) any assignment of Term Loans; and

        (C)    in the case of any assignment of a Revolving Commitment, each Issuing Lender and the Swingline Lender; and

in the case of all such assignments, subject to notice to the Syndication Agent.

        (ii)    Assignments shall be subject to the following additional conditions:

        (A)    no assignment may be made to an Ineligible Assignee;

        (B)    except in the case of an assignment to a Lender, an affiliate of a Lender or an Approved Fund or an assignment of the entire remaining amount of the assigning Lender's Commitments or Loans under any Facility, the amount of the Commitments or Loans of the assigning Lender subject to each such assignment (determined as of the date the Assignment and Assumption with respect to such assignment is delivered to the Administrative Agent) shall not be less than $1,000,000 unless each of the Borrower and the Administrative Agent otherwise consent, provided that (1) no such consent of the Borrower shall be required if an Event of Default has occurred and is continuing and (2) such amounts shall be aggregated in respect of each Lender and its affiliates or Approved Funds, if any;

        (C)    the parties to each assignment shall execute and deliver to the Administrative Agent an Assignment and Assumption, together with a processing and recordation fee of $1,500 (treating simultaneous assignments by a Lender to two or more Approved Funds of such Lender as a single assignment);

        (D)    the Assignee, if it shall not be a Lender, shall deliver to the Administrative Agent an administrative questionnaire; and

        (E)    in the case of an assignment by a Lender to a CLO (as defined below) managed or administered by such Lender or an Affiliate of such Lender, the assigning Lender shall retain the sole right to approve any amendment, modification or waiver of any provision of this Agreement and the other Loan Documents, provided that the Assignment and Assumption between such Lender and such CLO may provide that such Lender will not, without the consent of such CLO, agree to any amendment, modification or waiver that (1) requires the consent of each Lender directly affected thereby pursuant to the proviso to the second sentence of Section 12.1 and (2) directly affects such CLO.

For the purposes of this Section 12.6, the terms "Approved Fund" and "CLO" have the following meanings:

        "Approved Fund" means (a) with respect to any Lender, a CLO managed by such Lender or an Affiliate of such Lender and (b) with respect to any Lender that is a fund which invests in bank loans and similar extensions of credit, any other fund that invests in bank loans and similar

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extensions of credit and is managed by the same investment advisor as such Lender or by an affiliate of such investment advisor.

        "CLO" means any entity (whether a corporation, partnership, trust or otherwise) that is engaged in making, purchasing, holding or otherwise investing in bank loans and similar extensions of credit in the ordinary course of its business and is administered or managed by a Lender or an affiliate of such Lender.

        (iii)    Subject to acceptance and recording thereof pursuant to paragraph (b)(iv) below, from and after the effective date specified in each Assignment and Assumption the Assignee thereunder shall be a party hereto and, to the extent of the interest assigned by such Assignment and Assumption, have the rights and obligations of a Lender under this Agreement, and the assigning Lender thereunder shall, to the extent of the interest assigned by such Assignment and Assumption, be released from its obligations under this Agreement (and, in the case of an Assignment and Assumption covering all of the assigning Lender's rights and obligations under this Agreement, such Lender shall cease to be a party hereto but shall continue to be entitled to the benefits of Sections 5.9, 5.10, 5.11 and 12.5 relating to the period during which it was a Lender). Any assignment or transfer by a Lender of rights or obligations under this Agreement that does not comply with this Section 12.6 shall be treated for purposes of this Agreement as a sale by such Lender of a participation in such rights and obligations in accordance with paragraph (c) of this Section.

        (iv)    The Administrative Agent, acting for this purpose as an agent of the Borrower, shall maintain at one of its offices a copy of each Assignment and Assumption delivered to it and a register for the recordation of the names and addresses of the Lenders, and the Commitments of, and principal amount of the Loans and L/C Obligations owing to, each Lender pursuant to the terms hereof from time to time (the "Register"). The entries in the Register shall be conclusive, and the Borrower, the Administrative Agent, the Issuing Lender and the Lenders may treat each Person whose name is recorded in the Register pursuant to the terms hereof as a Lender hereunder for all purposes of this Agreement, notwithstanding notice to the contrary.

        (v)    Upon its receipt of a duly completed Assignment and Assumption executed by an assigning Lender and an Assignee, the Assignee's completed administrative questionnaire (unless the Assignee shall already be a Lender hereunder) and any written consent to such assignment required by paragraph (b) of this Section, the Administrative Agent shall accept such Assignment and Assumption and record the information contained therein in the Register. No assignment shall be effective for purposes of this Agreement unless it has been recorded in the Register as provided in this paragraph.

        (c)    (i) Any Lender may, without the consent of the Borrower or the Administrative Agent, sell participations to one or more banks or other entities (a "Participant") in all or a portion of such Lender's rights and obligations under this Agreement (including all or a portion of its Commitments and the Loans owing to it); provided that (A) such Lender's obligations under this Agreement shall remain unchanged, (B) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations and (C) the Borrower, the Agents, the Issuing Lender and the other Lenders shall continue to deal solely and directly with such Lender in connection with such Lender's rights and obligations under this Agreement. Any agreement pursuant to which a Lender sells such a participation shall provide that such Lender shall retain the sole right to enforce this Agreement and to approve any amendment, modification or waiver of any provision of this Agreement; provided that such agreement may provide that such Lender will not, without the consent of the Participant, agree to any amendment, modification or waiver that (1) requires the consent of each Lender directly affected thereby pursuant to the proviso to the second sentence of Section 12.1 and (2) directly affects such Participant. Subject to paragraph (c)(ii) of this Section, the Borrower agrees that each Participant shall be entitled to the benefits of Sections 5.9, 5.10 and 5.11 to the same extent as if it were a Lender and had acquired its interest by assignment pursuant to paragraph (b) of this Section. To the extent

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permitted by law, each Participant also shall be entitled to the benefits of Section 12.7(b) as though it were a Lender, provided such Participant shall be subject to Section 12.7(a) as though it were a Lender.

        (ii)    A Participant shall not be entitled to receive any greater payment under Section 5.9, 5.10 or 5.11 than the applicable Lender would have been entitled to receive with respect to the participation sold to such Participant, unless the sale of the participation to such Participant is made with the Borrower's prior written consent. Any Participant that is a Non-U.S. Lender shall not be entitled to the benefits of Section 5.10 unless such Participant complies with Section 5.10(d).

        (d)    Any Lender may, without the consent of the Borrower or the Administrative Agent, at any time pledge or assign a security interest in all or any portion of its rights under this Agreement to secure obligations of such Lender, including any pledge or assignment to secure obligations to a Federal Reserve Bank, and this Section shall not apply to any such pledge or assignment of a security interest; provided that no such pledge or assignment of a security interest shall release a Lender from any of its obligations hereunder or substitute any such pledgee or Assignee for such Lender as a party hereto. In the case of any Lender that is a fund that invests in bank loans, such Lender may, without the consent of the Borrower or the Administrative Agent, assign or pledge all or any portion of its rights under this Agreement, including the Term Loans and Notes representing such Term Loans or any other instrument evidencing its rights as a Lender under this Agreement, to any holder or, trustee for, or any other representative of holders of, obligations owed or securities issued, by such fund, as security for such obligations or securities; provided that any foreclosure or similar action by such trustee or representative shall be subject to the provisions of this Section concerning assignments.

        (e)    The Borrower, upon receipt of written notice from the relevant Lender, agrees to issue Notes to any Lender requiring Notes to facilitate transactions of the type described in paragraph (d) above.

        (f)    Notwithstanding the foregoing, any Conduit Lender may assign any or all of the Loans it may have funded hereunder to its designating Lender without the consent of the Borrower or the Administrative Agent and without regard to the limitations set forth in Section 12.6(b). The Borrower, each Lender and the Agents hereby confirms that it will not institute against a Conduit Lender or join any other Person in instituting against a Conduit Lender any bankruptcy, reorganization, arrangement, insolvency or liquidation proceeding under any state bankruptcy or similar law, for one year and one day after the payment in full of the latest maturing commercial paper note issued by such Conduit Lender; provided, however, that each Lender designating any Conduit Lender hereby agrees to indemnify, save and hold harmless each other party hereto for any loss, cost, damage or expense arising out of its inability to institute such a proceeding against such Conduit Lender during such period of forbearance.

        12.7.    Adjustments; Set-off.    (a) Except to the extent that this Agreement expressly provides for payments to be allocated to a particular Lender or to the Lenders under a particular Facility, if any Lender (a "Benefitted Lender") shall, at any time after the Loans and other amounts payable hereunder shall immediately become due and payable pursuant to Section 10, receive any payment of all or part of the Obligations owing to it, or receive any collateral in respect thereof (whether voluntarily or involuntarily, by set-off, pursuant to events or proceedings of the nature referred to in Section 10(f), or otherwise), in a greater proportion than any such payment to or collateral received by any other Lender, if any, in respect of the Obligations owing to such other Lender, such Benefitted Lender shall purchase for cash from the other Lenders a participating interest in such portion of the Obligations owing to each such other Lender, or shall provide such other Lenders with the benefits of any such collateral, as shall be necessary to cause such Benefitted Lender to share the excess payment or benefits of such collateral ratably with each of the Lenders; provided, however, that if all or any portion of such excess payment or benefits is thereafter recovered from such Benefitted Lender, such purchase shall be rescinded, and the purchase price and benefits returned, to the extent of such recovery, but without interest.

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        (b)    In addition to any rights and remedies of the Lenders provided by law, each Lender shall have the right, without prior notice to the Borrower, any such notice being expressly waived by the Borrower to the extent permitted by applicable law, upon any amount becoming due and payable by the Borrower hereunder (whether at the stated maturity, by acceleration or otherwise), to set off and appropriate and apply against such amount any and all deposits (general or special, time or demand, provisional or final), in any currency, and any other credits, indebtedness or claims, in any currency, in each case whether direct or indirect, absolute or contingent, matured or unmatured, at any time held or owing by such Lender or any branch or agency thereof to or for the credit or the account of the Borrower. Each Lender agrees promptly to notify the Borrower and the Administrative Agent after any such setoff and application made by such Lender, provided that the failure to give such notice shall not affect the validity of such setoff and application.

        12.8.    Counterparts.    This Agreement may be executed by one or more of the parties to this Agreement on any number of separate counterparts, and all of said counterparts taken together shall be deemed to constitute one and the same instrument. Delivery of an executed signature page of this Agreement by facsimile transmission shall be effective as delivery of a manually executed counterpart hereof. A set of the copies of this Agreement signed by all the parties shall be lodged with the Borrower and the Administrative Agent.

        12.9.    Severability.    Any provision of this Agreement that is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.

        12.10.    Integration.    This Agreement and the other Loan Documents represent the entire agreement of the Borrower, the Agents and the Lenders with respect to the subject matter hereof and thereof, and there are no promises, undertakings, representations or warranties by any Agent or any Lender relative to subject matter hereof not expressly set forth or referred to herein or in the other Loan Documents.

        12.11.GOVERNING LAW.THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES UNDER THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.

        12.12.    Submission To Jurisdiction; Waivers.    The Borrower hereby irrevocably and unconditionally:

        (a)    submits for itself and its property in any legal action or proceeding relating to this Agreement and the other Loan Documents to which it is a party, or for recognition and enforcement of any judgment in respect thereof, to the non-exclusive general jurisdiction of the courts of the State of New York, the courts of the United States for the Southern District of New York, and appellate courts from any thereof;

        (b)    consents that any such action or proceeding may be brought in such courts and waives any objection that it may now or hereafter have to the venue of any such action or proceeding in any such court or that such action or proceeding was brought in an inconvenient court and agrees not to plead or claim the same;

        (c)    agrees that service of process in any such action or proceeding may be effected by mailing a copy thereof by registered or certified mail (or any substantially similar form of mail), postage prepaid, to the Borrower at its address set forth in Section 12.2 or at such other address of which the Administrative Agent shall have been notified pursuant thereto;

        (d)    agrees that nothing herein shall affect the right to effect service of process in any other manner permitted by law or shall limit the right to sue in any other jurisdiction; and

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        (e)    waives, to the maximum extent not prohibited by law, any right it may have to claim or recover in any legal action or proceeding referred to in this Section any special, exemplary, punitive or consequential damages.

        12.13.    Acknowledgments.    The Borrower hereby acknowledges that:

        (a)    it has been advised by counsel in the negotiation, execution and delivery of this Agreement and the other Loan Documents;

        (b)    no Agent or Lender has any fiduciary relationship with or duty to the Borrower arising out of or in connection with this Agreement or any of the other Loan Documents, and the relationship between the Agents and Lenders, on one hand, and the Borrower, on the other hand, in connection herewith or therewith is solely that of debtor and creditor; and

        (c)    no joint venture is created hereby or by the other Loan Documents or otherwise exists by virtue of the transactions contemplated hereby among the Lenders or among the Borrower and the Lenders.

        12.14.    Releases of Guarantees and Liens.    (a) Notwithstanding anything to the contrary contained herein or in any other Loan Document, the Administrative Agent is hereby irrevocably authorized by each Lender (without requirement of notice to or consent of any Lender except as expressly required by Section 12.1) to take any action requested by the Borrower having the effect of releasing any Collateral or guarantee obligations (i) to the extent necessary to permit consummation of any transaction not prohibited by any Loan Document, including any Tax Reorganization, or that has been consented to in accordance with Section 12.1 or (ii) under the circumstances described in paragraph (b) below.

        (b)    At such time as the Loans, the Reimbursement Obligations and the other obligations under the Loan Documents (other than obligations under or in respect of Hedge Agreements) shall have been paid in full, the Commitments have been terminated and no Letters of Credit shall be outstanding, the Collateral shall be released from the Liens created by the Security Documents, and the Security Documents and all obligations (other than those expressly stated to survive such termination) of the Administrative Agent and each Loan Party under the Security Documents shall terminate, all without delivery of any instrument or performance of any act by any Person.

        12.15.    Confidentiality.    Each Agent and each Lender agrees to keep confidential all non-public information provided to it by any Loan Party pursuant to this Agreement that is designated by such Loan Party as confidential; provided that nothing herein shall prevent any Agent or any Lender from disclosing any such information (a) to any Agent, any other Lender or any Lender Affiliate, (b) subject to an agreement to comply with the provisions of this Section, to any actual or prospective Transferee or any direct or indirect counterparty to any Hedge Agreement (or any professional advisor to such counterparty), (c) to its employees, directors, agents, attorneys, accountants and other professional advisors or those of any of its affiliates, (d) upon the request or demand of any Governmental Authority, (e) in response to any order of any court or other Governmental Authority or as may otherwise be required pursuant to any Requirement of Law, (f) if requested or required to do so in connection with any litigation or similar proceeding, (g) that has been publicly disclosed, (h) to the National Association of Insurance Commissioners or any similar organization or any nationally recognized rating agency that requires access to information about a Lender's investment portfolio in connection with ratings issued with respect to such Lender, or (i) in connection with the exercise of any remedy hereunder or under any other Loan Document.

        12.16.WAIVERS OF JURY TRIAL.THE BORROWER, THE AGENTS AND THE LENDERS HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVE TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT AND FOR ANY COUNTERCLAIM THEREIN.

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        12.17.    Delivery of Addenda.    Each initial Lender shall become a party to this Agreement by delivering to the Administrative Agent an Addendum duly executed by such Lender.

        12.18.    Conversion of Currencies.    (a) If, for the purpose of obtaining judgment in any court, it is necessary to convert a sum owing hereunder in one currency into another currency, each party hereto agrees, to the fullest extent that it may effectively do so, that the rate of exchange used shall be that at which, in accordance with normal banking procedures in the relevant jurisdiction, the first currency could be purchased with such other currency on the Business Day immediately preceding the day on which final judgment is given.

        (b)    The obligations of the Borrower in respect of any sum due to any party hereto or any holder of the obligations owing hereunder (the "Applicable Creditor") shall, notwithstanding any judgment in a currency (the "Judgment Currency") other than the currency in which such sum is stated to be due hereunder (the "Agreement Currency"), be discharged only to the extent that, on the Business Day following receipt by the Applicable Creditor of any sum adjudged to be so due in the Judgment Currency, the Applicable Creditor may in accordance with normal banking procedures in the relevant jurisdiction purchase the Agreement Currency with the Judgment Currency; if the amount of the Agreement Currency so purchased is less than the sum originally due to the Applicable Creditor in the Agreement Currency, the Borrower agrees, as a separate obligation and notwithstanding any such judgment, to indemnify the Applicable Creditor against such loss. The obligations of the Borrower contained in this Section 12.18 shall survive the termination of this Agreement and the payment of all other amounts owing hereunder.

        12.19.    Interest Rate Limitation.    Notwithstanding anything herein to the contrary, if at any time the interest rate applicable to any Loan, together with all fees, charges and other amounts which are treated as interest on such Loan under applicable law (collectively the "Charges"), shall exceed the maximum lawful rate (the "Maximum Rate") which may be contracted for, charged, taken, received or reserved by the Lender holding such Loan in accordance with applicable law, the rate of interest payable in respect of such Loan hereunder, together with all Charges payable in respect thereof, shall be limited to the Maximum Rate and, to the extent lawful, the interest and Charges that would have been payable in respect of such Loan but were not payable as a result of the operation of this Section shall be cumulated and the interest and Charges payable to such Lender in respect of other Loans or periods shall be increased (but not above the Maximum Rate therefor) until such cumulated amount, together with interest thereon at the Federal Funds Effective Rate to the date of repayment, shall have been received by such Lender.

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        IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered by their proper and duly authorized officers as of the day and year first above written.

SCIENTIFIC GAMES CORPORATION
By:
	Name: Title:
BEAR, STEARNS & CO. INC., as Sole Lead Arranger and Sole Bookrunner
By:
	Name: Title:
BEAR STEARNS CORPORATE LENDING INC., as Syndication Agent and as a Lender
By:
	Name: Title:
THE BANK OF NEW YORK, as Administrative Agent
By:
	Name: Title:

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Annex A

PRICING GRID FOR REVOLVING LOANS AND SWINGLINE LOANS

Pricing Level	Applicable Margin for Eurocurrency Loans		Applicable Margin for Base Rate Loans
I	3.00	%	2.00	%
II	2.75	%	1.75	%
III	2.50	%	1.50	%
IV	2.25	%	1.25	%
V	2.00	%	1.00	%

The Applicable Margin for Revolving Loans and Swingline Loans and the Commitment Fee Rate shall be adjusted, on and after the first Adjustment Date (as defined below) occurring after the date which is six months after the Closing Date, based on changes in the Consolidated Leverage Ratio, with such adjustments to become effective on the date (the "Adjustment Date") that is three Business Days after the date on which the relevant financial statements are delivered to the Lenders pursuant to Section 8.1 and to remain in effect until the next adjustment to be effected pursuant to this paragraph. If any financial statements referred to above are not delivered within the time periods specified in Section 8.1, then, until the date that is three Business Days after the date on which such financial statements are delivered, the highest rate set forth in each column of the Pricing Grid shall apply. On each Adjustment Date, the Applicable Margin for Revolving Loans and Swingline Loans and the Commitment Fee Rate shall be adjusted to be equal to the Applicable Margins and Commitment Fee Rate opposite the Pricing Level determined to exist on such Adjustment Date from the financial statements relating to such Adjustment Date.

