10-K

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

FORM 10-K

ý	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended: December 31, 2010
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) (Zip Code)
Registrant's telephone number, including area code: (212) 754-2233

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Name of each exchange on which registered
Class A Common Stock, $.01 par value	Nasdaq Global Select Market

         Securities registered pursuant to Section 12(g) of the Act: None

         Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o    No ý

         Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o    No ý

         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 whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). 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 a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of "large accelerated filer," "accelerated filer," and "smaller reporting company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer ý Accelerated filer o Non-accelerated filer o
(Do not check if smaller
reporting company) Smaller reporting company o

         Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes o    No ý

         As of June 30, 2010 the market value of voting and non-voting common equity held by non-affiliates of the registrant was approximately $556,527,173(1).

         Common shares outstanding as of February 24, 2011 were 91,978,827.

DOCUMENTS INCORPORATED BY REFERENCE

         The following document is incorporated herein by reference:

Document	Parts Into Which Incorporated
Proxy Statement for the Company's 2011 Annual Meeting of Stockholders	Part III

(1)

For this purpose only, "non-affiliates" excludes directors and executive officers.

EXHIBIT INDEX APPEARS ON PAGE 142

PART I
FORWARD-LOOKING STATEMENTS

        Throughout this Annual Report on Form 10-K we make "forward-looking statements" within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements describe future expectations, plans, results or strategies and can often be identified by the use of terminology such as "may," "will," "estimate," "intend," "continue," "believe," "expect," "anticipate," "could," "potential," "opportunity," or similar terminology. The forward-looking statements contained in this Annual Report on Form 10-K are generally located in the material set forth under the headings "Business," "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" but may be found in other locations as well. These statements are based upon management's current expectations, assumptions and estimates and are not guarantees of future results or performance. Actual results may differ materially from those projected in these statements due to a variety of risks and uncertainties and other factors, including, among other things: competition; material adverse changes in economic and industry conditions; technological change; retention and renewal of existing contracts and entry into new or revised contracts; availability and adequacy of cash flows to satisfy obligations and indebtedness or future needs; protection of intellectual property; security and integrity of software and systems; laws and government regulation, including those relating to gaming licenses, permits and operations; inability to identify, complete and integrate future acquisitions; inability to benefit from, and risks associated with, joint ventures and strategic investments and relationships; seasonality; pending legal challenges that may affect our joint venture's Illinois lottery private management agreement or the failure of our joint venture to meet the net income targets or otherwise realize the anticipated benefits under such agreement; inability to identify and capitalize on trends and changes in the lottery and gaming industries; inability to enhance and develop successful gaming concepts; dependence on suppliers and manufacturers; liability for product defects; fluctuations in foreign currency exchange rates and other factors associated with foreign operations; influence of certain stockholders; dependence on key personnel; failure to perform on contracts; resolution of pending or future litigation; labor matters; and stock price volatility. Additional information regarding risks and uncertainties and other factors that could cause actual results to differ materially from those contemplated in forward-looking statements is included from time to time in our filings with the Securities and Exchange Commission ("SEC"), including under the heading "Risk Factors" in this Annual Report on Form 10-K. Forward-looking statements speak only as of the date they are made, and except for our ongoing obligations under the U.S. federal securities laws, we undertake no obligation to publicly update any forward-looking statements whether as a result of new information, future events or otherwise.

        You should also note that this Annual Report on Form 10-K 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. In general, there is less publicly available information concerning the international lottery industry than the lottery industry in the United States.

ITEM 1.    BUSINESS

        Unless otherwise specified or the context otherwise indicates, all references to the words "Scientific Games," "we," "us," "our," and the "Company" refer to Scientific Games Corporation and all entities included in our consolidated financial statements. "International" refers to non-United States jurisdictions. "SGI" refers to Scientific Games International, Inc., a wholly owned subsidiary of

2

Scientific Games Corporation. "United States ("U.S.") jurisdictions" refers to the 50 states in the U.S. plus the District of Columbia and Puerto Rico. "Online lottery" refers to a computerized system in which lottery terminals in retail outlets are continuously connected to a central computer system for the activation, sale and validation of lottery tickets and related functions. "Wide area gaming" generally refers to a collection of video lottery and/or other gaming terminals in which the terminals are distributed across a large number of venues, with relatively few terminals per venue.

        Scientific Games Corporation was incorporated in the state of Delaware on July 2, 1984. We are a global leader in providing customized, end-to-end gaming solutions to lottery and gaming organizations worldwide. Our integrated array of products and services include instant lottery games, lottery gaming systems, terminals and services, and Internet applications, as well as server-based interactive gaming machines and associated gaming control systems. We also gain access to technology and pursue global expansion through strategic joint ventures and non-controlling interests.

Industry Overview

Lottery

        Lotteries are operated by domestic and foreign governmental authorities and their licensees in approximately 178 jurisdictions throughout the world. Currently, 45 U.S. jurisdictions have online lotteries and 44 U.S. jurisdictions have instant ticket lotteries. Governments typically authorize lotteries as a means of generating revenues without the imposition of additional taxes. Net lottery proceeds are frequently set aside for a particular public purpose, such as education, aid to the elderly, conservation, transportation or economic development. Many jurisdictions have come to rely on the proceeds from lottery ticket sales as a significant source of funding for these programs. Although there are many types of lottery games worldwide, government authorized lotteries may generally be categorized into three principal categories: instant ticket; online; and traditional draw-type lotteries.

        An instant ticket lottery is typically played by removing a scratch-off coating from a preprinted ticket to determine whether it is a winner. Online lottery games, such as Powerball® and Mega Millions, are based on a random selection of a series of numbers, and prizes are generally based on the number of winners who share the prize pool, although set prizes are also offered. Online lotteries are conducted through a computerized system in which lottery terminals in retail outlets are continuously connected to a central computer system. Online lottery systems may also be used to validate instant lottery tickets to confirm that a ticket is a winner and prevent duplicate payments. In some jurisdictions, separate instant ticket validation systems may be installed. In addition, lotteries may offer quick draw keno ("keno"), video lottery, sports and other lottery games. Keno is typically played every five minutes in restricted social settings, such as bars and is usually offered as an extension of online lottery systems. Video lotteries are played on video lottery terminals ("VLTs") featuring "line-up" and card games, typically targeted to locations such as horse and greyhound racetracks, bars, truck stops, nightclubs, betting shops and similar establishments. Video lotteries generally use a distinct system from an online lottery system for accounting, security and control purposes. Traditional draw-type lotteries, which are generally conducted in international jurisdictions, typically involve selling tickets with pre-printed numbers and then performing a drawing to determine the winner.

        Based on industry information, U.S. instant ticket lottery sales and U.S. online lottery retail sales totaled approximately $31 billion and approximately $23 billion, respectively, during the U.S. lottery industry's fiscal year-end 2010 (which is generally June 30, 2010). Based on industry information, we estimate that worldwide instant ticket lottery retail sales and worldwide online lottery retail sales totaled approximately $64 billion and approximately $177 billion, respectively, during fiscal year 2009. Recent industry data indicates that in the U.S. instant ticket retail sales have generally been growing faster than online lottery retail sales, which we believe is due to the immediate gratification of an

3

instant ticket (compared to the delayed rewards of an online lottery game with periodic drawings), as well as increased prize payouts and more frequent game introductions.

        In early 2010, U.S. lotteries began cross-selling the multi-state Powerball and Mega Millions lottery games, enabling players in many lottery states to play a big jackpot game four days a week. We believe that lottery directors are considering an increase in the price point of the Powerball game from $1 to $2, as well as a potential new game at a $5 price point.

Wide Area Gaming

        Wide area gaming refers to a collection of video lottery and other gaming terminals in which the terminals are distributed across a large number of venues, with relatively few terminals per venue. This contrasts with casino-type venues, where a large number of gaming machines are housed in a single venue. Regulated wide area gaming is a large and growing industry, driven by the interest of governments to expand tax revenues and monitor and control gaming within their jurisdictions.

        Wide area gaming encompasses a number of categories including VLTs, server-based gaming terminals and other gaming devices that are increasingly converging as networked video gaming terminals. We bring to this arena a server-based technology that allows for a quick and easy refresh of game content on terminals in the field from a central location. Moreover, we seek to build on our expertise in field service and other local gaming operational capabilities to distinguish ourselves in this area.

Operational Overview

        We report our operations in three business segments: Printed Products Group; Lottery Systems Group; and Diversified Gaming Group.

Printed Products Group

        Our Printed Products Group is primarily comprised of our global instant lottery ticket business. We generate revenue from ticket design and manufacturing, as well as value-added services such as game design, sales and marketing support, specialty games and promotions, inventory management and warehousing and fulfillment services. We also provide lotteries with customized partnerships to help them efficiently and effectively manage and support their operations to achieve higher retail sales and lower operating costs. The Printed Products Group also includes MDI Entertainment, LLC ("MDI"), our subsidiary that provides licensed games, promotional entertainment and Internet services to the lottery industry.

        Instant Ticket and Related Services.    In 1974, we introduced the first secure instant lottery game ticket. We believe we are the leading designer, manufacturer and distributor of instant lottery tickets in the world. We market instant lottery tickets and related services to domestic and foreign lotteries and commercial (non-lottery) customers. We supply instant lottery tickets to 43 of the 44 U.S. jurisdictions that sell instant lottery tickets. In addition, we have sold instant lottery tickets to customers in approximately 50 countries. Our U.S. instant ticket contracts typically have an initial term of three to five years and frequently include multiple renewal options for additional periods ranging from one to five years, which our customers have generally exercised in the past. We typically sell our instant lottery tickets for a per unit price or are paid a fee equal to a percentage of the retail value of the instant lottery tickets sold. Some international customers purchase instant lottery tickets as needed rather than through multi-game supply contracts.

        We operate six printing facilities across five continents (including our joint venture's facility in China) with an aggregate capacity to print approximately 45 billion 2" x 4" standard instant lottery tickets annually. The instant lottery tickets we manufacture are typically printed on recyclable ticket

4

stock by a series of computer-controlled presses and ink-jet imagers, which we believe incorporate the most advanced technology and security in the industry. Instant lottery tickets generally range in size from 2" × 3" to as large as 8" × 12". Instant lottery tickets are normally played by removing a scratch-off coating to determine if they are winning tickets.

        Technology and security requirements necessary to manufacture and service instant lottery tickets continue to separate our business from conventional forms of printing. We are generally recognized within the lottery industry as the leader in applying computer-based technologies to the manufacturing and sale of instant lottery 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 applications to instant lottery tickets and systems.

        Our MDI business provides lotteries with access to some of the world's most popular entertainment brands on lottery products, which we believe helps increase their instant ticket sales. Our entertainment brands include themed instant games such as The Price is Right®, Major League Baseball®, National Basketball Association, Harley-Davidson®, Wheel-of-Fortune®, Monopoly™ and World Poker Tour®, to name a few. We also provide branded merchandise prizes, advertising, promotional support, turn-key drawing management and prize fulfillment programs. In 2009, we launched our Properties Plus™ offering, which is a web-based platform featuring players clubs, reward programs, second chance promotional websites, interactive games and, subject to applicable law, a subscription system that enables players to purchase lottery games securely over the Internet. In 2010, we acquired substantially all of the assets of GameLogic Inc., a provider of interactive marketing services to regulated gaming operators ("GameLogic"), including GameLogic's software for Internet-based loyalty programs for lottery players as well as an extensive suite of interactive games and related intellectual property. We also hired several key members from the GameLogic development and marketing teams. We have integrated the GameLogic assets with our existing Properties Plus business.

        We pioneered the concept of providing lotteries with customized cooperative services programs ("CSP"), in which we manage a lottery's instant ticket operations as a means to reduce the operating costs of the lottery and increase its retail sales. Our CSP contracts bundle supply of instant lottery tickets, systems, facilities management and/or other services, which can include the design and installation of game management software, inventory and distribution, telemarketing, field sales, accounting, training and advisory services. Under our CSP contracts, we are typically paid a percentage of the lottery's instant ticket revenues.

        We have CSP contracts with lotteries in Arkansas, Delaware, the District of Columbia, Florida, Georgia, Maine, Oklahoma, Pennsylvania, Puerto Rico, South Carolina, Tennessee and Virginia. We also have cooperative service style offerings in six German states and in the Ukraine. In 2010, we were awarded a CSP contract to supply instant lottery tickets and cooperative services to Dutch lottery operator, De Lotto.

        Italian Instant Ticket Concession.    We are a 20% equity owner in Lotterie Nazionali S.r.l. ("LNS"), a joint venture comprised principally of us, Lottomatica Group S.p.A. ("Lottomatica") and Arianna 2001, a company owned by the Federation of Italian Tobacconists, that was awarded the concession from the Italian Monopoli di Stato to be the exclusive operator of the Italian Gratta e Vinci instant ticket lottery beginning on October 1, 2010. The new concession has an initial term of nine years (subject to a performance evaluation during the fifth year) and could be extended by the Monopoli di Stato for an additional nine years. LNS succeeded Consorzio Lotterie Nazionali ("CLN"), a consortium comprised of essentially the same group that owns LNS, as holder of the concession. Under the new concession, we are the primary supplier of instant lottery tickets for the joint venture, as we were under the prior concession. CLN, which had held the concession since 2004, is being wound up and the bulk of its assets have been transferred to LNS.

5

        LNS paid €800 million in upfront fees under the terms of the new concession. We paid our pro rata share of these fees in 2010 (€104 million in the second quarter of 2010 and €56 million in the fourth quarter of 2010). The upfront fees associated with the new concession are amortized by LNS (anticipated to be approximately €89 million each year of the new concession on a pre-tax basis), which will reduce our equity in earnings of LNS. Our share of the amortization is expected to be approximately €18 million each year on a pre-tax basis. In light of the corporate structure of LNS, we will record our equity in earnings of LNS on an after-tax basis under applicable accounting rules, which will impact the comparability of our results of operations associated with LNS with our results of operations associated with CLN since we recorded our equity in earnings of CLN on a pre-tax basis. Subject to applicable limitations, we are entitled to receive from LNS annual cash dividends as well as periodic return of capital payments over the life of the concession.

        Northstar Lottery Group.    We are a 20% equity owner in Northstar Lottery Group, LLC ("Northstar"), a joint venture with GTECH Corporation ("GTECH"), a subsidiary of Lottomatica, that was formed to bid for the agreement to be the private manager for the Illinois lottery for a ten-year term. Northstar was selected as the private manager following a competitive procurement and entered into the private management agreement with the State of Illinois on January 18, 2011 (the "PMA"). As the private manager, Northstar will, subject to the oversight of the Illinois lottery, manage the day-to-day operations of the Lottery including lottery game development and portfolio management, retailer recruitment and training, supply of goods and services and overall marketing strategy. Under the terms of the PMA, Northstar is entitled to receive annual incentive compensation payments to the extent it is successful in increasing the lottery's net income above specified target levels, subject to a cap of 5% of the applicable year's net income. Northstar will be responsible for payments to the State to the extent such targets are not achieved, subject to a similar cap. Northstar is expected to be reimbursed on a monthly basis for most of its operating expenses under the PMA. Under a CSP agreement with Northstar, the Company will be responsible for the design, development, manufacturing, warehousing and distribution of instant lottery tickets and will be compensated based on a percentage of retail sales.

        Operations under the PMA are scheduled to commence in 2011, following a transition period. On January 26, 2011, the Appellate Court of Illinois upheld a constitutional challenge to the revenue statute that, among other things, amended the lottery law to facilitate the PMA on grounds that the statute impermissibly addressed more than one subject. The Illinois Supreme Court subsequently granted a stay of the Appellate Court's decision pending the appeal to the Illinois Supreme Court by the State of Illinois. We cannot predict what effect, if any, the court decision, if it is not reversed by the Illinois Supreme Court or addressed through new authorizing legislation, will have on the PMA. If the PMA is ultimately invalidated, we may lose our investment in Northstar and our existing instant ticket supply agreement with the Illinois lottery may come up for re-bid.

        CSG.    We are a 49% equity owner in CSG Lottery Technology (Beijing) Co., Ltd. ("CSG"), a joint venture that holds a 15-year contract to supply instant lottery tickets to the China Sports Lottery. In connection with the contract, the joint venture established an instant ticket manufacturing facility that began producing instant lottery tickets at the end of 2008. The facility has capacity to print eight billion 2" by 4" standard instant ticket units annually. We also receive a royalty fee from CSG for intellectual property rights deemed necessary to promote lottery ticket sales equal to 1% of the total gross profits distributed by the joint venture.

Lottery Systems Group

        We are a leading provider of customized computer software, software support, equipment and data communication services to lotteries. In the U.S., we typically provide the necessary equipment, software and maintenance services pursuant to long-term facilities management contracts that typically have a minimum initial term of five years under which we are generally paid a fee equal to a percentage of

6

the lottery's total retail sales of tickets. Our U.S. contracts typically contain multiple renewal options that generally have been exercised by our customers. Internationally, we typically sell point-of-sale terminals and/or computer software to lottery authorities and may provide ongoing fee-based systems and software support services under long-term contracts.

        Our lottery systems use proprietary technology that facilitates high-speed processing of online wagers as well as validation of winning online and instant tickets. Our lottery systems business includes the supply of transaction-processing software, online lottery games, point-of-sale terminals, central site computers and communication platforms, and ongoing operational support and maintenance services. We also provide software, hardware and support for sports betting systems, video lottery systems and the operation of credit card processing systems for non-lottery customers.

        We have contracts to operate online lottery systems for 11 of the 45 U.S. jurisdictions that operate online lotteries. We believe we are the second largest online lottery provider in the U.S. and a leading provider in Europe. Internationally, we have lottery systems operating in Argentina, Canada, Israel, Australia, China, Puerto Rico, France, Germany, Hungary, Iceland, Latvia, Mexico, Norway, the Philippines, Spain, and Switzerland. In addition, we are the exclusive instant ticket validation network provider to the China Sports Lottery.

        During 2010, the Iowa lottery awarded us a new lottery systems contract, which commences in July 2011, has an initial term of seven years and includes three one-year extension options held by the lottery. During 2010, the lottery authority in Maine awarded a new online lottery contract to one of our competitors, which award was subsequently invalidated as a result of our protest. The competitor has appealed the protest ruling. While we believe that the appeal will be denied and that, during the appeal, Maine will extend the current contract with us and issue a revised request for proposal ("RFP"), there can be no assurance that the appeal will be denied, that our current contract will be extended or that we will be the winning bidder under any reissued RFP. During 2009, the Indiana lottery awarded us a new online lottery contract which began in 2010 for a six-year term through 2016, subject to four additional one-year renewal options held by the lottery.

        Guard Libang.    We have a 50% equity ownership interest in Guard Libang, a provider of systems and services to a majority of the China Welfare Lottery ("CWL") jurisdictions.

Diversified Gaming Group

        Our Diversified Gaming Group provides services and systems to private and public operators in the wide area gaming industry, including server-based gaming machines and sports betting systems and services.

        The Diversified Gaming Group includes The Global Draw Limited ("Global Draw"), a leading supplier of wide area gaming machines, server-based gaming systems and game content to licensed bookmakers, primarily in betting shops in the U.K. and, increasingly, outside the U.K. with deployments in Austria, Mexico and the Caribbean. The Diversified Gaming Group also includes Games Media Limited ("Games Media"), a supplier of gaming terminals and content to U.K. public house ("pub") operators. We provide bookmakers with a turnkey offering which includes remote management of game content and management information, wagering terminals, central computer systems, data communication and field support services. We develop our own game content and contract with third parties for additional content. Our contracts are generally for an initial period of two to four years under which we are typically paid a fee equal to a percentage of our customer's revenues generated from wagers on each terminal. Global Draw operated approximately 15,000 terminals in the U.K. as of December 31, 2010 and has recently expanded into gaming venues in Latin America and the Caribbean.

7

        During 2010, Global Draw was awarded a contract to supply approximately 7,600 server-based gaming machines to Ladbrokes Betting and Gaming, Ltd. ("Ladbrokes"), which we believe represents approximately 95% of their terminal base. The gaming machines are scheduled to be rolled out in 2011.

        Games Media develops its own game content and contracts with third-party game developers and game content providers for use on its digital Amusement With Prize ("AWP") and Skill With Prize ("SWP") gaming terminals in the U.K. The content and terminals are supplied as part of a full turnkey digital gaming product offering to pubs. In late 2007, Games Media began to offer full facilities management contracts to U.K. pub operators and has approximately 3,300 digital terminals installed as of December 31, 2010 with almost 1,500 locations.

        In early 2010, we entered into agreements with a subsidiary of Playtech Limited ("Playtech") providing for our license of Playtech's back-end technology platform for our gaming machines in exchange for certain fees, including a fee based on a percentage of the net cash flow generated by the gaming machines. In 2010, we began migrating our gaming machine businesses in the U.K to the new back-end technology platform, which we expect will provide land-based operators with an enhanced and highly cost-effective way of delivering game content to their patrons.

        Sciplay.    In early 2010, we also entered into a joint venture with Playtech to deliver the latest state-of-the-art Internet gaming solutions to government-sponsored and government-regulated lotteries and certain other gaming operators through a newly formed entity, Sciplay. Sciplay seeks to capitalize on the combination of Playtech's Internet gaming software and content and our experience and relationships with lotteries and other gaming operators.

        Roberts Communication Network.    We have a 29.4% equity interest in Roberts Communications Network, LLC ("RCN"), which provides communications services to racing and non-racing customers.

        Sportech Plc.    The Diversified Gaming Group also included our racing and venue management businesses (collectively, the "Racing Business") prior to the sale of these businesses to Sportech Plc ("Sportech") on October 5, 2010. Upon the closing of the sale of the Racing Business to Sportech, we received an equity interest in Sportech of approximately 20% of the shares then outstanding. Sportech operates football pools and associated games through various distribution channels including direct mail and telephone, agent-based collection and via the Internet. Sportech also operates a portfolio of online casino, poker, bingo and fixed-odds games businesses through its e-Gaming division. Our interest in Sportech is accounted for under the equity method of accounting.

Company Strategy

        Our goal is to be a leader in providing wide area lottery and gaming products and services to customers around the world. The following are the primary elements of our strategy to accomplish this goal:

•

Maximize Revenue and Profits from Existing Contracts and Infrastructure.  We believe we have significant growth potential within our existing global customer base by introducing new products and services and by expanding distribution of our products to new venues. We view this as one of the more attractive avenues of growth as it utilizes our existing contracts and infrastructure and should require relatively limited incremental capital expenditures and overhead expenses. For example:



—

In our Lottery Systems business, we are seeking to maximize revenue and profitability from our existing contracts by working with lottery organizations to introduce new game content, including branded and higher price point games.

8

—

In our Global Draw and Games Media businesses, we believe that by enhancing the quality and delivery options for game content we can improve the performance of our gaming terminals. We are in the process of introducing a new state-of-the-art gaming platform that is anticipated to bring expanded content and functionality to our customers and end players, which we believe will result in improved cashbox performance.



—

In the U.S., we believe that there is potential to increase instant ticket sales by expanding into new forms of retail distribution. Industry estimates suggest that approximately 70% of total fiscal 2009 lottery sales were transacted at only 140,000 retail locations, which were primarily convenience stores, gas stations and grocery stores. We believe that by tailoring our products, content and delivery mechanisms to meet a broader set of retailer needs, we can expand distribution to new retail outlets, including "big box" retailers, drug store chains and other high traffic outlets that have historically not been significant retailers of our products.

•

Bring Our Products and Services to New Customers in New Geographies.  We believe that we have a significant opportunity to expand our business by introducing our wide area lottery and gaming products to new and underpenetrated geographies. For example:



—

We believe that instant tickets currently comprise less than 20% of lottery sales outside of the U.S., compared to almost 60% of lottery sales in the U.S. We are especially focused on increasing instant ticket penetration in both underpenetrated and new jurisdictions, particularly in Asia, South America and Eastern/Central Europe. We believe that several countries in these regions are evaluating the introduction of instant tickets to help fund existing budget deficits and/or public infrastructure improvements.



—

We believe the Global Draw business model has been validated by its success to date in the U.K., where it boasts an installed gaming machine base of approximately 15,000 units and was recently awarded an additional 7,600 machines to be deployed in the Ladbrokes estate in 2011. Outside of the U.K., Global Draw has had early success in geographies such as Mexico and the Caribbean, including Puerto Rico, St. Kitts and Nevis. We view North America and the Caribbean as substantial areas of growth for this business as they currently have estimated wide area gaming machine installed bases of approximately 140,000 and 86,000 terminals, respectively. In conjunction with this effort, our Lottery Systems Group's central monitoring and control systems business is actively pursuing opportunities in North American jurisdictions that are seeking to expand into licensed video gaming or replace their existing video gaming systems.

•

Pursue and Exploit New Business Models.  As U.S. states increasingly look towards lottery and gaming as a source of revenue, we believe they could pursue an outsourcing model whereby the day-to-day management of the lottery is conducted by a third party, similar to the private management agreement the Illinois lottery awarded to our Northstar joint venture. We believe this model bodes well for our business given the success our Italian joint venture has had historically as a value-added operator, where instant ticket sales grew from approximately $1.0 billion in 2004 to approximately $12.4 billion in 2010.

•

Expand Playership Through Mobile and Internet Technologies.  The liberalization and regulation of Internet and mobile gaming is becoming increasingly prevalent outside the U.S. as governments seek to raise public funds and to meet customer demands. We believe the global gaming industry is undergoing significant change, as players want the ability to play anytime and anywhere with one common electronic wallet, or account, to facilitate payment. As such, we believe the industry will be increasingly characterized by convergence, or the interlinking of land-based and virtual (e.g., Internet) gaming technologies, networks and content. Therefore, we are investing in development activities focused on using the Internet and other new media and interactive

9

technologies to grow lottery playership and drive business to the existing retail base, as well as take advantage of other regulated gaming opportunities. For example:

—

Our recently launched MDI Interactive business offers a portfolio of content, programs and services to lotteries designed to attract and engage more players both online and through other forms of digital media. MDI Interactive products and services include MDI's Properties Plus offering, a web-based platform featuring players clubs, the Points for Prizes™ rewards program, second chance promotional websites, the Play It Again™ instant game top prize management program, interactive games and, subject to applicable law, a subscription system that enables players to purchase lottery games securely over the Internet. We intend to market MDI Interactive's products and services to lottery customers that are seeking to benefit from evolving technology and consumer trends.



—

Our Sciplay joint venture focuses on providing end-to-end offerings of products and services that enable its customers to offer interactive lottery and gaming operated via the Internet and other new media distribution channels in a manner that is consistent with the applicable regulatory regimes.

•

Pursue Strategic Acquisitions.  In support of the foregoing strategy, we may engage in strategic acquisitions to help us achieve our goals. For example:



—

We recently acquired substantially all of the assets of GameLogic, a provider of interactive marketing services for the regulated gaming industry, including GameLogic's software for Internet-based loyalty programs for lottery players as well as an extensive portfolio of interactive games and related intellectual property. We have integrated the GameLogic assets with Properties Plus.



—

In 2010, we also acquired certain assets of Sceptre Leisure Solutions Limited, including 751 server-based gaming terminals and associated customer contracts, to increase Global Draw's estate of gaming machines supplied and operated by licensed betting offices in the U.K.

Contract Procurement

Lottery

        Government authorized lotteries in the U.S. typically operate under state-mandated public procurement regulations. See "Government Regulation." Lotteries select an instant ticket or online supplier by issuing an 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 and/or technical solutions, security plan and features, experience in the industry, quality of personnel and services to be delivered, and price. We believe that our product functionality, game content, the quality of our personnel, our technical expertise and our demonstrated ability to help the lotteries increase their revenues may give us an advantage relative to the competition when responding to lottery RFPs in the U.S. However, many lotteries still award the contract to the qualified vendor offering the lowest price, regardless of other factors. 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 to five years and frequently include multiple renewal options ranging from one to five years, which our customers have generally exercised in the past. Our U.S. online lottery contracts typically have a minimum initial term of five years, with additional renewal options held by the lottery that may extend up to ten years. The length of these lottery contracts, together with their renewal options, limits the number of contracts available for bidding in any given year.

10

        The table below lists the U.S. lottery contracts for which we had executed agreements as of January 15, 2011 and certain related information. We are the exclusive provider of systems in all online and video lottery contracts and the primary supplier of instant lottery tickets unless otherwise noted. The commencement date of the current contract is the date we began generating revenues under such contract, which for our online contracts is typically the start-up date. The table also includes instant ticket or online retail sales, as applicable, for each jurisdiction.

State/District	Fiscal 2010* State Instant Ticket or Online 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	$	336.9	ITRS	January 2010	January 2015	5 one-year
Arkansas		335.5	ITRS	August 2009	August 2016	3 one-year
California		1,661.3	ITRS	July 2005	June 2013	None
Colorado		328.1	ITRS	December 2010	June 2014	3 one-year
Colorado		172.9	Online	April 2005	October 2012	1 two-year
Connecticut		593.4	ITRS	August 2007	August 2011	1 one-year
Connecticut		403.2	Online	May 2008	May 2013	5 one-year
Delaware		36.1	ITRS	November 2005	November 2011	None
Delaware		87.0	Online	February 2003	February 2015	None
Delaware		534.1	Video	February 2003	February 2015	None
District of Columbia		47.4	ITRS	August 2005	August 2012	None
Florida		2,073.1	ITRS	October 2008	September 2014	2 two-year
Georgia		2,413.5	ITRS	September 2003	September 2013	None
Idaho (2)		90.6	ITRS	August 2007	August 2012	1 three-year
Illinois (4)		1,190.1	ITRS	November 2005	April 2011	None
Indiana (2)		463.5	ITRS	January 2002	December 2012	None
Indiana		265.9	Online	August 2010	August 2016	4 one-year
Iowa (2)		143.8	ITRS	January 2008	December 2011	1 one-year
Iowa (5)		93.0	Online	July 2001	June 2011	None
Kansas (1)		125.1	ITRS	August 2008	September 2013	3 one-year
Kentucky (2)		458.8	ITRS	June 2011	June 2018	8 years
Louisiana		136.0	ITRS	October 2010	October 2020	None
Maine		152.1	ITRS	July 2001	June 2011	None
Maine (6)		65.5	Online	July 2001	June 2011	None
Maine		57.3	Video	July 2008	June 2013	5 one-year
Maryland (1)		490.9	ITRS	July 2006	June 2013	None
Maryland		1,217.0	Online	October 2005	June 2016	None
Massachusetts (2)		3,015.7	ITRS	July 2009	June 2012	2 one-year
Minnesota (1)		338.1	ITRS	May 2010	May 2014	2 one-year
Missouri (2)		637.6	ITRS	April 2001	June 2011	None
Montana		14.3	ITRS	August 2008	August 2013	2 one-year
Nebraska (3)		66.9	ITRS	May 2001	June 2011	None
New Hampshire		160.3	ITRS	June 2006	June 2012	None
New Jersey (1)		1,301.5	ITRS	November 2001	June 2011	None
New Mexico (1)		78.4	ITRS	March 2010	March 2014	4 years
New Mexico		N/A	Video	December 2005	December 2013	None
New York		3,611.1	ITRS	July 2006	July 2011	None
North Carolina (3)		855.6	ITRS	March 2006	Jan 2017	None
North Dakota		24.2	Online	February 2004	March 2014	None
Ohio		1,375.8	ITRS	June 2007	June 2011	2 two-year
Oklahoma		89.0	ITRS	August 2005	August 2012	1 one-year

11

State/District	Fiscal 2010* State Instant Ticket or Online 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
Oklahoma		111.2	Online	August 2005	August 2012	None
Oregon (2)		113.3	ITRS	June 2010	June 2013	4 one-year
Pennsylvania		1,748.7	ITRS	July 2007	July 2015	2 one-year
Pennsylvania		1,321.4	Online	January 2009	December 2014	4 one-year
Puerto Rico		421.3	Online	March 2005	June 2012	2 two-year
Puerto Rico		N/A	ITRS	December 2009	June 2012	2 two-year
Rhode Island (2)		78.0	ITRS	July 2007	June 2011	2 one-year
South Carolina		646.5	ITRS	October 2006	September 2013	None
South Dakota		20.4	ITRS	August 2010	August 2016	None
South Dakota		178.9	VIdeo	December 2009	December 2019	5 one-year
Tennessee		890.3	ITRS	January 2004	April 2015	None
Texas		2,761.0	ITRS	September 2004	August 2011	1 one-year
Vermont		71.4	ITRS	February 2006	January 2012	2 one-year
Virginia		711.2	ITRS	June 2004	June 2014	None
Washington		289.3	ITRS	March 2006	March 2014	None
West Virginia		97.5	ITRS	February 2006	June 2011	None
West Virginia		N/A	Video	February 2006	February 2012	4 one-year
Wisconsin (2)		269.3	ITRS	July 2004	October 2011	3 one-year

(1)

Secondary instant ticket supplier.

(2)

Pull-tab sales are included within instant ticket sales.

(3)

Subcontract through GTECH, a subsidiary of Lottomatica.

(4)

It is contemplated that our existing instant ticket contract with the Illinois lottery will be replaced in 2011 with a new supply agreement between us and Northstar as the private manager of the Illinois lottery. The new supply agreement will be coterminous with Northstar's private management agreement with the Illinois lottery. See "Business—Operational Overview—Printed Products Group—Northstar Lottery Group" in Item 1 of this Annual Report on Form 10-K.

(5)

Current contract extension terminates June 2011. We recently signed a new contract that is scheduled to go into effect in July 2011. The contract has a seven (7) year term with three (3) one-year renewal options.

(6)

Current contract extension terminates June 2011. During 2010, the lottery authority in Maine awarded a new online lottery contract to one of our competitors, which award was subsequently invalidated as a result of our protest. The competitor has appealed the protest ruling. Although we believe that the appeal will be denied and that, during the appeal, Maine will extend our existing contract and issue a revised RFP, there can be no assurance that the appeal will be denied, that our current contract will be extended or that we will be the winning bidder under any reissued RFP.

*

Fiscal year 2010 is the year ended June 30, 2010, except for New York which is March 31, 2010, Texas which is August 31, 2010, Michigan which is September 30, 2010 and District of Columbia which is September 2010.

**

"ITRS" refers to instant ticket and related services.

**

"Video" refers to video lottery service contract.

12

        As of December 31, 2010, the Company has international lottery contracts with Atlantic Lottery Corporation (Canada), Loto-Quebec, Ontario Lottery and Gaming Corporation, LNS (Italy), La Francaise des Juex (France), Camelot (U.K.) along with various other customers across Germany, Australia, the Netherlands, China and the rest of the world. In addition, we provide products and services to international customers that are not subject to contracts.

Wide Area Gaming

        In the U.K., contract awards by the major bookmakers often involve a competitive bid process. Contracts with major bookmakers are typically for a term of four years. Our large bookmaker contracts in the U.K. are with Ladbrokes, William Hill, Corals and Totesport, the retail division of the U.K. Tote.

        U.K. pub contracts were historically supplied with analog AWPs and digital SWPs. Contracts are generally one to two years in length and machines supplied are based on product performance and pub company approvals. As this business continues to migrate to digital SWPs, contract periods are lengthening and are generally for a minimum of three years.

Research and Product Development

        We believe our ability to attract new lottery and wide area gaming 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. Our development efforts are focused on new systems and products, as well as the improvement and refinement of our existing products including the expansion of their uses and applications. We are also focused on expanding utilization of the Internet and other interactive technologies to grow lottery playership and pursue regulated gaming opportunities. Many of our product developments and innovations have quickly become industry standards, including games for Printed Products and multiplier games for Lottery Systems.

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 generally 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 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 addition, our MDI, Global Draw and Games Media businesses patent and license game content as part of their businesses. 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 and services, including BOODLE™, FailSafe®, Properties Plus, Points for Prizes®, Winner's Choice™, PlayCentral®, SciScan Technology™, Aegis®, Wave™, EXTREMA®, SGI-NET™, QUANTUM™, STAN® and MAX®. 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.

        From time to time we become aware of potential infringement of our intellectual property by competitors and other third parties and consider what action, if any, to take in that regard, including litigation where appropriate. Historically, others have threatened or brought litigation against us.

13

Production Processes, Sources and Availability of Components

        Our dedicated computer controlled printing process is specifically designed to produce secure instant lottery game tickets for government sanctioned lotteries and promotional games. Our facilities are designed for efficient, secure production of instant lottery 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 where we have CSP contracts). Paper and ink are the principal raw materials consumed in our ticket manufacturing operations.

        Production of our lottery and wagering terminals and related component products primarily involves the assembly of electronic components into more complex systems and products. The majority of our wide area gaming terminals and lottery terminals are purchased from third-party vendors as needed.

        We normally have sufficient lead time between reaching an agreement to provide the required system and the commencement of operations so that we are able to provide the customer with a fully functioning system, customized to meet its 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 change. The lead time for obtaining most of the electronic components that we use is approximately 90 days. We believe that this is consistent with our competitors' lead times and is also consistent with the needs of our customers.

Competition

Printed Products Group

        The Printed Products business is highly competitive and we operate in a period of intense price-based competition. Our principal instant lottery ticket competitors in the U.S. are Pollard Banknote Limited and GTECH, a subsidiary of Lottomatica. Except as permitted by the applicable provisions of the North American Free Trade Agreement with respect to Canada, 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 export their lottery products to the U.S. or should other foreign competitors establish printing facilities in the U.S. or Canada to supply the U.S. Internationally, a number of lottery instant ticket vendors compete with us including the competitors noted above and printers in India and China.

Lottery Systems Group

        The online lottery business is highly competitive, and, while it continues to operate in a period of intense price-based competition, we are beginning to see signs that some U.S. lotteries may be de-emphasizing price as the driving factor in awarding contracts in favor of a broader-based set of criteria, including sales and marketing, game content, retail development and flexible technology platform, in addition to the traditional factors of experience, compliance record and corporate capability.

        Our principal competitors in the U.S. online lottery systems industry are GTECH and Intralot Technologies, Inc. ("Intralot"), a subsidiary of Intralot, S.A. GTECH is also our major competitor in the international online lottery industry, along with Intralot and International Lottery and Totalizator Systems, Inc. We also compete with various suppliers of online lottery components such as terminals and computer systems and custom development performed by lottery operators internally and other suppliers.

14

        As countries liberalize gaming, lotteries may expand their scope by offering sports betting, gaming machines or Internet gaming, introducing new suppliers to lotteries and/or resulting in lotteries facing new forms of competition. In some jurisdictions, liberalization includes privatization or the outsourcing of lottery operations to bidders. Lottery companies such as Camelot Group, Plc, the Tattersalls Group, Lottomatica and Intralot are bidding on such opportunities.

Diversified Gaming Group

        Our wide area gaming business competes with a variety of suppliers in the U.K. and internationally. Principal direct competitors in the U.K. bookmaker business include Inspired Gaming Group Limited and the Barcrest division of International Game Technology ("IGT"). In the U.K. AWP/SWP industry, we compete directly with other suppliers of gaming machines, including Barcrest, the Bell-Fruit and Gamestec divisions of Danoptra Ltd and Games Warehouse Limited, a division of Merit Industries, Inc. As the U.K. pub industry transitions from analog to digital, we expect to compete with the current analog competitors, as well as new digital competitors. In emerging wide area gaming jurisdictions, we compete with video lottery and other gaming terminal and systems suppliers. Our competitors in these industries include IGT, Lottomatica, Bally Technologies, Inc., Inspired Gaming Group, Aristocrat Leisure Ltd, Novomatic AG, Multimedia Games, Inc., WMS Industries Inc. and Konami Digital Entertainment, Inc.

Employees

        As of December 31, 2010, we employed approximately 3,200 persons. The majority of our employee groups are not represented by labor unions. However, unions represent employees at our printing facilities in the United Kingdom, Australia, Chile, Canada and Sweden.

Government Regulation

General

        Lotteries, sports and other forms of wagering, and wide area 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 or regulatory screening of an applicant and its applicable subsidiaries, as well as their officers and directors. Regulators in those jurisdictions review many facets of an applicant 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 and, where appropriate, maintain obligations in our supply agreements with customers to allow us to monitor and help ensure ongoing compliance. 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.

        While we believe that our current and planned business activities comply with all applicable laws there can be no assurance that our activities or the activities of our customers will not become the subject of any regulatory or law enforcement proceeding or that any such proceeding would not have a material adverse impact on us or our business plans.

        We have developed and implemented an 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 companies. The compliance program is run on a day-to-day basis by our Chief Compliance Officer with legal advice provided by our General Counsel and outside experts. The compliance program is overseen by the Compliance Committee of our Board of Directors, consisting of four outside 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

15

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.

        In the United States, Congress passed the Unlawful Internet Gambling Enforcement Act of 2006. Among other things, the Unlawful Internet Gambling Enforcement Act prohibits the transmission of any wager, at least in part, by means of the Internet where such wager is prohibited by any applicable law where initiated, received or otherwise made. It imposes potentially severe criminal and civil sanctions on the owners and operators of such systems and on financial institutions processing wagering transactions. The law contains a safe harbor for wagers placed within a single state (disregarding intermediate routing of the transmission) where the method of placing the bet and receiving the bet is authorized by that state's law, provided the underlying regulations establish appropriate age and location verification.

        In the European Union, enforcement actions and pronouncements, statutory enactments and court decisions have raised questions about the ability of European national governments to grant or to maintain monopolies to lottery or other gaming providers or to limit extra-jurisdictional gaming where gaming is allowed in that country.

        Currently, the form of wagering is limited by jurisdictions and only through licensed wagering operators in certain jurisdictions. While we believe that we have developed the proper procedures and policies to comply with the requirements of these evolving laws and legal pronouncements, there can be no assurance that our activities or the activities of our customers will not become the subject of law enforcement proceedings or that any such proceedings would not have a material adverse impact on us or our business plans.

        From time to time we retain government affairs representatives in various U.S. and international jurisdictions to advise elected and appointed officials and the public concerning our views on lottery-and gaming-related legislation, to monitor such legislation and to advise us in our relations with lottery authorities.

Lottery Operations

        Currently, 45 U.S. jurisdictions, all the Canadian provinces, Mexico, China and many other foreign countries, including all countries in Europe, authorize lotteries. Lottery contracts and operations of lotteries both domestically and abroad are subject to extensive regulation. Although certain features of a lottery, such as the percentage of gross revenues that must be paid back to players in prize money, are usually set 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 vendors for equipment, technology and services, and retailers of lottery products. Furthermore, laws and regulations applicable to lotteries in 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 officers and directors, its subsidiaries and affiliates and its principal stockholders. 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

16

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.

        The award of lottery contracts and ongoing operations of lotteries in international jurisdictions are also 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.

Wide Area Gaming

        The existing and emerging wide area gaming industry is governed by gaming regulations. Coin or voucher operated gambling devices offering electronic, video versions of spinning reels, poker, blackjack and similar games include VLTs, server-based gaming terminals, AWPs and SWPs. Sixteen U.S. states authorize wagering on VLTs at state regulated and licensed facilities. Although some states currently restrict VLTs to already existing wagering facilities (e.g., racetracks), others permit these devices to be placed at venues such as bars, restaurants, truck stops and other specifically licensed gaming facilities. In addition, all of the Canadian provinces and various other foreign countries have authorized VLTs.

        Companies that manufacture, sell or distribute VLTs or provide the central computer systems that monitor these devices are subject to various provincial, state, county and municipal laws and regulations. The primary purposes of these rules are (1) to ensure the responsibility, financial stability and character of companies involved and their officers and directors and stockholders through licensing requirements, (2) to ensure the integrity and randomness of the machines and (3) to prohibit the use of VLTs at unauthorized locations or for the benefit of undesirable individuals or entities.

        In the U.K., the Gambling Act of 2005 regulates, among other things, the type of licensed gaming activity that is carried out by operators, the licensing of the various types of venues for the conduct of licensed gaming activities, the categories and number of gaming machines allowed in each type of venue, the licensing and regulation of the supply and operation of those machines and the issuance of technical specifications and standards and specific licensing requirements for each category of gaming machines. These regulations allow for some expansion of gaming in controlled environments (including the establishment of a restricted number of additional casinos over and above those already licensed) and limits on the type of activities and number of gaming machines and gaming activities allowed in other venues. In 2010, the U.K. revenue and customs department completed a review of the SWP machine sector with a view to determining whether SWPs or any subset should be classified as gaming machines and be subject to the amusement machine license duty ("AMLD"). This review concluded that SWPs which introduce an element of chance which affects a player's chance of winning should be treated as gaming machines for regulatory purposes and be subject to AMLD. We believe that our Games Media SWP titles are properly classified and would not be subject to AMLD. Currently, a consultation process by the HM Revenue & Customs department in the U.K. is ongoing to consider the future of the AMLD and VAT regime on gaming machine profits. We cannot predict the outcome or what effect, if any, this consultation process will have on Games Media and Global Draw.

17

Executive Officers of the Company

        Certain information regarding each of our executive officers is set forth below.

Name	Age	Position
A. Lorne Weil	65	Chief Executive Officer and Chairman of the Board
David L. Kennedy	64	Executive Vice Chairman
Michael R. Chambrello	53	Chief Executive Officer—Asia-Pacific Region
Jeffrey S. Lipkin	40	Senior Vice President and Chief Financial Officer
Ira H. Raphaelson	57	Vice President, General Counsel and Secretary
Larry A. Potts	63	Vice President, Chief Compliance Officer and Director of Security
Robert C. Becker	51	Vice President and Treasurer
Stephen L. Gibbs	38	Vice President, Corporate Controller and Chief Accounting Officer
James B. Trask	60	Senior Vice President and President of Printed Products Group (SGI)
William J. Huntley	61	Senior Vice President and President of Lottery Systems Group (SGI)
Stephen Frater	58	Executive Chairman—Global Draw & Games Media
Steve W. Beason	49	Senior Vice President and Enterprise Chief Technology Officer (SGI)
James C. Kennedy	54	Senior Vice President and Chief Marketing Officer (SGI)

A. Lorne Weil has been Chairman of the Board of Directors since October 1991. Mr. Weil became Chief Executive Officer in November 2010, a position he previously held from 1992 to 2008. Mr. Weil also served as President of the Company from August 1997 to June 2005. 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. Previously, Mr. Weil was Vice President of Corporate Development at General Instrument Corporation, working with wagering and cable systems.

David L. Kennedy was appointed to the position of Executive Vice Chairman in November 2010. Mr. Kennedy joined the Board of Directors of the Company in October 2009 as Vice Chairman. Mr. Kennedy also serves as Senior Executive Vice President of MacAndrews & Forbes Holdings Inc. and Vice Chairman of Revlon, Inc. Mr. Kennedy served as the President and Chief Executive Officer of Revlon from September 2006 through May 2009 and has held various senior management and senior financial positions with Revlon, the Coca-Cola Company, and affiliates during his 39-year business career. Mr. Kennedy is a director of Revlon, Inc. and Revlon Consumer Products Corporation.

Michael R. Chambrello became Chief Executive Officer—Asia-Pacific Region in November 2010 after serving as Chief Executive Officer since January 2010. From July 2005 to December 2009, Mr. Chambrello was President and Chief Operating Officer. From November 2000 to June 2005, Mr. Chambrello was President and Chief Executive Officer of Environmental Systems Products Holdings Inc. ("ESP"), which provides vehicle emissions testing systems and services to government agencies. Prior to ESP he was Chief Executive Officer of Transmedia Asia Pacific, Inc. and Transmedia Europe Inc., which provide membership-based consumer and business services. Mr. Chambrello has over 20 years of lottery industry experience, having served as President of GTECH Corporation and Executive Vice President of GTECH Holdings Corporation.

Jeffrey S. Lipkin currently serves as Senior Vice President and Chief Financial Officer of the Company. Mr. Lipkin joined the Company in April 2009 as Vice President and Chief Financial Officer. Prior to joining the Company, Mr. Lipkin was a Managing Director at Credit Suisse in the Media &

18

Telecom group within the Investment Banking division. Mr. Lipkin joined Credit Suisse in September 2003. Prior to Credit Suisse, Mr. Lipkin spent five years in the Investment Banking division at Merrill Lynch & Co and spent four years in public accounting with Coopers & Lybrand LLP.

Ira H. Raphaelson has served as Vice President and General Counsel since February 2006 and as Secretary since June 2006. Mr. Raphaelson is the chief legal officer of the Company. Prior to joining the Company, Mr. Raphaelson was a partner in the Washington D.C. office of the law firm of O'Melveny & Myers LLP for ten years and a partner in the Washington D.C. office of Shaw Pittman for three years. Prior to entering private practice, he was a state and federal prosecutor for 15 years, serving the last two years as Presidentially appointed Special Counsel for Financial Institutions Crime.

Larry A. Potts has served as Vice President, Chief Compliance Officer and Director of Security since February 2006. Mr. Potts joined the Company in September 2004 as Vice President, Security and Compliance. Previously, he was the Chief Operating Officer of an international consulting and investigative company in Washington, D.C. Prior to that, he served as a Special Agent of the Federal Bureau of Investigation for over 23 years, where he served in a number of management positions, including Deputy Director.

Robert C. Becker has served as Treasurer since October 1996 and as Vice President and Treasurer since April 2001. Prior to joining the Company, Mr. Becker served as Assistant Treasurer for the Fuller Company, a multi-national engineering and manufacturing company, from 1990 to 1994.

Stephen L. Gibbs has served as Vice President and Chief Accounting Officer since April 2006 and Corporate Controller since January 1, 2009. Mr. Gibbs joined Scientific Games Racing, LLC, a former subsidiary of the Company, in April 2005, as Vice President of Finance. Prior to joining the Company, Mr. Gibbs served as Manager of Accounting Research for The Coca-Cola Company from September 2004 to March 2005 and as Controller for TRX, Inc. from May 2004 to August 2004. Prior to that time, Mr. Gibbs served nine years in public accounting with the firms of Arthur Andersen LLP and Deloitte & Touche LLP.

James B. Trask became President of the Printed Products Group in January 2011 and has served as Senior Vice President of SGI since 2008. Mr. Trask joined the Company in 2002 as Managing Director of its printed products operations in Europe, Middle East and Africa, based out of Leeds, England. Mr. Trask has over 33 years of experience in the lottery and gaming industries. Prior to joining the Company, Mr. Trask was president of Canadian Bank Note Lotteries group, a lottery systems provider based in Ottawa, Canada and owner of Creative Games International, Inc., a scratch lottery ticket printer in the United States. Prior to that time, Mr. Trask held various senior positions with Oberthur Gaming Technologies, responsible for operations, sales, marketing and new product development.

William J. Huntley became President of the Lottery Systems Group in January 2011 and Senior Vice President of SGI in February 2011. Mr. Huntley was previously with the Company and its predecessor company for 37 years, including serving as President of Autotote Lottery Corporation from 1997 to 2000, President of the Systems Division of Scientific Games International, Inc. from 2000 to 2006, and President of Scientific Games Racing, LLC from 2006 to 2007. Mr. Huntley also served as Vice President of Autotote Systems, Inc. (which became Scientific Games Racing, LLC) from 1989 to 1997 and as Vice President of Operations of the Company from 1991 to 1994. From February 2009 to December 2010, Mr. Huntley served as a consultant to the Company.

Stephen Frater has served as Executive Chairman of Global Draw and Games Media since March 2010. Mr. Frater served as Chairman and Chief Executive Officer of Global Draw and Games Media from July 2008 to March 2010. Mr. Frater joined the Company in 2006 as part of the Company's acquisition of Global Draw, serving as Managing Director of Global Draw. Mr. Frater has worked in the bookmaking industry for over 30 years. Mr. Frater co-founded Global Draw in 1997 and was instrumental in the establishment of its gaming business in the U.K. Prior to that, Mr. Frater

19

co-founded Great Mark, which operated the Admiral Betting chain in the U.K. Prior to co-founding Great Mark and Global Draw, Mr. Frater worked for both the Mecca and William Hill groups as Head of Customer Relations.

Steve W. Beason has served as Enterprise Chief Technology Officer since January 2011 and has served as Vice President since August 2005. Previously he served as Chief Technology Officer from August 2005 until January 2011 and President, Lottery Systems Group, from November 2006 to November 2010. Prior to joining the Company, Mr. Beason was Executive Director, Information Technology, of The Hong Kong Jockey Club managing a staff of nearly 400 information technology professionals.

James C. Kennedy was appointed Chief Marketing Officer of the Company in January 2011. Since 2005, Mr. Kennedy has served as Senior Vice President of SGI, responsible for global lottery product marketing including in China, Europe and Latin America. In addition to his marketing responsibilities he also managed sales, customer service and creative service for all of the Company's North American lottery businesses. From 2000 to 2005, Mr. Kennedy served as Vice President of U.S. Sales for SGI and, prior to 2000, he served as President of SGI Retail Solutions. Prior to joining the Company, Mr. Kennedy was a Systems Engineer for Computer Task Group.

Access to Public Filings

        We file annual reports, quarterly reports, current reports, proxy statements and other documents with the SEC under the Securities Exchange Act of 1934, as amended. 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 make the following information available free of charge through the Investor Information link on our website at www.scientificgames.com:

•

our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports as soon as reasonably practicable after they are filed electronically with the SEC;

•

Section 16 ownership reports filed by our officers, directors and 10% stockholders on Forms 3, 4 and 5 and amendments to those reports as soon as reasonably practicable after they are filed electronically with the SEC; and

•

our code of business conduct, which applies to all of our officers, directors and employees.

ITEM 1A.    RISK FACTORS

Risks Relating to Our Business

We operate in highly competitive industries and our success depends on our ability to effectively compete with numerous domestic and foreign businesses.

        We face competition from a number of domestic and foreign businesses, some of which have substantially greater financial resources than we do, which could impact our ability to win new contracts and renew existing contracts. We continue to operate in a period of intense price-based competition, which could affect the number and the profitability of the contracts we win.

        Contract awards by lottery authorities are sometimes challenged by unsuccessful bidders, which can result in costly and protracted legal proceedings that can result in delayed implementation or cancellation of the award. In addition, the domestic lottery industry has matured such that the number of states conducting lotteries is unlikely to increase materially in the near-term.

20

        We believe our principal competitors in the instant ticket lottery business have increased their production capacity, which is expected to increase pricing pressures in the instant ticket business and adversely affect our ability to win or renew instant ticket contracts or reduce the profitability of instant ticket contracts that we do win. Our domestic instant ticket business could also be adversely affected should additional foreign competitors in Canada export their lottery products to the U.S. or should other foreign competitors establish printing facilities in the U.S. or Canada to supply the U.S. We also compete in the international instant ticket lottery business with low-price, low-quality printers in a regulated environment where laws are being reinterpreted so as to create competition from non-traditional lottery vendors and products.

        We also face increased price competition in the online lottery business from our two principal competitors. Since late 2007, the lottery authorities in South Carolina, West Virginia, South Dakota, New Hampshire and Vermont awarded new online lottery contracts to our competitors. Our online lottery contracts with South Carolina, West Virginia and South Dakota terminated on November 15, 2008, June 27, 2009 and August 2, 2009, respectively, and our online lottery contracts with New Hampshire and Vermont terminated on June 30, 2010. During 2010, the lottery authority in Maine awarded a new online lottery contract to one of our competitors, which award was subsequently invalidated as a result of our protest. The competitor has appealed the protest ruling. There can be no assurance that the appeal will be denied, that our existing contract will be extended or that we will be the winning bidder under any reissued RFP.

        Pricing pressures and potential privatizations (including partial privatizations through private management agreements or otherwise) of some lotteries may also change the manner in which online and instant ticket contracts are awarded and the profitability of those contracts. Any future success of our lottery business will also depend, in part, on the success of the lottery industry in attracting and retaining players in the face of increased competition for these players' entertainment dollars, as well as our own success in developing innovative products and systems to achieve this goal. Our failure to achieve this goal could reduce revenues from our lottery operations. As a result of pressures on state and other government budgets, other forms of gaming may be legalized, which could adversely impact our business.

        Our gaming-related businesses face competition from other vendors and illegal operators, as well as changes in law and regulation that can affect our future profitability. In our prepaid phone card business, we are operating in a period of intense price-based competition, which is likely to continue to negatively affect our revenues and operating margins.

Unfavorable economic conditions may adversely affect our business and financial condition.

        Unfavorable general economic conditions have had and may continue to have a negative effect on our business and results of operations. We cannot fully predict the effects that the current economic slowdown will have on us as it also impacts our customers, vendors and business partners. However, we believe that the difficult economic conditions have contributed to reductions in spending on marketing by our customers and, in certain instances, less favorable terms under our contracts, as many of our customers face significant budget shortfalls and look to cut costs.

        We believe that the lottery and wide area gaming businesses are less susceptible to reductions in consumer spending than the destination gaming business (e.g., resort/casino venues, which are typically less accessible than lottery and wide area gaming retail outlets) and other parts of the consumer sector. However, we believe that declines in consumer spending have adversely impacted the lottery and wide area gaming businesses to some extent, and further declines will likely exacerbate these negative effects.

21

Our business is subject to evolving technology.

        The sales of all of our products and services are affected by changing technology, new legislation and evolving industry standards. Our ability to anticipate or respond to such changes and to develop and introduce new and enhanced products and services on a timely basis will be a significant factor in our ability to expand, remain competitive, attract new customers and retain existing contracts.

        We can give no assurance that we will achieve the necessary technological advances or have the financial resources needed to introduce new products or services on a timely basis or that we will otherwise have the ability to compete effectively in the industries we serve.

We are heavily dependent on our ability to renew our long-term contracts with our customers and we could lose substantial revenue and profits if we are unable to renew certain of our contracts.

        Generally, our customer contracts contain initial multi-year terms, with optional renewal periods held by the customer. Upon the expiration of a contract, including any extensions thereof, new contracts may be awarded through a competitive bidding process. Since late 2007, the lottery authorities in South Carolina, West Virginia, South Dakota, New Hampshire and Vermont have awarded new online lottery contracts to our competitors. Our revenue from our online contracts in these states represented approximately $23.0 million, or approximately 2%, of our total 2008 revenue. During 2010, the lottery authority in Maine awarded a new online lottery contract to one of our competitors, which award was subsequently invalidated as a result of our protest. The competitor has appealed the protest ruling. There can be no assurance that the appeal will be denied, that our existing contract will be extended or that we will be the winning bidder under any reissued RFP.

        We are also required by certain of our lottery customers to provide surety or performance bonds in connection with our contracts. There can be no assurance that we will continue to be able to obtain surety or performance bonds on commercially reasonable terms or at all. Our inability to provide such bonds would materially and adversely affect our ability to renew existing, or obtain new lottery contracts.

        There can be no assurance that our current contracts will be extended or that we will be awarded new contracts as a result of competitive bidding processes in the future. The termination, expiration or failure to renew one or more of our contracts could cause us to lose substantial revenues and profits, which could have an adverse effect on our ability to win or renew other contracts or pursue acquisitions or other growth initiatives. See the table in "Business—Contract Procurement" in Item 1 of this Annual Report on Form 10-K for additional information regarding the potential expiration dates of our U.S. lottery contracts.

We may not have sufficient cash flows from operating activities, cash on hand and available borrowings under our credit facilities to finance required capital expenditures under new contracts, service our indebtedness and meet our other cash needs. These obligations require a significant amount of cash.

        Our online lottery and server-based interactive gaming machine businesses generally require significant upfront capital expenditures for terminal assembly, software customization and implementation, systems and equipment installation and telecommunications configuration. Historically, we have funded these upfront 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 or our ability to obtain additional financing on commercially reasonable terms. If we do not have adequate liquidity or are unable to obtain financing for these upfront costs on favorable terms or at all, we may not be able to bid on certain contracts, which could restrict our ability to grow and have a material adverse effect on our results of operations. Moreover, we may not realize the return on investment that we anticipate on new

22

contracts due to a variety of factors, including lower than anticipated retail sales, higher than anticipated capital or operating expenses and unanticipated regulatory developments or litigation.

        As of December 31, 2010, we had total indebtedness of approximately $1,396.7 million, or approximately 75.5% of our total capitalization, consisting primarily of senior secured term loan and revolving credit facilities under our credit agreement and our senior subordinated notes. Our ability to make payments on and to refinance our indebtedness will depend on our ability to generate cash in the future. This, to some extent, is subject to general economic, financial, competitive, legislative, regulatory and other factors that are beyond our control.

        If we are unable to generate sufficient cash flow from operations in the future to meet our commitments, we will be required to adopt one or more alternatives, such as refinancing or restructuring our indebtedness, selling material assets or operations or seeking to raise additional debt or equity capital. We cannot assure you that any of these actions could be completed on a timely basis or on satisfactory terms or at all, or that these actions would enable us to continue to satisfy our capital requirements. Moreover, our existing or future debt agreements contain restrictive covenants that may prohibit us from adopting these alternatives. Our failure to comply with these covenants could result in an event of default which, if not cured or waived, could result in the acceleration of all of our debt.

Our credit facilities and the indentures governing our senior subordinated notes impose certain restrictions. Failure to comply with any of these restrictions could result in the acceleration of the maturity of our indebtedness. Were this to occur, we would not have sufficient cash to pay our accelerated indebtedness.

        The operating and financial restrictions and covenants in our debt agreements, including our credit facilities and the indentures governing our senior subordinated notes may adversely affect our ability to finance future operations or capital needs or to engage in new business activities. Our credit facilities and/or indentures restrict our ability to, among other thing:

•

declare dividends or redeem or repurchase capital stock;

•

prepay, redeem or purchase other debt;

•

incur liens;

•

make loans, guarantees, acquisitions and investments;

•

incur additional indebtedness;

•

engage in sale and leaseback transactions;

•

amend or otherwise alter debt and other material agreements;

•

make capital expenditures;

•

engage in mergers, acquisitions or asset sales;

•

transact with affiliates; and

•

alter the business we conduct.

        In addition, our credit facilities require us to maintain certain financial ratios. As a result of these covenants, we will be limited in the manner in which we can conduct our business, and may be unable to engage in favorable business activities or finance future operations or capital needs. Accordingly, these restrictions may limit our ability to successfully operate our business. A failure to comply with the restrictions contained in the credit facilities or the indentures, or to maintain the financial ratios required by the credit facilities, could lead to an event of default which could result in an acceleration of the indebtedness. See Note 8 (Long-Term and Other Debt) to our Consolidated Financial Statements for additional information regarding these financial ratios.

23

        There can be no assurance that our future operating results will be sufficient to enable compliance with the covenants in our credit facilities, our indentures or other indebtedness or to remedy any such default. In addition, in the event of an acceleration, we may not have or be able to obtain sufficient funds to make any accelerated payments.

Our business depends on the protection of our intellectual property and proprietary information.

        We believe that our success depends, in part, on protecting our intellectual property in the U.S. and in foreign countries. Our intellectual property includes certain patents and trademarks relating to our instant ticket games and wagering systems, as well as proprietary or confidential information that is not subject to patent or similar protection. Our intellectual property protects the integrity of our games, systems, products and services, which is a core value of the industries in which we operate. For example, our intellectual property is designed to ensure the security of the printing of our instant lottery tickets and provide simple and secure validation of our lottery tickets. Competitors may independently develop similar or superior products, software, systems or business models. In cases where our intellectual property is not protected by an enforceable patent, such independent development may result in a significant diminution in the value of our intellectual property.

        There can be no assurance that we will be able to protect our intellectual property. We enter into confidentiality or license agreements with our employees, vendors, consultants and, to the extent legally permissible, our customers, and generally control access to, and the distribution of, our game designs, systems and other software documentation and other proprietary information, as well as the designs, systems and other software documentation and other information that we license from others. Despite our efforts to protect these proprietary rights, unauthorized parties may try to copy our gaming products, business models or systems, use certain of our confidential information to develop competing products, or develop independently or otherwise obtain and use our gaming products or technology, any of which could have a material adverse effect on our business. Policing unauthorized use of our technology is difficult and expensive, particularly because of the global nature of our operations. The laws of other countries may not adequately protect our intellectual property.

        There can be no assurance that our business activities, games, products and systems will not infringe upon the proprietary rights of others, or that other parties will not assert infringement claims against us. Any such claim and any resulting litigation, should it occur, could subject us to significant liability for damages and could result in invalidation of our proprietary rights, distract management, and/or require us to enter into costly and burdensome royalty and licensing agreements. Such royalty and licensing agreements, if required, may not be available on terms acceptable to us, or may not be available at all. In the future, we may also need to file or respond to lawsuits to defend the validity of our intellectual property rights and trade secrets, or to determine the validity and scope of the proprietary rights of others. Such litigation, whether successful or unsuccessful, could result in substantial costs and diversion of resources.

        We rely on products and technologies that we license from third parties. There can be no assurance that these third-party licenses, or the support for such licenses, will continue to be available to us on commercially reasonable terms, if at all.

Our business competes on the basis of the security and integrity of our systems and products.

        We believe that our success depends, in part, on providing secure products and systems to our vendors and customers. Attempts to penetrate security measures may come from various combinations of customers, retailers, vendors, employees and others. Our ability to monitor and ensure quality of our products is periodically reviewed and enhanced. Similarly, we constantly assess the adequacy of our security systems to protect against any material loss to any of our customers and the integrity of the product to end-users. There can be no assurance that our business will not be affected by a security

24

breach or lapse, which could have a material adverse impact on our results of operations, business and/or prospects.

Our industry is subject to strict government regulations that may limit our existing operations and have a negative impact on our ability to grow.

        In the U.S. and many other countries, lotteries and other forms of wagering must be expressly authorized by law. Once authorized, such activities are subject to extensive and evolving governmental regulation. Moreover, such gaming regulatory requirements vary from jurisdiction to jurisdiction. Therefore, we are subject to a wide range of complex gaming laws and regulations in the jurisdictions in which we are licensed. Most jurisdictions require that we be licensed, that our key personnel and certain of our security holders be found suitable or be licensed, and that our products be reviewed and approved before placement. If a license, approval or finding of suitability is required by a regulatory authority and we fail to seek or do not receive the necessary approval, license or finding of suitability, then we may be prohibited from distributing our products for use in the particular jurisdiction. The regulatory environment in any particular jurisdiction may change in the future, and any such change could have a material adverse effect on our results of operations, business or prospects. Moreover, there can be no assurance that the operation of lotteries, video gaming machines, Internet gaming or other forms of lottery or wagering systems will be approved by additional jurisdictions or that those jurisdictions in which these activities are currently permitted will continue to permit such activities. There can be no assurance that law enforcement or gaming regulatory authorities will not seek to restrict our business in their jurisdictions or even institute enforcement proceedings. In addition, there can be no assurance that any instituted enforcement proceedings will be favorably 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. Moreover, in addition to the risk of an enforcement action, we also potentially risk an impact on our reputation in the event of any potential legal or regulatory investigation whether or not we are ultimately accused of or found to have committed any violation.

        We are required to obtain and maintain licenses from various jurisdictions in order to operate certain aspects of our business and we are subject to extensive background investigations and suitability standards in our lottery business. We also will become subject to regulation in any other jurisdiction where our customers operate in the future. There can be no assurance that we will be able to obtain new licenses or renew any of our existing licenses, or that if such licenses are obtained, that such licenses will not be conditioned, suspended or revoked, and the loss, denial or non-renewal of any of our licenses could have a material adverse effect on our results of operations, business or prospects. Lottery authorities generally conduct background investigations of the winning vendor and its employees prior to and after the award of a lottery contract. Generally, regulatory authorities have broad discretion when granting, renewing or revoking these approvals and licenses. Lottery authorities with which we do business may require the removal of any of our employees deemed to be unsuitable and are generally empowered to disqualify us from receiving a lottery contract or operating a lottery system as a result of any such investigation. Our failure, or the failure of any of our key personnel, systems or machines, in obtaining or retaining a required license or approval in one jurisdiction could negatively impact our ability (or the ability of any of our key personnel, systems or gaming machines) to obtain or retain required licenses and approvals in other jurisdictions. The failure to obtain or retain a required license or approval in any jurisdiction would decrease the geographic areas where we may operate and generate revenues, decrease our share in the gaming industry and put us at a disadvantage compared with our competitors.

        Some jurisdictions also require extensive personal and financial disclosure and background checks from persons and entities beneficially owning a specified percentage (typically 5% or more) of our equity securities. The failure of these beneficial owners to submit to such background checks and

25

provide required disclosure could jeopardize the award of a lottery contract to us or provide grounds for termination of an existing lottery contract. Additional restrictions are often imposed by international jurisdictions in which we market our lottery systems on foreign corporations, such as us, seeking to do business in such jurisdictions. In light of these regulations and the potential impact on our business, our restated certificate of incorporation allows for the restriction of stock ownership by persons or entities who fail to comply with informational or other regulatory requirements under applicable gaming law, who are found unsuitable to hold our stock by gaming authorities or whose stock ownership adversely affects our ability to obtain, maintain, renew or qualify for a license, contract, franchise or other regulatory approval from a gaming authority. The licensing procedures and background investigations of the authorities that regulate our businesses and the amendment may inhibit potential investors from becoming significant stockholders or inhibit existing stockholders from retaining or increasing their ownership.

        We have developed and implemented an 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 our Chief Compliance Officer with legal advice provided by our General Counsel and outside experts. The compliance program is overseen by the Compliance Committee of our Board of Directors, consisting of four outside directors. 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.

Gaming opponents persist in their efforts to curtail the expansion of legalized gaming, which, if successful, could limit our existing operations.

        Legalized gaming is subject to opposition from gaming opponents. There can be no assurance that this opposition will not succeed in preventing the legalization of gaming in jurisdictions where these activities are presently prohibited or prohibiting or limiting the expansion of gaming where it is currently permitted, in either case to the detriment of our business, financial condition, results and prospects.

We may not succeed in realizing the anticipated benefits of our joint ventures and strategic investments and relationships.

        Part of our corporate strategy is to pursue growth through joint ventures and strategic investments as a means to, among other things, gain access to new and tactically important geographies, business opportunities and technical expertise, while simultaneously offering the potential for reducing capital requirements.

        These joint ventures and strategic investments currently include LNS (which succeeded CLN as the holder of the concession to operate the instant ticket lottery in Italy that began on October 1, 2010), our joint ventures in China, RCN, our Northstar joint venture to act as the private manager of the Illinois lottery, our Sciplay joint venture with Playtech to deliver Internet gaming solutions to government-sponsored and other lotteries and certain other gaming operators and our equity investment in Sportech. We are party to other strategic agreements with Playtech relating to gaming machines that contemplate our use of and reliance on Playtech's back-end technology platform in international territories. Failure to timely migrate to the new back-end technology platform could result in Global Draw being unable to meet certain contract commitments, which could negatively impact our business, results of operations and prospects. We cannot assure you that we will be able to successfully develop and market Internet and land-based gaming products under our agreements with Playtech.

26

        Our Northstar joint venture, in which we are a 20% equity holder, was awarded the agreement to be the private manager for the Illinois lottery for a ten-year term following a competitive procurement, which agreement was executed on January 18, 2011 (the "PMA"). See "Business—Operational Overview—Printed Products—Northstar Lottery Group" in Item 1 of this Annual Report on Form 10-K. Operations under the PMA are scheduled to commence in 2011 following a transition period. On January 26, 2011, the Illinois Appellate Court upheld a constitutional challenge to the revenue statute that, among other things, amended the Illinois lottery law to facilitate the PMA, on grounds that the statute impermissibly addressed more than one subject. The Illinois Supreme Court subsequently granted a stay of the Appellate Court's decision pending the appeal to the Illinois Supreme Court by the State of Illinois. We cannot predict what effect, if any, the court decision, if it is not reversed by the Illinois Supreme Court or addressed through new authorizing legislation, will have on the validity of the PMA. If the PMA is ultimately invalidated, we may lose our investment in Northstar and our existing instant ticket supply agreement with the Illinois lottery may come up for re-bid.

        We may not realize the anticipated benefits of these joint ventures, investments and other strategic relationships or others that we may enter into, or may not realize them in the timeframe expected. These arrangements pose significant risks that could have a negative effect on our operations, including: the potential diversion of our management's attention from our core business to, for example, integrate technologies; the potential failure to realize anticipated synergies, economies of scale or other value associated with the arrangements; unanticipated costs and other unanticipated events or circumstances; possible adverse effects on our operating results during any integration process; impairment charges if joint ventures, or strategic investments or relationships are not as successful as we originally anticipate; and our possible inability to achieve the intended objectives of the arrangements.

        Furthermore, our joint ventures and other strategic relationships pose risks arising from our reliance on our partners and our lack of sole decision-making authority, which may give rise to disputes between us and our joint venture and other strategic partners. Our joint venture and other strategic partners may have economic or business interests or goals that are inconsistent with our interests and goals, take actions contrary to our objectives or policies, undergo a change of control, experience financial and other difficulties or be unable or unwilling to fulfill their obligations under our arrangements.

        The failure to avoid the risks described above or other risks associated with such arrangements could have a material adverse effect on our business, financial condition and results of operations.

We may be required to recognize additional impairment charges.

        We assess our goodwill and other intangible assets and our long-lived assets as and when required by accounting principles generally accepted in the U.S. ("GAAP") to determine whether they are impaired. In 2010, we recorded asset impairment charges of approximately $17.5 million related to underperforming Lottery Systems contracts, $3.0 million of impairments related to obsolete equipment in Lottery Systems, $2.5 million of impairments related to obsolete equipment in Global Draw and $8.3 million of accelerated depreciation on existing platform technology due to Global Draw's migration to new platform technology. In 2009, we recorded asset impairment charges of approximately $24.7 million primarily related to underperforming Lottery Systems contracts. In 2008, we recorded approximately $76.2 million in impairment charges primarily related to the impairment of certain hardware and software assets and underperforming Lottery Systems contracts. Refer to the heading "Management's Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies—Valuation of long-lived and intangible assets and goodwill" in Item 7 of this Annual Report on Form 10-K and Note 1 (Description of the Business and Summary of Significant Accounting Policies) and Note 4 (Property and Equipment) included in the Notes to Consolidated

27

Financial Statements, for additional discussion of impairment charges. We cannot predict the occurrence of impairments and there can be no assurance that we will not have to record additional asset impairment charges in the future.

Our inability to complete future acquisitions of gaming and related businesses and integrate those businesses successfully could limit our future growth.

        Part of our corporate strategy is to continue to pursue expansion and acquisition opportunities in gaming and related businesses. In connection with any such acquisitions, we could face significant challenges in managing and integrating the expanded or combined operations, including acquired assets, operations and personnel. There can be no assurance that acquisition opportunities will be available on acceptable terms or at all or that we will be able to obtain necessary financing or regulatory approvals to complete potential acquisitions. Our ability to succeed in implementing our strategy will depend to some degree upon the ability of our management to identify, complete and successfully integrate commercially viable acquisitions. Acquisition transactions may disrupt our ongoing business and distract management from other responsibilities.

Our revenues fluctuate due to seasonality and timing of equipment sales and, therefore, our periodic operating results are not guarantees of future performance.

