750 Lexington Avenue, New York, New York 10022

Item 3. Quantitative and Qualitative Disclosures about Market Risk

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

Forward-Looking Statements

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agreements between the parties, whether oral or written, including the Original Agreement, are hereby terminated and superseded.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 (each such initial and succeeding year-long extension (if any), an “Extension Term”) , unless either party shall have given written notice to the other party at least ninety (90) days prior to the date upon which such extension would otherwise have become effective electing not to further extend the Term (a “Nonrenewal Notice”), in which case Executive’s employment shall terminate on the date of expiration of the then current Term (whether it be the initial Term or the then current Extension Term), unless earlier terminated in accordance with Section 5. In the event that Executive’s employment terminates because either party shall have given timely a Nonrenewal Notice to the other party, in accordance with the preceding sentence, then, notwithstanding anything to the contrary set forth herein, Executive shall upon such termination be entitled to receive the compensation and benefits set forth in Section 5(d) as if Executive’s employment had been terminated by the Company without Cause, or by Executive for Good Reason, as of the date of expiration of the Term (including, as the case may be, the date of expiration of the Extension Term during which the Nonrenewal Notice is given). Except to the extent (if any) that the context specifically requires otherwise,

3. Offices and Duties.

4. Compensation; Benefits.

5. Termination of Employment. Executive’s employment hereunder may be terminated prior to the end of the Term under the following circumstances:

6. Noncompetition; Nonsolicitation; Nondisclosure; etc.

7. Code of Conduct . Executive acknowledges that he has read the Company’s “Code of Business Conduct for Directors, Officers and Employees (as revised and adopted by the Board of Directors, February 23, 2006)” and agrees to

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 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 Executive’s employment.

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 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 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 the Company’s assets, or otherwise. The Company may also assign this Agreement and the Company’s rights and obligations hereunder to any subsidiary or affiliate of the Company, provided that upon any such assignment the Company shall

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 party 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 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 or arbitration panel 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 or arbitration panel 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 or arbitral proceeding, a court or arbitration panel 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 or arbitration panel 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.

12. Survivability. The provisions of this Agreement which by their terms call for performance subsequent to termination of Executive’s employment hereunder shall so survive such termination, whether or not such provisions expressly state that they shall so survive.

13. Governing Law; Arbitration.

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. Reimbursement of Expenses of Executive in Negotiating Agreement . All reasonable costs and expenses (including, without limitation, reasonable fees and disbursements of counsel) incurred by Executive in connection with the negotiation, preparation, execution, or delivery of this Agreement shall be paid on behalf of Executive (or, if already paid by Executive, reimbursed to Executive) promptly by the Company.

17. 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 such party at the address set forth below or at such other address as may be designated by such party by like notice:

18. Counterparts . This Agreement may be executed in two or more counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same Agreement. Delivery of an executed counterpart of a signature page to this Agreement by facsimile transmission shall be as effective as delivery of a manually executed counterpart of this Agreement.

6. Noncompetition; Nonsolicitation; Nondisclosure; etc.

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 party 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 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.

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.

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.

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, 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:

6. Noncompetition; Nonsolicitation; Nondisclosure; etc.

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 party 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 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.

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.

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.

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, 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:

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 party 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 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.

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.

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.

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, 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:

6. Noncompetition; Nonsolicitation; Nondisclosure; etc.

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 party 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

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.

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.

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.

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,

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:

a. From January 1, 2006 through December 31, 2007, Executive will serve as Chief Executive Officer of the Company and as Chairman of the Board of Directors of the Company (the “Board of Directors”), and as an officer or director of any subsidiary or affiliate of the Company if elected or appointed to any such position by the shareholders or by the board of directors of such subsidiary or affiliate, as the case may be.