        As used herein, the following rules shall govern the determination of Pricing Levels on each Adjustment Date:

        "Pricing Level I" shall exist on an Adjustment Date if the Consolidated Leverage Ratio for the relevant period is greater than or equal to 3.50 to 1.00.

        "Pricing Level II" shall exist on an Adjustment Date if the Consolidated Leverage Ratio for the relevant period is less than 3.50 to 1.00 but greater than or equal to 3.00 to 1.00.

        "Pricing Level III" shall exist on an Adjustment Date if the Consolidated Leverage Ratio for the relevant period is less than 3.00 to 1.00 but greater than or equal to 2.50 to 1.00.

        "Pricing Level IV" shall exist on an Adjustment Date if the Consolidated Leverage Ratio for the relevant period is less than 2.50 to 1.00 but greater than or equal to 2.00 to 1.00.

        "Pricing Level V" shall exist on an Adjustment Date if the Consolidated Leverage Ratio for the relevant period is less than 2.00 to 1.00.

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EXHIBIT 10.27

TABLE OF CONTENTS

Annex A

PRICING GRID FOR REVOLVING LOANS AND SWINGLINE LOANS

EX-10.28

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Exhibit 10.28

EXHIBIT A TO CREDIT AGREEMENT

GUARANTEE AND COLLATERAL AGREEMENT

made by

SCIENTIFIC GAMES CORPORATION

and certain of its Subsidiaries

in favor of

THE BANK OF NEW YORK,

as Administrative Agent

Dated as of December 19, 2002

TABLE OF CONTENTS

		Page
SECTION 1. DEFINED TERMS		1
1.1.	Definitions	1
1.2.	Other Definitional Provisions	3
SECTION 2. GUARANTEE		4
2.1.	Guarantee	4
2.2.	Right of Contribution	4
2.3.	No Subrogation	4
2.4.	Amendments, etc. with respect to the Borrower Obligations	4
2.5.	Guarantee Absolute and Unconditional	5
2.6.	Reinstatement	5
2.7.	Payments	5
SECTION 3. GRANT OF SECURITY INTEREST		6
SECTION 4. REPRESENTATIONS AND WARRANTIES		6
4.1.	Representations in Credit Agreement	6
4.2.	Title; No Other Liens	7
4.3.	Perfected First Priority Liens	7
4.4.	Jurisdiction of Organization; Chief Executive Office	7
4.5.	Inventory and Equipment	7
4.6.	Farm Products	7
4.7.	Investment Property	7
4.8.	Receivables	7
4.9.	Intellectual Property	7
SECTION 5. COVENANTS		8
5.1.	Covenants in Credit Agreement	8
5.2.	Delivery of Instruments and Chattel Paper	8
5.3.	Maintenance of Insurance	8
5.4.	Payment of Obligations	8
5.5.	Maintenance of Perfected Security Interest; Further Documentation	8
5.6.	Changes in Locations, Name, etc	9
5.7.	Notices	9
5.8.	Investment Property	9
5.9.	Receivables	10
5.10.	Intellectual Property	10
SECTION 6. REMEDIAL PROVISIONS		11
6.1.	Certain Matters Relating to Receivables	11
6.2.	Communications with Obligors; Grantors Remain Liable	12
6.3.	Pledged Stock	12
6.4.	Proceeds to be Turned Over to Administrative Agent	13
6.5.	Application of Proceeds	13
6.6.	Code and Other Remedies	13
6.7.	Registration Rights	14
6.8.	Deficiency	15

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SECTION 7. THE ADMINISTRATIVE AGENT		15
7.1.	Administrative Agent's Appointment as Attorney-in-Fact, etc.	15
7.2.	Duty of Administrative Agent	16
7.3.	Execution of Financing Statements	16
7.4.	Authority of Administrative Agent	17
SECTION 8. MISCELLANEOUS		17
8.1.	Amendments in Writing	17
8.2.	Notices	17
8.3.	No Waiver by Course of Conduct; Cumulative Remedies	17
8.4.	Enforcement Expenses; Indemnification	17
8.5.	Successors and Assigns	18
8.6.	Set-Off	18
8.7.	Counterparts	18
8.8.	Severability	18
8.9.	Section Headings	18
8.10.	Integration	18
8.11.	GOVERNING LAW	18
8.12.	Submission To Jurisdiction; Waivers	19
8.13.	Acknowledgements	19
8.14.	Additional Grantors	19
8.15.	Releases	19
8.16.	WAIVER OF JURY TRIAL	20

SCHEDULES
Schedule 1	Notice Addresses of Guarantors
Schedule 2	Description of Pledged Securities
Schedule 3	Filings and Other Actions Required to Perfect Security Interests
Schedule 4	Location of Jurisdiction of Organization and Chief Executive Office
Schedule 5	Location of Inventory and Equipment (including Exhibit A Office Leases Addresses)
Schedule 6	Intellectual Property
Schedule 7	Governmental Authorities
ANNEXES
Annex I	Form of Assumption Agreement
Annex II	Form of Acknowledgment and Consent

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        GUARANTEE AND COLLATERAL AGREEMENT, dated as of December 19, 2002, made by each of the signatories hereto (together with any other entity that may become a party hereto as provided herein, the "Grantors"), in favor of THE BANK OF NEW YORK, as Administrative Agent (in such capacity, the "Administrative Agent") for the banks, financial institutions and other entities (the "Lenders") from time to time parties to the Credit Agreement, dated as of December 19, 2002 (as amended, supplemented or otherwise modified from time to time, the "Credit Agreement"), among SCIENTIFIC GAMES CORPORATION, a Delaware corporation (the "Borrower"), the several banks, financial institutions and other entities from time to time parties to the Credit Agreement (the "Lenders"), BEAR, STEARNS & CO. INC., as sole lead arranger and sole bookrunner (in such capacity, the "Lead Arranger"), BNY CAPITAL MARKETS, INC., as co-arranger (in such capacity, the "Co-Arranger"), BEAR STEARNS CORPORATE LENDING INC., as syndication agent (in such capacity, the "Syndication Agent"), and the Administrative Agent.

W I T N E S S E T H:

        WHEREAS, pursuant to the Credit Agreement, the Lenders have severally agreed to make extensions of credit to the Borrower upon the terms and subject to the conditions set forth therein;

        WHEREAS, the Borrower is a member of an affiliated group of companies that includes each other Grantor;

        WHEREAS, the proceeds of the extensions of credit under the Credit Agreement will be used in part to enable the Borrower to make valuable transfers to one or more of the other Grantors in connection with the operation of their respective businesses;

        WHEREAS, the Borrower and the other Grantors are engaged in related businesses, and each Grantor will derive substantial direct and indirect benefit from the making of the extensions of credit under the Credit Agreement; and

        WHEREAS, it is a condition precedent to the obligation of the Lenders to make their respective extensions of credit to the Borrower under the Credit Agreement that the Grantors shall have executed and delivered this Agreement to the Administrative Agent for the ratable benefit of the Agents and the Lenders;

        NOW, THEREFORE, in consideration of the premises and to induce the Agents and the Lenders to enter into the Credit Agreement and to induce the Lenders to make their respective extensions of credit to the Borrower thereunder, each Grantor hereby agrees with the Administrative Agent, for the ratable benefit of the Agents and the Lenders, as follows:

SECTION 1.    DEFINED TERMS

        1.1.    Definitions.    (a) Unless otherwise defined herein, terms defined in the Credit Agreement and used herein shall have the meanings given to them in the Credit Agreement, and the following terms are used herein as defined in the New York UCC: Accounts, Certificated Security, Chattel Paper, Commercial Tort Claims, Documents, Equipment, Farm Products, General Intangibles, Goods, Instruments, Inventory, Letter-of-Credit Rights and Supporting Obligations.

        (b)    The following terms shall have the following meanings:

        "Agreement": this Guarantee and Collateral Agreement, as the same may be amended, supplemented or otherwise modified from time to time.

        "Borrower Credit Agreement Obligations": the collective reference to the unpaid principal of and interest on the Loans and Reimbursement Obligations and all other obligations and liabilities of the Borrower (including, without limitation, interest accruing at the then applicable rate provided in the Credit Agreement after the maturity of the Loans and Reimbursement Obligations and interest accruing at the then applicable rate provided in the Credit Agreement after the filing of any petition in bankruptcy, or the commencement of any insolvency, reorganization or like proceeding, relating to the Borrower, whether or not a claim for post-filing or post-petition interest is allowed in such proceeding) to any Agent or any Lender, whether direct or indirect, absolute or contingent, due or to become due, or now existing or hereafter incurred, which may arise under, out of, or in connection with, the Credit Agreement, this Agreement, the other Loan Documents or, any Letter of Credit, or any other document made, delivered or given in connection therewith, in each case whether on account of principal, interest, reimbursement obligations, fees, indemnities, costs, expenses or otherwise (including, without limitation, all fees and disbursements of counsel

to the Agents or to the Lenders that are required to be paid by the Borrower pursuant to the terms of any of the foregoing agreements).

        "Borrower Hedge Agreement Obligations": the collective reference to all obligations and liabilities of the Borrower (including, without limitation, interest accruing at the then applicable rate provided in any Specified Hedge Agreement after the filing of any petition in bankruptcy, or the commencement of any insolvency, reorganization or like proceeding, relating to the Borrower, whether or not a claim for post-filing or post-petition interest is allowed in such proceeding) to any Lender or any affiliate of any Lender, whether direct or indirect, absolute or contingent, due or to become due, or now existing or hereafter incurred, which may arise under, out of, or in connection with, any Specified Hedge Agreement or any other document made, delivered or given in connection therewith, in each case, whether on account of principal, interest, reimbursement obligations, fees, indemnities, costs, expenses or otherwise (including, without limitation, all fees and disbursements of counsel to the relevant Lender or affiliate thereof that are required to be paid by the Borrower pursuant to the terms of any Specified Hedge Agreement).

        "Borrower Obligations": the collective reference to (i) the Borrower Credit Agreement Obligations and (ii) the Borrower Hedge Agreement Obligations, but only to the extent that, and only so long as, the Borrower Credit Agreement Obligations are secured and guaranteed pursuant hereto.

        "Collateral": as defined in Section 3.

        "Collateral Account": any collateral account established by the Administrative Agent as provided in Section 6.1 or 6.4.

        "Copyrights": (i) all copyrights arising under the laws of the United States, any other country or any political subdivision thereof, whether registered or unregistered and whether published or unpublished (including, without limitation, those listed in Schedule 6), all registrations and recordings thereof, and all applications in connection therewith, including, without limitation, all registrations, recordings and applications in the United States Copyright Office, and (ii) the right to obtain all renewals thereof.

        "Copyright Licenses": any written agreement naming any Grantor as licensor or licensee (including, without limitation, those listed in Schedule 6), granting any right under any Copyright, including, without limitation, the grant of rights to manufacture, distribute, exploit and sell materials derived from any Copyright.

        "Deposit Account": as defined in the Uniform Commercial Code of any applicable jurisdiction and, in any event, including, without limitation, any demand, time, savings, passbook or like account maintained with a depositary institution.

        "Foreign Subsidiary Voting Stock": the voting Capital Stock of any Foreign Subsidiary.

        "Guarantor Obligations": with respect to any Guarantor, all obligations and liabilities of such Guarantor which may arise under or in connection with this Agreement (including, without limitation, Section 2) or any other Loan Document to which such Guarantor is a party, in each case whether on account of guarantee obligations, reimbursement obligations, fees, indemnities, costs, expenses or otherwise (including, without limitation, all fees and disbursements of counsel to the Agents or to the Lenders that are required to be paid by such Guarantor pursuant to the terms of this Agreement or any other Loan Document).

        "Guarantors": the collective reference to each Grantor other than the Borrower.

        "Intercompany Note": any promissory note evidencing loans made by any Grantor to any of its Subsidiaries.

        "Investment Property": the collective reference to (i) all "investment property" as such term is defined in Section 9-102(a)(49) of the New York UCC (other than any Foreign Subsidiary Voting Stock excluded from the definition of "Pledged Stock") and (ii) whether or not constituting "investment property" as so defined, all Pledged Notes and all Pledged Stock.

        "Issuers": the collective reference to each issuer of any Investment Property.

        "New York UCC": the Uniform Commercial Code as from time to time in effect in the State of New York.

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        "Obligations": (i) in the case of the Borrower, the Borrower Obligations, and (ii) in the case of each Guarantor, its Guarantor Obligations.

        "Patents": (i) all letters patent of the United States, any other country or any political subdivision thereof, all reissues and extensions thereof and all goodwill associated therewith, including, without limitation, any of the foregoing referred to in Schedule 6, (ii) all applications for letters patent of the United States or any other country and all divisions, continuations and continuations-in-part thereof, including, without limitation, any of the foregoing referred to in Schedule 6, and (iii) all rights to obtain any reissues or extensions of the foregoing.

        "Patent License": all agreements, whether written or oral, providing for the grant by or to any Grantor of any right to manufacture, use or sell any invention covered in whole or in part by a Patent, including, without limitation, any of the foregoing referred to in Schedule 6.

        "Pledged Notes": all promissory notes listed on Schedule 2, all Intercompany Notes at any time issued to any Grantor and all other promissory notes issued to or held by any Grantor (other than promissory notes issued in connection with extensions of trade credit by any Grantor in the ordinary course of business).

        "Pledged Stock": the shares of Capital Stock listed on Schedule 2, together with any other shares, stock certificates, options, interests or rights of any nature whatsoever in respect of the Capital Stock of any Person that may be issued or granted to, or held by, any Grantor while this Agreement is in effect; provided that in no event shall more than 65% of the total outstanding Foreign Subsidiary Voting Stock of any Foreign Subsidiary directly owned by a Grantor be required to be pledged hereunder.

        "Proceeds": all "proceeds" as such term is defined in Section 9-102(a)(64) of the New York UCC and, in any event, shall include, without limitation, all dividends or other income from the Investment Property, collections thereon or distributions or payments with respect thereto.

        "Receivable": any right to payment for goods sold or leased or for services rendered, whether or not such right is evidenced by an Instrument or Chattel Paper and whether or not it has been earned by performance (including, without limitation, any Account).

        "Securities Act": the Securities Act of 1933, as amended.

        "Trademarks": (i) all trademarks, trade names, corporate names, company names, business names, fictitious business names, trade styles, service marks, logos and other source or business identifiers, and all goodwill associated therewith, now existing or hereafter adopted or acquired, all registrations and recordings thereof, and all applications in connection therewith, whether in the United States Patent and Trademark Office or in any similar office or agency of the United States, any State thereof or any other country or any political subdivision thereof, or otherwise, and all common-law rights related thereto, including, without limitation, any of the foregoing referred to in Schedule 6, and (ii) the right to obtain all renewals thereof.

        "Trademark License": any agreement, whether written or oral, providing for the grant by or to any Grantor of any right to use any Trademark, including, without limitation, any of the foregoing referred to in Schedule 6.

        "Vehicles": all cars, trucks, trailers, construction, special purpose and other vehicles and equipment covered by a certificate of title of any state or of the United States of America and all appurtenants to any of the foregoing.

        1.2.    Other Definitional Provisions.    (a) The words "hereof," "herein", "hereto" and "hereunder" and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement, and Section and Schedule references are to this Agreement unless otherwise specified.

        (b)  The meanings given to terms defined herein shall be equally applicable to both the singular and plural forms of such terms.

        (c)  Where the context requires, terms relating to the Collateral or any part thereof, when used in relation to a Grantor, shall refer to such Grantor's Collateral or the relevant part thereof.

        (d)  Where the context requires, any affiliate of a Lender which is a party to a Specified Hedge Agreement shall be deemed to be a "Lender" for purposes of this Agreement.

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SECTION 2.    GUARANTEE

        2.1.    Guarantee.    (a) Each of the Guarantors hereby, jointly and severally, unconditionally and irrevocably, guarantees to the Administrative Agent, for the ratable benefit of the Agents and the Lenders and their respective permitted successors, indorsees, transferees and assigns, the prompt and complete payment and performance by the Borrower when due (whether at the stated maturity, by acceleration or otherwise) of the Borrower Obligations.

        (b)  Anything herein or in any other Loan Document to the contrary notwithstanding, the maximum liability of each Guarantor hereunder and under the other Loan Documents shall in no event exceed the amount which can be guaranteed by such Guarantor under applicable federal and state laws relating to the insolvency of debtors (after giving effect to the right of contribution established in Section 2.2).

        (c)  Each Guarantor agrees that the Borrower Obligations may at any time and from time to time exceed the amount of the liability of such Guarantor hereunder without impairing the guarantee contained in this Section 2 or affecting the rights and remedies of any Agent or any Lender hereunder.

        (d)  The guarantee contained in this Section 2 shall remain in full force and effect until all the Borrower Obligations and the obligations of each Guarantor under the guarantee contained in this Section 2 shall have been satisfied by payment in full, no Letter of Credit shall be outstanding and the Commitments shall be terminated, notwithstanding that from time to time during the term of the Credit Agreement the Borrower may be free from any Borrower Obligations.

        (e)  No payment made by the Borrower, any of the Guarantors, any other guarantor or any other Person or received or collected by any Agent or any Lender from the Borrower, any of the Guarantors, any other guarantor or any other Person by virtue of any action or proceeding or any set-off or appropriation or application at any time or from time to time in reduction of or in payment of the Borrower Obligations shall be deemed to modify, reduce, release or otherwise affect the liability of any Guarantor hereunder which shall, notwithstanding any such payment (other than any payment made by such Guarantor in respect of the Borrower Obligations or any payment received or collected from such Guarantor in respect of the Borrower Obligations), remain liable for the Borrower Obligations up to the maximum liability of such Guarantor hereunder until the Borrower Obligations are paid in full, no Letter of Credit shall be outstanding and the Commitments are terminated.

        2.2.    Right of Contribution.    Each Guarantor hereby agrees that to the extent that a Guarantor shall have paid more than its proportionate share of any payment made hereunder, such Guarantor shall be entitled to seek and receive contribution from and against any other Guarantor hereunder which has not paid its proportionate share of such payment. Each Guarantor's right of contribution shall be subject to the terms and conditions of Section 2.3. The provisions of this Section 2.2 shall in no respect limit the obligations and liabilities of any Guarantor to the Agents and the Lenders, and each Guarantor shall remain liable to the Agents and the Lenders for the full amount guaranteed by such Guarantor hereunder.

        2.3.    No Subrogation.    Notwithstanding any payment made by any Guarantor hereunder or any set-off or application of funds of any Guarantor by any Agent or any Lender, no Guarantor shall be entitled to be subrogated to any of the rights of any Agent or any Lender against the Borrower or any other Guarantor or any collateral security or guarantee or right of offset held by any Agent or any Lender for the payment of the Borrower Obligations, nor shall any Guarantor seek or be entitled to seek any contribution or reimbursement from the Borrower or any other Guarantor in respect of payments made by such Guarantor hereunder, until all amounts owing to the Agents and the Lenders by the Borrower on account of the Borrower Obligations are paid in full, no Letter of Credit shall be outstanding and the Commitments are terminated. If any amount shall be paid to any Guarantor on account of such subrogation rights at any time when all of the Borrower Obligations shall not have been paid in full, such amount shall be held by such Guarantor for the benefit of the Agents and the Lenders, segregated from other funds of such Guarantor, and shall, forthwith upon receipt by such Guarantor, be turned over to the Administrative Agent in the exact form received by such Guarantor (duly indorsed by such Guarantor to the Administrative Agent, if required), to be applied against the Borrower Obligations, whether matured or unmatured, in such order as the Administrative Agent may reasonably determine.