        Our revenues can fluctuate due to seasonality in some components of our business. The summer season historically has been the weakest part of the year for certain parts of our lottery business, particularly where our revenues are tied to a percentage of retail sales such as under our CSP contracts. The fourth quarter is typically the weakest quarter for Global Draw due to reduced wagering during the holiday season. This adversely affects the amounts wagered and our corresponding service revenues.

        In addition, our revenues in our Lottery Systems Group can be somewhat dependent on the size of jackpots of lottery games such as Powerball and Mega Millions during the relevant period.

        Lottery and wagering equipment sales and software license revenues usually reflect a limited number of large transactions, which may not recur on an annual basis. Consequently, revenues and operating margins can vary substantially from period to period as a result of the timing and magnitude of major equipment sales and software license revenue. As a general matter, lottery and wagering equipment sales generate lower operating margins than revenue from other aspects of our business. In addition, instant ticket 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.

Our success depends in part on our ability to develop, enhance and/or introduce successful gaming concepts and game content.

        In the Diversified Gaming Group, our Global Draw and Games Media businesses develop and source game content both internally and through third-party suppliers. Games Media also seeks to secure third-party brands for incorporation into its game content. We believe creative and appealing game content produces more revenue and net win for the gaming machine customers of these businesses and provides them with a competitive advantage, which in turn enhances the revenues of Global Draw and Games Media and their ability to attract new business or to retain existing business. In our lottery business, we believe that innovative gaming concepts and game content, such as multiplier games for our Lottery Systems Group and licensed brand game content for our Printed Products Group, can enhance the revenue of our lottery customers and distinguish us from our competitors. There can be no assurance that we will be able to sustain the success of our existing game content or effectively develop or obtain from third parties new and enhanced game content that will be widely accepted both by our customers and their end users.

28

We are dependent on our suppliers and contract manufacturers, and any failure of these parties to meet our performance and quality standards or requirements could cause us to incur additional costs or lose customers.

        Our production of instant lottery tickets, in particular, depends upon a continuous supply of raw materials, supplies, power and natural resources. Our operating results could be adversely affected by an interruption or cessation in the supply of these items or a serious quality assurance lapse.

        We transmit certain wagering data utilizing satellite transponders, generally pursuant to long-term contracts. The technical failure of any of these satellites would require us to obtain other communication services, including other satellite access. In some cases, we employ backup systems to limit our exposure in the event of such a failure. There can be no assurance of access to such other satellites or, if available, the ability to obtain the use of such other satellites on favorable terms or in a timely manner. While satellite failures are infrequent, the operation of satellites is outside of our control.

        In addition, our Global Draw business has entered into a number of significant contracts whose performance depends upon our third party suppliers delivering equipment on schedule for Global Draw to meet its contract commitments. Failure of the suppliers to meet their delivery commitments could result in Global Draw being in breach of and subsequently losing those contracts, which loss could have a material adverse effect on our results of operations.

We may be liable for product defects or other claims relating to our products.

        Our products could be defective, fail to perform as designed or otherwise cause harm to our customers, their equipment or their products. If any of our products are defective, we may be required to recall the products and/or repair or replace them, which could result in substantial expenses and affect our profitability. Any problems with the performance of our products could harm our reputation, which could result in a loss of sales to customers and/or potential customers. In addition, if our customers believe that they have suffered harm caused by our products, they could bring claims against us that could result in significant liability. Any claims brought against us by customers may result in diversion of management's time and attention, expenditure of large amounts of cash on legal fees, expenses, and payment of damages, decreased demand for our products and services, and injury to our reputation. Our insurance may not sufficiently cover a large judgment against us or a large settlement payment, and is subject to customary deductibles, limits and exclusions.

We have foreign operations, which subjects us to additional risks.

        We are a global business and derive a substantial and growing portion of our revenue and profits from operations outside the United States. In the year ended December 31, 2010, we derived approximately 47% of our revenue from our customers outside the United States. Our operations in foreign jurisdictions subject us to risks customarily associated with such operations, including:

•

the complexity of foreign laws, regulations and markets;

•

the impact of foreign labor laws and disputes;

•

other economic, tax and regulatory policies of local governments; and

•

the ability to attract and retain key personnel in foreign jurisdictions.

        Additionally, foreign taxes paid by our foreign subsidiaries and joint ventures on their earnings may not be recovered against our U.S. tax liability. At December 31, 2010, we had a deferred tax asset for our foreign tax credit ("FTC") carry forward of approximately $33.7 million. Although we will continue to explore tax planning strategies to use all of our FTC, at December 31, 2010, we established a valuation allowance of approximately $33.7 million against the FTC deferred tax asset to reduce the asset to the net amount that our management estimates is "more likely than not" to be realized.

29

        Our consolidated financial results are significantly affected by foreign currency exchange rate fluctuations. Foreign currency exchange rate exposures arise from current transactions and anticipated transactions denominated in currencies other than U.S. dollars and from the translation of foreign currency balance sheet accounts into U.S. dollar-denominated balance sheet accounts. We are exposed to currency exchange rate fluctuations because a significant portion of our revenues is denominated in currencies other than the U.S. dollar, particularly the British Pound Sterling and the Euro. Exchange rate fluctuations have in the past adversely affected our operating results and cash flows and may adversely affect our results of operations and cash flows and the value of our assets outside the U.S. in the future.

        In addition, our ability to expand successfully in foreign jurisdictions involves other risks, including difficulties in integrating our foreign operations, risks associated with entering jurisdictions in which we may have little experience and the day-to-day management of a growing and increasingly geographically diverse company. Our investment in foreign jurisdictions often entails entering into joint ventures or other business relationships with locally based entities, which can involve additional risks arising from our lack of sole decision-making authority, our reliance on a partner's financial condition, inconsistency between our business interests or goals and those of our partners and disputes between us and our partners.

        In particular, our investment in LNS (which succeeded CLN as the holder of the concession to operate the instant ticket lottery in Italy beginning on October 1, 2010) is a minority investment in a joint venture whose largest equity holder is Lottomatica, and, although certain corporate actions require our prior consent, we do not control decisions relating to the governance of LNS.

        Through our joint ventures and wholly owned foreign enterprises, we have lottery-related investments and business operations in China, from which we expect to derive a growing portion of income. Our business and results of operations in China are subject to a number of risks, including risks relating to competition in China, our ability to finance our operations in China, the complex regulatory environment in China, the political climate in China, the Chinese economy and our joint venture and other business partners in China. Two of our joint ventures are with locally based state-owned enterprises, which can potentially heighten the joint venture-related risks described above relating to inconsistency of business interests and disputes.

        We anticipate that continued lottery related growth in China depends in part on sustained demand for lottery tickets at higher price points, as well as continued expansion of the retailer network and optimization of retailer inventories. There can be no assurance that lottery ticket demand will be sustained at higher price points, and we cannot predict the rate of retailer expansion or the extent of inventory optimization.

        There can be no assurance that legal and regulatory requirements in China will not change or that China's central or local governments will not impose new, stricter regulations or interpretations of existing regulations that would impose additional costs on our operations in China or even restrict or prohibit such operations. For example, comprehensive legislation regulating competition took effect on August 1, 2008. This law, among other things, prohibits certain types of agreements (unless they fall within specified exemptions) and certain behavior classified as abuse of dominant market position or intellectual property rights. Additionally, new lottery regulations providing for enhanced supervision of the lottery industry in China became effective on July 1, 2009. We cannot predict with certainty what impact such laws and regulations (or implementing rules or enforcement policy) will have on our business in China.

        We may not realize the operating efficiencies, competitive position or financial results that we anticipate from our investments in foreign jurisdictions and our failure to effectively manage the foregoing risks associated with our operations in foreign jurisdictions could have a material adverse effect on our results of operations, business or prospects.

30

Certain holders of our common stock exert significant influence over the Company and may make decisions with which other stockholders may disagree.

        In August 2004, MacAndrews & Forbes Holdings Inc. was issued approximately 25% of our outstanding common stock in connection with its conversion of our then outstanding Series A Convertible Preferred Stock. According to an amendment to Schedule 13D filed with the SEC on December 9, 2010, this holder beneficially owns 30,700,737 shares of our common stock, or approximately 33.5% of our currently outstanding common stock. Such holder is entitled to appoint up to four members of our Board of Directors under a stockholders' agreement with us, as supplemented, which we originally entered into with holders of the Series A Convertible Preferred Stock, and certain actions of the Company require the approval of such holder. As a result, this holder has the ability to exert significant influence over our business and may make decisions with which other stockholders may disagree, including, among other things, delaying, discouraging or preventing a change of control of the Company or a potential merger, consolidation, tender offer, takeover or other business combination.

If certain of our key personnel leave us, our business will be significantly adversely affected.

        We depend on the continued performance of A. Lorne Weil, our Chairman and Chief Executive Officer, and Michael Chambrello, Chief Executive Officer—Asia-Pacific Region, as well as the members of our senior management team. Messrs. Weil and Chambrello have extensive experience in the lottery and gaming industry and have contributed significantly to the growth of our business. We rely on Mr. Weil's overall strategic vision and his direction on business development projects, including mergers and acquisitions. We rely on Mr. Chambrello to maintain and grow our China business. If we lose their services or any of our other senior officers and cannot find suitable replacements for such persons in a timely manner, it could have a material adverse effect on our business. Mr. Weil has an employment agreement that is scheduled to expire at the end of 2015. Mr. Chambrello has an employment agreement that is scheduled to expire at the end of 2013.

We could incur costs in the event of violations of or liabilities under environmental laws.

        Our operations and real properties are subject to U.S. and foreign environmental laws and regulations, including those relating to air emissions, the management and disposal of hazardous substances and wastes, and the cleanup of contaminated sites. We could incur costs, including cleanup costs, fines or penalties, and third-party claims as a result of violations of or liabilities under environmental laws. Some of our operations require environmental permits and controls to prevent or reduce environmental pollution, and these permits are subject to review, renewal and modification by issuing authorities.

Failure to perform under our lottery contracts may result in litigation, substantial monetary liquidated damages and contract termination.

        Our business subjects us to contract penalties and risks of litigation, including due to potential allegations that we have not fully performed under our contracts or that goods or services we supply are defective in some respect. Litigation is pending in Colombia arising out of the termination of certain Colombian lottery contracts in 1993. An agency of the Colombian government has asserted claims against certain parties, including our subsidiary, SGI, which owned a minority interest in Wintech de Colombia S.A., or Wintech (now liquidated), the former operator of the Colombian national lottery. The claims are for, among other things, contract penalties, interest and the costs of a bond issued by a Colombian surety. For additional information regarding this litigation, see "Legal Proceedings" in Item 3 of this Annual Report on Form 10-K. There can be no assurance that this litigation will not be finally resolved adversely to us or result in material liability.

31

        In addition, our lottery contracts typically permit a lottery authority to terminate the contract at any time for material failure to perform, other specified reasons and, in many cases, for no reason at all. Lottery contracts to which we are a party also frequently contain exacting implementation schedules and performance requirements and the failure to meet these schedules and requirements may result in substantial monetary liquidated damages, as well as possible contract termination. We are also required by certain of our lottery customers to provide surety or performance bonds. We have paid or incurred liquidated damages under our lottery contracts and material amounts of liquidated damages could be imposed on us in the future, which could, if imposed, have a material adverse effect on our results of operations, business or prospects.

Labor disputes may have an adverse effect on our operations.

        Certain of our employees are represented by unions, including employees at our printing facilities in Australia, Canada, Chile and the United Kingdom. There can be no assurance that we will not encounter any conflicts or strikes with any labor union that represents our employees, which could have an adverse effect on our business or results of operations, could cause us to lose customers or could cause our customers' operations to be affected and might have permanent effects on our business.

The price of our common stock has been volatile and may continue to be volatile.

        Our stock price may fluctuate in response to a number of events and factors, such as, variations in operating results, actions by various regulatory agencies, litigation, financial estimates and recommendation by securities analysts, rating agency reports, performance of other companies that investors or security analysts deem comparable to us, news reports relating to our business, our markets or general market conditions. During the 52-week period ended February 25, 2011, our stock price fluctuated between a high of $17.01 and a low of $6.58. This significant stock price fluctuation may make it more difficult for our stockholders to sell their common stock when they want and at prices they find attractive.

ITEM 1B.    UNRESOLVED STAFF MATTERS

        No disclosure required pursuant to this Item.

ITEM 2.    PROPERTIES

        Domestically, Scientific Games occupies approximately 972,000 square feet of space throughout the United States and Puerto Rico in support of operations. Our principal facilities include approximately 355,000 square feet of owned space (subject to mortgage encumbrance) in Alpharetta, Georgia for administrative and operations offices, a manufacturing plant and warehouse space and approximately 23,000 square feet of leased office space in New York, New York for our corporate offices.

        Internationally, Scientific Games occupies approximately 964,000 square feet of space in support of operations. Our principal facilities supporting administrative and operations offices and manufacturing and warehouse space for the Printed Products Group include approximately 150,000 square feet owned in Leeds, England, approximately 119,000 square feet owned in Montreal, Canada, approximately 47,000 square feet owned in Santiago, Chile and approximately 49,000 square feet leased in Sydney, Australia. Additionally, there are approximately 20,000 square feet leased in Ballymahon, Ireland for a manufacturing plant and warehouse space and approximately 71,000 square feet of leased space in Austria for administrative and operations offices.

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

32

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 liquidated), which formerly operated the Colombian national lottery under contract with Empresa Colombiana de Recursos para la Salud, S.A. (together with its successor agency, "Ecosalud"), an agency of the Colombian government. The contract provided for a penalty against Wintech, SGI and the other shareholders of Wintech of up to $5.0 million if certain levels of lottery sales were not achieved. In addition, SGI delivered to Ecosalud a $4.0 million surety bond as a further guarantee of performance under the contract. 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 that 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 declared that the contract was in default and asserted various claims against Wintech, SGI and other shareholders of Wintech for, among other things, realization of the full amount of the penalty, plus interest and costs of the bond. On June 4, 1999, Ecosalud filed a collection proceeding against SGI before the Tribunal Contencioso of Cundinamarca in Colombia. In July 2002, the Tribunal denied SGI's preliminary motion to dismiss the lawsuit and the decision was upheld on appeal. SGI's procedural defense motion was also denied. As a result of these decisions, this lawsuit will be heard in due course on its merits by the Tribunal and an appeal stage will be available. In July 2009, a Colombian court ruled against Wintech's appeal (to which we are not party) of an action by the Colombian governmental agency that arises out of the same claims asserted by the Colombian governmental agency against SGI.

        SGI believes it has various defenses on the merits against Ecosalud's claims. SGI also has certain cross indemnities and undertakings from the two other 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 August 5, 2008, Jerry Jamgotchian, individually and on behalf of all others similarly situated in California, Connecticut, Delaware, Indiana, Iowa, Louisiana, Maryland, Michigan, New York, New Jersey, Ohio, Pennsylvania, Texas or Wisconsin, brought a purported class action lawsuit in the United States District Court for the Central District of California against the Company, SGI and Scientific Games Racing, LLC relating to a software glitch affecting a type of wager known as "Quick Pick" offered on certain of Scientific Games Racing's pari-mutuel wagering terminals. The complainant sought among other things, class certification and damages in excess of $5.0 million on behalf of a purported class of persons who "bought 'Quick Pick' wagering tickets through Scientific Games' computerized pari-mutuel wagering system" from July 1, 2007 until June 2, 2008 in the above-mentioned states. On October 22, 2008, our motion to dismiss the Jamgotchian lawsuit was granted by the court, without leave to refile. The United States Court of Appeals for the Ninth Circuit upheld the district court's dismissal of the case on March 23, 2010.

ITEM 4.    RESERVED

33

PART II

ITEM 5.    MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

        Our outstanding common stock is listed for trading on the Nasdaq Global Select Market under the symbol "SGMS". The following table sets forth, for the periods indicated, the range of high and low sales prices of our Class A common stock.

		Sales Price of Scientific Games Common Stock
		High		Low
Fiscal Year 2010 (January 1, 2010-December 31, 2010)
	First Quarter	$	17.01	$	13.22
	Second Quarter	$	15.09	$	9.18
	Third Quarter	$	11.99	$	9.04
	Fourth Quarter	$	10.09	$	6.58
Fiscal Year 2009 (January 1, 2009-December 31, 2009)
	First Quarter	$	19.47	$	10.14
	Second Quarter	$	20.16	$	11.77
	Third Quarter	$	18.81	$	13.30
	Fourth Quarter	$	19.29	$	12.78

        On February 24, 2011, the last reported sale price for our common stock on the Nasdaq Global Select Market was $8.94 per share. There were approximately 1,062 holders of record of our common stock as of February 24, 2011.

        We have never paid any cash dividends on our Class A common stock. Our Board of Directors presently intends to retain earnings 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 our Board. Further, under the terms of certain of our debt agreements, we are limited in our ability to pay cash dividends or make certain other restricted payments (other than stock dividends) on our Class A common stock.

        On May 10, 2010, our Board of Directors approved a stock repurchase program under which we are authorized to repurchase, from time to time in the open market, shares of our outstanding common stock in an aggregate amount up to $200.0 million. The program expires on December 31, 2011.

        Repurchases for the fourth quarter ended December 31, 2010 are reflected on the following table:

Period		Total Number of Shares Purchased (1)		Weighted Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs		Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (2)
10/1/2010–10/31/2010			16,839	$	9.28		—	$	173.7 million
11/1/2010–11/30/2010			—	$	—		—	$	173.7 million
12/1/2010–12/31/2010			27,057	$	9.01		—	$	173.7 million
	Total		43,896	$	9.12		—	$	173.7 million

(1)

There were no shares purchased as part of the publicly announced repurchase program during the three months ended December 31, 2010. The activity in this column reflects 43,896 shares acquired from employees to satisfy the withholding taxes associated with the vesting of restricted stock units during the three months ended December 31, 2010.

(2)

The $200 million stock repurchase program, which expires on December 31, 2011, was publicly announced on May 10, 2010.

34

        On June 1, 2010, the remaining $9.9 million in aggregate principal amount of our 0.75% convertible senior subordinated debentures due 2024 (the "Convertible Debentures") was repurchased or redeemed at a price equal to 100% of the aggregate principal amount thereof, together with accrued but unpaid interest thereon. In connection with the repurchase and redemption, we unwound the corresponding remaining portion of the bond hedge and warrant option that we had purchased to mitigate the potential dilution from conversion of the Convertible Debentures.

Shareholder Return Performance Graph

        The following graph compares the cumulative total stockholder return over the five-year period ended December 31, 2010 of our common stock, the Nasdaq Composite Index and an index of peer group companies that operate in industries or lines of business similar to ours.

        The peer group index consists of Bally Technologies, Inc. (New York Stock Exchange ("NYSE"): BYI), International Game Technology (NYSE: IGT), WMS Industries Inc. (NYSE: WMS), Multimedia Games, Inc. (Nasdaq Global Select Market: MGAM), Aristocrat Leisure Limited (Australian Securities Exchange: ALL), Lottomatica (Borsa Italiana S.p.A.: LTO), Intralot SA (Athens Stock Exchange: INLOT), Pollard Banknote Limited (Toronto Stock Exchange: PLB.UN-TO) and Playtech Limited (LSE: PTEC). This peer group index is comprised of the same companies as the peer group index that was used in our Annual Report on Form 10-K for the year ended December 31, 2009, with the exception of Inspired Gaming Group Limited (formerly known as Inspired Gaming Group PLC), whose shares were delisted from the London Stock Exchange in 2010 upon its acquisition by a private equity firm.

        The companies in each peer group have been weighted based on their relative market capitalization each year. The graph assumes that $100 was invested in our common stock, the Nasdaq Composite Index and the peer group index at the beginning of the five-year period and that all dividends were reinvested. The comparisons are not intended to be indicative of future performance of our common stock.

COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*

*$100 invested on December 31, 2005 in stock or index, including reinvestment of dividends.

	12/31/05		12/31/06		12/31/07		12/31/08		12/31/09		12/31/10
Scientific Games Corporation		100.00		110.81		121.88		64.30		53.34		36.51
NASDAQ Composite Index		100.00		111.74		124.67		73.77		107.12		125.93
Peer Group Index		100.00		148.92		153.93		61.86		83.99		76.63

35

ITEM 6.    SELECTED FINANCIAL DATA

        Selected financial data presented below as of and for the years ended December 31, 2010, 2009, 2008, 2007 and 2006 have been derived from our audited consolidated financial statements. The following financial information reflects the acquisitions and dispositions of certain businesses from 2006 through 2010, including the acquisition of substantially all of the online lottery assets of EssNet AB on March 22, 2006, the acquisition of the Shoreline Greyhound Park and Simulcast Facility on April 5, 2006, the acquisition of Global Draw on April 20, 2006, the acquisition of Games Media on December 22, 2006, the acquisition of International Lotto Corp., SRL on December 28, 2006, the sale of our racing communications business and its 70% interest in NASRIN, our data communications business, to RCN in exchange for a 29.4% interest in the RCN consolidated business on February 28, 2007, the acquisition of Oberthur Gaming Technologies on May 1, 2007, the acquisition of Sceptre Leisure Solutions Limited assets on April 19, 2010, the acquisition of substantially all of GameLogic's assets on August 5, 2010 and the disposition of the Racing Business on October 5, 2010. This data should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations," in Item 7 of this Annual Report on Form 10-K and our Consolidated Financial Statements and the Notes thereto included in Item 8 of this Annual Report on Form 10-K.

36

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

				Year Ended December 31,
				2010(c)			2009(d)			2008(e)			2007(f)			2006(g)
	Revenue:
		Instant tickets		$	465,090		$	453,238		$	548,308		$	498,179		$	388,841
		Services			363,138			410,014			451,664			424,236			402,963
		Sales			54,271			64,497			118,857			124,289			105,426
			Total Revenue		882,499			927,749			1,118,829			1,046,704			897,230
	Operating expenses:
		Cost of instant tickets (1)			270,787			270,836			331,501			283,924			199,006
		Cost of services (1)			206,034			234,093			263,284			237,509			233,007
		Cost of sales (1)			38,045			44,539			85,856			90,347			77,934
		Selling, general and administrative (a)			158,500			168,248			184,213			165,080			143,105
		Write-down of assets held for sale			8,029			54,356			—			—			—
		Employee termination costs			602			3,920			13,695			3,642			12,622
		Depreciation and amortization			141,766			151,784			218,643			160,366			106,006
			Operating income (loss)		58,736			(27	)		21,637			105,836			125,550
	Other (income) expense:
		Interest expense			101,613			87,498			78,071			70,772			54,843
		Equity in earnings of joint ventures (b)			(49,090	)		(59,220	)		(58,570	)		(41,252	)		(7,900	)
		Early extinguishment of debt			2,932			(4,829	)		2,960			—			—
		Other expense (income), net			8,594			2,856			(4,691	)		(2,050	)		(767	)
					64,049			26,305			17,770			27,470			46,176
			Income (loss) before income taxes		(5,313	)		(26,332	)		3,867			78,366			79,374
	Income tax expense				143,888			13,547			8,352			25,211			24,113
			Net income (loss)		(149,201	)		(39,879	)		(4,485	)		53,155			55,261
Basic and diluted net income (loss) per share:
		Basic net income (loss)		$	(1.61	)	$	(0.43	)	$	(0.05	)	$	0.57		$	0.61
		Diluted net income (loss)		$	(1.61	)	$	(0.43	)	$	(0.05	)	$	0.55		$	0.58
	Weighted average number of shares used in per share calculations:
		Basic shares			92,666			92,701			92,875			92,566			91,066
		Diluted shares			92,666			92,701			92,875			95,996			94,979
(1) Exclusive of depreciation and amortization.
	Selected balance sheet data (end of period)
	Total assets			$	2,151,538		$	2,291,792		$	2,182,453		$	2,098,786		$	1,757,938
	Total long-term debt, including current installments				1,396,690			1,367,063			1,239,467			1,043,938			870,144
	Stockholders' equity				452,658			619,758			595,829			693,591			572,663
	Ratio of earnings to fixed charges				0.5x			0.1x			0.4x			1.5x			2.2x

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

(a)

Includes $22,807, $34,589, $34,122, $25,312 and $18,100 in stock-based compensation expense in 2010, 2009, 2008, 2007 and 2006, respectively.

(b)

Includes income of $39,434, $49,730, $51,700, $37,655 and $8,266 in 2010, 2009, 2008, 2007 and 2006, respectively, for our 20% interest in CLN (or its successor, LNS). Includes income of $3,522, $2,991, $3,923

37

and $3,330 in 2010, 2009, 2008 and 2007, respectively, for our 29.4% interest in RCN. Includes income of approximately $4,806 and $4,502 in 2010 and 2009, respectively, and a loss of $428 in 2008 from our 49% interest in CSG. Includes income of approximately $2,027, $2,427, $3,433 and $290 in 2010, 2009, 2008 and 2007, respectively, from our 50% interest in Guard Libang. Includes a loss of $314 in 2010 from our 20% interest in Sportech. Includes a loss of $481 in 2010 from our 50% interest in Sciplay. See Note 16 (Equity Investments in Joint Ventures) to our Consolidated Financial Statements for additional information regarding our joint ventures.

(c)

Includes a write-down of assets held for sale of approximately $8,000 resulting from our strategic decision to sell the Racing Business and a loss upon completion of the sale of the Racing Business of $361. Depreciation and amortization includes approximately $17,500 of impairment charges related to underperforming Lottery Systems contracts, approximately $8,300 related to the abandonment of our existing Global Draw platform technology to migrate to new platform technology and approximately $5,500 related to the write-off of obsolete Lottery Systems and Global Draw equipment. Includes a loss on early extinguishment of long-term debt of $2,932 related to the repurchase and redemption of our 6.25% senior subordinated notes due 2012 (the "2012 Notes") and the repayment of a portion of the term loan under our credit agreement. Other expense (income) includes approximately $12,559 net loss on foreign currency forward contracts related to the Italian instant ticket tender process. Income tax expense reflects a valuation allowance recorded in 2010 of $149,600.

(d)

Includes a write-down of assets held for sale of approximately $54,400 resulting from our strategic decision to sell our Racing Business. Depreciation and amortization includes approximately $24,700 in asset impairment charges as a result of underperforming Lottery Systems contracts. Selling, general and administrative expense reflects approximately $3,800 in due diligence costs in connection with potential acquisitions, approximately $3,000 of restructuring advisory fees, $2,000 of CEO retirement costs and approximately $2,600 of professional fees related to the Italian instant ticket tender process. Includes a gain on early extinguishment of debt of approximately $4,500 related to the repurchase of our Convertible Debentures and 2012 Notes during 2009.

(e)

Includes $13,700 of employee termination costs in 2008. Depreciation and amortization includes approximately $76,200 in impairment charges in 2008 primarily related to the impairment of certain hardware and software assets in the Printed Products Group ($6,400), the Lottery Systems Group ($64,100), the Diversified Gaming Group ($2,600) and from our corporate headquarters ($3,100) as a result of certain underperforming Lottery Systems contracts and the write-off of other impaired hardware. Cost of services includes contract loss accruals on Lottery Systems contracts in 2008 ($7,800). Selling, general and administrative expense includes a charge of approximately $4,400 in 2008 as a result of the earn-out in connection with our acquisition of Global Draw. Includes early extinguishment of long-term debt of $2,960 reflecting the write-off of unamortized deferred financing fees related to our old credit agreement, which was terminated and replaced with a new credit agreement. See Note 8 (Long-Term and Other Debt) to our Consolidated Financial Statements for more information regarding our credit agreement.

(f)

Depreciation and amortization includes approximately $26,300 in impairment charges resulting from the rationalization of our global Printed Products Group operations during 2007. Selling, general and administrative expense includes approximately $2,800 in charges resulting from the agreement we entered into during the fourth quarter of 2007 for the sale of our lottery operations in Peru, approximately $3,600 in charges related to a reduction in personnel that occurred in Germany during the fourth quarter of 2007 and income of approximately $3,900 during the fourth quarter of 2007 as a result of the reversal of an EssNet warranty reserve.

(g)

Depreciation and amortization includes approximately $9,700 related to pari-mutuel asset impairment charges in 2006. Includes approximately $12,600 in employee termination costs in 2006.

38

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

The following Management's Discussion and Analysis (this "MD&A") is intended to enhance the reader's understanding of our operations and current business environment. This MD&A should be read in conjunction with the description of our business (Item 1 of this Annual Report on Form 10-K) and our consolidated financial statements and notes thereto (Item 8 of this Annual Report on Form 10-K).

This MD&A also contains forward-looking statements and should also be read in conjunction with the disclosures and information contained under "Forward-Looking Statements" at the beginning of this Annual Report on Form 10-K and "Risk Factors" (Item 1A of this Annual Report on Form 10-K).

As used in this MD&A, the terms "we," "us," "our" and the "Company" mean Scientific Games Corporation together with its consolidated subsidiaries.

Overview

Introduction

        We are a leading global supplier of products and services to lotteries and a leading provider of gaming technology and content to other gaming operators worldwide. We also gain access to technology and pursue global expansion through strategic joint ventures and minority equity investments.

        We report our operations in three business segments: Printed Products Group; Lottery Systems Group; and Diversified Gaming Group.

        Our revenue is segregated into three categories: instant ticket revenue, service revenue and sales revenue. Instant ticket revenue includes revenue related to our instant ticket fulfillment/services businesses, including our MDI business. Revenue generated from our Lottery Systems business (including revenue from the validation of instant tickets), our wide area gaming business and the legacy Racing Business is categorized as service revenue. Revenue generated from our sales of lottery systems and terminals and phone cards, which are typically non-recurring in nature and not subject to multi-year supply agreements, is categorized as sales revenue.

        For the year ended December 31, 2010, we derived approximately 47% of our revenue from our customers outside of the U.S. and were affected by fluctuations in foreign currency exchange rates. The foreign currencies to which we are most exposed are the British Pound Sterling and Euro. Foreign currency exchange rate fluctuations increased our revenues by approximately $2.9 million in the year ended December 31, 2010.

        The discussion below highlights certain known trends, demands, commitments, events and uncertainties that have affected our recent financial and operating performance and/or may affect our future financial and operating performance in our three business segments.

Printed Products Group

        Our Printed Products Group is primarily comprised of our global instant ticket and related services businesses, which include ticket design and manufacturing as well as value-added services such as game design, sales and marketing support, specialty games and promotions, inventory management and warehousing and fulfillment services. We also provide lotteries with cooperative service partnerships, or CSPs, under which we provide an extended suite of services to help our customers efficiently and effectively manage their operations to achieve higher profitability. The Printed Products Group includes MDI, a leading provider of licensed games, promotional entertainment and Internet services to the lottery industry. The Printed Products Group also includes our interest in LNS, our joint venture that holds the concession to operate the Gratta e Vinci instant ticket lottery in Italy, our interest in Northstar, our joint venture that was awarded the private management agreement for the Illinois lottery in 2010 (executed in January 2011) and our interest in CSG, our instant ticket printing joint

39

venture in China. See Note 16 (Equity Investments in Joint Ventures) to our Consolidated Financial Statements for additional information regarding our equity interest in LNS (and its predecessor, CLN), Northstar and CSG.

        Based on third-party data, our customers' total instant ticket lottery retail sales in the U.S. increased approximately 3% in 2010 compared to the prior year due in part to the launch of new instant ticket lotteries in Arkansas and Puerto Rico in late 2009.

        We believe we are likely to continue to experience a highly competitive procurement environment for instant ticket contracts, which could lead to further contract rate reductions and/or additional service requirements in connection with re-bids, extensions and renewals of our domestic and international instant ticket and CSP contracts. In 2011, a number of U.S. instant ticket and CSP contracts are due to come up for re-bid. See the table in "Business—Contract Procurement" in Item 1 of this Annual Report on Form 10-K for additional information regarding the scheduled expiration dates of our U.S. lottery contracts. Our strategy to counter-balance these industry trends includes working with our lottery customers to grow their sales through a variety of methods including launching new products, implementing innovative marketing tools and expanding retail distribution. See "Business—Company Strategy" in Item 1 of this Annual Report on Form 10-K.

        Our LNS joint venture (as successor to our CLN joint venture) commenced operations under the new concession to operate the Italian instant ticket lottery on October 1, 2010. Under the new concession, we are the primary supplier of instant lottery tickets for the joint venture, as we were under the prior concession. In the fourth quarter of 2010, we supplied approximately 85% of the total instant tickets supplied to LNS, which was approximately 10% less than the volume that we supplied to CLN in recent years. Over the life of the new concession, we expect that we will supply no less than 80% of LNS' instant ticket requirements. In October 2010, we paid to LNS the final of two upfront payments associated with the new concession. The upfront fees associated with the new concession will be amortized by LNS (anticipated to be approximately €89 million per year of the new concession), which will reduce our equity in earnings of joint ventures. Our share of the amortization is expected to be approximately €18 million per year on a pre-tax basis. In light of the corporate structure of LNS, under applicable accounting rules, we will record our equity in earnings of LNS on an after-tax basis, which will impact the comparability of our results of operations from our Italian joint venture since we recorded our equity in earnings of CLN on a pre-tax basis.

        Retail sales of the Italian instant ticket lottery have improved from approximately $18.5 million per week at the commencement of our joint venture's operations in 2004 to approximately $238.4 million per week during 2010. However, retail sales of instant tickets in Italy during 2010 declined by approximately 1%, which we believe was due in part to the uncertainty relating to the results of the tender process for the new concession to operate the Italian instant ticket lottery. Now that the uncertainty regarding the tender process is over, we believe that LNS will be able to devote more time and attention to executing its marketing and retail expansion strategies. We saw the early success of these strategies in the fourth quarter of 2010 as retail sales rebounded approximately 1% year-over-year.

        Our Northstar joint venture, in which we are a 20% equity holder, was awarded the agreement to be the private manager for the Illinois lottery for a ten-year term following a competitive procurement, which agreement was executed on January 18, 2011 (the "PMA"). As the private manager, Northstar will, subject to the oversight of the Illinois lottery, manage the day-to-day operations of the Lottery including lottery game development and portfolio management, retailer recruitment and training, supply of goods and services and overall marketing strategy. See "Business—Operational Overview—Printed Products—Northstar Lottery Group" in Item 1 of this Annual Report on Form 10-K. Operations under the PMA are scheduled to commence in 2011 following a transition period. On January 26, 2011, the Illinois Appellate Court upheld a constitutional challenge to the revenue statute that, among other things, amended the lottery law to facilitate the PMA, on grounds that the statute

40

impermissibly addressed more than one subject. The Illinois Supreme Court subsequently granted a stay of the Appellate Court's decision pending the appeal to the Illinois Supreme Court by the State of Illinois. We cannot predict what effect, if any, the court decision, if it is not reversed by the Illinois Supreme Court or addressed through new authorizing legislation, will have on the validity of the PMA. If the PMA is ultimately invalidated, we may lose our investment in Northstar and our existing instant ticket supply agreement with the Illinois lottery may come up for re-bid.

Lottery Systems Group

        Our Lottery Systems Group provides customized computer software, software support, equipment and data communication services to lotteries. The Lottery Systems Group also provides lotteries with transaction processing software for the accounting and validation of both instant and online lottery games, point-of-sale terminals, VLTs, central site computers, communications technology, and ongoing support and maintenance for these products. We are also the exclusive instant ticket validation network provider to the China Sports Lottery. The Lottery Systems Group also includes our interest in Guard Libang. See Note 16 (Equity Investments in Joint Ventures) to our Consolidated Financial Statements for additional information regarding our equity interest in Guard Libang.

        Based on third-party data, Lottery Systems customers' retail sales in the U.S. decreased approximately 2% in 2010 compared to 2009. Our Lottery Systems Group has been subject to the same intense price-based competition to which our Printed Products Group is subject. Lottery Systems Group revenue decreased 8% in 2010 compared to 2009 reflecting the loss of a number of our lottery contracts or renewal at less favorable pricing terms and/or with increased product and service requirements. Since late 2007, the lotteries in South Carolina, West Virginia, South Dakota, New Hampshire and Vermont awarded new online lottery contracts to other vendors. Our online lottery contracts with South Carolina, West Virginia and South Dakota terminated on November 15, 2008, June 27, 2009 and August 2, 2009, respectively, and our online lottery contracts with New Hampshire and Vermont each terminated on June 30, 2010.

        During 2010, the lottery authority in Maine awarded a new online lottery contract to one of our competitors, which award was subsequently invalidated as a result of our protest. The competitor has appealed the protest ruling. Although we believe that the appeal will be denied and that, during the appeal, Maine will extend our existing contract and issue a revised RFP, there can be no assurance that the appeal will be denied, that our existing contract will be extended or that we will be the winning bidder under any reissued RFP.

        During 2009, the Indiana lottery awarded us an online lottery contract that began in 2010. In 2010, we were awarded the lottery systems contract in Iowa, which is scheduled to commence in July 2011.

        In early 2010, U.S. lotteries began cross-selling the multi-state Powerball and Mega Millions lottery games, enabling players in many lottery states to play a big jackpot game four days a week. Going forward, we believe that lottery directors are considering differentiating price points for these two games, as well as potentially launching a new game at a $5 price point. We believe that such initiatives, if implemented, would likely result in higher retail sales in the U.S. lottery systems business.

        We have recently seen an increase in bidding opportunities to provide central monitoring and control systems for video gaming networks, particularly in jurisdictions in North America, as these jurisdictions pursue VLTs as an opportunity to address budget deficits. We believe that this could be an attractive growth opportunity for the Company in the coming years.

        In China, instant ticket retail sales of the China Sports Lottery increased approximately 8% in 2010 compared to 2009. The year-over-year increase was less than anticipated due in part to increased competition from the CWL, including its ability to increase the average sales price of its tickets, and its exclusive right to sell instant tickets at the Shanghai World Expo from May 2010 through October 2010. We also experienced increased competition from sports wagering games during the World Cup in 2010.

41

We are focused on accelerating growth of our business through higher price point instant tickets, expansion of the retailer and validation network, the introduction of tickets with licensed brands, the pursuit of additional distribution channels (e.g., mobile phones) and the launch of an advertising campaign to build brand awareness. Given the performance in China relative to our expectations, we have recently devoted more senior management time and personnel to better capitalize on the opportunities in China.

        The rate we receive on retail sales under our China instant ticket validation contract decreased by 0.2% in January 2011 and is scheduled to decrease by an additional 0.1% in January 2012 and an additional 0.1% in January 2014. To the extent we are not able to offset these rate reductions by retail sales growth, our revenue and gross margin from this contract will be adversely affected.

Diversified Gaming Group

        Our Diversified Gaming Group provides services and systems to private and public operators in the wide area gaming industry, including server-based gaming machines. The Diversified Gaming Group includes Global Draw, a leading supplier of wide area gaming machines, server-based gaming systems and game content to licensed bookmakers primarily in betting shops in the U.K., and Games Media, a supplier of gaming terminals and content to U.K. pub operators. The Diversified Gaming Group also includes our equity interests in RCN, Sportech and Sciplay. See Note 16 (Equity Investments in Joint Ventures) to our Consolidated Financial Statements for additional information regarding our equity interests in RCN, Sportech and Sciplay.

        The Diversified Gaming Group included the Racing Business prior to its sale on October 5, 2010 to Sportech. Upon the closing of the transaction, we received approximately $33 million in cash and 39.7 million ordinary shares of Sportech stock (the "Consideration Shares"), representing approximately 20% of the outstanding shares of Sportech as of the closing of the transaction. The Consideration Shares were valued at approximately $26.3 million based on the closing price of Sportech stock on October 4, 2010. Sportech also agreed to make an additional cash payment to us on September 30, 2013 of approximately $10 million. In addition, if the Racing Business under Sportech's ownership achieves certain performance targets over the three-year period following the closing of the transaction, we will be entitled to an additional cash payment of up to $8 million. Due to the Company's continued involvement with Sportech, including our equity interest in Sportech, the disposal of the Racing Business did not qualify as discontinued operations and was not reflected as such in our Consolidated Statement of Operations. Going forward, our interest in Sportech will be accounted for under the equity method of accounting. The comparability of our results of operations during 2011 will be affected by the sale of the Racing Business.

        In 2010, Global Draw was awarded a four-year contract to supply approximately 7,600 server-based gaming machines to Ladbrokes, which we believe represents approximately 95% of its terminal base. The contract award is the largest in Global Draw's history. Global Draw is in the process of migrating its server-based gaming machines to a new state-of-the-art software platform technology, and rolling out this new technology to all of its customers in the U.K.

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 (Description of the Business and Summary of Significant Accounting Policies) to our 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 management's judgment in their

42

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

Revenue recognition

        We recognize revenue when it is realized or realizable and earned. As described below, the determination of when to recognize revenue for certain revenue transactions requires judgment. Revenue from licensed branded property coupled with a service component whereby we purchase and distribute merchandise prizes on behalf of the lottery authorities to identified winners is recognized on a proportional performance method as this method best reflects the pattern in which the obligations to the customer are fulfilled. A performance measure is used based on total estimated cost allocated to a specific contract. By accumulating costs for services as they are incurred, and dividing such costs by the total contract costs which is estimated based on a budget prior to contract inception, a percentage is determined. The percentage determined is applied to the total fixed price of the contract and that proportionate amount of revenue is recognized on a monthly basis.

        Revenue from the sale of lottery systems that require the production and delivery of terminals and customized software is recognized using the cost-to-cost measure of the percentage-of-completion method of accounting. The percentage-of-completion method recognizes income as work on a contract progresses. The use of the percentage-of-completion method depends on our ability to make reasonably dependable cost estimates for the design, manufacture, and delivery of our products. Estimation of these costs requires the use of judgment. Revenues under percentage-of-completion contracts are recorded as costs are incurred.

Stock-based compensation

        We measure compensation cost for stock awards at fair value and recognize compensation over the service period for awards expected to vest. The fair value of restricted stock units is determined based on the number of shares granted and the quoted price of our common stock, and the fair value of stock options is determined using the Black-Scholes valuation model. The estimation of stock-based awards that will ultimately vest requires judgment and, to the extent actual results or updated estimates differ from our current estimates, such amounts will be recorded as a cumulative adjustment in the period estimates are revised. We consider many factors when estimating expected forfeitures, including types of awards, employee class, and historical experience. Actual results and future changes in estimates may differ substantially from our current estimates.

        We may grant certain stock-based awards that are contingent upon the Company achieving certain financial performance targets. Upon determining the performance target is probable, the fair value of the award is recognized over the service period. Certain stock-based awards may be settled in cash or a variable number of shares. The fair value of these awards is measured each reporting period and recorded as a liability and corresponding compensation expense. As the fair value changes each reporting period, the corresponding liability and compensation expense are adjusted, such that the liability and cumulative compensation expense equal the total fair value of the obligation upon the reporting date.

Valuation of long-lived and intangible assets and goodwill

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

•

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

43

•

significant changes in the manner of 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.

        We evaluate goodwill for impairment by comparing the carrying value of each reporting unit to its fair value using a two-step impairment test. If the carrying amount of reporting unit goodwill exceeds the implied fair value of that goodwill, an impairment loss is recognized in an amount equal to that excess. 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 or by a comparison to third-party indications of fair market value. The estimate of a reporting unit's fair value requires the use of assumptions and estimates regarding the reporting unit's future cash flows, growth rates and weighted average cost of capital. Any significant adverse changes in key assumptions about these businesses and their prospects or an adverse change in market conditions may cause a change in the estimation of fair value and could result in an impairment charge. Given the significance of goodwill, an adverse change to the estimated fair value could result in an impairment charge that could be material to our financial statements.

        Significant judgment is required in the forecasting of future operating results, which are used in the preparation of projected cash flows. Due to uncertain market conditions and potential changes in our strategy and products, it is possible that forecasts used to support our goodwill may change in the future, which could result in significant non-cash charges that would adversely affect our results of operations.

Income Taxes and Deferred Income Taxes

        Income taxes are determined using the liability method of accounting for income taxes. The Company's tax expense includes the U.S. and international income taxes but excludes the provision for U.S. taxes on undistributed earnings of international subsidiaries deemed to be permanently invested.

        The Company applies a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. The Company recognizes in the financial statements the impact of a tax position, if that position is more likely than not of being sustained on audit, based on the technical merits of the position.

        Certain items of income and expense are not reported in tax returns and financial statements in the same year. The tax effect of such temporary differences is reported as deferred income taxes. The measurement of deferred tax assets is reduced, if necessary, by the amount of any tax benefits that, based on available evidence, are not expected to be realized. The Company establishes a valuation allowance for deferred tax assets for which realization is not likely. At December 31, 2010, the Company has a valuation allowance of $234.8 million recorded against the benefit of certain deferred tax assets of foreign and domestic subsidiaries. Until we determine that it is more likely than not that we will generate sufficient taxable income to realize our deferred income tax assets, U.S. income tax benefits associated with current period losses will be fully reserved.

        The Company operates within multiple taxing jurisdictions and in the normal course of business is examined in various jurisdictions. The reversal of the accruals is recorded when examinations are completed, statutes of limitation are closed or tax laws are changed.

44

Results of Operations

Year Ended December 31, 2010 Compared to Year Ended December 31, 2009

        The following analysis compares the results of operations for the year ended December 31, 2010 to the results of operations for the year ended December 31, 2009.

Revenue Analysis

        For the year ended December 31, 2010, total revenue was $882.5 million compared to $927.7 million for the year ended December 31, 2009, a decrease of $45.2 million or 5%. Our instant ticket revenue for the year ended December 31, 2010 was $465.1 million compared to $453.2 million for the year ended December 31, 2009, an increase of $11.9 million, or 3%. Our service revenue for the year ended December 31, 2010 was $363.1 million compared to $410.0 million for the year ended December 31, 2009, a decrease of $46.9 million, or 11%, which includes the effect of the sale of our Racing Business as described in the Diversified Gaming discussion below. Our sales revenue for the year ended December 31, 2010 was $54.3 million compared to $64.5 million in the year ended December 31, 2009, a decrease of $10.2 million or 16%.

Printed Products

        For the year ended December 31, 2010, total revenue for Printed Products was $474.3 million compared to $466.6 million in the year ended December 31, 2009, an increase of $7.7 million or 2%. For the year ended December 31, 2010, instant ticket revenue for Printed Products was $465.1 million compared to $453.2 million for the year ended December 31, 2009, an increase of $11.9 million or 3%. The increase was primarily due to an increase in revenue of $8.5 million from our U.S. and European CSP contracts, predominantly attributable to our CSP contracts in Arkansas (effective September 2009) and Puerto Rico (effective December 2009), partially offset by our lost CSP contracts in Ohio (ended June 2009) and Arizona (ended January 2010). Revenues also increased $5.8 million due to the conversion of a U.K. contract to a percent-of-sales contract in the prior-year period, $1.9 million from our U.S. instant ticket business and $4.9 million from MDI due to a full year of revenue from our Properties Plus contract with Arkansas that began in the fourth quarter of 2009 and an increase in MDI international revenue. The impact of foreign exchange rates increased revenue by $5.7 million. The increase in revenue was partially offset by lower international sales of instant lottery tickets of $6.4 million and lower sales of tickets to our CLN and LNS joint venture of $8.6 million.

        Printed Products sales revenue for the year ended December 31, 2010 was $9.2 million compared to $13.4 million for the year ended December 31, 2009, a decrease of $4.2 million or 31%. The decrease was primarily the result of a decline in phone card sales of $4.5 million.

Lottery Systems

        For the year ended December 31, 2010, total revenue for Lottery Systems was $236.0 million compared to $257.4 million for the year ended December 31, 2009, a decrease of $21.4 million or 8%. Lottery Systems service revenue for the year ended December 31, 2010 was $199.4 million compared to $211.0 million for the year ended December 31, 2009, a decrease of $11.6 million or 6%. The decrease was primarily due to contract losses in West Virginia (ended June 2009), South Dakota (ended August 2009), Vermont (ended June 2010) and New Hampshire (ended June 2010), resulting in lower revenue of approximately $9.4 million, lower international revenue of $3.9 million and negative impact of foreign exchange rates of $0.9 million. The decrease was partially offset by higher instant ticket validation revenue from the China Sports Lottery of $2.6 million.

        Lottery Systems sales revenue for the year ended December 31, 2010 was $36.6 million compared to $46.4 million for the year ended December 31, 2009, a decrease of $9.8 million or 21%. The decrease was primarily due to a decline in hardware sales outside of the U.S. of $15.4 million as

45

compared to the prior year and the negative impact of foreign exchange rates of $1.0 million, partially offset by an increase in hardware sales in the U.S. of $6.5 million.

Diversified Gaming

        For the year ended December 31, 2010, total revenue for Diversified Gaming was $172.2 million compared to $203.8 million in the year ended December 31, 2009, a decrease of $31.6 million or 16%. Diversified Gaming service revenue for the year ended December 31, 2010 was $163.7 million compared to $199.0 million for the year ended December 31, 2009, a decrease of $35.3 million or 18%. The decrease was primarily due to a decline in revenue of the Racing Business during the first three quarters of 2010 and the exclusion of the Racing Business revenue for most of the fourth quarter due to the sale of the Racing Business on October 5, 2010, resulting in a decrease in service revenue of approximately $29.2 million. In addition, Global Draw revenue decreased $6.1 million, primarily due to lower revenue from our Austrian over-the-counter business of $4.1 million, lower revenue of $7.2 million from revised contract terms in the U.K., lower revenue from independent betting shops of $1.2 million and lower revenue from Games Media of $1.6 million. The decreases were offset by higher revenue of $8.6 million from new business.

        The Diversified Gaming sales revenue for the year ended December 31, 2010 was $8.5 million compared to $4.8 million for the year ended December 31, 2009, an increase of $3.7 million or 77%. The increase was primarily due to increased hardware and software sales from the Racing Business prior to its sale on October 5, 2010.

Cost of Revenue Analysis

        Cost of instant ticket revenue of $270.8 million for the year ended December 31, 2010 was flat compared to the year ended December 31, 2009. Cost of services of $206.0 million for the year ended December 31, 2010 was $28.1 million or 12% lower than for the year ended December 31, 2009. Cost of sales of $38.0 million for the year ended December 31, 2010 was $6.5 million or 15% lower than for the year ended December 31, 2009.

Printed Products

        Cost of instant lottery tickets of $270.8 million for the year ended December 31, 2010 was flat compared to the year ended December 31, 2009. Offsetting amounts were primarily attributable to increased costs from the impact of foreign exchange rates of $4.6 million and increased costs from MDI of $1.1 million combined with a net decrease in costs from our international business of $5.5 million.

        Cost of sales of $7.0 million for the year ended December 31, 2010 was $1.9 million or 21% lower than for the year ended December 31, 2009 primarily due to lower phone card sales.

Lottery Systems

        Cost of services of $104.3 million for the year ended December 31, 2010 was $6.4 million or 6% lower than in the year ended December 31, 2009. The decrease was primarily due to the loss of online lottery contracts in West Virginia (ended June 2009), South Dakota (ended August 2009), New Hampshire (ended June 2010) and Vermont (ended June 2010) resulting in lower costs of $4.5 million. Telecommunications savings resulted in lower costs of $1.9 million.

        Cost of sales of $25.7 million for the year ended December 31, 2010 was $6.9 million or 21% lower than in the year ended December 31, 2009, primarily due to lower international lottery hardware and software sales resulting in lower costs of $11.1 million, partially offset by increased costs of $4.2 million related to increased hardware sales in the U.S.

46

Diversified Gaming

        Cost of services of $101.8 million for the year ended December 31, 2010 was $21.6 million or 18% lower than for the year ended December 31, 2009. The decrease was primarily due to the sale of the Racing Business resulting in lower costs of $21.7 million.

        Cost of sales of $5.3 million for the year ended December 31, 2010 was $2.3 million or 77% higher than for the year ended December 31, 2009, primarily due to an increase in hardware sales from the Racing Business prior to its sale on October 5, 2010.

Selling, General and Administrative Expense

        Selling, general and administrative expense of $158.5 million for the year ended December 31, 2010 was $9.7 million or 6% lower than for the year ended December 31, 2009. The decrease was principally the result of lower stock-based compensation expense of $11.8 million, lower selling and administrative expenses of $3.8 million due to the sale of the Racing Business and lower consulting and other professional service expenses of $5.8 million, partially offset by higher legal fees and proposal costs of $4.9 million, higher net incentive compensation costs of $4.3 million and recognition of an earn-out of $2.3 million related to an acquisition completed in 2004.

Write-down of Assets Held for Sale

        The write-down of assets held for sale of $8.0 million included in the year ended December 31, 2010 was the result of valuing the held for sale assets of the Racing Business at fair market value less the estimated transaction costs prior to its sale on October 5, 2010.

Depreciation and Amortization Expense

        Depreciation and amortization expense of $141.8 million for the year ended December 31, 2010 decreased $10.0 million, or 7%, from the year ended December 31, 2009, due to the impairment of long-lived assets recorded in 2010 of $17.5 million related to underperforming contracts in our Lottery Systems Group, offset by a reduction in depreciation of $21.4 million due to impairment of long-lived assets recorded in 2009 related to underperforming contracts in our Lottery Systems Group. In addition, the held for sale accounting treatment of the Racing Business prior to its sale on October 5, 2010 resulted in lower depreciation expense of $19.2 million. The decreases were partially offset by increased depreciation expense in Global Draw due to accelerated depreciation expense of approximately $8.3 million recorded on existing technology as we migrate to a new platform. In addition, we recorded impairments of long-lived assets totaling $5.5 million related to obsolete equipment.

Other Expense (Income)

        Interest expense of $101.6 million for the year ended December 31, 2010 increased $14.1 million or 16% from the year ended December 31, 2009. The increase was attributable to a net increase in outstanding debt from December 31, 2009 of $1,367.1 million to $1,396.7 million as of December 31, 2010 as well as an increase in the weighted average interest rate on fixed rate debt. The increase in interest-bearing debt was partially offset by a decline in LIBOR rates. See Note 8 (Long-Term and Other Debt) to our Consolidated Financial Statements for detail of debt related activity during 2010 and 2009.

        Equity in earnings of joint ventures for the year ended December 31, 2010 of $49.1 million decreased $10.1 million or 17% from the year ended December 31, 2009. The decrease was primarily due to lower equity in earnings of our Italian joint venture of $10.3 million as a result of lower sales of instant lottery tickets by the Italian joint venture during the tender process for the new instant ticket concession, recording earnings on an after-tax basis in the fourth quarter of 2010 rather than on a

47

pre-tax basis as we had done historically and the amortization of the associated upfront fees, which reduced our equity in earnings by approximately $8.0 million during 2010.

        Loss on early extinguishment of debt of $2.9 million for the year ended December 31, 2010 was the result of the write-off of debt-related costs related to the purchase of $187.1 million in aggregate principal amount of the Company's 2012 Notes and a prepayment on a portion of the outstanding borrowings under the term loan facilities under the Company's credit agreement.

        Other expense for the year ended December 31, 2010 of $8.6 million increased by $5.7 million from other income of $2.9 million reported for the year ended December 31, 2009. The increase was primarily due to the net loss on foreign currency forward contracts related to our hedging of the upfront payment for the new Italian instant ticket concession.

        Employee termination costs of $0.6 million for the year ended December 31, 2010 decreased $3.3 million from December 31, 2009. Employee termination costs of $3.9 million for the year ended December 31, 2009 were a result of our cost reduction efforts.

Income Tax Expense

        Income tax expense was $143.9 million for the year ended December 31, 2010 compared to $13.5 million for the year ended December 31, 2009. The effective income tax rates for the year ended December 31, 2010 and 2009 were (2,708.9)% and (51.45)%, respectively. During the year ended December 31, 2010, we recorded a valuation allowance of $149.6 million against U.S. deferred tax assets and this valuation allowance caused the effective tax rate for the year ended December 31, 2010 to be greater than the effective tax rate for the comparable year period.

        We established a valuation allowance against the U.S. deferred tax assets that, in the judgment of management, are more likely than not to expire before they can be utilized. In assessing the recoverability of our deferred tax assets, we analyzed all evidence, both positive and negative. We considered, among other things, our deferred tax liabilities, our historical earnings and losses, projections of future income, and tax-planning strategies available to us in the relevant jurisdiction.

Year Ended December 31, 2009 Compared to Year Ended December 31, 2008

        The following analysis compares the results of operations for the year ended December 31, 2009 to the results of operations for the year ended December 31, 2008.

Overview

Revenue Analysis

        For the year ended December 31, 2009, total revenue was $927.7 million compared to $1,118.8 million for the year ended December 31, 2008, a decrease of $191.1 million or 17%. Our instant ticket revenue for the year ended December 31, 2009 was $453.2 million compared to $548.3 million for the year ended December 31, 2008, a decrease of $95.1 million, or 17%. Our service revenue for the year ended December 31, 2009 was $410.0 million compared to $451.7 million for the year ended December 31, 2008, a decrease of $41.7 million, or 9%. Our sales revenue for the year ended December 31, 2009 was $64.5 million compared to $118.9 million in the year ended December 31, 2008, a decrease of $54.4 million or 46%.

48

Printed Products

        For the year ended December 31, 2009, total revenue for Printed Products was $466.6 million compared to $580.3 million in the year ended December 31, 2008, a decrease of $113.7 million or 20%. For the year ended December 31, 2009, instant ticket revenue for Printed Products was $453.2 million compared to $548.3 million for the year ended December 31, 2008, a decrease of $95.1 million or 17%. The decrease was primarily attributable to lower revenue due to the shift of China instant ticket production to our joint venture of $39.8 million, contract re-pricings, particularly in Florida of $19.5 million, revised contract terms of $6.2 million, lower sales of licensed games of $13.7 million and the negative impact of foreign exchange rates of $12.0 million, partially offset by an increase in the sale of instant lottery tickets to CLN of $4.1 million and revenue related to the start-up of instant ticket lottery sales in Arkansas and Puerto Rico of $3.1 million.

        Printed Products sales revenue for the year ended December 31, 2009 was $13.4 million compared to $31.9 million for the year ended December 31, 2008, a decrease of $18.5 million or 58%. The decrease was primarily the result of lower sales revenue related to the phone card business of $15.7 million and the negative impact of foreign exchange rates of $1.0 million.

Lottery Systems

        For the year ended December 31, 2009, total revenue for Lottery Systems was $257.4 million compared to $298.7 million for the year ended December 31, 2008, a decrease of $41.3 million or 14%. Lottery Systems service revenue for the year ended December 31, 2009 was $211.0 million compared to $236.0 million for the year ended December 31, 2008, a decrease of $25.0 million or 11%. The decrease was primarily attributable to lower revenue due to contract re-pricings, primarily in Pennsylvania of $24.3 million, contract terminations of $9.2 million and the negative impact of foreign exchange rates of $3.6 million, partially offset by higher revenue from China, reflecting China Sports Lottery instant ticket retail sales growth of $9.6 million, and the negative impact of foreign exchange rates of $1.5 million.

        Lottery Systems sales revenue for the year ended December 31, 2009 was $46.4 million compared to $62.7 million for the year ended December 31, 2008, a decrease of $16.3 million or 26%. The decrease was primarily due to lower Lottery Systems software and equipment sales in 2009 of $20.4 million and the negative impact of foreign exchange rates of $1.5 million, partially offset by higher terminal sales to Italy of $5.4 million.

Diversified Gaming

        For the year ended December 31, 2009, total revenue for Diversified Gaming was $203.8 million compared to $239.8 million in the year ended December 31, 2008, a decrease of $36.0 million or 15%. Diversified Gaming service revenue for the year ended December 31, 2009 was $199.0 million compared to $215.6 million for the year ended December 31, 2008, a decrease of $16.6 million or 8%. The decrease in service revenue primarily reflected a decline in the Racing Business resulting from lower handle of $9.6 million and the negative impact of foreign exchange rates of $20.6 million, partially offset by higher service revenue from Global Draw of $6.7 million due to continued growth in installed terminals and win per day in the U.K. and higher revenue from Mexico and service revenue from a higher number of Games Media's digital terminals of $7.8 million.

        Diversified Gaming sales revenue for the year ended December 31, 2009 was $4.8 million compared to $24.2 million for the year ended December 31, 2008, a decrease of $19.4 million or 80%. The decrease was primarily due to Games Media's planned transition from analog terminal sales to digital terminals that are being deployed under revenue participation agreements of $9.2 million, lower Global Draw content sales $5.3 million the negative impact of foreign exchange rates of $0.3 million and lower sales of pari-mutuel terminals of $2.5 million.

49

Cost of Revenue Analysis

        Total cost of revenue of $549.4 million for the year ended December 31, 2009 was $131.3 million or 19% lower than for the year ended December 31, 2008. Cost of instant ticket revenue of $270.8 million for the year ended December 31, 2009 was $60.7 million or 18% lower than for the year ended December 31, 2008. Cost of services of $234.1 million for the year ended December 31, 2009 was $29.2 million or 11% lower than for the year ended December 31, 2008. Cost of sales of $44.5 million for the year ended December 31, 2009 was $41.4 million or 48% lower than for the year ended December 31, 2008.

Printed Products

        Cost of instant ticket revenue of $270.8 million for the year ended December 31, 2009 was $60.7 million or 18% lower than for the year ended December 31, 2008. The decrease was primarily due to the shift of China instant ticket production to our joint venture, which allowed us to avoid the high level of freight and import duties associated with shipping tickets to China of $36.5 million, lower costs associated with lower sales of licensed games of $7.7 million, savings related to the Company's Profitability Improvement Program of $10.4 million and the impact of foreign exchange rates.

        Cost of sales of $8.9 million for the year ended December 31, 2009 was $11.3 million or 56% lower than for the year ended December 31, 2008 primarily due to lower phone card sales.

Lottery Systems

        Cost of services of $110.7 million for the year ended December 31, 2009 was $21.6 million or 16% lower than in the year ended December 31, 2008. The decrease was primarily due to lower costs from the Mexico and Oklahoma online lottery contracts of $18.8 million, and lower costs related to contract terminations of $6.8 million, partially offset by higher costs associated with the new Connecticut online contract of $1.8 million.

        Cost of sales of $32.6 million for the year ended December 31, 2009 was $21.7 million or 40% lower than in the year ended December 31, 2008, primarily due to costs related to lower Lottery Systems software and equipment sales in 2009, partially offset by costs related to higher terminal sales to a customer in Italy.

Diversified Gaming

        Cost of services of $123.4 million for the year ended December 31, 2009 was $7.5 million or 6% lower than for the year ended December 31, 2008. The decrease was primarily due to lower costs in the Racing Businesses of $4.8 million and the impact of foreign exchange rates of $8.0 million, partially offset by higher costs associated with the increased service revenue from Global Draw and Games Media of $7.9 million.

        Cost of sales of $3.0 million for the year ended December 31, 2009 was $8.4 million or 74% lower than for the year ended December 31, 2008, primarily due to reduced sales from Games Media.

Selling, General and Administrative Expense

        Selling, general and administrative expense of $168.2 million for the year ended December 31, 2009 was $16.0 million or 9% lower than for the year ended December 31, 2008. The decrease was primarily attributable to savings realized from our Profitability Improvement Program of $9.8 million, the absence of the Global Draw employee earn-out bonus which was accrued in part in 2008 of $4.4 million, lower costs from Games Media and from our domestic pari-mutuel business, and the impact of foreign exchange rates. The decrease was partially offset by transaction-related expenses of $3.8 million, restructuring-related expenses of $5.0 million, professional fees related to the tender for

50

the new Italian instant ticket concession of $2.6 million, an increase in costs from Global Draw and costs associated with a property tax settlement.

Write-down of Assets Held for Sale

        Write-downs of assets held for sale of $54.4 million were the result of our strategic decision to sell the Racing Business.

Depreciation and Amortization Expense

        Depreciation and amortization expense of $151.8 million for the year ended December 31, 2009 decreased $66.8 million or 31% from the year ended December 31, 2008 primarily due to long-lived asset impairment charges taken during the fourth quarter of 2008 of $76.2 million, decreased amortization on our licensed properties and lower depreciation and amortization on domestic contracts, partially offset by impairment charges of Lottery Systems contracts of $24.7 million and higher depreciation from Global Draw, Games Media and our domestic pari-mutuel business.

Other Expense Income

        Interest expense of $87.5 million for the year ended December 31, 2009 increased $9.4 million or 12% from 2008, primarily attributable to interest expense related to our 9.25% senior subordinated notes issued in 2009, partially offset by lower synthetic interest expense on our Convertible Debentures.

        Equity in earnings of joint ventures for the year ended December 31, 2009 of $59.2 million increased $0.6 million or 1% from the year ended December 31, 2008, primarily due to an increase in earnings from CSG of $4.9 million, partially offset by a decrease in earnings from CLN of $2.0 million, RCN $0.9 million and Guard Libang of $1.0 million. The decrease in income from CLN for the year primarily reflected the negative impact of foreign exchange rates and higher depreciation, partially offset by higher retail sales.

        Employee termination costs of $3.9 million for the year ended December 31, 2009 were a result of our cost reduction initiatives. Employee termination costs of $13.7 million for the year ended December 31, 2008 were a result of our cost reduction initiatives and the restructuring of our phone card business in the U.K.

        Gain on early extinguishment of long-term debt of $4.8 million for the year ended December 31, 2009 was the result of the repurchase of $263.8 in aggregate principal amount of the Convertible Debentures and $12.4 million in aggregate principal amount of the 2012 Notes.

        Income tax expense was $13.5 million for the year ended December 31, 2009 compared to $8.4 million for the year ended December 31, 2008. The effective tax rate decreased in 2009 to (51.45)% from 216.0% in 2008. The year-over-year change in tax expense and the tax rate was primarily due to a net increase in the U.S. component of tax expense. The U.S. tax expense increased for the change in the year of the valuation allowance on deferred tax asset related to foreign tax credit carryovers and decreased for the income tax benefit of the 2009 U.S. net operating loss and impairments.

Liquidity, Capital Resources and Working Capital

        We are party to a credit agreement, dated as of June 9, 2008 (as amended, the "Credit Agreement"), among SGI, as borrower, the Company, as guarantor, the several lenders from time to time parties thereto and JPMorgan Chase Bank, N.A. ("JPMorgan"), as administrative agent. The Credit Agreement contains customary covenants, including negative covenants that, among other things, limit the ability of the Company and its subsidiaries to incur additional indebtedness, pay dividends or make distributions or certain other restricted payments, purchase or redeem capital stock, make

51

investments or extend credit, engage in certain transactions with affiliates, engage in sale-leaseback transactions, consummate certain asset sales, effect a consolidation or merger, sell, transfer, lease or otherwise dispose of all or substantially all assets, prepay or modify certain indebtedness, or create certain liens and other encumbrances on assets.

        On February 12, 2010, the Company entered into an amendment and restatement of the Credit Agreement in order to revise certain financial covenants and provide the Company with additional operating and financing flexibility so that the Company could execute then pending and future strategic initiatives, including participation in the tender process for the new Italian instant ticket concession, the sale of the Racing Business and the Company's strategic transactions with Playtech.

        On June 1, 2010, the remaining $9.9 million of aggregate principal amount of the Convertible Debentures was repurchased or redeemed at a price equal to 100% of the aggregate principal amount thereof, together with accrued but unpaid interest thereon. In connection with the repurchase and redemption, we unwound the corresponding remaining portion of the bond hedge and warrant option that we had purchased to mitigate the potential dilution from conversion of the Convertible Debentures during the term of the bond hedge.

        On June 17, 2010, we obtained an incremental term loan facility under the Credit Agreement under which several lenders provided an aggregate principal amount of $78.0 million of senior secured term loans to SGI. The incremental term loan facility is, in all material respects, subject to the same terms and conditions as SGI's existing term loan facility under the Credit Agreement.

        On June 25, 2010, we repaid approximately £27.5 million of the approximately £28.1 million in aggregate principal amount of the promissory notes we issued to defer a portion of the earn-out payable in connection with our 2006 acquisition of Global Draw (the "Global Draw Promissory Notes"), leaving approximately £0.6 million in aggregate principal amount of the Global Draw Promissory Notes outstanding.

        On September 22, 2010, we issued $250 million in aggregate principal amount of our 8.125% Senior Subordinated Notes due 2018 (the "2018 Notes") at a price of 100% of the principal amount thereof in a private offering. The 2018 Notes were issued pursuant to an indenture dated as of September 22, 2010 (the "2018 Indenture") among the Company, the subsidiary guarantors party thereto and The Bank of Nova Scotia Trust Company of New York, as trustee. The 2018 Notes bear interest at the rate of 8.125% per annum, which is payable semiannually in arrears on March 15 and September 15 of each year, commencing on March 15, 2011. The 2018 Notes mature on September 15, 2018, unless earlier redeemed or repurchased, and are subject to the terms and conditions set forth in the 2018 Indenture. See Note 8 (Long-Term and Other Debt) to our Consolidated Financial Statements for additional information.

        On October 6, 2010, the Company completed a tender offer pursuant to which it purchased $107.6 million in aggregate principal amount of the 2012 Notes. On December 28, 2010, the Company redeemed all $79.5 million of the remaining outstanding 2012 Notes at a redemption price equal to 100% of the principal amount thereof, plus accrued and unpaid interest to, but not including, the redemption date. The purchase and redemption of the 2012 Notes was funded with the net proceeds from the issuance of the 2018 Notes. The purchase and redemption of the 2012 Notes satisfied the September 15, 2012 liquidity condition related to the 2012 Notes contained in the Credit Agreement.

        On December 16, 2010, we entered into an amendment to the Credit Agreement. Under the amendment, the acquisition of any specified percentage of the Company's common stock by MacAndrews & Forbes Holdings Inc. ("M&F") and/or certain related parties will not constitute an "event of default" under the Credit Agreement. In addition, the occurrence of a "change of control" under certain other indebtedness of the Company or SGI as a result of the acquisition of any specified percentage of the Company's common stock by M&F and/or certain related parties will not constitute

52

an "event of default" under the Credit Agreement, provided that SGI or any guarantor under the Credit Agreement would at such time be permitted under the terms of the Credit Agreement to repay any such indebtedness that becomes due and payable as a result of such acquisition.

        As of December 31, 2010, we had approximately $134.3 million available for additional borrowing or letter of credit issuances under our revolving credit facility under the Credit Agreement. There were no borrowings and $52.8 million in outstanding letters of credit under our revolving credit facility as of December 31, 2010. Our ability to borrow under the Credit Agreement will depend on us remaining in compliance with the limitations imposed by our lenders, including the maintenance of our financial ratios and covenants.

        On May 13, 2010, the members of CLN, our consortium that operated the Gratta e Vinci instant ticket lottery in Italy since 2004, were awarded a new concession to operate the instant ticket lottery upon the termination of CLN's concession on September 30, 2010. Our bidding group formed and capitalized a new vehicle, LNS, to hold the concession. LNS was responsible for upfront fees associated with the new concession totaling €800.0 million, which LNS paid to the Italian Monopoli di Stato in 2010. We were responsible for our pro rata share of this amount, or €160.0 million, of which €104.0 million was paid in the second quarter of 2010 and €56.0 million was paid in the fourth quarter of 2010. We incurred additional debt in 2009 and 2010 and entered into amendments to our Credit Agreement in February 2010 in part to provide us with sufficient liquidity to make these upfront payments.

        Our contractual obligations and commercial commitments principally include obligations associated with our outstanding indebtedness, contractual purchase obligations and future minimum operating lease obligations, as set forth in the table below as of December 31, 2010:

		Cash Payments Due By Period
		In thousands
		Total		Within 1 Year		Within 2-3 Years		Within 4-5 Years		After 5 Years
Long-term debt, 7.875% notes (1)		$	200,000		—		—		—		200,000
Long-term debt, 8.125% notes (1)			250,000		—		—		—		250,000
Long-term debt, 9.25% notes (1)			350,000		—		—		—		350,000
Long-term debt, term loan (1)			572,290		6,280		566,010		—		—
Global Draw promissory notes			980		980		—		—		—
Unsecured borrowings denominated in RMB (1)			27,079		—		27,079		—		—
Other long-term debt			1,778		1,171		605		2		—
Interest expense (2)			586,416		93,128		174,549		141,692		177,047
Contractual purchase obligations (3)			69,378		69,378		—		—		—
Operating leases (4)			72,504		13,450		23,145		19,964		15,945
Other liabilities (5)			32,269		10,472		9,805		4,183		7,809
	Total contractual obligations	$	2,162,694		194,859		801,193		165,841		1,000,801

(1)

See Note 8 (Long-Term and Other Debt) to our Consolidated Financial Statements for information regarding long-term and other debt.

(2)

Based on rates in effect at December 31, 2010.

(3)

Includes, among other obligations, obligations and/or capital commitments in connection with our Lottery Systems contracts, Global Draw's Ladbrokes contract and the contract with the China Sports Lottery.

(4)

See Note 9 (Leases) to our Consolidated Financial Statements for information regarding our operating leases.

53

(5)

We have excluded approximately $14.4 million of long-term pension plan and other post retirement liabilities, deferred compensation liabilities of approximately $7.2 million, SERP liability of $3.0 million and the liability for uncertain tax positions of $2.2 million at December 31, 2010. Due to the high degree of uncertainty regarding the timing of potential future cash flows associated with these liabilities, we are unable to make a reasonably reliable estimate of the amount and period in which these liabilities might be paid.

        Our online 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. Historically, the revenues we derive from our Lottery Systems service contracts have generally exceeded the direct costs associated with fulfilling our obligations thereunder. In addition, through advancements in technology, we are periodically 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 operating results.

        Periodically, we bid on new online lottery contracts. Once awarded, these contracts generally require significant upfront capital expenditures for terminal assembly, customization of software, software and equipment installation and telecommunications configuration. Historically, we have funded these upfront costs through cash flows generated from operations, available cash on hand and borrowings under our credit facilities. Our ability to continue to commit to new contracts will depend on, among other things, our then present liquidity levels and/or our ability to borrow at commercially acceptable rates to finance the initial upfront costs. The actual level of capital expenditures will ultimately largely depend on the extent to which we are successful in winning new contracts. Periodically, we elect to upgrade the technological capabilities of older terminals and replace terminals that have exhausted their useful lives. 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 to service our installed base, we purchase inventory on an as-needed basis. We presently have no inventory purchase obligations, other than in the ordinary course of business.

        During 2010, we repurchased approximately 2.6 million shares of our Class A common stock under our previously announced repurchase program for approximately $26.3 million.

        At December 31, 2010, our available cash, short-term investments and borrowing capacity totaled $258.6 million (including cash and cash equivalents of $124.3 million and availability of $134.3 million under the revolving credit facility) compared to $428.1 million at December 31, 2009. The amount of our available cash and short-term investments fluctuate principally based on the timing of collections from our customers, cash expenditures associated with new and existing wagering and lottery systems contracts, borrowings or repayments under our credit facilities, the funding of joint ventures, acquisitions and changes in our working capital position. Our borrowing capacity under the revolving credit facility under the Credit Agreement will depend on the balance of loans borrowed and outstanding letters of credit issued under the revolving credit facility as well as the level of certain financial ratios under the Credit Agreement.