b. From and after January 1, 2008, Executive shall continue to serve as both Chief Executive Officer and Chairman of the Board of Directors, unless notice within the time frames in the following sentence is provided by either Executive or the Company to the other party. Executive will relinquish the role of Chief Executive Officer of the Company (but will continue to be employed as and serve in the capacity of Chairman of the Board of Directors and shall continue to receive the compensation and benefits provided for herein) if (i) for the period January 1, 2008 to December 31, 2008, notice is provided by either party to the other party no later than September 1, 2007, or (ii) for the period January 1, 2009 to December 31, 2009, notice is provided by either party to the other party no later than September 1, 2008, or (iii) for each Extension Term, if any, notice is provided by either party to the other party no later than September 1 in the calendar year immediately preceding the commencement of such Extension Term. Receipt or giving of such notice and subsequent change in position shall not constitute “Cause” or “Good Reason” within the meaning of Section 5 of this Agreement.

c. 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 Board of Directors. Subject to Section 5(d) and to Executive’s right to continue to receive the compensation and benefits provided for herein, Executive’s functions, duties and responsibilities are subject to reasonable changes as the Board of

Directors may in good faith determine after consultation with Executive.

d. Executive hereby agrees to accept such employment and to serve the Company to the best of his ability in such capacities, devoting substantially all of his business time to such employment; provided, however, that Executive shall be entitled to (i) manage his personal investments and otherwise attend to personal affairs, including family financial and legal affairs, and (ii) serve on the boards of directors of up to three entities, each in a manner that does not conflict or unreasonably interfere with his responsibilities hereunder.

6.1 Noncompetition; Nonsolicitation .

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 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.

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.

6.7 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

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 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 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.

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.

6.1 Noncompetition; Nonsolicitation .

6.2 Proprietary Information; Inventions.

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 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.

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.

6.7 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 be 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 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 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.

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.

6.2 Proprietary Information; Inventions.

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 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.

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.

6.7 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 be 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 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 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.

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.

6.1 Noncompetition; Nonsolicitation .

6.2 Proprietary Information; Inventions.

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 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.

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.

6.7 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 be 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 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 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.

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.

Basic and Diluted Net Income Per Share

(a) Base Salary. During the Term the Company shall pay Executive a base salary (the “Base Salary”) at the initial rate of one million five hundred thousand dollars ($1,500,000.00) per annum, payable biweekly (except to the extent deferred under a deferred compensation plan). The first payment of Base Salary following the execution and delivery by the parties of this Agreement shall be in an amount equal to the difference between (i) the aggregate amount of Base Salary that Executive is entitled to have received at a base salary rate of one million five hundred thousand dollars ($1,500,000.00) per annum for all pay periods in 2006 up to and including the pay period covered by such first payment date, and (ii) the aggregate amount of Base Salary that Executive has received for such pay periods referred to in clause (i). The Base Salary shall be increased annually on each January 1 during the Term by a percentage of the Base Salary then in effect equal to the percentage increase, if any, during the preceding twelve months in the Consumer Price Index for the Greater New York Area. For purposes of this Agreement, the percentage increase, if any, during the preceding twelve months in the Consumer Price Index for the Greater New York area will be computed by dividing (i) the difference between (A) the Consumer Price Index—All Urban Consumers, New York-Northern New Jersey-Long Island, NY-NJ-CT-PA, All Items (1982-84=100), published by the U.S. Department of Labor Bureau of Labor Statistics (the “CPI”) for the month of December in the calendar year most recently ended prior to, or ending on, the date as of which the relevant increase is to be made ( e.g. , December 2007 for an increase to be made on January 1, 2008) and (B) the CPI for the month of December in the calendar year immediately preceding the year referred to in clause (i)(A) by (ii) the CPI referred to in clause (i)(B); provided, however, that if such computation yields a negative number, such percentage increase shall be deemed to be zero. Without limiting the foregoing, 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 be paid incentive compensation in amounts determined by the Compensation Committee of the Board of Directors of the Company (the “Compensation Committee”) in accordance with the applicable incentive compensation plan of the Company as in effect from time to time. Under such plan, Executive shall have the opportunity to earn a target bonus (the “Target Bonus”) up to 100% of Base Salary as incentive compensation at Target Opportunity and a maximum bonus up to 200% of Base Salary as incentive compensation at Maximum Opportunity. “Target Opportunity” and “Maximum Opportunity” shall have the meaning ascribed to them in the applicable incentive compensation plan. Notwithstanding the foregoing, if no incentive compensation plan is in effect at any relevant time, or if such plan, as in effect at any relevant time, does not provide a reasonable opportunity for Executive to earn annually incentive compensation in the amounts described in the foregoing provisions of this Section 4(b), then the Company shall provide such reasonable opportunity to Executive independently of such plan. Any incentive compensation payable to Executive shall be paid in accordance with the Company’s usual practices with respect to payment of incentive compensation to its other senior executives (regardless of whether, at such time, the Company has an incentive compensation plan in effect), except that the Company shall make available to Executive an opportunity to defer receipt of the incentive compensation under a deferred compensation plan.