        2.4.    Amendments, etc. with respect to the Borrower Obligations.    Each Guarantor shall remain obligated hereunder notwithstanding that, without any reservation of rights against any Guarantor and without notice

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to or further assent by any Guarantor, any demand for payment of any of the Borrower Obligations made by any Agent or any Lender may be rescinded by such Agent or such Lender and any of the Borrower Obligations continued, and the Borrower Obligations, or the liability of any other Person upon or for any part thereof, or any collateral security or guarantee therefor or right of offset with respect thereto, may, from time to time, in whole or in part, be renewed, extended, amended, modified, accelerated, compromised, waived, surrendered or released by any Agent or any Lender, and the Credit Agreement and the other Loan Documents and any other documents executed and delivered in connection therewith may be amended, modified, supplemented or terminated, in whole or in part, and any collateral security, guarantee or right of offset at any time held by any Agent or any Lender for the payment of the Borrower Obligations may be sold, exchanged, waived, surrendered or released. No Agent or Lender shall have any obligation to protect, secure, perfect or insure any Lien at any time held by it as security for the Borrower Obligations or for the guarantee contained in this Section 2 or any property subject thereto.

        2.5.    Guarantee Absolute and Unconditional.    Each Guarantor to the extent permitted by applicable law, waives any and all notice of the creation, renewal, extension or accrual of any of the Borrower Obligations and notice of or proof of reliance by any Agent or any Lender upon the guarantee contained in this Section 2 or acceptance of the guarantee contained in this Section 2; the Borrower Obligations, and any of them, shall conclusively be deemed to have been created, contracted or incurred, or renewed, extended, amended or waived, in reliance upon the guarantee contained in this Section 2; and all dealings between the Borrower and any of the Guarantors, on the one hand, and the Agents and the Lenders, on the other hand, likewise shall be conclusively presumed to have been had or consummated in reliance upon the guarantee contained in this Section 2. Each Guarantor, to the extent permitted by applicable law, waives diligence, presentment, protest, demand for payment and notice of default or nonpayment to or upon the Borrower or any of the Guarantors with respect to the Borrower Obligations. Each Guarantor understands and agrees that the guarantee contained in this Section 2 shall be construed as a continuing, absolute and unconditional guarantee of payment without regard to (a) the validity or enforceability of the Credit Agreement or any other Loan Document, any of the Borrower Obligations or any other collateral security therefor or guarantee or right of offset with respect thereto at any time or from time to time held by any Agent or any Lender, (b) any defense, set-off or counterclaim (other than a defense of payment or performance) which may at any time be available to or be asserted by the Borrower or any other Person against any Agent or any Lender, or (c) any other circumstance whatsoever (with or without notice to or knowledge of the Borrower or such Guarantor) which constitutes, or might be construed to constitute, an equitable or legal discharge of the Borrower for the Borrower Obligations, or of such Guarantor under the guarantee contained in this Section 2, in bankruptcy or in any other instance. When making any demand hereunder or otherwise pursuing its rights and remedies hereunder against any Guarantor, any Agent or any Lender may, but shall be under no obligation to, make a similar demand on or otherwise pursue such rights and remedies as it may have against the Borrower, any other Guarantor or any other Person or against any collateral security or guarantee for the Borrower Obligations or any right of offset with respect thereto, and any failure by any Agent or any Lender to make any such demand, to pursue such other rights or remedies or to collect any payments from the Borrower, any other Guarantor or any other Person or to realize upon any such collateral security or guarantee or to exercise any such right of offset, or any release of the Borrower, any other Guarantor or any other Person or any such collateral security, guarantee or right of offset, shall not relieve any Guarantor of any obligation or liability hereunder, and shall not impair or affect the rights and remedies, whether express, implied or available as a matter of law, of any Agent or any Lender against any Guarantor. For the purposes hereof "demand" shall include the commencement and continuance of any legal proceedings.

        2.6.    Reinstatement.    The guarantee contained in this Section 2 shall continue to be effective, or be reinstated, as the case may be, if at any time payment, or any part thereof, of any of the Borrower Obligations is rescinded or must otherwise be restored or returned by any Agent or any Lender upon the insolvency, bankruptcy, dissolution, liquidation or reorganization of the Borrower or any Guarantor, or upon or as a result of the appointment of a receiver, intervenor or conservator of, or trustee or similar officer for, the Borrower or any Guarantor or any substantial part of its property, or otherwise, all as though such payments had not been made.

        2.7.    Payments.    Each Guarantor hereby guarantees that payments hereunder will be paid to the Administrative Agent without set-off or counterclaim in Dollars at the Funding Office.

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SECTION 3.    GRANT OF SECURITY INTEREST

        Each Grantor hereby assigns and transfers to the Administrative Agent, and hereby grants to the Administrative Agent, for the ratable benefit of the Agents and the Lenders (and any affiliates of any Lender to which Borrower Hedge Agreement Obligations are owing), a security interest in, all of the following property now owned or at any time hereafter acquired by such Grantor or in which such Grantor now has or at any time in the future may acquire any right, title or interest (collectively, the "Collateral"), as collateral security for the prompt and complete payment and performance when due (whether at the stated maturity, by acceleration or otherwise) of such Grantor's Obligations:

        (a)  all Accounts;

        (b)  all Chattel Paper;

        (c)  all Deposit Accounts;

        (d)  all Documents;

        (e)  all Equipment, other than Vehicles;

        (f)    all General Intangibles;

        (g)  all Instruments;

        (h)  all Intellectual Property;

        (i)    all Inventory;

        (j)    all Investment Property;

        (k)  all Letter-of-Credit Rights;

        (l)    all Goods and other property not otherwise described above;

        (m)  all books and records pertaining to the Collateral; and

        (n)  to the extent not otherwise included, all Proceeds, Supporting Obligations and products of any and all of the foregoing and all collateral security and guarantees given by any Person with respect to any of the foregoing;

provided, however, that notwithstanding any of the other provisions set forth in this Section 3, this Agreement shall not constitute a grant of a security interest in any property to the extent that such grant of a security interest is prohibited by any Requirements of Law of a Governmental Authority, requires a consent not obtained of any Governmental Authority pursuant to such Requirement of Law or is prohibited by, or constitutes a breach or default under or results in the termination of or requires any consent not obtained under, any contract, license, agreement, instrument or other document evidencing or giving rise to such property or, in the case of any Investment Property, Pledged Stock or Pledged Note, any applicable shareholder or similar agreement, except to the extent that such Requirement of Law or the term in such contract, license, agreement, instrument or other document or shareholder or similar agreement providing for such prohibition, breach, default or termination or requiring such consent is ineffective under applicable law.

SECTION 4.    REPRESENTATIONS AND WARRANTIES

        To induce the Agents and the Lenders to enter into the Credit Agreement and to induce the Lenders to make their respective extensions of credit to the Borrower thereunder, each Grantor hereby represents and warrants to each Agent and each Lender that:

        4.1.    Representations in Credit Agreement.    In the case of each Guarantor, the representations and warranties set forth in Section 6 of the Credit Agreement as they relate to such Guarantor or to the Loan Documents to which such Guarantor is a party, each of which is hereby incorporated herein by reference, are true and correct, and each Agent and each Lender shall be entitled to rely on each of them as if they were fully set forth herein, provided that each reference in each such representation and warranty to the Borrower's knowledge shall, for the purposes of this Section 4.1, be deemed to be a reference to such Guarantor's knowledge.

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        4.2.    Title; No Other Liens.    Except for the security interest granted to the Administrative Agent for the ratable benefit of the Agents and the Lenders pursuant to this Agreement and the other Liens permitted to exist on the Collateral by the Credit Agreement, such Grantor owns each item of the Collateral free and clear of any and all Liens or claims of others. No financing statement or other public notice with respect to all or any part of the Collateral is on file or of record in any public office, except such as have been filed in favor of the Administrative Agent, for the ratable benefit of the Agents and the Lenders, pursuant to this Agreement or as are permitted by the Credit Agreement.

        4.3.    Perfected Liens.    The security interests granted pursuant to this Agreement (a) upon completion of the filings and other actions specified on Schedule 3 (which, in the case of all filings and other documents referred to on said Schedule, have been delivered to the Administrative Agent in completed and duly executed form) will constitute valid perfected security interests in all of the Collateral in favor of the Administrative Agent, for the ratable benefit of the Agents and the Lenders, as collateral security for such Grantor's Obligations, enforceable in accordance with the terms hereof against all creditors of such Grantor and any Persons purporting to purchase any Collateral from such Grantor and (b) are prior to all other Liens on the Collateral in existence on the date hereof except for Liens permitted by the Credit Agreement.

        4.4.    Jurisdiction of Organization; Chief Executive Office.    On the date hereof, such Grantor's jurisdiction of organization, identification number from the jurisdiction of organization (if any), and the location of such Grantor's chief executive office or sole place of business, are specified on Schedule 4. Such Grantor has furnished to the Administrative Agent a certified charter, certificate of incorporation or other organization document and long-form good standing certificate as of a date which is recent to the date hereof.

        4.5.    Inventory and Equipment.    On the date hereof, the Inventory and the Equipment (other than mobile goods) are kept at the locations listed on Schedule 5.

        4.6.    Farm Products.    None of the Collateral constitutes, or is the Proceeds of, Farm Products.

        4.7.    Investment Property.    (a) The shares of Pledged Stock pledged by such Grantor hereunder constitute all the issued and outstanding shares of all classes of the Capital Stock of each relevant Issuer owned by such Grantor or, in the case of Foreign Subsidiary Voting Stock, if less, 65% of the outstanding Foreign Subsidiary Voting Stock of each relevant Issuer owned by such Grantor.

        (b)  All the shares of the Pledged Stock have been duly and validly issued and are fully paid and nonassessable.

        (c)  Each of the Pledged Notes constitutes the legal, valid and binding obligation of the obligor with respect thereto, enforceable in accordance with its terms, subject to the effects of bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws relating to or affecting creditors' rights generally, general equitable principles (whether considered in a proceeding in equity or at law) and an implied covenant of good faith and fair dealing.

        (d)  Such Grantor is the record and beneficial owner of, and has good and marketable title to, the Investment Property pledged by it hereunder, free of any and all Liens or options in favor of, or claims of any other Person, except the security interest created by this Agreement.

        4.8.    Receivables.    (a) Each Grantor shall deliver to the Administrative Agent each Instrument or Chattel Paper in an amount in excess of $100,000 payable to such Grantor under or in connection with any Receivable.

        (b)  Except as set forth on Schedule 7, none of the obligors on any Receivables is a Governmental Authority.

        (c)  The amounts represented by such Grantor to the Lenders from time to time as owing to such Grantor in respect of the Receivables will at such times be accurate.

        4.9.    Intellectual Property.    (a) Schedule 6 lists all registered Copyrights, registered Trademarks, Patents and applications to register any of the foregoing owned by such Grantor in its own name on the date hereof, and all Copyright Licenses, Trademark Licenses and Patent Licenses.

        (b)  On the date hereof, all material Intellectual Property of such Grantor, including without limitation the Intellectual Property described on Schedule 6, is valid, subsisting, unexpired and enforceable, has not been abandoned and does not infringe the intellectual property rights of any other Person.

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        (c)  Except as set forth in Schedule 6, on the date hereof, none of the Intellectual Property is the subject of any licensing or franchise agreement pursuant to which such Grantor is the licensor or franchisor.

        (d)  No holding, decision or judgment has been rendered by any Governmental Authority which would limit, cancel or question the validity of, or such Grantor's rights in, any Intellectual Property in any respect that could reasonably be expected to have a Material Adverse Effect.

        (e)  Except as set forth on Schedule 6, no action or proceeding is pending, or, to the knowledge of such Grantor, threatened, on the date hereof (i) seeking to limit, cancel or question the validity of any Intellectual Property or such Grantor's ownership interest therein or (ii) which, if adversely determined, would have a material adverse effect on the value of any Intellectual Property.

SECTION 5.    COVENANTS

        Each Grantor covenants and agrees with the Agents and the Lenders that, from and after the date of this Agreement until the Obligations shall have been paid in full, no Letter of Credit shall be outstanding and the Commitments shall have terminated:

        5.1.    Covenants in Credit Agreement.    In the case of each Guarantor, such Guarantor shall take, or shall refrain from taking, as the case may be, each action that is necessary to be taken or not taken under Sections 7, 8 and 9 of the Credit Agreement, as the case may be, so that no Default or Event of Default is caused by the failure to take such action or to refrain from taking such action by such Guarantor or any of its Subsidiaries.

        5.2.    Delivery of Instruments and Chattel Paper.    If any amount in excess of $100,000 payable under or in connection with any of the Collateral shall be or become evidenced by any Instrument, Certificated Security or Chattel Paper, such Instrument, Certificated Security or Chattel Paper shall be promptly delivered to the Administrative Agent, duly indorsed in a manner reasonably satisfactory to the Administrative Agent, to be held as Collateral pursuant to this Agreement.

        5.3.    Maintenance of Insurance.    (a) Such Grantor will maintain, with financially sound and reputable companies, insurance policies in accordance with Section 8.5 of the Credit Agreement.

        (b)  All such insurance shall (i) provide that no cancellation, material reduction in amount or material change in coverage thereof shall be effective until at least 30 days after receipt by the Administrative Agent of written notice thereof, (ii) name the Administrative Agent as insured party or loss payee, (iii) if reasonably requested by the Administrative Agent, include a breach of warranty clause and (iv) be reasonably satisfactory in all other respects to the Administrative Agent.

        (c)  Upon the reasonable request of the Administrative Agent, the Borrower shall deliver to the Administrative Agent a report of a reputable insurance broker with respect to such insurance substantially concurrently with the delivery by the Borrower to the Administrative Agent of its audited financial statements for each fiscal year and such supplemental reports with respect thereto as the Administrative Agent may from time to time reasonably request.

        5.4.    Payment of Obligations.    Such Grantor will pay and discharge or otherwise satisfy at or before maturity or before they become delinquent, as the case may be, all material taxes, assessments and governmental charges or levies imposed upon the Collateral or in respect of income or profits therefrom, as well as all material claims of any kind (including, without limitation, claims for labor, materials and supplies) against or with respect to the Collateral, except that no such charge need be paid if the amount or validity thereof is currently being contested in good faith by appropriate proceedings and reserves in conformity with GAAP with respect thereto have been provided on the books of such Grantor.

        5.5.    Maintenance of Perfected Security Interest; Further Documentation.    (a) Such Grantor shall maintain the security interest created by this Agreement as a perfected security interest having at least the priority described in Section 4.3 and shall defend such security interest against the claims and demands of all Persons whomsoever, subject to the rights of such Grantor under the Loan Documents to Dispose of the Collateral.

        (b)  Such Grantor will furnish to the Administrative Agent and the Lenders from time to time statements and schedules further identifying and describing the assets and property of such Grantor and such

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other reports in connection therewith, in each case as the Administrative Agent may reasonably request, all in reasonable detail.

        (c)  At any time and from time to time, upon the written request of the Administrative Agent, and at the sole expense of such Grantor, such Grantor will promptly and duly execute and deliver, and have recorded, such further instruments and documents and take such further actions as the Administrative Agent may reasonably request for the purpose of obtaining or preserving the full benefits of this Agreement and of the rights and powers herein granted, including, without limitation, (i) the filing of any financing or continuation statements under the Uniform Commercial Code (or other similar laws) in effect in any jurisdiction with respect to the security interests created hereby and (ii) in the case of Investment Property, Deposit Accounts, Letter-of-Credit Rights and any other relevant Collateral, taking any actions necessary to enable the Administrative Agent to obtain "control" (within the meaning of the applicable Uniform Commercial Code) with respect thereto.

        5.6.    Changes in Locations, Name, etc.    Such Grantor will not, except upon 15 days' prior written notice to the Administrative Agent and delivery to the Administrative Agent of (a) all additional financing statements and other documents reasonably requested by the Administrative Agent as necessary to maintain the validity, perfection and priority of the security interests provided for herein and (b) if applicable, a written supplement to Schedule 5 showing any additional location at which Inventory or Equipment shall be kept:

          (i)  change its jurisdiction of organization or the location of its chief executive office or sole place of business or principal residence from that referred to in Section 4.4; or

        (ii)  change its name.

        5.7.    Notices.    Such Grantor will advise the Administrative Agent and the Lenders promptly, in reasonable detail, of:

        (a)  any Lien (other than security interests created hereby or Liens permitted under the Credit Agreement) on any of the Collateral which would materially adversely affect the ability of the Administrative Agent to exercise any of its remedies hereunder; and

        (b)  of the occurrence of any other event which could reasonably be expected to have a material adverse effect on the aggregate value of the Collateral or on the security interests created hereby.

        5.8.    Investment Property.    (a) If such Grantor shall become entitled to receive or shall receive any stock certificate (including, without limitation, any certificate representing a stock dividend or a distribution in connection with any reclassification, increase or reduction of capital or any certificate issued in connection with any reorganization), option or rights in respect of the Capital Stock of any Issuer, whether in addition to, in substitution of, as a conversion of, or in exchange for, any shares of the Pledged Stock, or otherwise in respect thereof, such Grantor shall accept the same as the agent of the Agents and the Lenders, hold the same for the benefit of the Agents and the Lenders and deliver the same forthwith to the Administrative Agent in the exact form received, duly indorsed by such Grantor to the Administrative Agent, if required, together with an undated stock power covering such certificate duly executed in blank by such Grantor to be held by the Administrative Agent, subject to the terms hereof, as additional collateral security for the Obligations. Any sums paid upon or in respect of the Investment Property upon the liquidation or dissolution of any Issuer shall be paid over to the Administrative Agent to be held by it hereunder as additional collateral security for the Obligations, and in case any distribution of capital shall be made on or in respect of the Investment Property or any property shall be distributed upon or with respect to the Investment Property pursuant to the recapitalization or reclassification of the capital of any Issuer or pursuant to the reorganization thereof, the property so distributed shall, unless otherwise subject to a perfected security interest in favor of the Administrative Agent, be delivered to the Administrative Agent to be held by it hereunder as additional collateral security for the Obligations. If any sums of money or property so paid or distributed in respect of the Investment Property shall be received by such Grantor, such Grantor shall, until such money or property is paid or delivered to the Administrative Agent, hold such money or property for the benefit of the Agents and the Lenders, segregated from other funds of such Grantor, as additional collateral security for the Obligations. Notwithstanding the foregoing, the Grantors shall not be required to pay over to the Administrative Agent or deliver to the Administrative Agent as Collateral any proceeds of any liquidation or dissolution of any Issuer, or any distribution of capital or property in respect of any Investment Property, to the extent that (i) such liquidation, dissolution or

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distribution, if treated as a Disposition of the relevant Issuer, would be permitted by the Credit Agreement and (ii) the proceeds thereof are applied toward prepayment of Loans and reduction of Commitments to the extent required by the Credit Agreement.