        The decrease in our available cash from the December 31, 2009 level principally reflects the net cash provided by operating activities for the year ended December 31, 2010 of $170.6 million, net cash proceeds of approximately $33.0 million from the sale of the Racing Business, $27.8 million and $6.6 million cash dividends from CLN and RCN, respectively, plus long-term borrowings of $355.5 million, offset by wagering and other capital expenditures and other investing activities totaling $107.2 million, acquisition-related payments of $12.5 million, investment in the LNS joint venture of $203.2 million, the repurchase of stock of $26.3 million and $323.9 million of payments on long-term debt. The $170.6 million of net cash provided by operating activities is derived from $138.2 million of

54

net cash provided by operations and $32.4 million provided by changes in working capital. The working capital changes occurred principally from decreases in inventories, prepaid expenses, deposits and other current assets and an increase in accrued liabilities, offset by increases in accounts receivable and a decrease in accounts payable. Capital expenditures totaled $9.4 million in the year ended December 31, 2010, compared to $12.9 million in the prior year. Wagering system expenditures, including software expenditures, totaled $99.3 million in the year ended December 31, 2010, compared to $98.6 million in the prior year. The wagering expenditures primarily related to the Indiana lottery contract and gaming terminals related to Global Draw and Games Media. Cash flow from financing activities principally reflects the borrowings and the repayments of borrowings under the Credit Agreement and in connection with the issuance of the 2018 Notes, as well as the repurchase of stock.

        We believe that our cash flow from operations, available cash and available borrowing capacity under the Credit Agreement will be sufficient to meet our liquidity needs, including anticipated capital expenditures, for the next twelve months; however, there can be no assurance that this will be the case. We believe that substantially all cash held by foreign entities is available to meet liquidity needs as necessary. Our contracts are periodically renewed and there can be no assurance 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 difficulty in obtaining such bonds to date, there can be no assurance that we will continue to be able to obtain performance bonds on commercially reasonable terms or at all. If we need to refinance all or part of our indebtedness, on or before maturity, or provide letters of credit or cash in lieu of performance bonds, there can be no assurance that we will be able to obtain new financing or to refinance any of our indebtedness, on commercially reasonable terms or at all.

Recently Issued Accounting Guidance

        In September 2009, the Financial Accounting Standards Board ("FASB") amended the Accounting Standards Codification ("ASC") as summarized in Accounting Standards Update ("ASU") 2009-14, Software (Topic 985): Certain Revenue Arrangements That Include Software Elements, and ASU 2009-13, Revenue Recognition (Topic 605): Multiple-Deliverable Revenue Arrangements. As summarized in ASU 2009-14, ASC Topic 985 has been amended to remove from the scope of industry-specific revenue accounting guidance for software and software related transactions tangible products containing software components and non-software components that function together to deliver the product's essential functionality. As summarized in ASU 2009-13, ASC Topic 605 has been amended: (1) to provide updated guidance on whether multiple deliverables exist, how the deliverables in an arrangement should be separated, and the consideration allocated; (2) to require an entity to allocate revenue in an arrangement using estimated selling prices of deliverables if a vendor does not have vendor-specific objective evidence ("VSOE") or third-party evidence of selling price; and (3) to eliminate the use of the residual method and require an entity to allocate revenue using the relative selling price method. The accounting changes summarized in ASU 2009-14 and ASU 2009-13 are both effective for fiscal years beginning on or after June 15, 2010, with early adoption permitted. Adoption may either be on a prospective basis or by retrospective application. We adopted these amendments to the ASC on January 1, 2011; at this time, we believe the impact of these accounting changes will be immaterial.

55

        In June 2009, the FASB issued Amendments to FASB Interpretation No. 46(R), which amends the consolidation guidance applicable to variable interest entities and the definition of a variable interest entity ("VIE") and requires enhanced disclosures to provide more information about an enterprise's involvement in a VIE. In addition, it requires an enterprise to perform an analysis to determine whether the enterprise's variable interest gives it a controlling interest in a VIE. The analysis identifies the primary beneficiary of the VIE as the enterprise that has both (1) the power to direct the activities of the VIE and (2) the obligation to absorb losses of the VIE. We adopted this statement on January 1, 2010. There was no financial impact of adoption of this standard.

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. (See "Risk Factors" in Item 1A of this Annual Report on Form 10-K for a more complete description of these risks and uncertainties.) 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 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 year 2010, 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 2011, 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. Although 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. All of our interest rate sensitive financial instruments are held for purposes other than trading purposes. At December 31, 2010, approximately 66% of our debt was in fixed-rate instruments. The table below 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. See "Management's Discussion and Analysis of Financial Condition and Results of Operations—Liquidity, Capital Resources and Working Capital" in Item 7 of this Annual Report on Form 10-K for additional information about our financial instruments.

        Effective October 17, 2008, SGI entered into a three-year interest rate swap agreement (the "Hedge") with JPMorgan. Under the Hedge, SGI pays interest on a $100 million notional amount of debt at a fixed rate of 3.49% and receives interest on a $100 million notional amount of debt at the prevailing three-month LIBOR rate. The objective of the Hedge is to eliminate the variability of cash flows attributable to the LIBOR component of interest expense paid on $100 million of our variable-rate debt.

56

Principal Amount by Expected Maturity—Average Interest Rate
December 31, 2010
(Dollars in thousands)

	2011			2012			2013			2014			2015		Thereafter			Total			FMV
Debt at fixed interest rates	$	2,151			18,213			109,470			2			—		800,000			929,836			946,201
Weighted-average interest rates		4.6	%		4.8	%		6.6	%		5.0	%				8.6	%		8.2	%
Debt at variable interest rates	$	6,280			6,280			459,730			—			—		—			472,290			477,013
Weighted-average interest rates		3.8	%		3.8	%		3.8	%										3.8	%

        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 Australia, Austria, Chile, Germany, Ireland, Mexico, the Netherlands, Spain, Sweden and the United Kingdom. Our investments 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. In addition, a significant portion of the cost attributable to our foreign operations is incurred in the local currencies. Although we provide technology-based products, systems and services to gaming industries worldwide, a substantial amount of our transactions and their resulting financial impact are transacted in U.S. dollars. The foreign currencies to which we have the most exposure are the Euro and the British Pound Sterling, representing approximately 23% and 48% of our non-U.S dollar revenues in 2010. Historically, our exposure to foreign currency fluctuations has been more significant with respect to revenues than expenses, as a significant portion of our expenses, such as paper and ink, are contracted for in U.S. dollars. At December 31, 2010, a hypothetical 10% strengthening in the value of the U.S. dollar relative to the Euro and the British Pound Sterling would result in a decrease in revenue and operating income of approximately $22.4 million and $6.9 million, respectively.

        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) entering into foreign currency exchange contracts; and (iii) netting asset and liability exposures denominated in similar foreign currencies to the extent possible. 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 institutions with high credit ratings. The investment policy limits our exposure to concentration of credit risks. We believe that the impact of a 10% increase or decrease in interest rates would not be material to our investment income and interest expense from bank loans.

Management Report on Internal Control over Financial Reporting

        Our management is responsible for establishing and maintaining adequate internal control over financial reporting. With the participation of the Chief Executive Officer and Chief Financial Officer, our management conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework and criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this evaluation, our management has concluded that our internal control over financial reporting was effective as of December 31, 2010.

57

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of
Scientific Games Corporation
New York, New York

        We have audited the internal control over financial reporting of Scientific Games Corporation and subsidiaries (the "Company") as of December 31, 2010, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. The Company's management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company's internal control over financial reporting based on our audit.

        We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

        A company's internal control over financial reporting is a process designed by, or under the supervision of, the company's principal executive and principal financial officers, or persons performing similar functions, and effected by the company's board of directors, management, and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.

        Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis. Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

        In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2010, based on the criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.

58

        We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated financial statements and financial statement schedule as of and for the year ended December 31, 2010 of the Company and our report dated March 1, 2011 expressed an unqualified opinion on those financial statements and financial statement schedule based on our audit and the report of other auditors.

/s/ DELOITTE & TOUCHE LLP

Atlanta, Georgia
March 1, 2011

59

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
Report of Independent Registered Public Accounting Firm		61
Consolidated Financial Statements:
	Consolidated Balance Sheets as of December 31, 2010 and 2009	62
	Consolidated Statements of Operations for the years ended December 31, 2010, 2009 and 2008	63
	Consolidated Statements of Stockholders' Equity and Comprehensive Income for the years ended December 31, 2010, 2009 and 2008	64
	Consolidated Statements of Cash Flows for the years ended December 31, 2010, 2009 and 2008	65
	Notes to Consolidated Financial Statements	67
Schedule:
	II. Valuation and Qualifying Accounts	129

        All other schedules are omitted as the required information is not applicable or the information is presented in the consolidated financial statements or related notes.

60

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of
Scientific Games Corporation
New York, New York

        We have audited the accompanying consolidated balance sheets of Scientific Games Corporation and subsidiaries (the "Company") as of December 31, 2010 and 2009, and the related consolidated statements of operations, stockholders' equity and comprehensive income, and cash flows for each of the three years in the period ended December 31, 2010. Our audits also included the financial statement schedule listed in the Index. These financial statements and financial statement schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on the financial statements and financial statement schedule based on our audits. We did not audit the financial statements of Consorzio Lotterie Nazionali ("CLN"), the Company's investment which is accounted for by use of the equity method (see note 16 to the consolidated financial statements), as of December 31, 2010 and 2009 and for each of the three years in the period ended December 31, 2010. The Company's equity in income of CLN was $35,236, $49,952 and $51,913 for the years ended December 31, 2010, 2009 and 2008, respectively. Those statements were prepared in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board and were audited by other auditors whose report has been furnished to us, and our opinion, insofar as it relates to the amounts included for CLN, on the basis of International Financial Reporting Standards as issued by the International Accounting Standards Board, for the three years ended December 31, 2010, is based solely on the report of the other auditors. We have applied auditing procedures to the adjustments to reflect equity in net income of CLN in accordance with accounting principles generally accepted in the United States of America.

        We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). 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 and the report of the other auditors provide a reasonable basis for our opinion.

        In our opinion, based on our audits and the report of the other auditors, such consolidated financial statements present fairly, in all material respects, the financial position of Scientific Games Corporation and subsidiaries as of December 31, 2010 and 2009, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2010, in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, such 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.

        We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Company's internal control over financial reporting as of December 31, 2010, based on the criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated March 1, 2011 expressed an unqualified opinion on the Company's internal control over financial reporting based on our audit.

/s/ DELOITTE & TOUCHE LLP

Atlanta, Georgia
March 1, 2011

61

SCIENTIFIC GAMES CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

As of December 31, 2010 and 2009

(in thousands, except per share amounts)

			As of December 31,
			2010			2009
ASSETS
Current assets:
	Cash and cash equivalents		$	124,281		$	260,131
	Accounts receivable, net of allowance for doubtful accounts of $2,175 and $2,140 in 2010 and 2009, respectively			178,179			177,967
	Inventories			68,744			73,940
	Deferred income taxes, current portion			2,448			22,557
	Prepaid expenses, deposits and other current assets			40,013			47,031
	Assets held for sale			—			91,102
		Total current assets		413,665			672,728
Property and equipment, at cost				776,367			751,713
	Less: accumulated depreciation			(325,786	)		(283,274	)
	Net property and equipment			450,581			468,439
Goodwill, net				763,915			772,732
Intangible assets, net				70,613			79,822
Other assets and investments				452,764			298,071
		Total assets	$	2,151,538		$	2,291,792
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
	Debt payments due within one year		$	8,431		$	24,808
	Accounts payable			50,642			57,309
	Accrued liabilities			136,925			122,989
	Liabilities held for sale			—			20,097
		Total current liabilities		195,998			225,203
Deferred income taxes				60,858			37,418
Other long-term liabilities				53,765			67,158
Long-term debt, excluding current installments				1,388,259			1,342,255
		Total liabilities		1,698,880			1,672,034
Commitments and contingencies
Stockholders' equity:
	Class A common stock, par value $0.01 per share, 199,300 shares authorized, 97,474 and 97,012 shares issued and 91,725 and 93,883 shares outstanding as of December 31, 2010 and 2009, respectively			975			939
	Additional paid-in capital			674,691			651,348
	Accumulated earnings			(131,021	)		18,180
	Treasury stock, at cost, 5,749 and 3,129 shares held as of December 31, 2010 and 2009, respectively			(74,460	)		(48,125	)
	Accumulated other comprehensive income			(17,527	)		(2,584	)
		Total stockholders' equity		452,658			619,758
		Total liabilities and stockholders' equity	$	2,151,538		$	2,291,792

See accompanying notes to consolidated financial statements.

62

SCIENTIFIC GAMES CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

Years Ended December 31, 2010, 2009 and 2008

(in thousands, except per share amounts)

				Years Ended December 31,
				2010			2009			2008
Revenue:
	Instant tickets			$	465,090		$	453,238		$	548,308
	Services				363,138			410,014			451,664
	Sales				54,271			64,497			118,857
		Total Revenue			882,499			927,749			1,118,829
Operating expenses:
	Cost of instant tickets (1)				270,787			270,836			331,501
	Cost of services (1)				206,034			234,093			263,284
	Cost of sales (1)				38,045			44,539			85,856
	Selling, general and administrative expenses				158,500			168,248			184,213
	Write-down of assets held for sale				8,029			54,356			—
	Employee termination costs				602			3,920			13,695
	Depreciation and amortization				141,766			151,784			218,643
			Operating income (loss)		58,736			(27	)		21,637
Other (income) expense:
	Interest expense				101,613			87,498			78,071
	Equity in earnings of joint ventures				(49,090	)		(59,220	)		(58,570	)
	Loss (gain) on early extinguishment of debt				2,932			(4,829	)		2,960
	Other (income) expense, net				8,594			2,856			(4,691	)
					64,049			26,305			17,770
			Income (loss) before income tax expense		(5,313	)		(26,332	)		3,867
Income tax expense					143,888			13,547			8,352
			Net loss	$	(149,201	)	$	(39,879	)	$	(4,485	)
Basic and diluted net loss per share:
	Basic			$	(1.61	)	$	(0.43	)	$	(0.05	)
	Diluted			$	(1.61	)	$	(0.43	)	$	(0.05	)
Weighted average number of shares used in per share calculations:
	Basic shares				92,666			92,701			92,875
	Diluted shares				92,666			92,701			92,875

(1)

Exclusive of depreciation and amortization.

See accompanying notes to consolidated financial statements.

63

SCIENTIFIC GAMES CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

AND COMPREHENSIVE INCOME

Years Ended December 31, 2010, 2009 and 2008

(in thousands)

		Years Ended December 31,
		2010			2009			2008
Common stock:
Beginning balance		$	939		$	926		$	934
	Issuance of Class A common stock in connection with employee stock purchase plan		1			1			1
	Issuance of Class A common stock in connection with stock options, restricted stock units and warrants		35			17			6
	Purchases of Class A common stock		—			(5	)		(15	)
Ending balance			975			939			926
Additional paid-in capital:
Beginning balance			651,348			628,356			589,057
	Issuance of Class A common stock in connection with employee stock purchase plan		664			797			962
	Issuance of Class A common stock in connection with stock options, restricted stock units and warrants		913			1,662			3,363
	Repurchase of stock options		(772	)		(1,892	)		—
	Share-based compensation		22,807			34,589			34,122
	Tax benefit from employee stock options and restricted stock units		(4,024	)		(1,236	)		134
	Tax benefit from repurchase of convertible debentures		—			3,141			—
	Unwind of bond hedge		—			1,335			—
	Deferred compensation		3,755			(5,456	)		719
	Convertible debt feature in accordance with New Convertible Debt Guidance		—			(9,948	)		(7	)
	Equity issuance costs per New Convertible Debt guidance		—			—			6
Ending balance			674,691			651,348			628,356
Accumulated (losses) earnings:
Beginning balance			18,180			58,059			62,544
	Net loss		(149,201	)		(39,879	)		(4,485	)
Ending balance			(131,021	)		18,180			58,059
Treasury stock:
Beginning balance			(48,125	)		(42,586	)		(19,442	)
	Purchase of Class A common stock		(26,335	)		(5,539	)		(23,144	)
Ending balance			(74,460	)		(48,125	)		(42,586	)
Accumulated other comprehensive income (loss):
Beginning balance			(2,584	)		(48,926	)		60,498
	Other comprehensive income (loss)		(14,943	)		46,342			(109,424	)
Ending balance			(17,527	)		(2,584	)		(48,926	)
Total stockholders' equity		$	452,658		$	619,758		$	595,829
Comprehensive income (loss):
Net loss		$	(149,201	)	$	(39,879	)	$	(4,485	)
Other comprehensive income (loss)
	Pension gains and losses, net of tax		447			(1,410	)		3,240
	Foreign currency translation adjustment		(16,325	)		45,304			(107,758	)
	Effective portion of derivative financial instruments		935			2,486			(4,901	)
	Unrealized loss on investments, net of tax		—			(38	)		(5	)
Other comprehensive income (loss)			(14,943	)		46,342			(109,424	)
Comprehensive income (loss)		$	(164,144	)	$	6,463		$	(113,909	)

See accompanying notes to consolidated financial statements.

64

SCIENTIFIC GAMES CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

Years Ended December 31, 2010, 2009 and 2008

(in thousands)

				Years Ended December 31,
				2010			2009			2008
Cash flows from operating activities:
	Net loss			$	(149,201	)	$	(39,879	)	$	(4,485	)
	Adjustments to reconcile net income to cash provided by operating activities:
		Depreciation and amortization			141,766			151,784			218,643
		Change in deferred income taxes			124,143			15,196			(16,836	)
		Stock-based compensation			22,807			34,589			34,122
		Non-cash interest expense			7,163			14,035			17,679
		Undistributed equity in earnings of joint ventures			(14,679	)		(27,300	)		(33,290	)
		Loss on sale of assets held for sale			8,390			54,075			—
		Loss (gain) on early extinguishment of debt			2,932			(4,829	)		2,960
		Changes in current assets and liabilities, net of effects of acquisitions
			Accounts receivable		(4,396	)		30,054			(20,797	)
			Inventories		4,136			2,525			(2,644	)
			Accounts payable		(2,915	)		(4,504	)		6,332
			Accrued liabilities		6,919			(28,236	)		18,024
			Other current assets		24,365			17,124			(14,798	)
		Other			(857	)		5,443			3,588
Net cash provided by operating activities					170,573			220,077			208,498
Cash flows from investing activities:
	Capital expenditures				(9,352	)		(12,932	)		(19,686	)
	Wagering systems expenditures				(62,926	)		(64,610	)		(163,954	)
	Other intangible assets and software expenditures				(36,372	)		(34,039	)		(46,278	)
	Proceeds from asset disposals				465			3,770			201
	Change in other assets and liabilities, net				946			6,169			(4,533	)
	Investment in joint venture				(203,795	)		—			5,605
	Proceeds from sale of Racing Business				35,942			—			—
	Business acquisitions, net of cash acquired				(12,493	)		(86,560	)		(8,109	)
Net cash used in investing activities					(287,585	)		(188,202	)		(236,754	)
Cash flows from financing activities:
	Repayments under revolving credit facility				—			—			(158,000	)
	Proceeds from issuance of long-term debt				355,542			386,533			807,348
	Payment on long-term debt				(323,854	)		(273,876	)		(467,978	)
	Payment of financing fees				(13,655	)		(15,647	)		(15,226	)
	Purchases of treasury stock				(26,335	)		(5,539	)		(23,144	)
	Excess tax benefit from equity-based compensation plan				502			(1,236	)		134
	Net proceeds from issuance of common stock				(1,995	)		1,912			3,310
Net cash (used in) provided by financing activities					(9,795	)		92,147			146,444
Effect of exchange rate changes on cash and cash equivalents					(9,043	)		432			(6,952	)
(Decrease) increase in cash and cash equivalents					(135,850	)		124,454			111,236
Cash and cash equivalents, beginning of period					260,131			140,639			29,403
Cash and cash equivalents of held for sale operations					—			(4,962	)		—
Cash and cash equivalents, end of period				$	124,281		$	260,131		$	140,639

See accompanying notes to consolidated financial statements.

65

SCIENTIFIC GAMES CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)

Years Ended December 31, 2010, 2009 and 2008

(in thousands)

Non-cash investing and financing activities

For the years ended December 31, 2010, 2009 and 2008

        See Note 22 (Acquisitions and Disposition) for a description of the non-cash consideration that the Company received for the sale of our racing and venue management business (the "Racing Business") to Sportech Plc ("Sportech") on October 5, 2010, which included ordinary shares of Sportech valued at $26,300 and a note receivable of $10,000. See Note 6 (Other Assets and Investments) and Note 8 (Long-Term and Other Debt) for a description of deferred financing fee write-offs and capital lease transactions.

Supplemental cash flow information

        Cash paid during the period for:

	2010			2009			2008
Interest	$	86,486		$	77,399		$	55,102
Income taxes, net of refunds		(3,393	)		(3,813	)		18,113

See accompanying notes to consolidated financial statements.

66

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

        When used in these notes, unless otherwise specified or the context otherwise indicates, all references to the words "Scientific Games," "we," "us," "our," and the "Company" refer to Scientific Games Corporation and all entities included in our consolidated financial statements unless otherwise specified or the context otherwise indicates.

(a) Basis of Presentation and Description of the Business

        The accompanying consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP"). Intercompany transactions have been eliminated. The Company has evaluated subsequent events through the date these financial statements were issued.

        We are a supplier of technology-based products, systems and services to gaming markets worldwide. We report our operations in three business segments: Printed Products Group; Lottery Systems Group; and Diversified Gaming Group.

Printed Products Group

        Our Printed Products Group is primarily comprised of our global instant lottery ticket business. Our instant ticket business and related services businesses include ticket design and manufacturing, as well as value-added services such as game design, sales and marketing support, specialty games and promotions, inventory management and warehousing and fulfillment services. We also provide lotteries with cooperative service partnerships ("CSP") under which we provide an extended suite of services to help our customers efficiently and effectively manage their operations to achieve higher profitability. The Printed Products Group also includes MDI Entertainment, LLC ("MDI"), our subsidiary that provides licensed games, promotional entertainment and Internet services to the lottery industry.

Lottery Systems Group

        Our Lottery Systems Group is a leading provider of customized computer software, software support, equipment and data communication services to lotteries. Our Lottery Systems Group offering includes the provision of transaction processing software for the accounting and validation of both instant and online lottery games, point-of-sale terminals, central site computers, communications technology, and ongoing support and maintenance for these products. Central computer systems, terminals and associated software are typically provided in the U.S. through facilities management contracts under which the Company deploys and operates the system on behalf of the lottery and internationally through outright sales, which often include a service and maintenance component. In addition, we are the exclusive instant ticket validation network provider to the China Sports Lottery.

Diversified Gaming Group

        Our Diversified Gaming Group provides services and systems to private and public operators in the wide area gaming industry, including server-based gaming machines and sports betting systems and services.

        The Diversified Gaming Group includes The Global Draw Limited and certain related companies ("Global Draw"), a supplier of gaming terminals, server-based gaming systems and game content to

67

SCIENTIFIC GAMES CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(in thousands, except per share amounts)

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

licensed bookmakers, primarily in betting shops in the U.K. and increasingly outside the U.K. with deployments in Austria, Mexico and the Caribbean. The Diversified Gaming Group also includes Games Media Limited ("Games Media"), a supplier of gaming terminals and content to U.K. public house operators.

        The Diversified Gaming Group had included the Racing Business prior to its sale to Sportech on October 5, 2010. Due to the Company's continued involvement with Sportech, through the equity interest in Sportech that we acquired upon the closing of the sale, the sale of the Racing Business did not qualify for discontinued operations accounting treatment and was not reflected as such in the Company's Consolidated Statement of Operations.

(b) Principles of Consolidation

        The accompanying consolidated financial statements include the Company's accounts and subsidiaries that are wholly owned and in which we have a controlling financial interest or where we are the primary beneficiary of a variable interest entity. Investments in other entities in which we do not have a controlling financial interest and we are not the primary beneficiary of a variable interest entity but we exert significant influence are accounted for in the consolidated financial statements using the equity method of accounting. All inter-company balances and transactions have been eliminated in consolidation.

(c) Cash and Cash Equivalents

        Cash and cash equivalents include all cash balances and highly liquid investments with an initial maturity of three months or less. We place our temporary cash investments with high credit quality financial institutions. At times such investments may be in excess of the Federal Deposit Insurance Corporation insurance limit.

(d) Accounts Receivable and Allowance for Doubtful Accounts

        Trade accounts receivable are recorded at the invoiced amount and do not bear interest. The allowance for doubtful accounts is our best estimate of the amount of probable credit losses in our existing accounts receivable; however, changes in circumstances relating to accounts receivable may result in additional allowances in the future. We determine the allowance based on historical experience, current market trends and, for larger accounts, the ability to pay outstanding balances. We continually review our allowance for doubtful accounts. Past due balances and other higher risk amounts are reviewed individually for collectability. Account balances are charged against the allowance

68

SCIENTIFIC GAMES CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(in thousands, except per share amounts)

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

after all collection efforts have been exhausted and the potential for recovery is considered remote. Accounts receivable, net, consists of the following:

	As of December 31,
	2010			2009
Accounts receivable	$	135,962		$	149,544
Unbilled accounts receivable		44,392			30,563
Allowance for doubtful accounts		(2,175	)		(2,140	)
	$	178,179		$	177,967

        In certain of our contracts, contractual billings do not coincide with revenue recognized on the contract. Unbilled accounts receivable represent revenue recorded in excess of amounts billable pursuant to contract provisions and generally become billable at contractually specified dates or upon the attainment of milestones.

(e) Inventories

        Inventories are stated at the lower of cost or market, including provisions for obsolescence commensurate with known or estimated exposures. Cost is determined as follows:

Item	Cost method
Parts	First-in, first-out or weighted moving average.
Work-in-process and 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.

(f) 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		3–12
Transportation equipment		3–8
Furniture and fixtures		5–10
Buildings and leasehold improvements		5–40

        Costs incurred for equipment associated with specific wagering system contracts not yet placed into service are classified as construction in progress in property and equipment and are not depreciated until deployed.

(g) Deferred Installation Costs

        Certain lottery and wide area gaming contracts require us to perform installation activities. Direct installation activities, which include costs for online terminals, facilities wiring, computers, internal labor

69

SCIENTIFIC GAMES CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(in thousands, except per share amounts)

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

and travel, are performed at the inception of a specific contract with a specific customer to enable us to perform under the terms of the contract. These activities begin after a contract is entered into and end when the setup activities are substantially complete. Such activities do not represent a separate earnings process and therefore are deferred and amortized over the expected life of the contract, which we define as the original life of the contract plus all available extensions. Deferred installation costs, net of accumulated depreciation, included in property and equipment were approximately $40,200 and $41,000 at December 31, 2010 and 2009, respectively.

(h) Goodwill and Acquired Intangible Assets

        Goodwill represents the excess of the purchase price over the fair value of the net assets of acquired companies. We follow the purchase method of accounting for all business combinations. All goodwill and intangible assets with indefinite useful lives are not amortized, but instead, are evaluated for impairment on an annual basis or more frequently if events and circumstances indicate that assets might be impaired.

(i) Other Assets and Investments

        We capitalize costs associated with internally developed and purchased software systems for use in our lottery and wagering service contracts. Capitalized costs are amortized on a straight-line basis over the expected useful lives of the asset. We also capitalize costs associated with long-term financing, marketing rights, and non-competition and employment agreements arising primarily from business acquisitions. An evaluation is performed to determine if any impairment has occurred with respect to any amortized or non-amortized assets.

(j) Derivative Financial Instruments

        We record derivative instruments on the balance sheet at their respective fair values. From time to time, the Company utilizes interest rate swap agreements to mitigate any gains or losses associated with the change in expected cash flows due to fluctuation in interest rates on variable rate debt. Such derivatives meet the requirements for cash flow hedge accounting and are recognized on the balance sheet at their fair value. The effective portion of the hedge is recorded in other comprehensive income (loss) and the ineffective portion of the hedge, if any, is recorded in the Company's Consolidated Statement of Operations. Amounts recorded in other comprehensive income (loss) that were deferred on the effective hedged forecasted transactions are reclassified to earnings when the interest expense related to the hedged item affects earnings.

        From time to time, we utilize derivative financial instruments in the form of forward contracts, which allow us to mitigate risk associated with cash payments required to be made by the Company in non-functional currencies. Such derivatives are recognized on the balance sheet at their fair value and any periodic changes to this fair value are recognized in the Company's Consolidated Statement of Operations.

70

SCIENTIFIC GAMES CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(in thousands, except per share amounts)

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

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

        We assess the recoverability of long-lived assets 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 undiscounted 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 other long-lived assets is measured by the amount by which the carrying value of the asset exceeds the fair market value of the asset. Assets held for sale are reported at the lower of the carrying amount or fair market value, less expected costs to sell.

(l) Income Taxes

        Income taxes are determined using the liability method of accounting for income taxes. The Company's tax expense includes the U.S. and international income taxes but excludes the provision for U.S. taxes on undistributed earnings of international subsidiaries deemed to be permanently invested.

        The Company applies a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. The Company recognizes in the financial statements the impact of a tax position if that position is more likely than not to be sustained on an audit based on the technical merits of the position.

        Certain items of income and expense are not reported in tax returns and financial statements in the same year. The tax effect of such temporary differences is reported as deferred income taxes. The measurement of deferred tax assets is reduced, if necessary, by the amount of any tax benefits that, based on available evidence, are not expected to be realized. The Company establishes a valuation allowance for deferred tax assets for which realization is not likely. At December 31, 2010 and 2009, the Company had a valuation allowance of $234,813 and $95,151 recorded against the benefit of its certain deferred tax assets of foreign and domestic subsidiaries.

        The Company operates within multiple taxing jurisdictions and in the normal course of business is examined in various jurisdictions. The reversal of the accruals is recorded when examinations are completed, statutes of limitation are closed or tax laws are changed.

(m) Foreign Currency Translation

        The U.S. dollar is the functional currency for most of our businesses. Significant operations where their local currency is the functional currency include our operations in Europe and China. 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 and have not been material to the financial statements.

71

SCIENTIFIC GAMES CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(in thousands, except per share amounts)

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

(n) Revenue Recognition

        We derive our revenue from three sources: instant lottery tickets; services; and sales. Our instant lottery ticket business consists of long-term contracts to supply instant lottery tickets and provide related services to our lottery customers. We offer our clients a number of related, value-added services as part of an integrated offering. These services include game design, determination of prize structure, game programming and rights to use licensed products. We view our instant ticket offering as neither a pure product sale nor a pure service offering. In order to provide users of our financial statements better visibility into our revenue streams, beginning with our results for the year ended December 31, 2009, we have segregated revenues related to our instant ticket fulfillment/services businesses from other service revenues.

        We recognize revenue when it is realized or realizable and earned. We consider revenue realized or realizable and earned when we have persuasive evidence of an arrangement, prices are fixed or determinable, services and products are provided to the customer and collectability is probable or reasonably assured depending on the applicable revenue recognition guidance followed. In addition to the general policy discussed above, the following are the specific revenue recognition policies for our operating segments:

Printed Products Group

        Revenue from the sale of instant lottery tickets that are sold on a per unit price basis is recognized when the customer accepts the product pursuant to the terms of the contract.

        Revenue from the sale of instant lottery tickets that are sold on a variable price basis is recognized when the percentage of the amount of retail sales is generated.

        Revenue from cooperative service contracts is recognized based upon a percentage of the amount of the retail value of lottery tickets pursuant to the terms of the contract.

        Revenue from licensing branded property coupled with a service component whereby we purchase and distribute merchandise prizes on behalf of lottery authorities to identified winners is recognized on a performance-based measure pursuant to the terms of the contract.

        Revenue from licensing of branded property with no service component is recognized when the contract is signed.

        Revenue from the sale of prepaid phone cards is recognized when the customer accepts the product pursuant to the terms of the contract.

Lottery Systems Group

        Revenue from online lottery services is recognized as a percentage of the retail sales of lottery tickets pursuant to the terms of the contract.

        Revenue from the sale of a lottery system or sub-system, which includes the customization of software, is recognized under the percentage of completion method of accounting, based on the ratio of costs incurred to estimated costs to complete.

72

SCIENTIFIC GAMES CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(in thousands, except per share amounts)

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

        Revenue from the perpetual licensing of customized lottery software is recognized under the percentage of completion method of accounting, based on the ratio of costs incurred to estimated costs to complete.

        Revenue derived from software maintenance on lottery software is recognized ratably over the maintenance period.

        Revenue from the sale of lottery terminals is recognized when the customer accepts the product pursuant to the terms of the contract.

Diversified Gaming Group

        Revenue from the provision of wide area gaming services is generally recognized as a percentage of revenue generated by the terminals.

        Revenue from the sale of gaming terminals and related software is recognized ratably over the term of the contract.

        Revenue from the provision of pari-mutuel wagering services is generally recognized as a percentage of the amount wagered by the customers' patrons at the time of the wager pursuant to the terms of the contract.

        Revenue from the sale of a pari-mutuel wagering system, which included the customization of software, is recognized on the percentage of completion method of accounting, based on the ratio of costs incurred to estimated costs to complete.

        Revenue from the sale of pari-mutuel wagering terminals is recognized when the customer accepted the product pursuant to the terms of the contract.

        Revenue from the perpetual licensing of customized pari-mutuel software is recognized under the percentage of completion method of accounting, based on the ratio of costs incurred to estimated costs to complete.

        Revenue from wagering at Company owned or operated sites is recognized as a percentage of the amount wagered by our customers at the time of the wager.

        Revenue from the provision of facilities management services to non-Company owned wagering sites is recognized as a percentage of the amount wagered by the customers' patrons at the time of the wager pursuant to the terms of the contract.

(o) Service Contract Arrangements

        Service contracts for lottery and wide area gaming systems generally provide for substantial related services such as software, maintenance personnel, computer operators and certain operating supplies. The service contracts generally cover four to seven year periods and frequently include renewal options that have generally been exercised by the customers. Under such contracts, we retain 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 the payment of significant liquidated damages. Instant ticket sales contracts

73

SCIENTIFIC GAMES CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(in thousands, except per share amounts)

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

provide for revenue based on a fixed fee per thousand instant lottery 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.

(p) Shipping and Handling Costs

        Shipping and handling costs are included in cost of sales for all periods presented.

(q) Stock-Based Compensation

        We measure compensation cost for stock awards at fair value and recognize compensation expense ratably over the service period for awards expected to vest. The fair value of restricted stock units is determined based on the number of shares underlying the units granted and the quoted market price of our common stock. The fair value of stock options is determined using the Black-Scholes valuation model. The estimation of stock awards that will ultimately vest requires judgment and, to the extent actual results or updated estimates differ from our current estimates, such amounts will be recorded as a cumulative adjustment in the period estimates are revised. We consider many factors when estimating expected forfeitures, including types of awards, employee class, and historical experience. Actual results, and future changes in estimates, may differ substantially from our current estimates.

        The Company may grant certain awards that are contingent upon the Company achieving certain performance targets. Upon determining the performance target is probable, the fair value of the award is recognized over the service period. Certain equity awards may be settled in cash or a variable number of shares. The fair value of these awards are measured each reporting period and recorded as a liability and corresponding compensation expense. As the fair value changes each reporting period, the corresponding liability and compensation expense are adjusted, such that the liability and cumulative compensation expense equal the total fair value of the obligation upon the reporting date.

(r) Comprehensive Income

        We include and separately classify in comprehensive income unrealized gains and losses from our foreign currency translation adjustments, gains or losses associated with pension or other post-retirement benefits, prior service costs or credits associated with pension or other postretirement benefits, transition assets or obligations associated with pension or other post-retirement benefits, the effective portion of derivative financial instruments and unrealized gains and losses on investments.

(s) Use of 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 significant estimates involve percentage of completion for contracted lottery development projects, stock-based compensation expense, capitalization of software development costs, evaluation of the recoverability of assets and assessment of litigation and contingencies, allocation of purchase price to assets acquired and liabilities assumed in business combinations and income and other taxes. Actual results could differ from estimates.

74

SCIENTIFIC GAMES CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(in thousands, except per share amounts)

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

        Basic income per common share is computed by dividing net income available to common stockholders 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. As of December 31, 2010, 2009 and 2008 we had outstanding stock options and restricted stock units which could potentially dilute basic earnings per share in the future. As of December 31, 2009 and 2008, we also had outstanding potentially dilutive 0.75% convertible senior subordinated debentures due 2024 (the "Convertible Debentures"). The following represents a reconciliation of the numerator and denominator used in computing basic and diluted income available to common stockholders per common share for the years ended December 31, 2010, 2009 and 2008:

	Years Ended December 31,
	2010			2009			2008
Income (numerator)
Net loss	$	(149,201	)	$	(39,879	)	$	(4,485	)
Shares (denominator)
Basic weighted-average common shares outstanding		92,666			92,701			92,875
Effect of dilutive securities-stock rights		—			—			—
Effect of dilutive shares related to Convertible Debentures		—			—			—
Diluted weighted-average common shares outstanding		92,666			92,701			92,875
Basic and diluted per share amounts
Basic net loss per share	$	(1.61	)	$	(0.43	)	$	(0.05	)
Diluted net loss per share	$	(1.61	)	$	(0.43	)	$	(0.05	)

        For the years ended December 31, 2010, 2009 and 2008, there were no dilutive stock rights due to the net loss reported for the periods.

        For the year ended December 31, 2009, the aggregate number of shares that we could have been obligated to issue upon conversion of the then remaining $9,943 in aggregate principal amount of the Convertible Debentures was approximately 342. The Convertible Debentures provided for net share settlement upon conversion. In December 2004, we purchased a bond hedge to mitigate the potential dilution from conversion of the Convertible Debentures during the term of the bond hedge.

        On June 1, 2010, the remaining $9,943 in aggregate principal amount of the Convertible Debentures was repurchased or redeemed at a price equal to 100% of the aggregate principal amount thereof, together with accrued but unpaid interest thereon. In connection with the repurchase and redemption, we unwound the corresponding remaining portion of the bond hedge and warrant option.

        During 2010, 2009 and 2008, the average price of our common stock did not exceed the conversion price of the Convertible Debentures. Therefore we have not included potentially dilutive shares related to the Convertible Debentures in our diluted weighted-average common shares outstanding.

75

SCIENTIFIC GAMES CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(in thousands, except per share amounts)

(3) Inventories

        Inventories consist of the following:

	As of December 31,
	2010		2009
Parts and work-in-process	$	23,224	$	26,643
Finished goods		45,520		47,297
	$	68,744	$	73,940

        Point-of-sale terminals manufactured by us 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.

(4) Property and Equipment

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

		As of December 31,
		2010			2009
Machinery, equipment and deferred installation costs		$	654,652		$	617,157
Land and buildings			65,181			65,584
Transportation equipment			4,274			6,264
Furniture and fixtures			12,773			14,345
Leasehold improvements			13,440			15,204
Construction in progress			26,047			33,159
	Property and equipment, at cost		776,367			751,713
Less: accumulated depreciation			(325,786	)		(283,274	)
	Net property and equipment	$	450,581		$	468,439

        Depreciation expense for the years ended December 31, 2010, 2009 and 2008 was approximately $99,700, $104,300 and $162,900, respectively.

        Cost for equipment associated with specific wagering systems contracts not yet placed into service are recorded as construction in progress and not depreciated. When the equipment is placed into service at wagering facilities, the related costs are transferred from construction in progress to machinery and equipment, and we commence depreciation.

        Depreciation expense is excluded from cost of sales and other operating expenses and is separately stated with amortization expense on the statement of operations.

        During the fourth quarter of 2010, we recorded long-lived asset impairment charges of approximately $17,500 related to underperforming Lottery Systems contracts. The fair value of the assets related to these contracts is approximately $32,200. During the fourth quarter of 2009, we recorded long-lived asset impairment charges of approximately $24,700 primarily related to underperforming Lottery Systems contracts. The fair value of the assets was approximately $36,000. We determine the fair value of the assets by using Level 2 valuation techniques within the fair value hierarchy and based on the present value of future cash flows of the respective contracts. The

76

SCIENTIFIC GAMES CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(in thousands, except per share amounts)

(4) Property and Equipment (Continued)

impairment charges are included in depreciation and amortization expense of the Lottery Systems Group in our Consolidated Statements of Operations for the year ended December 31, 2010 or 2009, as the case may be. During the fourth quarter of 2010, we also recorded an impairment charge of approximately $3,000 related to obsolete Lottery Systems equipment.

        During the fourth quarter of 2010, we recorded accelerated depreciation expense of approximately $8,300 as a result of Global Draw's transition to a new platform technology. We also recorded an impairment charge of approximately $2,500 related to obsolete Global Draw equipment.

(5) Goodwill and Intangible Assets

Intangible Assets

        The following disclosure presents certain information on our intangible assets as of December 31, 2010 and 2009. Amortizable intangible assets are being amortized on a straight-line basis over their estimated useful lives with no estimated residual values.

Intangible Assets		Gross Carrying Amount		Accumulated Amortization		Net Balance
Balance as of December 31, 2010
Amortizable intangible assets:
	Patents	$	12,106		4,321		7,785
	Customer lists		30,083		19,009		11,074
	Licenses		62,124		46,381		15,743
	Intellectual property		17,833		17,719		114
	Lottery contracts		1,500		1,093		407
			123,646		88,523		35,123
Non-amortizable intangible assets:
	Trade name		37,608		2,118		35,490
Total intangible assets		$	161,254		90,641		70,613
Balance as of December 31, 2009
Amortizable intangible assets:
	Patents	$	11,657		4,073		7,584
	Customer lists		29,706		17,431		12,275
	Licenses		63,974		41,825		22,149
	Intellectual property		18,581		16,946		1,635
	Lottery contracts		4,907		4,399		508
			128,825		84,674		44,151
Non-amortizable intangible assets:
	Trade name		37,789		2,118		35,671
Total intangible assets		$	166,614		86,792		79,822

77

SCIENTIFIC GAMES CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(in thousands, except per share amounts)

(5) Goodwill and Intangible Assets (Continued)

        The aggregate intangible asset amortization expense for the years ended December 31, 2010, 2009 and 2008 was approximately $13,700, $17,500 and $27,700, respectively. The estimated intangible asset amortization expense for the year ending December 31, 2011 and each of the subsequent four years is approximately $8,500, $7,100, $6,400, $5,400 and $2,400 respectively.

Goodwill

        The table below reconciles the change in the carrying amount of goodwill, by reporting segment, for the period from December 31, 2008 to December 31, 2010. In 2010, we recorded (a) a $4,662 increase in goodwill associated with the acquisition of substantially all of the assets of GameLogic Inc. ("GameLogic") and (b) a decrease in goodwill of $13,479 as a result of foreign currency translation.

        In 2009, we recorded (a) a $83,355 increase in goodwill associated with the final purchase price adjustment under the earn-out that was part of our acquisition of Global Draw, (b) a decrease of $745 in goodwill associated with the assets held for the sale of the Racing Business, and (c) an increase in goodwill of $32,911 as a result of foreign currency translation.

Goodwill		Printed Products Group		Lottery Systems Group			Diversified Gaming Group			Totals
Balance at December 31, 2008		$	324,245		190,341			142,625			657,211
	Adjustments		5,414		2,492			107,615			115,521
Balance at December 31, 2009			329,659		192,833			250,240			772,732
	Adjustments		5,822		(5,889	)		(8,750	)		(8,817	)
Balance at December 31, 2010		$	335,481		186,944			241,490			763,915

        We performed impairment tests for fiscal years 2010 and 2009. No adjustment was required to the carrying value of our goodwill or intangible assets with indefinite useful lives as of December 31, 2010 or 2009 as a result of the annual impairment tests.

(6) Other Assets and Investments

        Other assets and investments consist of the following:

	As of December 31,
	2010		2009
Software systems development costs, net	$	62,054	$	63,350
Deferred financing costs		31,151		26,947
Deferred tax asset, long-term portion		15,580		105,903
SERP trust		—		2,432
Investments in joint ventures		321,180		84,112
Other assets		22,799		15,327
	$	452,764	$	298,071

78

SCIENTIFIC GAMES CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(in thousands, except per share amounts)

(6) Other Assets and Investments (Continued)

        In the years ended December 31, 2010 and 2009, we capitalized $26,900 and $26,200, respectively, of software systems development costs related primarily to lottery and wide area gaming. Capitalized costs are amortized on a straight-line basis over a period of five to ten years. The total amount charged to amortization expense for amortization of capitalized systems development costs was approximately $27,000, $28,200 and $24,800 for the years ended December 31, 2010, 2009 and 2008, respectively.

        Deferred financing costs arise in connection with our long-term financing and are amortized over the life of the financing agreements. We capitalized approximately $12,700, $14,700 and $15,200 during 2010, 2009 and 2008, respectively, in connection with these financing transactions. Amortization of deferred financing costs amounted to approximately $6,500, $5,100 and $4,200 for the years ended December 31, 2010, 2009 and 2008, respectively.

        During 2010, we wrote-off approximately $1,300 of unamortized deferred financing fees related to our repurchase and redemption of our 6.25% senior subordinated notes due 2012 (the "2012 Notes"). We also wrote-off approximately $700 of unamortized deferred financing fees related to the repayment of a portion of the outstanding borrowings under our term loan facilities under the Credit Agreement.

        During the second quarter of 2009, we wrote-off approximately $140 of unamortized deferred financing fees related to the Company's repurchase of some of the 2012 Notes. During 2009, the Company repurchased most of the Convertible Debentures and wrote-off approximately $1,100 of unamortized deferred financing fees related to the Convertible Debentures.

(7) Accrued Liabilities

        Accrued liabilities consist of the following:

	As of December 31,
	2010		2009
Compensation and benefits	$	39,766	$	44,142
Customer advances		1,024		1,723
Deferred revenue		18,227		14,545
Taxes, other than income		6,982		7,275
Accrued licenses		1,157		1,150
Liabilites assumed in business combinations		1,450		1,724
Accrued contract costs		19,941		7,320
Accrued interest		9,668		4,809
Other		38,710		40,301
	$	136,925	$	122,989

79

SCIENTIFIC GAMES CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(in thousands, except per share amounts)

(8) Long-Term and Other Debt

Financing-Related Transactions

        We are party to a credit agreement, dated as of June 9, 2008 (as amended, the "Credit Agreement"), among Scientific Games International, Inc. ("SGI"), as borrower, the Company, as guarantor, the several lenders from time to time parties thereto and JPMorgan Chase Bank, N.A. ("JPMorgan"), as administrative agent. On February 12, 2010, the Company entered into an amendment and restatement of the Credit Agreement in order to revise certain financial covenants and provide the Company with additional operating and financing flexibility so that the Company could execute then pending and future strategic initiatives, including participation in the tender process for the Italian instant ticket concession, the sale of the Racing Business and the Company's strategic transactions with Playtech Limited or its affiliates ("Playtech").

        On June 17, 2010, we obtained an incremental term loan facility under the Credit Agreement under which several lenders provided an aggregate principal amount of $78,000 of senior secured term loans to SGI. The incremental term loan facility is, in all material respects, subject to the same terms and conditions as SGI's existing term loan facility under the Credit Agreement (described below).

        On December 16, 2010, we entered into an amendment to the Credit Agreement. Under the amendment, the acquisition of any specified percentage of the Company's common stock by MacAndrews & Forbes Holdings Inc. ("M&F") and/or certain related parties will not constitute an "event of default" under the Credit Agreement. In addition, the occurrence of a "change of control" under certain other indebtedness of the Company or SGI as a result of the acquisition of any specified percentage of the Company's common stock by M&F and/or certain related parties will not constitute an "event of default" under the Credit Agreement, provided that SGI or any guarantor under the Credit Agreement would at such time be permitted under the terms of the Credit Agreement to repay any such indebtedness that becomes due and payable as a result of such acquisition.

        We also entered into certain other debt financing transactions during 2010 in order to repurchase or redeem outstanding debt, to enhance liquidity and to extend the average maturity of our debt.

        On June 1, 2010, the remaining $9,943 in aggregate principal amount of our Convertible Debentures was repurchased or redeemed at a price equal to 100% of the aggregate principal amount thereof, together with accrued but unpaid interest thereon. In connection with the repurchase and redemption, we unwound the corresponding remaining portion of the bond hedge and warrant option that we had purchased to mitigate the potential dilution from conversion of the Convertible Debentures.

        On June 25, 2010, we repaid approximately £27,506 of the approximately £28,134 in aggregate principal amount of the two-year, senior unsecured promissory notes issued by certain of the Company's foreign subsidiaries to defer a portion of the earn-out payable in connection with our 2006 acquisition of Global Draw (which notes are guaranteed by the Company and certain of its U.S. subsidiaries, including SGI) (the "Global Draw Promissory Notes"), leaving approximately £628 in aggregate principal amount of the Global Draw Promissory Notes outstanding.

        On September 22, 2010, the Company issued $250,000 in aggregate principal amount of its 8.125% Senior Subordinated Notes due 2018 (the "2018 Notes") at a price of 100% of the principal amount thereof in a private offering to qualified institutional buyers in accordance with Rule 144A under the Securities Act of 1933, as amended (the "Securities Act"), and to persons outside the United States under Regulation S under the Securities Act. The 2018 Notes were issued pursuant to an indenture

80

SCIENTIFIC GAMES CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(in thousands, except per share amounts)

(8) Long-Term and Other Debt (Continued)

dated as of September 22, 2010 (the "2018 Notes Indenture") among the Company, the subsidiary guarantors party thereto and The Bank of Nova Scotia Trust Company of New York, as trustee.

        On October 6, 2010, the Company completed a tender offer pursuant to which it purchased approximately $107,600 in aggregate principal amount of the 2012 Notes. In connection with the tender offer, the Company completed a consent solicitation under which tendering holders consented to proposed amendments to the indenture governing the 2012 Notes to eliminate substantially all restrictive covenants and certain default provisions in the indenture. On December 28, 2010, the Company redeemed all approximately $79,500 of the remaining outstanding 2012 Notes at a price equal to 100% of the principal amount thereof, plus accrued and unpaid interest to, but not including, the redemption date. The redemption was funded with proceeds from the 2018 Notes. Redemption of the 2012 Notes fully satisfied the September 15, 2012 liquidity condition related to the 2012 Notes contained in the Credit Agreement.

        During 2010, we recognized a loss on early extinguishment of debt of approximately $2,260 related to the repurchase of approximately $187,075 in aggregate principal amount of the 2012 Notes.

Outstanding Debt and Capital Leases

        As of December 31, 2010, our total debt was comprised principally of $572,290 outstanding under our term loan facilities under the Credit Agreement, $350,000 in aggregate principal amount of the 9.25% senior subordinated notes due 2019 (the "2019 Notes"), $200,000 in aggregate principal amount of the 7.875% senior subordinated notes due 2016 (the "2016 Notes"), $250,000 in aggregate principal amount of the 2018 Notes, £628 in aggregate principal amount of the Global Draw Promissory Notes and loans denominated in Chinese Renminbi Yuan ("RMB") totaling RMB178,500 of which RMB116,000 matures in December 2012 and RMB62,500 matures in January 2013 (the "China Loans").

81

SCIENTIFIC GAMES CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(in thousands, except per share amounts)

(8) Long-Term and Other Debt (Continued)

        The following reflects outstanding debt as of December 31, 2010 and 2009:

		December 31,
		2010			2009
Revolver, varying interest rate, due 2013		$	—		$	—
Term Loan, varying interest rate, due 2013 (1)			571,644			540,375
2016 Notes, 7.875% interest, due 2016			200,000			200,000
2012 Notes, 6.25% interest, due 2012			—			187,075
2018 Notes, 8.125% interest, due 2018			250,000			—
2019 Notes, 9.25% interest, due 2019 (2)			345,209			344,932
Convertible Debentures, 0.75% interest, due 2024			—			9,731
Global Draw Promissory Notes, 6.9% interest, due 2011			980			45,473
China Loans, varying interest rate			27,079			37,504
Capital lease obligations, 5.0% interest as of December 31, 2010 payable monthly through 2014			146			173
Various loans and bank facilities, interest as of December 31, 2010 up to 6.2%			1,632			1,800
	Total long-term debt outstanding	$	1,396,690		$	1,367,063
Less: debt payments due within one year			(8,431	)		(24,808	)
	Long-term debt, net of current installments	$	1,388,259		$	1,342,255

(1)

Total of $572,290 less amortization of a loan discount in the amount of $646 as of December 31, 2010.

(2)

Total of $350,000 less amortization of a loan discount in the amount of $4,791 as of December 31, 2010.

82

SCIENTIFIC GAMES CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(in thousands, except per share amounts)

(8) Long-Term and Other Debt (Continued)

        The following reflects debt and capital lease payments due over the next five years and beyond as of December 31, 2010:

		As of December 31, 2010
		Total			Within 1 Year		Within 2 Years		Within 3 Years		Within 4 Years		Within 5 Years		After 5 Years
Revolver		$	—		$	—	$	—	$	—	$	—	$	—	$	—
Term Loan			572,290			6,280		6,280		559,730		—		—		—
2016 Notes			200,000			—		—		—		—		—		200,000
2018 Notes			250,000			—		—		—		—		—		250,000
2019 Notes			350,000			—		—		—		—		—		350,000
Global Draw Promissory Notes			980			980		—		—		—		—		—
China Loans			27,079			—		17,977		9,102		—		—		—
Other			1,778			1,171		238		367		2		—		—
	Total	$	1,402,127		$	8,431	$	24,495	$	569,199	$	2	$	—	$	800,000
Unamortized discount		$	(5,437	)
		$	1,396,690

Credit Agreement

        The Credit Agreement provides for a $250,000 senior secured revolving credit facility and senior secured term loan credit facilities under which $572,290 of borrowings are outstanding as of December 31, 2010. The Credit Agreement will mature on June 9, 2013.

        Amounts under the revolving credit facility may be borrowed, repaid and re-borrowed by SGI from time to time until maturity. Voluntary prepayments and commitment reductions under the Credit Agreement are permitted at any time in whole or in part, without premium or penalty (other than break-funding costs), upon proper notice and subject to a minimum dollar requirement.

        Borrowings under the Credit Agreement bear interest at a rate per annum equal to, at SGI's option, either (1) a base rate determined by reference to the higher of (a) the prime rate of JPMorgan and (b) the federal funds effective rate plus 0.50%, or (2) a reserve-adjusted LIBOR rate, in each case plus an applicable margin. The applicable margin varies based on the Consolidated Leverage Ratio (as defined below) of the Company from 1.00% to 2.50% above the base rate for base rate loans, and from 2.00% to 3.50% above LIBOR for LIBOR-based loans. Until the delivery of the financial statements required under the Credit Agreement for the fiscal quarter ended March 31, 2010, the applicable margins for base rate loans and LIBOR-based loans were deemed to be 2.50% and 3.50%, respectively, regardless of the Consolidated Leverage Ratio.

        During the term of the Credit Agreement, SGI will pay its lenders a fee, payable quarterly in arrears on the third business day after the last day of each of March, June, September and December and the last day of the revolving commitment period, equal to the product of (1) the available revolving credit facility commitments and (2) either 0.50% per annum if the Consolidated Leverage Ratio as of the most recent determination date is less than 4.25 to 1.00 or 0.75% per annum if the Consolidated Leverage Ratio as of the most recent determination date is greater than or equal to 4.25 to 1.00.

83

SCIENTIFIC GAMES CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(in thousands, except per share amounts)

(8) Long-Term and Other Debt (Continued)

        The Company and its direct and indirect 100%-owned domestic subsidiaries (other than SGI) have guaranteed the payment of SGI's obligations under the Credit Agreement. In addition, the obligations under the Credit Agreement are secured by a first priority, perfected lien on (1) substantially all the property and assets (real and personal, tangible and intangible) of the Company and its direct and indirect 100% owned domestic subsidiaries and (2) 100% of the capital stock (or other equity interests) of all of the Company's direct and indirect 100%-owned domestic subsidiaries and 65% of the capital stock (or other equity interests) of the direct foreign subsidiaries of SGI and the guarantors.

        The Credit Agreement contains customary covenants, including negative covenants that, among other things, limit the ability of the Company and its 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 asset sales, effect a consolidation or merger, sell, transfer, lease or otherwise dispose of all or substantially all assets, prepay or modify certain indebtedness, or create certain liens and other encumbrances on assets.

        In addition, the Credit Agreement requires us to maintain the following financial ratios:

•

a "Consolidated Leverage Ratio" as at the last day of each fiscal quarter not to exceed the ratio set forth below with respect to such fiscal quarter or with respect to the period during which such fiscal quarter ends:

•

5.75 to 1.00 (fiscal quarter ended December 31, 2009 through March 31, 2012);

•

5.50 to 1.00 (fiscal quarter ending June 30, 2012); and

•

5.25 to 1.00 (fiscal quarter ending September 30, 2012 and thereafter);

"Consolidated Leverage Ratio" means, as of the last day of any period, the ratio of (1) Consolidated Total Debt (defined as the aggregate principal amount of our indebtedness, determined on a consolidated basis and required to be reflected on our balance sheet in accordance with GAAP on such day, to (2) Consolidated EBITDA (as defined below) for the period of four consecutive fiscal quarters then ended.

•

a "Consolidated Senior Debt Ratio" as at the last day of each fiscal quarter not to exceed the ratio set forth below with respect to such fiscal quarter or with respect to the period during which such fiscal quarter ends:

•

2.75 to 1.00 (fiscal quarter ended December 31, 2009 through June 30, 2012); and

•

2.50 to 1.00 (fiscal quarter ending September 30, 2012 and thereafter);

"Consolidated Senior Debt Ratio" means, as of the last day of any period, the ratio of (1) Consolidated Total Debt (other than the 2012 Notes, the 2016 Notes, the 2018 Notes and the 2019 Notes and any additional subordinated debt permitted under the Credit Agreement) to (2) Consolidated EBITDA for the period of four consecutive fiscal quarters then ended.

•

a "Consolidated Interest Coverage Ratio" for any period of four consecutive fiscal quarters of not less than the ratio set forth below with respect to such period or with respect to the period during which such four consecutive fiscal quarters ends:

•

2.50 to 1.00 (four consecutive fiscal quarters ended December 31, 2009 and through June 30, 2010); and

84

SCIENTIFIC GAMES CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(in thousands, except per share amounts)

(8) Long-Term and Other Debt (Continued)

•

2.25 to 1.00 (four consecutive fiscal quarters ended September 30, 2010 and thereafter).

"Consolidated Interest Coverage Ratio" means, for any period, the ratio of (1) Consolidated EBITDA for such period to (2) total cash interest expense with respect to all outstanding debt of the Company and its subsidiaries for such period.

        "Consolidated EBITDA" means, for any period, "Consolidated Net Income" (i.e., our consolidated net income (or loss) excluding, among other items, the income (or deficit) of our joint venture entities except to the extent that such income is actually received by us in the form of distributions or payments in respect of loans made by us to such joint venture entities in lieu of equity investments) for such period plus, to the extent reflected as a charge in the statement of such Consolidated Net Income for such period, the sum of:

•

income tax expense;

•

interest expense, amortization or write-off of debt discount and debt issuance costs and commissions, discounts and other fees and charges associated with debt;

•

depreciation and amortization expense;

•

amortization of intangibles (including goodwill) and organization costs;

•

earn-out payments with respect to certain acquisitions that we have made, such as our acquisition of Global Draw, or any "Permitted Acquisitions" (defined generally as acquisitions of companies that are primarily engaged in the same or related line of business and that become subsidiaries of ours, or acquisitions of all or substantially all of the assets of another company or division or business unit of another company), including any loss or expense with respect to such earn-out payments;

•

extraordinary charges or losses determined in accordance with GAAP;

•

non-cash stock-based compensation expenses;

•

up to $3,000 of expenses, charges or losses resulting from certain Peru investments;

•

the non-cash portion of any non-recurring write-offs or write-downs as required in accordance with GAAP;

•

advisory fees and related expenses paid to advisory firms in connection with Permitted Acquisitions;

•

"Permitted Add-Backs" (i.e., (1) up to $15,000 (less the amount of certain permitted pro forma adjustments to Consolidated EBITDA in connection with material acquisitions) of charges incurred during any 12-month period in connection with (a) reductions in workforce, (b) contract losses, discontinued operations, shutdown expenses and cost reduction initiatives, (c) transaction expenses incurred in connection with potential acquisitions and divestitures, whether or not consummated, and (d) restructuring charges and transaction expenses incurred in connection with certain transactions with Playtech and (2) reasonable and customary costs incurred in connection with amendments to the Credit Agreement);

provided that the foregoing amounts do not include (1) write-offs or write-downs of accounts receivable or inventory and (2) except with respect to Permitted Add-Backs, any write-off or write-down to the extent it is in respect of cash payments to be made in a future period;

85

SCIENTIFIC GAMES CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(in thousands, except per share amounts)

(8) Long-Term and Other Debt (Continued)

•

to the extent treated as an expense in the period paid or incurred, certain payments, costs and obligations (up to a specified amount) made or incurred by us, whether directly or indirectly, in connection with any award of a concession to operate the instant ticket lottery in Italy, including upfront fees required under the applicable tender process;

•

restructuring charges, transaction expenses and shutdown expenses incurred in connection with the disposition of all or part of the Racing Business, together with any charges incurred in connection with discontinued operations and cost-reduction initiatives associated with such disposition, in an aggregate amount (for all periods combined) not to exceed $7,325; and

•

up to £5,250 during any four-quarter period of expenses or charges incurred in connection with the payment of license royalties or other fees to Playtech and for software services provided to Global Draw or Games Media by Playtech;

minus, to the extent included in the statement of such Consolidated Net Income for such period, the sum of:

•

interest income;

•

extraordinary income or gains determined in accordance with GAAP; and

•

income or gains with respect to earn-out payments with respect to acquisitions referred to above.

        Consolidated EBITDA is subject to certain adjustments in connection with material acquisitions and dispositions as provided in the Credit Agreement.

        The Credit Agreement generally requires mandatory prepayments of the term loan credit facilities with the net cash proceeds from (1) the incurrence of indebtedness by us (excluding certain permitted debt) and (2) the sale of assets that yields to us net cash proceeds in excess of $5,000 (excluding certain permitted asset sales) or any settlement of or payment in respect of any property or casualty insurance claim or any condemnation proceeding relating to any of our assets.

        Under the terms of the Credit Agreement, SGI has the ability, subject to certain terms and conditions, to request additional tranches of term loans or to request an increase in the commitments under the revolving credit facility, or a combination thereof, in a maximum aggregate amount of $122,000 at a later date.

        We were in compliance with our covenants under the Credit Agreement as of December 31, 2010.

        As of December 31, 2010, the balance of outstanding loans under the term loan facilities under the Credit Agreement was $572,290.

        As of December 31, 2010, we had approximately $134,335 available for additional borrowing or letter of credit issuances under our revolving credit facility. There were no borrowings and $52,808 in outstanding letters of credit under our revolving credit facility as of December 31, 2010. Our ability to borrow under the Credit Agreement will depend on us remaining in compliance with the covenants contained in the Credit Agreement, including the maintenance of the foregoing financial ratios.

2018 Notes

        The 2018 Notes issued by the Company bear interest at the rate of 8.125% per annum, which accrues from September 22, 2010 and is payable semiannually in arrears on March 15 and September 15 of each year, commencing on March 15, 2011. The 2018 Notes mature on September 15,

86

SCIENTIFIC GAMES CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(in thousands, except per share amounts)

(8) Long-Term and Other Debt (Continued)

2018, unless earlier redeemed or repurchased by the Company, and are subject to the terms and conditions set forth in the indenture governing the 2018 Notes dated as of September 22, 2010 (the "2018 Notes Indenture").

        The Company may redeem some or all of the 2018 Notes at any time prior to September 15, 2014 at a price equal to 100% of the principal amount of the 2018 Notes plus accrued and unpaid interest, if any, to the date of redemption plus a "make whole" premium. The Company may redeem some or all of the 2018 Notes for cash at any time on or after September 15, 2014 at the prices specified in the 2018 Notes Indenture. In addition, at any time on or prior to September 15, 2013, the Company may redeem up to 35% of the initially outstanding aggregate principal amount of the 2018 Notes at a redemption price of 108.125% of the principal amount thereof, plus accrued and unpaid interest, if any, to the date of redemption, with the net cash proceeds from one or more equity offerings of the Company.

        Additionally, if a holder of 2018 Notes is required to be licensed, qualified or found suitable under any applicable gaming laws or regulations and that holder does not become so licensed or qualified or is not found to be suitable, then the Company will have the right, subject to certain notice provisions set forth in the 2018 Notes Indenture, (1) to require that holder to dispose of all or a portion of those 2018 Notes or (2) to redeem the 2018 Notes of that holder at a redemption price calculated as set forth in the 2018 Notes Indenture.

        Upon the occurrence of a change of control (as defined in the 2018 Notes Indenture), the Company must make an offer to purchase the 2018 Notes at a purchase price equal to 101% of the principal amount thereof, plus accrued and unpaid interest, if any, to the date of repurchase. In addition, following an asset sale (as defined in the 2018 Notes Indenture) and subject to the limitations contained in the 2018 Notes Indenture, the Company must make an offer to purchase certain amounts of the 2018 Notes using the net cash proceeds from such asset sale to the extent such proceeds are not applied as set forth in the 2018 Notes Indenture, at a purchase price equal to 100% of the principal amount of the 2018 Notes to be repurchased, plus accrued interest to the date of repurchase.

        The 2018 Notes are unsecured senior subordinated obligations of the Company and are subordinated to all of the Company's existing and future senior debt, rank equally with all of the Company's future senior subordinated debt, and rank senior to all of the Company's future debt that is expressly subordinated to the 2018 Notes. The 2018 Notes are guaranteed on an unsecured senior subordinated basis by all of the Company's 100%-owned domestic subsidiaries (including SGI). The 2018 Notes are structurally subordinated to all of the liabilities of our non-guarantor subsidiaries.

        The 2018 Notes Indenture contains certain covenants that, among other things, limit the Company's ability, and the ability of certain of its 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 assets. The 2018 Notes Indenture contains events of default customary for agreements of its type (with customary grace periods, as applicable).

        In connection with the issuance of the 2018 Notes, the Company, the guarantors party thereto, and J.P. Morgan Securities LLC, as representative for the initial purchasers listed therein, entered into a

87

SCIENTIFIC GAMES CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(in thousands, except per share amounts)

(8) Long-Term and Other Debt (Continued)

registration rights agreement, dated as of September 22, 2010 (the "Registration Rights Agreement"). Under the Registration Rights Agreement, the Company and the guarantors agreed, for the benefit of the holders of the 2018 Notes, that they will file with the Securities and Exchange Commission (the "SEC") within 180 days after the date the 2018 Notes are issued, and use their commercially reasonable efforts to cause to become effective, a registration statement relating to an offer to exchange the 2018 Notes for an issue of SEC-registered notes (the "Exchange Notes") with terms identical to the 2018 Notes (except that the Exchange Notes will not be subject to restrictions on transfer or to any increase in annual interest rate as described below).

        Under certain circumstances, including if applicable interpretations of the staff of the SEC do not permit the Company to effect the exchange offer, the Company and the guarantors will use their commercially reasonable efforts to cause to become effective a shelf registration statement relating to resales of the 2018 Notes and to keep that shelf registration statement effective until the first anniversary of the date such shelf registration statement becomes effective, or such shorter period that will terminate when all 2018 Notes covered by the shelf registration statement have been sold. The obligation to complete the exchange offer and/or file a shelf registration statement will terminate on September 22, 2012.

        If the exchange offer registration statement is not filed within 180 days after the date the 2018 Notes were issued, or the exchange offer is not completed (or, if required, the shelf registration statement is not declared effective) on or before June 20, 2011 (subject to the right of the Company to extend such date by up to 90 additional days under customary "blackout" provisions if the Company determines in good faith that it is in possession of material, non-public information), the annual interest rate borne by the 2018 Notes will be increased by 0.25% per annum for the first 90-day period immediately following such date and by an additional 0.25% per annum with respect to each subsequent 90-day period, up to a maximum additional rate of 1.00% per annum thereafter until the exchange offer is completed, the shelf registration statement is declared effective or the obligation to complete the exchange offer and/or file the shelf registration statement terminates, at which time the interest rate will revert to the original interest rate on the date the 2018 Notes were originally issued.

2019 Notes

        The 2019 Notes issued by SGI bear interest at the rate of 9.25% per annum, which accrues from May 21, 2009 and is payable semiannually in arrears on June 15 and December 15 of each year, commencing on December 15, 2009. The 2019 Notes mature on June 15, 2019, unless earlier redeemed or repurchased, and are subject to the terms and conditions set forth in the indenture governing the 2019 Notes dated as of May 21, 2009 (the "2019 Notes Indenture").

88

SCIENTIFIC GAMES CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(in thousands, except per share amounts)

(8) Long-Term and Other Debt (Continued)

        SGI may redeem some or all of the 2019 Notes at any time prior to June 15, 2014 at a price equal to 100% of the principal amount of the 2019 Notes plus accrued and unpaid interest, if any, to the date of redemption plus a "make whole" premium calculated as set forth in the 2019 Notes. SGI may redeem some or all of the 2019 Notes for cash at any time on or after June 15, 2014 at the prices specified in the 2019 Notes Indenture. In addition, at any time on or prior to June 15, 2012, SGI may redeem up to 35% of the initially outstanding aggregate principal amount of the 2019 Notes at a redemption price of 109.25% of the principal amount thereof, plus accrued and unpaid interest, if any, to the date of redemption, with the net cash proceeds contributed to the capital of SGI from one or more equity offerings of the Company.

        Additionally, if a holder of the 2019 Notes is required to be licensed, qualified or found suitable under any applicable gaming laws or regulations and that holder does not become so licensed or qualified or is not found to be suitable, then SGI will have the right subject to certain notice provisions set forth in the 2019 Notes Indenture, (1) to require that holder to dispose of all or a portion of those Notes or (2) to redeem the 2019 Notes of that holder at a redemption price calculated as set forth in the 2019 Notes Indenture.

        Upon the occurrence of a change of control (as defined in the 2019 Notes Indenture), SGI must make an offer to purchase the 2019 Notes at a purchase price equal to 101% of the principal amount thereof, plus accrued and unpaid interest, if any, to the date of repurchase. In addition, following an asset sale (as defined in the 2019 Notes Indenture) and subject to the limitations contained in the 2019 Notes Indenture, SGI must make an offer to purchase certain amounts of the 2019 Notes using the net cash proceeds from such asset sale to the extent such proceeds are not applied as set forth in the 2019 Notes Indenture, at a purchase price equal to 100% of the principal amount of the 2019 Notes to be repurchased, plus accrued interest to the date of repurchase.

        The 2019 Notes are unsecured senior subordinated obligations of SGI and are subordinated to all of SGI's existing and future senior debt, rank equally with all of SGI's existing and future senior subordinated debt and rank senior to all of SGI's future debt that is expressly subordinated to the 2019 Notes. The 2019 Notes are guaranteed on an unsecured senior subordinated basis by the Company and all of its 100%-owned domestic subsidiaries (other than SGI). The 2019 Notes are structurally subordinated to all of the liabilities of our non-guarantor subsidiaries.

        The 2019 Notes Indenture contains certain covenants that, among other things, limit the Company's ability, and the ability of certain of its subsidiaries, including SGI, 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 assets. The 2019 Notes Indenture contains events of default customary for agreements of its type (with customary grace periods, as applicable).

2016 Notes

        The 2016 Notes issued by SGI bear interest at the rate of 7.875% per annum, which accrues from June 11, 2008 and is payable semiannually in arrears on June 15 and December 15 of each year,

89

SCIENTIFIC GAMES CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(in thousands, except per share amounts)

(8) Long-Term and Other Debt (Continued)

commencing on December 15, 2008. The 2016 Notes mature on June 15, 2016, unless earlier redeemed or repurchased, and are subject to the terms and conditions set forth in the indenture governing the 2016 Notes dated as of June 11, 2008 (the "2016 Notes Indenture").

        SGI may redeem some or all of the 2016 Notes at any time prior to June 15, 2012 at a price equal to 100% of the principal amount of the 2016 Notes, plus accrued and unpaid interest, if any, to the date of redemption plus a "make whole" premium calculated as set forth in the 2016 Notes. SGI may redeem some or all of the 2016 Notes for cash at any time on or after June 15, 2012 at the prices specified in the 2016 Notes Indenture. In addition, at any time on or prior to June 15, 2011, SGI may redeem up to 35% of the initially outstanding aggregate principal amount of the 2016 Notes at a redemption price equal to 107.875% of the principal amount thereof, plus accrued and unpaid interest, if any, to the date of redemption, with the net cash proceeds contributed to the capital of SGI from one or more equity offerings of the Company.

        Additionally, if a holder of 2016 Notes is required to be licensed or found qualified under any applicable gaming laws or regulations and that holder does not become so licensed or found qualified or suitable, then SGI will have the right subject to certain notice provisions set forth in the 2016 Notes Indenture, (1) to require that holder to dispose of all or a portion of those 2016 Notes or (2) to redeem the 2016 Notes of that holder at a redemption price calculated as set forth in the 2016 Notes.

        Upon the occurrence of a change of control (as defined in the 2016 Notes Indenture), SGI must make an offer to purchase the 2016 Notes at a purchase price equal to 101% of the principal amount thereof, plus accrued and unpaid interest, if any, to the date of repurchase. In addition, following an asset sale (as defined in the 2016 Notes Indenture) and subject to the limitations contained in the 2016 Notes Indenture, SGI must make an offer to purchase certain amounts of the 2016 Notes using the net cash proceeds from such asset sale to the extent such proceeds are not applied as set forth in the 2016 Notes Indenture, at a purchase price equal to 100% of the principal amount of the 2016 Notes to be repurchased, plus accrued interest to the date of repurchase.

        The 2016 Notes are unsecured senior subordinated obligations of SGI and are subordinated to all of SGI's existing and future senior debt, rank equally with all of SGI's existing and future senior subordinated debt and rank senior to all of SGI's future debt that is expressly subordinated to the 2016 Notes. The 2016 Notes are guaranteed on an unsecured senior subordinated basis by the Company and all of its 100%-owned domestic subsidiaries (other than SGI). The 2016 Notes are structurally subordinated to all of the liabilities of our non-guarantor subsidiaries.

        The 2016 Notes Indenture contains certain covenants that, among other things, limit 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 asset 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 assets. The 2016 Notes Indenture contains events of default customary for agreements of its type (with customary grace periods, as applicable).