        (b)  Without the prior written consent of the Administrative Agent, such Grantor will not (i) vote to enable, or take any other action to permit, any Issuer to issue any stock or other equity securities of any nature or to issue any other securities convertible into or granting the right to purchase or exchange for any stock or other equity securities of any nature of any Issuer, (ii) sell, assign, transfer, exchange, or otherwise dispose of, or grant any option with respect to, the Investment Property or Proceeds thereof (except pursuant to a transaction expressly permitted by the Credit Agreement), (iii) create, incur or permit to exist any Lien or option in favor of, or any claim of any Person with respect to, any of the Investment Property or Proceeds thereof, or any interest therein, except for the security interests created by this Agreement or (iv) enter into any agreement or undertaking restricting the right or ability of such Grantor or the Administrative Agent to sell, assign or transfer any of the Investment Property or Proceeds thereof (except pursuant to a transaction expressly permitted by the Credit Agreement).

        (c)  In the case of each Grantor which is an Issuer, such Issuer agrees that (i) it will be bound by the terms of this Agreement relating to the Investment Property issued by it and will comply with such terms insofar as such terms are applicable to it, (ii) it will notify the Administrative Agent promptly in writing of the occurrence of any of the events described in Section 5.8(a) with respect to the Investment Property issued by it and (iii) the terms of Sections 6.3(c) and 6.7 shall apply to it, mutatis mutandis, with respect to all actions that may be required of it pursuant to Section 6.3(c) or 6.7 with respect to the Investment Property issued by it.

        5.9.    Receivables.    (a) Other than in the ordinary course of business consistent with its past practice, such Grantor will not (i) grant any extension of the time of payment of any Receivable, (ii) compromise or settle any Receivable for less than the full amount thereof, (iii) release, wholly or partially, any Person liable for the payment of any Receivable, (iv) allow any credit or discount whatsoever on any Receivable or (v) amend, supplement or modify in any material respect any Receivable in any manner that could adversely affect the value thereof.

        (b)  Such Grantor will deliver to the Administrative Agent a copy of each material written demand, notice or document received by it that questions the validity or enforceability of more than 5% of the aggregate amount of the then outstanding Receivables.

        5.10.    Intellectual Property.    (a) Such Grantor (either itself or through licensees) will (i) continue to use each material Trademark on and with respect to each and every product and service applicable to its then current line in order to maintain such Trademark in full force free from any claim of abandonment for non-use, provided that if a product or service line is discontinued, use of a Trademark with respect to such product or service line may be discontinued, (ii) maintain at least the current quality of products and services offered under such Trademark, (iii) use such Trademark with the appropriate notice of registration and all other notices and legends required by applicable Requirements of Law, (iv) not adopt or use any mark which is confusingly similar or a colorable imitation of such Trademark unless the Administrative Agent, for the ratable benefit of the Agents and the Lenders, shall obtain a perfected security interest in such mark pursuant to this Agreement, and (v) not knowingly (and not knowingly permit any licensee or sublicensee thereof to) do any act or knowingly omit to do any act whereby such Trademark may become invalidated or impaired in any way, except as provided in Section 5.10(a)(i) above.

        (b)  Such Grantor (either itself or through licensees) will not knowingly do any act, or knowingly omit to do any act, whereby any material Patent may become forfeited, abandoned or dedicated to the public.

        (c)  Such Grantor (either itself or through licensees) will not knowingly (and will not knowingly permit any licensee or sublicensee thereof to) do any act or knowingly omit to do any act whereby any material portion of the Copyrights may become invalidated or otherwise impaired. Such Grantor will not knowingly (either itself or through licensees) do any act whereby any material portion of the Copyrights may fall into the public domain.

        (d)  Such Grantor (either itself or through licensees) will not do any act that knowingly uses any material Intellectual Property to infringe the intellectual property rights of any other Person.

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        (e)  Such Grantor will notify the Administrative Agent and the Lenders promptly if it knows, or has reason to know, that any application or registration relating to any material Intellectual Property may become forfeited, abandoned or dedicated to the public, or of any adverse determination or development (including, without limitation, the institution of, or any such determination or development in, any proceeding in the United States Patent and Trademark Office, the United States Copyright Office or any court or tribunal in any country) regarding such Grantor's ownership of, or the validity of, any material Intellectual Property or such Grantor's right to register the same or to own and maintain the same.

        (f)    Whenever such Grantor, either by itself or through any agent, employee, licensee or designee, shall file an application for the registration of any Intellectual Property with the United States Patent and Trademark Office, the United States Copyright Office or any similar office or agency in any other country or any political subdivision thereof, such Grantor shall report such filing to the Administrative Agent within thirty Business Days after the last day of the fiscal quarter in which such filing occurs. Upon request of the Administrative Agent, such Grantor shall execute and deliver, for recordation by the Administrative Agent (at such Grantor's cost and expense), any and all agreements, instruments, documents, and papers as the Administrative Agent may request to evidence the Agents' and the Lenders' security interest in any Copyright, Patent or Trademark and the goodwill and general intangibles of such Grantor relating thereto or represented thereby.

        (g)  Such Grantor will take all reasonable and necessary steps, including, without limitation, in any proceeding before the United States Patent and Trademark Office, the United States Copyright Office or any similar office or agency in any other country or any political subdivision thereof, to maintain and pursue each application (and to obtain the relevant registration) and to maintain each registration of the material Intellectual Property, including, without limitation, filing of applications for renewal, affidavits of use and affidavits of incontestability.

        (h)  In the event that any material Intellectual Property is infringed, misappropriated or diluted by a third party, such Grantor shall (i) take such actions as such Grantor shall reasonably deem appropriate under the circumstances to protect such Intellectual Property and (ii) if such Intellectual Property is of material economic value, promptly notify the Administrative Agent after it learns thereof and take all commercially reasonable actions necessary to protect such Intellectual Property and to recover any and all damages for such infringement, misappropriation or dilution.

SECTION 6.    REMEDIAL PROVISIONS

        6.1.    Certain Matters Relating to Receivables.    (a) The Administrative Agent shall have the right to make test verifications of the Receivables in any manner and through any medium that the Administrative Agent (in consultation with the Borrower) reasonably considers advisable, and each Grantor shall furnish all such assistance and information as the Administrative Agent may reasonably require in connection with such test verifications. At any time upon the occurrence and during the continuance of an Event of Default, upon the Administrative Agent's reasonable request and at the expense of the relevant Grantor, such Grantor shall cause independent public accountants reasonably satisfactory to the Administrative Agent to furnish to the Administrative Agent reports showing reconciliations, aging and test verifications of, and trial balances for, the Receivables.

        (b)  The Administrative Agent hereby authorizes each Grantor to collect such Grantor's Receivables and the Administrative Agent may curtail or terminate said authority at any time after the occurrence and during the continuance of an Event of Default. If required by the Administrative Agent at any time after the occurrence and during the continuance of an Event of Default, any payments of Receivables, when collected by any Grantor, (i) shall be forthwith (and, in any event, within two Business Days) deposited by such Grantor in the exact form received, duly indorsed by such Grantor to the Administrative Agent if required, in a Collateral Account maintained under the sole dominion and control of the Administrative Agent, subject to withdrawal by the Administrative Agent for the account of the Lenders only as provided in Section 6.5, and (ii) until so turned over, shall be held by such Grantor on behalf of the Administrative Agent and the Lenders, segregated from other funds of such Grantor. Each such deposit of Proceeds of Receivables shall be accompanied by a report identifying in reasonable detail the nature and source of the payments included in the deposit.

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        (c)  Upon the occurrence and during the continuance of an Event of Default, at the Administrative Agent's request, each Grantor shall deliver to the Administrative Agent all original (where practicable, otherwise copies will be delivered) and other documents evidencing, and relating to, the agreements and transactions which gave rise to the Receivables, including, without limitation, all original orders, invoices and shipping receipts.

        6.2.    Communications with Obligors; Grantors Remain Liable.    (a) The Administrative Agent in its own name or in the name of others may at any time after the occurrence and during the continuance of an Event of Default communicate with obligors under the Receivables to verify with them to the Administrative Agent's reasonable satisfaction the existence, amount and terms of any Receivables.

        (b)  Upon the reasonable request of the Administrative Agent at any time after the occurrence and during the continuance of an Event of Default, each Grantor shall notify obligors on the Receivables that the Receivables have been assigned to the Administrative Agent for the ratable benefit of the Agents and the Lenders and that payments in respect thereof shall be made directly to the Administrative Agent.

        (c)  Anything herein to the contrary notwithstanding, each Grantor shall remain liable under each Receivables to observe and perform in all material respects all the conditions and obligations to be observed and performed by it thereunder, all in accordance with the terms of any agreement giving rise thereto. No Agent or Lender shall have any obligation or liability under any Receivable (or any agreement giving rise thereto) by reason of or arising out of this Agreement or the receipt by any Agent or any Lender of any payment relating thereto, nor shall any Agent or any Lender be obligated in any manner to perform any of the obligations of any Grantor under or pursuant to any Receivable (or any agreement giving rise thereto), to make any payment, to make any inquiry as to the nature or the sufficiency of any payment received by it or as to the sufficiency of any performance by any party thereunder, to present or file any claim, to take any action to enforce any performance or to collect the payment of any amounts which may have been assigned to it or to which it may be entitled at any time or times.

        6.3.    Pledged Stock.    (a) Unless an Event of Default shall have occurred and be continuing and the Administrative Agent shall have given notice to the relevant Grantor of the Administrative Agent's intent to exercise its corresponding rights pursuant to Section 6.3(b), each Grantor shall be permitted to receive all cash dividends paid in respect of the Pledged Stock and all payments made in respect of the Pledged Notes and to exercise all voting and corporate or other organizational rights with respect to the Investment Property; provided, however, that no vote shall be cast or corporate or other organizational right exercised or other action taken which, in the Administrative Agent's reasonable judgment, would impair the Collateral or which would be inconsistent with or result in any violation of any provision of the Credit Agreement, this Agreement or any other Loan Document.

        (b)  If an Event of Default shall occur and be continuing and the Administrative Agent shall give notice of its intent to exercise such rights to the relevant Grantor or Grantors, (i) the Administrative Agent shall have the right to receive any and all cash dividends, payments or other Proceeds paid in respect of the Investment Property and make application thereof to the Obligations in the order set forth in Section 6.5, and (ii) any or all of the Investment Property shall be registered in the name of the Administrative Agent or its nominee, and the Administrative Agent or its nominee may thereafter exercise (x) all voting, corporate and other rights pertaining to such Investment Property at any meeting of shareholders of the relevant Issuer or Issuers or otherwise and (y) any and all rights of conversion, exchange and subscription and any other rights, privileges or options pertaining to such Investment Property as if it were the absolute owner thereof (including, without limitation, the right to exchange at its discretion any and all of the Investment Property upon the merger, consolidation, reorganization, recapitalization or other fundamental change in the corporate or other organizational structure of any Issuer, or upon the exercise by any Grantor or the Administrative Agent of any right, privilege or option pertaining to such Investment Property, and in connection therewith, the right to deposit and deliver any and all of the Investment Property with any committee, depositary, transfer agent, registrar or other designated agency upon such terms and conditions as the Administrative Agent may determine), all without liability except to account for property actually received by it, but the Administrative Agent shall have no duty to any Grantor to exercise any such right, privilege or option and shall not be responsible for any failure to do so or delay in so doing.

        (c)  Each Grantor hereby authorizes and instructs each Issuer of any Investment Property pledged by such Grantor hereunder to (i) comply with any instruction received by it from the Administrative Agent in writing that (x) states that an Event of Default has occurred and is continuing and (y) is otherwise in

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accordance with the terms of this Agreement, without any other or further instructions from such Grantor, and each Grantor agrees that each Issuer shall be fully protected in so complying, and (ii) unless otherwise expressly permitted hereby, pay any dividends or other payments with respect to the Investment Property directly to the Administrative Agent.

        6.4.    Proceeds to be Turned Over to Administrative Agent.    In addition to the rights of the Agents and the Lenders specified in Section 6.1 with respect to payments of Receivables, if an Event of Default shall occur and be continuing, all Proceeds received by any Grantor consisting of cash, checks and other near-cash items shall be held by such Grantor on behalf of the Agents and the Lenders, segregated from other funds of such Grantor, and shall, forthwith upon receipt by such Grantor, be turned over to the Administrative Agent in the exact form received by such Grantor (duly indorsed by such Grantor to the Administrative Agent, if required). All Proceeds received by the Administrative Agent hereunder shall be held by the Administrative Agent in a Collateral Account maintained under its sole dominion and control. All Proceeds while held by the Administrative Agent in a Collateral Account (or by such Grantor on behalf of the Administrative Agent and the Lenders) shall continue to be held as collateral security for all the Obligations and shall not constitute payment thereof until applied as provided in Section 6.5.

        6.5.    Application of Proceeds.    At such intervals as may be agreed upon by the Borrower and the Administrative Agent, or, if an Event of Default shall have occurred and be continuing, at any time at the Administrative Agent's election, the Administrative Agent may apply all or any part of Proceeds constituting Collateral, whether or not held in any Collateral Account, and any proceeds of the guarantee set forth in Section 2, in payment of the Obligations in the following order:

First, to pay incurred and unpaid fees, costs and expenses of the Administrative Agent under the Loan Documents, including, without limitation, the reasonable fees and expenses of counsel to the Administrative Agent;

Second, to the Administrative Agent, for application by it towards payment of amounts remaining unpaid in respect of the Obligations, pro rata among the Agents and the Lenders according to the amounts of the Obligations remaining unpaid to the Agents and the Lenders (including depositing in a cash collateral account opened by the Administrative Agent, an amount equal to the aggregate amount of L/C Obligations at the time of application of Proceeds pursuant to this Section 6.5 and with respect to which the Borrower has not previously made a deposit into a cash collateral account pursuant to Section 10 of the Credit Agreement); and

Third, any balance of such Proceeds remaining after the then outstanding Obligations shall have been paid in full, no Letters of Credit shall be outstanding and the Commitments shall have been terminated shall be paid over to the Borrower or to whomsoever may be lawfully entitled to receive the same.

        6.6.    Code and Other Remedies.    If an Event of Default shall occur and be continuing, the Administrative Agent, on behalf of the Lenders, may exercise, in addition to all other rights and remedies granted to them in this Agreement and in any other instrument or agreement securing, evidencing or relating to the Obligations, all rights and remedies of a secured party under the New York UCC or any other applicable law. Without limiting the generality of the foregoing, the Administrative Agent, without demand of performance or other demand, presentment, protest, advertisement or notice of any kind (except any notice required by law referred to below) to or upon any Grantor or any other Person (all and each of which demands, defenses, advertisements and notices are hereby waived to the extent permitted by applicable law), may in such circumstances forthwith collect, receive, appropriate and realize upon the Collateral, or any part thereof, and/or may forthwith sell, lease, assign, give option or options to purchase, or otherwise dispose of and deliver the Collateral or any part thereof (or contract to do any of the foregoing), in one or more parcels at public or private sale or sales, at any exchange, broker's board or office of any Agent or any Lender or elsewhere upon such terms and conditions as it may deem advisable and at such prices as it may reasonably deem best, for cash or on credit or for future delivery without assumption of any credit risk. Any Agent or any Lender shall have the right upon any such public sale or sales, and, to the extent permitted by law, upon any such private sale or sales, to purchase the whole or any part of the Collateral so sold, free of any right or equity of redemption in any Grantor, which right or equity is hereby waived and released. Each Grantor further agrees, at the Administrative Agent's request, to assemble the Collateral and make it available to the Administrative Agent at places which the Administrative Agent shall reasonably select, whether at such Grantor's premises or elsewhere. The Administrative Agent shall apply the net proceeds of

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any action taken by it pursuant to this Section 6.6, after deducting all reasonable costs and expenses of every kind incurred in connection therewith or incidental to the care or safekeeping of any of the Collateral or in any way relating to the Collateral or the rights of the Administrative Agent and the Lenders hereunder, including, without limitation, reasonable attorneys' fees and disbursements, to the payment in whole or in part of the Obligations, in such order as the Administrative Agent may elect, and only after such application and after the payment by the Administrative Agent of any other amount required by any provision of law, including, without limitation, Section 9-615(a)(3) of the New York UCC, need the Administrative Agent account for the surplus, if any, to any Grantor. To the extent permitted by applicable law, each Grantor waives all claims, damages and demands it may acquire against any Agent or any Lender arising out of the exercise by them of any rights hereunder. If any notice of a proposed sale or other disposition of Collateral shall be required by law, such notice shall be deemed reasonable and proper if given at least 10 days before such sale or other disposition.

        6.7.    Registration Rights.    (a) If the Administrative Agent shall determine to exercise its right to sell any or all of the Pledged Stock pursuant to Section 6.6, and if in the opinion of the Administrative Agent it is necessary or advisable to have the Pledged Stock, or that portion thereof to be sold, registered under the provisions of the Securities Act, the relevant Grantor will cause the Issuer thereof to (i) execute and deliver, and cause the directors and officers of such Issuer to execute and deliver, all such instruments and documents, and do or cause to be done all such other acts as may be, in the opinion of the Administrative Agent, necessary or advisable to register the Pledged Stock, or that portion thereof to be sold, under the provisions of the Securities Act, (ii) use its best efforts to cause the registration statement relating thereto to become effective and to remain effective for a period of one year from the date of the first public offering of the Pledged Stock, or that portion thereof to be sold, and (iii) make all amendments thereto and/or to the related prospectus which, in the opinion of the Administrative Agent, are necessary or advisable, all in conformity with the requirements of the Securities Act and the rules and regulations of the Securities and Exchange Commission applicable thereto. Each Grantor agrees to cause such Issuer to comply with the provisions of the securities or "Blue Sky" laws of any and all jurisdictions which the Administrative Agent shall designate and to make available to its security holders, as soon as practicable, an earnings statement (which need not be audited) which will satisfy the provisions of Section 11(a) of the Securities Act.

        (b)  Each Grantor recognizes that the Administrative Agent may be unable to effect a public sale of any or all the Pledged Stock, by reason of certain prohibitions contained in the Securities Act and applicable state securities laws or otherwise, and may be compelled to resort to one or more private sales thereof to a restricted group of purchasers which will be obliged to agree, among other things, to acquire such securities for their own account for investment and not with a view to the distribution or resale thereof. Each Grantor acknowledges and agrees that any such private sale may result in prices and other terms less favorable than if such sale were a public sale and, notwithstanding such circumstances, agrees that any such private sale shall be deemed to have been made in a commercially reasonable manner. The Administrative Agent shall be under no obligation to delay a sale of any of the Pledged Stock for the period of time necessary to permit the Issuer thereof to register such securities for public sale under the Securities Act, or under applicable state securities laws, even if such Issuer would agree to do so.

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        (c)  Each Grantor agrees to use its best efforts to do or cause to be done all such other acts as may be necessary to make such sale or sales of all or any portion of the Pledged Stock pursuant to this Section 6.7 valid and binding and in compliance with any and all other applicable Requirements of Law. Each Grantor further agrees that a breach of any of the covenants contained in this Section 6.7 will cause irreparable injury to the Agents and the Lenders, that the Agents and the Lenders have no adequate remedy at law in respect of such breach and, as a consequence, that each and every covenant contained in this Section 6.7 shall be specifically enforceable against such Grantor, and such Grantor hereby waives and agrees not to assert any defenses against an action for specific performance of such covenants except for a defense that no Event of Default has occurred under the Credit Agreement.

        6.8    Deficiency.    Each Grantor shall remain liable for any deficiency if the proceeds of any sale or other disposition of the Collateral are insufficient to pay its Obligations.

SECTION 7.    THE ADMINISTRATIVE AGENT

        7.1    Administrative Agent's Appointment as Attorney-in-Fact, etc.    (a)    Each Grantor hereby irrevocably constitutes and appoints the Administrative Agent and any officer or agent thereof, with full power of substitution, as its true and lawful attorney-in-fact with full irrevocable power and authority in the place and stead of such Grantor and in the name of such Grantor or in its own name, for the purpose of carrying out the terms of this Agreement, to take any and all appropriate action and to execute any and all documents and instruments which may be necessary or desirable to accomplish the purposes of this Agreement, and, without limiting the generality of the foregoing, each Grantor hereby gives the Administrative Agent the power and right, on behalf of such Grantor, without notice to or assent by such Grantor, to do any or all of the following:

        (i)    in the name of such Grantor or its own name, or otherwise, take possession of and indorse and collect any checks, drafts, notes, acceptances or other instruments for the payment of moneys due under any Receivable or with respect to any other Collateral and file any claim or take any other action or proceeding in any court of law or equity or otherwise deemed appropriate by the Administrative Agent for the purpose of collecting any and all such moneys due under any Receivable or with respect to any other Collateral whenever payable;

        (ii)  in the case of any Intellectual Property, execute and deliver, and have recorded, any and all agreements, instruments, documents and papers as the Administrative Agent may reasonably request to evidence the Agents' and the Lenders' security interest in such Intellectual Property and the goodwill and general intangibles of such Grantor relating thereto or represented thereby;

        (iii)  pay or discharge taxes and Liens levied or placed on or threatened against the Collateral, effect any repairs or any insurance called for by the terms of this Agreement and pay all or any part of the premiums therefor and the costs thereof;

        (iv)  execute, in connection with any sale provided for in Section 6.6 or 6.7, any indorsements, assignments or other instruments of conveyance or transfer with respect to the Collateral; and

        (v)  (1) direct any party liable for any payment under any of the Collateral to make payment of any and all moneys due or to become due thereunder directly to the Administrative Agent or as the Administrative Agent shall direct; (2) ask or demand for, collect, and receive payment of and receipt for, any and all moneys, claims and other amounts due or to become due at any time in respect of or arising out of any Collateral; (3) sign and indorse any invoices, freight or express bills, bills of lading, storage or warehouse receipts, drafts against debtors, assignments, verifications, notices and other documents in connection with any of the Collateral; (4) commence and prosecute any suits, actions or proceedings at law or in equity in any court of competent jurisdiction to collect the Collateral or any portion thereof and to enforce any other right in respect of any Collateral; (5) defend any suit, action or proceeding brought against such Grantor

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with respect to any Collateral; (6) settle, compromise or adjust any such suit, action or proceeding and, in connection therewith, give such discharges or releases as the Administrative Agent may deem appropriate; (7) assign any Copyright, Patent or Trademark (along with the goodwill of the business to which any such Copyright, Patent or Trademark pertains), throughout the world for such term or terms, on such conditions, and in such manner, as the Administrative Agent shall in its sole discretion determine; and (8) generally, sell, transfer, pledge and make any agreement with respect to or otherwise deal with any of the Collateral as fully and completely as though the Administrative Agent were the absolute owner thereof for all purposes, and do, at the Administrative Agent's option and such Grantor's expense, at any time, or from time to time, all acts and things which the Administrative Agent deems necessary to protect, preserve or realize upon the Collateral and the Administrative Agent's and the Lenders' security interests therein and to effect the intent of this Agreement, all as fully and effectively as such Grantor might do.

        Anything in this Section 7.1 (a) to the contrary notwithstanding, the Administrative Agent agrees that it will not exercise any rights under the power of attorney provided for in this Section 7.1(a) unless an Event of Default shall have occurred and be continuing.

        (b)  If any Grantor fails to perform or comply with any of its agreements contained herein, the Administrative Agent, at its option, but without any obligation so to do, may perform or comply, or otherwise cause performance or compliance, with such agreement.

        (c)  The expenses of the Administrative Agent incurred in connection with actions undertaken as provided in this Section 7.1, together with interest thereon at a rate per annum equal to the rate per annum at which interest would then be payable on past due Revolving Loans that are Base Rate Loans under the Credit Agreement, from the date of payment by the Administrative Agent to the date reimbursed by the relevant Grantor, shall be payable by such Grantor to the Administrative Agent on demand.

        (d)  Each Grantor hereby ratifies all that said attorneys shall lawfully do or cause to be done by virtue hereof. All powers, authorizations and agencies contained in this Agreement are coupled with an interest and are irrevocable until this Agreement is terminated and the security interests created hereby are released.

        7.2.    Duty of Administrative Agent.    The Administrative Agent's sole duty with respect to the custody, safekeeping and physical preservation of the Collateral in its possession, under Section 9-207 of the New York UCC or otherwise, shall be to deal with it in the same manner as the Administrative Agent deals with similar property for its own account. Neither the Administrative Agent, any Lender nor any of their respective officers, directors, employees or agents shall be liable for failure to demand, collect or realize upon any of the Collateral or for any delay in doing so or shall be under any obligation to sell or otherwise dispose of any Collateral upon the request of any Grantor or any other Person or to take any other action whatsoever with regard to the Collateral or any part thereof, except if such failure or delay results from their own gross negligence or willful misconduct. The powers conferred on the Agents and the Lenders hereunder are solely to protect the Agents' and the Lenders' interests in the Collateral and shall not impose any duty upon any Agent or any Lender to exercise any such powers. The Agents and the Lenders shall be accountable only for amounts that they actually receive as a result of the exercise of such powers, and neither they nor any of their officers, directors, employees or agents shall be responsible to any Grantor for any act or failure to act hereunder, except for their own gross negligence or willful misconduct.

        7.3.    Execution of Financing Statements.    Pursuant to any applicable law, each Grantor authorizes the Administrative Agent to file or record financing statements and other filing or recording documents or instruments with respect to the Collateral without the signature of such Grantor in such form and in such offices as the Administrative Agent determines appropriate to perfect the security interests of the Administrative Agent under this Agreement. Each Grantor authorizes the Administrative Agent to use

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the collateral description "all personal property" in any such financing statements. Each Grantor hereby ratifies and authorizes the filing by the Administrative Agent of any financing statement with respect to the Collateral made prior to the date hereof.

        7.4.    Authority of Administrative Agent.    Each Grantor acknowledges that the rights and responsibilities of the Administrative Agent under this Agreement with respect to any action taken by the Administrative Agent or the exercise or non-exercise by the Administrative Agent of any option, voting right, request, judgment or other right or remedy provided for herein or resulting or arising out of this Agreement shall, as between the Agents and the Lenders, be governed by the Credit Agreement and by such other agreements with respect thereto as may exist from time to time among them, but, as between the Administrative Agent and the Grantors, the Administrative Agent shall be conclusively presumed to be acting as agent for the Agents and the Lenders with full and valid authority so to act or refrain from acting, and no Grantor shall be under any obligation, or entitlement, to make any inquiry respecting such authority.

SECTION 8.    MISCELLANEOUS

        8.1.    Amendments in Writing.    None of the terms or provisions of this Agreement may be waived, amended, supplemented or otherwise modified except in accordance with Section 12.1 of the Credit Agreement.

        8.2.    Notices.    All notices, requests and demands to or upon the Administrative Agent or any Grantor hereunder shall be effected in the manner provided for in Section 12.2 of the Credit Agreement; provided that any such notice, request or demand to or upon any Guarantor shall be addressed to such Guarantor at its notice address set forth on Schedule 1.

        8.3.    No Waiver by Course of Conduct; Cumulative Remedies.    No Agent or Lender shall by any act (except by a written instrument pursuant to Section 8.1), delay, indulgence, omission or otherwise be deemed to have waived any right or remedy hereunder or to have acquiesced in any Default or Event of Default. No failure to exercise, nor any delay in exercising, on the part of any Agent or any Lender, any right, power or privilege hereunder shall operate as a waiver thereof. No single or partial exercise of any right, power or privilege hereunder shall preclude any other or further exercise thereof or the exercise of any other right, power or privilege. A waiver by any Agent or any Lender of any right or remedy hereunder on any one occasion shall not be construed as a bar to any right or remedy which the Administrative Agent or such Lender would otherwise have on any future occasion. The rights and remedies herein provided are cumulative, may be exercised singly or concurrently and are not exclusive of any other rights or remedies provided by law.

        8.4.    Enforcement Expenses; Indemnification.    (a) Each Guarantor agrees to pay, or reimburse each Lender and Agent for all its costs and expenses incurred in collecting against such Guarantor under the guarantee contained in Section 2 or otherwise enforcing or preserving any rights under this Agreement and the other Loan Documents to which such Guarantor is a party, including, without limitation, the fees and disbursements of counsel (including the allocated fees and expenses of in-house counsel) to each Lender and of counsel to the Administrative Agent.

        (b)  Each Guarantor agrees to pay, and to save the Agents and the Lenders harmless from, any and all liabilities with respect to, or resulting from any delay in paying, any and all stamp, excise, sales or other taxes which may be payable or determined to be payable with respect to any of the Collateral or in connection with any of the transactions contemplated by this Agreement.

        (c)  Each Guarantor agrees to pay, and to save the Agents and the Lenders harmless from, any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever with respect to the execution, delivery, enforcement,

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performance and administration of this Agreement to the extent the Borrower would be required to do so pursuant to Section 12.5 of the Credit Agreement.

        (d)  The agreements in this Section shall survive repayment of the Obligations and all other amounts payable under the Credit Agreement and the other Loan Documents.

        8.5.    Successors and Assigns.    This Agreement shall be binding upon the successors and assigns of each Grantor and shall inure to the benefit of the Agents and the Lenders and their successors and assigns; provided that no Grantor may assign, transfer or delegate any of its rights or obligations under this Agreement without the prior written consent of the Administrative Agent unless permitted by the Credit Agreement.

        8.6.    Set-Off.    Each Grantor hereby irrevocably authorizes each Agent and each Lender at any time and from time to time while an Event of Default shall have occurred and be continuing, without notice to such Grantor or any other Grantor, any such notice being expressly waived by each Grantor to the extent permitted by applicable law, to set-off and appropriate and apply any and all deposits (general or special, time or demand, provisional or final), in any currency, and any other credits, indebtedness or claims, in any currency, in each case whether direct or indirect, absolute or contingent, matured or unmatured, at any time held or owing by such Agent or such Lender to or for the credit or the account of such Grantor, or any part thereof in such amounts as such Agent or such Lender may elect, against and on account of the obligations and liabilities of such Grantor to such Agent or such Lender hereunder and claims of every nature and description of such Agent or such Lender against such Grantor, in any currency, arising hereunder, under the Credit Agreement or any other Loan Document to which it is a party, as such Agent or such Lender may elect, whether or not any Agent or any Lender has made any demand for payment and although such obligations, liabilities and claims may be contingent or unmatured. Each Agent and each Lender shall notify such Grantor promptly of any such set-off and the application made by such Agent or such Lender of the proceeds thereof, provided that the failure to give such notice shall not affect the validity of such set-off and application. The rights of each Agent and each Lender under this Section are in addition to other rights and remedies (including, without limitation, other rights of set-off) which such Agent or such Lender may have.

        8.7.    Counterparts.    This Agreement may be executed by one or more of the parties to this Agreement on any number of separate counterparts (including by telecopy), and all of said counterparts taken together shall be deemed to constitute one and the same instrument.

        8.8.    Severability.    Any provision of this Agreement which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.

        8.9.    Section Headings.    The Section headings used in this Agreement are for convenience of reference only and are not to affect the construction hereof or be taken into consideration in the interpretation hereof.

        8.10.    Integration.    This Agreement and the other Loan Documents represent the agreement of the Grantors, the Agents and the Lenders with respect to the subject matter hereof and thereof, and there are no promises, undertakings, representations or warranties by any Agent or any Lender relative to subject matter hereof and thereof not expressly set forth or referred to herein or in the other Loan Documents.

        8.11.GOVERNING LAW.THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.

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        8.12.    Submission To Jurisdiction; Waivers.    Each Grantor hereby irrevocably and unconditionally:

        (a)  submits for itself and its property in any legal action or proceeding relating to this Agreement and the other Loan Documents to which it is a party, or for recognition and enforcement of any judgment in respect thereof, to the non-exclusive general jurisdiction of the Courts of the State of New York, the courts of the United States of America for the Southern District of New York, and appellate courts from any thereof;

        (b)  consents that any such action or proceeding may be brought in such courts and waives any objection that it may now or hereafter have to the venue of any such action or proceeding in any such court or that such action or proceeding was brought in an inconvenient court and agrees not to plead or claim the same;

        (c)  agrees that service of process in any such action or proceeding may be effected by mailing a copy thereof by registered or certified mail (or any substantially similar form of mail), postage prepaid, to such Grantor at its address referred to in Schedule 1 or at such other address of which the Administrative Agent shall have been notified pursuant hereto;

        (d)  agrees that nothing herein shall affect the right to effect service of process in any other manner permitted by law or shall limit the right to sue in any other jurisdiction; and

        (e)  waives, to the maximum extent not prohibited by law, any right it may have to claim or recover in any legal action or proceeding referred to in this Section any special, exemplary, punitive or consequential damages.

        8.13.    Acknowledgements.    Each Grantor hereby acknowledges that:

        (a)  it has been advised by counsel in the negotiation, execution and delivery of this Agreement and the other Loan Documents to which it is a party;

        (b)  no Agent or Lender has any fiduciary relationship with or duty to any Grantor arising out of or in connection with this Agreement or any of the other Loan Documents, and the relationship between the Grantors, on the one hand, and the Agents and Lenders, on the other hand, in connection herewith or therewith is solely that of debtor and creditor; and

        (c)  no joint venture is created hereby or by the other Loan Documents or otherwise exists by virtue of the transactions contemplated hereby among the Lenders or among the Grantors and the Lenders.

        8.14.    Additional Grantors.    Each Subsidiary of the Borrower that is required to become a party to this Agreement pursuant to Section 8.9 of the Credit Agreement shall become a Grantor for all purposes of this Agreement upon execution and delivery by such Subsidiary of an Assumption Agreement in the form of Annex I hereto.

        8.15.    Releases.    (a) At such time as the Loans, the Reimbursement Obligations and the other Obligations (other than Borrower Hedge Agreement Obligations) shall have been paid in full, the Commitments have been terminated and no Letters of Credit shall be outstanding, the Collateral shall be released from the Liens created hereby, and this Agreement and all obligations (other than those expressly stated to survive such termination) of the Administrative Agent and each Grantor hereunder shall terminate, all without delivery of any instrument or performance of any act by any party, and all rights to the Collateral shall revert to the Grantors. At the request and sole expense of any Grantor following any such termination, the Administrative Agent shall promptly deliver to such Grantor any Collateral held by the Administrative Agent hereunder, and execute and deliver to such Grantor such documents as such Grantor shall reasonably request to evidence such termination.

        (b)  If any of the Collateral shall be sold, transferred or otherwise Disposed of by any Grantor in a transaction permitted by the Credit Agreement, then the Administrative Agent, at the request and sole

19

expense of such Grantor, shall execute and deliver to such Grantor all releases or other documents reasonably necessary or desirable for the release of the Liens created hereby on such Collateral. At the request and sole expense of the Borrower, a Guarantor shall be released from its obligations hereunder in the event that all the Capital Stock of such Guarantor shall be sold, transferred or otherwise Disposed of in a transaction permitted by the Credit Agreement; provided that the Borrower shall have delivered to the Administrative Agent at least five Business Days prior to the date of the proposed release, a written request for release identifying the relevant Guarantor and the terms of the sale or other disposition in reasonable detail, including the price thereof, together with a certification by the Borrower stating that such transaction is in compliance with the Credit Agreement and the other Loan Documents.

        8.16.WAIVER OF JURY TRIAL.EACH GRANTOR AND, BY ACCEPTANCE OF THE BENEFITS HEREOF, EACH AGENT AND EACH LENDER, HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT AND FOR ANY COUNTERCLAIM THEREIN.

20

        IN WITNESS WHEREOF, each of the undersigned has caused this Guarantee and Collateral Agreement to be duly executed and delivered as of the date first above written.

BORROWER:
	SCIENTIFIC GAMES CORPORATION
	By:	Name: Title:
GUARANTORS:
	AUTOTOTE DOMINICANA INC.
	By:	Name: Title:
	AUTOTOTE ENTERPRISES, INC.
	By:	Name: Title:
	AUTOTOTE GAMING, INC.
	By:	Name: Title:
	AUTOTOTE INTERACTIVE, INC.
	By:	Name: Title:
	AUTOTOTE INTERNATIONAL, INC.
	By:	Name: Title:
	AUTOTOTE KENO CORPORATION
	By:	Name: Title:

21

AUTOTOTE SYSTEMS, INC.
By:	Name: Title:
BLUE SUEDE ACQUISITION CORP.
By:	Name: Title:
SCIENTIFIC GAMES ACQUISITION, INC.
By:	Name: Title:
SCIENTIFIC GAMES FINANCE CORPORATION
By:	Name: Title:
SCIENTIFIC GAMES (GREECE), INC.
By:	Name: Title:
SCIENTIFIC GAMES HOLDINGS CORP.
By:	Name: Title:
SCIENTIFIC GAMES INTERNATIONAL, INC.
By:	Name: Title:
SCIENTIFIC GAMES MANAGEMENT CORPORATION
By:	Name: Title:

22

SCIENTIFIC GAMES ROYALTY CORPORATION
By:	Name: Title:

23

Schedule 1

NOTICE ADDRESSES OF GUARANTORS

Schedule 2

DESCRIPTION OF INVESTMENT PROPERTY

Pledged Stock:

Issuer
Class of Stock Stock Certificate No. Number of Shares

Pledged Notes:

Issuer
Payee
Principal Amount

Schedule 3

FILINGS AND OTHER ACTIONS

REQUIRED TO PERFECT SECURITY INTERESTS

At Closing:

Uniform Commercial Code Filings
[List each office where a financing statement is to be filed]^*

Patent and Trademark Filings
[List all filings]

Actions with Regard to Pledged Stock**

Other Actions
[Describe other actions to be taken]

Post-Closing:

*

Note that perfection of security interests in patents and trademarks requires filings under the UCC in the jurisdictions where filings would be made for general intangibles, as well as filings in the U.S Copyright Office and the U.S. Patent & Trademark Office.

**

    If the interest of a Grantor in Pledged Stock appears on the books of a financial intermediary, a control agreement as described in Section 8-106 of the New York UCC will be required.

Schedule 4

LOCATION OF JURISDICTION OF ORGANIZATION AND CHIEF EXECUTIVE OFFICE

Grantor
Jurisdiction of
Organization Identification
Number Location of Chief
Executive Office

Schedule 5

LOCATIONS OF INVENTORY AND EQUIPMENT

Grantor
Locations

Schedule 6

INTELLECTUAL PROPERTY

I.

Copyrights and Copyright Licenses:



II.

Patents and Patent Licenses:



III.