90

SCIENTIFIC GAMES CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(in thousands, except per share amounts)

(8) Long-Term and Other Debt (Continued)

Other Debt

        As of December 31, 2009, total debt outstanding included RMB256,000 of loans from two Chinese banks at interest rates ranging from 4.779% to 5.755%, which is 90% to 105% of the rate set by the People's Bank of China for similar type loans.

        In January 2010, we repaid the RMB256,000 of Chinese bank loans with cash on hand plus the proceeds of the China Loans. At December 31, 2010, the interest rate on the China Loans was 4.86%, which is 90% of the rate set by the People's Bank of China (the "PBOC") for similar type loans. The interest rate on the China Loans is subject to change on the loan anniversary dates at 90% of the prevailing PBOC rate for similar type loans. The lending banks have received standby letters of credit issued under our revolving credit facility to guarantee repayment of these borrowings.

(9) Leases

        At December 31, 2010, we were obligated under operating leases covering office equipment, office and warehouse space, transponders and transportation equipment expiring at various dates. Future minimum lease payments required under our leasing arrangements at December 31, 2010 are approximately as follows: $13,500 in 2011; $12,300 in 2012; $10,800 in 2013; $10,400 in 2014; $9,600 in 2015; and $15,900 thereafter. Total rental expense under these operating leases was approximately $21,600, $21,100 and $20,700 in the years ended December 31, 2010, 2009 and 2008, respectively.

        We have entered into several operating lease agreements, some of which contain provisions for future rent increases, rent-free periods, or periods in which rent payments are reduced (abated). The total amount of rental payments due over the lease term is being charged to rent expense on the straight-line method over the term of the lease. The difference between rent expense recorded and the amount paid is credited or charged to deferred rent obligation, which is included in other current liabilities and other long-term liabilities in the accompanying Consolidated Balance Sheet.

(10) Fair Value of Financial Instruments

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

        We believe that the fair value of our fixed interest rate debt approximated $946,201 and $946,144 as of December 31, 2010 and 2009, respectively, based on reference to dealer markets. We believe that the fair value of our variable interest rate debt approximated $477,013 and $438,173 as of December 31, 2010 and 2009, respectively, based on reference to dealer markets.

        Effective October 17, 2008, SGI entered into a three-year interest rate swap agreement (the "Hedge") with JPMorgan. Under the Hedge, which is designated as a cash flow hedge, SGI pays interest on a $100,000 notional amount of debt at a fixed rate of 3.49% and receives interest on a $100,000 notional amount of debt at the prevailing three-month LIBOR rate. The objective of the Hedge is to eliminate the variability of cash flows attributable to the LIBOR component of interest expense paid on $100,000 of our variable-rate debt. As of December 31, 2010, the Hedge was measured

91

SCIENTIFIC GAMES CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(in thousands, except per share amounts)

(10) Fair Value of Financial Instruments (Continued)

at fair value of $2,488 using Level 2 valuation techniques of the fair value hierarchy and included in other long-term liabilities on the Consolidated Balance Sheet.

        We believe we have matched the critical terms of the hedged variable-rate debt with the Hedge and expect the Hedge to be highly effective in offsetting changes in the expected cash flows due to fluctuation in the three-month LIBOR-based rate over the term of the forecasted interest payments related to the $100,000 notional amount of variable-rate debt. Hedge effectiveness is measured quarterly on a retrospective basis using the cumulative dollar-offset approach in which the cumulative changes in the cash flows of the actual swap are compared to the cumulative changes in the cash flows of the hypothetical swap. The effective portion of the Hedge is recorded in other comprehensive income (loss) and the ineffective portion of the Hedge, if any, is recorded in the Consolidated Statement of Operations. During the years ended December 31, 2010 and 2009, we recorded a gain of approximately $935 and $2,486, respectively, in the caption "other comprehensive income (loss)" in the Consolidated Statement of Stockholders' Equity. There was no ineffective portion of the Hedge recorded in the Consolidated Statement of Operations. Amounts recorded in other comprehensive income (loss) that were deferred on the effective hedged forecasted transactions are reclassified to earnings when the interest expense related to the hedged item affects earnings.

        During the fourth quarter of 2009, we entered into a series of short-term forward contracts (the "Forwards") with various counterparties, which were outstanding as of December 31, 2009. Under the Forwards, we locked in the price to purchase 80,000 Euro at a weighted-average fixed rate of $1.4294 per Euro during the first quarter of 2010. The objective of the Forwards was to mitigate the risk associated with cash payments required to be made by the Company in non-functional currencies. As of December 31, 2009, the Forwards were measured to have a fair value of approximately $390 using Level 2 valuation techniques of the fair value hierarchy.

        During 2010, we entered into several short-term forward contracts (the "Forwards") with various counterparties, all of which have been settled as of December 31, 2010. Under the Forwards, we locked in the price to purchase or sell a predetermined amount of Euros at a later date. The objective of the Forwards, which are not designated as hedges, was to mitigate the risk associated with cash payments required to be made by the Company in non-functional currencies.

        For the year ended December 31, 2010, we recorded a net loss of approximately $12,559 on forward contracts in our Consolidated Statements of Operations. The loss on forward contracts is included in "other expense (income), net."

(11) Stockholders' Equity

Preferred Stock

        As of December 31, 2010, we had a total of 2,000 shares of preferred stock, $1.00 par value, authorized for issuance, including 229 authorized shares of Series A convertible preferred stock and 1 authorized share of Series B preferred stock. No shares of preferred stock are currently outstanding.

92

SCIENTIFIC GAMES CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(in thousands, except per share amounts)

(11) Stockholders' Equity (Continued)

Common Stock

        We have two classes of common stock, consisting of Class A common stock and Class B non-voting 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. As of December 31, 2010 and 2009, there were 700 shares of Class B common stock authorized and none outstanding. The following demonstrates the change in the number of Class A common shares outstanding during the fiscal years ended December 31, 2010 and 2009:

	December 31,
	2010			2009
Shares outstanding as of beginning of period		93,883			92,601
Shares issued as part of equity-based compensation plans and the ESPP, net of RSUs surrendered		461			1,804
Shares repurchased into treasury stock		(2,619	)		(522	)
Shares outstanding as of end of period		91,725			93,883

Warrants

        During 2004, we sold warrants to acquire up to approximately 9,450 shares of our Class A common stock for approximately $37,900 to the parties with whom we entered into a bond hedge in connection with the Convertible Debentures.

        On June 1, 2010, the remaining $9,943 in aggregate principal amount of the Convertible Debentures was repurchased or redeemed at a price equal to 100% of the aggregate principal amount thereof, together with accrued but unpaid interest thereon. In connection with the repurchase and redemption, we unwound the corresponding remaining portion of the bond hedge and warrant option.

        On December 15, 2006, we entered into a licensing agreement with Hasbro, Inc. for the use of certain Hasbro brands in multiple lottery platforms. Under the terms of the agreement, we issued to Hasbro in February 2007 warrants to purchase 40 shares of our Class A common stock at a purchase price of $32.98 per share. The warrants may be exercised at any time before February 28, 2012. The fair value of the warrants on the date of grant was $480. The value of the warrant is reflected in the caption "Other assets and investments" in the Consolidated Balance Sheet. There would be dilution from the exercise of the warrants to the extent that the market price per share of our common stock exceeds $32.98 at the time of exercise.

Treasury Stock

        On May 10, 2010, our Board of Directors approved a stock repurchase program under which we are authorized to repurchase shares of our outstanding common stock in an aggregate amount up to $200,000. During fiscal year 2010, we repurchased 2,619 shares at an aggregate cost of approximately $26,300. As of December 31, 2010, we had approximately $173,697 remaining for purchases under the program. The program expires on December 31, 2011. During fiscal year 2009, we repurchased 522 shares at an aggregate cost of approximately $5,500 under our prior repurchase program. Purchases in 2009 and 2010 were funded by cash flows from operations, borrowings, or a combination thereof.

93

SCIENTIFIC GAMES CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(in thousands, except per share amounts)

(12) Stock-Based Compensation

        We offer stock-based compensation through the use of stock options and restrictive stock units ("RSUs"). We also offer an Employee Stock Purchase Plan ("ESPP"). We grant stock options to employees and directors under our stock option plans at not less than the fair market value of the stock at the date of grant. The annual limitations and vesting of the stock option awards are determined at our discretion. Options granted over the last several years have generally been exercisable in four or five equal installments beginning on the first anniversary of the date of grant with a maximum term of ten years. RSUs typically vest in four or five equal installments beginning on the first anniversary of the date of grant or when certain performance measures are met. There are approximately 13,500 shares of common stock authorized for awards under our stock option and RSU plans approved by stockholders, in addition to reserved shares from preexisting award plans and stock options granted as part of inducement stock option awards, which generally are not approved by stockholders prior to being granted.

        Our ESPP allows for a total of up to 1,000 shares of Class A common stock to be purchased by eligible employees under offerings made each January 1 and July 1. Employees participate through payroll deductions up to a maximum of 15% of eligible compensation. The term of each offering period is six months and shares are purchased on the last day of the offering period at a discount on the stock's market value. Under an amendment to the ESPP adopted in 2006, the purchase price for offering periods beginning in 2007 represents a 15% discount on the closing price of the stock on the last day of the offering period (rather than a 15% discount on the lower of (x) the closing price of the stock on the first day of the offering period and (y) the closing price of the stock on the last day of the offering period). For offering periods held in 2010, 2009 and 2008, we issued a total of 81, 62 and 50 shares, respectively, of common stock at an average price of $8.25, $12.88 and $19.12 per share, respectively. As of December 31, 2010, we had approximately 514 shares of common stock available to be granted under the ESPP.

        We record compensation cost for all stock options and RSUs based on the fair value at the grant date.

        On November 29, 2010, the Company awarded to its new Chief Executive Officer sign-on equity awards consisting of 1,000 stock options (with an exercise price of $9.00 per share and a ten-year term) and 1,000 RSUs, which awards have a four-year vesting schedule (one-quarter vesting on December 31, 2011 and on each of the next three anniversaries of such date) (such options and RSUs, the "time-vesting equity awards"). The Chief Executive Officer was also awarded an additional performance-based award consisting of 1,000 stock options (with an exercise price of $8.06 per share (representing the market value of the Company's stock on the date of grant)) and 1,000 RSUs, which awards will vest at the rate of 20% per year if specified performance targets are met (such performance-vesting options and RSU, the "performance-vesting equity awards"). Delivery of shares in respect of performance-vesting RSUs will occur on March 15, 2016, if vested, provided that such RSUs will be forfeited to the extent that sufficient shares are not available under the Company's equity incentive compensation plan at time of delivery. Similarly, the performance-vesting stock options that vest will not be exercisable to the extent that sufficient shares are not available under the plan for the delivery of the shares issuable upon such exercise. To the extent that sufficient shares are not available under the plan for the delivery of the shares underlying the 500 time-vesting RSUs that are scheduled to vest on December 31, 2013 and December 31, 2014, the Company will settle such delivery in cash. To the extent that sufficient

94

SCIENTIFIC GAMES CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(in thousands, except per share amounts)

(12) Stock-Based Compensation (Continued)

shares are not available under the plan for the delivery of the shares issuable upon the exercise of 200 of the time-vesting options that are scheduled to become exercisable on December 31, 2014, the Company will elect to settle such exercise in cash. See the Company's Current Report on Form 8-K filed on December 3, 2010 for additional information regarding these sign-on equity awards, including information regarding the performance targets with respect to the performance-vesting equity awards.

        The performance-vesting equity awards that will be forfeited or not exercisable and the time-vesting equity awards that will be settled in cash, as the case may be, to the extent that sufficient shares are not available under the applicable plan for the delivery of the underlying shares, are not deemed to be granted for accounting purposes (and are not reflected as granted in 2010 or outstanding as of December 31, 2010 in the tables below). Excluding the awards described in the preceding sentence, we had approximately 2,119 shares available for grants of equity awards under our equity-based compensation plans as of December 31, 2010.

Stock Options

        A summary of the changes in stock options outstanding under our equity-based compensation plans during 2010 is presented below:

	Number of Options			Weighted Average Remaining Contract Term (Years)		Weighted Average Exercise Price		Aggregate Intrinsic Value
Options outstanding as of December 31, 2009		6,160			5.7	$	21.56	$	8,642
Granted		1,379				$	11.52
Exercised		(182	)			$	3.69	$	1,276
Canceled		(606	)			$	13.31
Options outstanding as of December 31, 2010		6,751			6.0	$	20.72	$	1,814
Options exercisable as of December 31, 2010		4,251			4.5	$	23.43	$	1,046
Options expected to vest after December 31, 2010		2,655			8.7	$	15.48	$	960

        The weighted-average grant date fair value of options granted during 2010, 2009 and 2008 was $3.63, $5.85 and $10.36, respectively. The aggregate intrinsic value of the options exercised during the years ended December 31, 2009 and 2008 was approximately $7,724 and $4,352, respectively.

95

SCIENTIFIC GAMES CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(in thousands, except per share amounts)

(12) Stock-Based Compensation (Continued)

        The fair value of each option grant is estimated on the date of grant using the Black-Scholes option pricing model. The weighted-average assumptions used in the model are outlined in the following table:

		Year Ended December 31,
		2010			2009			2008
Assumptions:
	Expected volatility		51	%		47	%		38	%
	Risk-free interest rate		2.6	%		2.3	%		3.3	%
	Dividend yield		—			—			—
	Expected life (in years)		6			6			6

        The computation of the expected volatility is based on historical daily stock price over a term less than the expected term. A timeframe was used that provided a better representation of the current and future expected volatility. Expected life is based on annual historical employee exercise behavior of option grants with similar vesting periods and option expiration data. The risk-free interest rate is based on the yield of zero-coupon U.S. Treasury securities. We do not anticipate paying dividends in the foreseeable future.

        For the years ended December 31, 2010, 2009 and 2008, we recognized stock-based compensation expense of approximately $7,300, $11,400 and $15,500, respectively, and the related tax benefit of approximately $2,700, $4,200 and $5,300, respectively, related to the vesting of stock options. At December 31, 2010, we had approximately $14,600 relating to non-vested stock option awards not yet recognized that will be amortized over a weighted-average period of approximately two years. During the year ended December 31, 2010, we received approximately $672 in cash from the exercise of stock options. The actual tax benefit realized for the tax deductions from option exercise of the stock-based payment arrangements totaled approximately $480 for the year ended December 31, 2010.

Restricted Stock Units

        A summary of the changes in RSUs outstanding under our equity-based compensation plans during 2010 is presented below:

	Number of Restricted Stock Units			Weighted Average Grant Date Fair Value
Non-vested units as of December 31, 2009		1,586		$	19.54
Granted		1,473		$	12.74
Vested		(525	)	$	21.55
Canceled		(94	)	$	16.68
Non-vested units as of December 31, 2010		2,440		$	15.13

96

SCIENTIFIC GAMES CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(in thousands, except per share amounts)

(12) Stock-Based Compensation (Continued)

        The weighted-average grant date fair value of RSUs granted during 2009 and 2008 was $12.77 and $24.55, respectively. The fair value of each RSU grant is based on the market value of our common stock at the time of grant. During the years ended December 31, 2010, 2009 and 2008, we recognized stock-based compensation expense of approximately $15,400, $23,000 and $18,400, respectively, and the related tax benefits of approximately $5,800, $9,000 and $7,200, respectively, related to the vesting of RSUs. At December 31, 2010, we had approximately $29,800 relating to non-vested RSUs not yet recognized that will be amortized over a weighted-average period of approximately two years. The fair value at exercise date of RSUs vested during the years ended December 31, 2010, 2009 and 2008 was approximately $7,000, $16,000 and $8,500, respectively.

(13) Pension and Other Post-Retirement Plans

        We have defined benefit pension plans for our U.K.-based union employees (the "U.K. Plan") and certain Canadian-based employees (the "Canadian Plan"). As a result of the sale of our Racing Business on October 5, 2010, our defined benefit pension plan for U.S. based Racing Business employees (the "U.S. Plan") was transferred to Sportech, the purchaser of the Racing Business. See Note 22 (Acquisitions and Dispositions) for additional information. The U.S. Plan settlement was treated as a curtailment in the amount of $4,519 for the pension benefit obligation. Plan assets were curtailed by $3,942 as a result of the sale of the Racing Business. Net periodic cost curtailments include $1,644 due to the sale of the Racing Business. Retirement benefits under the U.K. Plan are based on an employee's average compensation over the two years preceding retirement. Retirement benefits under the Canadian Plan are generally based on the number of years of credited service. Our policy is to fund the minimum contribution permissible by the respective authorities. We estimate that approximately $3,376 will be contributed to the pension plans in fiscal year 2011.

        Prior to fiscal year 2006, we had an unfunded, nonqualified Supplemental Executive Retirement Plan (the "SERP"), which was intended to provide supplemental retirement benefits for certain of our senior executives. In December 2005, we curtailed the SERP and participation and benefit accruals under the plan have ceased. We recorded a charge of $12,363 in the December 31, 2005 statement of operations for the curtailment of the SERP. The benefit distribution amounts were agreed upon for each participant and will continue to grow at a rate of 4% compounded annually from the plan curtailment until benefits are distributed. In 2003, to provide a source for the payment of certain benefits under the SERP, we made an initial $14,700 cash payment to a rabbi trust, which in turn made a $14,700 payment for whole-life insurance policies on the participants. These policies were placed in a rabbi trust. During the third and fourth quarters of 2009, a portion of the remaining life insurance policies was cashed in for the cash surrender value and the resulting cash was placed in a government fund account. The cash value in the government fund account as of December 31, 2010 was approximately $902. The cash value of the remaining life insurance policies as of December 31, 2010 was approximately $2,228. The cash value of the life insurance policies as of December 31, 2009 was approximately $4,451.

97

SCIENTIFIC GAMES CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(in thousands, except per share amounts)

(13) Pension and Other Post-Retirement Plans (Continued)

        The following table sets forth the combined funded status of the pension plans and their reconciliation with the related amounts recognized in our Consolidated Financial Statements at our December 31 measurement dates:

		December 31,
		2010			2009
Change in benefit obligation:
Benefit obligation at beginning of year		$	87,585		$	81,070
Service cost			1,750			1,553
Interest cost			4,799			4,671
Prior service cost			(1,405	)		—
Participant contributions			1,153			1,207
Curtailments			(4,329	)		(249	)
Actuarial (gain) loss			5,117			8,138
Benefits paid			(2,734	)		(3,724	)
Settlement payments			(2,978	)		(13,113	)
Other, principally foreign exchange			(85	)		8,032
Benefit obligation at end of year			88,873			87,585
Change in plan assets:
Fair value of plan assets at beginning of year			68,663			51,631
Curtailments			(3,942	)		—
Actual gain (loss) on plan assets			7,334			10,232
Employer contributions			2,907			3,119
Participant contributions			1,153			1,207
Benefits paid			(2,734	)		(3,724	)
Settlement payments			—			—
Other, principally foreign exchange			(181	)		6,198
Fair value of assets at end of year			73,200			68,663
Amounts recognized in the consolidated balance sheets:
Funded status (current)			(2,998	)		(2,882	)
Funded status (non-current)			(12,675	)		(16,040	)
Accumulated other comprehensive income (pre-tax):
	Unrecognized actuarial loss		9,045			9,616
	Unrecognized prior service cost		—			347
Net amount recognized		$	(6,628	)	$	(8,959	)

98

SCIENTIFIC GAMES CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(in thousands, except per share amounts)

(13) Pension and Other Post-Retirement Plans (Continued)

        The following are the components of our net periodic pension cost:

	December 31,
	2010			2009			2008
Components of net periodic pension benefit cost:
Service cost	$	1,750		$	1,553		$	2,237
Interest cost		4,799			4,671			4,244
Expected return on plan assets		(4,767	)		(3,921	)		(4,633	)
Amortization of actuarial gains/losses		503			522			626
Curtailments		1,692			(249	)		525
Canadian SERP termination loss		—			—			218
Amortization of unrecognized prior service cost		(51	)		43			43
Net periodic cost	$	3,926		$	2,619		$	3,260

        The accumulated benefit obligation for all defined benefit pension plans was $78,184 and $76,649 as of December 31, 2010 and 2009, respectively. The underfunded status of our post-retirement benefit plans recorded as a liability in our Consolidated Balance Sheets as of December 31, 2010, 2009 and 2008 was approximately $15,673, $18,922 and $29,439, respectively.

        The amounts included in accumulated other comprehensive income as of December 31, 2010 expected to be recognized as components of net periodic pension cost during the fiscal year ending December 31, 2011 are as follows:

Net gain or loss		$	300
Net prior service cost			—
	Net amount expected to be recognized	$	300

        The U.K. Plan investment policy is to maximize long-term financial return commensurate with security and minimizing risk. This is achieved by holding a portfolio of marketable investments which avoids over-concentration of investment and spreads assets both over industry and geography. In setting investment strategy, the trustees considered the lowest risk strategy that they could adopt in relation to the U.K. Plan's liabilities and designed their asset allocation to achieve a higher return while maintaining a cautious approach to meeting the plan's liabilities. The trustees undertook a review of investment strategy and took advice from their investment advisors. They considered a full range of asset classes, the risks and rewards of a range of alternative asset allocation strategies, the suitability of each asset class and the need for appropriate diversification. The current strategy is to hold approximately 37.5% in U.K. equities, approximately 37.5% in overseas equities, approximately 10% in fixed-interest U.K. government bonds, approximately 10% in corporate bonds and approximately 5% in real estate.

99

SCIENTIFIC GAMES CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(in thousands, except per share amounts)

(13) Pension and Other Post-Retirement Plans (Continued)

        The fair value of our U.K. Plan assets at December 31, 2010 by asset category is as follows:

Asset Category	Market Value at 12/31/2010		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Equity securities in U.K. companies (a)	$	16,785		—	$	16,785	$	—
Equity securities in overseas companies (a)	$	15,206		—	$	15,206		—
Fixed-income U.K. government bonds (a)	$	3,963		—	$	3,963		—
Corporate bonds (a)	$	5,384		—	$	5,384		—
Real estate	$	2,416		—		—		2,416
Cash (b)	$	189	$	189		—		—
Total pension assets	$	43,943	$	189	$	41,338	$	2,416

(a)

The assets are invested through managed funds that are valued using inputs derived principally from quoted prices in active markets for the underlying assets in the fund.

(b)

The fair value of cash equals its book value.

        The change in fair value of the pension assets valued using significant unobservable inputs (Level 3) was due to the following:

	General Account
Beginning balance at December 31, 2009	$	1,686
Purchases		507
Unrealized gain on asset still held at December 31, 2010		223
Ending balance at December 31, 2010	$	2,416

        The fair value of our U.K. Plan assets at December 31, 2009 by asset category is as follows:

Asset Category	Market Value at 12/31/2009		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Equity securities in U.K. companies (a)	$	14,419		—	$	14,419	$	—
Equity securities in overseas companies (a)	$	13,514		—	$	13,514		—
Fixed-income U.K. government bonds (a)	$	4,261		—	$	4,261		—
Corporate bonds (a)	$	4,591		—	$	4,591		—
Real estate	$	1,686		—		—		1,686
Cash (b)	$	337	$	337		—		—
Total pension assets	$	38,808	$	337	$	36,785	$	1,686

(a)

The assets are invested through managed funds that are valued using inputs derived principally from quoted prices in active markets for the underlying assets in the fund.

100

SCIENTIFIC GAMES CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(in thousands, except per share amounts)

(13) Pension and Other Post-Retirement Plans (Continued)

(b)

The fair value of cash equals its book value.

        The change in fair value of the pension assets valued using significant unobservable inputs (Level 3) was due to the following:

	General Account
Beginning balance at December 31, 2008	$	1,272
Purchases		320
Unrealized gain on asset still held at December 31, 2009		94
Ending balance at December 31, 2009	$	1,686

        The Canadian Plan investment policy is to maximize long-term financial return commensurate with security and minimizing risk. This is achieved by holding a portfolio of marketable investments which avoids over-concentration of investment and spreads assets both over industry and geography. In setting investment strategy, the Company considered the lowest risk strategy that it could adopt in relation to the Canadian Plan's liabilities and designed the asset allocation to achieve a higher return while maintaining a cautious approach to meeting the plan's liabilities. The Company considered a full range of asset classes, the risks and rewards of a range of alternative asset allocation strategies, the suitability of each asset class and the need for appropriate diversification. The current strategy is to hold approximately 37% in Canadian equities, approximately 28% in foreign equities and approximately 35% in bonds.

        The fair value of our Canadian Plan assets at December 31, 2010 by asset category is as follows:

Asset Category	Market Value at 12/31/2010		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Equity securities in Canadian companies (a)	$	9,634	$	8,927	$	707	$	—
Equity securities in foreign companies (a)		8,841		8,841		—		—
Government bonds		2,998		2,998		—		—
Corporate bonds		6,187		6,187		—		—
Other short-term investment (b)		1,423		—		1,423		—
Cash and cash equivalents (c)		174		174		—		—
Total pension assets	$	29,257	$	27,127	$	2,130	$	—

(a)

Direct investments in equity securities are valued at quoted prices in active markets for identical assets. Equity securities invested through pooled funds are valued using inputs derived principally from the quoted prices in active markets for the underlying assets in the pool.

(b)

Other short-term investments are investments in pooled money market funds that are valued using inputs derived principally from the quoted prices in active markets for the underlying assets in the pool.

(c)

The carrying value of cash and cash equivalents approximates fair value because of the short-term maturity of these instruments.

101

SCIENTIFIC GAMES CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(in thousands, except per share amounts)

(13) Pension and Other Post-Retirement Plans (Continued)

        The fair value of our Canadian Plan assets at December 31, 2009 by asset category is as follows:

Asset Category	Market Value at 12/31/2009		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Equity securities in Canadian companies (a)	$	9,555	$	8,942	$	613	$	—
Equity securities in foreign companies (a)		8,281		4,074		4,207		—
Government bonds		2,969		2,969		—		—
Corporate bonds		5,062		5,062		—		—
Other short-term investment (b)		198		—		198		—
Cash and cash equivalents (c)		83		83		—		—
Total pension assets	$	26,148	$	21,130	$	5,018	$	—

(a)

Direct investments in equity securities are valued at quoted prices in active markets for identical assets. Equity securities invested through pooled funds are valued using inputs derived principally from the quoted prices in active markets for the underlying assets in the pool.

(b)

Other short-term investments are investments in pooled money market funds that are valued using inputs derived principally from the quoted prices in active markets for the underlying assets in the pool.

(c)

The carrying value of cash and cash equivalents approximates fair value because of the short-term maturity of these instruments.

        The table below provides the weighted-average actuarial assumptions used to determine the benefit obligation and net periodic benefit cost.

		U.K. Plan									Canadian Plan
		2010			2009			2008			2010			2009			2008
Discount rates:
	Benefit obligation		5.40	%		5.80	%		6.20	%		5.50	%		6.40	%		7.50	%
	Net periodic pension cost		5.80	%		6.20	%		5.55	%		6.40	%		7.50	%		5.60	%
Rate of compensation increase			4.00	%		3.60	%		3.60	%		3.25	%		3.25	%		3.25	%
Expected return on assets			7.80	%		6.62	%		7.75	%		7.00	%		7.00	%		7.00	%

        The overall expected long-term rate of return on assets assumption for the U.K. Plan has been determined as a weighted-average of the expected returns on the above asset classes for the U.K. Plan. The expected return on bonds is taken as the current redemption yield on the appropriate index. The expected return on equities and property is determined by assuming a measure of outperformance over the gilt-yield. The expected return on cash is related to the Bank of England base rate. Returns so determined are reduced to allow for investment manager expenses.

        The overall expected long-term rate of return on assets assumption for the Canadian Plan has been determined by consideration of the current level of expected returns on risk-free investments (primarily government bonds), the historical level of the risk premium associated with the other asset

102

SCIENTIFIC GAMES CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(in thousands, except per share amounts)

(13) Pension and Other Post-Retirement Plans (Continued)

classes in which the portfolio is invested and the expectations for future returns of each asset class. Since our investment policy is to actively manage certain asset classes where the potential exists to outperform the broader market, the expected returns for those asset classes were adjusted to reflect the expected additional returns. The expected return for each asset class was then weighted based on the target asset allocation to develop the expected long-term rate of return on assets assumption for the portfolio. Finally, we have adjusted the expected long-term rate of return on assets to allow for investment and administration expenses paid from the pension fund.

        The following benefit payments, which reflect expected future service, as appropriate, are expected to be paid:

Year	U.K. Plan		Canadian Plan
2011	$	742	$	1,279
2012	$	758	$	1,343
2013	$	789	$	1,410
2014	$	821	$	1,492
2015	$	853	$	1,600
2016-2020	$	4,705	$	10,561

        We have a 401(k) plan for U.S.-based employees who are not covered by a collective bargaining agreement under which participants were eligible to receive matching contributions from us for the first 6% of participant contributions for a match of up to 3% of eligible compensation. Effective February 28, 2009, we reduced the matching contributions from 50 to 25 cents on the dollar for the first 6% of participant contributions for a match of up to 1.5% of eligible compensation. Effective January 1, 2010, we increased the matching contributions to 37.5 cents on the dollar for the first 6% of contributions for a match of up to 2.25% of eligible compensation. Contribution expense for the years ended December 31, 2010, 2009 and 2008 amounted to approximately $1,718, $1,272 and $2,244, respectively.

(14) Income Tax Expense

        The components of income (loss) before income taxes are as follows:

	Years Ended December 31,
	2010			2009			2008
United States ("U.S.")	$	(84,751	)	$	(100,050	)	$	(19,317	)
Foreign		79,438			73,718			23,184
Income (loss) before income tax expense	$	(5,313	)	$	(26,332	)	$	3,867

103

SCIENTIFIC GAMES CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(in thousands, except per share amounts)

(14) Income Tax Expense (Continued)

        The components of the provision for income taxes are as follows:

		Years Ended December 31,
		2010			2009			2008
Current
	U.S. Federal	$	7,565		$	(16,229	)	$	5,638
	U.S. State		25			426			990
	Foreign		6,210			1,321			12,409
	Total		13,800			(14,482	)		19,037
Deferred
	U.S. Federal		100,982			26,736			(7,083	)
	U.S. State		16,882			(7,604	)		(4,114	)
	Foreign		12,224			8,897			512
	Total		130,088			28,029			(10,685	)
Total income tax expense		$	143,888		$	13,547		$	8,352
The reconciliation of the U.S. federal statutory tax rate to the actual tax rate is as follows:
Statutory U.S. federal income tax rate			35.00	%		35.00	%		35.00	%
	U.S. state income taxes, net of federal benefit		141.89	%		40.25	%		(91.17	)%
	Federal benefit of R&D credits, net		9.49	%		(14.93	)%		(10.23	)%
	Foreign earnings at lower rates than U.S. federal rate		170.94	%		56.02	%		104.09	%
	Federal expense (benefit) of U.S. permanent differences		(251.91	)%		(2.67	)%		175.42	%
	Valuation allowance adjustments		(2816.14	)%		(165.82	)%		0.00	%
	Other		1.80	%		0.70	%		2.89	%
Effective income tax rate			(2708.93	)%		(51.45	)%		216.00	%

        The effective tax rate increased in 2010 to (2,708.9)% from (51.5)% in 2009. The increase in the effective tax rate is primarily due to a valuation allowance recorded in 2010 against U.S. deferred tax assets.

        Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting and the amounts used for income tax purposes.

104

SCIENTIFIC GAMES CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(in thousands, except per share amounts)

(14) Income Tax Expense (Continued)

The deferred income tax balances are established using the enacted statutory tax rates and are adjusted for changes in such rates in the period of change.

		December 31,
		2010			2009
Deferred tax assets:
	Inventory valuation	$	8,886		$	9,888
	Reserves and other accrued expenses		5,096			11,683
	Compensation not currently deductible		6,184			7,258
	Employee pension benefit included in other comprehensive income		1,711			4,248
	Unrealized losses and income from derivative financial instruments included in other comprehensive income		758			3,031
	Share based compensation		25,085			24,743
	Net operating loss carry forwards		125,483			73,124
	Tax credit carry forwards		45,790			62,527
	Differences in financial reporting and tax basis for Property and Equipment		17,729			38,069
	Valuation allowance		(234,813	)		(95,151	)
Realizable deferred tax assets			1,909			139,420
Deferred tax liabilities:
	Deferred costs and prepaid expenses		(923	)		(1,035	)
	Differences in financial reporting and tax basis for: Identifiable intangible assets		(43,837	)		(46,533	)
Total deferred tax liabilities			(44,760	)		(47,568	)
Net deferred tax assets on balance sheet			(42,851	)		91,852
Reported As:
	Current deferred tax assets		2,448			22,557
	Non-current deferred tax assets		15,580			105,903
	Current deferred tax liabilities		(21	)		—
	Non-current deferred tax liabilities		(60,858	)		(37,418	)
	Assets held for sale		—			944
	Liabilities held for sale		—			(134	)
Net deferred tax assets on the balance sheet		$	(42,851	)	$	91,852

        In accordance with ASC 740, the current and non-current components of our deferred tax balances are generally based on the balance sheet classification of the asset or liability creating the temporary difference. If the deferred tax asset or liability is not related to a component of our balance sheet, such as our net operating loss carry forwards, the classification is presented based on the expected reversal date of the temporary difference. Our valuation allowance has been classified as current or non-current based on the percentage of current and non-current deferred tax assets to total deferred tax assets.

105

SCIENTIFIC GAMES CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(in thousands, except per share amounts)

(14) Income Tax Expense (Continued)

        At December 31, 2010, we had net operating loss ("NOL") carry forwards (tax-effected) for federal, state and foreign income tax purposes of $51,828, $15,538 and $58,117, respectively. If not utilized, the federal and state tax loss carry forward will expire through 2030. Certain of our federal NOL carry forwards are limited due to prior year changes in ownership. The foreign NOL carry forwards can be carried forward for periods that vary from five years to indefinitely.

        We have foreign tax credit carry forwards of approximately $33,689 (which if unutilized will expire through 2020), research and development tax credit carry forwards of $8,917 (which if unutilized will expire through 2030), alternative minimum tax credit carry forwards of $367 (which can be carried forward indefinitely), state tax credits of $1,646 (which if unutilized will expire through 2020), and other non-U.S. tax credits of $1,170 (which can be carried forward indefinitely).

        At December 31, 2010, we established a valuation allowance of $149,583 against the U.S. deferred tax assets that, in the judgment of management, are more likely than not to expire before they can be utilized. In assessing the recoverability of our deferred tax assets, we analyzed all evidence, both positive and negative. We considered, among other things, our deferred tax liabilities, our historical earnings and losses, projections of future income, and tax-planning strategies available to us in the relevant jurisdiction.

        We established at December 31, 2010, valuation allowances of $122,317 and $24,432 against the benefit of U.S. federal and state deferred tax assets, respectively.

        At December 31, 2010 and 2009, we established valuation allowances of $33,689 and $43,665 against the benefit of the deferred tax assets related to the U.S. foreign tax credit carry forwards. The decrease in the foreign tax credit valuation allowance in 2010 is due to the election by the Company to deduct foreign tax credits on its 2009 U.S. federal income tax return.

        At December 31, 2010 and 2009, we established valuation allowances of $54,375 and $51,486, respectively, against the benefit of the deferred tax assets related to foreign NOL carry forwards to measure them at their expected realizable value.

        The net increase in all of the Company's U.S. and foreign valuation allowances for 2010 and 2009 was $139,662 and $49,461, respectively.

        Deferred taxes have not been provided on the excess of book basis over tax basis in the shares of certain foreign subsidiaries because these basis differences are not expected to reverse in the foreseeable future and are essentially permanent in duration. Management has plans to continue to reinvest the earnings of our foreign subsidiaries indefinitely. It is not practicable to estimate the amount of U.S. tax that might be payable on the Company's earnings that are permanently reinvested overseas.

Unrecognized Tax Benefits

        The Company applies a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. The Company recognizes the impact of a tax position in the financial statements when the position is more likely than not of being sustained on audit based on the technical merits of the position.

106

SCIENTIFIC GAMES CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(in thousands, except per share amounts)

(14) Income Tax Expense (Continued)

        The total amount of unrecognized tax benefits as of December 31, 2010 was approximately $1,760. Of this amount, approximately $1,186, if recognized, would be included in our statement of operations and have an impact on our effective tax rate. During 2010, the Company recognized a decrease to its liability for unrecognized tax benefits as a result of the lapse of the 2006 federal statute of limitations. The Company does not anticipate a material reduction of its liability for unrecognized tax benefits before December 31, 2011.

        We recognize interest accrued for unrecognized tax benefits in interest expense and recognize penalties in income tax expense. During the years ended December 31, 2010, 2009 and 2008, we recognized approximately $102, $(1,206) and $733, respectively, in interest and penalties. We had approximately $484 and $383 for the payment of interest and penalties accrued at December 31, 2010 and 2009, respectively.

        We and our subsidiaries file income tax returns in the U.S. federal jurisdiction and various states and foreign jurisdictions. With few exceptions, we are no longer subject to U.S. federal, state and local, or non-U.S. income tax examinations by tax authorities for years before 2007.

        The Company had the following activity for unrecognized tax benefits:

	Year Ended December 31,
	2010			2009			2008
Balance at beginning of period	$	6,612		$	18,250		$	13,226
Tax positions related to current year additions		—			—			1,092
Additions for tax positions of prior years		211			—			4,245
Tax positions related to prior years reductions		—			(1,114	)		—
Reductions due to lapse of statute of limitations on tax positions		(5,020	)		(33	)		(313	)
Settlements		(43	)		(10,491	)		—
Balance at end of period	$	1,760		$	6,612		$	18,250

107

SCIENTIFIC GAMES CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(in thousands, except per share amounts)

(15) Business and Geographic Segments

        We report our operations in three business segments: Printed Products Group; Lottery Systems Group; and Diversified Gaming Group.

        The following tables represent revenues, cost of revenues, selling, general and administrative expenses, write-down of assets held for sales, employee termination costs, depreciation, amortization, operating income, capital expenditures and assets for the years ended December 31, 2010, 2009 and 2008, respectively, by current reportable segments. Corporate expenses, including interest expense, other (income) expenses, and corporate depreciation and amortization, are not allocated to the reportable segments.

			Year Ended December 31, 2010
			Printed Products Group		Lottery Systems Group		Diversified Gaming Group			Totals
	Revenue:
		Instant tickets	$	465,090		—		—			465,090
		Services		—		199,439		163,699			363,138
		Sales		9,222		36,597		8,452			54,271
	Total revenue			474,312		236,036		172,151			882,499
	Cost of instant tickets (1)			270,787		—		—			270,787
	Cost of services (1)			—		104,274		101,760			206,034
	Cost of sales (1)			6,981		25,716		5,348			38,045
	Selling, general and administrative expenses			55,518		31,412		20,518			107,448
	Write-down of assets held for sale			—		—		8,029			8,029
	Employee termination costs			—		—		602			602
	Depreciation and amortization			33,303		64,979		42,983			141,265
	Segment operating income (loss)			107,723		9,655		(7,089	)		110,289
	Unallocated corporate costs										51,553
	Corporate employee termination costs										—
	Consolidated operating income										58,736
Segment assets at December 31, 2010			$	947,736		756,593		429,003
Unallocated assets at December 31, 2010											18,206
Consolidated assets at December 31, 2010											2,151,538
Capital and wagering systems expenditures			$	19,351		47,679		41,488			108,518

(1)

Exclusive of depreciation and amortization.

108

SCIENTIFIC GAMES CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(in thousands, except per share amounts)

(15) Business and Geographic Segments (Continued)

			Year Ended December 31, 2009
			Printed Products Group		Lottery Systems Group		Diversified Gaming Group			Totals
	Revenue:
		Instant tickets	$	453,238		—		—			453,238
		Services		—		211,015		198,999			410,014
		Sales		13,374		46,372		4,751			64,497
	Total revenue			466,612		257,387		203,750			927,749
	Cost of instant tickets (1)			270,836		—		—			270,836
	Cost of services (1)			—		110,660		123,433			234,093
	Cost of sales (1)			8,923		32,619		2,997			44,539
	Selling, general and administrative expenses			44,979		30,225		24,923			100,127
	Write-down of assets held for sale			—		—		54,356			54,356
	Employee termination costs			2,016		125		433			2,574
	Depreciation and amortization			32,982		68,902		49,224			151,108
	Segment operating income (loss)			106,876		14,856		(51,616	)		70,116
	Unallocated corporate costs										68,797
	Corporate employee termination costs										1,346
	Consolidated operating income										(27	)
Segment assets at December 31, 2009			$	913,767		800,825		537,731			—
Unallocated assets at December 31, 2009											39,569
Consolidated assets at December 31, 2009											2,291,792
Capital and wagering systems expenditures			$	15,772		38,779		22,991			77,542

(1)

Exclusive of depreciation and amortization.

109

SCIENTIFIC GAMES CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(in thousands, except per share amounts)

(15) Business and Geographic Segments (Continued)

			Year Ended December 31, 2008
			Printed Products Group		Lottery Systems Group			Diversified Gaming Group		Totals
	Revenue:
		Instant tickets	$	548,308		—			—		548,308
		Services		—		236,022			215,642		451,664
		Sales		31,943		62,708			24,206		118,857
	Total revenue			580,251		298,730			239,848		1,118,829
	Cost of instant tickets (1)			331,501		—			—		331,501
	Cost of services (1)			—		132,335			130,949		263,284
	Cost of sales (1)			20,177		54,254			11,425		85,856
	Selling, general and administrative expenses			59,336		33,634			25,923		118,893
	Employee termination costs			7,213		2,576			1,152		10,941
	Depreciation and amortization			43,091		125,764			45,575		214,430
	Segment operating income (loss)			118,933		(49,833	)		24,824		93,924
	Unallocated corporate costs										69,533
	Corporate employee termination costs										2,754
	Consolidated operating income										21,637
Segment assets at December 31, 2008			$	990,182		652,852			502,501
Unallocated assets at December 31, 2008											36,918
Consolidated assets at December 31, 2008											2,182,453
Capital and wagering systems expenditures			$	25,094		107,686			50,860		183,640

(1)

Exclusive of depreciation and amortization.

        In evaluating financial performance, we focus on segment operating income as a segment's measure of profit or loss. Segment operating income (loss) is before investment income, interest expense, gain (loss) on extinguishment of debt, equity in net income in joint ventures, unallocated corporate costs and income taxes. Certain corporate assets consisting of cash, prepaid expenses, and property, plant and equipment are not allocated to the segments. The accounting policies of the reportable segments are the same as those described in the summary of significant accounting policies.

        Providing information on the revenues from external customers for each product and service is impractical.

110

SCIENTIFIC GAMES CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(in thousands, except per share amounts)

(15) Business and Geographic Segments (Continued)

        The following table provides a reconciliation of segment operating income to consolidated income before income tax expense for each period.

	Years Ended December 31,
	2010			2009			2008
Reported segment operating income	$	110,289		$	70,116		$	93,924
Unallocated corporate costs		(51,553	)		(68,797	)		(69,533	)
Corporate employee termination costs		—			(1,346	)		(2,754	)
Consolidating operating income		58,736			(27	)		21,637
Interest expense		(101,613	)		(87,498	)		(78,071	)
Other loss		(8,594	)		(2,856	)		4,691
Equity in earnings of joint ventures		49,090			59,220			58,570
Gain (loss) on early extinguishment of debt		(2,932	)		4,829			(2,960	)
Income (loss) before income tax expense	$	(5,313	)	$	(26,332	)	$	3,867

        Sales to foreign customers amounted to approximately $28,000, $40,000 and $92,000 for the years ended December 31, 2010, 2009 and 2008, respectively. The following represents the service and sales revenue and long-lived assets by geographic segment:

		Years Ended December 31,
		2010		2009		2008
Geographic Segments
Service and Sales Revenue:
	United States	$	470,639	$	477,175	$	561,088
	North America, other than United States		66,526		53,139		61,266
	Europe		265,607		308,634		364,207
	Other		79,727		88,801		132,268
		$	882,499	$	927,749	$	1,118,829

		As of December 31,
		2010		2009
Long-lived assets (excluding identifiable intangibles):
	United States	$	195,718	$	217,110
	North America, other than United States		47,960		41,412
	Europe		141,647		139,196
	Other		65,256		70,721
		$	450,581	$	468,439

111

SCIENTIFIC GAMES CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(in thousands, except per share amounts)

(16) Equity Investments in Joint Ventures

        At December 31, 2010, the Company had investments in the following entities which are accounted for using the equity method of accounting. The Company records income or losses from equity method investments as "Equity in earnings of joint ventures" in the Consolidated Statement of Operations and records the carrying value of each investment in "Other assets and investments" in the Consolidated Balance Sheets.

Consorzio Lotterie Nazionali / Lotterie Nazionali S.r.l.

        We are a 20% equity owner in Lotterie Nazionali S.r.l. ("LNS"), a joint venture comprised principally of us, Lottomatica Group S.p.A. and Arianna 2001, a company owned by the Federation of Italian Tobacconists, that was awarded the concession from the Italian Monopoli di Stato to be the exclusive operator of the Italian Gratta e Vinci instant ticket lottery beginning on October 1, 2010. The new concession has an initial term of nine years (subject to a performance evaluation during the fifth year) and could be extended by the Monopoli di Stato for an additional nine years. LNS succeeded Consorzio Lotterie Nazionali ("CLN"), a consortium comprised of essentially the same group that owns LNS, as holder of the concession. Under the new concession, we are the primary supplier of instant lottery tickets for the joint venture, as we were under the prior concession. CLN, which had held the concession since 2004, is being wound up and the bulk of its assets have been transferred to LNS. LNS paid €800,000 in upfront fees under the terms of the new concession. We paid our pro rata share of these fees in 2010 (€104,000 in the second quarter of 2010 and €56,000 in the fourth quarter of 2010). The upfront fees associated with the new concession are amortized by LNS (anticipated to be approximately €89,000 each year of the new concession on a pre-tax basis), which will reduce our equity in earnings of LNS. Our share of the amortization is expected to be approximately €18,000 each year on a pre-tax basis. In light of the corporate structure of LNS, we will record our equity in earnings of LNS on an after-tax basis under applicable accounting rules, which will impact the comparability of our results of operations associated with LNS with our results of operations associated with CLN, since we recorded our equity in earnings of CLN on a pre-tax basis. Subject to applicable limitations, we are entitled to receive from LNS annual cash dividends as well as periodic return of capital payments over the life of the concession.

        For the years ended December 31, 2010, 2009 and 2008 we recorded income representing our share of equity in income of CLN of approximately $35,168, $49,730 and $51,700, respectively. We recognized revenue from the sale of instant lottery tickets to CLN during the years ended December 31, 2010, 2009 and 2008 of approximately $37,976, $64,276 and $60,161, respectively. For the year ended December 31, 2010 we recorded income of approximately $4,266 representing our share of equity in income of LNS with respect to the fourth quarter of 2010. We recognized revenue from the sale of tickets to LNS during the year ended December 31, 2010 of approximately $17,644 with respect to the fourth quarter of 2010. As of December 31, 2010 we had approximately $40,400 in accounts receivable from LNS in our Consolidated Balance Sheet.

112

SCIENTIFIC GAMES CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(in thousands, except per share amounts)

(16) Equity Investments in Joint Ventures (Continued)

Guard Libang

        On November 15, 2007, we acquired a 50% interest in the ownership of Guard Libang, a leading provider of instant lottery ticket validation systems and certain cooperative services in China for approximately $28,000. Our interest in Guard Libang is accounted for using the equity method of accounting. For the years ended December 31, 2010, 2009 and 2008 we recorded income of approximately $2,027, $2,427 and $3,433, respectively, representing our share of equity in the earnings of Guard Libang.

Roberts Communications Network, LLC

        On February 28, 2007, we sold our racing communications business and our 70% interest in NASRIN, our data communications business, to Roberts Communications Network, LLC ("RCN") in exchange for a 29.4% interest in the RCN consolidated business. RCN provides communications services to racing and non-racing entities using both satellite and terrestrial services. For the years ended December 31, 2010, 2009 and 2008, we recorded income of $3,522, $2,991 and $3,923, respectively, representing our share of equity in the earnings of RCN.

CSG Lottery Technology (Beijing) Co. Ltd.

        On October 12, 2007, we invested $7,350 for a 49% interest in CSG Lottery Technology (Beijing) Co., Ltd. ("CSG"). CSG established an instant ticket manufacturing facility that produces instant lottery tickets for sale to the China Sports Lottery for a 15-year period that began in 2009. Our interest in CSG is accounted for using the equity method of accounting. For the years ended December 31, 2010, 2009 and 2008, we recorded income (loss) of $4,806, $4,502 and ($428), respectively, representing our share of equity in the earnings of CSG. We also receive a royalty fee from CSG for intellectual property rights deemed necessary to promote lottery ticket sales equal to 1% of the total gross profits distributed by the joint venture.

Shandong Inspur Scientific Games Technology, Ltd.

        On April 16, 2007, we invested approximately $750 to establish Shandong Inspur Scientific Games Technology, Ltd. ("SIST"). Through our joint venture with SIST, we began providing cooperative services support in the Shangdong Province of China beginning in the first half of 2008. Our interest in SIST is accounted for using the equity method of accounting. For the years ended December 31, 2010, 2009 and 2008 we recorded income (loss) of $96, ($430) and ($58), respectively, representing our share of equity in the earnings of SIST. On February 1, 2011, we sold our interest in SIST.

Sciplay

        On January 21, 2010, we entered into a joint venture with Playtech Services (Cyprus) Limited ("Playtech") via the formation of two entities, Sciplay, International S.a.r.l. and Sciplay (Luxembourg) S.a.r.l., collectively "Sciplay". The joint venture focuses on providing end-to-end offerings of products and services that enable lotteries and certain other gaming operators to offer Internet gaming solutions in a manner that is consistent with applicable regulatory regimes. During 2010, we invested $250 in Sciplay. We have a 50% interest in each Sciplay entity, which is accounted for using the equity method

113

SCIENTIFIC GAMES CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(in thousands, except per share amounts)

(16) Equity Investments in Joint Ventures (Continued)

of accounting. For the year ended December 31, 2010, we recorded a loss of $481 representing our share of equity in earnings of Sciplay.

Sportech Plc

        Upon the closing of the sale of the Racing Business to Sportech, we received an equity interest in Sportech of approximately 20% of the shares then outstanding. Sportech operates football pools and associated games through various distribution channels including direct mail and telephone, agent-based collection and via the Internet. Sportech also operates a portfolio of online casino, poker, bingo and fixed-odds games businesses through its e-Gaming division. Our interest in Sportech is accounted for under the equity method of accounting. During the year ended December 31, 2010 we recorded a loss of $314 representing our share of equity in earnings of Sportech.

Northstar Lottery Group, LLC

        We are a 20% equity owner in Northstar Lottery Group, LLC ("Northstar"), a joint venture with GTECH Corporation, a subsidiary of Lottomatica, that was formed to bid for the agreement to be the private manager for the Illinois lottery for a ten-year term. Northstar was selected as the private manager following a competitive procurement and entered into the private management agreement with the State of Illinois on January 18, 2011 (the "PMA"). As the private manager, Northstar will, subject to the oversight of the Illinois lottery, manage the day-to-day operations of the lottery including lottery game development and portfolio management, retailer recruitment and training, supply of goods and services and overall marketing strategy. Under the terms of the PMA, Northstar will receive annual incentive compensation payments to the extent it is successful in increasing the lottery's net income above specified target levels, subject to a cap of 5% of the applicable year's net income. Northstar will be responsible for payments to the State to the extent such targets are not achieved, subject to a similar cap. Northstar is expected to be reimbursed on a monthly basis for most of its operating expenses under the PMA. Under a CSP agreement with Northstar, the Company will be responsible for the design, development, manufacturing, warehousing and distribution of instant lottery tickets and will be compensated based on a percentage of retail sales.

        Operations under the PMA are scheduled to commence in 2011 following a transition period. On January 26, 2011, the Appellate Court of Illinois upheld a constitutional challenge to the revenue statute that, among other things, amended the lottery law to facilitate the PMA on grounds that the statute impermissibly addressed more than one subject. The Illinois Supreme Court subsequently granted a stay of the Appellate Court's decision pending the appeal to the Illinois Supreme Court by the State of Illinois. We cannot predict what effect, if any, the court decision, if it is not reversed by the Illinois Supreme Court or addressed through new authorizing legislation, will have on the PMA. If the PMA is ultimately invalidated, we may lose our investment in Northstar and our existing instant ticket supply agreement for the Illinois lottery may come up for re-bid.

114

SCIENTIFIC GAMES CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(in thousands, except per share amounts)

(16) Equity Investments in Joint Ventures (Continued)

        The following represents combined summary financial information as of and for the year ended December 31, 2010 for the Guard Libang, RCN, CSG, Sciplay, LNS and Sportech entities. The combined financial summary information as of December 31, 2009 and for the years ended December 31, 2009 and 2008 is presented for the Guard Libang, RCN and CSG entities:

	Years Ended December 31,
	2010		2009		2008
Revenues	$	271,280	$	102,305	$	60,451
Revenues less cost of revenue	$	155,735	$	55,586	$	39,213
Net income	$	42,738	$	24,471	$	16,418

	As of December 31,
	2010		2009
Current assets	$	786,382	$	60,596
Noncurrent assets	$	1,498,246	$	90,694
Current liabilities	$	735,280	$	23,548
Noncurrent liabilities	$	1,250,569	$	22,116

        The audited financial statements of CLN are attached as Exhibit 99.1 to this Annual Report on Form 10-K.

(17) Accumulated Other Comprehensive Income (Loss)

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

	Foreign Currency Items			Unrealized Gains (Losses) on Securities			Derivative Financial Instruments (1)			Minimum Pension Liability			Unrecognized actuarial gains (losses) and unrecognized prior service cost (2)			Accumulated Other Comprehensive Income (Loss)
Balance at December 31, 2007	$	69,946			116			—			(6,609	)		(2,955	)		60,498
Change during period		(107,758	)		(5	)		(4,901	)		—			4,908			(107,756	)
Reclassified into operations		—			—			—			—			(1,668	)		(1,668	)
Balance at December 31, 2008	$	(37,812	)		111			(4,901	)		(6,609	)		285			(48,926	)
Change during period		45,304			(38	)		2,486			—			(1,804	)		45,948
Reclassified into operations		—			—			—			—			394			394
Balance at December 31, 2009	$	7,492			73			(2,415	)		(6,609	)		(1,125	)		(2,584	)
Change during period		(16,325	)		—			935			—			57			(15,333	)
Reclassified into operations		—			—			—			—			390			390
Balance at December 31, 2010	$	(8,833	)		73			(1,480	)		(6,609	)		(678	)		(17,527	)

(1)

The change during the period is net of income taxes of approximately $(623) and $1,631 in 2010 and 2009, respectively.

(2)

The change during the period is net of income taxes of approximately $306, $(667) and $1,289 in 2010, 2009 and 2008 respectively.

115

SCIENTIFIC GAMES CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(in thousands, except per share amounts)

(18) Litigation

        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 liquidated), which formerly operated the Colombian national lottery under contract with Empresa Colombiana de Recursos para la Salud, S.A. (together with its successor agency, "Ecosalud"), an agency of the Colombian government. The contract provided for a penalty against Wintech, SGI and the other shareholders of Wintech of up to $5,000 if certain levels of lottery sales were not achieved. In addition, SGI delivered to Ecosalud a $4,000 surety bond as a further guarantee of performance under the contract. 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 that 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 declared that the contract was in default and asserted various claims against Wintech, SGI and other shareholders of Wintech for, among other things, realization of the full amount of the penalty, plus interest and costs of the bond. On June 4, 1999, Ecosalud filed a collection proceeding against SGI before the Tribunal Contencioso of Cundinamarca in Colombia. In July 2002, the Tribunal denied SGI's preliminary motion to dismiss the lawsuit and the decision was upheld on appeal. SGI's procedural defense motion was also denied. As a result of these decisions, this lawsuit will be heard in due course on its merits by the Tribunal and an appeal stage will be available. In July 2009, a Colombian court ruled against Wintech's appeal (to which we are not party) of an action by the Colombian governmental agency that arises out of the same claims asserted by the Colombian governmental agency against SGI.

        SGI believes it has various defenses on the merits against Ecosalud's claims. SGI also has certain cross indemnities and undertakings from the two other 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 August 5, 2008, Jerry Jamgotchian, individually and on behalf of all others similarly situated in California, Connecticut, Delaware, Indiana, Iowa, Louisiana, Maryland, Michigan, New York, New Jersey, Ohio, Pennsylvania, Texas or Wisconsin, brought a purported class action lawsuit in the United States District Court for the Central District of California against the Company, SGI and Scientific Games Racing, LLC relating to a software glitch affecting a type of wager known as "Quick Pick" offered on certain of Scientific Games Racing's pari-mutuel wagering terminals. The complainant sought among other things, class certification and damages in excess of $5,000 on behalf of a purported class of persons who "bought 'Quick Pick' wagering tickets through Scientific Games' computerized

116

SCIENTIFIC GAMES CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(in thousands, except per share amounts)

(18) Litigation (Continued)

pari-mutuel wagering system" from July 1, 2007 until June 2, 2008 in the above-mentioned states. On October 22, 2008, our motion to dismiss the Jamgotchian lawsuit was granted by the court, without leave to refile. The United States Court of Appeals for the Ninth Circuit upheld the district court's dismissal of the case on March 23, 2010.

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

        We conduct substantially all of our business through our domestic and foreign subsidiaries. SGI's obligations under the Credit Agreement, the 2016 Notes and the 2019 Notes are fully and unconditionally and jointly and severally guaranteed by Scientific Games Corporation (the "Parent Company") and our 100%-owned domestic subsidiaries other than SGI (the "Guarantor Subsidiaries"). Our 2018 Notes, which were issued by the Parent Company, are fully and unconditionally and jointly and severally guaranteed by our 100% owned domestic subsidiaries, including SGI.

        Presented below is condensed consolidating financial information for (i) the Parent Company, (ii) SGI, (iii) the 100%-owned Guarantor Subsidiaries other than SGI and (iv) the 100%-owned foreign subsidiaries and the non-100%-owned domestic and foreign subsidiaries (the "Non-Guarantor Subsidiaries") as of December 31, 2010 and December 31, 2009 and for the years ended December 31, 2010, 2009 and 2008. 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, SGI, the Guarantor Subsidiaries and the Non-Guarantor Subsidiaries assuming the guarantee structures of the Credit Agreement, the 2019 Notes, the 2018 Notes, the 2016 Notes, the Convertible Debentures and the 2012 Notes were in effect at the beginning of the periods presented. The condensed consolidating financial information has also been recast for all periods presented to reflect entities included in the sale of the Racing Business as non-guarantors.

        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. Corporate interest and administrative expenses have not been allocated to the subsidiaries.

117

SCIENTIFIC GAMES CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(in thousands, except per share amounts)

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

SCIENTIFIC GAMES CORPORATION AND SUBSIDIARIES

SUPPLEMENTAL CONDENSED CONSOLIDATING BALANCE SHEET

December 31, 2010
(in thousands)

			Parent Company		SGI		Guarantor Subsidiaries		Non- Guarantor Subsidiaries		Eliminating Entries			Consolidated
Assets
	Cash and cash equivalents		$	62,639	$	150	$	—	$	62,770	$	(1,278	)	$	124,281
	Accounts receivable, net			—		72,830		45,541		59,808					178,179
	Inventories			—		29,416		16,210		23,118					68,744
	Other current assets			14,997		2,783		4,564		20,117					42,461
	Property and equipment, net			1,730		150,130		43,859		254,862					450,581
	Investment in subsidiaries			510,260		670,471		—		386,690		(1,567,421	)		—
	Goodwill			—		273,656		78,843		411,416					763,915
	Intangible assets			—		42,170		20,481		7,962					70,613
	Intercompany balances			133,483		—		164,982		—		(298,465	)		—
	Other assets			18,457		98,933		6,046		335,429		(6,101	)		452,764
		Total assets	$	741,566	$	1,340,539	$	380,526	$	1,562,172	$	(1,873,265	)	$	2,151,538
Liabilities and stockholders' equity
	Current installments of long-term debt		$	—	$	6,280	$	—	$	2,151				$	8,431
	Other current liabilities			29,363		48,074		32,601		78,817		(1,288	)		187,567
	Long-term debt, excluding current installments			250,000		1,110,573		—		27,686					1,388,259
	Other non-current liabilities			9,545		43,188		8,141		53,749					114,623
	Intercompany balances			—		27,292		—		271,186		(298,478	)		—
	Stockholders' equity			452,658		105,132		339,784		1,128,583		(1,573,499	)		452,658
		Total liabilities and stockholders' equity	$	741,566	$	1,340,539	$	380,526	$	1,562,172	$	(1,873,265	)	$	2,151,538

118

SCIENTIFIC GAMES CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(in thousands, except per share amounts)

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

SCIENTIFIC GAMES CORPORATION AND SUBSIDIARIES

SUPPLEMENTAL CONDENSED CONSOLIDATING BALANCE SHEET

December 31, 2009
(in thousands)

			Parent Company		SGI		Guarantor Subsidiaries		Non-Guarantor Subsidiaries		Eliminating Entries			Consolidated
Assets
	Cash and cash equivalents		$	147,220	$	137	$	—	$	113,053	$	(279	)	$	260,131
	Accounts receivable, net			—		79,294		37,189		61,484		—			177,967
	Inventories			—		30,511		15,017		28,412		—			73,940
	Other current assets			26,303		12,612		12,114		18,559		—			69,588
	Assets held for sale			—		—		—		98,314		(7,212	)		91,102
	Property and equipment, net			1,954		170,350		44,762		251,373		—			468,439
	Investment in subsidiaries			468,405		562,537		—		218,540		(1,249,482	)		—
	Goodwill			—		273,656		74,183		424,893		—			772,732
	Intangible assets			—		43,040		27,572		9,210		—			79,822
	Intercompany balances			178,848		—		75,036		—		(253,884	)		—
	Other assets			45,858		132,059		9,180		117,075		(6,101	)		298,071
		Total assets	$	868,588	$	1,304,196	$	295,053	$	1,340,913	$	(1,516,958	)	$	2,291,792
Liabilities and stockholders' equity
	Current installments of long-term debt		$	9,731	$	5,500	$	—	$	9,577	$	—		$	24,808
	Other current liabilities			30,271		44,327		35,614		70,357		(271	)		180,298
	Liabilities held for sale			—		—		—		20,097		—			20,097
	Long-term debt, excluding current installments			187,075		1,079,807		—		75,373		—			1,342,255
	Other non-current liabilities			21,753		12,488		9,721		60,608		6			104,576
	Intercompany balances			—		25,911		—		227,982		(253,893	)		—
	Stockholders' equity			619,758		136,163		249,718		876,919		(1,262,800	)		619,758
		Total liabilities and stockholders' equity	$	868,588	$	1,304,196	$	295,053	$	1,340,913	$	(1,516,958	)	$	2,291,792

119

SCIENTIFIC GAMES CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(in thousands, except per share amounts)

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

SCIENTIFIC GAMES CORPORATION AND SUBSIDIARIES

SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF INCOME

Year Ended December 31, 2010
(in thousands)

		Parent Company			SGI			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminating Entries			Consolidated
Revenues		$	—		$	378,523		$	52,344		$	453,118		$	(1,486	)	$	882,499
Cost of instant ticket revenue, services, and sales (1)			—			120,771			140,467			255,254			(1,626	)		514,866
Selling, general and administrative expenses			46,922			53,711			10,831			46,860			176			158,500
Write-down of assets held for sale			—			—			—			8,029			—			8,029
Employee termination costs			—			—			—			602			—			602
Depreciation and amortization			501			53,696			18,337			69,232			—			141,766
	Operating income (loss)		(47,423	)		150,345			(117,291	)		73,141			(36	)		58,736
Interest expense			16,817			82,005			—			2,791			—			101,613
Other income (expense)			12,198			164,573			(202,489	)		(11,810	)		(36	)		(37,564	)
Income (loss) before equity in income of subsidiaries, and income taxes			(76,438	)		(96,233	)		85,198			82,160			—			(5,313	)
Equity in income of subsidiaries			19,167			81,454			—			—			(100,621	)		—
Income tax expense			91,930			15,849			12			36,097			—			143,888
Net income (loss)		$	(149,201	)	$	(30,628	)	$	85,186		$	46,063		$	(100,621	)	$	(149,201	)

(1)

Exclusive of depreciation and amortization.

SCIENTIFIC GAMES CORPORATION AND SUBSIDIARIES

SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF INCOME

Year Ended December 31, 2009
(in thousands)

		Parent Company			SGI			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminating Entries			Consolidated
Revenues		$	—		$	392,463		$	47,987		$	491,066		$	(3,767	)	$	927,749
Cost of instant ticket revenue, services, and sales (1)			—			121,274			151,888			280,103			(3,797	)		549,468
Selling, general and administrative expenses			63,330			49,143			7,356			48,381			38			168,248
Write-down of assets held for sale			—			—			—			54,356			—			54,356
Employee termination costs			1,346			1,546			—			1,028			—			3,920
Depreciation and amortization			676			60,669			18,153			72,286			—			151,784
	Operating income (loss)		(65,352	)		159,831			(129,410	)		34,912			(8	)		(27	)
Interest expense			24,144			58,429			2			4,923			—			87,498
Other income (expense)			(50,665	)		149,734			(198,513	)		38,259			(8	)		(61,193	)
Income (loss) before equity in income of subsidiaries, and income taxes			(38,831	)		(48,332	)		69,101			(8,270	)		—			(26,332	)
Equity in income of subsidiaries			(795	)		1,654			—			—			(859	)		—
Income tax expense			253			167			126			13,001			—			13,547
Net income (loss)		$	(39,879	)	$	(46,845	)	$	68,975		$	(21,271	)	$	(859	)	$	(39,879	)

(1)

Exclusive of depreciation and amortization.

120

SCIENTIFIC GAMES CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(in thousands, except per share amounts)

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

SCIENTIFIC GAMES CORPORATION AND SUBSIDIARIES

SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF INCOME

Year Ended December 31, 2008
(in thousands)

		Parent Company			SGI			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminating Entries			Consolidated
Revenues		$	—		$	505,064		$	64,155		$	553,839		$	(4,229	)	$	1,118,829
Cost of instant ticket revenue, services, and sales (1)			—			53,035			286,552			345,256			(4,202	)		680,641
Selling, general and administrative expenses			61,360			60,832			7,779			54,308			(66	)		184,213
Employee termination costs			2,754			1,519			1,320			8,102			—			13,695
Depreciation and amortization			4,213			83,437			19,037			111,956			—			218,643
	Operating income (loss)		(68,327	)		306,241			(250,533	)		34,217			39			21,637
Interest expense			46,502			27,979			(2	)		3,592			—			78,071
Other income (expense)			(120,110	)		299,717			(104,042	)		(135,905	)		39			(60,301	)
Income (loss) before equity in income of subsidiaries, and income taxes			5,281			(21,455	)		(146,489	)		166,530			—			3,867
Equity in income (loss) of subsidiaries			(20,397	)		106,186			—			—			(85,789	)		—
Income tax expense			(10,631	)		9,304			371			9,308			—			8,352
Net income (loss)		$	(4,485	)	$	75,427		$	(146,860	)	$	157,222		$	(85,789	)	$	(4,485	)

(1)

Exclusive of depreciation and amortization.

121

SCIENTIFIC GAMES CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(in thousands, except per share amounts)

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

SCIENTIFIC GAMES CORPORATION AND SUBSIDIARIES

SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

Year Ended December 31, 2010
(in thousands)

		Parent Company			SGI			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminating Entries			Consolidated
Net income (loss)		$	(149,201	)	$	(30,628	)	$	85,186		$	46,063		$	(100,621	)	$	(149,201	)
	Depreciation and amortization		501			53,696			18,337			69,232			—			141,766
	Change in deferred income taxes		58,650			17,963			(730	)		48,260			—			124,143
	Equity in income of subsidiaries		(19,167	)		(81,454	)		—			—			100,621			—
	Non-cash interest expense		886			6,277			—			—			—			7,163
	Gain or loss from asset disposal		(10	)		(134	)		2			142			—			—
	Undistributed earnings from affiliates		—			(7,576	)		(764	)		(6,339	)		—			(14,679	)
	Stock-based compensation		22,807			—			—			—			—			22,807
	Early extinguishment of debt		2,260			672			—			—			—			2,932
	Restructuring and write-down of assets		3,532			985			—			5,922			(2,049	)		8,390
	Changes in working capital and other		6,233			22,390			(2,785	)		1,385			29			27,252
Net cash provided by (used in) operating activities			(73,509	)		(17,809	)		99,246			164,665			(2,020	)		170,573
Cash flows from investing activities:
	Capital and wagering systems expenditures		(101	)		(25,325	)		(4,357	)		(42,495	)		—			(72,278	)
	Investments in subsidiaries		(57,163	)		(59,609	)		—			(160,938	)		277,710			—
	Investment in joint venture		—			(3,817	)		(343	)		(199,635	)		—			(203,795	)
	Proceeds from sale of Racing Business		35,942			—			—			—			—			35,942
	Business acquisitions, net of cash acquired		—			—			(6,556	)		(5,937	)		—			(12,493	)
	Other assets and investments		28,936			(14,813	)		(13,338	)		(35,741	)		(5	)		(34,961	)
Net cash provided by (used in) investing activities			7,614			(103,564	)		(24,594	)		(444,746	)		277,705			(287,585	)
Cash flows from financing activities:
	Net proceeds/payments on long-term debt		52,982			31,135			—			(52,429	)		—			31,688
	Excess tax benefit from equity-based compensation plans		435			—			—			67			—			502
	Payments of financing fees		(6,686	)		(6,969	)		—			—			—			(13,655	)
	Net proceeds from stock issue		(1,995	)		103,940			4,879			166,844			(275,663	)		(1,995	)
	Purchase of treasury stock		(26,335	)		—			—			—			—			(26,335	)
	Other, principally intercompany balances		(40,019	)		(6,465	)		(80,531	)		126,860			155			—
Net cash provided by (used in) financing activities			(21,618	)		121,641			(75,652	)		241,342			(275,508	)		(9,795	)
Effect of exchange rate changes on cash			2,930			(253	)		—			(11,543	)		(177	)		(9,043	)
Increase (decrease) in cash and cash equivalents			(84,583	)		15			(1,000	)		(50,282	)		—			(135,858	)
Cash and cash equivalents, beginning of period			147,220			137			3,278			109,496			—			260,131
Cash and cash equivalents of held for sale operations at Decemer 31, 2009			—			—			—			—			—			—
Cash and cash equivalents, end of year		$	62,637		$	152		$	2,278		$	59,214		$	—		$	124,281

122

SCIENTIFIC GAMES CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(in thousands, except per share amounts)

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

SCIENTIFIC GAMES CORPORATION AND SUBSIDIARIES

SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

Year Ended December 31, 2009
(in thousands)

		Parent Company			SGI			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminating Entries			Consolidated
Net income (loss)		$	(39,879	)	$	(46,846	)	$	68,975		$	(21,270	)	$	(859	)	$	(39,879	)
	Depreciation and amortization		676			60,669			18,153			72,286			—			151,784
	Change in deferred income taxes		21,324			3,645			(9,320	)		(453	)		—			15,196
	Equity in income of subsidiaries		795			(1,654	)		—			—			859			—
	Non-cash interest expense		10,200			3,835			—			—			—			14,035
	Gain or loss from asset disposal		—			—			—			175			—			175
	Undistributed earnings from affiliates		—			(21,712	)		—			(5,588	)		—			(27,300	)
	Stock-based compensation		34,589			—			—			—			—			34,589
	Early extinguishment of debt		(4,829	)		—			—			—			—			(4,829	)
	Restructuring and write-down of assets		—			—			—			54,075			—			54,075
	Changes in working capital and other		(1,901	)		10,145			(3,359	)		17,367			(21	)		22,231
Net cash provided by (used in) operating activities			20,975			8,082			74,449			116,592			(21	)		220,077
Cash flows from investing activities:
	Capital and wagering systems expenditures		(18	)		(25,452	)		(5,609	)		(46,463	)		—			(77,542	)
	Investments in subsidiaries		(407	)		(137,066	)		—			(245,101	)		382,574			—
	Investment in joint venture		—			—			—			—			—			—
	Business acquisitions, net of cash acquired		—			—			(96	)		(86,464	)		—			(86,560	)
	Other assets and investments		10,375			(8,645	)		(7,431	)		(18,399	)		—			(24,100	)
Net cash used in investing activities			9,950			(171,163	)		(13,136	)		(396,427	)		382,574			(188,202	)
Cash flows from financing activities:
	Net proceeds/payments on long-term debt		(267,598	)		339,227			—			41,028			—			112,657
	Excess tax benefit from equity-based compensation plans		(1,305	)		—			—			69			—			(1,236	)
	Payments of financing fees		(926	)		(14,721	)		—			—			—			(15,647	)
	Net proceeds from stock issue		1,912			(3,075	)		35,873			349,777			(382,575	)		1,912
	Purchase of treasury stock		(5,539	)		—			—			—			—			(5,539	)
	Other, principally intercompany balances		326,803			(158,418	)		(94,879	)		(74,458	)		952			—
Net cash provided by (used in) financing activities			53,347			163,013			(59,006	)		316,416			(381,623	)		92,147
Effect of exchange rate changes on cash			—			—			—			1,362			(930	)		432
Increase (decrease) in cash and cash equivalents			84,272			(68	)		2,307			37,943			—			124,454
Cash and cash equivalents, beginning of period			62,949			204			(2,587	)		80,073			—			140,639
Cash and cash equivalents of held for sale operations at Decemer 31, 2009			—			—			—			(4,962	)		—			(4,962	)
Cash and cash equivalents, end of year		$	147,221		$	136		$	(280	)	$	113,054		$	—		$	260,131

123

SCIENTIFIC GAMES CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(in thousands, except per share amounts)

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

SCIENTIFIC GAMES CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
Year Ended December 31, 2008
(in thousands)

		Parent Company			SGI			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminating Entries			Consolidated
Net income (loss)		$	(4,485	)	$	75,426		$	(146,859	)	$	157,224		$	(85,791	)	$	(4,485	)
	Depreciation and amortization		4,213			83,437			19,037			111,956			—			218,643
	Change in deferred income taxes		(12,951	)		(17,422	)		19,942			(6,405	)		—			(16,836	)
	Equity in income of subsidiaries		20,396			(106,187	)		—			—			85,791			—
	Non-cash interest expense		16,248			1,431			—			—			—			17,679
	Gain or loss from asset disposal		—			141			—			553			—			694
	Undistributed earnings from affiliates		—			(51,700	)		—			(6,870	)		—			(58,570	)
	Stock-based compensation		34,122			—			—			—			—			34,122
	Early extinguishment of debt		2,960			—			—			—			—			2,960
	Changes in working capital and other		(6,897	)		37,323			8,180			(24,315	)		—			14,291
Net cash provided by operating activities			53,606			22,449			(99,700	)		232,143			—			208,498
Cash flows from investing activities:
	Capital and wagering systems expenditures		(709	)		(75,913	)		9,735			(116,753	)		—			(183,640	)
	Investments in subsidiaries		179,438			10,602			—			931			(190,971	)		—
	Investment in joint venture		—			—			—			5,605			—			5,605
	Business acquisitions, net of cash acquired		—			—			(6,148	)		(1,961	)		—			(8,109	)
	Other assets and investments		(11,192	)		(2,875	)		(11,036	)		(25,507	)		—			(50,610	)
Net cash used in investing activities			167,537			(68,186	)		(7,449	)		(137,685	)		(190,971	)		(236,754	)
Cash flows from financing activities:
	Net proceeds/payments on long-term debt		(602,000	)		745,867			—			37,503			—			181,370
	Excess tax benefit from equity-based compensation plans		(104	)		—			—			238			—			134
	Payments of financing fees		—			(15,226	)		—			—			—			(15,226	)
	Net proceeds from stock issue		(5,022	)		(32,904	)		(85,323	)		(59,161	)		185,720			3,310
	Purchase of treasury stock		(23,144	)		—			—			—			—			(23,144	)
	Other, principally intercompany balances		471,121			(651,677	)		192,704			(17,399	)		5,251			—
Net cash provided by (used in) financing activities			(159,149	)		46,060			107,381			(38,819	)		190,971			146,444
Effect of exchange rate changes on cash			—			—			—			(6,952	)		—			(6,952	)
Increase (decrease) in cash and cash equivalents			61,994			323			232			48,687			—			111,236
Cash and cash equivalents, beginning of period			955			(119	)		(2,818	)		31,385			—			29,403
Cash and cash equivalents, end of year		$	62,949		$	204		$	(2,586	)	$	80,072		$	—		$	140,639

124

SCIENTIFIC GAMES CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(in thousands, except per share amounts)

(20) Selected Quarterly Financial Data, Unaudited

	Quarter Ended 2010
	March 31 (a)		June 30 (b)			September 30 (c)		December 31 (d)
Total operating revenues	$	216,339	$	233,033		$	221,061	$	212,066
Total cost of instant ticket revenues, services and sales		128,625		132,998			132,838		120,405
Selling, general and administrative expenses		38,556		40,552			36,435		42,957
Write-down of assets held for sale		—		5,874			2,155		—
Employee termination costs		—		—			602		—
Depreciation and amortization		27,655		27,078			27,284		59,749
Operating income (loss)		21,503		26,531			21,747		(11,045	)
Net income (loss)	$	4,887	$	(4,343	)	$	8,704	$	(158,449	)
Basic and diluted earnings (loss) per share:
Basic net income (loss) available to common shareholders	$	0.05	$	(0.05	)	$	0.09	$	(1.74	)
Diluted net income (loss) available to common shareholders	$	0.05	$	(0.05	)	$	0.09	$	(1.74	)
Weighted average number of shares used in per share calculations:
Basic shares		93,993		93,552			91,844		91,277
Diluted shares		94,662		93,552			92,240		91,277

(a)

Net income includes a loss of approximately $6,700 on foreign currency forward contracts related to the Italian instant ticket tender process.