Trademarks and Trademark Licenses:

Schedule 7

GOVERNMENTAL AUTHORITIES

Annex I
to
Guarantee and Collateral Agreement

        ASSUMPTION AGREEMENT, dated as of                        , 200            , made by                        , a                        corporation (the "Additional Grantor"), in favor of The Bank of New York, as administrative agent (in such capacity, the "Administrative Agent") for the banks and other financial institutions (the "Lenders") parties to the Credit Agreement referred to below. All capitalized terms not defined herein shall have the meaning ascribed to them in such Credit Agreement.

W I T N E S S E T H:

        WHEREAS, Scientific Games Corporation (the "Borrower"), the Lenders, the Administrative Agent and other entities party thereto have entered into a Credit Agreement, dated as of December 19, 2002 (as amended, supplemented or otherwise modified from time to time, the "Credit Agreement");

        WHEREAS, in connection with the Credit Agreement, the Borrower and certain of its Affiliates (other than the Additional Grantor) have entered into the Guarantee and Collateral Agreement, dated as of December 19, 2002 (as amended, supplemented or otherwise modified from time to time, the "Guarantee and Collateral Agreement") in favor of the Administrative Agent for the benefit of the Agents and the Lenders;

        WHEREAS, the Credit Agreement requires the Additional Grantor to become a party to the Guarantee and Collateral Agreement; and

        WHEREAS, the Additional Grantor has agreed to execute and deliver this Assumption Agreement in order to become a party to the Guarantee and Collateral Agreement;

        NOW, THEREFORE, IT IS AGREED:

        1.    Guarantee and Collateral Agreement.    By executing and delivering this Assumption Agreement, the Additional Grantor, as provided in Section 8.14 of the Guarantee and Collateral Agreement, hereby becomes a party to the Guarantee and Collateral Agreement as a Grantor thereunder with the same force and effect as if originally named therein as a Grantor and, without limiting the generality of the foregoing, hereby expressly assumes all obligations and liabilities of a Grantor thereunder. The information set forth in Annex 1-A hereto is hereby added to the information set forth in Schedules                        ^* to the Guarantee and Collateral Agreement. The Additional Grantor hereby represents and warrants that each of the representations and warranties contained in Section 4 of the Guarantee and Collateral Agreement is true and correct on and as of the date hereof (after giving effect to this Assumption Agreement) as if made on and as of such date.

*

Refer to each Schedule which needs to be supplemented.

2.GOVERNING LAW.THIS ASSUMPTION AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.

        IN WITNESS WHEREOF, the undersigned has caused this Assumption Agreement to be duly executed and delivered as of the date first above written.

[ADDITIONAL GRANTOR]
By:
	Name: Title:

2

Annex II
to
Guarantee and Collateral Agreement

ACKNOWLEDGEMENT AND CONSENT

        The undersigned hereby acknowledges receipt of a copy of the Guarantee and Collateral Agreement dated as of December 19, 2002 (the "Agreement"), made by the Grantors parties thereto for the benefit of The Bank of New York, as Administrative Agent. The undersigned agrees for the benefit of the Agents and the Lenders as follows:

        1.    The undersigned will be bound by the terms of the Agreement and will comply with such terms insofar as such terms are applicable to the undersigned.

        2.    The undersigned will notify the Administrative Agent promptly in writing of the occurrence of any of the events described in Section 5.8(a) of the Agreement.

        3.    The terms of Sections 6.3(a) and 6.7 of the Agreement shall apply to the undersigned, mutatis mutandis, with respect to all actions that may be required of the undersigned pursuant to Section 6.3(a) or 6.7 of the Agreement.

[NAME OF ISSUER]

By

Title

Address for Notices:

Fax:

EXHIBIT B TO
CREDIT AGREEMENT

FORM OF COMPLIANCE CERTIFICATE

        This Compliance Certificate is delivered to you pursuant to Subsection 8.2(b) of the Credit Agreement, dated as of December 19, 2002 (as amended, supplemented or otherwise modified from time to time, the "Credit Agreement"), among SCIENTIFIC GAMES CORPORATION, a Delaware corporation (the "Borrower"), the several banks, financial institutions and other entities from time to time parties thereto (the "Lenders"), BEAR, STEARNS & CO. INC., as sole lead arranger and sole bookrunner (in such capacity, the "Lead Arranger"), BNY CAPITAL MARKETS, INC., as co-arranger (in such capacity, the "Co-Arranger"), BEAR STEARNS CORPORATE LENDING INC., as syndication agent (in such capacity, the "Syndication Agent"), and THE BANK OF NEW YORK, as administrative agent (in such capacity, the "Administrative Agent"). Terms defined in the Credit Agreement and not otherwise defined herein are used herein with the meanings so defined.

        1.    I am the duly elected, qualified and acting Chief Financial Officer of the Borrower.

        2.    I have reviewed and am familiar with the contents of this Certificate.

        3.    I have reviewed the terms of the Credit Agreement and the other Loan Documents and have made or caused to be made under my supervision, a review in reasonable detail of the transactions and condition of the Borrower during the accounting period covered by the financial statements attached hereto as Attachment 1 (the "Financial Statements"). Such review did not disclose the existence during or at the end of the accounting period covered by the Financial Statements, and I have no knowledge of the existence, as of the date of this Certificate, of any condition or event which constitutes a Default or Event of Default.

        4.    Attached hereto as Attachment 2 are the computations showing compliance with the covenants set forth in Section 9.1, 9.2, 9.3, 9.5, 9.6, 9.7 and 9.8 of the Credit Agreement.

        IN WITNESS WHEREOF, I execute this Certificate on behalf of the Borrower this            day of            , 200    .

SCIENTIFIC GAMES CORPORATION
By:
	Name: Title: Chief Financial Officer

Attachment 1
to Exhibit B

[Attach Financial Statements]

Attachment 2
to Exhibit B

        The information described herein is as of            , 200            , and pertains to the period from                        , 20            to                             , 20    .

[Set forth Covenant Calculations]

EXHIBIT C TO
CREDIT AGREEMENT

FORM OF CLOSING CERTIFICATE

        Pursuant to subsection 7.1(g) of the Credit Agreement dated as of December 19, 2002 (the "Credit Agreement"; terms defined therein being used herein as therein defined), among SCIENTIFIC GAMES CORPORATION, a Delaware corporation (the "Borrower"), the several banks, financial institutions and other entities from time to time parties thereto (the "Lenders"), BEAR, STEARNS & CO. INC., as sole lead arranger and sole bookrunner (in such capacity, the "Lead Arranger"), BNY CAPITAL MARKETS, INC., as co-arranger (in such capacity, the "Co-Arranger"), BEAR STEARNS CORPORATE LENDING INC., as syndication agent (in such capacity, the "Syndication Agent"), and THE BANK OF NEW YORK, as administrative agent (in such capacity, the "Administrative Agent"), the undersigned [INSERT TITLE OF OFFICER] of [INSERT NAME OF COMPANY] (the "Company") hereby certifies, in his capacity as [INSERT TITLE OF OFFICER] of the Company and not individually, as follows:

        1.    The representations and warranties of the Company set forth in each of the Loan Documents to which it is a party or which are contained in any certificate furnished by or on behalf of the Company pursuant to any of the Loan Documents to which it is a party are true and correct in all material respects on and as of the date hereof with the same effect as if made on the date hereof, except for representations and warranties expressly stated to relate to a specific earlier date, in which case such representations and warranties were true and correct in all material respects as of such earlier date.

        2.                            is the duly elected and qualified [Assistant] Secretary of the Company and the signature set forth for such officer below is such officer's true and genuine signature.

        3.    No Default or Event of Default has occurred and is continuing as of the date hereof or after giving effect to the Loans to be made on the date hereof. [Borrower only]

        4.    The conditions precedent set forth in Section 7.1 of the Credit Agreement were satisfied as of the Closing Date. [Borrower only]

        The undersigned [Assistant] Secretary of the Company certifies on behalf of the Company as follows:

        1.    There are no liquidation or dissolution proceedings pending or to my knowledge threatened against the Company, nor has any other event occurred adversely affecting or threatening the continued corporate existence of the Company.

        2.    The Company is a [corporation] duly [incorporated], validly existing and in good standing under the laws of the jurisdiction of its organization.

        3.    Attached hereto as Annex 1 is a true and complete copy of resolutions duly adopted by the Board of Directors of the Company on the dates described therein; such resolutions have not in any way been amended, modified, revoked or rescinded, have been in full force and effect since their adoption to and including the date hereof and are now in full force and effect and are the only corporate proceedings of the Company now in force relating to or affecting the matters referred to therein.

        4.    Attached hereto as Annex 2 is a true and complete copy of the [By-Laws] [other governance document] of the Company as in effect on the date hereof.

        5.    Attached hereto as Annex 3 is a true and complete copy of the [Certificate of Incorporation] [other charter document] of the Company as in effect on the date hereof, and such certificate has not been amended, repealed, modified or restated.

        6.    The following persons are now duly elected and qualified officers of the Company holding the offices indicated next to their respective names below, and such officers have held such offices with the Company at all times since the date indicated next to their respective titles to and including the date hereof, and the signatures appearing opposite their respective names below are the true and genuine signatures of such officers, and each such officer is duly authorized to execute and deliver on behalf of the Company each Loan Document to which it is a party and any certificate or other document to be delivered by the Company pursuant to the Loan Documents to which it is a party:

Name
Office Date Signature

2

        IN WITNESS WHEREOF, the undersigned have hereunto set our names as of the date set forth below.

Name:
Title:
Name:
Title:

Date:                     , 2002

3

ANNEX 1

[Board Resolutions]

ANNEX 2

[By-Laws] [other governance document]

ANNEX 3

[Certificate of Incorporation] [other charter document]

EXHIBIT D-1 TO
CREDIT AGREEMENT

FORM OF NEW LENDER SUPPLEMENT

        SUPPLEMENT, dated                        , to the Credit Agreement, dated as of December 19, 2002 (as amended supplemented or otherwise modified from time to time, the "Credit Agreement"), among SCIENTIFIC GAMES CORPORATION, a Delaware corporation (the "Borrower"), the several banks and other financial institutions or entities from time to time parties thereto (the "Lenders"), BEAR, STEARNS & CO. INC., as Lead Arranger, BNY CAPITAL MARKETS, INC., as Co-Arranger, BEAR STEARNS CORPORATE LENDING INC., as Syndication Agent, and THE BANK OF NEW YORK, as Administrative Agent, and others.

W I T N E S S E T H:

        WHEREAS, the Credit Agreement provides in Section 4.1 thereof that any bank, financial institution or other entity, although not originally a party thereto, may become a party to the Credit Agreement in accordance with the terms thereof by executing and delivering to the Borrower, the Syndication Agent and the Administrative Agent a supplement to the Credit Agreement in substantially the form of this Supplement; and

        WHEREAS, the undersigned was not an original party to the Credit Agreement but now desires to become a party thereto;

        NOW, THEREFORE, the undersigned hereby agrees as follows:

        1.    The undersigned agrees to be bound by the provisions of the Credit Agreement, and agrees that it shall, on the date this Supplement is accepted by the Borrower, the Administrative Agent and the Issuing Lender, become a Lender for all purposes of the Credit Agreement to the same extent as if originally a party thereto, with a Revolving Commitment of $                        .

        2.    The undersigned (a) represents and warrants that it is legally authorized to enter into this Supplement; (b) confirms that it has received a copy of the Credit Agreement, together with copies of the financial statements delivered pursuant to Section 8.1 thereof and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into this Supplement; (c) agrees that it has made and will, independently and without reliance upon the Administrative Agent, Syndication Agent or any other Lender and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under the Credit Agreement or any instrument or document furnished pursuant hereto or thereto; (d) appoints and authorizes the Administrative Agent to take such action as administrative agent on its behalf and to exercise such powers and discretion under the Credit Agreement or any instrument or document furnished pursuant hereto or thereto as are delegated to the Administrative Agent by the terms thereof, together with such powers as are incidental thereto; and (e) agrees that it will be bound by the provisions of the Credit Agreement and will perform in accordance with its terms all the obligations which by the terms of the Credit Agreement are required to be performed by it as a Lender including, without limitation, if it is organized under the laws of a jurisdiction outside the United States, its obligation pursuant to Section 5.10 of the Credit Agreement.

        3.    The undersigned's address for notices for the purposes of the Credit Agreement is as follows:

        4.    Terms defined in the Credit Agreement shall have their defined meanings when used herein.

        IN WITNESS WHEREOF, the undersigned has caused this Supplement to be executed and delivered by a duly authorized officer on the date first above written.

[INSERT NAME OF LENDER]
By:
	Name: Title:

Accepted this            day of                         ,            .
SCIENTIFIC GAMES CORPORATION
By:
	Name: Title:
Accepted this            day of                         ,            .
THE BANK OF NEW YORK, as Administrative Agent
By:
	Name: Title:
Accepted this            day of                         ,            .
	as Issuing Lender
By:
	Name: Title:

2

EXHIBIT D-2 TO
CREDIT AGREEMENT

FORM OF
COMMITMENT INCREASE SUPPLEMENT

        SUPPLEMENT, dated                        , to the Credit Agreement, dated as of December 19, 2002 (as amended supplemented or otherwise modified from time to time, the "Credit Agreement"), among SCIENTIFIC GAMES CORPORATION, a Delaware corporation (the "Borrower"), the several banks and other financial institutions or entities from time to time parties thereto (the "Lenders"), BEAR, STEARNS & CO. INC., as Lead Arranger, BNY CAPITAL MARKETS, INC., as Co-Arranger, BEAR STEARNS CORPORATE LENDING INC., as Syndication Agent, and THE BANK OF NEW YORK, as Administrative Agent, and others.

W I T N E S S E T H:

        WHEREAS, pursuant to the provisions of Section 4.1 of the Credit Agreement, the undersigned may increase the amount of its Revolving Commitment in accordance with the terms thereof by executing and delivering to the Borrower, the Syndication Agent and the Administrative Agent a supplement to the Credit Agreement in substantially the form of this Supplement; and

        WHEREAS, the undersigned now desires to increase the amount of its Revolving Commitment under the Credit Agreement;

        NOW THEREFORE, the undersigned hereby agrees as follows:

        1.    The undersigned agrees, subject to the terms and conditions of the Credit Agreement, that on the date this Supplement is accepted by the Borrower and the Syndication Agent it shall have its Revolving Commitment increased by $                        , thereby making the amount of its Revolving Commitment $                        .

        2.    Terms defined in the Credit Agreement shall have their defined meanings when used herein.

        IN WITNESS WHEREOF, the undersigned has caused this Supplement to be executed and delivered by a duly authorized officer on the date first above written.

[INSERT NAME OF LENDER]
By:
	Name: Title:

Accepted this            day of                         ,            .
SCIENTIFIC GAMES CORPORATION
By:
	Name: Title:
Accepted this            day of                         ,            .
BEAR STEARNS CORPORATE LENDING INC., as Syndication Agent
By:
	Name: Title:

EXHIBIT E TO
CREDIT AGREEMENT

[FORM OF MORTGAGE]

EXHIBIT F TO
CREDIT AGREEMENT

FORM OF
ASSIGNMENT AND ASSUMPTION

        Reference is made to the Credit Agreement, dated as of December 19, 2002 (as amended, supplemented or otherwise modified from time to time, the "Credit Agreement"), among SCIENTIFIC GAMES CORPORATION (the "Borrower"), the several banks and other financial institutions or entities from time to time parties thereto (the "Lenders"), BEAR, STEARNS & CO. INC., as Lead Arranger, BNY CAPITAL MARKETS, INC., as Co-Arranger, BEAR STEARNS CORPORATE LENDING INC., as Syndication Agent, and THE BANK OF NEW YORK, as administrative agent for the Lenders (in such capacity, the "Administrative Agent"). Unless otherwise defined herein, terms defined in the Credit Agreement and used herein shall have the meanings given to them in the Credit Agreement.

        The Assignor identified on Schedule l hereto (the "Assignor") and the Assignee identified on Schedule l hereto (the "Assignee") agree as follows:

        1.    The Assignor hereby irrevocably sells and assigns to the Assignee without recourse to the Assignor, and the Assignee hereby irrevocably purchases and assumes from the Assignor without recourse to the Assignor, as of the Effective Date (as defined below), the interest described in Schedule 1 hereto (the "Assigned Interest") in and to the Assignor's rights and obligations under the Credit Agreement with respect to those credit facilities contained in the Credit Agreement as are set forth on Schedule 1 hereto (individually, an "Assigned Facility"; collectively, the "Assigned Facilities"), in a principal amount for each Assigned Facility as set forth on Schedule 1 hereto.

        2.    The Assignor (a) makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with the Credit Agreement or with respect to the execution, legality, validity, enforceability, genuineness, sufficiency or value of the Credit Agreement, any other Loan Document or any other instrument or document furnished pursuant thereto, other than that the Assignor is the legal and beneficial owner of the interest being assigned and that the Assignor has not created any adverse claim upon the interest being assigned by it hereunder and that such interest is free and clear of any such adverse claim and (b) makes no representation or warranty and assumes no responsibility with respect to the financial condition of the Borrower, any of its Subsidiaries or any other obligor or the performance or observance by the Borrower, any of its Subsidiaries or any other obligor of any of their respective obligations under the Credit Agreement or any other Loan Document or any other instrument or document furnished pursuant hereto or thereto.

        3.    The Assignee (a) represents and warrants that it is legally authorized to enter into this Assignment and Assumption; (b) confirms that it has received a copy of the Credit Agreement, together with copies of the financial statements delivered pursuant to Section 8.1 thereof and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into this Assignment and Assumption; (c) agrees that it will, independently and without reliance upon the Assignor, the Agents or any other Lender and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under the Credit Agreement, the other Loan Documents or any other instrument or document furnished pursuant hereto or thereto; (d) appoints and authorizes the Agents to take such action as agent on its behalf and to exercise such powers and discretion under the Credit Agreement, the other Loan Documents or any other instrument or document furnished pursuant hereto or thereto as are delegated to the Agents by the terms thereof, together with such powers as are incidental thereto; and (e) agrees that it will be bound by the provisions of the Credit Agreement and will perform in accordance with its terms all the obligations which by the terms of the Credit Agreement are required to be performed by it as a Lender including, if it is organized under the laws

of a jurisdiction outside the United States, its obligation pursuant to Section 5.10 of the Credit Agreement.

        4.    The effective date of this Assignment and Assumption shall be the Effective Date of Assignment described in Schedule 1 hereto (the "Effective Date"). Following the execution of this Assignment and Assumption, it will be delivered to the Administrative Agent for acceptance by it and recording by the Administrative Agent pursuant to the Credit Agreement, effective as of the Effective Date (which shall not, unless otherwise agreed to by the Administrative Agent, be earlier than five Business Days after the date of such acceptance and recording by the Administrative Agent).

        5.    Upon such acceptance and recording, from and after the Effective Date, the Administrative Agent shall make all payments in respect of the Assigned Interest (including payments of principal, interest, fees and other amounts) to the Assignee whether such amounts have accrued prior to the Effective Date or accrue subsequent to the Effective Date. The Assignor and the Assignee shall make all appropriate adjustments in payments by the Administrative Agent for periods prior to the Effective Date or with respect to the making of this assignment directly between themselves.

        6.    From and after the Effective Date, (a) the Assignee shall be a party to the Credit Agreement and, to the extent provided in this Assignment and Assumption, have the rights and obligations of a Lender thereunder and under the other Loan Documents and shall be bound by the provisions thereof and (b) the Assignor shall, to the extent provided in this Assignment and Assumption, relinquish its rights and be released from its obligations under the Credit Agreement.

        7.    This Assignment and Assumption shall be governed by and construed in accordance with the laws of the State of New York.

        IN WITNESS WHEREOF, the parties hereto have caused this Assignment and Assumption to be executed as of the date first above written by their respective duly authorized officers on Schedule 1 hereto.

Schedule 1 to
Assignment and Assumption

Name of Assignor:

Name of Assignee:

Effective Date of Assignment:

Credit Facility Assigned	Principal Amount Assigned	Commitment Percentage Assigned1
	$	.                                       %

[Name of Assignee]		[Name of Assignor]
By:		By:
	Title:		Title:
Accepted:		Required Consents (if any):
BEAR STEARNS CORPORATE LENDING INC., as Syndication Agent		SCIENTIFIC GAMES CORPORATION
By:		By:
	Title:		Title:
		THE BANK OF NEW YORK, as Administrative Agent
		By:
			Title:
		[Issuing Lender][Swingline Lender]		, as
		By:
			Title:

¹

Calculate the Commitment Percentage that is assigned to at least 15 decimal places and show as a percentage of the aggregate commitments of all applicable Lenders.

EXHIBIT G-1 TO
CREDIT AGREEMENT

[FORM OF LEGAL OPINION OF KRAMER LEVIN NAFTALIS & FRANKEL LLP]

EXHIBIT G-2 TO
CREDIT AGREEMENT

[FORM OF LEGAL OPINION OF MARTIN E. SCHLOSS]

EXHIBIT H TO
CREDIT AGREEMENT

FORM OF EXEMPTION CERTIFICATE

        Reference is made to the Credit Agreement, dated as of December 19, 2002 (as amended, supplemented or otherwise modified from time to time, the "Credit Agreement"), among SCIENTIFIC GAMES CORPORATION (the "Borrower"), the Lenders party thereto, BEAR, STEARNS & CO. INC., as Lead Arranger, BNY CAPITAL MARKETS, INC., as Co-Arranger, BEAR STEARNS CORPORATE LENDING INC., as Syndication Agent, and THE BANK OF NEW YORK, as administrative agent (in such capacity, the "Administrative Agent"), and others. Unless otherwise defined herein, terms defined in the Credit Agreement and used herein shall have the meanings given to them in the Credit Agreement.                                      (the "Non-U.S. Lender") is providing this certificate pursuant to Section 5.10(d) of the Credit Agreement. The Non-U.S. Lender hereby represents and warrants that:

        1.    The Non-U.S. Lender is the sole record and beneficial owner of the Loans in respect of which it is providing this certificate.

        2.    The Non-U.S. Lender is not a "bank" for purposes of Section 881(c)(3)(A) of the Internal Revenue Code of 1986, as amended (the "Code"). In this regard, the Non-U.S. Lender further represents and warrants that:

(a)

the Non-U.S. Lender is not subject to regulatory or other legal requirements as a bank in any jurisdiction; and



(b)

the Non-U.S. Lender has not been treated as a bank for purposes of any tax, securities law or other filing or submission made to any Governmental Authority, any application made to a rating agency or qualification for any exemption from tax, securities law or other legal requirements.

        3.    The Non-U.S. Lender is not a 10-percent shareholder of the Borrower within the meaning of Section 881(c)(3)(B) of the Code.

        4.    The Non-U.S. Lender is not a controlled foreign corporation receiving interest from a related person within the meaning of Section 881(c)(3)(C) of the Code.

        IN WITNESS WHEREOF, the undersigned has duly executed this certificate.

[NAME OF NON-U.S. LENDER]
By:
	Name: Title:

Date:

EXHIBIT I-1 TO
CREDIT AGREEMENT

FORM OF TERM NOTE

        THIS NOTE AND THE OBLIGATIONS REPRESENTED HEREBY MAY NOT BE TRANSFERRED EXCEPT IN COMPLIANCE WITH THE TERMS AND PROVISIONS OF THE CREDIT AGREEMENT REFERRED TO BELOW. TRANSFERS OF THIS NOTE AND THE OBLIGATIONS REPRESENTED HEREBY MUST BE RECORDED IN THE REGISTER MAINTAINED BY THE ADMINISTRATIVE AGENT PURSUANT TO THE TERMS OF SUCH CREDIT AGREEMENT.

$                         New York, New York
                , 2002

        FOR VALUE RECEIVED, the undersigned, Scientific Games Corporation, a Delaware corporation (the "Borrower"), hereby unconditionally promises to pay to                        (the "Lender") or its registered assigns at the Funding Office specified in the Credit Agreement (as hereinafter defined) in lawful money of the United States and in immediately available funds, the principal amount of (a)                          DOLLARS ($            ), or, if less, (b) the unpaid principal amount of the Term Loan of the Lender outstanding pursuant to Section 2.1 of the Credit Agreement. The principal amount shall be paid in the amounts and on the dates specified in Section 2.3 of the Credit Agreement. The Borrower further agrees to pay interest in like money at such office on the unpaid principal amount hereof from time to time outstanding at the rates and on the dates specified in Section 5.5 of the Credit Agreement.

        The holder of this Note is authorized to endorse on the schedules annexed hereto and made a part hereof or on a continuation thereof which shall be attached hereto and made a part hereof the date, Type and amount of the Term Loan and the date and amount of each payment or prepayment of principal with respect thereto, each conversion of all or a portion thereof to another Type, each continuation of all or a portion thereof as the same Type and, in the case of Eurocurrency Loans, the length of each Interest Period with respect thereto. Each such endorsement shall constitute prima facie evidence of the accuracy of the information endorsed. The failure to make any such endorsement or any error in any such endorsement shall not affect the obligations of the Borrower in respect of the Term Loan.

        This Note (a) is one of the Term Notes referred to in the Credit Agreement, dated as of December 19, 2002 (as amended, supplemented or otherwise modified from time to time, the "Credit Agreement"), among the Borrower, the several banks and other financial institutions or entities from time to time parties thereto, Bear, Stearns & Co. Inc., as Lead Arranger, BNY Capital Markets, Inc., as Co-Arranger, Bear Stearns Corporate Lending Inc., as Syndication Agent, and The Bank of New York, as Administrative Agent, (b) is subject to the provisions of the Credit Agreement and (c) is subject to optional and mandatory prepayment in whole or in part as provided in the Credit Agreement. This Note is secured and guaranteed as provided in the Loan Documents. Reference is hereby made to the Loan Documents for a description of the properties and assets in which a security interest has been granted, the nature and extent of the security and the guarantees, the terms and conditions upon which the security interests and each guarantee were granted and the rights of the holder of this Note in respect thereof.

        Upon the occurrence and during the continuance of any one or more of the Events of Default, after notice to the Borrower from the Administrative Agent, all principal and all accrued interest then remaining unpaid on this Note shall become, or may be declared to be, immediately due and payable, all as provided in the Credit Agreement.

        All parties now and hereafter liable with respect to this Note, whether maker, principal, surety, guarantor, endorser or otherwise, hereby waive presentment, demand, protest and all other notices of any kind.

        Unless otherwise defined herein, terms defined in the Credit Agreement and used herein shall have the meanings given to them in the Credit Agreement.

NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED HEREIN OR IN THE CREDIT AGREEMENT, THIS NOTE MAY NOT BE TRANSFERRED EXCEPT PURSUANT TO AND IN ACCORDANCE WITH THE ASSIGNMENT AND OTHER PROVISIONS OF SECTION 12.6 OF THE CREDIT AGREEMENT.

2

THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.

SCIENTIFIC GAMES CORPORATION
By:
	Name: Title:

3

Schedule A
to Term Note

LOANS, CONVERSIONS AND REPAYMENTS OF BASE RATE LOANS

Date

Amount of
Base Rate
Loans

Amount
Converted to
Base Rate Loans

Amount of
Principal of
Base Rate Loans Repaid

Amount of Base Rate
Loans Converted to
Eurocurrency Loans
Unpaid
Principal
Balance of
Base Rate Loans


Notation
Made By

Schedule B
to Term Note

LOANS, CONTINUATIONS, CONVERSIONS AND REPAYMENTS OF EURODOLLAR LOANS

Date
Amount of
Eurocurrency
Loans
Amount
Converted to
Eurocurrency
Loans
Interest Period
and
E1urocurrency
Rate with
Respect Thereto
Amount of
Principal of
Eurocurrency
Loans Repaid
Amount of
Eurocurrency Loans
Converted to
Base Rate Loans
Unpaid Principal
Balance of
Eurocurrency
Loans
Notation
Made By

EXHIBIT I-2 TO
CREDIT AGREEMENT

FORM OF REVOLVING NOTE

        THIS NOTE AND THE OBLIGATIONS REPRESENTED HEREBY MAY NOT BE TRANSFERRED EXCEPT IN COMPLIANCE WITH THE TERMS AND PROVISIONS OF THE CREDIT AGREEMENT REFERRED TO BELOW. TRANSFERS OF THIS NOTE AND THE OBLIGATIONS REPRESENTED HEREBY MUST BE RECORDED IN THE REGISTER MAINTAINED BY THE ADMINISTRATIVE AGENT PURSUANT TO THE TERMS OF SUCH CREDIT AGREEMENT.

$                         New York, New York
                            , 2002

        FOR VALUE RECEIVED, the undersigned, Scientific Games Corporation, a Delaware corporation (the "Borrower"), hereby unconditionally promises to pay to                        (the "Lender") or its registered assigns at the Funding Office specified in the Credit Agreement (as hereinafter defined) in lawful money of the United States and in immediately available funds, on the Revolving Termination Date the principal amount of (a)             DOLLARS ($            ), or, if less, (b) the aggregate unpaid principal amount of all Revolving Loans made by the Lender to the Borrower pursuant to Section 3.1 of the Credit Agreement. The Borrower further agrees to pay interest in like money at such office on the unpaid principal amount hereof from time to time outstanding at the rates and on the dates specified in Section 5.5 of the Credit Agreement.

        The holder of this Note is authorized to endorse on the schedules annexed hereto and made a part hereof or on a continuation thereof which shall be attached hereto and made a part hereof the date, Type and amount of each Revolving Loan made pursuant to the Credit Agreement and the date and amount of each payment or prepayment of principal thereof, each continuation thereof, each conversion of all or a portion thereof to another Type and, in the case of Eurocurrency Loans, the length of each Interest Period with respect thereto. Each such endorsement shall constitute prima facie evidence of the accuracy of the information endorsed. The failure to make any such endorsement or any error in any such endorsement shall not affect the obligations of the Borrower in respect of any Revolving Loan.

        This Note (a) is one of the Revolving Notes referred to in the Credit Agreement dated as of December 19, 2002 (as amended, supplemented or otherwise modified from time to time, the "Credit Agreement"), among the Borrower, the several banks and other financial institutions or entities from time to time parties thereto, Bear, Stearns & Co. Inc., as Lead Arranger, BNY Capital Markets, Inc., as Co-Arranger, Bear Stearns Corporate Lending Inc., as Syndication Agent, and The Bank of New York, as Administrative Agent, (b) is subject to the provisions of the Credit Agreement and (c) is subject to optional and mandatory prepayment in whole or in part as provided in the Credit Agreement. This Note is secured and guaranteed as provided in the Loan Documents. Reference is hereby made to the Loan Documents for a description of the properties and assets in which a security interest has been granted, the nature and extent of the security and the guarantees, the terms and conditions upon which the security interests and each guarantee were granted and the rights of the holder of this Note in respect thereof.

        Upon the occurrence and during the continuance of any one or more of the Events of Default, after notice to the Borrower from the Administrative Agent, all principal and all accrued interest then remaining unpaid on this Note shall become, or may be declared to be, immediately due and payable, all as provided in the Credit Agreement.

        All parties now and hereafter liable with respect to this Note, whether maker, principal, surety, guarantor, endorser or otherwise, hereby waive presentment, demand, protest and all other notices of any kind.

        Unless otherwise defined herein, terms defined in the Credit Agreement and used herein shall have the meanings given to them in the Credit Agreement.

NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED HEREIN OR IN THE CREDIT AGREEMENT, THIS NOTE MAY NOT BE TRANSFERRED EXCEPT PURSUANT TO AND IN ACCORDANCE WITH THE ASSIGNMENT AND OTHER PROVISIONS OF SECTION 12.6 OF THE CREDIT AGREEMENT.

2

THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.

SCIENTIFIC GAMES CORPORATION
By:
	Name: Title:

3

Schedule A
to Revolving Note

LOANS, CONVERSIONS AND REPAYMENTS OF BASE RATE LOANS

Date

Amount of
Base Rate
Loans

Amount
Converted to
Base Rate Loans

Amount of
Principal of
Base Rate Loans Repaid

Amount of Base Rate
Loans Converted to
Eurocurrency Loans
Unpaid
Principal
Balance of
Base Rate Loans


Notation
Made By

Schedule B
to Revolving Note

LOANS, CONTINUATIONS, CONVERSIONS AND REPAYMENTS OF EURODOLLAR LOANS

Date

Amount of
Eurocurrency
Loans

Amount
Converted to
Eurocurrency
Loans

Interest Period
and
Eurocurrency
Rate with
Respect Thereto

Amount of
Principal of
Eurocurrency
Loans Repaid

Amount of
Eurocurrency Loans
Converted to
Base Rate Loans

Unpaid Principal
Balance of
Eurocurrency
Loans

Notation
Made By

EXHIBIT I-3 TO
CREDIT AGREEMENT

FORM OF SWINGLINE NOTE

        THIS NOTE AND THE OBLIGATIONS REPRESENTED HEREBY MAY NOT BE TRANSFERRED EXCEPT IN COMPLIANCE WITH THE TERMS AND PROVISIONS OF THE CREDIT AGREEMENT REFERRED TO BELOW. TRANSFERS OF THIS NOTE AND THE OBLIGATIONS REPRESENTED HEREBY MUST BE RECORDED IN THE REGISTER MAINTAINED BY THE ADMINISTRATIVE AGENT PURSUANT TO THE TERMS OF SUCH CREDIT AGREEMENT.

$                         New York, New York
                , 2002

        FOR VALUE RECEIVED, the undersigned, Scientific Games Corporation, a Delaware corporation (the "Borrower"), hereby unconditionally promises to pay to                        (the "Swingline Lender") or its registered assigns at the Funding Office specified in the Credit Agreement (as hereinafter defined) in lawful money of the United States and in immediately available funds, on the Revolving Termination Date the principal amount of (a)             DOLLARS ($                        ), or, if less, (b) the aggregate unpaid principal amount of all Swingline Loans made by the Swingline Lender to the Borrower pursuant to Section 3.3 of the Credit Agreement. The Borrower further agrees to pay interest in like money at such office on the unpaid principal amount hereof from time to time outstanding at the rates and on the dates specified in Section 5.5 of such Credit Agreement.

        The holder of this Note is authorized to endorse on the schedules annexed hereto and made a part hereof or on a continuation thereof which shall be attached hereto and made a part hereof the date and amount of each Swingline Loan made pursuant to the Credit Agreement and the date and amount of each payment or prepayment of principal thereof. Each such endorsement shall constitute prima facie evidence of the accuracy of the information endorsed. The failure to make any such endorsement or any error in any such endorsement shall not affect the obligations of the Borrower in respect of any Swingline Loan.

        This Note (a) is one of the Swingline Notes referred to in the Credit Agreement, dated as of December 19, 2002 (as amended, supplemented or otherwise modified from time to time, the "Credit Agreement"), among the Borrower, the Swingline Lender, the several banks and other financial institutions or entities from time to time parties thereto, Bear, Stearns & Co. Inc., as Lead Arranger, BNY Capital Markets, Inc., as Co-Arranger, Bear Stearns Corporate Lending Inc., as Syndication Agent, and The Bank of New York, as Administrative Agent, (b) is subject to the provisions of the Credit Agreement and (c) is subject to optional and mandatory prepayment in whole or in part as provided in the Credit Agreement. This Note is secured and guaranteed as provided in the Loan Documents. Reference is hereby made to the Loan Documents for a description of the properties and assets in which a security interest has been granted, the nature and extent of the security and the guarantees, the terms and conditions upon which the security interests and each guarantee were granted and the rights of the holder of this Note in respect thereof.

        Upon the occurrence and during the continuance of any one or more of the Events of Default, after notice to the Borrower from the Administrative Agent, all principal and all accrued interest then remaining unpaid on this Note shall become, or may be declared to be, immediately due and payable, all as provided in the Credit Agreement.

        All parties now and hereafter liable with respect to this Note, whether maker, principal, surety, guarantor, endorser or otherwise, hereby waive presentment, demand, protest and all other notices of any kind.

        Unless otherwise defined herein, terms defined in the Credit Agreement and used herein shall have the meanings given to them in the Credit Agreement.

NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED HEREIN OR IN THE CREDIT AGREEMENT, THIS NOTE MAY NOT BE TRANSFERRED EXCEPT PURSUANT TO AND IN ACCORDANCE WITH THE ASSIGNMENT AND OTHER PROVISIONS OF SECTION 12.6 OF THE CREDIT AGREEMENT.

2

THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.

SCIENTIFIC GAMES CORPORATION
By:
	Name: Title:

3

Schedule A
to Swingline Note

LOANS AND REPAYMENTS OF SWINGLINE LOANS

Date
Amount of
Swingline Loans
Amount of Principal of
Swingline Loans Repaid
Unpaid Principal Balance
of Swingline Loans
Notation
Made By

EXHIBIT J TO
CREDIT AGREEMENT

FORM OF ADDENDUM

        Reference is made to the Credit Agreement, dated as of December 19, 2002 (as amended, supplemented or otherwise modified from time to time, the "Credit Agreement"), among Scientific Games Corporation, the banks and other financial institutions from time to time parties thereto as Lenders, Bear, Stearns & Co. Inc., as Lead Arranger, BNY Capital Markets, Inc., as Co-Arranger, Bear Stearns Corporate Lending Inc., as Syndication Agent, and The Bank of New York, as Administrative Agent. Unless otherwise defined herein, terms defined in the Credit Agreement and used herein shall have the meanings given to them in the Credit Agreement.

        Upon execution and delivery of this Lender Addendum by the parties hereto as provided in Section 12.17 of the Credit Agreement, the undersigned hereby becomes a Lender thereunder having the Commitments set forth in Schedule 1 hereto, effective as of the Closing Date.

THIS LENDER ADDENDUM SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.

        This Lender Addendum may be executed by one or more of the parties hereto on any number of separate counterparts, and all of said counterparts taken together shall be deemed to constitute one and the same instrument. Delivery of an executed signature page hereof by facsimile transmission shall be effective as delivery of a manually executed counterpart hereof.

        IN WITNESS WHEREOF, the parties hereto have caused this Lender Addendum to be duly executed and delivered by their proper and duly authorized officers as of this            day of             , 2002.