(b)

Includes a write-down of assets held for sale of approximately $5,900 resulting from our strategic decision to sell the Racing Business. Net loss includes a loss of approximately $9,000 on foreign currency forward contracts related to the Italian instant ticket tender process.

(c)

Includes a write-down of assets held for sale of approximately $2,200 resulting from our strategic decision to sell the Racing Business. Includes a loss on early extinguishment of long-term debt of approximately $2,200 related to the repurchase of the 2012 Notes. Net income includes a gain of approximately $3,200 on foreign currency forward contracts related to the Italian instant ticket tender process.

(d)

Depreciation and amortization includes approximately $17,500 of impairment charges related to underperforming Lottery Systems contracts, $8,300 related to the abandonment of our existing Global Draw platform technology to migrate to new platform technology and approximately $5,500 related to the write-off of obsolete Lottery Systems and Global Draw equipment. Net income includes a valuation allowance of $149,600.

125

SCIENTIFIC GAMES CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(in thousands, except per share amounts)

(20) Selected Quarterly Financial Data, Unaudited (Continued)

	Quarter Ended 2009
	March 31 (a)			June 30 (b)		September 30 (c)		December 31 (d)
Total operating revenues	$	230,690		$	225,028	$	239,146	$	232,885
Total cost of instant ticket revenues, services and sales		141,184			129,106		138,286		140,892
Selling, general and administrative expenses		41,486			39,132		38,861		48,769
Write-down of assets held for sale		—			—		—		54,356
Employee termination costs		3,920			—		—		—
Depreciation and amortization		31,143			30,261		32,049		58,331
Operating income (loss)		12,957			26,529		29,950		(69,463	)
Net income (loss)	$	(25,190	)	$	20,346	$	15,106	$	(50,141	)
Basic and diluted earnings (loss) per share:
Basic net income (loss) available to common shareholders	$	(0.27	)	$	0.22	$	0.16	$	(0.54	)
Diluted net income (loss) available to common shareholders	$	(0.27	)	$	0.22	$	0.16	$	(0.54	)
Weighted average number of shares used in per share calculations:
Basic shares		92,539			92,463		92,727		93,070
Diluted shares		92,539			93,959		94,028		93,070

(a)

Includes approximately $3,920 of employee termination costs as a result of cost reduction initiatives. Includes a gain on early extinguishment of long-term debt of $2,288 reflecting repurchase of $47,000 in aggregate principal amount of the Convertible Debentures. Net income includes a gain of approximately $700 on forward contracts.

(b)

Includes a gain on early extinguishment of long-term debt of $1,401 reflecting repurchase of $84,403 in aggregate principal amount of the Convertible Debentures. Includes a gain on early extinguishment of long-term debt of $355 reflecting the repurchase of $12,925 in aggregate principal amount of the 2012 Notes.

(c)

Includes a gain on early extinguishment of long-term debt of $550 reflecting repurchase of $43,188 in aggregate principal amount of the Convertible Debentures.

(d)

Includes a write-down of assets held for sale of approximately $54,400. Depreciation and amortization includes approximately $24,700 in asset impairment charges as a result of underperforming Lottery Systems contracts. Selling, general and administrative expenses reflects approximately $3,800 in due diligence costs in connection with potential acquisitions, approximately $3,000 of restructuring advisory fees, $2,000 of CEO retirement costs and approximately $2,000 of professional fees related to the tender for the Italian instant ticket concession. Net income includes an approximately $4,000 net loss on forward contracts.

126

SCIENTIFIC GAMES CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(in thousands, except per share amounts)

(21) Recently Issued Accounting Guidance

        In September 2009, the Financial Accounting Standards Board ("FASB") amended the Accounting Standards Codification ("ASC") as summarized in Accounting Standards Update ("ASU") 2009-14, Software (Topic 985): Certain Revenue Arrangements That Include Software Elements, and ASU 2009-13, Revenue Recognition (Topic 605): Multiple-Deliverable Revenue Arrangements. As summarized in ASU 2009-14, ASC Topic 985 has been amended to remove from the scope of industry-specific revenue accounting guidance for software and software related transactions tangible products containing software components and non-software components that function together to deliver the product's essential functionality. As summarized in ASU 2009-13, ASC Topic 605 has been amended: (1) to provide updated guidance on whether multiple deliverables exist, how the deliverables in an arrangement should be separated, and the consideration allocated; (2) to require an entity to allocate revenue in an arrangement using estimated selling prices of deliverables if a vendor does not have vendor-specific objective evidence ("VSOE") or third-party evidence of selling price; and (3) to eliminate the use of the residual method and require an entity to allocate revenue using the relative selling price method. The accounting changes summarized in ASU 2009-14 and ASU 2009-13 are both effective for fiscal years beginning on or after June 15, 2010, with early adoption permitted. Adoption may either be on a prospective basis or by retrospective application. We adopted these amendments to the ASC on January 1, 2011; at this time, we believe the impact of these accounting changes will be immaterial.

        In June 2009, the FASB issued Amendments to FASB Interpretation No. 46(R), which amends the consolidation guidance applicable to variable interest entities and the definition of a variable interest entity ("VIE") and requires enhanced disclosures to provide more information about an enterprise's involvement in a VIE. In addition, it requires an enterprise to perform an analysis to determine whether the enterprise's variable interest gives it a controlling interest in a VIE. The analysis identifies the primary beneficiary of the VIE as the enterprise that has both (1) the power to direct the activities of the VIE and (2) the obligation to absorb losses of the VIE. We adopted this statement on January 1, 2010. There was no financial impact of adoption of this standard.

(22) Acquisitions and Dispositions

Acquisitions

        On August 5, 2010, the Company acquired substantially all of the assets of GameLogic, a provider of interactive marketing services for the U.S. regulated gaming market, including GameLogic's software for Internet-based loyalty programs for lottery players as well as an extensive suite of interactive games and related intellectual property. We also hired several key members from the GameLogic development and marketing teams. We have integrated the GameLogic assets with our existing Properties Plus business. The acquisition was not material to the Company's operations.

        On April 19, 2010, the Company acquired certain assets of Sceptre Leisure Solutions Limited, including 751 server-based gaming terminals and associated customer contracts, to increase the Company's existing estate of gaming machines supplied and operated by licensed betting offices in the U.K. The acquired terminals installed at approximately 240 locations in the U.K. were added to Global Draw's existing server-based gaming installed base in the U.K. The operating results derived from the acquired assets are included in the Diversified Gaming segment in the Company's statement of operations since the date of acquisition. The acquisition was not material to the Company's operations.

127

SCIENTIFIC GAMES CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(in thousands, except per share amounts)

(22) Acquisitions and Dispositions (Continued)

Dispositions

        On October 5, 2010, we completed the sale of the Racing Business to Sportech pursuant to the Purchase Agreement dated as of January 27, 2010 (the "Purchase Agreement"). Upon the closing of the transaction, we received approximately $33,000 in cash (subject to certain post-closing adjustments as specified in the Purchase Agreement) and 39,742 shares of Sportech stock (the "Consideration Shares") representing approximately 20% of Sportech's outstanding shares as of the closing of the transaction. The Consideration Shares were valued at approximately $26,300 based on the closing price of Sportech stock on October 4, 2010. Sportech also agreed to make an additional cash payment to us on September 30, 2013 of approximately $10,000. In addition, if the Racing Business, under Sportech's ownership, achieves certain performance targets over the three-year period following the closing of the transaction, we will be entitled to an additional cash payment of up to $8,000.

        Until completion of the sale on October 5, 2010, we classified the assets and liabilities of the Racing Business as held for sale in our Consolidated Balance Sheets. In accordance with GAAP, the Company is required to adjust the net assets classified as held for sale to fair value, less estimated cost to sell. During the nine month period ended September 30, 2010, we recorded a write down of assets held for sale of $8,029 in our Consolidated Statements of Operations to decrease the carrying amount of the Racing Business to fair value, less cost to sell. During the three months ended December 31, 2010, we recorded a loss on the sale of the Racing Business of $361.

128

SCHEDULE II

SCIENTIFIC GAMES CORPORATION AND SUBSIDIARIES

Valuation and Qualifying Accounts

Years Ended December 31, 2010, 2009 and 2008
(in thousands)

Allowance for doubtful accounts	Balance at Beginning of Period		Charged to Costs and Expenses		Other (1)		Deductions (2)		Balance at End of Period
Year ended December 31, 2010
Allowance for doubtful accounts	$	2,140		398		—		363	$	2,175
Year ended December 31, 2009
Allowance for doubtful accounts	$	6,465		2,074		3,921		2,478	$	2,140
Year ended December 31, 2008
Allowance for doubtful accounts	$	9,184		1,841		—		4,560	$	6,465

Valuation allowance	Balance at Beginning of Period		Charged to Tax Expense		Other (3)			Balance at End of Period
Year ended December 31, 2010
Valuation allowance	$	95,151		152,472		(12,811	)	$	234,813
Year ended December 31, 2009
Valuation allowance	$	45,690		49,462		—		$	95,151
Year ended December 31, 2008
Valuation allowance	$	20,055		25,635		—		$	45,690

(1)

Racing Business assets held for sale.

(2)

Amounts written off.

(3)

Amount written off due to our election to convert previously claimed foreign tax credits into deductions on our 2009 federal tax return.

129

ITEM 9.    CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

        None.

ITEM 9A.    CONTROLS AND PROCEDURES

        As of the end of the period covered by this Annual Report on Form 10-K, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and our Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)). Based upon that evaluation, our Chief Executive Officer and our Chief Financial Officer concluded that our disclosure controls and procedures are effective.

        There were no changes in our internal control over financial reporting during the year ended December 31, 2010 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

        The report called for by Item 308(a) of Regulation S-K is included herein as "Management's Report on Internal Control Over Financial Reporting," which appears in Item 7A in this Annual Report on Form 10-K.

        The attestation report called for by Item 308(b) of Registration S-K is included herein as "Report of Independent Registered Public Accounting Firm on Internal Control Over Financial Reporting," which appears in Item 7A in this Annual Report on Form 10-K.

ITEM 9B.    OTHER INFORMATION.

        None.

130

PART III

ITEM 10.    DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

        We have adopted a Code of Business Conduct that applies to all of our officers, directors and employees (including our Chief Executive Officer, Chief Financial Officer and Chief Accounting Officer) and have posted the Code on our website at www.scientificgames.com. In the event that we have any amendments to or waivers from any provision of the Code applicable to our Chief Executive Officer, Chief Financial Officer and Chief Accounting Officer, we intend to satisfy the disclosure requirement under Item 5.05 of Form 8-K by posting such information on our website.

        Information relating to our executive officers is included in Part I of this Annual Report on Form 10-K, as permitted by General Instruction G(3). The other information called for by this item is incorporated by reference to our definitive proxy statement relating to our 2011 Annual Meeting of Stockholders, which will be filed with the SEC. If such proxy statement is not filed on or before April 30, 2011, the information called for by this item will be filed as part of an amendment to this Annual Report on Form 10-K on or before such date, in accordance with General Instruction G(3).

ITEM 11.    EXECUTIVE COMPENSATION

        The information called for by this item is incorporated herein by reference to our definitive proxy statement relating to our 2011 Annual Meeting of Stockholders, which will be filed with the SEC. If such proxy statement is not filed on or before April 30, 2011, the information called for by this item will be filed as part of an amendment to this Annual Report on Form 10-K on or before such date, in accordance with General Instruction G(3).

ITEM 12.    SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

        The information called for by this item is incorporated herein by reference to our definitive proxy statement relating to our 2011 Annual Meeting of Stockholders, which will be filed with the SEC. If such proxy statement is not filed on or before April 30, 2011, the information called for by this item will be filed as part of an amendment to this Annual Report on Form 10-K on or before such date, in accordance with General Instruction G(3).

ITEM 13.    CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

        The information called for by this item is incorporated herein by reference to our definitive proxy statement relating to our 2011 Annual Meeting of Stockholders, which will be filed with the SEC. If such proxy statement is not filed on or before April 30, 2011, the information called for by this item will be filed as part of an amendment to this Annual Report on Form 10-K on or before such date, in accordance with General Instruction G(3).

ITEM 14.    PRINCIPAL ACCOUNTANT FEES AND SERVICES

        The information called for by this item is incorporated herein by reference to our definitive proxy statement relating to our 2011 Annual Meeting of Stockholders, which will be filed with the SEC. If such proxy statement is not filed on or before April 30, 2011, the information called for by this item will be filed as part of an amendment to this Annual Report on Form 10-K on or before such date, in accordance with General Instruction G(3).

131

ITEM 15.    EXHIBITS, FINANCIAL STATEMENT SCHEDULES

(a)   (1) and (2). Financial Statements and Financial Statements Schedule.

        See index to Consolidated Financial Statements under Item 8 in Part II hereof where these documents are listed.

(a)   (3). Exhibits.

Exhibit Number			Description
	3.1	(a)	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 Annual Report on Form 10-K for the fiscal year ended December 31, 2002).
	3.1	(b)	Certificate of Amendment of the Restated Certificate of Incorporation of the Company, filed with the Secretary of State of the State of Delaware on June 7, 2007 (incorporated by reference to Exhibit 3.1(b) to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2007).
	3.2		Amended and Restated Bylaws of the Company (incorporated by reference to Exhibit 3.1 to the Company's Current Report on Form 8-K filed on November 1, 2010).
	4.1		Indenture, dated as of September 22, 2010, among the Company, as issuer, the guarantors party thereto and The Bank of Nova Scotia Trust Company of New York, as trustee (incorporated by reference to Exhibit 4.1 to the Company's Current Report on Form 8-K filed on September 23, 2010).
	4.2		Registration Rights Agreement, dated September 22, 2010, among the Company, the guarantors party thereto and J.P. Morgan Securities LLC, as representative for the initial purchasers listed therein (incorporated by reference to Exhibit 4.2 to the Company's Current Report on Form 8-K filed on September 23, 2010).
	4.3		Form of 8.125% Senior Subordinated Note (No. 001) (included in Exhibit 4.1 above).
	4.4		Form of 8.125% Senior Subordinated Note (No. 002) (included in Exhibit 4.1 above).
	4.5		Indenture, dated as of June 11, 2008, among Scientific Games International, Inc., as issuer, the Company, as a guarantor, the subsidiary guarantors party thereto, and The Bank of Nova Scotia Trust Company of New York, as trustee, relating to the 7.875% Senior Subordinated Notes due 2016 (incorporated by reference to Exhibit 4.1 to the Company's Current Report on Form 8-K filed on June 13, 2008).
	4.6		Registration Rights Agreement, dated June 11, 2008, among Scientific Games International, Inc., the Company, the subsidiary guarantors listed therein, and J.P. Morgan Securities Inc., Banc of America Securities LLC and UBS Securities LLC, as representatives for the initial purchasers listed therein, relating to the 7.875% Senior Subordinated Notes due 2016 (incorporated by reference to Exhibit 4.2 to the Company's Current Report on Form 8-K filed on June 13, 2008).
	4.7		Form of 7.875% Senior Subordinated Notes due 2016 (incorporated by reference to Exhibits 4.3(a) and 4.3(b) to the Company's Registration Statement on Form S-3ASR (No. 333-155346) filed on November 13, 2008).

132

Exhibit Number		Description
	4.8	Indenture, dated as of May 21, 2009, among Scientific Games International, Inc., as issuer, the Company, as a guarantor, the subsidiary guarantors party thereto, and The Bank of Nova Scotia Trust Company of New York, as trustee, relating to the 9.25% Senior Subordinated Notes due 2019 (incorporated by reference to Exhibit 4.1 to the Company's Current Report on Form 8-K filed on May 27, 2009).
	4.9	Registration Rights Agreement, dated as of May 21, 2009, among Scientific Games International, Inc., the Company, the subsidiary guarantors party thereto, and J.P. Morgan Securities Inc., Banc of America Securities LLC, Credit Suisse Securities (USA) LLC and Goldman, Sachs & Co., as representatives for the initial purchasers listed therein, relating to the 9.25% Senior Subordinated Notes due 2019 (incorporated by reference to Exhibit 4.2 to the Company's Current Report on Form 8-K filed on May 27, 2009).
	4.10	Form of 9.25% Senior Subordinated Notes due 2019 (incorporated by reference to Exhibits 4.31(a) and 4.31(b) to the Company's Registration Statement on Form S-4 (No. 333-161268) filed on August 11, 2009 and included in Exhibit 4.8 above).
	4.11	Registration Rights Agreement, dated November 5, 2009, among Scientific Games International, Inc., the Company, the subsidiary guarantors party thereto, and J.P. Morgan Securities Inc., Banc of America Securities LLC, Credit Suisse Securities (USA) LLC and Goldman, Sachs & Co., as representatives for the initial purchasers named therein, relating to the 9.25% Senior Subordinated Notes due 2019 (incorporated by reference to Exhibit 4.1 to the Company's Current Report on Form 8-K filed on November 12, 2009).
	10.1	Fifth Amendment, dated as of December 16, 2010, among Scientific Games International, Inc., as borrower, the Company, as guarantor, the several lenders parties thereto and JPMorgan Chase Bank, N.A., as administrative agent, which amended the Credit Agreement, dated as of June 9, 2008 and amended and restated as of February 12, 2010, among Scientific Games International, Inc., the Company, the several lenders from time to time party thereto and JPMorgan Chase Bank, N.A., as administrative agent, as amended by the First Incremental Amendment, dated as of June 17, 2010, among Scientific Games International Inc., the Company, the subsidiary guarantors party thereto, the incremental term lenders party thereto and JPMorgan Chase Bank, N.A., as administrative agent (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed on December 20, 2010).
	10.2	First Incremental Amendment, dated as of June 17, 2010, among Scientific Games International, Inc., the Company, the subsidiary guarantors party thereto, the incremental term lenders party thereto and JPMorgan Chase Bank, N.A., as administrative agent, to the Credit Agreement, dated as of June 9, 2008, as amended and restated as of February 12, 2010, among Scientific Games International, Inc., as borrower, the Company, as guarantor, the several lenders from time to time party thereto and JPMorgan Chase Bank, N.A., as administrative agent (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed on June 23, 2010).

133

Exhibit Number		Description
	10.3	Amendment and Restatement Agreement, dated as of February 12, 2010, among Scientific Games International, Inc., as borrower, the Company, as guarantor, the several lenders from time to time parties thereto and JPMorgan Chase Bank. N.A. as administrative agent, which (i) amended and restated in its entirety the Credit Agreement, dated as of June 9, 2008 and amended as of March 27, 2009, September 30, 2009 and October 13, 2009, among such parties, as set forth in Exhibit A to such Amendment and Restatement Agreement, and (ii) amended the Guarantee and Collateral Agreement, dated as of June 9, 2008, among Scientific Games International, Inc., as borrower, the company, as the guarantor, and each of the other subsidiaries of the Company party thereto, in favor of JPMorgan Chase Bank, N.A., as administrative agent for the several lenders from time to time party to the Credit Agreement (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed on February 19, 2010).
	10.4	Guarantee and Collateral Agreement, dated as of June 9, 2008, among Scientific Games International, Inc., the Company, as a guarantor, and each other subsidiary of the Company listed on the signature pages thereto, as additional guarantors, in favor of JPMorgan Chase Bank, N.A., as administrative agent (incorporated by reference to Exhibit 10.2 to the Company's Current Report on Form 8-K filed on June 13, 2008).
	10.5	Stockholders' Agreement, dated September 6, 2000, among the Company, MacAndrews & Forbes Holdings Inc. (formerly known as Mafco Holdings Inc.) ("MacAndrews") (as successor in interest under the agreement to Cirmatica Gaming S.A.) and Ramius Securities, LLC (incorporated by reference to Exhibit 10.38 to the Company's Quarterly Report on Form 10-Q for the quarter ended July 31, 2000).
	10.6	Supplemental Stockholders' Agreement, dated June 26, 2002, among the Company and MacAndrews (as successor in interest to Cirmatica Gaming S.A.) (incorporated by reference to Exhibit 4.2 to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2002).
	10.7	Letter Agreement, dated as of October 10, 2003, by and between the Company and MacAndrews further supplementing the Stockholders' Agreement (incorporated by reference to Exhibit 3 to the Schedule 13D jointly filed by MacAndrews and SGMS Acquisition Corporation on November 26, 2003).
	10.8	Letter Agreement dated February 15, 2007 between the Company and MacAndrews & Forbes Holdings Inc. (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed on February 16, 2007).
	10.9	Purchase Agreement, dated as of January 27, 2010, by and among the Company, Scientific Games International, Inc., SG Racing, Inc., Scientific Games Germany GmbH, Scientific Games Luxembourg Holdings SARL, Scientific Games Holdings Limited, Scientific Games Racing, LLC, Sportech, Sportech Holdco 1 Limited and Sportech Holdco 2 Limited (incorporated by reference to Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2010 filed on May 10, 2010).
	10.10	Stock Purchase Agreement, dated as of May 1, 2007, among François-Charles Oberthur Fiduciaire, S.A., the Company and Scientific Games Holdings (Canada) Inc. (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed on May 7, 2007).

134

Exhibit Number		Description
	10.11	Agreement, dated April 20, 2006, among the Company, Scientific Games International Holdings Limited, Scientific Games Beteiligungsgesellschaft mbH, Walter Grubmueller, Stephen George Frater, The Trustees of Warero Privatsitiftung and Jeffery Frederick Nash for the sale and purchase of the entire issued share capital of Neomi Associates, Inc. and Research and Development GmbH (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed on April 26, 2006).
	10.12	Share Purchase and Sale Agreement, dated April 4, 2005, among Scientific Games Chile Limitada, Epicentro S.A. and Inversiones Y Aesorias Iculpe Limitada (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed on April 8, 2005).
	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). *
	10.16	2003 Incentive Compensation Plan, as amended and restated (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed on June 19, 2009). *
	10.17	Elective Deferred Compensation Plan (Executive Deferred Compensation Plan and Non-Employee Directors Deferred Compensation Plan) (effective January 1, 2005, as amended and restated effective January 1, 2009) (incorporated by reference to Exhibit 10.14 to the Company's Annual Report on Form 10-K for the year ended December 31, 2008). *
	10.18	Frozen Supplemental Executive Retirement Plan (as amended and restated effective January 1, 2009) (incorporated by reference to Exhibit 10.15 to the Company's Annual Report on Form 10-K for the year ended December 31, 2008). *
	10.19	2002 Employee Stock Purchase 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, 2005). *
	10.20	Asia Pacific Business Incentive Compensation Program (incorporated by reference to Exhibit 10.4 to the Company's Current Report on Form 8-K filed on December 3, 2010). *
	10.21	Employment Agreement dated as of January 1, 2006 by and between the Company and A. Lorne Weil (executed on August 8, 2006) (incorporated by reference to Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2006). *
	10.22	Letter dated August 2, 2007 between A. Lorne Weil and the Company with respect to payment of Mr. Weil's deferred compensation upon a termination of employment under Mr. Weil's Employment Agreement dated as of January 1, 2006 (incorporated by reference to Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2007). *

135

Exhibit Number		Description
	10.23	Amendment to Employment Agreement dated as of May 1, 2008 by and between the Company and A. Lorne Weil (executed on May 12, 2008), which amended Mr. Weil's Employment Agreement dated as of January 1, 2006, as amended by the Letter dated August 2, 2007 (incorporated by reference to Exhibit 10.2 to the Company's Current Report on Form 8-K filed on May 14, 2008). *
	10.24	Amendment to Employment Agreement dated as of December 30, 2008 by and between the Company and A. Lorne Weil, which amended Mr. Weil's Employment Agreement dated as of January 1, 2006, as amended by the Letter dated August 2, 2007 and the Amendment dated as of May 1, 2008 (incorporated by reference to Exhibit 10.20 to the Company's Annual Report on Form 10-K for the year ended December 31, 2008). *
	10.25	Third Amendment to Employment Agreement dated as of May 29, 2009 between the Company and A. Lorne Weil, which amended Mr. Weil's Employment Agreement dated as of January 1, 2006, as amended by the Letter dated August 2, 2007 and the Amendments dated as of May 1, 2008 and December 30, 2008 (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed on June 2, 2009). *
	10.26	Amendment to Employment Agreement dated as of December 2, 2010 between the Company and A. Lorne Weil, which amended Mr. Weil's Employment Agreement dated as of January 1, 2006, as amended by the Letter dated August 2, 2007 and the Amendments dated as of May 1, 2008, December 30, 2008 and May 29, 2009 (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed on December 3, 2010). *
	10.27	Employment Agreement dated as of July 1, 2005 between the Company and Michael Chambrello (executed on June 17, 2005) (incorporated by reference to Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2005). *
	10.28	Letter Agreement dated as of August 2, 2006 by and between the Company and Michael R. Chambrello, which amended Mr. Chambrello's Employment Agreement dated as of July 1, 2005 (incorporated by reference to Exhibit 10.9 to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2006). *
	10.29	Letter Agreement dated as of May 8, 2008 by and between the Company and Michael R. Chambrello, which amended Mr. Chambrello's Employment Agreement dated as of July 1, 2005, as amended by the Letter Agreement dated as of August 2, 2006 (incorporated by reference to Exhibit 10.3 to the Company's Current Report on Form 8-K filed on May 14, 2008). *
	10.30	Amendment to Employment Agreement dated as of December 30, 2008 by and between the Company and Michael R. Chambrello, which amended Mr. Chambrello's Employment Agreement dated as of July 1, 2005, as amended by the Letter Agreement dated as of August 2, 2006 and the Letter Agreement dated as of May 8, 2008 (incorporated by reference to Exhibit 10.26 to the Company's Annual Report on Form 10-K for the year ended December 31, 2008). *
	10.31	Amendment to Employment Agreement dated as of November 29, 2010 by and between the Company and Michael R. Chambrello, which amended Mr. Chambrello's Employment Agreement dated as of July 1, 2005, as amended by the Letter Agreement dated as of August 2, 2006, the Letter Agreement dated as of May 8, 2008 and the Amendment dated as of December 30, 2008 (incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K filed on December 3, 2010). *

136

Exhibit Number		Description
	10.32	Employment Agreement dated as of January 1, 2006 by and between the Company and Robert C. Becker (executed on August 2, 2006) (incorporated by reference to Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2006). *
	10.33	Letter Agreement dated as of October 7, 2008 by and between the Company and Robert C. Becker, which amended Mr. Becker's Employment Agreement dated as of January 1, 2006 (incorporated by reference to Exhibit 10.32 to the Company's Annual Report on Form 10-K for the year ended December 31, 2008). *
	10.34	Amendment to Employment Agreement dated as of December 30, 2008 by and between the Company and Robert C. Becker, which amended Mr. Becker's Employment Agreement dated as of January 1, 2006, as amended by the Letter Agreement dated as of October 7, 2008 (incorporated by reference to Exhibit 10.33 to the Company's Annual Report on Form 10-K for the year ended December 31, 2008). *
	10.35	Employment Agreement dated as of January 1, 2006 by and between the Company and Larry Potts (executed on August 2, 2006) (incorporated by reference to Exhibit 10.4 to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2006). *
	10.36	Letter Agreement dated as of October 2, 2008 by and between the Company and Larry Potts, which amended Mr. Potts' Employment Agreement dated as of January 1, 2006 (incorporated by reference to Exhibit 10.36 to the Company's Annual Report on Form 10-K for the year ended December 31, 2008). *
	10.37	Amendment to Employment Agreement dated as of December 30, 2008 by and between the Company and Larry Potts, which amended Mr. Potts' Employment Agreement dated as of January 1, 2006, as amended by the Letter Agreement dated as of October 2, 2008 (incorporated by reference to Exhibit 10.37 to the Company's Annual Report on Form 10-K for the year ended December 31, 2008). *
	10.38	Employment and Severance Benefits Agreement dated December 15, 2005 between the Company and Ira H. Raphaelson (incorporated by reference to Exhibit 10.22 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2005). *
	10.39	Letter Agreement dated as of August 2, 2006 by and between the Company and Ira H. Raphaelson, which amended Mr. Raphaelson's Employment Agreement dated December 15, 2005 (effective as of February 1, 2006) (incorporated by reference to Exhibit 10.11 to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2006). *
	10.40	Letter Agreement dated as of October 6, 2008 by and between the Company and Ira H. Raphaelson, which amended Mr. Raphaelson's Employment and Severance Benefits Agreement dated December 15, 2005, as amended by the Letter Agreement dated as of August 2, 2006 (incorporated by reference to Exhibit 10.45 to the Company's Annual Report on Form 10-K for the year ended December 31, 2008). *
	10.41	Amendment to Employment Agreement dated as of December 30, 2008 by and between the Company and Ira H. Raphaelson, which amended Mr. Raphaelson's Employment and Severance Benefits Agreement dated December 15, 2005, as amended by the Letter Agreement dated as of August 2, 2006 and the Letter Agreement dated as of October 6, 2008 (incorporated by reference to Exhibit 10.46 to the Company's Annual Report on Form 10-K for the year ended December 31, 2008). *

137

Exhibit Number		Description
	10.42	Employment Agreement dated as of February 11, 2009 (effective as of January 1, 2009) by and between the Company and Stephen L. Gibbs (incorporated by reference to Exhibit 10.47 to the Company's Annual Report on Form 10-K for the year ended December 31, 2008). *
	10.43	Employment Inducement Stock Option Grant Agreement dated July 1, 2005 between the Company and Michael Chambrello (incorporated by reference to Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2005). *
	10.44	Employment Inducement Stock Option Grant Agreement dated August 8, 2005 between the Company and Steven Beason (incorporated by reference to Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2005). *
	10.45	Employment Agreement dated as of March 2, 2009 (effective April 1, 2009) by and between the Company and Jeff Lipkin (incorporated by reference to Exhibit 10.3 to the Company's Current Report on Form 8-K filed on April 2, 2009). *
	10.46	Employment Agreement dated as of August 8, 2005 by and between the Company and Steven W. Beason (incorporated by reference to Exhibit 10.56 to the Company's Annual Report on Form 10-K for the year ended December 31, 2009). *
	10.47	Letter Agreement dated as of August 30, 2007 by and between the Company and Steven W. Beason, which amended Mr. Beason's Employment Agreement dated August 8, 2005 (incorporated by reference to Exhibit 10.57 to the Company's Annual Report on Form 10-K for the year ended December 31, 2009). *
	10.48	Letter Agreement dated as of June 17, 2008 by and between the Company and Steven W. Beason, which amended Mr. Beason's Employment Agreement dated as of August 8, 2005, as amended by the Letter Agreement dated as of August 30, 2007 (incorporated by reference to Exhibit 10.58 to the Company's Annual Report on Form 10-K for the year ended December 31, 2009). *
	10.49	Amendment to Employment Agreement dated as of December 30, 2008 by and between the Company and Steven W. Beason, which amended Mr. Beason's Employment Agreement dated as of August 8, 2005, as amended by the Letter Agreement dated as of August 30, 2007 and the Letter Agreement dated as of June 17, 2008 (incorporated by reference to Exhibit 10.59 to the Company's Annual Report on Form 10-K for the year ended December 31, 2009). *
	10.50	Employment Agreement dated as of November 29, 2010 by and between the Company and David L. Kennedy (incorporated by reference to Exhibit 10.3 to the Company's Current Report on Form 8-K filed on December 3, 2010). *
	10.51	Employment Agreement dated as of May 13, 2008 (effective as of July 1, 2008) by and between The Global Draw Ltd and Stephen Frater. *(†)
	10.52	Letter Agreement dated as of June 22, 2010 by and between The Global Draw Ltd and Stephen Frater, which amended Mr. Frater's Employment Agreement dated as of July 1, 2008. *(†)
	10.53	Employment Agreement dated as of December 11, 2006 (effective as of January 1, 2007) by and between Scientific Games International, Inc. and James C. Kennedy. *(†)
	10.54	Amendment to Employment Agreement dated as of December 30, 2008 by and between Scientific Games Corporation and James C. Kennedy, which amended Mr. Kennedy's Employment Agreement dated as of January 1, 2007. *(†)

138

Exhibit Number		Description
	10.55	Letter Agreement dated as of May 7, 2009 by and between Scientific Games International, Inc. and James C. Kennedy, which amended Mr. Kennedy's Employment Agreement dated as of January 1, 2007, as amended by the Amendment dated as of December 30, 2008. *(†)
	10.56	Employment Agreement dated as of December 22, 2010 by and between Scientific Games International, Inc. and William J. Huntley. *(†)
	10.57	Employment Agreement dated as of December 22, 2010 by and between Scientific Games International, Inc. and James B. Trask. *(†)
	12	Computation of Ratio of Earnings to Fixed Charges. (†)
	21	List of Subsidiaries. (†)
	23.1	Consent of Deloitte & Touche LLP, Independent Registered Public Accounting Firm. (†)
	23.2	Consent of Reconta Ernst & Young S.p.A., Independent Registered Public Accounting Firm. (†)
	31.1	Certification of Chief Executive Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934. (†)
	31.2	Certification of Chief Financial Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934. (†)
	32.1	Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (†)
	32.2	Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (†)
	99.1	Report of Reconta Ernst & Young S.p.A., Independent Registered Public Accounting Firm. (†)
	99.2	Financial Statements of Consorzio Lotterie Nazionali. (†)

*

Management contracts and compensation plans and arrangements.

(†)

Filed herewith.

139

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.

March 1, 2011	SCIENTIFIC GAMES CORPORATION
	By:	/s/ JEFFREY S. LIPKIN Jeffrey S. Lipkin, Chief Financial Officer
	By:	/s/ STEPHEN L. GIBBS Stephen L. Gibbs, Chief Accounting 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 1, 2011.

Signature	Title
/s/ A. LORNE WEIL A. Lorne Weil	Chief Executive officer and Chairman of the Board (principal executive officer)
/s/ JEFFREY S. LIPKIN Jeffrey S. Lipkin	Senior Vice President and Chief Financial Officer (principal financial officer)
/s/ STEPHEN L. GIBBS Stephen L. Gibbs	Vice President, Chief Accounting Officer and Corporate Controller (principal accounting officer)
/s/ DAVID L. KENNEDY David L. Kennedy	Executive Vice Chairman of the Board
/s/ MICHAEL R. CHAMBRELLO Michael R. Chambrello	Chief Executive Officer—Asia Pacific Region and Director
/s/ PETER A. COHEN Peter A. Cohen	Vice Chairman of the Board

140

Signature	Title
/s/ GERALD J. FORD Gerald J. Ford	Director
/s/ J. ROBERT KERREY J. Robert Kerrey	Director
/s/ ERIC M. TURNER Eric M. Turner	Director
/s/ RONALD O. PERELMAN Ronald O. Perelman	Director
/s/ BARRY F. SCHWARTZ Barry F. Schwartz	Director
/s/ FRANCIS TOWNSEND Francis Townsend	Director
/s/ MICHAEL J. REGAN Michael J. Regan	Director

141

EXHIBIT INDEX

Exhibit Number			Description
	3.1	(a)	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 Annual Report on Form 10-K for the fiscal year ended December 31, 2002).
	3.1	(b)	Certificate of Amendment of the Restated Certificate of Incorporation of the Company, filed with the Secretary of State of the State of Delaware on June 7, 2007 (incorporated by reference to Exhibit 3.1(b) to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2007).
	3.2		Amended and Restated Bylaws of the Company (incorporated by reference to Exhibit 3.1 to the Company's Current Report on Form 8-K filed on November 1, 2010).
	4.1		Indenture, dated as of September 22, 2010, among the Company, as issuer, the guarantors party thereto and The Bank of Nova Scotia Trust Company of New York, as trustee (incorporated by reference to Exhibit 4.1 to the Company's Current Report on Form 8-K filed on September 23, 2010).
	4.2		Registration Rights Agreement, dated September 22, 2010, among the Company, the guarantors party thereto and J.P. Morgan Securities LLC, as representative for the initial purchasers listed therein (incorporated by reference to Exhibit 4.2 to the Company's Current Report on Form 8-K filed on September 23, 2010).
	4.3		Form of 8.125% Senior Subordinated Note (No. 001) (included in Exhibit 4.1 above).
	4.4		Form of 8.125% Senior Subordinated Note (No. 002) (included in Exhibit 4.1 above).
	4.5		Indenture, dated as of June 11, 2008, among Scientific Games International, Inc., as issuer, the Company, as a guarantor, the subsidiary guarantors party thereto, and The Bank of Nova Scotia Trust Company of New York, as trustee, relating to the 7.875% Senior Subordinated Notes due 2016 (incorporated by reference to Exhibit 4.1 to the Company's Current Report on Form 8-K filed on June 13, 2008).
	4.6		Registration Rights Agreement, dated June 11, 2008, among Scientific Games International, Inc., the Company, the subsidiary guarantors listed therein, and J.P. Morgan Securities Inc., Banc of America Securities LLC and UBS Securities LLC, as representatives for the initial purchasers listed therein, relating to the 7.875% Senior Subordinated Notes due 2016 (incorporated by reference to Exhibit 4.2 to the Company's Current Report on Form 8-K filed on June 13, 2008).
	4.7		Form of 7.875% Senior Subordinated Notes due 2016 (incorporated by reference to Exhibits 4.3(a) and 4.3(b) to the Company's Registration Statement on Form S-3ASR (No. 333-155346) filed on November 13, 2008).
	4.8		Indenture, dated as of May 21, 2009, among Scientific Games International, Inc., as issuer, the Company, as a guarantor, the subsidiary guarantors party thereto, and The Bank of Nova Scotia Trust Company of New York, as trustee, relating to the 9.25% Senior Subordinated Notes due 2019 (incorporated by reference to Exhibit 4.1 to the Company's Current Report on Form 8-K filed on May 27, 2009).

142

Exhibit Number		Description
	4.9	Registration Rights Agreement, dated as of May 21, 2009, among Scientific Games International, Inc., the Company, the subsidiary guarantors party thereto, and J.P. Morgan Securities Inc., Banc of America Securities LLC, Credit Suisse Securities (USA) LLC and Goldman, Sachs & Co., as representatives for the initial purchasers listed therein, relating to the 9.25% Senior Subordinated Notes due 2019 (incorporated by reference to Exhibit 4.2 to the Company's Current Report on Form 8-K filed on May 27, 2009).
	4.10	Form of 9.25% Senior Subordinated Notes due 2019 (incorporated by reference to Exhibits 4.31(a) and 4.31(b) to the Company's Registration Statement on Form S-4 (No. 333-161268) filed on August 11, 2009 and included in Exhibit 4.8 above).
	4.11	Registration Rights Agreement, dated November 5, 2009, among Scientific Games International, Inc., the Company, the subsidiary guarantors party thereto, and J.P. Morgan Securities Inc., Banc of America Securities LLC, Credit Suisse Securities (USA) LLC and Goldman, Sachs & Co., as representatives for the initial purchasers named therein, relating to the 9.25% Senior Subordinated Notes due 2019 (incorporated by reference to Exhibit 4.1 to the Company's Current Report on Form 8-K filed on November 12, 2009).
	10.1	Fifth Amendment, dated as of December 16, 2010, among Scientific Games International, Inc., as borrower, the Company, as guarantor, the several lenders parties thereto and JPMorgan Chase Bank, N.A., as administrative agent, which amended the Credit Agreement, dated as of June 9, 2008 and amended and restated as of February 12, 2010, among Scientific Games International, Inc., the Company, the several lenders from time to time party thereto and JPMorgan Chase Bank, N.A., as administrative agent, as amended by the First Incremental Amendment, dated as of June 17, 2010, among Scientific Games International Inc., the Company, the subsidiary guarantors party thereto, the incremental term lenders party thereto and JPMorgan Chase Bank, N.A., as administrative agent (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed on December 20, 2010).
	10.2	First Incremental Amendment, dated as of June 17, 2010, among Scientific Games International, Inc., the Company, the subsidiary guarantors party thereto, the incremental term lenders party thereto and JPMorgan Chase Bank, N.A., as administrative agent, to the Credit Agreement, dated as of June 9, 2008, as amended and restated as of February 12, 2010, among Scientific Games International, Inc., as borrower, the Company, as guarantor, the several lenders from time to time party thereto and JPMorgan Chase Bank, N.A., as administrative agent (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed on June 23, 2010).
	10.3	Amendment and Restatement Agreement, dated as of February 12, 2010, among Scientific Games International, Inc., as borrower, the Company, as guarantor, the several lenders from time to time parties thereto and JPMorgan Chase Bank. N.A. as administrative agent, which (i) amended and restated in its entirety the Credit Agreement, dated as of June 9, 2008 and amended as of March 27, 2009, September 30, 2009 and October 13, 2009, among such parties, as set forth in Exhibit A to such Amendment and Restatement Agreement, and (ii) amended the Guarantee and Collateral Agreement, dated as of June 9, 2008, among Scientific Games International, Inc., as borrower, the company, as the guarantor, and each of the other subsidiaries of the Company party thereto, in favor of JPMorgan Chase Bank, N.A., as administrative agent for the several lenders from time to time party to the Credit Agreement (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed on February 19, 2010).

143

Exhibit Number		Description
	10.4	Guarantee and Collateral Agreement, dated as of June 9, 2008, among Scientific Games International, Inc., the Company, as a guarantor, and each other subsidiary of the Company listed on the signature pages thereto, as additional guarantors, in favor of JPMorgan Chase Bank, N.A., as administrative agent (incorporated by reference to Exhibit 10.2 to the Company's Current Report on Form 8-K filed on June 13, 2008).
	10.5	Stockholders' Agreement, dated September 6, 2000, among the Company, MacAndrews & Forbes Holdings Inc. (formerly known as Mafco Holdings Inc.) ("MacAndrews") (as successor in interest under the agreement to Cirmatica Gaming S.A.) and Ramius Securities, LLC (incorporated by reference to Exhibit 10.38 to the Company's Quarterly Report on Form 10-Q for the quarter ended July 31, 2000).
	10.6	Supplemental Stockholders' Agreement, dated June 26, 2002, among the Company and MacAndrews (as successor in interest to Cirmatica Gaming S.A.) (incorporated by reference to Exhibit 4.2 to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2002).
	10.7	Letter Agreement, dated as of October 10, 2003, by and between the Company and MacAndrews further supplementing the Stockholders' Agreement (incorporated by reference to Exhibit 3 to the Schedule 13D jointly filed by MacAndrews and SGMS Acquisition Corporation on November 26, 2003).
	10.8	Letter Agreement dated February 15, 2007 between the Company and MacAndrews & Forbes Holdings Inc. (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed on February 16, 2007).
	10.9	Purchase Agreement, dated as of January 27, 2010, by and among the Company, Scientific Games International, Inc., SG Racing, Inc., Scientific Games Germany GmbH, Scientific Games Luxembourg Holdings SARL, Scientific Games Holdings Limited, Scientific Games Racing, LLC, Sportech, Sportech Holdco 1 Limited and Sportech Holdco 2 Limited (incorporated by reference to Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2010 filed on May 10, 2010).
	10.10	Stock Purchase Agreement, dated as of May 1, 2007, among François-Charles Oberthur Fiduciaire, S.A., the Company and Scientific Games Holdings (Canada) Inc. (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed on May 7, 2007).
	10.11	Agreement, dated April 20, 2006, among the Company, Scientific Games International Holdings Limited, Scientific Games Beteiligungsgesellschaft mbH, Walter Grubmueller, Stephen George Frater, The Trustees of Warero Privatsitiftung and Jeffery Frederick Nash for the sale and purchase of the entire issued share capital of Neomi Associates, Inc. and Research and Development GmbH (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed on April 26, 2006).
	10.12	Share Purchase and Sale Agreement, dated April 4, 2005, among Scientific Games Chile Limitada, Epicentro S.A. and Inversiones Y Aesorias Iculpe Limitada (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed on April 8, 2005).
	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). *

144

Exhibit Number		Description
	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). *
	10.16	2003 Incentive Compensation Plan, as amended and restated (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed on June 19, 2009). *
	10.17	Elective Deferred Compensation Plan (Executive Deferred Compensation Plan and Non-Employee Directors Deferred Compensation Plan) (effective January 1, 2005, as amended and restated effective January 1, 2009) (incorporated by reference to Exhibit 10.14 to the Company's Annual Report on Form 10-K for the year ended December 31, 2008). *
	10.18	Frozen Supplemental Executive Retirement Plan (as amended and restated effective January 1, 2009) (incorporated by reference to Exhibit 10.15 to the Company's Annual Report on Form 10-K for the year ended December 31, 2008). *
	10.19	2002 Employee Stock Purchase 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, 2005). *
	10.20	Asia Pacific Business Incentive Compensation Program (incorporated by reference to Exhibit 10.4 to the Company's Current Report on Form 8-K filed on December 3, 2010). *
	10.21	Employment Agreement dated as of January 1, 2006 by and between the Company and A. Lorne Weil (executed on August 8, 2006) (incorporated by reference to Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2006). *
	10.22	Letter dated August 2, 2007 between A. Lorne Weil and the Company with respect to payment of Mr. Weil's deferred compensation upon a termination of employment under Mr. Weil's Employment Agreement dated as of January 1, 2006 (incorporated by reference to Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2007). *
	10.23	Amendment to Employment Agreement dated as of May 1, 2008 by and between the Company and A. Lorne Weil (executed on May 12, 2008), which amended Mr. Weil's Employment Agreement dated as of January 1, 2006, as amended by the Letter dated August 2, 2007 (incorporated by reference to Exhibit 10.2 to the Company's Current Report on Form 8-K filed on May 14, 2008). *
	10.24	Amendment to Employment Agreement dated as of December 30, 2008 by and between the Company and A. Lorne Weil, which amended Mr. Weil's Employment Agreement dated as of January 1, 2006, as amended by the Letter dated August 2, 2007 and the Amendment dated as of May 1, 2008 (incorporated by reference to Exhibit 10.20 to the Company's Annual Report on Form 10-K for the year ended December 31, 2008). *
	10.25	Third Amendment to Employment Agreement dated as of May 29, 2009 between the Company and A. Lorne Weil, which amended Mr. Weil's Employment Agreement dated as of January 1, 2006, as amended by the Letter dated August 2, 2007 and the Amendments dated as of May 1, 2008 and December 30, 2008 (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed on June 2, 2009). *

145

Exhibit Number		Description
	10.26	Amendment to Employment Agreement dated as of December 2, 2010 between the Company and A. Lorne Weil, which amended Mr. Weil's Employment Agreement dated as of January 1, 2006, as amended by the Letter dated August 2, 2007 and the Amendments dated as of May 1, 2008, December 30, 2008 and May 29, 2009 (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed on December 3, 2010). *
	10.27	Employment Agreement dated as of July 1, 2005 between the Company and Michael Chambrello (executed on June 17, 2005) (incorporated by reference to Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2005). *
	10.28	Letter Agreement dated as of August 2, 2006 by and between the Company and Michael R. Chambrello, which amended Mr. Chambrello's Employment Agreement dated as of July 1, 2005 (incorporated by reference to Exhibit 10.9 to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2006). *
	10.29	Letter Agreement dated as of May 8, 2008 by and between the Company and Michael R. Chambrello, which amended Mr. Chambrello's Employment Agreement dated as of July 1, 2005, as amended by the Letter Agreement dated as of August 2, 2006 (incorporated by reference to Exhibit 10.3 to the Company's Current Report on Form 8-K filed on May 14, 2008). *
	10.30	Amendment to Employment Agreement dated as of December 30, 2008 by and between the Company and Michael R. Chambrello, which amended Mr. Chambrello's Employment Agreement dated as of July 1, 2005, as amended by the Letter Agreement dated as of August 2, 2006 and the Letter Agreement dated as of May 8, 2008 (incorporated by reference to Exhibit 10.26 to the Company's Annual Report on Form 10-K for the year ended December 31, 2008). *
	10.31	Amendment to Employment Agreement dated as of November 29, 2010 by and between the Company and Michael R. Chambrello, which amended Mr. Chambrello's Employment Agreement dated as of July 1, 2005, as amended by the Letter Agreement dated as of August 2, 2006, the Letter Agreement dated as of May 8, 2008 and the Amendment dated as of December 30, 2008 (incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K filed on December 3, 2010). *
	10.32	Employment Agreement dated as of January 1, 2006 by and between the Company and Robert C. Becker (executed on August 2, 2006) (incorporated by reference to Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2006). *
	10.33	Letter Agreement dated as of October 7, 2008 by and between the Company and Robert C. Becker, which amended Mr. Becker's Employment Agreement dated as of January 1, 2006 (incorporated by reference to Exhibit 10.32 to the Company's Annual Report on Form 10-K for the year ended December 31, 2008). *
	10.34	Amendment to Employment Agreement dated as of December 30, 2008 by and between the Company and Robert C. Becker, which amended Mr. Becker's Employment Agreement dated as of January 1, 2006, as amended by the Letter Agreement dated as of October 7, 2008 (incorporated by reference to Exhibit 10.33 to the Company's Annual Report on Form 10-K for the year ended December 31, 2008). *
	10.35	Employment Agreement dated as of January 1, 2006 by and between the Company and Larry Potts (executed on August 2, 2006) (incorporated by reference to Exhibit 10.4 to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2006). *

146

Exhibit Number		Description
	10.36	Letter Agreement dated as of October 2, 2008 by and between the Company and Larry Potts, which amended Mr. Potts' Employment Agreement dated as of January 1, 2006 (incorporated by reference to Exhibit 10.36 to the Company's Annual Report on Form 10-K for the year ended December 31, 2008). *
	10.37	Amendment to Employment Agreement dated as of December 30, 2008 by and between the Company and Larry Potts, which amended Mr. Potts' Employment Agreement dated as of January 1, 2006, as amended by the Letter Agreement dated as of October 2, 2008 (incorporated by reference to Exhibit 10.37 to the Company's Annual Report on Form 10-K for the year ended December 31, 2008). *
	10.38	Employment and Severance Benefits Agreement dated December 15, 2005 between the Company and Ira H. Raphaelson (incorporated by reference to Exhibit 10.22 to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2005). *
	10.39	Letter Agreement dated as of August 2, 2006 by and between the Company and Ira H. Raphaelson, which amended Mr. Raphaelson's Employment Agreement dated December 15, 2005 (effective as of February 1, 2006) (incorporated by reference to Exhibit 10.11 to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2006). *
	10.40	Letter Agreement dated as of October 6, 2008 by and between the Company and Ira H. Raphaelson, which amended Mr. Raphaelson's Employment and Severance Benefits Agreement dated December 15, 2005, as amended by the Letter Agreement dated as of August 2, 2006 (incorporated by reference to Exhibit 10.45 to the Company's Annual Report on Form 10-K for the year ended December 31, 2008). *
	10.41	Amendment to Employment Agreement dated as of December 30, 2008 by and between the Company and Ira H. Raphaelson, which amended Mr. Raphaelson's Employment and Severance Benefits Agreement dated December 15, 2005, as amended by the Letter Agreement dated as of August 2, 2006 and the Letter Agreement dated as of October 6, 2008 (incorporated by reference to Exhibit 10.46 to the Company's Annual Report on Form 10-K for the year ended December 31, 2008). *
	10.42	Employment Agreement dated as of February 11, 2009 (effective as of January 1, 2009) by and between the Company and Stephen L. Gibbs (incorporated by reference to Exhibit 10.47 to the Company's Annual Report on Form 10-K for the year ended December 31, 2008). *
	10.43	Employment Inducement Stock Option Grant Agreement dated July 1, 2005 between the Company and Michael Chambrello (incorporated by reference to Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2005). *
	10.44	Employment Inducement Stock Option Grant Agreement dated August 8, 2005 between the Company and Steven Beason (incorporated by reference to Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2005). *
	10.45	Employment Agreement dated as of March 2, 2009 (effective April 1, 2009) by and between the Company and Jeff Lipkin (incorporated by reference to Exhibit 10.3 to the Company's Current Report on Form 8-K filed on April 2, 2009). *
	10.46	Employment Agreement dated as of August 8, 2005 by and between the Company and Steven W. Beason (incorporated by reference to Exhibit 10.56 to the Company's Annual Report on Form 10-K for the year ended December 31, 2009). *

147

Exhibit Number		Description
	10.47	Letter Agreement dated as of August 30, 2007 by and between the Company and Steven W. Beason, which amended Mr. Beason's Employment Agreement dated August 8, 2005 (incorporated by reference to Exhibit 10.57 to the Company's Annual Report on Form 10-K for the year ended December 31, 2009). *
	10.48	Letter Agreement dated as of June 17, 2008 by and between the Company and Steven W. Beason, which amended Mr. Beason's Employment Agreement dated as of August 8, 2005, as amended by the Letter Agreement dated as of August 30, 2007 (incorporated by reference to Exhibit 10.58 to the Company's Annual Report on Form 10-K for the year ended December 31, 2009). *
	10.49	Amendment to Employment Agreement dated as of December 30, 2008 by and between the Company and Steven W. Beason, which amended Mr. Beason's Employment Agreement dated as of August 8, 2005, as amended by the Letter Agreement dated as of August 30, 2007 and the Letter Agreement dated as of June 17, 2008 (incorporated by reference to Exhibit 10.59 to the Company's Annual Report on Form 10-K for the year ended December 31, 2009). *
	10.50	Employment Agreement dated as of November 29, 2010 by and between the Company and David L. Kennedy (incorporated by reference to Exhibit 10.3 to the Company's Current Report on Form 8-K filed on December 3, 2010). *
	10.51	Employment Agreement dated as of May 13, 2008 (effective as of July 1, 2008) by and between The Global Draw Ltd and Stephen Frater. *(†)
	10.52	Letter Agreement dated as of June 22, 2010 by and between The Global Draw Ltd and Stephen Frater, which amended Mr. Frater's Employment Agreement dated as of July 1, 2008. *(†)
	10.53	Employment Agreement dated as of December 11, 2006 (effective as of January 1, 2007) by and between Scientific Games International, Inc. and James C. Kennedy. *(†)
	10.54	Amendment to Employment Agreement dated as of December 30, 2008 by and between Scientific Games Corporation and James C. Kennedy, which amended Mr. Kennedy's Employment Agreement dated as of January 1, 2007. *(†)
	10.55	Letter Agreement dated as of May 7, 2009 by and between Scientific Games International, Inc. and James C. Kennedy, which amended Mr. Kennedy's Employment Agreement dated as of January 1, 2007, as amended by the Amendment dated as of December 30, 2008. *(†)
	10.56	Employment Agreement dated as of December 22, 2010 by and between Scientific Games International, Inc. and William J. Huntley. *(†)
	10.57	Employment Agreement dated as of December 22, 2010 by and between Scientific Games International, Inc. and James B. Trask. *(†)
	12	Computation of Ratio of Earnings to Fixed Charges. (†)
	21	List of Subsidiaries. (†)
	23.1	Consent of Deloitte & Touche LLP, Independent Registered Public Accounting Firm. (†)
	23.2	Consent of Reconta Ernst & Young S.p.A., Independent Registered Public Accounting Firm. (†)
	31.1	Certification of Chief Executive Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934. (†)

148

Exhibit Number		Description
	31.2	Certification of Chief Financial Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934. (†)
	32.1	Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (†)
	32.2	Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (†)
	99.1	Report of Reconta Ernst & Young S.p.A., Independent Registered Public Accounting Firm. (†)
	99.2	Financial Statements of Consorzio Lotterie Nazionali. (†)

*

Management contracts and compensation plans and arrangements.

(†)

Filed herewith.

149

EX-10.51

Exhibit 10.51

This EMPLOYMENT AGREEMENT (this “Agreement”) is made as of July 1, 2008 (the “Effective Date”), between The Global Draw Ltd (the “Company”) an indirect subsidiary of Scientific Games Corporation, a Delaware Corporation, headquartered in New York, New York, (USA) and publicly traded on the NASDAQ stock exchange (“SGC”), and Stephen Frater (“Executive”), subject to the approval of the necessary Committees of the Board of Directors of SGC, on the following terms and conditions:

W I T N E S S E T H

1.             Employment; Term.

a.Subject to the Executive being free to take up the appointment, the Company hereby agrees to employ the Executive, and the Executive hereby accepts employment with the Company, in accordance with and subject to the terms and conditions set forth herein.

b.The term of employment of the Executive under this Agreement (the “Term”) shall commence on the Effective Date and continue for an indefinite period. Executive’s employment may be terminated by either party upon giving six (6) months written notice to the other, provided, unless Executive’s employment is terminated earlier in accordance with Section 5 except that the Parties intend for this contract to be effective at least through December 31, 2010.

c.The Executive warrants that by entering into this agreement he will not be in breach of any express or implied terms of any contract or of any other obligation binding upon him.

d.Except for the Global Draw earnout bonus aspects of the Employment Agreement between the Company and the Executive of April 20, 2006, which bonus is to be quantified and paid in 2009, if earned in 2008, that Agreement is terminated and superseded by this Agreement.

2.             Offices and Duties.

a.The Executive will serve as Chief Executive Officer and Chairman of the Board of Directors of the Company and as well as the Chief Executive Officer and Chairman of the Board of Games Media, coordinating the business activities of both companies and reporting to SGC’s Chairman of the Board or other such person nominated by SGC Board of Directors from time to time.

b.The Executive will accept appointment to such position and as an officer or director of any subsidiary or affiliate of the Company if elected to any such position by the shareholders or by the Board of Directors of the Company or any subsidiary or affiliate, as the case may be.

c.In such capacities, the Executive shall perform such duties and shall have such responsibilities as are normally associated with such positions and as otherwise may be assigned to the Executive from time to time by the Chief Executive Officer or Chief Operating Officer or upon the authority of the Board of Directors of SGC.

d.The Executive will work from the Company’s facility currently on Green Lane, Hounslow in the United Kingdom, the Games Media facility in Wolverhampton, and such other locations deemed necessary and appropriate by the Executive (including remote locations with remote

connectivity) until such time as the parties agree that Executive shall work at another location. Executive will undertake reasonable travel as he deems necessary or as reasonably directed by the Chairman or Board of SGC.

e.Subject to Section 5, Executive’s functions, duties and responsibilities are subject to reasonable changes as the Company may in good faith determine. The Executive hereby agrees to accept such employment and to serve the Company to the best of the Executive’s ability in such capacities, devoting substantially all of the Executive’s business time to such employment. The Executive shall observe and comply with all lawful and reasonable requests, instructions, resolutions and regulations of the Board of the Company or SGC. The Executive shall carry out his duties in a proper, loyal and efficient manner to the best of his ability and use his best endeavors to maintain, develop and extend th e business of the Company.

3.             Reporting.  The Executive shall report to the Board in writing any matter relating to the Company or any Group Company or any of its or their officers or employees which he becomes aware of and which could be the subject of a qualifying disclosure as defined by section 43B of the Employment Rights Act 1996.

4.             Compensation; Benefits.

(a)           Base Salary.  During the Term the Company shall pay the Executive a base salary (the “Base Salary”) at the initial rate of two hundred and fifteen thousand British Pounds (£215,000) per annum (less statutory deductions), payable in accordance with the Company’s regular payroll policies and subject to all withholdings that are legally required or are agreed to by the Executive. In the event that the Company, in its sole discretion, from time to time determines to increase the Base Salary, such increased amount shall, from and after the effective date of the increase, constitute the “Base Salary” for purposes of this Agreement.

(b)           Incentive Compensation.  Executive shall have the opportunity annually to earn incentive compensation in amounts determined by the Compensation Committee of the Board of Directors of SGC (the “Compensation Committee”) in accordance with the applicable incentive compensation plan of the Company as in effect from time to time (“Incentive Compensation”). Under such plan, Executive shall have the opportunity to earn up to 66.7% of Base Salary as Incentive Compensation at Target Opportunity (“Target Bonus”) and up to 133.4% of Base Salary as Incentive Compensation at Maximum Opportunity (“Incentive Compensation”) through the MICP of SGC, which payment shall be made subject to applicable withholding taxes and Company payroll policy.  This incentive compensation will not include participation in the one-time Global Draw Earnout Incentive to be awarded in 2009, if earned in 2008, which participation will be unaffected by this Agreement.

(c)           Eligibility for Annual Equity Awards.  The Executive shall be eligible to receive an annual grant of stock options or other equity awards, in the sole discretion of the Compensation Committee, in accordance with the applicable plans and programs for executives of the Company and subject to the Company’s right to at any time amend or terminate any such plan or program, so long as any such change does not adversely affect any accrued or vested interest under any such plan or program.  Any such awards under the existing 2003 Plan would vest over five (5) years, twenty percent (20%) in each year, subject

2

to lapsing of any unvested awards at termination which equity awards will be governed by the laws of the United States.  Any such awards do not form part of the Executive’s contract of employment under UK law.  On termination of the Appointment howsoever arising the Executive shall not be entitled to any compensation for the loss of any rights or benefits under any equity or stock option award or scheme (operated by the Company or any Group Company) in which he may participate.

(d)           Expense Reimbursement.     The Company shall reimburse the Executive for all reasonable and necessary travel, business entertainment and other business expenses incurred by the Executive in connection with the performance of the Executive’s duties under this Agreement, on a timely basis upon submission by the Executive of vouchers therefore in accordance with the Company’s standard procedures.

(e)           Health and Welfare Benefits.   The Executive shall be entitled to participation in any and all medical insurance, group health, disability, life, insurance, retirement, and such other plans and programs which are made generally available by the Company to its other similarly situated executives in accordance with the terms of such plans and programs and subject to the Company’s right to at any time amend or terminate any such plan or program.  In particular, Executive, his wife and children under age 16 shall be eligible to participate in Company sponsored private health care plan. The Executive shall be entitled to paid holiday and such other time off for bank holidays each holiday year in accordance with the Company’s policies in effect from time to time. Du ring any period in which the Executive is eligible to receive such benefits, the Company’s obligations shall be limited to paying to the Executive such sums as it receives in respect of the Executive under such insurance plans mentioned above; and, further, for the avoidance of doubt, Executive agrees in such circumstances to accept such sums in place of further payment of Base Salary and any other remuneration including Incentive Compensation and the provision of a company car under the terms of this Agreement.  During any such period, the Executive shall continue to be bound by all his obligations (other than to provide his services) under this Agreement. The benefits referred to above are conditional on the relevant insurer accepting cover for the Executive at normal rates and accepting liability for any particular claim.  In the event that the relevant insurer does not accept cover or liability in respect of the Executive at normal rates which are reasonable in the opinion of the Company o r any claim by the Executive in respect of any of the benefits referred to above, the Company shall have no obligation to provide any alternative benefit or cover in this regard. The provision of the benefits described above shall not restrict the Company’s ability to terminate the Executive’s employment for any reason including, without limitation, incapacity. All and any benefits referred to above shall cease with effect from the date of termination of Executive’s employment.

(f)            Car. Payments pursuant to Section 4.5 of the April 20, 2006 Agreement will continue during this Agreement.

(g)           Sign on Equity Awards.  As of the effective date of this Agreement, and conditioned on the Shareholder’s Approval of an increase in share availability for executive compensation, on the Effective Date of this Agreement, the Company shall grant to Executive 35,000 stock options under the Scientific Games Corporation 2003 Incentive Compensation Plan (the “Award Plan”), as amended and restated and individual stock option and restricted stock agreements to be entered into by and between the Company and the

3

Executive (the “Equity Award Agreements”).  The equity agreements shall provide that the equity awards shall vest with respect to twenty percent (20%) of the shares of common stock subject to such award on each of the first five anniversaries of the grant date, subject to certain provisions relating to forfeiture as described in this Agreement, the Equity Award Agreements or the Equity Plan.

(h)           Pension: Executive shall participate in Company provided pension regime at the same level as like situated U.K. executives of the Company.

5.             Disciplinary and Grievance Procedures

(a)           There is no contractual disciplinary procedure which applies to the Executive’s employment with the Company.  For the avoidance of doubt, this procedure is non contractual.

(b)           The Executive shall refer any grievance he may have about his employment or an appeal in connection with any disciplinary decision relating to him to the Chairman of the Board in writing in the first instance.

(c)           The Board shall have the right to suspend the Executive from his duties on such terms and conditions as the Board shall determine for the purpose of carrying out an investigation into any allegation of misconduct or negligence or an allegation of bullying harassment or discrimination against the Executive and pending any disciplinary hearing. The Company shall be required to continue to pay the Salary and provide all other contractual benefits to the Executive during any period of suspension.  The Company shall not be required to give any reason for exercising its right under this clause.

6.             Termination of Employment.

(a) Termination by the Company For Cause:  The Company shall be entitled, as defined by U.K. law, to terminate this Agreement.  A sufficient cause to terminate without notice by the Company shall be the following:

(0)the making of decisions without a grant of authority from the Executive’s supervisor or the Company’s shareholders, respectively, for such decisions;

(1)any violation of the non-competition or confidentiality provisions of this Agreement;

(2)repeated or flagrant failure to follow instructions of the Executive’s supervisor;

(3)any continued or repeated violation of any provision of this Agreement despite receiving written notice of such violation from the Company;

(4)SGC or Board reasonably believes that the Executive is guilty of any gross or serious misconduct or (after [written] warning)

4

wilful neglect in the discharge of his duties under this agreement; or

(5)SGC or Board reasonably believes that the Executive is guilty of any fraud, dishonesty or conduct tending to bring himself, the Company or any Group Company into disrepute including for the avoidance of doubt any criminal offence (except a road traffic offence not involving a custodial sentence); or

(6)the Executive becomes prohibited by law from being or acting as a director of the Company;

(7)the Executive resigns as a director of the Company other than at the request of the Board;

(8)any failure to meet the standards applicable to a company subject to gaming regulations; or

(9)a violation of the anti-corruption warranties and representations contained in Attachment A.

Following a termination of employment for Cause, Executive will not be entitled to receive any additional compensation or benefits under this Agreement except in accordance with U.K. law.

(b) Termination By the Executive:  Should the Executive wish to terminate this Agreement during the term, Executive may do so by providing six (6) months written notice to her supervisor after which termination, Executive shall be entitled to earned salary and vested and non-forfeitable benefits and other amounts required by U.K. law.

(c) Termination by Reason of Disability or Death of Executive or Termination by the Company without Cause:  In the event the Executive becomes disabled and is unable to perform assigned duties under this Agreement or dies, or in the event this employment is terminated by the Company without Cause, the Executive, or Executive’s designated beneficiary, as the case may be, shall receive such benefits as required by U.K. law, provided, however, that the parties agree that in the event of death, Executive’s estate shall receive a sum equal to three (3) times his base salary through a Company paid life insurance policy.  In the event Executive is terminated by the Company without cause, except to the extent otherwise provided at the time of grant under the terms of any equity award made to Execu tive, all stock options, deferred stock, restricted stock and other equity-based awards held by Executive at termination will become fully vested and non-forfeitable, and, in all other respects, all such options and other awards shall be governed by the plans and programs and the agreements and other documents pursuant to which the awards were granted.

(d)  Other Conditions of Termination

(i)            Upon termination of Executive’s employment with the Company, the Executive shall upon the request of the Company resign from

5

all (if any) offices held by him in the Company and all (if any) trusteeships held by him under any pension scheme or any trust established or subscribed to/by the Company; and in the event of his failure to do so the Company is hereby irrevocably authorized to appoint some person in his name and on his behalf to sign and execute all documents and do all things necessary to constitute and give effect to such resignation and the Executive shall immediately return to the Company all correspondence, documents, papers, memoranda, notes, records such as may be contained in magnetic media or other forms of computer storage, videos, tapes (whether or not prepared or produced by his) and any copies thereof charge and credit cards and all other property (including any car) belonging to the Company which may be in the Executive’s possession or under his control.

(ii)           The Executive shall not at any time after the termination of his employment represent himself as being in any way connected with or interested in the business of the Company. The Company may in its absolute discretion at any time after notice of termination shall have been given by either party lawfully terminate this Agreement by notice in writing with immediate effect by paying to the Executive an amount equal to his Base Salary entitlement for the then unexpired period of notice (subject to deduction at source of income tax and national insurance contributions).

(iii)          The Company reserves the right to place the Executive on garden leave in accordance with the terms of Schedule 1 and also in its absolute discretion to require the Executive to take any unused but accrued holiday entitlement during any period of notice.

(iv)          Except as may be provided under this Agreement, under any other written agreement between the Executive and the Company, or under the terms of any plan or policy applicable to the Executive, the Executive shall have no right to receive any other compensation from the Company, or to participate in any other plan, arrangement or benefit provided by the Company, with respect to any future period after such termination or resignation.

7.             Retirement Age.   Subject to the statutory right to request to continue working beyond normal retirement age, the Appointment will terminate automatically upon the Executive reaching normal retirement age which is 65.

8.             Assignability; Binding Effect.  Neither this Agreement nor the rights or obligations hereunder of the parties hereto shall be transferable or assignable by the Executive, except in accordance with the laws of descent and distribution and as specified below. The Company may assign this Agreement and the Company’s rights and obligations hereunder, and shall assign this Agreement and such rights and obligations, to any Successor (as hereinafter defined) which, by operation of law or otherwise, continues to carry on substantially the business of the Company (or a business unit of the Company for which the Executive provided services) prior to the event of succession, and the Company shall, as a condition of the succession, require such Successor to agree in writing to assume the Company’s obligations an d be bound by this Agreement. For purposes of this Agreement, “Successor” shall mean any person that succeeds to, or has the practical ability to control, the Company’s business directly or indirectly, by merger or consolidation, by purchase or ownership of voting securities of the Company or all or substantially all of its assets or those

6

relating to a particular business unit of the Company to which provides services, or otherwise. The Company may also assign this Agreement and the Company’s rights and obligations hereunder to any affiliate of the Company, provided that upon any such assignment the Company shall remain liable for the obligations to the Executive hereunder. This Agreement shall be binding upon and inure to the benefit of the Executive, the Executive’s heirs, executors, administrators, and beneficiaries, and shall be binding upon and inure to the benefit of the Company and its successors and assigns.

9.     Other Conditions.

(a)           This Agreement is also conditioned on Executive’s compliance with Company policies, the Scientific Games UK Code of Conduct and the specific terms contained in Attachment A to this Agreement.

(b)           The parties of this Agreement have not entered into any other written or oral agreements, relating to the subject matter hereof.

(c)           If any provision of this Agreement is or becomes ineffective, the remaining provisions of this Agreement shall thereby not be affected. In such a case, the parties shall replace the ineffective provision by a legally admissible provision which as closely as possible reaches the economic goal of the invalid provision.

(d)           Any amendments or additions to this Agreement shall be in writing to become effective.

(e)           This Agreement shall be governed by U.K Law except as to those provisions relating to the award of SGC equity which shall be governed by U.S. law related to securities.

10.           Notices.  Whenever under this Agreement it becomes necessary to give notice, such notice shall be in writing, signed by the party or parties giving or making the same, and shall be served on the person or persons for whom it is intended or who should be advised or notified, by Federal Express or other similar overnight service or by certified or registered mail, return receipt requested, postage prepaid and addressed to Executive at his last address with the Company and to the Company at the address set forth below or at such other address as may be designated by such party by like notice:

Scientific Games Corporation

750 Lexington Avenue

New York, N.Y. 10022

Attention: General Counsel

11.   Data Protection. The Executive’s personal data will be held by the Company in its manual and automated filing systems.  The Executive consents to the processing and disclosure of such data both inside and, where necessary, outside the European Economic Area (including in particular, but without limitation, the US)  in order for the Executive’s role to be performed and this agreement to be fulfilled, for decisions to be made regarding the Executive’s employment or continued employment, for obtaining or carrying out work from or for customers or potential customers, or for the purpose of any potential sale of over 50% of the shares of the Company or any Holding Company of the Company or other change of

7

control or any potential transfer of the Executive’s employment under the Transfer of Undertaking (Protection of Employment) Regulations 2006. Disclosure may include, in the case of sale, change of control or transfer, disclosure to the potential purchaser or investor and their advisors and, in the case of obtaining or carrying out work, disclosure to customers or potential customers. The Executive consents to the Company processing sensitive data including medical information for the purpose of the performance of the Appointment and fulfillment of this agreement and determining the Executive’s fitness to carry out duties on behalf of the Group.  The Executive further consents to the Company processing data regarding sex, marital status, race, ethnic origin or disability for the purpose of monitoring to ensure equality of opportunity within the Group. The Executive shall use all reasonable endeav ours to keep the Company informed of any changes to his personal data.

12.   Contracts (Rights Of Third Parties) Act 1999. A person who is not party to this agreement shall have no right under the Contracts (Rights of Third Parties) Act 1999 to enforce any term of this agreement.  This clause does not affect any right or remedy of any person which exists or is available otherwise than pursuant to that Act.

13.   Tax. The Executive shall pay and fully indemnify the Company against all income tax payable by the Company on his behalf by reason of the provision of the company car referred to in clause 4 above and any of the other benefits received by the Executive in connection with the Appointment.  The Company shall be entitled to make deductions from the Base Salary or other payments due to the Executive to satisfy any such income tax liability.

IN WITNESS WHEREOF, each of the parties hereto has duly executed this Agreement on May 13, 2008, to be deemed effective as of the date first above written.

The Global Draw
By:	/s/ Ira H. Raphaelson
Ira H. Raphaelson
Director
Acknowledged and Agreed:
/s/ Stephen Frater
Stephen Frater
Date:	May 13, 2008

8

ATTACHMENT A

Warranties, Obligations and Restraints

The Company existence is based on research and development and the Company business consists in selling products derived from the Company know how and research.  The Company has invested substantial money in securing appropriate employees highly remunerated for their abilities and the know-how they are bringing to the Company.  The Company every year spends considerable amounts in development and research and it is to be recognised that the very existence of the Company depends on the research and know-how of its employees.  In these circumstances you acknowledge that the following warranties, obligations and restrictions are reasonable.

1.1Warranties by Employees

(a)You certify and warrant that all information supplied by you to the Company is complete, truthful, and accurate.

(b)You certify and represent that, in connection with its activities with or for the Company, you:

(i)will comply with the laws, rules and regulations of all applicable jurisdictions including, but not limited to, applicable gaming, competition, anti-money laundering, licensing, and registration laws, as well as anti-corruption laws, including the laws, regulations, and administrative requirements promulgated under the OECD Convention on Combating Bribery of Foreign Public Officials as adopted by the UK and the United States Foreign Corrupt Practices Act (FCPA);

(ii)have not made or authorized and will not, directly or indirectly, make or authorize any payments or gifts, or offers or promises of payments or gifts or things of value, directly or indirectly, to any official or employee of any U.K., U.S. or foreign national, state, or local (including EU) government or any agency or instrumentality thereof; to any candidate for public office; to any political party, or any officer or employee thereof; and

(iii)have not paid, or offered, or agreed to pay any political contributions in respect of any business for which you provide or may have provided services to the Company, and that you will not do so in the future;

(iv)will exercise reasonable oversight to ensure compliance with applicable laws and Company policy by subordinates and such consultants as have been engaged in accordance with Company policy and whose work is supervised by you.

(v)will fully cooperate in any investigation in the event that the Company requests such cooperation.

(c)           Attached hereto as Schedule 2 is a Code of Business Conduct (the Code). By execution of this agreement, you warrant and certify that you fully understand the Code with respect to international sales transactions and relations with customers and suppliers, and that you will do nothing in the performance of

9

the services required under this agreement which will be in conflict with the Code.

(d)You further certify and represent that, in connection with its activities for the Company, you will represent the interests of the Company zealously and in accordance with the highest professional and ethical standards.  You will advise the Company if at any time you become aware that positions taken by you or the Company can be interpreted to violate any law.

(e)You certify and represent that, unless disclosed in writing to the Company prior the execution of this agreement, you have not been convicted of or pleaded guilty to a criminal offence (Except MINOR traffic citations), including one involving fraud, corruption, or moral turpitude and that you are not now the subject of any government investigation for such offences.

(f)You agree to give prompt written notice to the Company if, at any time during the term of the agreement, you have failed to comply with or have breached any of the warranties in this Attachment.

You specifically acknowledge that the Company is subject to the gaming and licensing requirements of various jurisdictions and is obliged to take reasonable efforts to determine the suitability of its business associates.  You agree to cooperate fully with the Company in providing it with any information, of whatever nature, that the Company deems necessary or appropriate in assuring itself that you possess the good character, honesty, integrity, and reputation applicable to those engaged in the gaming industry, and specifically represent that there is nothing in your background, history, or reputation that would be deemed unsuitable under the standards applicable to the gaming industry.  If the Company, during the term of this agreement, is notified by any regulatory agency that the conduct of the business with you will jeopardize the Company’s or an affiliate’s license, or the abili ty to be licensed, or if the Company concludes that you fail to meet the above criteria, this agreement shall terminate immediately upon written notice to you, at:

1.2Competition

You warrant that at the date of commencement of employment, and during the term of this agreement, you will not be directly or indirectly engaged, connected or interested in any trade, business, company or occupation of any kind which is in competition, or potential competition, with the Company Business or the business of any subsidiary or company related from time to time to the Company.

1.3Confidentiality

During the course of your employment, you will have access to confidential information of the Company or of a subsidiary or a company related from time to time to the Company.  You agree to maintain secrecy concerning business matters and to abstain from communicating any business information to third parties who are not expressly authorised by the Company to receive such information.  In this context, you are specifically obligated in any capacity (including as employee, independent contractor, consultant, principal, agent, director, joint venture, partner, trustee, beneficiary) to maintain strict secrecy with respect to all software data carriers, information, documents and documentation that have been disclosed, are disclosed or will be disclosed to you as a result of the agreement and your employment with the Company.  You agree that during the period of this agreement and also after its

10

termination, you shall in no way whatsoever make such information, and any Confidential Information or Developed Material whether directly or indirectly, accessible to third parties, i.e., people not working for the Company.  You also agree that you will not in any capacity directly or indirectly during the period of the agreement and also after its termination, except as directed by the Company, use or facilitate, or allow others to use, Confidential Information or Developed Material. You acknowledge that this agreement is confidential and you shall consider it as such.

1.4Restraint

You will not, for six months and the geographical area of the UK and Austria after the termination of your employment with the Company:

(a)perform work or provide services in any capacity (including as employee, independent contractor, consultant, principal, agent, director, joint venture, partner, trustee, beneficiary), directly or indirectly, for any person or entity that competes with the Company’s Business, in which you have been involved or in respect of which you have received confidential information and for the same period shall not carry on any business, either directly or indirectly, that so competes with the Company;

(b)perform work or provide services in any capacity (including as employee,  independent contractor, consultant, principal, agent, director, joint venture, partner, trustee, beneficiary), directly or indirectly, for any person, and for the same period shall not carry on any business, either directly or indirectly, that so competes with the Company in the geographical area herein;

(c)solicit, canvas or endeavour to entice away from the Company any client or customer of the Company, or any person, who at any time during the last 6 months of your employment including the date of the termination of your employment, were or are clients or customers of the Company or are in the habit of dealing with the Company and with whom you had obtained business on behalf of the Company or any group company or for whom you had management responsibility;

(d)solicit, interfere with, or endeavour to entice away any senior employee of the Company employed in the capacity of executive, senior sales person or senior technical employee; or

(e)counsel, or otherwise assist any person to do any of the acts referred to above.

1.5Property of Developed Material

You acknowledge and agree that all Developed Material and all property (whether tangible or intangible) which is created, developed, expanded, added to and/or modified in any manner by you during your employment is, and will remain, the sole and exclusive property of the Company at all times during your employment and after termination.

1.6Inventions

You agree that you shall immediately inform the Company about any inventions, designs, improvements or developments made during working time or leisure time, by you alone or in co-operation with someone else, which you become aware of during your employment period and which relate to the business of the Company.  You

11

expressly undertake to transfer any claims in such invention to the Company without any charge and to sign all papers and necessary wherewithal to obtain patents, on behalf of the Company and at the cost of the Company.

1.7Assignment of Intellectual Property

You agree that you hereby assign all your assignable rights, title and interest to, and in, any property relating to the Company Business (whether tangible or intangible) which is created during your employment, including all rights to any designs, inventions, patents or other industrial or intellectual property.

1.8Misrepresentation Following Termination

You undertake that you will not, after termination of your employment, represent that you continue to be in any way connected with, or interested in the Company or any subsidiary or related company from time to time.

1.9Obligations and Restraints Considered Reasonable

You acknowledge:

(a)that the restraints contained herein are reasonable in all the circumstances of your employment, and that you agree they are necessary for the protection and maintenance of the Company and of the Company Business.

(b)Any provision in this agreement which is found by a court of competent jurisdiction invalid or unenforceable is to be read down for the purposes of that jurisdiction, if possible, so as to be valid and enforceable, and is otherwise capable of being severed to the extent of the invalidity or unenforceability, without affecting the remaining provisions of this agreement or affecting the validity or enforceability of that provision in any other jurisdiction.  This clause has no effect if the severance alters the basic nature of this agreement, or is contrary to public policy.

1.10Injunction

You acknowledge that your failure to observe and perform the obligations and restraints in this Appendix may cause the Company damage which is unable to be assessed or compensated by damages.  You agree that in these circumstances, the Company may be entitled if the law so permits to seek an order for specific performance, an injunction restraining you from acting in breach of the restraints in herein, or any other equitable remedy available.

12

1.11Waiver of Restraint

The Company may at its own discretion wave any or all restraints imposed by this Agreement. Any such waver of restraint must be formally presented in writing to you by the Company.

/s/ Stephen Frater

Executive

13

SCHEDULE 1

GARDEN LEAVE

The Company reserves the right at its absolute discretion to allow or require the Executive to take such period of additional holiday as it thinks fit during the period following notice of termination, without giving any reason for so acting and/or to remove him from his normal duties during all or part of his notice period.  This is referred to as “Garden Leave”.

During such time the Company shall not be obliged to provide the Executive with work, but shall continue to pay him his salary and provide contractual benefits.

During this period the Executive shall remain available for work, may be required to perform tasks other than his normal duties which are consistent with his position or a hand over and he must not begin any employment or engagement with any third party.

If the Company requires the Executive to take Garden Leave, the Company reserves the right to require him not to attend any Company premises and not to have business contact with any customers, suppliers or employees of the Company during the period of Garden Leave without the prior consent of the President of Scientific Games International.

The Executive’s other express and implied duties to the Company as a result of his employment continue during Garden Leave.

14

EX-10.52

Exhibit 10.52

22 June 2010

Stephen Frater

The Global Draw

99 Green Lane, Hounslow

Middlesex, TW4 6BW, UK

Dear Steve:

Subject to final approval of the Compensation Committee, it is my pleasure to confirm our understanding regarding certain amendments to the Employment Agreement dated 1 July 2008 (the “Agreement”), between you and The Global Draw Ltd (the “Company”) an indirect subsidiary of Scientific Games Corporation, a Delaware Corporation, headquartered in New York, New York, (USA). Except as expressly set forth herein, the terms of the Agreement shall remain in full force.

Employment Term. The “Employment Term” set forth in Section 1(b) of the Agreement shall be amended to read:

“The term of employment of the Executive under this Agreement (the “Term”) shall commence on the Effective Date and continue by mutual agreement through 31 December 2012. Executive’s employment may be terminated by either party upon giving six (6) months written notice to the other, provided, unless Executive’s employment is terminated earlier in accordance with Section 5 except that the Parties intend for this contract to be effective through 31 December 2012.”

Incentive Compensation.  In addition to your current opportunity to earn up to 66.7% of Base Salary as Incentive Compensation at Target Opportunity (“Target Bonus”) and up to 133.4% of Base Salary as Incentive Compensation at Maximum Opportunity (“Incentive Compensation”) through the MICP of SGC, you may be eligible, at the sole discretion of the Chief Executive Officer of Scientific Games Corporation and upon approval of the Compensation Committee, for an additional annual discretionary bonus based upon Company performance and your individual performance.

Car. Effective 1 July 2010, you will be eligible for an annual car allowance of £18,000 gross paid monthly.

Please indicate your agreement to the foregoing by countersigning and returning an original signed copy to me.

The Global Draw
By:
/s/ Ira H. Raphaelson
Ira H. Raphaelson
Director
Acknowledged and Agreed:
/s/ Stephen Frater
Stephen Frater
Date:	22 June 2010

2

EX-10.53

Exhibit 10.53

EMPLOYMENT AGREEMENT

This EMPLOYMENT AGREEMENT (this “Agreement”) is made as of January 1, 2007 (the “Effective Date”), by and between SCIENTIFIC GAMES INTERNATIONAL, INC., a Delaware corporation (the “Company”), which is a subsidiary of SCIENTIFIC GAMES CORPORATION, a Delaware corporation (“SGC”), and JAMES C. KENNEDY (“Executive”).

W I T N E S S E T H

WHEREAS, Executive has been employed pursuant to an Employment and Severance Benefits Agreement with the Company dated September 6, 2000 as modified by a letter agreement dated December 18, 2002 (the “Original Agreement”); and

WHEREAS, the Company and Executive desire that this Agreement replace and supersede the Original Agreement;

NOW, THEREFORE, in consideration of the premises and the mutual benefits to be derived herefrom and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows:

1.             Termination of Existing Employment Agreements.  As of the Effective Date, all existing employment agreements between the parties, whether oral or written, including the Original Agreement, are hereby terminated and superseded.

2.             Employment; Term. The Company hereby agrees to employ Executive, and Executive hereby accepts employment with the Company, in accordance with and subject to the terms and conditions set forth herein. The term of employment of Executive under this Agreement (the “Term”) shall be the period commencing on the Effective Date and ending on December 31, 2009, as may be extended in accordance with this Section and subject to earlier termination in accordance with Section 5. The Term shall be extended automatically without further action by either party by one additional year (added to the end of the Term), and then on each succeeding annual anniversary thereafter, unless either party shall have given written notice to the other party at least one hundred and eighty (180) days prior to the date upon which s uch extension would otherwise have become effective electing not to further extend the Term, in which case Executive’s employment shall terminate on the date upon which such extension would otherwise have become effective, unless earlier terminated in accordance with Section 5. It is also intended that Executive’s previous term of employment with the Company shall be included when calculating Executive’s tenure at the Company for all purposes.

3.             Offices and Duties. During the Term, the Executive will serve as Senior Vice President of Sales and Global Marketing for the Company, and as an officer or director of any subsidiary or affiliate of the Company if elected to any such position by the shareholders or by the Board of Directors of the Company or any subsidiary or affiliate, as the case may be. In such capacities, the Executive shall perform such duties and shall have such responsibilities as are normally associated with such positions and as otherwise may be assigned to the Executive from

time to time by the Chief Executive Officer or Chief Operating Officer of the Company, or upon the authority of the Board of Directors of the Company. Subject to Section 5(e), Executive’s functions, duties and responsibilities are subject to reasonable changes as the Company may in good faith determine. The Executive hereby agrees to accept such employment and to serve the Company to the best of the Executive’s ability in such capacities, devoting substantially all of the Executive’s business time to such employment.

4.             Compensation; Benefits

(a)           Base Salary.  During the Term the Company shall pay Executive a base salary (the “Base Salary”) at the initial rate of three hundred forty thousand five hundred dollars ($342,500) per annum, payable in accordance with the Company’s regular payroll policies and subject to all withholdings that are legally required or are agreed to by Executive. In the event that the Company, in its sole discretion, from time to time determines to increase the Base Salary, such increased amount shall, from and after the effective date of the increase, constitute the “Base Salary” for purposes of this Agreement.

(b)           Incentive Compensation.  Executive shall have the opportunity annually to earn incentive compensation in amounts determined by the Compensation Committee of the Board of Directors of SGC (the “Compensation Committee”) in accordance with the applicable incentive compensation plan of the Company as in effect from time to time (“Incentive Compensation”). Under such plan, Executive shall have the opportunity to earn up to 50% of Base Salary as Incentive Compensation at Target Opportunity (“Target Bonus”) and up to 100% of Base Salary as Incentive Compensation at Maximum Opportunity.

(c)           Eligibility for Annual Equity Awards.  Executive shall be eligible to receive an annual grant of stock options or other equity awards, in the sole discretion of the Compensation Committee, in accordance with the applicable plans and programs for senior executives of the Company and subject to the Company’s right to at any time amend or terminate any such plan or program, so long as any such change does not adversely affect any accrued or vested interest under any such plan or program.

(d)           Expense Reimbursement.     The Company shall reimburse Executive for all reasonable and necessary travel, business entertainment and other business expenses incurred by Executive in connection with the performance of Executive’s duties under this Agreement, on a timely basis upon submission by Executive of vouchers in accordance with the Company’s standard procedures.

(e)           Health and Welfare Benefits.   Executive shall be entitled to participate, without discrimination or duplication, in any and all medical insurance, group health, disability, life, accidental death, dismemberment insurance, 401(k) or other retirement, deferred compensation, profit sharing, stock ownership and such other plans and programs which are made generally available by the Company to its other senior executives in accordance with the terms of such plans and programs and subject to the Company’s right to at any time amend or terminate any such plan or program. Executive shall be entitled to paid vacation, holidays, and any other time off in accordance with the Company’s policies in effect from time to time.

2

(f)            Taxes and Internal Revenue Code 409A.  The Company makes no representations regarding the tax implications of the compensation and benefits to be paid to Executive under this Agreement, including, without limitation, under Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”), and applicable administrative guidance and regulations.  Internal Revenue Code Section 409A governs plans and arrangements that provide “nonqualified deferred compensation” (as defined under the Code) which may include, among others, nonqualified retirement plans, bonus plans, stock option plans, employment agreements and severance agreements.  The Company reserves the right to provide compensation and benefits under any plan or arrangement in amounts, at ti mes and in a manner that minimizes taxes, interest or penalties as a result of Section 409A. In addition, in the event any benefits or amounts paid hereunder are deemed to be subject to Section 409A, including payments under Section 5 of this Agreement, Executive consents to the Company adopting such conforming amendments as the Company deems necessary, in its reasonable discretion, to comply with Section 409A (including, but not limited to, delaying payment until six months following termination of employment).

5.             Termination of Employment.  Executive’s employment hereunder may be terminated prior to the end of the Term under the following circumstances:

(a)           Termination by Executive for Other than Good Reason.  Executive may terminate his employment hereunder for any reason or no reason upon 60 days’ prior written notice to the Company referring to this Section 5(a); provided, however, that a termination of Executive’s employment for “Good Reason” (as defined below) shall not constitute a termination by Executive for other than Good Reason pursuant to this Section 5(a). In the event the Executive terminates his employment for other than Good Reason, the Executive shall be entitled only to the following compensation and benefits (collectively, the “Standard Termination Payments”):

(i)            Any accrued but unpaid Base Salary (as determined pursuant to Section 4(a)) for services rendered to the date of termination paid to Executive in accordance with regular payroll policies;

(ii)           All vested nonforfeitable amounts owing or accrued at the date of termination under benefit plans, programs, and arrangements set forth or referred to in Section 4 hereof in which Executive theretofore participated will be paid under the terms and conditions of such plans, programs, and arrangements (and agreements and documents thereunder);

(iii)          Except as provided in Section 6.6, all stock options and other equity awards will be governed by the terms of the plans and programs under which the options or other awards were granted; and

(iv)          Reasonable business expenses and disbursements incurred by Executive prior to such termination will be reimbursed in accordance with Section 4(d).

3

(b)           Termination by Reason of Death.  If Executive dies during the Term of this Agreement, the Company shall pay to the last beneficiary designated by the Executive by written notice to the Company or, failing such designation, to Executive’s estate, the following amounts:

(i)            The Standard Termination Payments (as defined in Section 5(a)); and

(ii)           A lump sum payment equal to Executive’s annual Base Salary, payable within 30 days of termination.

(c)           Termination By Reason of Total Disability.  Executive and the Company agree that Executive may not reasonably be expected to be able to perform his duties and the essential functions of his office in the event of the Executive’s “Total Disability.” For purposes of this Agreement, “Total Disability” shall mean Executive’s (a) becoming eligible to receive benefits under any long-term disability insurance program or (b) failure to perform the duties and responsibilities contemplated under this Agreement for a period of more than 180 days during any consecutive 12-month period due to physical or mental incapacity or impairment. In the event that Executive’s employment is terminated by reason of Total Disability, the Company shall pay the following amo unts, and make the following other benefits available, to Executive:

(i)            The Standard Termination Payments (as defined in Section 5(a));

(ii)           An amount equal to the sum of (A) Executive’s annual Base Salary and (B) Executive’s “Severance Bonus Amount” (as defined below) payable over a period of twelve (12) months after termination in accordance with Section 5(f) of this Agreement, provided such amount shall be reduced by any disability payments provided to Executive as a result of any disability plan sponsored by the Company or its affiliates providing benefits to Executive. For purposes of this Agreement, “Severance Bonus Amount” shall mean an amount equal to the highest annual Incentive Compensation paid to Executive in respect of the two most recent fiscal years of the Company but not more than the Executive’s Target Bonus for the-then current fiscal year;

(iii)          In lieu of any Incentive Compensation for the year in which such termination of employment occurs, payment of an amount equal to (A) the highest annual Incentive Compensation paid to Executive in respect of the two most recent fiscal years of the Company but not more than Executive’s Target Bonus for the year of termination, multiplied by (B) a fraction the numerator of which is the number of days Executive was employed in the year of termination and the denominator of which is the total number of days in the year of termination, payable as and when such Incentive Compensation would otherwise have been payable under Section 4(b); and

(iv)          If Executive elects to continue medical coverage under the Company’s group health plan in accordance with COBRA, the Company shall pay the monthly premiums for such coverage for a period of twelve (12) months.

4

(d)           Termination by the Company for Cause.  The Company may terminate Executive’s employment hereunder for “Cause” upon written notice to Executive referring to this Section 5(d). For purposes of this Agreement, the term “Cause” shall mean (i) gross neglect by the Executive of the Executive’s duties hereunder; (ii) conviction (including conviction on a nolo contendere plea) of the Executive of any felony; (iii) conviction (including conviction on a nolo contendere plea) of the Executive of any non-felony crime or offense involving the property of the Company or any of its subsidiaries or affiliates or evidencing moral turpitude; (iv) willful misconduct by the Executive in connection with the performance of the Executive’s duties hereunde r; (v) intentional breach by the Executive of any material provision of this Agreement; (vi) material violation of material provision of the Company’s Code of Conduct; or (vii) any other willful or grossly negligent conduct on the part of the Executive which would make the Executive’s continued employment by the Company materially prejudicial to the best interests of the Company; provided, however, that a termination by the Company under Sections 5(d)(i), 5(d)(v), 5(d)(vi) or 5(d)(vii), if curable, shall be effective only if, within 21 days following delivery of a written notice by the Company to Executive that the Company is terminating Executive’s employment for Cause and setting forth in reasonable detail the facts and circumstances allegedly constituting Cause, Executive has failed to cure the circumstances giving rise to Cause.   In the event that Executive’s employment is terminated by the Company for Cause, the Executiv e shall be entitled to receive only the Standard Termination Payments (as defined in Section 5(a)).

(e)           Termination by the Company Without Cause or by Executive for Good Reason.  The Company may terminate Executive’s employment hereunder at any time, without Cause, for any reason or no reason, and Executive may terminate his employment hereunder for “Good Reason.” For purposes of this Agreement, “Good Reason” shall mean that without Executive’s prior written consent, any of the following shall have occurred:  (i) a material change, adverse to Executive, in Executive’s positions, titles, offices, or duties as provided in Section 3, except, in such case, in connection with the termination of Executive’s employment for Cause, Total Disability or death; (ii) an assignment of significant duties to Executive which are inconsistent with Executive’s positions or offices held under Section 3; (iii) a decrease in Base Salary or material decrease in Executive’s incentive compensation opportunities provided under this Agreement; and (iv) any other failure by the Company to perform any material obligation under, or breach by the Company of any material provision of, this Agreement; provided, however, that a termination by Executive for Good Reason under any of clauses (i) — (iv) of this Section 5(e) shall not be considered effective unless Executive shall have provided the Company with written notice of the specific reasons for such termination within thirty (30) days after he has knowledge of the event or circumstance constituting Good Reason and the Company shall have failed to cure the event or condition allegedly constituting Good Reason within thirty (30) days after notice has been given to the Company. In the event that Executive’s employment is terminated by the Company without Cause or by Executive for Good Reason, the Company shall pay the following amounts, and make the following other benefits available, to Executive:

(i)            The Standard Termination Payments (as defined in Section 5(a));

5

(ii)           An amount equal to the sum of (A) Executive’s annual Base Salary and (B) Executive’s Severance Bonus Amount payable over a period of twelve (12) months after termination in accordance with Section 5(f) of this Agreement;

(iii)          Except to the extent otherwise provided at the time of grant under the terms of any equity award made to Executive, all stock options, deferred stock, restricted stock and other equity-based awards held by Executive at termination will become fully vested and non-forfeitable, and, in all other respects, all such options and other awards shall be governed by the plans and programs and the agreements and other documents pursuant to which the awards were granted;

(iv)          In lieu of any Incentive Compensation for the year in which such termination of employment occurs, payment of an amount equal to (A) the highest annual Incentive Compensation paid to Executive in respect of the two most recent fiscal years of the Company but not more than the Executive’s Target Bonus for the year of termination, multiplied by (B) a fraction the numerator of which is the number of days Executive was employed in the year of termination and the denominator of which is the total number of days in the year of termination, payable as and when such Incentive Compensation would otherwise have been payable under Section 4(b); and

(v)           If Executive elects to continue medical coverage under the Company’s group health plan in accordance with COBRA, the Company shall pay the monthly premiums for such coverage for a period of twelve (12) months.

(f)            Change in Control. In the event Executive’s employment is terminated by the Company without Cause or by Executive for Good Reason under Section 5(e) and such termination occurs upon or within one year immediately following a “Change in Control” (as defined below), Executive shall be entitled to the payments described in Section 5(e) above except that the aggregate amount payable under 5(e)(ii) shall be multiplied by two (i.e., Base Salary plus Severance Bonus Amount multiplied by two) and such amount, as well as the amount payable under 5(e)(iv), shall be paid in a lump sum in accordance with Section 5(g) of this Agreement. Notwithstanding the foregoing, payments pursuant to this Section 5(f) shall be reduced by the amount necessary, if any, to ensure that the aggregate compensation to be received by the Executive in connection with such “Change in Control” does not constitute a “parachute payment,” as such term is defined in 26 U.S.C. § 280G.

For purposes of this Agreement, a “Change in Control” shall be deemed to have occurred if: (i) any “person” as defined in Section 3(a)(9) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and as used in sections 13(d) and 14(d) thereof, including a “group” as defined in Section 13 (d) of the Exchange Act but excluding SGC and any subsidiary or affiliate and any employee benefit plan sponsored or maintained by SGC or any subsidiary or affiliate (including any trustee of such plan acting as trustee) or any current shareholder of 20% or more of the outstanding common stock, directly or indirectly, becomes the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act) of securities of SGC representing at least 40% of the combined voting power of SGC’s then-outstanding securities; (ii) the stockholders of SGC app rove a merger, consolidation, recapitalization, or reorganization of SGC, or a reverse

6

stock split of any class of voting securities of SGC, or the consummation of any such transaction if stockholder approval is not obtained, other than any such transaction which would result in at least 60% of the total voting power represented by the voting securities of SGC or the surviving entity outstanding immediately after such transaction being beneficially owned by persons who together beneficially owned at least 80% of the combined voting power of the voting securities of SGC outstanding immediately prior to such transaction; provided that, for purposes of this Section 5(f), such continuity of ownership (and preservation of relative voting power) shall be deemed to be satisfied if the failure to meet such 60% threshold is due solely to the acquisition of voting securities by an employee benefit plan of SGC or such surviving entity or of any subsidiary of SGC or such surviving entity; (iii) the stockhold ers of SGC or the Company, as applicable, approve a plan of complete liquidation of SGC or the Company, an agreement for the sale or disposition by SGC or the Company of all or substantially all of its assets (or any transaction having a similar effect), or SGC sells all or substantially all of the stock of the Company to any person or entity other than an affiliate of SGC; or (iv) during any period of two consecutive years, individuals who at the beginning of such period constitute the Board, together with any new director (other than a director designated by a person who has entered into an agreement with the Company to effect a transaction described in Subsection (i), (ii), or (iii) hereof) whose election by the Board of Directors of SGC or nomination for election by SGC’s stockholders was approved by a vote of at least two-thirds (2/3) of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved (the “Continuing Directors”), cease for any reason to constitute at least a majority of the Board of Directors of SGC.

(g)           Timing of Certain Payments Under Section 5.  Payments pursuant to Sections 5(c)(ii) or 5(e)(ii) of this Agreement, if any, shall be payable in equal installments in accordance with the Company’s standard payroll practices over a period of twelve (12) months following the date of termination; provided, however, that if necessary to comply with Section 409A of the Code, and applicable administrative guidance and regulations, such payments shall be made as follows:  (1) no payments shall be made for a six-month period following the date of termination, (2) an amount equal to the aggregate sum that would have been otherwise payable during the initial six-month period shall be paid in a lu mp sum six months following the date of termination, and (3) during the period beginning six months following the date of termination through the remainder of the twelve-month period, payment of the remaining amount due shall be payable in equal installments in accordance with the Company’s standard payroll practices. In addition, notwithstanding any other provision with respect to the timing of payments under this Agreement, if necessary to comply with Section 409A of the Code, and applicable administrative guidance and regulations, amounts payable following termination of employment in a lump sum, including pursuant to Sections 5(c)(iii) and 5(e)(iii) of this Agreement, shall instead be paid six months following the date of termination.

(h)           No Obligation to Mitigate.  The Executive shall have no obligation to mitigate damages pursuant to this Section 5, but shall be obligated to promptly advise the Company regarding any compensation earned or any payments that will become due with respect to services provided to another employer during any period of continued payments pursuant to this Section 5. The Company’s obligation to make continued insurance or disability payments to the Executive shall be reduced by any compensation earned by the Executive by another

7

employer or insurer during the year following the Executive’s separation from employment (without regard to when such compensation is paid).

(i)            Set-Off.  To the fullest extent permitted by law, any amounts otherwise due the Executive hereunder (including, without limitation, any payments pursuant to this Section 5) shall be subject to set-off with respect to any amounts the Executive otherwise owes the Company or any subsidiary or affiliate thereof.

(j)            No Other Benefits or Compensation.  Except as may be provided under this Agreement, under any other written agreement between Executive and the Company, or under the terms of any plan or policy applicable to Executive, Executive shall have no right to receive any other compensation from the Company, or to participate in any other plan, arrangement or benefit provided by the Company, with respect to any future period after such termination or resignation.

(k)           Release of Employment Claims; Compliance with Section 6.  Executive agrees, as a condition to receipt of any termination payments and benefits provided for in Section 5 (other than the Standard Termination Payments), that Executive will execute a general release agreement, in a form reasonably satisfactory to the Company, releasing any and all claims arising out of Executive’s employment (other than enforcement of this Agreement).  The Company’s obligation to make any termination payments and benefits provided for in Section 5 (other than the Standard Termination Payments) shall immediately cease if Executive willfully and materially breaches Section 6.1, 6.2 , 6.3, 6.4, or 6.8.

6.             Noncompetition; Nonsolicitation; Nondisclosure; etc.

6.1           Noncompetition; Nonsolicitation.

(a) Executive acknowledges the highly competitive nature of the Company’s business and that access to the Company’s confidential records and proprietary information renders Executive special and unique within the Company’s industry. In consideration of the amounts that may hereafter be paid to Executive pursuant to this Agreement (including, without limitation, Sections 4 and 5), Executive agrees that during the Term (including any extensions thereof) and during the Covered Time (as defined in Section 6.1(e)), Executive, alone or with others, will not, directly or indirectly, engage (as owner, investor, partner, stockholder, employer, employee, consultant, advisor, director or otherwise) in any Competing Business. For purposes of this Section 6, “Competing Business” shall mean any business: (i) involving design and production of instant lottery tickets and the man agement of related marketing and distribution programs; manufacture, sale, operation or management of on-line lottery systems (Lotto-type games); development and commercialization of licensed and other proprietary game entertainment for all lottery product channels; provision of wagering (whether pari-mutuel (pooled) or otherwise) or venue management services for racetracks and off-track betting facilities; production of prepaid cellular phone cards; or any other business in which the Company or its affiliates is then or was within the previous twelve (12) months engaged or in which the Company, to Executive’s knowledge, intends to engage during the Term or the Covered Time (as defined below); (ii) in which the Executive was engaged or involved (whether in an executive or supervisory capacity or otherwise) on behalf of the Company or with respect

8

to which the Executive has obtained proprietary or confidential information; and (iii) which was conducted anywhere in the United States or in any other geographic area in which such business was conducted or planned to be conducted by the Company.

(b)           In further consideration of the amounts that may hereafter be paid to Executive pursuant to this Agreement (including, without limitation, Sections 3, 4 and 5), Executive agrees that during the Term (including any extensions thereof) and during the Covered Time Executive shall not, directly or indirectly, (i) solicit or attempt to induce any of the employees, agents, consultants or representatives of the Company to terminate his, her, or its relationship with the Company; (ii) solicit or attempt to induce any of the employees, agents, consultants or representatives of the Company to become employees, agents, consultants or representatives of any other person or entity; (iii) solicit or attempt to induce any customer, vendor or distributor of the Company to curtail or cancel any business with the Company; or (iv) hire any person wh o, to Executive’s actual knowledge, is, or was within 180 days prior to such hiring, an employee of the Company.

(c)  During the Term (including any extensions thereof) and during the Covered Time, Executive agrees that upon the earlier of Executive’s (i) negotiating with any Competitor (as defined below) concerning the possible employment of Executive by the Competitor, (ii) responding to (other than for the purpose of declining) an offer of employment from a Competitor, or (iii) becoming employed by a Competitor, (x) Executive will provide copies of Section 6 of this Agreement to the Competitor, and (y) in the case of any circumstance described in (iii) above occurring during the Covered Time, and in the case of any circumstance described in (i) or (ii) above occurring during the Term or during the Covered Time, Executive will promptly provide notice to the Company of such circumstances. Executive further agrees that the Company may provide notice to a Competitor of Executive’s obligations under this Agreement. For purposes of this Agreement, “Competitor” shall mean any entity (other than the Company, its subsidiaries or affiliates) that engages, directly or indirectly, in the United States in any Competing Business.

(d)           Executive understands that the restrictions in this Section 6.1 may limit Executive’s ability to earn a livelihood in a business similar to the business of the Company but nevertheless agrees and acknowledges that the consideration provided under this Agreement (including, without limitation, Sections 4 and 5) is sufficient to justify such restrictions. In consideration thereof and in light of Executive’s education, skills and abilities, Executive agrees that Executive will not assert in any forum that such restrictions prevent Executive from earning a living or otherwise should be held void or unenforceable.

(e)           For purposes of this Section 6.1, “Covered Time” shall mean the period beginning on the date of termination of Executive’s employment (the “Date of Termination”) and ending eighteen (18) months after the Date of Termination.

6.2           Proprietary Information; Inventions.

(a)           Executive acknowledges that during the course of Executive’s employment with the Company Executive necessarily will have (and during any employment by the Company prior to the Term has had) access to and make use of proprietary information and

9

confidential records of the Company. Executive covenants that Executive shall not during the Term or at any time thereafter, directly or indirectly, use for Executive’s own purpose or for the benefit of any person or entity other than the Company, nor otherwise disclose to any individual or entity, any such proprietary information, unless such disclosure has been authorized in writing by the Company or is otherwise required by law. The term “proprietary information” means: (i) the software products, programs, applications, and processes utilized by the Company; (ii) the name and/or address of any customer or vendor of the Company or any information concerning the transactions or relations of any customer or vendor of the Company with the Company; (iii) any information concerning any product, technology, or procedure employed by the Company but not generally known to its customers or vendors or co mpetitors, or under development by or being tested by the Company but not at the time offered generally to customers or vendors; (iv) any information relating to the Company’s computer software, computer systems, pricing or marketing methods, sales margins, cost of goods, cost of material, capital structure, operating results, borrowing arrangements or business plans; (v) any information identified as confidential or proprietary in any line of business engaged in by the Company; (vi) any information that, to Executive’s actual knowledge, the Company ordinarily maintains as confidential or proprietary; (vii) any business plans, budgets, advertising or marketing plans; (viii) any information contained in any of the Company’s written or oral policies and procedures or manuals; (ix) any information belonging to customers, vendors or any other person or entity which the Company, to Executive’s actual knowledge, has agreed to hold in confidence; and (x) all written, graphic, electronic data and other material containing any of the foregoing. Executive acknowledges that information that is not novel or copyrighted or patented may nonetheless be proprietary information. The term “proprietary information” shall not include information generally known or available to the public or generally known or available to the industry or information that becomes available to Executive on an unrestricted, non-confidential basis from a source other than the Company or its directors, officers, employees, or agents (without breach of any obligation of confidentiality of which Executive has actual knowledge at the time of the relevant disclosure by Executive).

(b)           Executive agrees that all processes, technologies and inventions (collectively, “Inventions”), including new contributions, improvements, ideas and discoveries, whether patentable or not, conceived, developed, invented or made by Executive during the Term (and during any employment by the Company prior to the Term) shall belong to the Company, provided that such Inventions grew out of the Executive’s work with the Company or any of its subsidiaries or affiliates, are related in any manner to the business (commercial or experimental) of the Company or any of its subsidiaries or affiliates or are conceived or made on the Company’s time or with the use of the Company’s facilities or materials. Executive shall further:  (i) promptly disclose such Inventions to the Company; (ii) assign to the Company, without additional compensation, all patent and other rights to such Inventions for the United States and foreign countries; (iii) sign all papers necessary to carry out the foregoing; and (iv) give testimony in support of the Executive’s inventorship. If any Invention is described in a patent application or is disclosed to third parties, directly or indirectly, by the Executive within two years after the termination of the Executive’s employment by the Company, it is to be presumed that the Invention was conceived or made during the Term. Executive agrees that Executive will not assert any rights to any Invention as having been made or acquired by Executive prior to the date of this Agreement, except for Inventions, if any, disclosed in Exhibit A to this Agreement.

10

6.3           Confidentiality and Surrender of Records.  Executive shall not during the Term or at any time thereafter (irrespective of the circumstances under which Executive’s employment by the Company terminates), except as required by law, directly or indirectly publish, make known or in any fashion disclose any confidential records to, or permit any inspection or copying of confidential records by, any individual or entity other than in the course of such individual’s or entity’s employment or retention by the Company, nor shall Executive retain, and will deliver promptly to the Company, any of the same following termination of Executive’s employment hereunder for any reason or upon request by the Company. For purposes hereof, “confidential records” means those po rtions of correspondence, memoranda, files, manuals, books, lists, financial, operating or marketing records, magnetic tape, or electronic or other media or equipment of any kind in Executive’s possession or under Executive’s control or accessible to Executive which contain any proprietary information. All confidential records shall be and remain the sole property of the Company during the Term and thereafter.

6.4           Nondisparagement.  Executive shall not, during the Term and thereafter, disparage in any material respect the Company, any affiliate of the Company, any of their respective businesses, any of their respective officers, directors or employees, or the reputation of any of the foregoing persons or entities. Notwithstanding the foregoing, nothing in this Agreement shall preclude Executive from making truthful statements that are required by applicable law, regulation or legal process.

6.5           No Other Obligations.  Executive represents that Executive is not precluded or limited in Executive’s ability to undertake or perform the duties described herein by any contract, agreement or restrictive covenant. Executive covenants that Executive shall not employ the trade secrets or proprietary information of any other person in connection with Executive’s employment by the Company without such person’s authorization.

6.6           Forfeiture of Outstanding Options. The provisions of Section 5 notwithstanding, if Executive willfully and materially fails to comply with Section 6.1, 6.2, 6.3, 6.4, or 6.8, all options (whether granted prior to, contemporaneous with, or subsequent to this Agreement) to purchase common stock granted by the Company and held by Executive or a transferee of Executive shall be immediately forfeited and cancelled.

11

6.7           Enforcement.  Executive acknowledges and agrees that, by virtue of Executive’s position, services and access to and use of confidential records and proprietary information, any violation by Executive of any of the undertakings contained in this Section 6 would cause the Company immediate, substantial and irreparable injury for which it has no adequate remedy at law. Accordingly, Executive agrees and consents to the entry of an injunction or other equitable relief by a court of competent jurisdiction restraining any violation or threatened violation of any undertaking contained in this Section 6. Executive waives posting of any bond otherwise necessary to secure such injunction or other equitable relief. Rights and remedies provided for in this Section 6 are cumulative and shall b e in addition to rights and remedies otherwise available to the parties hereunder or under any other agreement or applicable law.

6.8           Cooperation with Regard to Litigation.  Executive agrees to cooperate reasonably with the Company, during the Term and thereafter (including following Executive’s termination of employment for any reason), by being available to testify on behalf of the Company in any action, suit, or proceeding, whether civil, criminal, administrative, or investigative. In addition, except to the extent that Executive has or intends to assert in good faith an interest or position adverse to or inconsistent with the interest or position of the Company, Executive agrees to cooperate reasonably with the Company, during the Term and thereafter (including following Executive’s termination of employment for any reason), to assist the Company in any such action, suit, or proceeding by providing inf ormation and meeting and consulting with the Board or its representatives or counsel, or representatives or counsel to the Company, in each case, as reasonably requested by the Company. The Company agrees to pay (or reimburse, if already paid by Executive) all reasonable expenses actually incurred in connection with Executive’s cooperation and assistance including, without limitation, reasonable fees and disbursements of counsel, if any, chosen by Executive if Executive reasonably determines in good faith, on the advice of counsel, that the Company’s counsel may not ethically represent Executive in connection with such action, suit or proceeding due to actual or potential conflicts of interests.

6.9           Survival.  The provisions of this Section 6 shall survive the termination of the Term and any termination or expiration of this Agreement.

6.10         Company.  For purposes of this Section 6, references to the “Company” shall include both the Company and each subsidiary and/or affiliate of the Company.

7.             Code of Conduct.  Executive acknowledges that he has read the Company’s Code of Conduct and agrees to abide by such Code, as amended or supplemented from time to time, and other policies applicable to employees and executives of the Company.

8.             Indemnification.  During the Term of this Agreement and all periods after the expiration of this Agreement or termination of Executive’s employment for any reason, the Company shall indemnify Executive to the full extent permitted under the Company’s Certificate of Incorporation or By-Laws and pursuant to any other agreements or policies in effect from time to time. To the extent permitted under the Company’s Certificate of Incorporation and By-Laws and applicable law, the Company shall advance expenses for which indemnification may be claimed as such expenses are incurred, subject to any requirement that Executive provide an

12

undertaking to repay such advances if it is ultimately determined that Executive is not entitled to indemnification; provided, however, that any determination required to be made with respect to whether Executive’s conduct complies with the standards required to be met as a condition of indemnification or advancement of expenses under applicable law and the Company’s Certificate of Incorporation, By-Laws, or other agreement, shall be made by independent counsel mutually acceptable to Executive and the Company (except to the extent otherwise required by law). Any provision contained herein notwithstanding, this Agreement shall not limit or reduce, and the Company hereby agrees to provide to Executive, any and all rights to indemnification Executive would otherwise have, to the full extent permitted under applicable law. In addition, the Company will maintain directors’ and officers’ liability insurance in effect and covering acts and omissions of Executive. For purposes of this Section 8, references to the “Company” shall include both the Company and each of its subsidiaries and/or affiliates for which Executive has acted, acts or will in the future act in any capacity. The provisions of this Section 8 shall survive the termination of the Term and any termination or expiration of this Agreement.

9.             Assignability; Binding Effect.  Neither this Agreement nor the rights or obligations hereunder of the parties hereto shall be transferable or assignable by Executive, except in accordance with the laws of descent and distribution and as specified below. The Company may assign this Agreement and the Company’s rights and obligations hereunder, and shall assign this Agreement and such rights and obligations, to any Successor (as hereinafter defined) which, by operation of law or otherwise, continues to carry on substantially the business of the Company (or a business unit of the Company for which Executive provided services) prior to the event of succession, and the Company shall, as a condition of the succession, require such Successor to agree in writing to assume the Company’s obligations and be bou nd by this Agreement. For purposes of this Agreement, “Successor” shall mean any person that succeeds to, or has the practical ability to control, the Company’s business directly or indirectly, by merger or consolidation, by purchase or ownership of voting securities of the Company or all or substantially all of its assets or those relating to a particular business unit of the Company to which Executive provides services, or otherwise. The Company may also assign this Agreement and the Company’s rights and obligations hereunder to any affiliate of the Company, provided that upon any such assignment the Company shall remain liable for the obligations to Executive hereunder. This Agreement shall be binding upon and inure to the benefit of Executive, Executive’s heirs, executors, administrators, and beneficiaries, and shall be binding upon and inure to the benefit of the Company and its successors and assigns. Question: what happens to my unvested option in the event of change of contro l?

10.           Complete Understanding; Amendment; Waiver.  This Agreement constitutes the complete understanding between the parties with respect to the employment of Executive and supersedes all other prior agreements and understandings, both written and oral, between the parties with respect to the subject matter hereof, and no statement, representation, warranty or covenant has been made by either party with respect thereto except as expressly set forth herein. This Agreement shall not be modified, amended or terminated except by a written instrument signed by each of the parties. Any waiver of any term or provision hereof, or of the application of any such term or provision to any circumstances, shall be in writing signed by the party charged with giving such waiver. Waiver by either party of any breach hereunder by the other part y shall not operate as a waiver of any other breach, whether similar to or different from the breach waived. No delay by either party in the exercise of any rights or remedies shall operate as

13

a waiver thereof, and no single or partial exercise by either party of any such right or remedy shall preclude other or further exercise thereof.

11.           Severability.  If any provision of this Agreement or the application of any such provision to any person or circumstances shall be determined by any court of competent jurisdiction to be invalid or unenforceable to any extent, the remainder of this Agreement, or the application of such provision to such person or circumstances other than those to which it is so determined to be invalid or unenforceable, shall not be affected thereby, and each provision hereof shall be enforced to the fullest extent permitted by law. If any provision of this Agreement, or any part thereof, is held to be invalid or unenforceable because of the scope or duration of or the area covered by such provision, the parties hereto agree that the court making such determination shall reduce the scope, duration and/or area of such provision (and shall sub stitute appropriate provisions for any such invalid or unenforceable provisions) in order to make such provision enforceable to the fullest extent permitted by law and/or shall delete specific words and phrases, and such modified provision shall then be enforceable and shall be enforced. The parties hereto recognize that if, in any judicial proceeding, a court shall refuse to enforce any of the separate covenants contained in this Agreement, then that invalid or unenforceable covenant contained in this Agreement shall be deemed eliminated from these provisions to the extent necessary to permit the remaining separate covenants to be enforced. In the event that any court determines that the time period or the area, or both, are unreasonable and that any of the covenants is to that extent invalid or unenforceable, the parties hereto agree that such covenants will remain in full force and effect, first, for the greatest time period, and second, in the greatest geographical area that would not render them unenfor ceable.

12.           Survivability.  The provisions of this Agreement which by their terms call for performance subsequent to termination of Executive’s employment hereunder, or of this Agreement, shall so survive such termination, whether or not such provisions expressly state that they shall so survive.

13.           Governing Law; Arbitration.

(a)           Governing Law.  This Agreement shall be governed by and construed in accordance with the laws of the State of New York applicable to agreements made and to be wholly performed within that State, without regard to its conflict of laws provisions.

(b)           Arbitration.  The Executive and the Company agree that, except for claims for Workers’ Compensation, Unemployment Compensation, and any other claim that is non-arbitrable under applicable law, final and binding arbitration shall be the exclusive forum for any dispute or controversy between them, including, without limitation, disputes arising under or in connection with this Agreement, Executive’s employment, and/or termination of employment, with the Company; provided, however, that the Company shall be entitled to commence an action in any court of competent jurisdiction for injunctive relief in connection with any alleged actual or threatened violation of any provision of Section 6. Judgment may be entered on the arbitrators’ award in any court having jurisdiction. For purposes of entering such judgme nt or seeking injunctive relief with regard to Section 6, the Company and Executive hereby consent to the jurisdiction of any or all of the following courts: (i) the United States District Court for the Southern District of New York; (ii) the Supreme Court of the State of New York, New York

14

County; or (iii) any other court having jurisdiction; provided, that damages for any alleged violation of Section 6, as well as any claim, counterclaim or crossclaim brought by the Executive or any third-party in response to, or in connection with any court action commenced by the Company seeking said injunctive relief shall remain exclusively subject to final and binding arbitration as provided for herein. The Company and Executive hereby waive, to the fullest extent permitted by applicable law, any objection which either may now or hereafter have to such jurisdiction, venue and any defense of inconvenient forum.  Thus, except for the claims carved out above, this Agreement includes all common-law and statutory claims (whether arising under federal state or local law), including, but not limited to, any claim for breach of contract, fraud, fraud in the inducement, unpaid wages, wrongful termination, and g ender, age, national origin, sexual orientation, marital status, disability, or any other  protected status.

(c)           Any arbitration under this Agreement shall be filed exclusively with the American Arbitration Association in New York, New York before three arbitrators, in accordance with the National Rules for the Resolution of Employment Disputes of the American Arbitration Association in effect at the time of submission to arbitration.  The Company and Executive hereby agree that a judgment upon an award rendered by the arbitrators may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law.  The Company shall pay all costs uniquely attributable to arbitration, including the administrative fees and costs of the arbitrators.  Each party shall pay that party’s own costs and attorney fees, if any, unless the arbitrators rule otherwise.  The Executive understands that he is giving up no substantive rights, and this Agreement simply governs forum.  The arbitrators shall apply the same standards a court would apply to award any damages, attorney fees or costs.  The Executive shall not be required to pay any fee or cost that he would not otherwise be required to pay in a court action, unless so ordered by the arbitrators.

(d)           BY SIGNING THIS AGREEMENT, EXECUTIVE AND THE COMPANY ACKNOWLEDGE THAT THE RIGHT TO A COURT TRIAL AND TRIAL BY JURY IS OF VALUE, AND KNOWINGLY AND VOLUNTARILY WAIVE THAT RIGHT FOR ANY DISPUTE SUBJECT TO THE TERMS OF THIS ARBITRATION PROVISION.

14.           Titles and Captions.  All paragraph titles or captions in this Agreement are for convenience only and in no way define, limit, extend or describe the scope or intent of any provision hereof.

15.           Joint Drafting.  In recognition of the fact that the parties hereto had an equal opportunity to negotiate the language of, and draft, this Agreement, the parties acknowledge and agree that there is no single drafter of this Agreement and therefore, the general rule that ambiguities are to be construed against the drafter is, and shall be, inapplicable.  If any language in this Agreement is found or claimed to be ambiguous, each party shall have the same opportunity to present evidence as to the actual intent of the parties with respect to any such ambiguous language without any inference or presumption being drawn against any party.

16.           Notices.  Whenever under this Agreement it becomes necessary to give notice, such notice shall be in writing, signed by the party or parties giving or making the same, and shall be served on the person or persons for whom it is intended or who should be advised or notified, by Federal Express or other similar overnight service or by certified or registered mail,

15

return receipt requested, postage prepaid and addressed to such party at the address set forth below or at such other address as may be designated by such party by like notice:

To the Company:

Scientific Games Corporation

750 Lexington Avenue

New York, N.Y. 10022

Attention: General Counsel

To Executive:

James C. Kennedy

440 Watergate Way

Roswell, GA 30076-3235

[Remainder of Page Intentionally Left Blank]

16

IN WITNESS WHEREOF, each of the parties hereto has duly executed this Agreement on December 11, 2006, to be deemed effective as of the date first above written.

SCIENTIFIC GAMES INTERNATIONAL, INC.
By:	/s/ Michael Chambrello
Name:	Michael Chambrello
Title:	President and Chief Operating Officer
EXECUTIVE
/s/ James C. Kennedy
James C. Kennedy

17

EXHIBIT A

LIST OF PRE-EXISTING INVENTIONS OF EXECUTIVE

18

EX-10.54

Exhibit 10.54

Amendment to Employment Agreement

Amendment to Employment Agreement (this “Agreement”), dated as of December 30, 2008, by and between Scientific Games Corporation, a Delaware corporation (the “Company”), and James C. Kennedy (“Executive”).

WHEREAS, the Company and Executive entered into an Employment Agreement dated as of January 1, 2007 by and between the Company and Executive (the “Employment Agreement”); and

WHEREAS, the Company and Executive desire to amend the Employment Agreement as set forth herein to bring the Employment Agreement into compliance with Section 409A of the Internal Revenue Code of 1986 and the regulations and Treasury guidance thereunder; and

WHEREAS, the amendments contemplated hereby are intended to bring the timing of, and certain procedural aspects with respect to, certain payments under the Employment Agreement into compliance with Section 409A but not to otherwise affect Executive’s right to such payments.

NOW THEREFORE, in consideration of the premises and the mutual benefits to be derived herefrom and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

1.Section 4(f) of the Employment Agreement is hereby amended by adding the following three sentences at the end thereof:

“To the extent any payments of money or other benefits due to Executive hereunder could cause the application of an acceleration or additional tax under Section 409A of the Code, such payments or other benefits shall be deferred if deferral will make such payment or other benefits compliant under Section 409A of the Code, or otherwise such payments or other benefits shall be restructured, to the extent possible, in a manner determined by the Company that does not cause such acceleration or additional tax.  To the extent any reimbursements or in-kind benefits due to Executive under this Agreement constitute deferred compensation under Section 409A of the Code, any such reimbursements or in-kind benefits shall be paid to Executive in a manner consistent with Treas. Reg. Section 1.409A-3(i)(1)(iv).  Each payment made under this Agreement shall be designated as a “separate pa yment” within the meaning of Section 409A of the Code.”

2.Section 5(f) of the Employment Agreement is hereby amended by deleting the end of the first sentence commencing with “and such amount” and replacing such portion of the sentence with the following:

“and such amount shall be payable over a period of twelve (12) months after termination in accordance with Section 5(g) of this Agreement; provided, however, to the extent that such foregoing amount is exempt from Section 409A and/or if such Change in Control constitutes a change in ownership, change in effective control or a change in ownership of a substantial portion of the assets of the Company under Regulation Section 1.409A-3(i)(5), the foregoing amount, as well as the amount payable under Section 5(e)(iv) of this Agreement, shall be paid in a lump sum in accordance with Section 5(g) of this Agreement.”

3.Section 5(g) of the Employment Agreement is hereby amended by substituting “Section 5(c)(ii), 5(e)(ii) or 5(f) (solely with respect to the amount determined by reference to Section 5(e)(ii) and subject to the proviso in the first sentence of Section 5(f))” for “Sections 5(c)(ii) or 5(e)(ii)” in the first sentence of such section.

4.Section 5(k) of the Employment Agreement is hereby amended by inserting the following new sentence after the first sentence thereof:

“The Company shall provide Executive with the proposed form of release referred to in the immediately preceding sentence no later than two days following the Termination Date.  The Executive shall have 21 days to consider the release and if he executes the release, shall have seven (7) days after execution of the release to revoke the release, and, absent such revocation, the release shall become binding.  Provided Executive does not revoke the release, payments contingent on the release (if any) shall be paid no earlier than eight (8) days after execution thereof in accordance with the applicable provisions herein.”

5.Employment Agreement.  Except as set forth in this Amendment, all other terms and conditions of the Employment Agreement shall remain unchanged and in full force and effect.

6.Counterparts.  This Amendment may be executed in one or more counterparts, each of which shall for all purposes be deemed to be an original and all of which shall constitute the same instrument.

7.Headings.  The headings of the paragraphs herein are included solely for convenience of reference and shall not control the meaning or interpretation of any provision of this Amendment.

2

IN WITNESS WHEREOF, each of the parties hereto has caused this Amendment to be executed on its behalf as of the date first above written.

SCIENTIFIC GAMES INTERNATIONAL, INC
By:	/s/ Ira Raphaelson
	Name:	Ira Raphaelson
	Title:	VP, General Counsel & Secretary
	/s/ James C. Kennedy
	Name:	James C. Kennedy

3

EX-10.55

Exhibit 10.55

May 7, 2009

James Kennedy

Senior Vice President, Sales and Global Marketing

Scientific Games International, Inc.

1500 Bluegrasslakes Parkway

Alpharetta, Georgia

Dear Jim:

This will confirm our understanding regarding certain amendments to the Employment and Severance Benefits Agreement, dated ,  (effective as of January 1, 2007), between you and Scientific Games International, Inc. (the “Company”), as amended by the Letter Agreement, dated as of December 30, 2008, by and between you and the Company (as amended hereby, the “Agreement”).  Except as expressly set forth herein, the terms of the Agreement shall remain in full force and effect and are hereby ratified and confirmed in all respects.  Capitalized terms used herein but not defined herein shall have the meanings ascribed to them in the Agreement (except as otherwise modified hereby).

Term.  The “Term” set forth in Section 2 of the Agreement shall be extended to December 31, 2012 (as may be extended in accordance with Section 1 of the Agreement and subject to earlier termination in accordance with the Agreement).

Base Salary.  Effective January 1, 2010, your “Base Salary” shall be four hundred thousand US dollars (US$400,000) per year and effective January 1, 2011, your “Base Salary” shall be four hundred and twenty-five thousand US dollars (US$425,000) per year, subject to such future increases thereof as may be determined from time to time in the sole discretion of the Compensation Committee of the Company (“Compensation Committee”).

Termination Upon Expiration of Agreement.  In the event that the Agreement expires on or after December 31, 2012, you will receive the Accrued Obligations and:

A.if not already paid to you and without duplication, the non-equity portion of your incentive compensation for the completed calendar year after which such expiration occurs, payable if, as and when such bonuses are awarded in the ordinary course in such subsequent year, subject to payroll deductions; provided, however, that if and to the extent necessary to comply with Section 409A(a)(2)(B)(i) of the Internal Reve nue Code, and applicable administrative guidance and regulations, such payment shall be made in a lump sum on the date that is six months plus one day following the applicable expiration date; and

B.except to the extent otherwise provided at the time of grant under the terms of any equity award made to you, all stock options, deferred stock, restricted stock and other equity-based awards held by you, if such termination on or after December 31, 2012 is not for Cause, will become fully vested and non-

forfeitable (provided that any such options will cease being exercisable upon the earlier of (x) three (3) months after the expiration date of the Agreement and (y) the scheduled expiration date of such options), and, in all other respects, all such options and other awards shall be governed by the plans and programs and the agreements and other documents pursuant to which the awards were granted; provided, however, that any performance based equity award in respect of which the performance criteria has not been finally determined as having been met (or not met), will either vest and be delivered upon such determination of such criteria being satisfied or lapse in the event such criteria is not met.

Timing of Certain Payments.  Unless otherwise contemplated in the Agreement, all payments payable in connection with termination of your employment under the Agreement shall be made as soon as practicable after the Termination Date but in no event later than 30 days after the Termination Date; provided, however, that if and to the extent necessary to comply with Section 409A(a)(2)(B)(i) of the Code, and applicable administrative guidance and regulations, any such payment shall be made in a lump sum on the date that is six months plus one day following the Termination Date.

Special Recognition Equity Award Grant.  In recognition of your additional responsibilities for supervising MDI sales and China marketing, the Company shall grant you twenty thousand (20,000) restricted stock units under the Scientific Games Corporation 2003 Incentive Compensation Plan, as amended and restated (the “Plan”), and an individual equity agreement (in the form to be provided to you) to be entered into by and between the Company and you (the “Equity Agreement”).  The Equity Agreement shall provide that the equity award shall vest with respect to twenty percent (20%) of the shares of common stock subject to such award on each of the first five anniversaries of the date of grant, subject to any applicable provisions relating to accelerated vesting and forfeiture as described in the Agreement, t he Equity Agreement or the Plan.

Please indicate your agreement to the foregoing by countersigning and returning an original signed copy of this letter to me.

		Very truly yours,
		Scientific Games International, Inc.
		By:	/s/ Michael Chambrello
		Name:	Michael Chambrello
		Title:	President & COO
Accepted and Agreed to:
By:	/s/ James Kennedy
	James Kennedy

2

EX-10.56

Exhibit 10.56

Employment Agreement

This Employment Agreement (the “Agreement”) is made as of December 22, 2010, by and between Scientific Games International, Inc., a Delaware corporation (the “Company”), and William J. Huntley (“Executive”).

WHEREAS, the Company and Executive previously entered into an Employment Agreement dated as of August 1, 2006, as amended by the Superseding Employment, Separation, Non-Competition and General Release Agreement dated as of July 1, 2008, as amended by the Amendment thereto dated as of December 30, 2008 (as so amended, the “Prior Employment Agreement”); and

WHEREAS, the Company and Executive previously entered into a consulting letter agreements dated May 19, 2008 and December 10, 2009 (collectively, the “Prior Consulting Agreement”); and

WHEREAS, the Company and Executive wish to enter into this new employment agreement;

NOW, THEREFORE, in consideration of the premises and mutual benefits to be derived herefrom and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged by the Company and Executive, the parties hereto agree as follows.

1.Employment; Term.  The Company hereby agrees to employ Executive, and Executive hereby accepts employment with the Company, in accordance with and subject to the terms and conditions set forth in this Agreement.  This term of employment of Executive under this Agreement (the “Term”) shall be the period commencing on January 1, 2011 and ending on December 31, 2013, as may be extended in accordance with this Section 1 and subject to earlier termination in accordance with Section 4 hereof.  The Term shall be extended automatically without further action by either party hereto by one ( 1) additional year (added to the end of the Term), and then on each succeeding annual anniversary thereafter, unless either party hereto shall have given written notice to the other party hereto prior to the date which is sixty (60) days prior to the date upon which such extension would otherwise have become effective electing not to further extend the Term, in which case Executive’s employment shall terminate on the date upon which such extension would otherwise have become effective, unless earlier terminated in accordance with Section 4.

2.Position and Duties.  During the Term, Executive will serve as President, Lottery Systems, of the Company and as an officer or director of any subsidiary or affiliate of the Company if elected to any such position by the stockholders or by the board of directors of any such subsidiary or affiliate, as the case may be.  In such capacities, Executive shall perform such duties and shall have such responsibilities as are normally associated with such positions, and as otherwise may be assigned to Executive from time to time by the Chief Executive Officer of Scientific Games Corporation, the parent company of the Company (“SGC”) or upon the authority of the board of directors of SGC (the “Board”) or the Company.  Subject to Section 4(e) hereof, Executive’s functions, duties and responsibilities are subject to reasonable changes as the Company or SGC may in good faith determine from time to time.  Executive hereby agrees to accept such employment and to serve the Company and its subsidiaries and affiliates to the best of Executive’s ability in such capacities, devoting all of Executive’s business time to such employment.

3.Compensation.

(a)Base Salary.  During the Term, Executive will receive a base salary of five hundred seventy five thousand U.S. dollars (US$575,000) per annum (pro-rated for any partial year), payable in accordance with the Company’s regular payroll practices and subject to such deductions or

i

amounts to be withheld as required by applicable law and regulations or as may be agreed to by Executive.  In the event that the Company, in its sole discretion, from time to time determines to increase Executive’s base salary, such increased amount shall, from and after the effective date of such increase, constitute the “base salary” of Executive for purposes of this Agreement.

(b)Incentive Compensation.  Executive shall have the opportunity annually to earn incentive compensation in amounts determined by the Compensation Committee of the Board (the “Compensation Committee”) in accordance with the applicable incentive compensation plan of the Company or SGC as in effect from time to time (“Incentive Compensation”).  Under such plan, Executive shall have the opportunity annually (beginning with respect to the 2011 performance period) to earn up to 66.7% of Executive’ ;s base salary as Incentive Compensation at “target opportunity” (“Target Bonus”) and up to 133% of Executive’s base salary as Incentive Compensation at “maximum opportunity” on the terms and subject to the conditions of such plan (any such Incentive Compensation to be subject to such deductions or amounts to be withheld as required by applicable law and regulations or as may be agreed to by Executive).

(c)Eligibility for Annual Equity Awards.  Executive shall be eligible (beginning in 2011) to receive an annual grant of stock options, restricted stock units or other equity awards in the sole discretion of the Compensation Committee and in accordance with the applicable plans and programs for senior executives of the Company and subject to the Company’s right to at any time amend or terminate any such plan or program, so long as any such change does not adversely affect any a ccrued or vested interest of Executive under any such plan or program.

(d)Expense Reimbursement.  Subject to Section 3(g) hereof, the Company shall reimburse Executive for all reasonable and necessary travel, business entertainment and other business expenses incurred by Executive in connection with the performance of Executive’s duties under this Agreement, on a timely basis upon timely submission by Executive of vouchers therefor in accordance with the Company’s standard policies and procedures.

(e)Health and Welfare Benefits.  Executive shall be entitled to participate, without discrimination or duplication, in any and all medical insurance, group health, disability, life insurance, accidental death and dismemberment insurance, 401(k) or other retirement, deferred compensation, stock ownership and such other plans and programs which are made generally available by the Company to similarly situated Executives in accordance with the terms of such plans and programs and subject to the right of the Company (or its app licable affiliate) to at any time amend or terminate any such plan or program.  Executive shall be entitled to paid vacation, holidays and any other time off in accordance with the Company’s policies in effect from time to time.

(f)Sign-On Award.  Executive will be granted on January 1, 2011 two hundred thousand (200,000) stock options (with an exercise price equal to the average of the high and low sales prices of the SGC’s common stock on the trading day immediately prior to the grant date) under the SGC 2003 Incentive Compensation Plan, as amended and restated (or any successor plan) (the “Plan”), pursuant to an equity award agreement to be provided by the Company entered into by and between SGC and Executive (t he “Equity Award Agreement”) (the “Sign-On Option Award”).  The Equity Award Agreement shall provide that the Sign-On Option Award shall vest and become exercisable with respect to twenty-five percent (25%) of the shares of SGC common stock subject to such Sign-On Option Award on each of the first four anniversaries of the date of grant of the Sign-On Option Award, subject to any applicable provisions relating to accelerated vesting and forfeiture as described in this Agreement, the Equity Award Agreement or the Plan.  Notwithstanding anything contained in this Agreement, the Equity Agreement or the Plan to the contrary, the stock options comprising the Sign-On Option Award shall not be exercisable except to the extent that sufficient shares (as reasonably determined by the Compensation

2

Committee in light of outstanding awards) are available under the applicable Plan for the delivery of the shares issuable upon exercise of such stock options.

(g)Taxes and Internal Revenue Code 409A.  Payment of all compensation and benefits to Executive specified in this Section 3 and in Section 4 of this Agreement shall be subject to all legally required and customary withholdings.  The Company makes no representations regarding the tax implications of the compensation and benefits to be paid to Executive under this Agreement, including, without limitation, under Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”), and applicable administrative guidance and regulations (“Section 409A”).  Section 409A governs plans and arrangements that provide “nonqualified deferred compensation” (as defined under the Code) which may include, among others, nonqualified retirement plans, bonus plans, stock option plans, employment agreements and severance agreements.  The Company reserves the right to provide compensation and benefits under any plan or arrangement in amounts, at times and in a manner that minimizes taxes, interest or penalties as a result of Section 409A.  In addition, in the event any benefits or amounts paid hereunder are deemed to be subject to Section 409A, including payments under Section 4 of this Agreement, Executive consents to the Company adopting such conforming amendments as the Company deems necessary, in its reasonable discretion, to comply with Section 409A (including, but not limited to, delaying payment until six (6) months following terminat ion of employment).  Notwithstanding anything herein to the contrary, if (i) at the time of Executive’s “separation from service” (as defined in Treas. Reg. Section 1.409A-1(h)) with the Company other than as a result of Executive’s death, (ii) Executive is a “specified employee” (as defined in Section 409A(a)(2)(B)(i) of the Code), (iii) one or more of the payments or benefits received or to be received by Executive pursuant to this Agreement would constitute deferred compensation subject to Section 409A, and (iv) the deferral of the commencement of any such payments or benefits otherwise payable hereunder as a result of such separation of service is necessary in order to prevent any accelerated or additional tax under Section 409A, then the Company will defer the commencement of the payment of any such payments or benefits hereunder to the extent necessary (without any reduction in such payments or benefits ultimately paid or p rovided to Executive) until the date that is six (6) months following Executive’s separation from service with the Company (or the earliest date as is permitted under Section 409A).  Any remaining payments or benefits shall be made as otherwise scheduled hereunder.  Furthermore, to the extent any payments of money or other benefits due to Executive hereunder could cause the application of an accelerated or additional tax under Section 409A, such payments or other benefits shall be deferred if deferral will make such payment or other benefits compliant under Section 409A, or otherwise such payments or other benefits shall be restructured, to the extent possible, in a manner determined by the Company that does not cause such an accelerated or additional tax.  To the extent any reimbursements or in-kind benefits due to Executive under this Agreement constitute deferred compensation under Section 409A, any such reimbursements or in-kind benefits shall be paid to Execu tive in a manner consistent with Treas. Reg. Section 1.409A-3(i)(1)(iv).  Each payment made under this Agreement shall be designated as a “separate payment” within the meaning of Section 409A.

4.Termination of Employment.  Executive’s employment may be terminated at any time prior to the end of the Term under the terms described in this Section 4.

(a)Termination by Executive for Other than Good Reason.  Executive may terminate Executive’s employment hereunder for any reason or no reason upon 60 days’ prior written notice to the Company referring to this Section 4(a); provided, however, that a termination by Executive for “Good Reason” (as defined below) shall not constitute a termination by Executive for other than Good Reason pursuant to this Section 4(a).  In the event Executive terminates Executive’s employme nt for other than Good Reason, Executive shall be entitled only to the following compensation and benefits (collectively, the “Standard Termination Payments”):

3

(i)any accrued but unpaid base salary for services rendered by Executive to the date of such termination, payable in accordance with the Company’s regular payroll practices and subject to such deductions or amounts to be withheld as required by applicable law and regulations or as may be agreed to by Executive;

(ii)any vested non-forfeitable amounts owing or accrued at the date of such termination under benefit plans, programs and arrangements set forth or referred to in Section 3(e) hereof in which Executive participated during the Term will be paid under the terms and conditions of such plans, programs, and arrangements (and agreements and documents thereunder);

(iii)except as provided in Section 5.6 hereof, all stock options, restricted stock units and other equity-based awards will be governed by the terms of the plans and programs under which such options, restricted stock units or other awards were granted; and

(iv)reasonable business expenses and disbursements incurred by Executive prior to such termination will be reimbursed in accordance with Section 3(d) hereof.

(b)Termination By Reason of Death.  If Executive dies during the Term, the last beneficiary designated by Executive by written notice to the Company (or, in the absence of such designation, Executive’s estate) shall be entitled only to the Standard Termination Payments (including, if applicable, any benefits that may be payable under any life insurance benefit of Executive for which the Company pays premiums, in accordance with the terms of any such benefit and subject to the right of the Company (or its applicable affilia te) to at any time amend or terminate any such benefit).

(c)Termination By Reason of Total Disability.  The Company may terminate Executive’s employment in the event of Executive’s “Total Disability.”  For purposes of this Agreement, “Total Disability” shall mean Executive’s (1) becoming eligible to receive benefits under any long-term disability insurance program of the Company or (2) failure to perform the duties and responsibilities contemplated under this Agreement for a period of more than 180 days during any consec utive 12-month period due to physical or mental incapacity or impairment.  In the event that Executive’s employment is terminated by the Company by reason of Total Disability, the Company shall pay the following amounts, and make the following other benefits available, to Executive:

(i)the Standard Termination Payments;

(ii)an amount equal to Executive’s annual base salary; provided such amount shall be reduced by any disability payments to which Executive may be entitled as a result of any disability plan sponsored or maintained by the Company or its affiliates providing benefits to Executive.

(d)Termination by the Company for Cause.  The Company may terminate the employment of Executive at any time for “Cause.”  For purposes of this Agreement, “Cause” shall mean: (i) gross neglect by Executive of Executive’s duties hereunder; (ii) Executive’s conviction (including conviction on a nolo contendere plea) of a felony or any non-felony crime or offense involving the property of the Company or any of its subsidiaries or affiliates or evidencing moral turpitude; (iii)&nbs p;willful misconduct by Executive in connection with the performance of Executive’s duties hereunder; (iv) intentional breach by Executive of any material provision of this Agreement; (v) material violation by Executive of a material provision of the Company’s Code of Conduct; or (vi) any other willful or grossly negligent conduct of Executive that would make the continued employment of Executive by the Company materially prejudicial to the best interests of the Company.  In the event Executive’s employment is

4

terminated for “Cause,” Executive shall not be entitled to receive any compensation or benefits under this Agreement except for the Standard Termination Payments.

(e)Termination by the Company without Cause or by Executive for Good Reason.  The Company may terminate Executive’s employment at any time without Cause, for any reason or no reason, and Executive may terminate Executive’s employment for “Good Reason.”  For purposes of this Agreement “Good Reason” shall mean that, without Executive’s prior written consent, any of the following shall have occurred:  (i) a material change, adverse to Executive, in Executive’s pos itions, titles, offices, or duties as provided in Section 2 hereof, except, in such case, in connection with the termination of Executive’s employment for Cause or due to Total Disability, death or expiration of the Term; (ii) an assignment of any significant duties to Executive which are materially inconsistent with Executive’s positions or offices held under Section 2 hereof; (iii) a material decrease in base salary or material decrease in Executive’s incentive compensation opportunities provided under this Agreement;  or (iv) any other material failure by the Company to perform any material obligation under, or material breach by the Company of any material provision of, this Agreement; provided, however, that a termination by Executive for Good Reason under any of clauses (i) through (iv) of this Section 4(e) shall not be considered effective unless Executive shall have provided the Company with written notice of the specific reasons for such termination within thirty (30) days after he has knowledge of the event or circumstance constituting Good Reason and the Company shall have failed to cure the event or condition allegedly constituting Good Reason within thirty (30) days after such notice has been given to the Company.  In the event that Executive’s employment is terminated by the Company without Cause or by Executive for Good Reason (and not, for the avoidance of doubt, in the event of a termination pursuant to Section 4(a), (b), (c) or (d) hereof or due to the expiration of the Term), the Company shall pay the following amounts, and make the following other benefits available, to Executive.