[NAME OF LENDER]
By:
	Name: Title:
Accepted and agreed: SCIENTIFIC GAMES CORPORATION
By:
	Name: Title:
THE BANK OF NEW YORK, as Administrative Agent
By:
	Name: Title:

Schedule 1
to Exhibit J

COMMITMENTS AND NOTICE ADDRESS

Name and Notice
Address of Lender Revolving
Commitment Foreign
Currency
Commitment Term
Commitment

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Exhibit 10.28
EXHIBIT A TO CREDIT AGREEMENT

TABLE OF CONTENTS
W I T N E S S E T H
SECTION 1. DEFINED TERMS
SECTION 2. GUARANTEE
SECTION 3. GRANT OF SECURITY INTEREST
SECTION 4. REPRESENTATIONS AND WARRANTIES
SECTION 5. COVENANTS
SECTION 6. REMEDIAL PROVISIONS
SECTION 7. THE ADMINISTRATIVE AGENT
SECTION 8. MISCELLANEOUS

Schedule 1

Schedule 2

DESCRIPTION OF INVESTMENT PROPERTY

Schedule 3

FILINGS AND OTHER ACTIONS REQUIRED TO PERFECT SECURITY INTERESTS

Schedule 4

LOCATION OF JURISDICTION OF ORGANIZATION AND CHIEF EXECUTIVE OFFICE

Schedule 5

LOCATIONS OF INVENTORY AND EQUIPMENT

Schedule 6
Schedule 7

Annex I to Guarantee and Collateral Agreement

W I T N E S S E T H

Annex II to Guarantee and Collateral Agreement

ACKNOWLEDGEMENT AND CONSENT

EXHIBIT B TO CREDIT AGREEMENT

FORM OF COMPLIANCE CERTIFICATE

Attachment 1 to Exhibit B

[Attach Financial Statements]

Attachment 2 to Exhibit B

EXHIBIT C TO CREDIT AGREEMENT

FORM OF CLOSING CERTIFICATE

ANNEX 1

[Board Resolutions]

ANNEX 2

[By-Laws] [other governance document]

ANNEX 3

[Certificate of Incorporation] [other charter document]

EXHIBIT D-1 TO CREDIT AGREEMENT

FORM OF NEW LENDER SUPPLEMENT
W I T N E S S E T H

EXHIBIT D-2 TO CREDIT AGREEMENT

FORM OF COMMITMENT INCREASE SUPPLEMENT
W I T N E S S E T H

EXHIBIT E TO CREDIT AGREEMENT

EXHIBIT F TO CREDIT AGREEMENT

EXHIBIT G-1 TO CREDIT AGREEMENT

[FORM OF LEGAL OPINION OF KRAMER LEVIN NAFTALIS & FRANKEL LLP]

EXHIBIT G-2 TO CREDIT AGREEMENT

[FORM OF LEGAL OPINION OF MARTIN E. SCHLOSS]

EXHIBIT H TO CREDIT AGREEMENT

FORM OF EXEMPTION CERTIFICATE

EXHIBIT I-1 TO CREDIT AGREEMENT

FORM OF TERM NOTE

Schedule A to Term Note

LOANS, CONVERSIONS AND REPAYMENTS OF BASE RATE LOANS

Schedule B to Term Note

LOANS, CONTINUATIONS, CONVERSIONS AND REPAYMENTS OF EURODOLLAR LOANS

EXHIBIT I-2 TO CREDIT AGREEMENT

FORM OF REVOLVING NOTE

Schedule A to Revolving Note

LOANS, CONVERSIONS AND REPAYMENTS OF BASE RATE LOANS

Schedule B to Revolving Note

LOANS, CONTINUATIONS, CONVERSIONS AND REPAYMENTS OF EURODOLLAR LOANS

EXHIBIT I-3 TO CREDIT AGREEMENT

FORM OF SWINGLINE NOTE

Schedule A to Swingline Note

LOANS AND REPAYMENTS OF SWINGLINE LOANS

EXHIBIT J TO CREDIT AGREEMENT

FORM OF ADDENDUM

Schedule 1 to Exhibit J

COMMITMENTS AND NOTICE ADDRESS

EX-10.29

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Exhibit 10.29

SUPPLEMENT TO CREDIT AGREEMENT

SUPPLEMENT NO. 1, dated as of December 30, 2002 (this "Supplement"), to the Credit Agreement, dated as of December 19, 2002 (as supplemented and as the same may be amended, further supplemented or otherwise modified from time to time, the "Credit Agreement"), among Scientific Games Corporation (the "Borrower"), the Lenders from time to time parties thereto, Bear, Stearns & Co. Inc., as Lead Arranger, BNY Capital Markets, Inc., as Co-Arranger, Bear Stearns Corporate Lending Inc., as Syndication Agent, and The Bank of New York as Administrative Agent (in such capacity, the "Administrative Agent") for the Lenders (as defined in the Credit Agreement).

        A.    Each of Scientific Games Holdings Corp. ("Holdings"), Scientific Games International, Inc. ("International"), Scientific Games International Holdings LTD ("SGIH"), Scientific Games UK Holdings LTD ("SGUK") and Scientific Games International GmbH ("SGIG") is a Subsidiary (as defined in the Credit Agreement) of the Borrower.

        B.    Concurrently with the execution and delivery of this Supplement, Holdings and International are entering into and consummating the Tax Reorganizations (as defined in Section 9.5(f) of the Credit Agreement). Pursuant to the Tax Reorganizations, (i) SGUK will cease to be a wholly owned direct Subsidiary of Holdings and shall be a wholly owned direct subsidiary of SGIH; (ii) SGIG will cease to be a wholly owned direct Subsidiary of International and shall be a wholly owned direct subsidiary of SGIH; and (iii) SGIH shall incur Indebtedness to Holdings in the form of two intercompany notes in the principal amounts of Twenty Three Million Nine Hundred Thousand Pounds Sterling (£23,900,000) and Six Million Five Hundred Thousand Pounds Sterling (£6,500,000), respectively.

        C.    All capitalized terms used herein and not otherwise defined herein shall have the respective meanings assigned to such terms in the Credit Agreement.

        Accordingly, the Borrower agrees and confirms as follows:

        SECTION 1.    Pursuant to Section 9.5(f) of the Credit Agreement, upon the consummation of the Tax Reorganizations, this Supplement may be attached to the Credit Agreement, and the existing Schedule 6.15(a), Schedule 9.2(d) and Schedule 9.8(f) to the Credit Agreement shall be deemed to be replaced in its entirety with Schedule 6.15(a), Schedule 9.2(d) and Schedule 9.8(f), respectively, attached hereto.

        SECTION 2.    All approvals and consents applicable or required to consummate the Tax Reorganizations have been obtained and are in full force and effect.

        SECTION 3.    This Supplement shall become effective when the Administrative Agent shall have received an executed copy of this Supplement. Delivery of an executed signature page to this Supplement by facsimile transmission shall be as effective as a delivery of a manually executed Supplement.

        SECTION 4.    Except as expressly supplemented hereby, the Credit Agreement shall remain in full force and effect.

        SECTION 5.    THIS SUPPLEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.

        SECTION 6.    Any provision of this Supplement which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.

        SECTION 7.    All communications and notices hereunder shall be in writing and given as provided in Section 12.2 of the Credit Agreement.

[Remainder of Page Intentionally Left Blank]

2

        IN WITNESS WHEREOF, the undersigned has executed this Supplement to the Credit Agreement as of the date first above written.

SCIENTIFIC GAMES CORPORATION
By:	Name: Title:

3

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Exhibit 10.29

SUPPLEMENT TO CREDIT AGREEMENT

EX-10.30

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Exhibit 10.30

SUPPLEMENT TO GUARANTEE AND COLLATERAL AGREEMENT

SUPPLEMENT NO. 1, dated as of December 30, 2002 (this "Supplement"), to the Guarantee and Collateral Agreement, dated as of December 19, 2002 (as supplemented and as the same may be amended, further supplemented or otherwise modified from time to time, the "Guarantee and Collateral Agreement"), by Scientific Games Corporation, a Delaware corporation (the "Company"), and each of the other signatories thereto (each such signatory individually, a "Grantor" and collectively, the "Grantors") in favor of The Bank of New York, as Administrative Agent (in such capacity, the "Administrative Agent") for the Lenders (as defined in the Credit Agreement referred to below).

        A.    Reference is made to that certain Credit Agreement, dated as of December 19, 2002 (as supplemented and as the same may be amended, further supplemented or otherwise modified from time to time, the "Credit Agreement"), among the Company, the Lenders from time to time parties thereto, Bear, Stearns & Co. Inc., as Lead Arranger, BNY Capital Markets, Inc., as Co-Arranger, Bear Stearns Corporate Lending Inc., as Syndication Agent, and the Administrative Agent.

        B.    All capitalized terms used herein and not otherwise defined herein shall have the respective meanings assigned to such terms in the Credit Agreement.

        C.    The Grantors have entered into the Guarantee and Collateral Agreement in order to induce the Lenders to make extensions of credit to the Company.

        D.    Scientific Games Holdings Corp. ("Holdings") is a Grantor under the Guarantee and Collateral Agreement. Pursuant to Section 3 of the Guarantee and Collateral Agreement, Holdings assigned and transferred to the Administrative Agent a security interest in, inter alia, 65 ordinary shares of Scientific Games UK Holdings LTD (the "UK Shares").

        E.    Scientific Games International, Inc. ("International") is a Grantor under the Guarantee and Collateral Agreement. Pursuant to Section 3 of the Guarantee and Collateral Agreement, International assigned and transferred to the Administrative Agent a security interest in, inter alia, sixty-five percent (65%) of the share capital of Scientific Games International GmbH (the "Austrian Shares").

        F.    Concurrently with the execution and delivery of this Supplement, Holdings and International are entering into and consummating the Tax Reorganizations (as defined in Section 9.5(f) of the Credit Agreement).

        G.    Upon the consummation of the Tax Reorganizations, Holdings shall have received an additional 34,400,000 ordinary shares of £1.00 each of Scientific Games International Holdings LTD (the "New Shares") and two separate intercompany notes, one in the principal amount of £23,900,000 and the other in the principal amount of £6,500,000, each dated December , 2002, and each made by Scientific Games International Holdings LTD payable to Holdings (together, the "New Notes").

        Accordingly, each of the undersigned agrees as follows:

        SECTION 1.    Pursuant to Section 9.5(f) of the Credit Agreement, Holdings hereby assigns and transfers to the Administrative Agent, and hereby grants to the Administrative Agent, for the ratable benefit of the Agents and the Lenders (and any affiliates of any Lender to which Borrower Hedge Agreement Obligations (as defined in the Guarantee and Collateral Agreement) are owing), a security interest in the following property, as collateral security for the prompt and complete payment and performance when due (whether at the stated maturity, by acceleration or otherwise) of Holdings' Obligations (as defined in the Guarantee and Collateral Agreement):

        (a)    22,360,000 New Shares (such New Shares, the "New Pledged Shares"), which New Pledged Shares represent sixty-five percent (65%) of the New Shares, as "Pledged Shares" under the Guarantee and Collateral Agreement; and

        (b)    the New Notes as "Pledged Notes" under the Guarantee and Collateral Agreement.

        SECTION 2.    Pursuant to Section 9.5(f) of the Credit Agreement, upon the consummation of the Tax Reorganizations, this Supplement may be attached to the Guarantee and Collateral Agreement, and the existing Schedule 2 to the Guarantee and Collateral Agreement shall be deemed to be replaced in its entirety with Schedule 2 attached hereto.

        SECTION 3.    (a) Holdings hereby represents and warrants that each of the representations and warranties set forth in Section 4.7 of the Guarantee and Collateral Agreement relating to Holdings or the New Pledged Shares or the New Notes, each of which is incorporated herein by reference, is true and correct, and each Agent and each Lender shall be entitled to rely on each of such representations and warranties as if they were fully set forth herein.

        (b)  Each of the Grantors hereby represents and warrants that each of its representations and warranties set forth in the Guarantee and Collateral Agreement is true and correct on and as of the date hereof as if made on the date hereof.

        SECTION 4.    The Company and Holdings hereby covenant and agree that, no later than January 17, 2003, the Company shall cause Holdings to, and Holdings shall, deliver to the Administrative Agent a certificate or certificates representing the New Pledged Shares.

        SECTION 5.    This Supplement may be executed by one or more of the parties to this Supplement on any number of separate counterparts (including by telecopy), and all of said counterparts taken together shall be deemed to constitute one and the same instrument. This Supplement shall become effective when the Administrative Agent shall have received counterparts of this Supplement that, when taken together, bear the signatures of each of the undersigned.

        SECTION 6.    Except as expressly supplemented hereby, the Guarantee and Collateral Agreement shall remain in full force and effect.

        SECTION 7.    THIS SUPPLEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.

        SECTION 8.    Any provision of this Supplement which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.

        SECTION 9.    All communications and notices hereunder shall be in writing and given as provided in Section 12.2 of the Credit Agreement.

[Remainder of Page Intentionally Left Blank]

2

        IN WITNESS WHEREOF, the undersigned have entered into this Supplement to the Guarantee and Collateral Agreement as of the date first above written. `

COMPANY:
	SCIENTIFIC GAMES CORPORATION
	By:
		Name: Title:
GUARANTORS:
	AUTOTOTE DOMINICANA INC.
	By:
		Name: Title:
	AUTOTOTE ENTERPRISES, INC.
	By:
		Name: Title:
	AUTOTOTE GAMING, INC.
	By:
		Name: Title:
	AUTOTOTE INTERACTIVE, INC.
	By:
		Name: Title:
	AUTOTOTE INTERNATIONAL, INC.
	By:
		Name: Title:

3

AUTOTOTE KENO CORPORATION
By:
	Name: Title:
AUTOTOTE SYSTEMS, INC.
By:
	Name: Title:
BLUE SUEDE ACQUISITION CORP.
By:
	Name: Title:
SCIENTIFIC GAMES ACQUISITION, INC.
By:
	Name: Title:
SCIENTIFIC GAMES FINANCE CORPORATION
By:
	Name: Title:
SCIENTIFIC GAMES (GREECE), INC.
By:
	Name: Title:
SCIENTIFIC GAMES HOLDINGS CORP.
By:
	Name: Title:

4

SCIENTIFIC GAMES INTERNATIONAL, INC.
By:
	Name: Title:
SCIENTIFIC GAMES MANAGEMENT CORPORATION
By:
	Name: Title:
SCIENTIFIC GAMES ROYALTY CORPORATION
By:
	Name: Title:

5

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Exhibit 10.30

SUPPLEMENT TO GUARANTEE AND COLLATERAL AGREEMENT
[Remainder of Page Intentionally Left Blank]

EX-21.1

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Exhibit 21.1

SCIENTIFIC GAMES CORPORATION SUBSIDIARIES

Scientific Games Management Corporation (Delaware) (100%)

Scientific Games Holdings Corp. (Delaware) (100%)

        Scientific Games (Greece), Inc. (Delaware) (100%)

        Scientific Games Acquisition, Inc. (Delaware) (100%)

        Scientific Games International Holdings Limited (UK) (100%)

        Scientific Games International GmbH (Austria) (100%)

        Scientific Games UK Holdings Limited (UK) (100%)

        Scientific Games International Limited (UK) (100%)

        Scientific Connections SDN BHD (Malaysia) (100%)

        Knightway Promotions Limited (UK) (100%)

        Norton & Wright Limited (UK) (99.9%)

        Scientific Connections Limited (UK) (100%)

        OPAX Lotteries International Limited (UK) (100%)

        Scientific Games Finance Corporation (Delaware) (100%)

        Scientific Games International, Inc. (Delaware) (100%)

        MDI Entertainment, Inc. (Delaware) (100%)

        Scientific Games Royalty Corporation (Delaware) (100%)

        Scientific Games Canada Inc. (Ottawa) (100%)

        Scientific Connections India Private Limited (India) (99.9%)

Autotote Systems, Inc. (Delaware) (100%)

        Autotote International, Inc. (Delaware) (100%)

        Autotote Canada Inc. (Ontario) (100%)

        NASRIN Services LLC (Delaware) (70%)

        Autotote Worldwide Services Limited (Ireland) (100%)

        TRACKPLAY LLC (Delaware) (70%)

        Autotote Electronics and Computer Services and Trading LLC (Turkey) (99.9%)

Autotote Enterprises, Inc. (Connecticut) (100%)

Autotote Keno Corporation (Nebraska) (100%)

Autotote Europe GmbH (Germany) (100%)

        AUTOTOTE Deutschland GmbH (Germany) (100%)

        TEK Totalisatorservice GmbH (Germany) (50%)

        GTS Galopp Totalisator Service GmbH (Germany) (50%)

        AUTOTOTE GmbH Oesterreich (Austria) (100%)

        AUTOTOTE France S.A. (France) (99.96%)

        SASO S.A.R.L. (France) (99.6%)

Autotote Panama, Inc. (Panama) (100%)

Autotote Nederland B.V. (the Netherlands) (100%)

        Autotote Banen B.V. (the Netherlands) (100%)

Autotote Gaming, Inc. (Nevada) (100%)

Autotote Dominicana Inc. (Delaware) (100%)

Autotote Interactive, Inc. (Delaware) (100%)

Scientific Games Chile Limitada (Chile) (100%)

        Scientific Games Latino America S.A. (Chile) (65%)

        SGLA Servicios Limitada (Chile) (100%)

        SGLA Comercializadora de Materiales Limitada (Chile) (100%)

        SGLA Exportadora Limitada (Chile) (100%)

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Exhibit 21.1

SCIENTIFIC GAMES CORPORATION SUBSIDIARIES

EX-23

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Exhibit 23

CONSENT OF INDEPENDENT AUDITORS

The Board of Directors and Stockholders
Scientific Games Corporation:

        We consent to the incorporation by reference in the registration statements (No's 33-82612, 33-46594, 33-27737, 33305811, 333-44983, 333-44979, 333-101725 and 333-101729) on Form S-8 of Scientific Games Corporation of our report dated February 21, 2003, relating to the consolidated balance sheets of Scientific Games Corporation and subsidiaries as of December 31, 2001 and 2002, and the related consolidated statements of operations, stockholders' equity and comprehensive income (loss), cash flows, and related financial statement schedule for the year ended October 31, 2000, the two months ended December 31, 2000, and the years ended December 31, 2001 and 2002, which report appears in the Form 10-K of Scientific Games Corporation for the year ended December 31, 2002.

        Our report on the consolidated financial statements refers to the Company's adoption of Statement of Financial Accounting Standards No. 142, "Goodwill and Other Intangible Assets," effective January 1, 2002.

Short Hills, New Jersey
March 24, 2003

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Exhibit 23

CONSENT OF INDEPENDENT AUDITORS

EX-99.1

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Exhibit 99.1

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

        In connection with the Annual Report of Scientific Games Corporation (the "Company") on Form 10-K for the period ending December 31, 2002 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, A. Lorne Weil, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

(1)

The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)

The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/  A. LORNE WEIL A. Lorne Weil
Chief Executive Officer
March 21, 2003

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Exhibit 99.1

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

EX-99.2

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Exhibit 99.2

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

        In connection with the Annual Report of Scientific Games Corporation (the "Company") on Form 10-K for the period ending December 31, 2002 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, DeWayne E. Laird, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

(1)

The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)

The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/  DEWAYNE E. LAIRD DeWayne E. Laird
Chief Financial Officer
March 21, 2003

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Exhibit 99.2

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002