(i)the Standard Termination Payments;

(ii)an amount equal to the sum of (A) Executive’s base salary and (2) an amount equal to the highest annual Incentive Compensation paid to Executive in respect of the two (2) most recent fiscal years of the Company but not more than Executive’s Target Bonus for the-then current fiscal year [(provided if Executive was not employed by the Company during the prior fiscal year, such amount shall be Executive’s Target Bonus for the then current fiscal year)] (such amount under this sub-clause (2), the “Severance Amount”), such amount payable over a perio d of 12 months after such termination in accordance with Section 4(h) of this Agreement;

(iii)no later than March 15 following the end of the year in which such termination occurs, in lieu of any Incentive Compensation for the year in which such termination occurs, payment of an amount equal to (A) the Incentive Compensation which would have been payable to Executive had Executive remained in employment with the Company during the entire year in which such termination occurred, multiplied by (B) a fraction the numerator of which is the number of days Executive was employed in the year in which such termination occurs and the denominator of which is the total number of days in the year in which such t ermination occurs; and

(iv)if Executive elects to continue medical coverage under the Company’s group health plan in accordance with COBRA, the monthly premiums for such coverage for a period of twelve (12) months.

(f)Termination by the Company without Cause or by Executive for Good Reason in connection with a Change in Control.  In the event Executive’s employment is terminated by the Company without Cause or by Executive for Good Reason pursuant to Section 4(e) hereof and such

5

termination occurs upon, or within one (1) year immediately following, a “Change in Control” (as defined below), Executive shall be entitled (without duplication) to the payments and benefits described in Section 4(e) hereof, except that, solely in the case of an amount otherwise payable under Section 4(e)(ii) hereof, such amount shall be multiplied by two (2) (i.e., an amount equal to two (2) multiplied by the sum of Executive’s base salary and Executive’s Severance Bonus Amount, without duplication) and such amount shall be payable over a period of 24 months after termination in accordance with Section 4(h) of this Agreement; provided, however, to the extent that such amount under Section 4(e)(ii) is exempt from Section 409A and/or if such Change in Control constitutes a change in ownership, change in effective control or a chang e in ownership of a substantial portion of the assets of SGC under Regulation Section 1.409A-3(i)(5), such amount otherwise payable under Section 4(e)(ii) hereof shall be paid in a lump sum in accordance with Section 4(h) of this Agreement.  Notwithstanding the foregoing, payments pursuant to this Section 4(f) shall be reduced by the amount necessary, if any, to ensure that the aggregate compensation to be received by the Executive in connection with such Change in Control does not constitute a “parachute payment,” as such term is defined in 26 U.S.C. § 280G.

For purposes of this Agreement, a “Change in Control” shall be deemed to have occurred if: (i) any “person” as defined in Section 3(a)(9) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and as used in Sections 13(d) and 14(d) thereof, including a “group” as defined in Section 13(d) of the Exchange Act but excluding SGC and any subsidiary or affiliate and any employee benefit plan sponsored or maintained by SGC or any subsidiary or affiliate (including any trustee of such plan acting as trustee) or any current stockholder of 20% or more of the outstanding common stock of SGC, directly or indirectly, becomes the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act) of securities of SGC representing at least 40% of the combined voting power of the SGC’s then-outstandi ng securities; (ii) the stockholders of SGC approve a merger, consolidation, recapitalization, or reorganization of SGC, or a reverse stock split of any class of voting securities of SGC, or the consummation of any such transaction if stockholder approval is not obtained, other than any such transaction that would result in at least 60% of the total voting power represented by the voting securities of SGC or the surviving entity outstanding immediately after such transaction being beneficially owned by persons who together beneficially owned at least 80% of the combined voting power of the voting securities of SGC outstanding immediately prior to such transaction; provided that, for purposes of this Section 4(f), such continuity of ownership (and preservation of relative voting power) shall be deemed to be satisfied if the failure to meet such 60% threshold is due solely to the acquisition of voting securities by an employee benefit plan of SGC or such surviving entity or of any subsidiary o f SGC or such surviving entity; (iii) the stockholders of SGC approve a plan of complete liquidation of SGC, an agreement for the sale or disposition by SGC of all or substantially all of its assets (or any transaction having a similar effect); or (iv) during any period of two (2) consecutive years, individuals who at the beginning of such period constitute the Board, together with any new director (other than a director designated by a person who has entered into an agreement with the Company to effect a transaction described in clause (i), (ii) or (iii) above) whose election by the Board or nomination for election by SGC’s stockholders was approved by a vote of at least two-thirds (2/3) of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved, cease for any reason to constitute at least a majority of the Board.

(g)Expiration of Term of Agreement.  In the event that the Agreement expires at the end of the Term, Executive shall not be entitled to receive any compensation or benefits under this Agreement except for the Standard Termination Payments; provided, however, that (i) subject to Section 5.6 hereof, any unvested stock options comprising the Sign-On Option Award held by Executive upon the expiration of the Term will become fully vested and exercisable (provided that any stock options comprising the Sign-On Option Award will cea se being exercisable upon the earlier of three (3) months after such expiration of the Term and the scheduled expiration date of such stock options), and in all other respects, all such stock options shall be governed by the plans and programs and the agreements and other

6

documents pursuant to which such stock options were granted, and (ii) subject to Section 5.6 hereof and except to the extent otherwise provided at the time of grant under the terms of any equity award made to Executive, 50% of any unvested stock options and 50% of any unvested restricted stock units held by Executive upon the expiration of the Term will become fully vested (and, in the case of any such stock options, exercisable) (provided that any stock options held by Executive will cease being exercisable upon the earlier of three (3) months after such expiration of the Term and the scheduled expiration date of such stock options), and in all other respects, all stock options, restricted stock units and other equity-based awards held by Executive shall be governed by the plans and programs and the agreements and other documents pursuant to which the awards were granted; provided, how ever, that in the event such expiration of the Term occurs prior to the Compensation Committee’s determination as to the satisfaction of any performance criteria to which any such stock options and/or restricted stock units is subject, such stock options and/or restricted stock units (as the case may be) will not vest (and, in the case of any such stock options, will not become exercisable) unless and until a determination is or has been made by the Compensation Committee that such criteria have been satisfied, at which time such stock options and/or restricted stock units will vest (and, in the case of any such stock options, will become exercisable) to the extent contemplated by the terms of such award (it being understood and agreed, for the avoidance of doubt, that such stock options or restricted stock units will immediately be forfeited to the extent contemplated by the terms of such award in the event that such criteria are determined not to have been satisfied); provided, further, however, if necessary to comply with Section 409A, settlement of any such equity-based awards shall be made on the date that is six (6) months plus one (1) day following expiration of the Term.

(h)Timing of Certain Payments under Section 4.  Payments pursuant to Sections 4(c)(ii), 4(e)(ii) and 4(f) (solely with respect to the amount determined by reference to Section 4(e)(ii) and subject to the proviso in the first sentence of Section 4(f)), if any, shall be payable in equal installments in accordance with the Company’s standard payroll practices over the applicable period of months contemplated by such Sections following the date of termination (subject to such deductions or amounts to be withheld as required by applicable law and regulations); provided, however, that if and to the extent necessary to prevent any acceleration or additional tax under Section 409A, such payments shall be made as follows:  (i) no payments shall be made for a six-month period following the date of Executive’s separation of service (as defined in Section 409A(a)(2)(B)(i) of the Code) with the Company; (ii) an amount equal to the aggregate sum that would have been otherwise payable during the initial six-month period shall be paid in a lump sum six (6) months following the date of Executive’s separation of service with the Company (subject to such deductions or amounts to be withheld as required by applicable law and regulations); and (iii) during the period beginning six (6) months following Executive’s separation of service with the Company through the remainder of the applicable period, payment of the remaining amount due shall be p ayable in equal installments in accordance with the Company’s standard payroll practices (subject to such deductions or amounts to be withheld as required by applicable law and regulations).  In addition, notwithstanding any other provision with respect to the timing of payments under this Agreement, if and to the extent necessary to comply with Section 409A, any amounts payable following termination of employment in a lump sum, including pursuant to Sections 4(e)(iii) and 4(f) (if the proviso in the first sentence of Section 4(f) of this Agreement is applicable), shall instead be paid six (6) months following the date of Executive’s separation of service (subject to such deductions or amounts to be withheld as required by applicable law and regulations).

(i)No Obligation to Mitigate.  Executive shall have no obligation to mitigate damages pursuant to this Section 4, but shall be obligated to promptly advise the Company regarding obtaining other employment providing health insurance benefits with respect to services provided to another employer during any period of continued payments pursuant to this Section 4.  The Company’s obligation to make continued insurance payments to or on behalf of Executive shall be reduced by any

7

insurance coverage obtained by Executive during the severance period through employment by another entity (without regard to when such coverage is paid).

(j)Set-Off.  To the fullest extent permitted by law and provided an acceleration of income or the imposition of an additional tax under Section 409A would not result, any amounts otherwise due to Executive hereunder (including, without limitation, any payments pursuant to this Section 4) shall be subject to set-off with respect to any amounts Executive otherwise owes the Company or any subsidiary or affiliate thereof.

(k)No Other Benefits or Compensation.  Except as may be provided under this Agreement, under any other written agreement between Executive and the Company, or under the terms of any plan or policy applicable to Executive, Executive shall have no right to receive any other compensation from the Company or any subsidiary or affiliate thereof, or to participate in any other plan, arrangement or benefit provided by the Company or any subsidiary or affiliate thereof, with respect to any future period after such termination or resignation.  Except for any benefits Executive has vested in pursuant to Executive’s participation in SGC’s 401(k) Plan, which benefits shall be subject to the terms and conditions set forth in such plan, Executive acknowledges and agrees that he has received all salary, consulting, incentive compensation, severance or similar payments, equity-based awards and other compensation and benefits to which he may have been entitled to from the Company or any of its subsidiaries or affiliates as of the date of this Agreement (including any payments and benefits under the Prior Employment Agreement or the Prior Consulting Agreement), and Executive acknowledges and agrees that he is entitled to no other compensation or benefits from the Company or any of its subsidiaries or affiliates of any kind or nature whatsoever in respect of periods prior to the date of this Agreement.

(l)Release of Employment Claims; Compliance with Section 5.  Executive agrees, as a condition to receipt of any termination payments and benefits provided for in this Section 4 (other than the Standard Termination Payments), that Executive will execute a general release agreement, in a form reasonably satisfactory to the Company, releasing any and all claims arising out of Executive’s employment and the termination of such employment (other than enforcement of this Agreement).  The Company s hall provide Executive with the proposed form of general release agreement referred to in the immediately preceding sentence no later than two (2) days following the date of termination.  Executive shall thereupon have 21 days to consider such general release agreement and, if he executes such general release agreement, shall have seven (7) days after execution of such general release agreement to revoke such general release agreement.  Absent such revocation, such general release agreement shall become binding on Executive.  If Executive does not revoke such general release agreement, payments contingent on such general release agreement that constitute deferred compensation under Section 409A (if any) shall be paid on the later of 60th day after the date of termination or the date such payments are otherwise scheduled to be paid pursuant to this Agre ement.  The Company’s obligation to make any termination payments and benefits provided for in this Section 4 (other than the Standard Termination Payments) shall immediately cease if Executive willfully and materially breaches Section 5.1, 5.2 , 5.3, 5.4, or 5.8 hereof.

5.Noncompetition; Non-solicitation; Nondisclosure; etc.

5.1 Noncompetition; Non-solicitation.

(a)Executive acknowledges the highly competitive nature of the Company’s business and that access to the Company’s confidential records and proprietary information renders Executive special and unique within the Company’s industry. In consideration of the amounts that may hereafter be paid to Executive pursuant to this Agreement (including, without limitation, Sections 3 and 4 hereof), Executive agrees that during the Term (including any extensions thereof) and during the Covered

8

Time (as defined in Section 5.1(e) hereof), Executive, alone or with others, will not, directly or indirectly, engage (as owner, investor, partner, stockholder, employer, employee, consultant, advisor, director or otherwise) in any Competing Business. For purposes of this Section 5, “Competing Business” shall mean any business: (i) involving design and production of instant lottery tickets and the management of related marketing and distribution programs; manufacture, sale, operation or management of on-line lottery systems (Lotto-type games), video gaming, including fixed odds or server-based betting terminals and video lottery terminals; development and commercialization of licensed and other proprietary game entertainment for all lottery product channels; provision of wagering (whether pari-mutuel (pooled) or otherwise) or venue management services for racetracks and off- track betting facilities; production of prepaid cellular phone cards; or any other business in which the Company or its affiliates is then or was within the previous eighteen (18) months engaged or in which the Company, to Executive’s knowledge, intends to engage during the Term or the Covered Time; (ii) in which Executive was engaged or involved (whether in an executive or supervisory capacity or otherwise) on behalf of the Company or with respect to which Executive has obtained proprietary or confidential information; and (iii) which was conducted anywhere in the United States or in any other geographic area in which such business was conducted or planned to be conducted by the Company.

(b)In further consideration of the amounts that may hereafter be paid to Executive pursuant to this Agreement (including, without limitation, Sections 3 and 4 hereof), Executive agrees that, during the Term (including any extensions thereof) and during the Covered Time, Executive shall not, directly or indirectly:  (i) solicit or attempt to induce any of the employees, agents, consultants or representatives of the Company to terminate his, her, or its relationship with the Company; (ii) solicit or attempt to induce any of the employees, agents, consultants or representatives of the Company to bec ome employees, agents, consultants or representatives of any other person or entity; (iii) solicit or attempt to induce any customer, vendor or distributor of the Company to curtail or cancel any business with the Company; or (iv) hire any person who, to Executive’s actual knowledge, is, or was within 180 days prior to such hiring, an employee of the Company.

(c)During the Term (including any extensions thereof) and during the Covered Time, Executive agrees that upon the earlier of Executive’s (i) negotiating with any Competitor (as defined below) concerning the possible employment of Executive by the Competitor, (ii) responding to (other than for the purpose of declining) an offer of employment from a Competitor, or (iii) becoming employed by a Competitor, (A) Executive will provide copies of Section 5 of this Agreement to the Competitor, and (B) in the case of any circumstance described in (iii) above occurring during the Covered Time, and in the case of any circumstance described in (i) or (ii) above occurring during the Term or during the Covered Time, Executive will promptly provide notice to the Company of such circumstances.  Executive further agrees that the Company may provide notice to a Competitor of Executive’s obligations under this Agreement.  For purposes of this Agreement, “Competitor” shall mean any person or entity (other than the Company, its subsidiaries or affiliates) that engages, directly or indirectly, in the United States in any Competing Business.

(d)Executive understands that the restrictions in this Section 5.1 may limit Executive’s ability to earn a livelihood in a business similar to the business of the Company but nevertheless agrees and acknowledges that the consideration provided under this Agreement (including, without limitation, Sections 3 and 4 hereof) is sufficient to justify such restrictions. In consideration thereof and in light of Executive’s education, skills and abilities, Executive agrees that Executive will not assert in any forum that such restrictions prevent Executive from earning a living or otherwise should be held void or unenforceable.

9

(e)For purposes of this Section 5.1, “Covered Time” shall mean the period beginning on the date of termination of Executive’s employment (the “Date of Termination”) and ending eighteen (18) months after the Date of Termination.

5.2Proprietary Information; Inventions.

(a)Executive acknowledges that, during the course of Executive’s employment with the Company, Executive necessarily will have (and during any employment by, or affiliation with, the Company prior to the Term has had) access to and make use of proprietary information and confidential records of the Company.  Executive covenants that Executive shall not during the Term or at any time thereafter, directly or indirectly, use for Executive’s own purpose or for the benefit of any person or entity other than the Company, nor otherwise disclose to any person or entity, any such proprietary informat ion, unless and to the extent such disclosure has been authorized in writing by the Company or is otherwise required by law.  The term “proprietary information” means:  (i) the software products, programs, applications, and processes utilized by the Company; (ii) the name and/or address of any customer or vendor of the Company or any information concerning the transactions or relations of any customer or vendor of the Company with the Company; (iii) any information concerning any product, technology, or procedure employed by the Company but not generally known to its customers or vendors or competitors, or under development by or being tested by the Company but not at the time offered generally to customers or vendors; (iv) any information relating to the Company’s computer software, computer systems, pricing or marketing methods, sales margins, cost of goods, cost of material, capital structure, operating results, borrowing arrangements or business plans; (v) any information identified as confidential or proprietary in any line of business engaged in by the Company; (vi) any information that, to Executive’s actual knowledge, the Company ordinarily maintains as confidential or proprietary; (vii) any business plans, budgets, advertising or marketing plans; (viii) any information contained in any of the Company’s written or oral policies and procedures or manuals; (ix) any information belonging to customers, vendors or any other person or entity which the Company, to Executive’s actual knowledge, has agreed to hold in confidence; and (x) all written, graphic, electronic data and other material containing any of the foregoing.  Executive acknowledges that information that is not novel or copyrighted or patented may nonetheless be proprietary information.  The term “proprietary information” shall not include information generally known or available to the public or information that becomes available to Executive on an unrestricted, non-confidential basis from a source other than the Company or any of its directors, officers, employees, agents or other representatives (without breach of any obligation of confidentiality of which Executive has knowledge, after reasonable inquiry, at the time of the relevant disclosure by Executive).  Notwithstanding the foregoing and Section 5.3 hereof, Executive may disclose or use proprietary information or confidential records solely to the extent (A) such disclosure or use may be required or appropriate in the performance of his duties as a director or employee of the Company, (B) required to do so by a court of law, by any governmental agency having supervisory authority over the business of the Company or by any administrative or legislative body (including a committee thereof) with apparent jurisdiction to order him to divulge, disclose or make accessible such information (provided that in such case Executive shall first give the Company prompt written notice of any such legal requirement, disclose no more information than is so required and cooperate fully with all efforts by the Company to obtain a protective order or similar confidentiality treatment for such information), (C) such information or records becomes generally known to the public without his violation of this Agreement, or (D) disclosed to Executive’s spouse, attorney and/or his personal tax and financial advisors to the extent reasonably necessary to advance Executive’s tax, financial and other personal planning (each an “Exempt Person”); provided, however, that any disclosure or use of any proprietary information or confidential records by an Exempt Person shall be deemed to be a breach of this Section 5.2 or Section 5.3 by Executive.

10

(b)Executive agrees that all processes, technologies and inventions (collectively, “Inventions”), including new contributions, improvements, ideas and discoveries, whether patentable or not, conceived, developed, invented or made by Executive during the Term (and during any employment by, or affiliation with, the Company prior to the Term) shall belong to the Company, provided that such Inventions grew out of Executive’s work with the Company or any of its subsidiaries or affiliates, are related in any manner to the business (commercial or experimental) of the Company or any of its subsidi aries or affiliates or are conceived or made on the Company’s time or with the use of the Company’s facilities or materials.  Executive shall further:  (i) promptly disclose such Inventions to the Company; (ii) assign to the Company, without additional compensation, all patent and other rights to such Inventions for the United States and foreign countries; (iii) sign all papers necessary to carry out the foregoing; and (iv) give testimony in support of Executive’s inventorship.  If any Invention is described in a patent application or is disclosed to third parties, directly or indirectly, by Executive within two (2) years after the termination of Executive’s employment with the Company, it is to be presumed that the Invention was conceived or made during the Term.  Executive agrees that Executive will not assert any rights to any Invention as having been made or acquired by Executive prior to the date of this Agreement, except for Inventions, i f any, disclosed in Exhibit A to this Agreement.

5.3Confidentiality and Surrender of Records.  Executive shall not, during the Term or at any time thereafter (irrespective of the circumstances under which Executive’s employment by the Company terminates), except to the extent required by law, directly or indirectly publish, make known or in any fashion disclose any confidential records to, or permit any inspection or copying of confidential records by, any person or entity other than in the course of such person’s or entity’s employment or retention by the Company, nor shall Executive retain, and will deliver promptly to the Company, any of the same following termination of Executive’s employment hereunder for any reason or upon request by the Company.  For purposes hereof, “confidential records” means those portions of correspondence, memoranda, files, manuals, books, lists, financial, operating or marketing records, magnetic tape, or electronic or other media or equipment of any kind in Executive’s possession or under Executive’s control or accessible to Executive which contain any proprietary information.  All confidential records shall be and remain the sole property of the Company during the Term and thereafter.

5.4Non-disparagement.  Executive shall not, during the Term and thereafter, disparage in any material respect the Company, any affiliate of the Company, any of their respective businesses, any of their respective officers, directors or employees, or the reputation of any of the foregoing persons or entities.  Notwithstanding the foregoing, nothing in this Agreement shall preclude Executive from making truthful statements that are required by applicable law, regulation or legal proce ss.

5.5No Other Obligations.  Executive represents that Executive is not precluded or limited in Executive’s ability to undertake or perform the duties described herein by any contract, agreement or restrictive covenant.  Executive covenants that Executive shall not employ the trade secrets or proprietary information of any other person in connection with Executive’s employment by the Company without such person’s authorization.

5.6Forfeiture of Outstanding Equity Awards; “Clawback” Policies.  The provisions of Section 4 hereof notwithstanding, if Executive willfully and materially fails to comply with Section 5.1, 5.2, 5.3, 5.4, or 5.8 hereof, all options to purchase common stock, restricted stock units and other equity-based awards granted by the Company or any of its affiliates (whether prior to, contemporaneous with, or subsequent to the date hereof) and held by Executive or a transferee of Executive shall be immediately forfeited and cancelled.  Executive acknowledges and agrees that, notwithstanding anything contained in this Agreement or any other agreement, plan or program, any incentive-based compensation or benefits contemplated under this Agreement (including Incentive Compensation and equity-based awards) shall be subject to recovery by the Company under any compensation recovery or “clawback” policy, generally

11

applicable to senior executives of the Company or SGC, that the Company or SGC may adopt from time to time, including without limitation any policy which the Company or SGC may be required to adopt under Section 954 of the Dodd-Frank Wall Street Reform and Consumer Protection Act and the rules and regulations of the Securities and Exchange Commission thereunder or the requirements of any national securities exchange on which the Company’s or SGC’s common stock may be listed.

5.7Enforcement.  Executive acknowledges and agrees that, by virtue of Executive’s position, services and access to and use of confidential records and proprietary information, any violation by Executive of any of the undertakings contained in this Section 5 would cause the Company immediate, substantial and irreparable injury for which it has no adequate remedy at law.  Accordingly, Executive agrees and consents to the entry of an injunction or other equitable relief by a court of competent jurisdiction restraining any violation or threatened violation of any undertaking contained in this Section 5.  Executive waives posting of any bond otherwise necessary to secure such injunction or other equitable relief.  Rights and remedies provided for in this Section 5 are cumulative and shall be in addition to rights and remedies otherwise available to the parties hereunder or under any other agreement or applicable law.

5.8Cooperation with Regard to Litigation.  Executive agrees to cooperate reasonably with the Company, during the Term and thereafter (including following Executive’s termination of employment for any reason), by being available to testify on behalf of the Company in any action, suit, or proceeding, whether civil, criminal, administrative, or investigative.  In addition, except to the extent that Executive has or intends to assert in good faith an interest or position adverse to or inconsistent with the interest or position of the Company, Executive agrees to cooperate reasonably with the Company, during the Term and thereafter (including following Executive’s termination of employment for any reason), to assist the Company in any such action, suit, or proceeding by providing information and meeting and consulting with the Board or its representatives or counsel, or representatives or counsel to the Company, in each case, as reasonably requested by the Company.  The Company agrees to pay (or reimburse, if already paid by Executive) all reasonable expenses actually incurred in connection with Executive’s cooperation and assistance including, without limitation, reasonable fees and disbursements of counsel, if any, chosen by Executive if Executive reasonably determines in good faith, on the advice of counsel, that the Company’s counsel may not ethically represent Executive in connection with such action, suit or proceeding due to actual or potential conflicts of i nterests.

5.9Survival.  The provisions of this Section 5 shall survive the termination of the Term and any termination or expiration of this Agreement.

5.10Company.  For purposes of this Section 5, references to the “Company” shall include the Company and each subsidiary and/or affiliate of the Company (and each of their respective joint ventures).

5.11Subsequent Agreement.Notwithstanding the foregoing, in the event that the Company and Executive separately agree in writing after the date hereof (including, without limitation, in any equity award agreement) to restrictive covenants, including covenants relating to non-competition, non-solicitation and/or confidentiality, such covenants will automatically (without any fur ther action by the parties hereto) supersede and replace the corresponding covenants set forth in this Section 5, except to the extent otherwise specifically provided otherwise in such separate agreement.

6.Code of Conduct.  Executive acknowledges that he has read SGC’s Code of Conduct and agrees to abide by such Code of Conduct, as amended or supplemented from time to time, and other policies applicable to employees and executives of SGC or the Company.

12

7.Indemnification.  The Company shall indemnify Executive to the full extent permitted under the Company’s Certificate of Incorporation or By-Laws and pursuant to any other agreements or policies in effect from time to time in connection with any action, suit or proceeding to which Executive may be made a party by reason of Executive being an officer, director or employee of the Company or of any subsidiary or affiliate of the Company.

8.Assignability; Binding Effect.  Neither this Agreement nor the rights or obligations hereunder of the parties hereto shall be transferable or assignable by Executive, except in accordance with the laws of descent and distribution and as specified below.  The Company may assign this Agreement and the Company’s rights and obligations hereunder to any affiliate of the Company, provided that upon any such assignment the Company shall remain liable for the obligations to Executive hereunder.  This Agreemen t shall be binding upon and inure to the benefit of Executive, Executive’s heirs, executors, administrators, and beneficiaries, and shall be binding upon and inure to the benefit of the Company and its successors and assigns.

9.Complete Understanding; Amendment; Waiver.  This Agreement constitutes the complete understanding between the parties hereto with respect to the employment of Executive and supersedes all other prior agreements and understandings, both written and oral, between the parties hereto with respect to the subject matter hereof, and no statement, representation, warranty or covenant has been made by either party hereto with respect thereto except as expressly set forth herein.  Except as contemplated by Section 3 (g) hereof, this Agreement shall not be modified, amended or terminated except by a written instrument signed by each of the parties hereto.  Any waiver of any term or provision hereof, or of the application of any such term or provision to any circumstances, shall be in writing signed by the party hereto charged with giving such waiver.  Waiver by either party hereto of any breach hereunder by the other party hereto shall not operate as a waiver of any other breach, whether similar to or different from the breach waived.  No delay by either party hereto in the exercise of any rights or remedies shall operate as a waiver thereof, and no single or partial exercise by either party hereto of any such right or remedy shall preclude other or further exercise thereof.

10.Severability.If any provision of this Agreement or the application of any such provision to any person or circumstances shall be determined by any court of competent jurisdiction to be invalid or unenforceable to any extent, the remainder of this Agreement, or the application of such provision to such person or circumstances other than those to which it is so determined to be invalid or unenforceable, shall not be affected thereby , and each provision hereof shall be enforced to the fullest extent permitted by law.  If any provision of this Agreement, or any part thereof, is held to be invalid or unenforceable because of the scope or duration of or the area covered by such provision, the parties hereto agree that the court making such determination shall reduce the scope, duration and/or area of such provision (and shall substitute appropriate provisions for any such invalid or unenforceable provisions) in order to make such provision enforceable to the fullest extent permitted by law and/or shall delete specific words and phrases, and such modified provision shall then be enforceable and shall be enforced.  The parties hereto recognize that if, in any judicial proceeding, a court shall refuse to enforce any of the separate covenants contained in this Agreement, then that invalid or unenforceable covenant contained in this Agreement shall be deemed eliminated from these provisions to the extent necessary to permit the remain ing separate covenants to be enforced.  In the event that any court determines that the time period or the area, or both, are unreasonable and that any of the covenants is to that extent invalid or unenforceable, the parties hereto agree that such covenants will remain in full force and effect, first, for the greatest time period, and second, in the greatest geographical area that would not render them unenforceable.

11.Survivability.  The provisions of this Agreement which by their terms call for performance subsequent to termination of Executive’s employment hereunder, or of this Agreement, shall so survive such termination, whether or not such provisions expressly state that they shall so survive.

13

12.Governing Law; Arbitration.

(a)Governing Law.  This Agreement shall be governed by and construed in accordance with the laws of the State of Georgia applicable to agreements made and to be wholly performed within that State, without regard to its conflict of laws provisions.

(b)Arbitration.

(i)Executive and the Company agree that, except for claims for workers’ compensation, unemployment compensation, and any other claim that is non-arbitrable under applicable law, final and binding arbitration shall be the exclusive forum for any dispute or controversy between them, including, without limitation, disputes arising under or in connection with this Agreement, Executive’s employment, and/or termination of employment, with the Company; provided, however, that the Company shall be entitled to commence an action in any court of competent jurisdiction for injunctive relief in connection with any alleged actual or threatened violation of any provision of Section 5 hereof.  Judgment may be entered on the arbitrators’ award in any court having jurisdiction.  For purposes of entering such judgment or seeking injunctive relief with regard to Section 5 hereof, the Company and Executive hereby consent to the jurisdiction of any or all of the following courts: (i) the United States District Court for the Northern District of Georgia; (ii) the Superior Court of Forsyth County, Georgia; or (iii) any other court having jurisdiction; provided that damages for any alleged violation of Section 5 hereof, as well as any claim, counterclaim or cross-claim brought by Executive or any third-party in response to, or in connection with any court action commenced by the Company seeking said injunctive relief shall remain exclusively subject to final and binding arbitration as provided for herein.  The Company and Executi ve hereby waive, to the fullest extent permitted by applicable law, any objection which either may now or hereafter have to such jurisdiction, venue and any defense of inconvenient forum.   Thus, except for the claims carved out above, this Agreement includes all common-law and statutory claims (whether arising under federal state or local law), including, but not limited to, any claim for breach of contract, fraud, fraud in the inducement, unpaid wages, wrongful termination, and gender, age, national origin, sexual orientation, marital status, disability, or any other protected status.

(ii)Any arbitration under this Agreement shall be filed exclusively with, and administered by, the American Arbitration Association in Atlanta, Georgia before three arbitrators, in accordance with the National Rules for the Resolution of Employment Disputes of the American Arbitration Association in effect at the time of submission to arbitration.  The Company and Executive hereby agree that a judgment upon an award rendered by the arbitrators may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law.  The Company shall pay all costs uniquely attributable to arbitration, including the administrative fees and costs of the arbitrators.  Each party shall pay that party’s own costs and attorney fees, if any, unless the arbitrators rule otherwise.  Executive understands that he is giving up no substantive rights, and this Agreement simply governs forum.  The arbitrators shall apply the same standards a court would apply to award any damages, attorney fees or costs.  Executive shall not be required to pay any fee or cost that he would not otherwise be required to pay in a court action, unless so ordered by the arbitrators.

EXECUTIVE INITIALS: COMPANY INITIALS:

(c)WAIVER OF JURY TRIAL.  BY SIGNING THIS AGREEMENT, EXECUTIVE AND THE COMPANY ACKNOWLEDGE THAT THE RIGHT TO A COURT TRIAL AND TRIAL BY JURY IS OF VALUE, AND KNOWINGLY AND

14

VOLUNTARILY WAIVE THAT RIGHT FOR ANY DISPUTE SUBJECT TO THE TERMS OF THIS ARBITRATION PROVISION.

13.Titles and Captions.  All paragraph titles or captions in this Agreement are for convenience only and in no way define, limit, extend or describe the scope or intent of any provision hereof.

14.Joint Drafting.  In recognition of the fact that the parties hereto had an equal opportunity to negotiate the language of, and draft, this Agreement, the parties acknowledge and agree that there is no single drafter of this Agreement and, therefore, the general rule that ambiguities are to be construed against the drafter is, and shall be, inapplicable.  If any language in this Agreement is found or claimed to be ambiguous, each party hereto shall have the same opportunity to present evidence as to the actual intent of the parties hereto wi th respect to any such ambiguous language without any inference or presumption being drawn against any party hereto.

15.Notices.  All notices and other communications to be given or to otherwise be made to any party to this Agreement shall be deemed to be sufficient if contained in a written instrument delivered in person or duly sent by certified mail or by a recognized national courier service, postage or charges prepaid, (a) to Scientific Games International, Inc., c/o Scientific Games Corporation, Attn General Counsel, at 750 Lexington Avenue, 25th Floor, New York, NY 10022, (b) to Executive, at the last address shown in the Company’ ;s records, or (c) to such other replacement address as may be designated in writing by the addressee to the addressor.

IN WITNESS WHEREOF, each of the parties hereto has duly executed this Agreement as of the date above written.

SCIENTIFIC GAMES INTERNATIONAL, INC.
By:	/s/ Jeffrey S. Lipkin
Name:  Jeffrey S. Lipkin
Title:    Vice President
EXECUTIVE
/s/ William J. Huntley
Name: William J. Huntley

15

Exhibit A

Inventions

None

16

EX-10.57

Exhibit 10.57

Employment Agreement

This Employment Agreement (the “Agreement”) is made as of December 22, 2010, by and between Scientific Games International, Inc., a Delaware corporation (the “Company”), and James B. Trask (“Executive”).

WHEREAS, the Company and Executive previously entered into an Employment Agreement dated as of January 11, 2007 (effective as of April 1, 2007), and amended on October 2, 2008 and December 30, 2008  (as so amended, the “Prior Employment Agreement”), which Prior Employment Agreement is hereby terminated and superseded; and

WHEREAS, the Company and Executive wish to enter into this new employment agreement;

NOW, THEREFORE, in consideration of the premises and mutual benefits to be derived herefrom and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged by the Company and Executive, the parties hereto agree as follows.

1.       Employment; Term.  The Company hereby agrees to employ Executive, and Executive hereby accepts employment with the Company, in accordance with and subject to the terms and conditions set forth in this Agreement.  This term of employment of Executive under this Agreement (the “Term”) shall be the period commencing on January 1, 2011 (the “Effective Date”) and ending on December 31, 2012, as may be extended in accordance with this Section 1 and subject to earlier termination in accordance with Section 4 hereof.  The Term shall be extended automatically without further action by either party hereto by one (1) additional year (added to the end of the Term), and then on each succeeding annual anniversary thereafter, unless either party hereto shall have given written notice to the other party hereto prior to the date which is sixty (60) days prior to the date upon which such extension would otherwise have become effective electing not to further extend the Term, in which case Executive’s employment shall terminate on the date upon which such extension would otherwise have become effective, unless earlier terminated in accordance with Section 4.

2.       Position and Duties.  During the Term, Executive will serve as President, Printed Products, of the Company and as an officer or director of any subsidiary or affiliate of the Company if elected to any such position by the stockholders or by the board of directors of any such subsidiary or affiliate, as the case may be.  In such capacities, Executive shall perform such duties and shall have such responsibilities as are normally associated with such positions, and as otherwise may be assigned to Executive from time to time by the Chief Executive Officer of Scientific Games Corporation, the parent company of the Company (“SGC”) or upon the authority of the board of directors of SGC (the “Board”) or the Company.  Subject to Section 4(e) hereof, Executive’s functions, duties and resp onsibilities are subject to reasonable changes as the Company or SGC may in good faith determine from time to time.  Executive hereby agrees to accept such employment and to serve the Company and its subsidiaries and affiliates to the best of Executive’s ability in such capacities, devoting all of Executive’s business time to such employment.

3.       Compensation.

(a)           Base Salary.  During the Term, Executive will receive a base salary of four hundred fifty thousand U.S. dollars (US$450,000) per annum (pro-rated for any partial year), payable in accordance with the Company’s regular payroll practices and subject to such deductions or amounts to be withheld as required by applicable law and regulations or as may be agreed to by Executive.  In the event that the Company, in its sole discretion, from time to time determines to increase Executive’s base salary, such increased amount shall, from and after the effective date of such increase, constitute the “base

i

salary” of Executive for purposes of this Agreement.

(b)           Incentive Compensation.  Executive shall have the opportunity annually to earn incentive compensation in amounts determined by the Compensation Committee of the Board (the “Compensation Committee”) in accordance with the applicable incentive compensation plan of the Company or SGC as in effect from time to time (“Incentive Compensation”).  Under such plan, Executive shall have the opportunity annually (beginning with respect to the 2011 performance period) to earn up to 66.7% of Executive’s base salary as Incentive Compensation at “target opportunity” (“Target Bonus”) and up to 133% of Executive’s base salary as Incentive Compensation at “maximum opportunity” on the terms and subject to the conditions of such plan (any such Incentive Compensation to be subject to such deductions or amounts to be withheld as required by applicable law and regulations or as may be agreed to by Executive).

(c)           Eligibility for Annual Equity Awards.  Executive shall be eligible (beginning in 2011) to receive an annual grant of stock options, restricted stock units or other equity awards in the sole discretion of the Compensation Committee and in accordance with the applicable plans and programs for senior executives of the Company and subject to the Company’s right to at any time amend or terminate any such plan or program, so long as any such change does not adversely affect any accrued or vested interest of Executive under any such plan or program.

(d)           Expense Reimbursement.  Subject to Section 3(g) hereof, the Company shall reimburse Executive for all reasonable and necessary travel, business entertainment and other business expenses incurred by Executive in connection with the performance of Executive’s duties under this Agreement, on a timely basis upon timely submission by Executive of vouchers therefor in accordance with the Company’s standard policies and procedures.

(e)           Health and Welfare Benefits.  Executive shall be entitled to participate, without discrimination or duplication, in any and all medical insurance, group health, disability, life insurance, accidental death and dismemberment insurance, 401(k) or other retirement, deferred compensation, stock ownership and such other plans and programs which are made generally available by the Company to similarly situated Executives in accordance with the terms of such plans and programs and subject to the right of the Company (or its applicable affiliate) to at any time amend or terminate any such plan or program.  Executive shall be entitled to paid vacation, holidays and any other time off in accordance with the Company’s policies in effect from time to time.

(f)            Sign-On Award.  Executive will be granted on the Effective Date fifty thousand (50,000) stock options (with an exercise price equal to the average of the high and low sales prices of the SGC’s common stock on the trading day immediately prior to the grant date) under the SGC 2003 Incentive Compensation Plan, as amended and restated (or any successor plan) (the “Plan”), pursuant to an equity award agreement to be provided by the Company entered into by and between SGC and Executive (the “Equity Award Agreement”) (the “Sign-On Option Award”).  The Equity Award Agreement shall provide that the Sign-On Option Award shall vest and become exercisable with respect to twenty-five percent (25%) of the shares of SGC common stock subject to such Sign-On Option Awa rd on each of the first four anniversaries of the date of grant of the Sign-On Option Award, subject to any applicable provisions relating to accelerated vesting and forfeiture as described in this Agreement, the Equity Award Agreement or the Plan.  Notwithstanding anything contained in this Agreement, the Equity Agreement or the Plan to the contrary, the stock options comprising the Sign-On Option Award shall not be exercisable except to the extent that sufficient shares (as reasonably determined by the Compensation Committee in light of outstanding awards) are available under the applicable Plan for the delivery of the shares issuable upon exercise of such stock options.

2

(g)           Taxes and Internal Revenue Code 409A.  Payment of all compensation and benefits to Executive specified in this Section 3 and in Section 4 of this Agreement shall be subject to all legally required and customary withholdings.  The Company makes no representations regarding the tax implications of the compensation and benefits to be paid to Executive under this Agreement, including, without limitation, under Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”), and applicable administrative guidance and regulations (“Section 409A”).  Section 409A governs plans and arrangements that provide “nonqualified deferred compensation” (as defined under the Code) which may include, among others, nonqualified retirement plans, bonus plans, stock option plans, employment agreements and severance agreements.  The Company reserves the right to provide compensation and benefits under any plan or arrangement in amounts, at times and in a manner that minimizes taxes, interest or penalties as a result of Section 409A.  In addition, in the event any benefits or amounts paid hereunder are deemed to be subject to Section 409A, including payments under Section 4 of this Agreement, Executive consents to the Company adopting such conforming amendments as the Company deems necessary, in its reasonable discretion, to comply with Section 409A (including, but not limited to, delaying payment until six (6) months following termination of employment).  Notwithstanding anything herein to the contrary, if (i) at the time of Executive’s “separation from service” (as defined in Treas. Reg. Section 1.409A-1(h)) with the Company other than as a result of Executive’s death, (ii) Executiv e is a “specified employee” (as defined in Section 409A(a)(2)(B)(i) of the Code), (iii) one or more of the payments or benefits received or to be received by Executive pursuant to this Agreement would constitute deferred compensation subject to Section 409A, and (iv) the deferral of the commencement of any such payments or benefits otherwise payable hereunder as a result of such separation of service is necessary in order to prevent any accelerated or additional tax under Section 409A, then the Company will defer the commencement of the payment of any such payments or benefits hereunder to the extent necessary (without any reduction in such payments or benefits ultimately paid or provided to Executive) until the date that is six (6) months following Executive’s separation from service with the Company (or the earliest date as is permitted under Section 409A).  Any remaining payments or benefits shall be made as otherwise scheduled hereunder.  F urthermore, to the extent any payments of money or other benefits due to Executive hereunder could cause the application of an accelerated or additional tax under Section 409A, such payments or other benefits shall be deferred if deferral will make such payment or other benefits compliant under Section 409A, or otherwise such payments or other benefits shall be restructured, to the extent possible, in a manner determined by the Company that does not cause such an accelerated or additional tax.  To the extent any reimbursements or in-kind benefits due to Executive under this Agreement constitute deferred compensation under Section 409A, any such reimbursements or in-kind benefits shall be paid to Executive in a manner consistent with Treas. Reg. Section 1.409A-3(i)(1)(iv).  Each payment made under this Agreement shall be designated as a “separate payment” within the meaning of Section 409A.

4.             Termination of Employment.  Executive’s employment may be terminated at any time prior to the end of the Term under the terms described in this Section 4.

(a)           Termination by Executive for Other than Good Reason.  Executive may terminate Executive’s employment hereunder for any reason or no reason upon 60 days’ prior written notice to the Company referring to this Section 4(a); provided, however, that a termination by Executive for “Good Reason” (as defined below) shall not constitute a termination by Executive for other than Good Reason pursuant to this Section 4(a).  In the event Executive terminates Executive’s employment for other than Good Reason, Executive shall be entitled only to the following compensation and benefits (collectively, the “Standard Termination Payments”):

(i)         any accrued but unpaid base salary for services rendered by Executive to the date of such termination, payable in accordance with the Company’s regular payroll practices

3

and subject to such deductions or amounts to be withheld as required by applicable law and regulations or as may be agreed to by Executive;

(ii)        any vested non-forfeitable amounts owing or accrued at the date of such termination under benefit plans, programs and arrangements set forth or referred to in Section 3(e) hereof in which Executive participated during the Term will be paid under the terms and conditions of such plans, programs, and arrangements (and agreements and documents thereunder);

(iii)       except as provided in Section 5.6 hereof, all stock options, restricted stock units and other equity-based awards will be governed by the terms of the plans and programs under which such options, restricted stock units or other awards were granted; and

(iv)       reasonable business expenses and disbursements incurred by Executive prior to such termination will be reimbursed in accordance with Section 3(d) hereof.

(b)           Termination By Reason of Death.  If Executive dies during the Term, the last beneficiary designated by Executive by written notice to the Company (or, in the absence of such designation, Executive’s estate) shall be entitled only to the Standard Termination Payments (including, if applicable, any benefits that may be payable under any life insurance benefit of Executive for which the Company pays premiums, in accordance with the terms of any such benefit and subject to the right of the Company (or its applicable affiliate) to at any time amend or terminate any such benefit).

(c)           Termination By Reason of Total Disability.  The Company may terminate Executive’s employment in the event of Executive’s “Total Disability.”  For purposes of this Agreement, “Total Disability” shall mean Executive’s (1) becoming eligible to receive benefits under any long-term disability insurance program of the Company or (2) failure to perform the duties and responsibilities contemplated under this Agreement for a period of more than 180 days during any consecutive 12-month period due to physical or mental incapacity or impairment.  In the event that Executive’s employment is terminated by the Company by reason of Total Disability, the Company shall pay the following amounts, and make the following other benefits available, to Executive:

(i)            the Standard Termination Payments;

(ii)           an amount equal to Executive’s annual base salary; provided such amount shall be reduced by any disability payments to which Executive may be entitled as a result of any disability plan sponsored or maintained by the Company or its affiliates providing benefits to Executive.

(d)           Termination by the Company for Cause.  The Company may terminate the employment of Executive at any time for “Cause.”  For purposes of this Agreement, “Cause” shall mean: (i) gross neglect by Executive of Executive’s duties hereunder; (ii) Executive’s conviction (including conviction on a nolo contendere plea) of a felony or any non-felony crime or offense involving the property of the Company or any of its subsidiaries or affiliates or evidencing moral turpitude; (iii) willful misconduct by Executive in connection with the performance of Executive’s duties hereunder; (iv) intentional breach by Executive of any material provision of this Agreement; (v) material violation by Executive of a material provision of the Company’s Code of Cond uct; or (vi) any other willful or grossly negligent conduct of Executive that would make the continued employment of Executive by the Company materially prejudicial to the best interests of the Company.  In the event Executive’s employment is terminated for “Cause,” Executive shall not be entitled to receive any compensation or benefits under this Agreement except for the Standard Termination Payments.

4

(e)           Termination by the Company without Cause or by Executive for Good Reason.  The Company may terminate Executive’s employment at any time without Cause, for any reason or no reason, and Executive may terminate Executive’s employment for “Good Reason.”  For purposes of this Agreement “Good Reason” shall mean that, without Executive’s prior written consent, any of the following shall have occurred:  (i) a material change, adverse to Executive, in Executive’s positions, titles, offices, or duties as provided in Section 2 hereof, except, in such case, in connection with the termination of Executive’s employment for Cause or due to Total Disability, death or expiration of the Term; (ii) an assignment of any significant duties to Executive whic h are materially inconsistent with Executive’s positions or offices held under Section 2 hereof; (iii) a material decrease in base salary or material decrease in Executive’s incentive compensation opportunities provided under this Agreement;  or (iv) any other material failure by the Company to perform any material obligation under, or material breach by the Company of any material provision of, this Agreement; provided, however, that a termination by Executive for Good Reason under any of clauses (i) through (iv) of this Section 4(e) shall not be considered effective unless Executive shall have provided the Company with written notice of the specific reasons for such termination within thirty (30) days after he has knowledge of the event or circumstance constituting Good Reason and the Company shall have failed to cure the event or condition allegedly constituting Good Reason within thirty (30) days after such notice has been given to the Compa ny.  In the event that Executive’s employment is terminated by the Company without Cause or by Executive for Good Reason (and not, for the avoidance of doubt, in the event of a termination pursuant to Section 4(a), (b), (c) or (d) hereof or due to the expiration of the Term), the Company shall pay the following amounts, and make the following other benefits available, to Executive.

(i)            the Standard Termination Payments;

(ii)           an amount equal to the sum of (A) Executive’s base salary and (2) an amount equal to the highest annual Incentive Compensation paid to Executive in respect of the two (2) most recent fiscal years of the Company but not more than Executive’s Target Bonus for the-then current fiscal year (such amount under this sub-clause (2), the “Severance Amount”), such amount payable over a period of 12 months after such termination in accordance with Section 4(h) of this Agreement;

(iii)          no later than March 15 following the end of the year in which such termination occurs, in lieu of any Incentive Compensation for the year in which such termination occurs, payment of an amount equal to (A) the Incentive Compensation which would have been payable to Executive had Executive remained in employment with the Company during the entire year in which such termination occurred, multiplied by (B) a fraction the numerator of which is the number of days Executive was employed in the year in which such termination occurs and the denominator of which is the total number of days in the year in which such termination occurs; and

(iv)          if Executive elects to continue medical coverage under the Company’s group health plan in accordance with COBRA, the monthly premiums for such coverage for a period of twelve (12) months.

(f)            Termination by the Company without Cause or by Executive for Good Reason in connection with a Change in Control.  In the event Executive’s employment is terminated by the Company without Cause or by Executive for Good Reason pursuant to Section 4(e) hereof and such termination occurs upon, or within one (1) year immediately following, a “Change in Control” (as defined below), Executive shall be entitled (without duplication) to the payments and benefits described in Section 4(e) hereof, except that, solely in the case of an amount otherwise payable under Section 4(e)(ii) hereof, such amount shall be multiplied by two (2) (i.e., an amount equal to two (2) multiplied by the sum

5

of Executive’s base salary and Executive’s Severance Bonus Amount, without duplication) and such amount shall be payable over a period of 24 months after termination in accordance with Section 4(h) of this Agreement; provided, however, to the extent that such amount under Section 4(e)(ii) is exempt from Section 409A and/or if such Change in Control constitutes a change in ownership, change in effective control or a change in ownership of a substantial portion of the assets of SGC under Regulation Section 1.409A-3(i)(5), such amount otherwise payable under Section 4(e)(ii) hereof shall be paid in a lump sum in accordance with Section 4(h) of this Agreement.  Notwithstanding the foregoing, payments pursuant to this Section 4(f) shall be reduced by the amount necessary, if any, to ensure that the aggregate compensation to be received by the Execu tive in connection with such Change in Control does not constitute a “parachute payment,” as such term is defined in 26 U.S.C. § 280G.

For purposes of this Agreement, a “Change in Control” shall be deemed to have occurred if: (i) any “person” as defined in Section 3(a)(9) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and as used in Sections 13(d) and 14(d) thereof, including a “group” as defined in Section 13(d) of the Exchange Act but excluding SGC and any subsidiary or affiliate and any employee benefit plan sponsored or maintained by SGC or any subsidiary or affiliate (including any trustee of such plan acting as trustee) or any current stockholder of 20% or more of the outstanding common stock of SGC, directly or indirectly, becomes the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act) of securities of SGC representing at least 40% of the combined voting power of the SGC’s then-outstandi ng securities; (ii) the stockholders of SGC approve a merger, consolidation, recapitalization, or reorganization of SGC, or a reverse stock split of any class of voting securities of SGC, or the consummation of any such transaction if stockholder approval is not obtained, other than any such transaction that would result in at least 60% of the total voting power represented by the voting securities of SGC or the surviving entity outstanding immediately after such transaction being beneficially owned by persons who together beneficially owned at least 80% of the combined voting power of the voting securities of SGC outstanding immediately prior to such transaction; provided that, for purposes of this Section 4(f), such continuity of ownership (and preservation of relative voting power) shall be deemed to be satisfied if the failure to meet such 60% threshold is due solely to the acquisition of voting securities by an employee benefit plan of SGC or such surviving entity or of any subsidiary o f SGC or such surviving entity; (iii) the stockholders of SGC approve a plan of complete liquidation of SGC, an agreement for the sale or disposition by SGC of all or substantially all of its assets (or any transaction having a similar effect); or (iv) during any period of two (2) consecutive years, individuals who at the beginning of such period constitute the Board, together with any new director (other than a director designated by a person who has entered into an agreement with the Company to effect a transaction described in clause (i), (ii) or (iii) above) whose election by the Board or nomination for election by SGC’s stockholders was approved by a vote of at least two-thirds (2/3) of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved, cease for any reason to constitute at least a majority of the Board.

(g)           Expiration of Term of Agreement.  In the event that the Agreement expires at the end of the Term, Executive shall not be entitled to receive any compensation or benefits under this Agreement except for the Standard Termination Payments; provided, however, that (i) subject to Section 5.6 hereof, any unvested stock options comprising the Sign-On Option Award held by Executive upon the expiration of the Term will become fully vested and exercisable (provided that any stock options comprising the Sign-On Option Award will cease being exercisable upon the earlier of three (3) months after such expiration of the Term and the scheduled expiration date of such stock options), and in all other respects, all such stock options shall be governed by the plans and programs and the agreements and other d ocuments pursuant to which such stock options were granted, (ii) subject to Section 5.6 hereof and except to the extent otherwise provided at the time of grant under the terms of any equity award made to Executive, 50% of any unvested stock options granted on or after the Effective Date and 50% of any unvested restricted stock units granted on or after the Effective Date held by Executive upon the

6

expiration of the Term will become fully vested (and, in the case of any such stock options, exercisable) (provided that any stock options held by Executive will cease being exercisable upon the earlier of three (3) months after such expiration of the Term and the scheduled expiration date of such stock options), and (iii) subject to Section 5.6 hereof and except to the extent otherwise provided at the time of grant under the terms of any equity award made to Executive, 100% of any unvested stock options granted prior to the Effective Date and 100% of any unvested restricted stock units granted prior to the Effective Date will become fully vested (and, in the case of any such stock options, exercisable) (provided that any stock options held by Executive will cease being exercisable upon the earlier of three (3) months after such expiration of the Term and the scheduled expiration date of suc h stock options), and in all other respects, all stock options, restricted stock units and other equity-based awards held by Executive shall be governed by the plans and programs and the agreements and other documents pursuant to which the awards were granted; provided, however, that in the event such expiration of the Term occurs prior to the Compensation Committee’s determination as to the satisfaction of any performance criteria to which any such stock options and/or restricted stock units is subject, such stock options and/or restricted stock units (as the case may be) will not vest (and, in the case of any such stock options, will not become exercisable) unless and until a determination is or has been made by the Compensation Committee that such criteria have been satisfied, at which time such stock options and/or restricted stock units will vest (and, in the case of any such stock options, will become exercisable) to the extent contemplated by the terms of such award (it being unders tood and agreed, for the avoidance of doubt, that such stock options or restricted stock units will immediately be forfeited to the extent contemplated by the terms of such award in the event that such criteria are determined not to have been satisfied); provided, further, however, if necessary to comply with Section 409A, settlement of any such equity-based awards shall be made on the date that is six (6) months plus one (1) day following expiration of the Term.

(h)           Timing of Certain Payments under Section 4.  Payments pursuant to Sections 4(c)(ii), 4(e)(ii) and 4(f) (solely with respect to the amount determined by reference to  Section 4(e)(ii) and subject to the proviso in the first sentence of Section 4(f)), if any, shall be payable in equal installments in accordance with the Company’s standard payroll practices over the applicable period of months contemplated by such Sections following the date of termination (subject to such deductions or amounts to be withheld as required by applicable law and regulations); provided, however, that if and to the extent necessary to prevent any acceleration or additional tax under Section 409A, such payments shall be made as follows:  (i) no payments shall be made fo r a six-month period following the date of Executive’s separation of service (as defined in Section 409A(a)(2)(B)(i) of the Code) with the Company; (ii) an amount equal to the aggregate sum that would have been otherwise payable during the initial six-month period shall be paid in a lump sum six (6) months following the date of Executive’s separation of service with the Company (subject to such deductions or amounts to be withheld as required by applicable law and regulations); and (iii) during the period beginning six (6) months following Executive’s separation of service with the Company through the remainder of the applicable period, payment of the remaining amount due shall be payable in equal installments in accordance with the Company’s standard payroll practices (subject to such deductions or amounts to be withheld as required by applicable law and regulations).  In addition, notwithstanding any other provision with respect to the timing of paymen ts under this Agreement, if and to the extent necessary to comply with Section 409A, any amounts payable following termination of employment in a lump sum, including pursuant to Sections 4(e)(iii) and 4(f) (if the proviso in the first sentence of Section 4(f) of this Agreement is applicable), shall instead be paid six (6) months following the date of Executive’s separation of service (subject to such deductions or amounts to be withheld as required by applicable law and regulations).

(i)            No Obligation to Mitigate.  Executive shall have no obligation to mitigate damages pursuant to this Section 4, but shall be obligated to promptly advise the Company regarding obtaining other employment providing health insurance benefits with respect to services provided to another employer during any period of continued payments pursuant to this Section 4.  The Company’s

7

obligation to make continued insurance payments to or on behalf of Executive shall be reduced by any insurance coverage obtained by Executive during the severance period through employment by another entity (without regard to when such coverage is paid).

(j)            Set-Off.  To the fullest extent permitted by law and provided an acceleration of income or the imposition of an additional tax under Section 409A would not result, any amounts otherwise due to Executive hereunder (including, without limitation, any payments pursuant to this Section 4) shall be subject to set-off with respect to any amounts Executive otherwise owes the Company or any subsidiary or affiliate thereof.

(k)           No Other Benefits or Compensation.  Except as may be provided under this Agreement, under any other written agreement between Executive and the Company, or under the terms of any plan or policy applicable to Executive, Executive shall have no right to receive any other compensation from the Company or any subsidiary or affiliate thereof, or to participate in any other plan, arrangement or benefit provided by the Company or any subsidiary or affiliate thereof, with respect to any future period after such termination or resignation.  This Agreement supersedes the Prior Employment Agreement in all respects, which is hereby terminated.  Except for any benefits Executive has vested in pursuant to Executive’s participation in SGC’s 401(k) Plan, which benefits shall be subject to the terms and conditi ons set forth in such plan, Executive acknowledges and agrees that he has received all salary, consulting, incentive compensation, severance or similar payments, equity-based awards and other compensation and benefits to which he may have been entitled to from the Company or any of its subsidiaries or affiliates as of the date of this Agreement (including any payments and benefits under the Prior Employment Agreement), and Executive acknowledges and agrees that he is entitled to no other compensation or benefits from the Company or any of its subsidiaries or affiliates of any kind or nature whatsoever in respect of periods prior to the date of this Agreement.

(l)            Release of Employment Claims; Compliance with Section 5.  Executive agrees, as a condition to receipt of any termination payments and benefits provided for in this Section 4 (other than the Standard Termination Payments), that Executive will execute a general release agreement, in a form reasonably satisfactory to the Company, releasing any and all claims arising out of Executive’s employment and the termination of such employment (other than enforcement of this Agreement).  The Company shall provide Executive with the proposed form of general release agreement referred to in the immediately preceding sentence no later than two (2) days following the date of termination.  Executive shall thereupon have 21 days to consider such general release agreement and, if he executes such genera l release agreement, shall have seven (7) days after execution of such general release agreement to revoke such general release agreement.  Absent such revocation, such general release agreement shall become binding on Executive.  If Executive does not revoke such general release agreement, payments contingent on such general release agreement that constitute deferred compensation under Section 409A (if any) shall be paid on the later of 60th day after the date of termination or the date such payments are otherwise scheduled to be paid pursuant to this Agreement.  The Company’s obligation to make any termination payments and benefits provided for in this Section 4 (other than the Standard Termination Payments) shall immediately cease if Executive willfully and materially breaches Section 5.1, 5.2 , 5.3, 5.4, or 5.8 hereof.

5.             Noncompetition; Non-solicitation; Nondisclosure; etc.

5.1 Noncompetition; Non-solicitation.

(a)           Executive acknowledges the highly competitive nature of the Company’s business and that access to the Company’s confidential records and proprietary information renders Executive special and unique within the Company’s industry. In consideration of the amounts that may

8

hereafter be paid to Executive pursuant to this Agreement (including, without limitation, Sections 3 and 4 hereof), Executive agrees that during the Term (including any extensions thereof) and during the Covered Time (as defined in Section 5.1(e) hereof), Executive, alone or with others, will not, directly or indirectly, engage (as owner, investor, partner, stockholder, employer, employee, consultant, advisor, director or otherwise) in any Competing Business. For purposes of this Section 5, “Competing Business” shall mean any business: (i) involving design and production of instant lottery tickets and the management of related marketing and distribution programs; manufacture, sale, operation or management of on-line lottery systems (Lotto-type games), video gaming, including fixed odds or server-based betting terminals and video lottery terminals; development and commercialization of licensed a nd other proprietary game entertainment for all lottery product channels; provision of wagering (whether pari-mutuel (pooled) or otherwise) or venue management services for racetracks and off-track betting facilities; production of prepaid cellular phone cards; or any other business in which the Company or its affiliates is then or was within the previous eighteen (18) months engaged or in which the Company, to Executive’s knowledge, intends to engage during the Term or the Covered Time; (ii) in which Executive was engaged or involved (whether in an executive or supervisory capacity or otherwise) on behalf of the Company or with respect to which Executive has obtained proprietary or confidential information; and (iii) which was conducted anywhere in the United States or in any other geographic area in which such business was conducted or planned to be conducted by the Company.

(b)           In further consideration of the amounts that may hereafter be paid to Executive pursuant to this Agreement (including, without limitation, Sections 3 and 4 hereof), Executive agrees that, during the Term (including any extensions thereof) and during the Covered Time, Executive shall not, directly or indirectly:  (i) solicit or attempt to induce any of the employees, agents, consultants or representatives of the Company to terminate his, her, or its relationship with the Company; (ii) solicit or attempt to induce any of the employees, agents, consultants or representatives of the Company to become employees, agents, consultants or representatives of any other person or entity; (iii) solicit or attempt to induce any customer, vendor or distributor of the Company to curtail or cancel any business with the Company; or (iv) hire any person who, to Executive’s actual knowledge, is, or was within 180 days prior to such hiring, an employee of the Company.

(c)           During the Term (including any extensions thereof) and during the Covered Time, Executive agrees that upon the earlier of Executive’s (i) negotiating with any Competitor (as defined below) concerning the possible employment of Executive by the Competitor, (ii) responding to (other than for the purpose of declining) an offer of employment from a Competitor, or (iii) becoming employed by a Competitor, (A) Executive will provide copies of Section 5 of this Agreement to the Competitor, and (B) in the case of any circumstance described in (iii) above occurring during the Covered Time, and in the case of any circumstance described in (i) or (ii) above occurring during the Term or during the Covered Time, Executive will promptly provide notice to the Company of such circumstances.  E xecutive further agrees that the Company may provide notice to a Competitor of Executive’s obligations under this Agreement.  For purposes of this Agreement, “Competitor” shall mean any person or entity (other than the Company, its subsidiaries or affiliates) that engages, directly or indirectly, in the United States in any Competing Business.

(d)           Executive understands that the restrictions in this Section 5.1 may limit Executive’s ability to earn a livelihood in a business similar to the business of the Company but nevertheless agrees and acknowledges that the consideration provided under this Agreement (including, without limitation, Sections 3 and 4 hereof) is sufficient to justify such restrictions. In consideration thereof and in light of Executive’s education, skills and abilities, Executive agrees that Executive will not assert in any forum that such restrictions prevent Executive from earning a living or otherwise should be held void or unenforceable.

9

(e)           For purposes of this Section 5.1, “Covered Time” shall mean the period beginning on the date of termination of Executive’s employment (the “Date of Termination”) and ending eighteen (18) months after the Date of Termination.

5.2          Proprietary Information; Inventions.

(a)           Executive acknowledges that, during the course of Executive’s employment with the Company, Executive necessarily will have (and during any employment by, or affiliation with, the Company prior to the Term has had) access to and make use of proprietary information and confidential records of the Company.  Executive covenants that Executive shall not during the Term or at any time thereafter, directly or indirectly, use for Executive’s own purpose or for the benefit of any person or entity other than the Company, nor otherwise disclose to any person or entity, any such proprietary information, unless and to the extent such disclosure has been authorized in writing by the Company or is otherwise required by law.  The term “proprietary information” means:  (i) the software products, progr ams, applications, and processes utilized by the Company; (ii) the name and/or address of any customer or vendor of the Company or any information concerning the transactions or relations of any customer or vendor of the Company with the Company; (iii) any information concerning any product, technology, or procedure employed by the Company but not generally known to its customers or vendors or competitors, or under development by or being tested by the Company but not at the time offered generally to customers or vendors; (iv) any information relating to the Company’s computer software, computer systems, pricing or marketing methods, sales margins, cost of goods, cost of material, capital structure, operating results, borrowing arrangements or business plans; (v) any information identified as confidential or proprietary in any line of business engaged in by the Company; (vi) any information that, to Executive’s actual knowledge, the Company ordinarily maintains as confident ial or proprietary; (vii) any business plans, budgets, advertising or marketing plans; (viii) any information contained in any of the Company’s written or oral policies and procedures or manuals; (ix) any information belonging to customers, vendors or any other person or entity which the Company, to Executive’s actual knowledge, has agreed to hold in confidence; and (x) all written, graphic, electronic data and other material containing any of the foregoing.  Executive acknowledges that information that is not novel or copyrighted or patented may nonetheless be proprietary information.  The term “proprietary information” shall not include information generally known or available to the public or information that becomes available to Executive on an unrestricted, non-confidential basis from a source other than the Company or any of its directors, officers, employees, agents or other representatives (without breach of any obligation of confidentiality of which Executive has knowledge, after reasonable inquiry, at the time of the relevant disclosure by Executive).  Notwithstanding the foregoing and Section 5.3 hereof, Executive may disclose or use proprietary information or confidential records solely to the extent (A) such disclosure or use may be required or appropriate in the performance of his duties as a director or employee of the Company, (B) required to do so by a court of law, by any governmental agency having supervisory authority over the business of the Company or by any administrative or legislative body (including a committee thereof) with apparent jurisdiction to order him to divulge, disclose or make accessible such information (provided that in such case Executive shall first give the Company prompt written notice of any such legal requirement, disclose no more information than is so required and cooperate fully with all efforts by the Company to obtain a protective order or similar confidentiality treatment for such information ), (C) such information or records becomes generally known to the public without his violation of this Agreement, or (D) disclosed to Executive’s spouse, attorney and/or his personal tax and financial advisors to the extent reasonably necessary to advance Executive’s tax, financial and other personal planning (each an “Exempt Person”); provided, however, that any disclosure or use of any proprietary information or confidential records by an Exempt Person shall be deemed to be a breach of this Section 5.2 or Section 5.3 by Executive.

10

(b)           Executive agrees that all processes, technologies and inventions (collectively, “Inventions”), including new contributions, improvements, ideas and discoveries, whether patentable or not, conceived, developed, invented or made by Executive during the Term (and during any employment by, or affiliation with, the Company prior to the Term) shall belong to the Company, provided that such Inventions grew out of Executive’s work with the Company or any of its subsidiaries or affiliates, are related in any manner to the business (commercial or experimental) of the Company or any of its subsidiaries or affiliates or are conceived or made on the Company’s time or with the use of the Company’s facilities or materials.  Executive shall further:  (i) promptly disclose such Inventions to the Compa ny; (ii) assign to the Company, without additional compensation, all patent and other rights to such Inventions for the United States and foreign countries; (iii) sign all papers necessary to carry out the foregoing; and (iv) give testimony in support of Executive’s inventorship.  If any Invention is described in a patent application or is disclosed to third parties, directly or indirectly, by Executive within two (2) years after the termination of Executive’s employment with the Company, it is to be presumed that the Invention was conceived or made during the Term.  Executive agrees that Executive will not assert any rights to any Invention as having been made or acquired by Executive prior to the date of this Agreement, except for Inventions, if any, disclosed in Exhibit A to this Agreement.

5.3           Confidentiality and Surrender of Records.  Executive shall not, during the Term or at any time thereafter (irrespective of the circumstances under which Executive’s employment by the Company terminates), except to the extent required by law, directly or indirectly publish, make known or in any fashion disclose any confidential records to, or permit any inspection or copying of confidential records by, any person or entity other than in the course of such person’s or entity’s employment or retention by the Company, nor shall Executive retain, and will deliver promptly to the Company, any of the same following termination of Executive’s employment hereunder for any reason or upon request by the Company.  For purposes hereof, “confidential records” means those portions of correspondence, memoranda, files, manuals, books, lists, financial, operating or marketing records, magnetic tape, or electronic or other media or equipment of any kind in Executive’s possession or under Executive’s control or accessible to Executive which contain any proprietary information.  All confidential records shall be and remain the sole property of the Company during the Term and thereafter.

5.4           Non-disparagement.  Executive shall not, during the Term and thereafter, disparage in any material respect the Company, any affiliate of the Company, any of their respective businesses, any of their respective officers, directors or employees, or the reputation of any of the foregoing persons or entities.  Notwithstanding the foregoing, nothing in this Agreement shall preclude Executive from making truthful statements that are required by applicable law, regulation or legal process.

5.5           No Other Obligations.  Executive represents that Executive is not precluded or limited in Executive’s ability to undertake or perform the duties described herein by any contract, agreement or restrictive covenant.  Executive covenants that Executive shall not employ the trade secrets or proprietary information of any other person in connection with Executive’s employment by the Company without such person’s authorization.

5.6           Forfeiture of Outstanding Equity Awards; “Clawback” Policies.  The provisions of Section 4 hereof notwithstanding, if Executive willfully and materially fails to comply with Section 5.1, 5.2, 5.3, 5.4, or 5.8 hereof, all options to purchase common stock, restricted stock units and other equity-based awards granted by the Company or any of its affiliates (whether prior to, contemporaneous with, or subsequent to the date hereof) and held by Executive or a transferee of Executive shall be immediately forfeited and cancelled.  Executive acknowledges and agrees that, notwithstanding anything contained in this Agreement or any other agreement, plan or program, any incentive-based compensation or benefits contemplated under this Agreement (including Incentive Compensation and equity-based awards) shal l be subject to recovery by the Company under any compensation recovery or “clawback” policy, generally

11

applicable to senior executives of the Company or SGC, that the Company or SGC may adopt from time to time, including without limitation any policy which the Company or SGC may be required to adopt under Section 954 of the Dodd-Frank Wall Street Reform and Consumer Protection Act and the rules and regulations of the Securities and Exchange Commission thereunder or the requirements of any national securities exchange on which the Company’s or SGC’s common stock may be listed.

5.7           Enforcement.  Executive acknowledges and agrees that, by virtue of Executive’s position, services and access to and use of confidential records and proprietary information, any violation by Executive of any of the undertakings contained in this Section 5 would cause the Company immediate, substantial and irreparable injury for which it has no adequate remedy at law.  Accordingly, Executive agrees and consents to the entry of an injunction or other equitable relief by a court of competent jurisdiction restraining any violation or threatened violation of any undertaking contained in this Section 5.  Executive waives posting of any bond otherwise necessary to secure such injunction or other equitable relief.  Rights and remedies provided for in this Section 5 are cumulative and shall be in addition to rights and remedies otherwise available to the parties hereunder or under any other agreement or applicable law.

5.8           Cooperation with Regard to Litigation.  Executive agrees to cooperate reasonably with the Company, during the Term and thereafter (including following Executive’s termination of employment for any reason), by being available to testify on behalf of the Company in any action, suit, or proceeding, whether civil, criminal, administrative, or investigative.  In addition, except to the extent that Executive has or intends to assert in good faith an interest or position adverse to or inconsistent with the interest or position of the Company, Executive agrees to cooperate reasonably with the Company, during the Term and thereafter (including following Executive’s termination of employment for any reason), to assist the Company in any such action, suit, or proceeding by providing information and meeting and cons ulting with the Board or its representatives or counsel, or representatives or counsel to the Company, in each case, as reasonably requested by the Company.  The Company agrees to pay (or reimburse, if already paid by Executive) all reasonable expenses actually incurred in connection with Executive’s cooperation and assistance including, without limitation, reasonable fees and disbursements of counsel, if any, chosen by Executive if Executive reasonably determines in good faith, on the advice of counsel, that the Company’s counsel may not ethically represent Executive in connection with such action, suit or proceeding due to actual or potential conflicts of interests.

5.9           Survival.  The provisions of this Section 5 shall survive the termination of the Term and any termination or expiration of this Agreement.

5.10         Company.  For purposes of this Section 5, references to the “Company” shall include the Company and each subsidiary and/or affiliate of the Company (and each of their respective joint ventures).

5.11         Subsequent Agreement.Notwithstanding the foregoing, in the event that the Company and Executive separately agree in writing after the date hereof (including, without limitation, in any equity award agreement) to restrictive covenants, including covenants relating to non-competition, non-solicitation and/or confidentiality, such covenants will automatically (without any further action by the parties hereto) supersede and replace the corresponding covenants set forth in this Section 5, except to the extent otherwise specifically provided otherwise in such separate agreement.

12

6.             Code of Conduct.  Executive acknowledges that he has read SGC’s Code of Conduct and agrees to abide by such Code of Conduct, as amended or supplemented from time to time, and other policies applicable to employees and executives of SGC or the Company.

7.             Indemnification.  The Company shall indemnify Executive to the full extent permitted under the Company’s Certificate of Incorporation or By-Laws and pursuant to any other agreements or policies in effect from time to time in connection with any action, suit or proceeding to which Executive may be made a party by reason of Executive being an officer, director or employee of the Company or of any subsidiary or affiliate of the Company.

8.             Assignability; Binding Effect.  Neither this Agreement nor the rights or obligations hereunder of the parties hereto shall be transferable or assignable by Executive, except in accordance with the laws of descent and distribution and as specified below.  The Company may assign this Agreement and the Company’s rights and obligations hereunder to any affiliate of the Company, provided that upon any such assignment the Company shall remain liable for the obligations to Executive hereunder.  This Agreement shall be binding upon and inure to the benefit of Executive, Executive’s heirs, executors, administrators, and beneficiaries, and shall be binding upon and inure to the benefit of the Company and its successors and assigns.

9.             Complete Understanding; Amendment; Waiver.  This Agreement constitutes the complete understanding between the parties hereto with respect to the employment of Executive and supersedes all other prior agreements and understandings, both written and oral, between the parties hereto with respect to the subject matter hereof, and no statement, representation, warranty or covenant has been made by either party hereto with respect thereto except as expressly set forth herein.  Except as contemplated by Section 3(g) hereof, this Agreement shall not be modified, amended or terminated except by a written instrument signed by each of the parties hereto.  Any waiver of any term or provision hereof, or of the application of any such term or provision to any circumstances, shall be in writing signed by the party hereto charged with giving such waiver.  Waiver by either party hereto of any breach hereunder by the other party hereto shall not operate as a waiver of any other breach, whether similar to or different from the breach waived.  No delay by either party hereto in the exercise of any rights or remedies shall operate as a waiver thereof, and no single or partial exercise by either party hereto of any such right or remedy shall preclude other or further exercise thereof.

10.           Severability.  If any provision of this Agreement or the application of any such provision to any person or circumstances shall be determined by any court of competent jurisdiction to be invalid or unenforceable to any extent, the remainder of this Agreement, or the application of such provision to such person or circumstances other than those to which it is so determined to be invalid or unenforceable, shall not be affected thereby, and each provision hereof shall be enforced to the fullest extent permitted by law.  If any provision of this Agreement, or any part thereof, is held to be invalid or unenforceable because of the scope or duration of or the area covered by such provision, the parties hereto agree that the court making such determination shall reduce the scope, duration and/or area of such provis ion (and shall substitute appropriate provisions for any such invalid or unenforceable provisions) in order to make such provision enforceable to the fullest extent permitted by law and/or shall delete specific words and phrases, and such modified provision shall then be enforceable and shall be enforced.  The parties hereto recognize that if, in any judicial proceeding, a court shall refuse to enforce any of the separate covenants contained in this Agreement, then that invalid or unenforceable covenant contained in this Agreement shall be deemed eliminated from these provisions to the extent necessary to permit the remaining separate covenants to be enforced.  In the event that any court determines that the time period or the area, or both, are unreasonable and that any of the covenants is to that extent invalid or unenforceable, the parties hereto agree that such covenants will remain in full force and effect, first, for the greatest time period, and second, in the greatest geographical area that would not render them unenforceable.

13

11.           Survivability.  The provisions of this Agreement which by their terms call for performance subsequent to termination of Executive’s employment hereunder, or of this Agreement, shall so survive such termination, whether or not such provisions expressly state that they shall so survive.

12.           Governing Law; Arbitration.

(a)           Governing Law.  This Agreement shall be governed by and construed in accordance with the laws of the State of Georgia applicable to agreements made and to be wholly performed within that State, without regard to its conflict of laws provisions.

(b)           Arbitration.

(i)            Executive and the Company agree that, except for claims for workers’ compensation, unemployment compensation, and any other claim that is non-arbitrable under applicable law, final and binding arbitration shall be the exclusive forum for any dispute or controversy between them, including, without limitation, disputes arising under or in connection with this Agreement, Executive’s employment, and/or termination of employment, with the Company; provided, however, that the Company shall be entitled to commence an action in any court of competent jurisdiction for injunctive relief in connection with any alleged actual or threatened violation of any provision of Section 5 hereof.  Judgment may be entered on the arbitrators’ award in any court having jurisdiction.  For purposes of e ntering such judgment or seeking injunctive relief with regard to Section 5 hereof, the Company and Executive hereby consent to the jurisdiction of any or all of the following courts: (i) the United States District Court for the Northern District of Georgia; (ii) the Superior Court of Forsyth County, Georgia; or (iii) any other court having jurisdiction; provided that damages for any alleged violation of Section 5 hereof, as well as any claim, counterclaim or cross-claim brought by Executive or any third-party in response to, or in connection with any court action commenced by the Company seeking said injunctive relief shall remain exclusively subject to final and binding arbitration as provided for herein.  The Company and Executive hereby waive, to the fullest extent permitted by applicable law, any objection which either may now or hereafter have to such jurisdiction, venue and any defense of inconvenient forum.   Thus, except for the claims carved out above, this Agreement includes all common-law and statutory claims (whether arising under federal state or local law), including, but not limited to, any claim for breach of contract, fraud, fraud in the inducement, unpaid wages, wrongful termination, and gender, age, national origin, sexual orientation, marital status, disability, or any other  protected status.

Any arbitration under this Agreement shall be filed exclusively with, and administered by, the American Arbitration Association in Atlanta, Georgia before three arbitrators, in accordance with the National Rules for the Resolution of Employment Disputes of the American Arbitration Association in effect at the time of submission to arbitration.  The Company and Executive hereby agree that a judgment upon an award rendered by the arbitrators may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law.  The Company shall pay all costs uniquely attributable to arbitration, including the administrative fees and costs of the arbitrators.  Each party shall pay that party’s own costs and attorney fees, if any, unless the arbitrators rule otherwise.  Executive understands that he is giving up no substantive rights, and this Agreement simpl y governs forum.  The arbitrators shall apply the same standards a court would apply to award any damages, attorney fees or costs.  Executive shall not be required to pay any fee or cost that he would not otherwise be required to pay in a court action, unless so ordered by the arbitrators.

EXECUTIVE INITIALS: COMPANY INITIALS:

14

(c)           WAIVER OF JURY TRIAL.  BY SIGNING THIS AGREEMENT, EXECUTIVE AND THE COMPANY ACKNOWLEDGE THAT THE RIGHT TO A COURT TRIAL AND TRIAL BY JURY IS OF VALUE, AND KNOWINGLY AND VOLUNTARILY WAIVE THAT RIGHT FOR ANY DISPUTE SUBJECT TO THE TERMS OF THIS ARBITRATION PROVISION.

13.           Titles and Captions.  All paragraph titles or captions in this Agreement are for convenience only and in no way define, limit, extend or describe the scope or intent of any provision hereof.

14.           Joint Drafting.  In recognition of the fact that the parties hereto had an equal opportunity to negotiate the language of, and draft, this Agreement, the parties acknowledge and agree that there is no single drafter of this Agreement and, therefore, the general rule that ambiguities are to be construed against the drafter is, and shall be, inapplicable.  If any language in this Agreement is found or claimed to be ambiguous, each party hereto shall have the same opportunity to present evidence as to the actual intent of the parties hereto with respect to any such ambiguous language without any inference or presumption being drawn against any party hereto.

15.           Notices.  All notices and other communications to be given or to otherwise be made to any party to this Agreement shall be deemed to be sufficient if contained in a written instrument delivered in person or duly sent by certified mail or by a recognized national courier service, postage or charges prepaid, (a) to Scientific Games International, Inc., c/o Scientific Games Corporation, Attn General Counsel, at 750 Lexington Avenue, 25th Floor, New York, NY 10022, (b) to Executive, at the last address shown in the Company’s records, or (c) to such other replacement address as may be designated in writing by the addressee to the addressor.

IN WITNESS WHEREOF, each of the parties hereto has duly executed this Agreement as of the date above written.

SCIENTIFIC GAMES INTERNATIONAL, INC.
By:	/s/ Jeffrey S. Lipkin
Name:  Jeffrey S. Lipkin
Title:    Vice President
EXECUTIVE
/s/ James B. Trask
Name:  James B. Trask

15

Exhibit A

Inventions

None

16

EX-12

QuickLinks -- Click here to rapidly navigate through this document

Exhibit 12

Ratio of Earnings to Fixed Charges

		December 31,
		2006			2007			2008			2009			2010
Income (loss) before income tax expense			73,955			38,701			(54,063	)		(85,627	)		(53,856	)
Equity in earnings (loss) of equity-method investees			(1,721	)		(1,042	)		(448	)		53			(383	)
Net income (loss) before equity in earnings (loss) of equity method investees			72,234			37,659			(54,511	)		(85,575	)		(54,239	)
Add fixed charges:
	Interest expense including amortization of debt issuance costs		54,843			70,772			78,071			87,498			101,613
	Estimate of interest within rental expense		4,755			4,699			6,885			6,179			5,856
			59,598			75,471			84,956			93,677			107,469
	Adjusted earnings		131,832			113,130			30,445			8,103			53,230
Ratio of earnings to fixed charges (1)			2.2			1.5			0.4			0.1			0.5

(1)

The ratio of earnings to fixed charges is computed by dividing adjusted earnings by fixed charges.

QuickLinks

Exhibit 12

Ratio of Earnings to Fixed Charges

EX-21

QuickLinks -- Click here to rapidly navigate through this document

Exhibit 21

SCIENTIFIC GAMES CORPORATION SUBSIDIARIES

All subsidiaries are 100% owned unless otherwise stated.

Scientific Games International, Inc. (Delaware)
MDI Entertainment, LLC (Delaware)
Scientific Games Products, Inc. (Delaware)
Scientific Games SA, Inc. (Delaware)
Sciplay Inc. (Delaware) (50%)
SG Gaming, Inc. (Nevada)
Scientific Games Australia Pty. Ltd. (Australia)
Scientific Games Products Australia Pty Ltd (Australia)
Global Draw Austria GmbH (Austria)
Scientific Games Beteiligungsgesellschaft mBH (Austria)
Scientific Games International GmbH (Austria)
Scientific Games (Bermuda) Limited (Bermuda)
Scientific Games Brasil Ltda. (Brazil)
Happy Sun Technologies Ltd. (British Virgin Islands) (50%)
Neomi Associates, Inc. (British Virgin Islands)
Scientific Games Canada Inc. (Ottawa, Canada)
Scientific Games Holdings (Canada) ULC (Nova Scotia, Canada)
Scientific Games Products (Canada) ULC (Nova Scotia, Canada)
Scientific Games Chile Limitada (Chile) (99.99%)
Scientific Games Latino America SpA (Chile)
Beijing Guard Libang Technology Co. Limited (China) (50%)
Scientific Games (China) Company Limited (China)
Scientific Games Technology (Beijing) Co., Ltd. (China)
Shenzhen Leli (China) (50%)
Success Trader SZ (China) (50%)
Scientific Games Deutschland GmbH (Germany)
Scientific Games Germany GmbH (Germany)
Scientific Games Honsel GmbH (Germany)
Success Trader Technologies Limited (Hong Kong) (50%)
Scientific Games Lottery Services KFT (Hungary)
Scientific Connections India Private Limited (India)
Interplay Gaming Ventures Ltd. (Ireland)
Scientific Games Holdings Limited (Ireland)
Scientific Games Worldwide Limited (Ireland)
Scientific Games Global Gaming SARL (Luxembourg)
Scientific Games Luxembourg Holdings SARL (Luxembourg)
Scientific Games (Luxembourg) Investments SARL (Luxembourg)
Sciplay International SARL (Luxembourg) (50%)
Sciplay (Luxembourg) SARL (Luxembourg) (50%)
Scientific Connections SDN BHD (Malaysia)
Scientific Games Malta Limited (Malta)
Scientific Games Global Mexico S. de R.L. de C.V. (Mexico)
Scientific Games Mexico, SRL de CV (Mexico)
Scientific Games Panama S. de R.L. (Panama)
Scientific Games del Peru, S.R.L. (Peru) (99.9%)
Scientific Games Puerto Rico, Inc. (Puerto Rico)
Scientific Games International Inc.—Indra Sistemas S.A. Union
    Temporal De Empresas (Spain) (51%)

Scientific Games Spain Services SRL (Spain)
Scientific Games Sweden AB (Sweden)
Games Media Limited (UK)
Global Draw Limited (UK)
Knightway Promotions Limited (UK)
Pagoda Leisure Limited (UK)
Scientific Connections Limited (UK)
Scientific Games Global Plus Limited (UK)
Scientific Games International Holdings LTD (UK)
Scientific Games International Limited (UK)
Scientific Games Europe SARL (Luxembourg)

QuickLinks

Exhibit 21

SCIENTIFIC GAMES CORPORATION SUBSIDIARIES

EX-23.1

Exhibit 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the incorporation by reference in Registration Statement Nos. 33-82612, 333-05811, 333-44983, 333-44979, 333-101725, 333-101729, 333-110141, 333-134043, 333-157638, and 333-161232 on Form S-8 and Registration Nos. 33-84742, 333-74590, 333-110477, 333-112452, 333-124107, 333-141720, 333-155346 and 333-165743 on Form S-3 of our reports dated March 1, 2011, relating to the consolidated financial statements and consolidated financial statement schedule of Scientific Games Corporation, and the effectiveness of Scientific Games Corporation’s internal control over financial reporting, appearing in this Annual Report on Form 10-K of Scientific Games Corporation for the year ended December 31, 2010.

/s/ DELOITTE & TOUCHE LLP

Atlanta, Georgia

March 1, 2011

EX-23.2

Exhibit 23.2

Consent of Independent Registered Public Accounting Firm

We consent to the incorporation by reference in Registration Statement Nos. 33-82612, 333-05811, 333-44983, 333-44979, 333-101725, 333-101729, 333-110141, 333-134043, 333-157638, and 333-161232 of Scientific Games Corporation on Form S-8; Registration Statement Nos. 333-74590, 333-110477, 333-112452, 333-124107, 333-141720 and 333-165743 of Scientific Games Corporation on Form S-3 and Registration Statement No. 333-155346 of Scientific Games International, Inc. on Form S-3 of our report dated February 25, 2011, with respect to the statements of financial position of Consorzio Lotterie Nazionali as of December 31, 2010 and 2009, and the related statements of comprehensive income, changes in equity and cash flows for each of the three years in the period ended December 31, 2010, prepared on the basis of International Financial Reporting Standards as issued by the International Accounting Standards Board, inc luded in this Annual Report (Form 10-K) of Scientific Games Corporation for the year ended December 31, 2010.

/s/ Reconta Ernst & Young S.p.A.

Rome, Italy

February 25, 2011

EX-31.1

QuickLinks -- Click here to rapidly navigate through this document

Exhibit 31.1

Certification by Chief Executive Officer Pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002

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 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 report;

        3.     Based on my knowledge, the financial statements, and other financial information included in this 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 report;

        4.     The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

        a)    Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, 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 report is being prepared;

        b)    Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

        c)     Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

        d)    Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

        5.     The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

        a)    All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

        b)    Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: March 1, 2011

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

QuickLinks

Exhibit 31.1

EX-31.2

QuickLinks -- Click here to rapidly navigate through this document

Exhibit 31.2

Certification by Chief Financial Officer Pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002

I, Jeffrey S. Lipkin, certify that:

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

        2.     Based on my knowledge, this 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 report;

        3.     Based on my knowledge, the financial statements, and other financial information included in this 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 report;

        4.     The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

        a)    Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, 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 report is being prepared;

        b)    Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

        c)     Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

        d)    Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

        5.     The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

        a)    All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

        b)    Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: March 1, 2011

/s/ JEFFREY S. LIPKIN
Jeffrey S. Lipkin
Chief Financial Officer

QuickLinks

Exhibit 31.2

EX-32.1

QuickLinks -- Click here to rapidly navigate through this document

Exhibit 32.1

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 ended December 31, 2010 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 Section 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.

        A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

/s/ A. LORNE WEIL
A. Lorne Weil
Chief Executive Officer
March 1, 2011

QuickLinks

Exhibit 32.1

EX-32.2

QuickLinks -- Click here to rapidly navigate through this document

Exhibit 32.2

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 ended December 31, 2010 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Jeffrey S. Lipkin, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to Section 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.

        A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

/s/ JEFFREY S. LIPKIN
Jeffrey S. Lipkin
Chief Financial Officer
March 1, 2011

QuickLinks

Exhibit 32.2

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

EX-99.1

Exhibit 99.1

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Equity holders of

Consorzio Lotterie Nazionali

We have audited the accompanying statements of financial position of Consorzio Lotterie Nazionali as of December 31, 2010 and 2009, and the related statements of comprehensive income, changes in equity, and cash flows for each of the three years in the period ended December 31, 2010.  These financial statements are the responsibility of the Company’s management.  Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Company’s internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.  Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant e stimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Consorzio Lotterie Nazionali at December 31, 2010 and 2009, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2010, in conformity with International Financial Reporting Standards as issued by the International Accounting Standards Board.

As discussed in Note 1 of the financial statements, the Company’s Board of Directors obtained approval from its equity holders on February 24, 2011 to begin formal dissolution of the Company during 2011, which raises substantial doubt about its ability to continue as a going concern.  As discussed in Note 2.1 of the financial statements, the 2010 financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the uncertain outcome associated with such dissolution.

/s/ Reconta Ernst & Young S.p.A.

Rome, Italy

February 25, 2011

EX-99.2

Exhibit 99.2

CONSORZIO LOTTERIE NAZIONALI

INDEX TO FINANCIAL STATEMENTS

	Page
Statements of Financial Position as of December 31, 2010 and 2009	F- 2
Statements of Comprehensive Income for the Years Ended December 31, 2010, 2009 and 2008	F- 3
Statements of Changes in Equity for the Years Ended December 31, 2010, 2009 and 2008	F- 4
Cash Flow Statements for the Years Ended December 31, 2010, 2009 and 2008	F- 5
Notes to Financial Statements	F- 6

F-1

CONSORZIO LOTTERIE NAZIONALI

STATEMENTS OF FINANCIAL POSITION

December 31, 2010 and 2009

(In thousands of Euro)

		December 31,
	Notes	2010	2009
ASSETS
Non-current assets
Equipment, net	3	—	2.801
Intangible assets, net	4	—	286
Deferred income taxes	16	141	2.212
Total non-current assets		141	5.299
Current assets
Inventories	5	—	13.618
Trade and other receivables	6	—	305.946
Current financial assets from parent company	18/20	109.540	249.913
Other current assets	7	54	1.231
Income taxes receivable		760	—
Cash and cash equivalents	8	331	4
Total current assets		110.685	570.712
TOTAL ASSETS		110.826	576.011
EQUITY AND LIABILITIES
Equity
Issued capital	9	16.000	16.000
Legal reserve		3.200	3.200
Retained earnings, including net income for the period		89.109	123.347
Total equity		108.309	142.547
Non-current liabilities
Long-term provisions	10	438	730
Total non-current liabilities		438	730
Current liabilities
Accounts payable	11	628	428.247
Derivative instruments	20	—	583
Current financial payables to parent company	18/20	1.355	1.241
Other current liabilities	12	96	219
Income taxes payable		—	2.444
Total current liabilities		2.079	432.734
TOTAL EQUITY AND LIABILITIES		110.826	576.011

F-2

CONSORZIO LOTTERIE NAZIONALI

STATEMENTS OF COMPREHENSIVE INCOME

Years ended December 31, 2010, 2009 and 2008

(In thousands of Euro)

		For the year ended December 31,
	Notes	2010		2009		2008
Service revenues	13	244.025		327.957		322.411
Other revenue		956		875		990
Total Revenue		244.981		328.832		323.401
Cost of tickets		35.239		45.628		43.090
Service costs	14	68.987		93.448		93.228
Depreciation, amortization and write-downs		3.623		4.339		4.130
Other operating costs		538		989		1.368
Total Costs		108.387		144.404		141.816
Operating Income		136.594		184.428		181.585
Financial income	15	3.789		4.332		3.665
Financial expenses	15	(8.553	)	(7.658	)	(11.749	)
Net income before income tax	16	131.831		181.103		173.502
Income tax expense	16	42.723		57.756		55.771
Net income for the year		89.108		123.347		117.731
Other comprehensive income:
Components of other comprehensive income		—		—		—
Income tax relating to components of other comprehensive income		—		—		—
Other comprehensive income for the year, net of tax		—		—		—
Total comprehensive income for the year		89.108		123.347		117.731

F-3

CONSORZIO LOTTERIE NAZIONALI

STATEMENTS OF CHANGES IN EQUITY

Years ended December 31, 2010, 2009 and 2008

(In thousands of Euro)

	Issued	Legal	Retained
For the year ended December 31, 2010	Capital	Reserve	Earnings		Total
Balance at January 1, 2010	16.000	3.200	123.347		142.547
Net income for the year	—	—	89.108		89.108
Other comprehensive income/(loss)	—	—	—		—
Total comprehensive income/(loss)	—	—	89.108		89.108
Dividend distribution	—	—	(123.347	)	(123.347	)
Balance at December 31, 2010	16.000	3.200	89.108		108.308

	Issued	Legal	Retained
For the year ended December 31, 2009	Capital	Reserve	Earnings		Total
Balance at January 1, 2009	16.000	3.200	117.731		136.931
Net income for the year	—	—	123.347		123.347
Other comprehensive income/(loss)	—	—	—		—
Total comprehensive income/(loss)	—	—	123.347		123.347
Dividend distribution	—	—	(117.731	)	(117.731	)
Balance at December 31, 2009	16.000	3.200	123.347		142.547

	Issued	Legal	Retained
For the year ended December 31, 2008	Capital	Reserve	Earnings		Total
Balance at January 1, 2008	16.000	1.077	85.920		102.997
Net income for the year	—	—	117.731		117.731
Other comprehensive income/(loss)	—	—	—		—
Total comprehensive income/(loss)	—	—	117.731		117.731
Allocation of prior year income	—	2.123	(2.123	)	—
Dividend distribution	—	—	(83.797	)	(83.797	)
Balance at December 31, 2008	16.000	3.200	117.731		136.931

F-4

CONSORZIO LOTTERIE NAZIONALI

CASH FLOW STATEMENTS

Years ended December 31, 2010, 2009 and 2008

(In thousands of Euro)

		Year ended December 31,
	Notes	2010		2009		2008
Operating activities:
Profit before income tax	16	131.831		181.103		173.502
Adjustments to reconcile profit before income tax to net cash flow
Depreciation	3	1.667		2.175		1.830
Intangible asset amortization	4	235		332		47
Interest income	20	(42	)	(38	)	(46	)
Interest on intercompany loan	18	(698	)	(1.263	)	(708	)
Total accrued interest income		(740	)	(1.301	)	(754	)
Bank interest charges and commissions	20	24		26		35
Other intercompany interest expense	20	345		908		5.254
Interest expense to AAMS and other interest expense		121		461		2.041
Total accrued interest expense		490		1.395		7.330
Other non-monetary items:
Unrealized foreign exchange (gains)/losses, net		—		(137	)	(217	)
Exchange (gains)/losses on derivatives, net	20	(192	)	(389	)	(1.674	)
Net change in long-term provisions		(292	)	114		472
Realized foreign exchange (gains)/losses, net		1.304		(1.498	)	2.040
Income taxes paid		(43.857	)	(60.878	)	(91.361	)
Cash flows before changes in working capital		90.446		120.916		91.215
Change in net working capital:
Inventories		5.494		(4.494	)	1.524
Trade and other receivables:
- Trade and other receivables		32.135		(3.356	)	(4.434	)
- Receivables from PoS (retailers)		35.414		60.693		52.539
- Related party receivables		2.764		(3.769	)	(2.030	)
Accounts payable:
- Payables to AAMS		(49.641	)	88.213		53.475
- Payables to others		154		(697	)	98
- Payables to suppliers including related parties		37.065		(10.887	)	9.169
Current income taxes	16	(40.652	)	(58.349	)	(56.171	)
Deferred income taxes	16	(2.071	)	593		400
Income taxes payable		(2.444	)	2.106		4.768
Other tax receivables		45.247		55.599		50.932
VAT payables and taxes other than income taxes		—		(2.109	)	389
Cash flows from operating activities		153.911		244.459		201.872
Investing activities:
Purchase of equipment	3	(1.656	)	(1.123	)	(863	)
Purchase of intangible assets	4	(380	)	(572	)	(57	)
Disposals of intangible assets	4	6		—		—
Interest received		400		511		46
Cash flows from investing activities		(1.630	)	(1.184	)	(874	)
Financing activities
Interest paid		(466	)	(1.005	)	(971	)
Dividends paid		(123.347	)	(117.731	)	(83.797	)
Net change in financial receivables from/payables to parent company		(28.141	)	(124.709	)	(116.059	)
Cash flows from financing activities		(151.954	)	(243.445	)	(200.827	)
Net increase (decrease) in cash and cash equivalents		327		(171	)	171
Cash and cash equivalents at the beginning of the period		4		175		4
Cash and cash equivalents at the end of the period	8	331		4		175

See Note 1 for a description of the transfer of certain asset and liability balances effective October 1, 2010 that materially impacted the financial statements as of and for year ended December 31, 2010 but that did not have a cash flow impact.

F-5

CONSORZIO LOTTERIE NAZIONALI

NOTES TO FINANCIAL STATEMENTS

(thousands of Euro)

1.Corporate information

Consorzio Lotterie Nazionali (hereinafter “CLN” or “the Company”) is a consortium organized under the laws of the Republic of Italy.  The head office of the Company is located in Rome, Italy.

The Company’s operations are entirely in the Republic of Italy.  In the month of October 2003, the Italian Ministry of Economy and Finances granted to CLN the exclusive concession to operate various traditional and instant lotteries, including “Scratch and Win” instant games.  The Company’s instant and traditional lotteries are available through various vendors located throughout Italy, mainly at tobacco shops, cafès, bars, motorway restaurants and newspaper stands (collectively, “Points of Sale” or “PoS”).

The Company’s deed of association assigns to all of its equity holders specific roles in the Company’s business activities as follows:

·Lottomatica Group S.p.A. (the parent of the Company and formerly Lottomatica S.p.A.): its role includes the design and coordination of the Company’s overall operations including management of the marketing and accounting functions, collection of wagers from Points of Sales, administration of periodic drawings, and procurement of software and hardware for Points of Sale;

·Scientific Games International: its role includes design and production of instant lottery tickets;

·Arianna 2001 S.p.A: its role includes serving as the secure depository and manager of the instant lottery tickets inventory;

·Olivetti S.p.A.: its role includes responsibilities for the supply and maintenance of software and hardware of the Company;

·Servizi Base 2001 S.p.A.: its role includes management of the instant lottery ticket distribution to the Points of Sale.

The concession granted to CLN by the Ministry entity Amministrazione Autonoma dei Monopoli di Stato (hereinafter “AAMS”) expired in the months of March and May of 2010, for traditional lotteries and instant lotteries, respectively. During August 2009, AAMS issued a tender for a new nine-year concession agreement to be effective from June 10, 2010, which was initially awarded to the Company.  However, another lottery operator in the Italian market filed an order to annul the tender process, which was granted by the Regional Administrative Court (“TAR”) of Lazio.  AAMS and CLN subsequently filed an appeal to the Supreme Administrative Court (Consiglio di Stato) defending the legality of the tender process and requesting an annulment of the decision by the TAR of Lazio.

In a hearing held on March 9, 2010, the Supreme Administrative Court generally accepted the appeal submitted by AAMS and CLN, but also partially accepted the decision of the TAR of Lazio by agreeing that certain laws regulating the tender process were not applicable.  Accordingly, on March 30, 2010, AAMS issued a decree aimed at reopening the prior public tender for the new Scratch & Win concession requiring the bidders to submit their applications by May 10, 2010.

On May 13, 2010, AAMS officially awarded CLN as the sole license holder for the new Scratch & Win instant lotteries concession, subject to the requirement that such concession be subscribed by a new company structured as an incorporated entity, as discussed in further detail below. In order to guarantee continuity of service in the meantime, AAMS granted CLN the temporary management of the Scratch & Win instant lotteries, effective June 1, 2010 and ending no later than September 30, 2010.  Given the requirements of the tender process, CLN continued its operations through the end of the third calendar quarter of 2010, while a newly established incorporated entity, Lotterie Nazionali S.r.l. (“LN”), which is also a majority owned subsidiary of Lottomatica Group S.p.A. having substantially the same equity owners and management team as CLN, began managing the instant l ottery concession effective October 1, 2010.

F-6

CONSORZIO LOTTERIE NAZIONALI

NOTES TO FINANCIAL STATEMENTS

(thousands of Euro)

On August 5, 2010, LN and AAMS signed the new Scratch & Win instant lotteries concession agreement, effective October 1, 2010. On September 30, 2010, CLN, LN and AAMS subscribed an addendum to the new concession agreement aimed at regulating a smooth transition to the new entity’s operations and ensuring continuity in the service to be provided by LN. In particular, this addendum required CLN to transfer at book value, effective October 1, 2010, certain of its assets and liabilities as of August 31, 2010 to LN based on the provision of a third separate contract (also signed on September 30, 2010). Based on the accounts and balances transferred at such date, the parties determined the transfer price to be zero (i.e., total assets equaled total liabilities), but agreed to potentially adjust the transfer price before December 31, 2010 based on the results of a third party analysis and valuation (i.e., appraisal) to be conducted throughout the fourth quarter.

The final appraisal validated the net worth valuation criteria initially adopted (i.e., measuring at book value the assets and liabilities to be transferred) by confirming a transfer price of zero.   The September 30, 2010 asset and liability balances that were transferred to LN effective October 1, 2010 based on the provision of the addendum to the new concession agreement included the following:

	September 30, 2010
Equipment, net	2,790
Intangible assets, net	425
Inventories	8,124
Other current assets	64
Receivables from PoS (retailers)	227,536
Related party receivables	9,210
Current financial assets from parent company	168,359
	416,508
Accounts payable	2,709
Other liabilities to AAMS	286,295
Related parties payables	127,462
Other current liabilities	42
	416,508

The rationale for the zero transfer price resulted from the fact that such transfer was exclusively driven by regulatory and government tax requirements and was also intended to protect Italian lottery consumers’ interests by ensuring continuity in the service. This transfer was, in other words, considered a mandatory (i.e., necessary) action aimed at both regulating the transition to the new concessionaire’s operations and satisfying the new concession’s requirements and was not intended to represent a regular or recurring transfer (i.e., sale) responding to market conditions.

Although virtually all CLN’s assets, liabilities and operations were transferred to LN effective October 1, 2010, the Company was not formally liquidated on such date and still existed on December 31, 2010.  However, given that the terms of the original Scratch & Win lotteries concession agreements pertaining to CLN have expired, coupled with the fact that management of the instant lotteries was successfully transitioned to LN during the fourth calendar quarter of 2010, the CLN Board of Directors proposed, on February 9, 2011, to begin formal dissolution of the Company.  Such recommendation was presented to, and approved by, the Company’s equity holders in a meeting held on February 24, 2011.  Accordingly, management will begin to implement plans to completely liquidate the Company during 2011.

2.1Basis of preparation

As discussed above, on February 9, 2011, CLN’s Board of Directors proposed the dissolution of the Company and requested its equity holders to formally approve such liquidation in a meeting held on February 24, 2011.  Such request was approved during the meeting.  Even though the Company is no longer considered a “going concern entity” as of the statement of financial position date as management does not

F-7

CONSORZIO LOTTERIE NAZIONALI

NOTES TO FINANCIAL STATEMENTS

(thousands of Euro)

expect it to continue to operate in the foreseeable future (at a minimum, for the one year period subsequent to December 31, 2010), its remaining assets and liabilities have been recognized and measured assuming they will be completely recovered and discharged, respectively, in the normal course of ceasing its business. Specifically, as noted above, such dissolution is the direct result of the transfer of the Company’s business operations to a new entity under common control in accordance with regulatory and governmental requirements and accordingly, is not indicative of a distressed transaction or a liquidation that is occurring under duress.  To the contrary, given the substantial profitability experienced by the Company during the original concession agreement, management expects that the assets existing as of December 31, 2010 will be sufficient to fully settle all of the Company’s liability and equity obligations existing as of that date.  Accordingly, the 2010 financial statements have been prepared on a historical cost basis and are presented in thousands of Euro, unless otherwise indicated.  Additionally, given the liquid nature of the Company’s assets and liabilities existing as of December 31, 2010, management does not believe that there would be a material effect on the Company’s financial position as of December 31, 2010 or on the results of its operations or cash flows for the year then ended if such financial statements had been prepared using an alternate accounting method, such as the liquidation basis of accounting.

The financial statements of the Company as of December 31, 2010 and for the year then ended were approved for issuance by the Board of Directors in accordance with a resolution dated February 24, 2011.

Statement of Compliance

The financial statements of CLN have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”).

2.2Changes in accounting policy

The accounting policies adopted are consistent with those of the previous financial year except as follows:

The Company has adopted the following new and amended IFRS and International Financial Reporting Interpretations Committee (“IFRIC”) interpretations during the year effective as of January 1, 2010. Adoption of these new and amended standards and interpretations did not have any effect on the financial position, performance or cash flows of the Company.

·IFRS 2 Share-based Payment: Group Cash-settled Share-based Payment Transactions;

·IFRS 3 Business Combinations (Revised) and IAS 27 Consolidated and Separate Financial Statements (Amended), including consequential amendments to IFRS 2, IFRS 5 IFRS 7, IAS 7, IAS 21, IAS 28, IAS 31 and IAS 39;

·IAS 39 Financial Instruments: Recognition and Measurement — Eligible Hedged Items;

·IFRIC 17 Distributions of Non-cash Assets to Owners;

·Improvements to IFRSs (May 2008 and April 2009).

The principal effects of these changes are as follows:

IFRS 2 Share-based Payment: Group Cash-settled Share-based Payment Transactions

The IASB issued an amendment to IFRS 2 that clarified the scope and the accounting for group cash-settled share-based payment transactions. The adoption of this amendment did not effect the financial position, performance or cash flows of the Company or require additional disclosures since the Company has no share based payment plans.

F-8

CONSORZIO LOTTERIE NAZIONALI

NOTES TO FINANCIAL STATEMENTS

(thousands of Euro)

IFRS 3 Business Combinations (Revised) and IAS 27 Consolidated and Separate Financial Statements (Amended)

IFRS 3 (Revised) introduces significant changes in the accounting for business combinations occurring after July 1, 2009, its effective date. Changes affect the valuation of non-controlling interests, the accounting for transaction costs, the initial recognition and subsequent measurement of contingent consideration and business combinations achieved in stages. These changes will impact the amount of goodwill recognised, the reported results in the period that an acquisition occurs and future reported results.

IAS 27 (Amended) requires that a change in the ownership interest of a subsidiary (without loss of control) is accounted for as a transaction with owners in their capacity as owners. Therefore, such transactions will no longer give rise to goodwill or give rise to a gain or loss. Furthermore, the amended standard changes the accounting for losses incurred by the subsidiary as well as the loss of control of a subsidiary.

The changes required by IFRS 3 (Revised) and IAS 27 (Amended) did not effect the financial position, performance or cash flows of the Company or require additional disclosures since the Company had no transactions representing a business combination, change in ownership interest of a subsidiary, loss of control of a subsidiary or change in non-controlling interests.

IAS 39 Financial Instruments: Recognition and Measurement — Eligible Hedged Items

The amendment addresses the designation of a one-sided risk in a hedged item, and the designation of inflation as a hedged risk in particular situations. It clarifies that an entity is permitted to designate a portion of the fair value changes or cash flow variability of a financial instrument as the hedged item. The Company has concluded that the adoption of this amendment had no impact on its financial position, performance or cash flows, as CLN has not entered into any such instruments as accounting hedges.

IFRIC 17 Distribution of Non-cash Assets to Owners

This interpretation provides guidance on accounting for arrangements whereby an entity distributes non-cash assets to shareholders either as a distribution of reserves or as dividends. The adoption of this interpretation had no impact on the financial position, performance or cash flows of the Company.

Improvements to IFRSs

In May 2008 and April 2009, the IASB issued omnibus of amendments to its standards, primarily with a view of removing inconsistencies and clarifying wording. There are separate transitional provisions for each standard. The amendments made can result in accounting changes for presentation, recognition and measurement. The adoption of such amendments resulted in changes to accounting policies but had no effect on the financial position, performance or cash flows of the Company.

Issued in May 2008

IFRS 5 Non-current Assets Held for Sale and Discontinued Operations: clarifies that when a subsidiary is classified as held for sale, all its assets and liabilities are classified as held for sale, even when the entity remains a non-controlling interest after the sale transaction.

Issued in April 2009

·IFRS 2 Share-Based Payment: confirms that contributions of a business on the formation of a joint venture and common control transactions are excluded from the scope of IFRS 2.

·IFRS 5 Non-current Assets Held for Sale and Discontinued Operations: clarifies that the disclosures required in respect of non-current assets and disposal groups classified as held for sale or discontinued operations are only those set out in IFRS 5. The disclosure requirements of other IFRSs only apply if specifically required for such non-current assets or discontinued operations.

·IFRS 8 Operating Segments: clarifies that segment assets and liabilities need only be reported when those assets and liabilities are included in measures that are used by the chief operating decision maker.

·IAS 1 Presentation of Financial Statements: clarifies that the potential settlement of a liability by the issue of equity is not relevant to its classification as current or non-current.

F-9

CONSORZIO LOTTERIE NAZIONALI

NOTES TO FINANCIAL STATEMENTS

(thousands of Euro)

·IAS 7 Statement of Cash Flows: states that only expenditure that results in recognising an asset can be classified as a cash flow from investing activities.

·IAS 17 Leases: clarifies that when a lease includes both land and building elements, an entity assesses the classification of each element as a finance or operating lease separately.

·IAS 18 Revenue:  provides additional guidance on how to determine whether an entity is acting as a principal or as an agent. The features to consider are whether the entity:

·Has primary responsibility for providing the goods or service;

·Has inventory risk;

·Has discretion in establishing prices;

·Bears the credit risk.

·IAS 36 Impairment of Assets: clarifies that the largest unit permitted for allocating goodwill, acquired in a business combination, is the operating segment as defined in IFRS 8 before aggregation for reporting purposes.

·IAS 38 Intangible Assets: two amendments to IAS 38 clarify the accounting for intangible assets acquired in a business combination and the description of valuation techniques commonly used when measuring the fair value of intangible assets acquired in a business combination that are not traded in active markets.

·IAS 39 Financial Instruments Recognition and Measurement: clarifies the type of forward contracts to which the guidance applies and provides additional guidance regarding embedded prepayment penalties and hedging transactions.

·IFRIC 9 Reassessment of Embedded Derivatives: clarifies that the scope of IFRIC 9 excludes contracts with embedded derivatives acquired in a combination between entities under common control or in the formation of a joint venture.

·IFRIC 16 Hedges of a Net Investment in a Foreign Operation: removes the restriction on the entity that can hold hedging instruments.

2.3International Financial Reporting Standards to be adopted in 2011 and later

The IASB and IFRIC issued additional standards and interpretations which are effective for periods starting after the date of these financial statements and therefore have yet to be adopted by CLN as described below.

IAS 12 Income Taxes — Deferred tax: Recovery of Underlying Assets (Amendment)

The amendment, issued on December 20, 2010, is effective for annual periods beginning on or after January 1, 2012. It provides an exception to the general principles of IAS 12 for investment property measured using the fair value model in IAS 40 Investment Property. The adoption of this standard is not expected to impact the financial position, performance or cash flows of the Company.

IAS 24 Related Party Disclosures (Amendment)

The amended standard is effective for annual periods beginning on or after January 1, 2011. It clarifies the definition of a related party to simplify the identification of such relationships and to eliminate inconsistencies in its application. The revised standard introduces a partial exemption of disclosure requirements for government-related entities. Early adoption is permitted for either the partial exemption for government-related entities or for the entire standard. The Company intends to adopt the standard on its effective date and does not expect such adoption to have any impact on its financial position, performance or cash flows.

IAS 32 Financial Instruments: Presentation — Classification of Rights Issues (Amendment)

The amendment to IAS 32 is effective for annual periods beginning on or after February 1, 2010.  It amended the definition of a financial liability in order to classify rights issues (and certain options or warrants) as equity instruments in cases where such rights are given pro rata to all of the existing owners of the same class of an entity’s non-derivative equity instruments, or to acquire a fixed number of the entity’s

F-10

CONSORZIO LOTTERIE NAZIONALI

NOTES TO FINANCIAL STATEMENTS

(thousands of Euro)

own equity instruments for a fixed amount in any currency. The adoption of this standard will have no impact on the financial position, performance or cash flows of the Company.

IFRS 1 First Time Adoption — Severe Hyperinflation and Removal of Fixed Dates for First-Time Adopters (Amendments)

The amendments, issued on December 20, 2010, are effective for annual periods beginning on or after July 1, 2011. The first amendment provides guidance on how an entity should resume presenting financial statements in accordance with IFRSs after a period when the entity was unable to comply with IFRSs because its functional currency was subject to severe hyperinflation. The second amendment replaces references to a fixed transition date of “January 1, 2004” with ‘the date of transition to IFRSs’, thus eliminating the need for companies adopting IFRSs for the first time to restate derecognition transactions that occurred before the date of transition to IFRSs. The adoption of these standards are not expected to impact the financial position, performance or cash flows of the Company.

IFRS 7 Financial Instruments: Disclosures (Amendment)

The amendment, issued on October 7, 2010, is effective for annual periods beginning on or after July 1, 2011. It increases the disclosure requirements for transactions involving transfers of financial assets. The amendment requires enhancements to the existing disclosures in IFRS 7 where an asset is transferred but is not derecognized and introduce new disclosure for assets that are derecognized but the entity continues to have a continuing exposure to the asset after the sale. The adoption of this standard is not expected to impact the financial position, performance or cash flows of the Company.

IFRS 9 Financial Instruments: Classification and Measurement

IFRS 9 as issued reflects the first phase of the IASBs work on the replacement of IAS 39 and applies toclassification and measurement of financial assets as defined in IAS 39. The standard is effective for annualperiods beginning on or after January 1, 2013. In subsequent phases, the IASB will address classification andmeasurement of financial liabilities, hedge accounting and derecognition. The completion of this project isexpected in early 2011. The adoption of this standard will have no impact on the financial position , performance or cash flows of the Company.

IFRIC 14 Prepayments of a minimum funding requirement (Amendment)

The amendment to IFRIC 14 is effective for annual periods beginning on or after January 1, 2011 with retrospective application. The amendment provides guidance on assessing the recoverable amount of a net pension asset. The amendment permits an entity to treat the prepayment of a minimum funding requirement as an asset. The adoption of this interpretation will have no impact on the financial position, performance or cash flows of the Company.

IFRIC 19 Extinguishing Financial Liabilities with Equity Instruments

IFRIC 19 is effective for annual periods beginning on or after July 1, 2010. The interpretation clarifies that equity instruments issued to a creditor to extinguish a financial liability qualify as consideration paid. The equity instruments issued are measured at their fair value. In cases in which the equity instruments cannot be reliably measured, the instruments are measured at the fair value of the liability extinguished. Any gain or loss is recognised immediately in profit or loss. The adoption of this interpretation is not expected to impact the financial position, performance or cash flows of the Company.

Improvements to IFRSs (issued in May 2010)

The IASB issued Improvements to IFRSs, an omnibus of amendments to its IFRS standards. The amendments have not been adopted as they become effective for annual periods on or after either July 1, 2010 or January 1, 2011. The amendments listed below are not expected to have any impact on the financial position, performance or cash flows of the Company:

·IFRS 3 Business Combinations;

·IFRS 7 Financial Instruments: Disclosures;

F-11

CONSORZIO LOTTERIE NAZIONALI

NOTES TO FINANCIAL STATEMENTS

(thousands of Euro)

·IAS 1 Presentation of Financial Statements;

·IAS 27 Consolidated and Separate Financial Statements;

·IAS 34 Interim Financial Reporting;

·IFRIC 13 Customer Loyalty Programmes.

2.4Significant accounting judgments, estimates and assumptions

The preparation of the Company’s financial statements requires management to make judgments, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and the disclosure of contingent liabilities, at the reporting date. However, uncertainty about these assumptions and estimates could result in outcomes that could require a material adjustment to the carrying amount of the asset or liability affected in the future.

Estimates and assumptions

The key assumptions concerning the future and other key sources of estimation uncertainty at the statement of financial position date that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.

Deferred Tax Assets

Deferred tax assets are recognized to the extent that it is probable that taxable profit will be available in the future. Significant management judgment is required to determine the amount of deferred tax assets that can be realized, based upon the likely timing and level of future taxable profits together with future tax planning strategies.

2.5Summary of significant accounting policies

Foreign currency translation

Transactions in foreign currencies are initially recorded at the functional currency rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are retranslated at the functional currency rate of exchange ruling at the balance sheet date. All differences are taken to profit or loss.

Non monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates as at the dates of the initial transactions.

Equipment, net

Equipment are stated at cost less accumulated depreciation. Cost includes ancillary costs directly attributable to bringing the asset into operating condition. Depreciation is calculated on straight-line basis over the estimated useful life of the assets as follows:

Terminals and communication equipment	5 to 7 years
Machinery and equipment	4 years
Furniture and fittings	8 to 9 years

The carrying values of systems and equipment are reviewed for impairment when events or changes in circumstances indicate that the carrying values may not be recoverable.

All repairs and maintenance costs are recognised in profit or loss as incurred.

F-12

CONSORZIO LOTTERIE NAZIONALI

NOTES TO FINANCIAL STATEMENTS

(thousands of Euro)

A unit of equipment is derecognised upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in profit or loss in the year the asset is derecognised.

Intangible assets, net

Intangible assets acquired separately are measured on initial recognition at cost. Following initial recognition, intangible assets are carried at cost less any accumulated amortization and any accumulated impairment losses. The useful lives of intangible assets are assessed to be either finite or indefinite.  Intangible assets with finite lives are amortized over the useful economic life and assessed for impairment whenever there is an indication that the intangible asset may be impaired.  The estimated useful lives are as follows:

Software	3 years
Licenses	3 years
Others	2 to 5 years

The amortization period and the amortization method for an intangible asset with a finite useful life is reviewed at least annually at year-end. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset is accounted for by changing the amortization period or method, as appropriate, and treated as changes in accounting estimates.  The amortization expense for intangible assets with finite lives is recognized in the income statement within the caption “Depreciation, amortization and write-downs”.

Gains or losses arising from derecognition of an intangible asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognized in profit or loss when the asset is derecognized.

Impairment of non-financial assets

The Company assesses at each reporting date whether there is an indication that an asset may be impaired.  If any such indication exists, or when annual impairment testing for an asset is required, the Company makes an estimate of the asset’s recoverable amount. An asset’s recoverable amount is the higher of an asset’s or cash-generating unit’s fair value less costs to sell and its value in use, and is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets. Where the carrying amount of an asset exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount. In assessing value in use, the estimated future cash flows take into account the risks specific to the asset and are discounted to their present value using a pre-tax discount rate t hat reflects current market assessments of the time value of money and the risks specific to the asset.

An assessment is made at each reporting date as to whether there is any indication that previously recognized impairment losses may no longer exist or may have decreased. If such indication exists, the recoverable amount is estimated. A previously recognized impairment loss is reversed only if there has been a change in the estimates used to determine the asset’s recoverable amount since the last impairment loss was recognized. If that is the case, the carrying amount of the asset is increased to its recoverable amount. That increased amount cannot exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognized for the asset in prior years.  Such reversal is recognized in profit or loss unless the asset is carried at revalued amount, in which case the reversal is treated as a revaluation increase. After such a reversal, the depreciation charge is adjusted in future periods to allocate the asset’s revised carrying amount, less any residual value, on a systematic basis over its remaining useful life.

F-13

CONSORZIO LOTTERIE NAZIONALI

NOTES TO FINANCIAL STATEMENTS

(thousands of Euro)

Inventories

Inventories are stated at the lower of cost or net realizable value. Cost is determined on a specific identification basis.

Net realizable value is the estimated selling price in the ordinary course of business, less estimated costs necessary to make the sale.

Financial assets

Financial assets within the scope of IAS 39 are classified as financial assets at fair value through profit or loss, loans and receivables, held-to-maturity investments, or available-for-sale financial assets, as appropriate. The Company only has financial assets classified as loans and receivables and fair value through profit and loss. When financial assets are recognized initially on the trade date, they are measured at fair value, plus, in the case of investments not recognized at fair value through profit or loss, directly attributable transaction costs.

The Company determines the classification of its financial assets on initial recognition.

Trade receivables and other receivables

Trade accounts receivable are subsequently measured at amortized cost less impairment. Allowances for doubtful accounts are generally recorded when there is objective evidence that the Company will not be able to collect the related receivables. Bad debts are written off when identified.

Short-term receivables are not discounted because the effect of discounting cash flows is immaterial.

Cash and cash equivalents

Cash and cash equivalents in the balance sheet are comprised of cash at banks and on hand and short-term, highly liquid investments with an original maturity of three months or less at the date of purchase.

Financial liabilities

Financial liabilities at amortized cost

All loans and borrowings and trade accounts payable are initially recognized at fair value less directly attributable transaction costs. After initial recognition, interest bearing loans and borrowings are subsequently measured at amortized cost using the effective interest method. Short-term payables are not discounted because the effect of discounting cash flows is immaterial.

Financial liabilities at fair value through profit or loss

Financial liabilities at fair value through profit or loss include financial liabilities held for trading and financial liabilities designated upon initial recognition as at fair value through profit or loss.

Financial liabilities are classified as held for trading if they are acquired for the purpose of selling in the near term. Derivatives are classified as held for trading unless they are designated as effective hedging instruments.

Gains or losses on liabilities held for trading are recognized in the statement of comprehensive income.

Derivative financial instruments and hedging

The Company uses derivative financial instruments such as foreign currency forward contracts to mitigate the risks associated with foreign currency related to the purchase of lottery tickets.

The Company’s foreign currency forward contracts do not qualify for hedge accounting; therefore any gains or losses arising from changes in their fair value are taken directly to net profit or loss for the year. The fair value of foreign currency forward contracts is calculated by reference to current forward exchange rates for

F-14

CONSORZIO LOTTERIE NAZIONALI

NOTES TO FINANCIAL STATEMENTS

(thousands of Euro)

contracts with similar maturity profiles.  All of the Company’s executed foreign currency forward contracts matured during 2010 and none are outstanding at December 31, 2010.

Derecognition of financial assets and liabilities

Financial assets

A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is derecognized when:

·the rights to receive cash flows from the asset have expired;

·the Company retains the right to receive cash flows from the asset, but has assumed an obligation to pay them in full without material delay to a third party under a ‘pass through’ arrangement; or

·the Company has transferred its rights to receive cash flows from the asset and either (a) has transferred substantially all the risks and rewards of the asset, or (b) has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.

Financial liabilities

A financial liability is derecognized when the obligation under the liability is discharged or cancelled or expires.

Provisions

Provisions are recognized when the Company has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. Whenever the Company expects some or all of a provision to be reimbursed, for example under an insurance contract, the reimbursement is recognized as a separate asset, but only when the reimbursement is virtually certain. The expense relating to any provision is presented in the income statement net of any reimbursement. If the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that reflects, where appropriate, the risks specific to the liability. Where discounting is used, the increase in the provision due to the passage of time is recognized as a borrowing cost .

Revenue recognition

Revenues are recognized to the extent that it is probable the economic benefits associated with the transaction will flow to the Company and the amount of revenue can be reliably measured. Revenues are measured at the fair value of the consideration received, excluding discounts and taxes. Specific recognition criteria must also be met before revenue is recognized as discussed below.

The Company’s revenues derive from operating contracts. Under operating contracts, the Company manages all of the activities along the lottery value chain including collecting wagers, paying out prizes, managing all accounting and other back-office functions, running advertising and promotions, operating data transmission networks and processing centers, training staff, providing retailers with assistance and supplying materials for the game. The operating contracts generally provide for a variable amount of monthly service fees received through AAMS based on a percentage of instant and traditional lottery’s total wagers. Fees earned under operating contracts are recognized as revenue in the period earned and are classified as Service Revenue in the st atement of comprehensive income when all of the following criteria are met:

·Persuasive evidence of an arrangement exists, which is typically when a customer contract has been signed;

·Services have been rendered;

·The fee is deemed to be fixed or determinable and free of contingencies or significant uncertainties; and

·Collectability is reasonably assured.

F-15

CONSORZIO LOTTERIE NAZIONALI

NOTES TO FINANCIAL STATEMENTS

(thousands of Euro)

Interest income and interest expense

Interest income and interest expense are recognized as interest accrues (using the effective interest rate, which is the rate that exactly discounts estimated future cash receipts or payments through the expected life of the financial instrument to the net carrying amount of the financial assets or liabilities).

Income taxes

Current income tax

Current tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted by the statement of financial position date.

Deferred income tax

Deferred income tax is provided using the liability method on temporary differences at the statement of financial position date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes.

Deferred income tax liabilities are recognized for all taxable temporary differences.

Deferred income tax assets are recognized for all deductible temporary differences, carry-forward of unused tax credits and unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the carry-forward of unused tax credits and unused tax losses, can be utilized.

The carrying amount of deferred income tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred income tax asset to be utilized.  Unrecognized deferred income tax assets are reassessed at each statement of financial position date and are recognized to the extent that it has become probable that future taxable profit will allow the deferred tax asset to be recovered.

Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is realized or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the statement of financial position date.

Income tax relating to items recognized directly in equity is recognized in equity and not in the statement of comprehensive income.

3.Equipment, net

Equipment, net include “Freely distributed assets” (“FDA”), which are defined as those tangible assets originally determined to be transferred free of charge to the Ministry of Finance at the expiration of the original concession agreement.  These assets primarily relate to the Company’s equipment in use by third parties (points of sale) to carry out activities related to Instant and Traditional lotteries.  The Company’s equipment, net were transferred to LN effective October 1, 2010 based on the provision of the addendum to the new concession agreement subscribed by CLN, LN and AAMS on September 30, 2010.

F-16

CONSORZIO LOTTERIE NAZIONALI

NOTES TO FINANCIAL STATEMENTS

(thousands of Euro)

			Furniture				Contract		Freely
	Leasehold		and		Other		in		Distributed
Balance at December 31, 2010	Improvements		Equipment		Assets		Progress		Assets		Total
Gross
Balance at January 1, 2010	230		6,550		153		117		1,582		8,632
Additions	—		—		—		1,391		265		1,656
Transfers	—		491		—		(1,015	)	524		—
Transfer to LN	(230	)	(7,041	)	(153	)	(493	)	(2,371	)	(10,288	)
Balance at December 31, 2010	—		—		—		—		—		—
Accumulated depreciation
Balance at January 1, 2010	230		4,260		101		—		1,240		5,831
Depreciation charge for the year	—		1,440		14		—		213		1,667
Transfers	—		(239	)	—		—		239		—
Transfer to LN	(230	)	(5,461	)	(115	)	—		(1,692	)	(7,498	)
Balance at December 31, 2010	—		—		—		—		—		—
Net book value
Balance at December 31, 2010	—		—		—		—		—		—
			Furniture				Contract		Freely
	Leasehold		and		Other		in		Distributed
Balance at December 31, 2009	Improvements		Equipment		Assets		Progress		Assets		Total
Gross
Balance at January 1, 2009	230		5,309		153		290		1,527		7,509
Additions	—		951		—		117		55		1,123
Transfers	—		290		—		(290	)	—		—
Balance at December 31, 2009	230		6,550		153		117		1,582		8,632
Accumulated depreciation
Balance at January 1, 2009	187		2,378		83		—		1,008		3,656
Depreciation charge for the year	43		1,882		18		—		232		2,175
Transfers	—		—		—		—		—		—
Balance at December 31, 2009	230		4,260		101		—		1,240		5,831
Net book value
Balance at December 31, 2009	—		2,290		52		117		342		2,801

F-17

CONSORZIO LOTTERIE NAZIONALI

NOTES TO FINANCIAL STATEMENTS

(thousands of Euro)

4.Intangible assets, net

Intangible assets are comprised of certain computer software and license costs to operate such software and were transferred to LN effective October 1, 2010 based on the provision of the addendum to the new concession agreement subscribed by CLN, LN and AAMS on September 30, 2010.

Balance at December 31, 2010	Software		Licences		Total
Gross
Balance at January 1, 2010	4,117		776		4,893
Additions	380		—		380
Disposals	(6	)	—		(6	)
Transfer to LN	(4,491	)	(776	)	(5,267	)
Balance at December 31, 2010	—		—		—
Amortisation and impairment
Balance at January 1, 2010	3,849		758		4,607
Amortization for the year	227		8		235
Transfer to LN	(4,076	)	(766	)	(4,842	)
Balance at December 31, 2010	—		—		—
Net book value
Balance at December 31, 2010	—		—		—
Balance at December 31, 2009	Software		Licences		Total
Gross
Balance at January 1, 2009	3,624		697		4,321
Additions	493		79		572
Balance at December 31, 2009	4,117		776		4,893
Amortisation and impairment
Balance at January 1, 2009	3,578		697		4,275
Amortization for the year	271		61		332
Balance at December 31, 2009	3,849		758		4,607
Net book value
Balance at December 31, 2009	268		18		286

F-18

CONSORZIO LOTTERIE NAZIONALI

NOTES TO FINANCIAL STATEMENTS

(thousands of Euro)

5.Inventories

	December 31,
	2010	2009
Instant Lottery Tickets (at cost or net realizable value)	—	13,618

Inventories are mainly comprised of instant lottery tickets held by the depositary and equity holder Arianna 2001 S.p.A. and were transferred to LN effective October 1, 2010 based on the provision of the addendum to the new concession agreement subscribed by CLN, LN and AAMS on September 30, 2010. During the years ended December 31, 2010, 2009 and 2008, there were no write downs or any reversal of write downs.

6.Trade and other receivables

	December 31,
	2010	2009
Trade receivables	—	31,022
Receivables from retailers	—	262,950
Related party receivables	—	11,974
	—	305,946

Trade receivables refer to the commission fees from AAMS as set forth in the concession agreement, are non-interest bearing and are generally due from 30 to 90 days.

Receivables from retailers refer to the amounts due to CLN from the retailers where lottery tickets are sold. The collection of these monthly remittances generally occurs between ten and twenty days after each month-end.

The related party receivables relate to services rendered for the collection of lottery tickets.

All of the trade and other receivables balances were transferred to LN effective October 1, 2010 based on the provision of the addendum to the new concession agreement subscribed by CLN, LN and AAMS on September 30, 2010.

7.Other current assets

	December 31,
	2010	2009
Other receivables	18	191
Prepaid expenses	—	297
VAT receivables	36	743
	54	1,231

F-19

CONSORZIO LOTTERIE NAZIONALI

NOTES TO FINANCIAL STATEMENTS

(thousands of Euro)

8.Cash and cash equivalents

	December 31,
	2010	2009
Cash and cash equivalents	331	4

Cash and cash equivalents are stated at cost, which approximates fair value, and earn interest at market rates. The Company participates in a cash pooling agreement with an equity holder, Lottomatica Group S.p.A., pursuant to which its funds are swept daily into various cash pools managed by Lottomatica Group S.p.A.  Amounts swept into the cash pools of Lottomatica Group S.p.A. are classified as “current financial assets from parent company”.  For comments on related party balances and transactions, see further disclosure in Notes 18 and 20.

9.Equity

On February 25, 2010, at the annual meeting, general equity holders’ declared, and the Company subsequently paid, Euro 123.347 in dividends.

The equity holders and issued capital attributed to them are as follows at December 31, 2010:

Equity holder	Percent of issued capital		Issued capital
Lottomatica Group S.p.A.	63	%	10.080
Scientific Games Int.	20	%	3.200
Arianna 2001 S.p.A.	15	%	2.400
Olivetti S.p.A.	1	%	160
Servizi Base 2001 S.p.A.	1	%	160
Total	100	%	16.000

10.  Long term provisions

	Legal
Balance at December 31, 2010	Matters		Other		Total
Balance at January 1, 2010	730		—		730
Arising during the year	—		—		—
Utilized	(292	)	—		(292	)
Balance at December 31, 2010	438		—		438
	Legal
Balance at December 31, 2009	Matters		Other		Total
Balance at January 1, 2009	600		16		616
Arising during the year	292		—		292
Utilized	(162	)	(16	)	(178	)
Balance at December 31, 2009	730		—		730

F-20

CONSORZIO LOTTERIE NAZIONALI

NOTES TO FINANCIAL STATEMENTS

(thousands of Euro)

Legal matters

Provisions relate primarily to legal fees in connection with the legal matters discussed in Note 19 and were not transferred to LN since such legal matters exclusively relate to the Company.

It is expected that such provisions will be fully utilized by the time that the Company is completely liquidated during 2011.

11.  Accounts payable

	December 31,
	2010	2009
Accounts payable	509	4,276
Other liabilities to AAMS	—	335,936
Related parties payables	119	88,035
	628	428,247

Accounts payable are non-interest bearing and are normally settled on 60 to 90 day terms.

Other liabilities to AAMS refer to the remittance due to AAMS based on the total monthly wagers. Since the Company effectively ceased operations as of September 30, 2010, such balances were transferred to LN effective October 1, 2010 based on the provision of the addendum to the new concession agreement subscribed by CLN, LN and AAMS on September 30, 2010.

For comments on related parties payables, see the related parties relationships and transactions disclosure in Note 18.

12.  Other current liabilities

	December 31,
	2010	2009
Taxes other than income taxes	—	15
Other liabilities	96	204
	96	219

13.  Service revenue

	December 31,
	2010	2009	2008
Instant lotteries	243,442	326,827	320,665
Traditional lotteries	583	1,130	1,746
	244,025	327,957	322,411

F-21

CONSORZIO LOTTERIE NAZIONALI

NOTES TO FINANCIAL STATEMENTS

(thousands of Euro)

The Company previously operated in a highly regulated environment and sold to counterparties (PoS) generally not impacted in a significant manner by the current adverse market conditions.

Current year revenues correspond to nine months of operations since the Company effectively ceased operations as of September 30, 2010 upon the expiration of the extended term of the original Scratch & Win instant lotteries concession.

14. Service costs

	December 31,
	2010	2009	2008
Service costs from Lottomatica Group S.p.A.	46,633	66,411	65,961
Points of Sale assistance	17,071	21,123	21,707
Consulting fees	1,564	3,622	2,248
Maintenance fees	712	993	899
Advertising costs	695	227	1,685
Other costs	2,312	1,072	728
	68,987	93,448	93,228

Current year service costs correspond to nine months of operations since the Company effectively ceased operations as of September 30, 2010 upon the expiration of the extended term of the original Scratch & Win instant lotteries concession.

For comments related to costs from the equity holder Lottomatica Group S.p.A. and other related parties with which the Company conducts business, see the related parties relationships and transactions disclosure in Note 18.

15. Financial income and expenses

	December 31,
	2010	2009	2008
Interest income	739	1,301	754
Forward currency contracts	192	536	1,674
Exchange gains	2,858	2,495	1,237
Financial income	3,789	4,332	3,665
Interest expense	768	1,453	7,332
Forward currency contracts	—	147	—
Factoring of trade receivables contract	3,623	5,198	1,357
Exchange losses	4,162	860	3,060
Financial expenses	8,553	7,658	11,749

F-22

CONSORZIO LOTTERIE NAZIONALI

NOTES TO FINANCIAL STATEMENTS

(thousands of Euro)

16.  Income tax

Significant components of income tax expense are as follows:

	December  31,
	2010		2009		2008
Current
National (IRES)	34,371		50,215		48,185
Regional (IRAP)	6,281		8,134		7,986
Total Current	40,652		58,349		56,171
Deferred
Deferred income tax recovered	2,235		(304	)	91
Deferred income tax (benefit)/expense	—		(2	)	(549	)
Other adjustments	(164	)	(287	)	58
Total Deferred	2,071		(593	)	(400	)
Total income tax expense	42,723		57,756		55,771

The tax effects of temporary differences and carry forwards that give rise to deferred income tax assets and liabilities consist of the following:

	December 31,
	2010		2009
Deferred tax assets
Bad debt reserve provision	—		1,387
Other provisions	141		664
Intangible assets	—		—
Equipment depreciation	—		324
Other	—		1
	141		2,376
Deferred tax liabilities
Unrealized exchange gains	—		49
Equipment depreciation	—		17
Other	—		98
	—		164
Net deferred income tax assets	141		2,212
Net deferred income tax assets at December 31, 2010	141
Net deferred income tax assets at December 31, 2009	2,212
Deferred income tax expense debited to profit or loss	(2,071	)

F-23

CONSORZIO LOTTERIE NAZIONALI

NOTES TO FINANCIAL STATEMENTS

(thousands of Euro)

	December 31,
	2010		2009		2008
Net income before income tax	131,831		181,103		173,502
Italian statutory tax rate (IRES)	27.5	%	27.5	%	27.5	%
Theoretical provision for income taxes based on Italian statutory tax rate	36,254		49,803		47,713
Reconciliation of the theoretical and effective provision for income taxes:
Permanent differences
Italian local tax (IRAP)	5,946		7,896		7,565
Non-deductible expenses	408		81		425
Other	116		(24	)	68
Total tax provision	42,723		57,756		55,771
Effective tax rate	32.4	%	31.9	%	32.1	%

The temporary differences that give rise to the deferred income tax assets remaining at December 31, 2010 refer to the provisions for legal matters discussed in Note 19 that exclusively relate to the Company. Management expects that these temporary differences will be realized even if the Company’s liquidation is fully implemented in 2011. This would result in the recognition of a liability for losses that will result in tax deductible amounts (i.e., deductible temporary differences) when the liability is ultimately settled (upon liquidation of the Company or when the litigation is ultimately settled).

In addition, management has determined that it is probable that sufficient taxable profit will be available in 2011 (i.e., interest income generated by the remaining balance of Current financial assets from parent company) against which the Euro 141 remaining deferred tax assets can be utilized.

17.  Geographic information

The Company previously operated geographically only in Italy.

18.  Related parties disclosures

Related parties relationships and transactions are reported in the table below:

F-24

CONSORZIO LOTTERIE NAZIONALI

NOTES TO FINANCIAL STATEMENTS

(thousands of Euro)

	December 31,
	2010	2009
STATEMENTS OF FINANCIAL POSITION
Trade and other receivables
Lottomatica Group S.p.A.	—	11,884
Scientific Games Int.	—	90
	—	11,974
Current financial assets from parent company
Lottomatica Group S.p.A.	109,540	249,913
	109,540	249,913
Accounts payable
Lottomatica Group S.p.A.	73	49,844
Scientific Games Int.	—	30,474
Arianna 2001	—	6,648
GTech Corp.	46	948
Olivetti S.p.A.	—	121
	119	88,035
Current financial payables to parent company
Lottomatica Group S.p.A.	1,355	1,241
	1,355	1,241

	December 31,
	2010	2009	2008
STATEMENTS OF COMPREHENSIVE INCOME
Cost of tickets
Scientific Games Int.	35,239	45,628	43,090
	35,239	45,628	43,090
Service costs
Lottomatica Group S.p.A.	46,633	66,411	65,961
Arianna 2001	17,483	19,152	18,900
Scientific Games Int.	168	1,057	1,937
Olivetti S.p.A.	137	228	161
GTech Corp.	27	2	48
	64,448	86,850	87,007
Financial income
Lottomatica Group S.p.A.	698	1,263	708
	698	1,263	708
Financial expenses
Lottomatica Group S.p.A.	345	908	5,254
	345	908	5,254

F-25

CONSORZIO LOTTERIE NAZIONALI

NOTES TO FINANCIAL STATEMENTS

(thousands of Euro)

Current financial assets from parent company refer to the intercompany cash pooling transactions swept daily into the cash pools managed by Lottomatica.

Accounts payable and service costs to the parent company refer to the services rendered to CLN in accordance with intercompany agreements. In particular, they refer primarily to marketing and advertising, data processing, back office and cash pooling activities performed by the parent company and charged to the Company.

Accounts payable and service costs to the equity holder, Arianna 2001, refer to secure depository and distribution expenses.

Accounts payable and costs to Scientific Games Int. refer primarily to the tickets purchased during the year. In addition Euro 168 of costs refer to tickets license fees and software maintenance costs.

Financial income and expenses from/to the parent company refer primarily to interest received from/charged by the equity holder Lottomatica Group S.p.A. relating to the Company’s short-term borrowing transactions with the parent company.

All the transactions with related parties, including the intragroup transactions, were executed at terms and conditions that are consistent with market rates and they refer to mutual administrative, financial and organizational services rendered. No atypical and/or unusual transactions have been recorded by the Company.

At December 31, 2010, there were no guarantees made to or received from related parties.

19.  Litigation

“LAS VEGAS” Instantaneous Lottery Petitions

Beginning in April 2006, the Company began receiving payment requests relating to the “Las Vegas” instant lottery tickets (scratch and win) for non-winning tickets.

To-date, 787 petitions and 102 requests for injunctive payments have been received by the Company. There have also been numerous requests for out-of court settlements. These claims amounted to approximately Euro 5.9 million in prize money and requested payment for non-winning tickets. The players claimed that according to their interpretation of the Game Regulations established with the Finance Ministry Decree of February 16, 2005, the amounts corresponding to the winnings indicated in the various areas of the tickets should have been paid every time cards with points from 10 to K appear, even though the regulations state that all the cards must have the same points. As a matter of fact, the players sustained that in all French card games those cards with 10 to K have the same points.

The Company considers these requests unfounded as they do not follow the Game Regulations which explicitly describe the qualifications of a winning ticket.  However, in the opinion of legal counsel, other rulings might have a negative outcome based on the same information used in unfavorable rulings against the Company as noted below.

To-date, 251 rulings have been issued fully accepting the reasons represented by legal counsel assisting the Company. With regard to the unfavorable rulings, the Company instructed its legal counsel to file appeals with the Supreme Court.

F-26

CONSORZIO LOTTERIE NAZIONALI

NOTES TO FINANCIAL STATEMENTS

(thousands of Euro)

20.  Financial instruments and financial risk management objective and policies

Fair values

Set out below is a comparison, by category, of the carrying amounts and fair values of our financial instruments.

	December 31, 2010		December 31, 2009
	Carrying	Fair	Carrying	Fair
	Amount	Value	Amount	Value
Financial assets
Trade and other receivables	—	—	305,946	305,946
Current financial assets from parent	109,540	109,540	249,913	249,913
Other current assets	54	54	1,231	1,231
Cash and cash equivalents	331	331	4	4
	109,925	109,925	557,094	557,094
Financial liabilities at amortised costs
Accounts payable	628	628	428,247	428,247
Current financial liabilities to parent	1,355	1,355	1,241	1,241
Other current liabilities	96	96	219	219
	2,079	2,079	429,707	429,707
Financial liabilities
Derivative instruments	—	—	583	583
	—	—	583	583

The fair value of the financial assets and liabilities are included at the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale.

The following methods and assumptions were used to estimate the fair values:

·Trade and other receivables, current financial assets from parent, other current assets, cash and cash equivalents, accounts payable, current financial liabilities to parent and other current liabilities approximate their carrying amounts largely due to the short-term maturities of these instruments.

·The Company previously executed derivative financial instruments with various counterparties, principally financial institutions with investment grade credit ratings.  Derivatives valued using valuation techniques with market observable inputs included foreign currency forward contracts.  The fair value of these derivatives was calculated principally by reference to forward exchange rates for contracts with similar maturity profiles.  The valuation techniques incorporated various inputs including the credit quality of the counterparty in a net liability position.

Fair value hierarchy

The Company uses the following hierarchy for determining and disclosing the fair value of financial instruments by valuation technique:

Level 1: quoted (unadjusted) prices in active markets for identical assets or liabilities

Level 2: other techniques for which all inputs that have a significant effect on the recorded fair value are observable, either directly or indirectly

Level 3: techniques which use inputs that have a significant effect on the recorded fair value that are not based on observable market data.

At December 31, 2010, all of the Company’s financial instruments were valued utilizing Level 1 fair value measurements.  During the reporting period ended December 31, 2010, there were no transfers between

F-27

CONSORZIO LOTTERIE NAZIONALI

NOTES TO FINANCIAL STATEMENTS

(thousands of Euro)

Level 1 and Level 2 fair value measurements, and no transfers into and out of Level 3 fair value measurements.

Interest income and expense

The following is a breakdown of the Company’s interest income and interest expense by category for the year ended December 31:

	Interest Income			Interest Expense
	2010	2009	2008	2010	2009	2008
Financial assets
Current financial assets from parent company	698	1,263	708	—	—	—
Other current financial assets	42	38	44	—	—	—
Forward currency contracts	192	536	1,674	—	—	—
Cash and cash equivalents	—	—	2	—	—	—
	932	1,837	2,428	—	—	—
Financial liabilities at amortised costs
Current financial payables to parent company	—	—	—	345	908	5,254
Other current liabilities	—	—	—	398	519	2,043
	—	—	—	743	1,427	7,297
Financial liabilities
Bank overdrafts	—	—	—	24	26	35
Factoring of trade receivables contract	—	—	—	3,623	5,198	1,357
Forward currency contracts	—	—	—	—	147	—
	—	—	—	3,647	5,371	1,392

Credit risk

The Company’s credit risk is derived from cash and cash equivalents, trade and other receivables and other current assets balances. We maintain cash deposits and trade with only recognized, creditworthy third parties. We evaluate the collectability of trade accounts and sales receivables on a customer by customer basis. Trade and other receivables are reported net of allowances for doubtful accounts. Allowance for doubtful accounts is generally recorded when objective evidence exists that we will not been able to collect the receivable.

With respect to credit risk arising from financial assets of the Company, the Company’s exposure arises only from default of the counterparty, with a maximum exposure equal to the carrying amount of these balances. We manage our exposure to counterparty credit risk by dealing with major, financially sound counterparties with high-grade credit ratings and by limiting exposure to any one counterparty.

The balance of trade receivables and receivables from retailers (including related bad debt allowance provisions) at December 31, 2010 was zero as a result of the transfer of such balances to LN effective October 1, 2010 based on the provision of the addendum to the new concession agreement subscribed by CLN, LN and AAMS on September 30, 2010 as described above.

The following is an analysis of the Company’s past due trade receivables (amounts indicated net of allowance).

F-28

CONSORZIO LOTTERIE NAZIONALI

NOTES TO FINANCIAL STATEMENTS

(thousands of Euro)

Year Ended December 31, 2010

			1 - 30	31 - 60	61 - 90	over 90
	Total	Current	days	days	days	days
Trade receivables	—	—	—	—	—	—

Year Ended December 31, 2009

					1 - 30		31 - 60		61 - 90		over 90
	Total		Current		days		days		days		days
Trade receivables	31,022		31,022		—		—		—		—
	100.0	%	100.0	%	0.0	%	0.0	%	0.0	%	0.0	%

The following is an analysis of the Company’s past due receivables from retailers and the related bad debt reserve:

Year Ended December 31, 2010

			1 - 30	31 - 60	61 - 90	over 90
	Total	Current	days	days	days	days
Receivables from retailers	—	—	—	—	—	—

Year Ended December 31, 2009

					1 - 30		31 - 60		61 - 90		over 90
	Total		Current		days		days		days		days
Receivables from retailers	262,950		180,903		77,483		1,108		510		2,946
	100.0	%	68.8	%	29.5	%	0.4	%	0.2	%	1.1	%

	2010		2009
Balance at beginning of period	4,889		4,139
Provisions	1,857		1,832
Utilization	(450	)	(1,082	)
Transfer to LN	(6,296	)	—
Balance at end of period	—		4,889

Liquidity risk

The Company participates in a cash pooling agreement with the parent company, Lottomatica Group S.p.A., pursuant to which the Company’s funds are swept daily into various cash pools managed by Lottomatica Group S.p.A. We expect to use the cash generated during the year ended December 31, 2010 and reflected in the balance Current financial assets from parent company to fund our remaining contractual obligations and satisfy our equity obligations (i.e., to pay dividends) during 2011 in conjunction with the liquidation of the Company.

The Company does not have any remaining financial liabilities, including derivatives, with maturity dates that exceed 12 months. As such, the contractual maturity dates of the Company’s remaining financial liabilities are all within one year.

F-29

CONSORZIO LOTTERIE NAZIONALI

NOTES TO FINANCIAL STATEMENTS

(thousands of Euro)

The Company, since entering into the cash pooling agreement discussed above, did not enter into any lines of credit or other borrowing arrangements with banks.

Market risk

Foreign currency exchange rate risk

As a result of transactions relating to tickets purchased from the US equity holder Scientific Games Int., our financial statements can be affected by movements in the USD/EUR exchange rates.  The primary risk inherent in our financial instruments is the market risk arising from adverse changes in foreign currency exchange rates.  Historically, we managed our foreign currency exchange risk by entering into foreign currency forward contracts to reduce the exposure associated with certain liabilities denominated in USD, thereby economically hedging approximately 50% of the estimated future supply of tickets. For the majority of fiscal year 2010, the Company was totally exposed to foreign currency exchange rate fluctuations resulting from tickets purchased from Scientific Games Int. in USD as all foreign currency forward contracts matured prior to the beginning of the second fiscal quarter of 2010 to coi ncide with the expiration of the original concession agreement.

The sensitivity analysis to a reasonably possible change in the USD exchange rate, in a range between +10% and -10% compared to the exchange rate as of December 31, 2010, 2009 and 2008, and the related potential effect on the net income and net equity of the Company is as follows:

	Increase/		Effect on net
	decrease in US		income before		Effect on
	dollar rate		tax		equity
2010	+ 10	%	2.724		1.852
	- 10	%	(3.324	)	(2.260	)
2009	+ 10	%	2.230		1.521
	- 10	%	(2.726	)	(1.859	)
2008	+ 10	%	242		165
	- 10	%	(296	)	(202	)

Interest rate risk

The Company does not have financing arrangements with banks since its short-term borrowing requirements are provided by Lottomatica Group S.p.A. through the cash pooling agreement previously discussed. The interest rate for the cash pooling agreement is set on a quarterly basis. The interest rate on the cash account for the remittances to AAMS is set at market rates. Consequently, changes in market interest rates would not have a significant effect on the Company’s net income and net equity.

F-30