(c) Eligibility for Annual Equity Awards and Participation in Executive Compensation Plans. 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. Executive shall be eligible to participate in such plans and programs, and in other executive compensation 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) in each case on terms no less favorable to Executive than the most favorable terms of participation of any other executive of the Company. For the avoidance of doubt, Executive’s participation in any such equity award plan or program shall be deemed to be on terms no less favorable to Executive than the most favorable terms of participation of any other executive of the Company if the absolute number or amount of stock options, restricted stock units, or other equity awards awarded to Executive is at least equal to the highest absolute number or amount of stock options, restricted stock units or other equity award awarded to any other executive of the Company in respect of the same period (regardless of the percentage of Executive’s Base Salary, incentive compensation or any other compensation or benefit represented by such award).

(d) Incentive Equity Awards.

(i) The Company shall grant to Executive (A) as a sign-on bonus thirty days following the parties’ execution of this Agreement (the “2006 RSU Grant”), 235,000 restricted stock units; and (B) thereafter on June 30, 2007 (the “2007 RSU Grant” and collectively with the 2006 RSU Grant, the “Special RSU Grants” and each individually, a “Special RSU Grant”) (the respective date each Special RSU Grant is made, the “Grant Date” thereof) restricted stock units in a number equal to (x) $8 million divided by (y) the average closing price per share of the Company’s common stock for the 30-day period preceding the Grant Date of the 2007 RSU Grant (such closing prices, in each case, as reported in the Wall Street Journal for those dates during such 30-day period on which the principal national stock exchange or quotation system on which the Company’s stock is traded is open for business). Each Special RSU Grant shall be granted under and subject to the terms and conditions of the Company’s 2003 Incentive Compensation Plan, as amended and restated, or an applicable successor plan (in either case, the “Equity Plan”) and a restricted stock unit agreement in the form attached hereto as Exhibit A to be entered into with respect to such Special RSU Grant by and between the Company and Executive (each, an “RSU Agreement”), provided, however, that the parties hereby agree, and the RSU Agreements shall respectively provide, that the 2006 RSU Grant shall vest with respect to twenty-five percent (25%) of the shares of common stock subject to the 2006 RSU Grant on December 31, 2006 and each subsequent December 31 st through December 31, 2009, and that the 2007 RSU Grant shall vest with respect to one third (1/3) of the shares of common stock subject to the 2007 RSU Grant on December 31, 2007 and each subsequent December 31 st through December 31, 2009, subject to certain provisions relating to accelerated vesting and forfeiture as described in this Agreement, the applicable RSU Agreement and the Equity Plan; provided, however, that, notwithstanding anything to the contrary set forth in the Equity Plan, in the RSU Agreements, in this Agreement or in any other Company plan or policy, it is hereby agreed that this Agreement (or any written amendment hereto signed by Executive and the Company that expressly states that it supersedes this proviso) and the RSU Agreement in the form of Exhibit A hereto contain the only provisions regarding forfeiture that shall apply to the Special RSU Grants. In each case, the applicable RSU Agreement shall provide that delivery to Executive of shares of Company common stock subject to vested restricted stock units under the applicable Special RSU Grant shall occur on earliest date on which such shares may be so delivered without becoming subject to taxes, interest or penalties as a result of Section 409A (“Section 409A”) of the Internal Revenue Code of 1986, as amended (the “Code”) and applicable administrative guidance and regulations, and without affecting any compensation deduction applicable thereto as a result of Section 162(m) of the Code but in no event shall such shares be delivered (x) later than six months plus one day after the date of termination of Executive’s employment (the date of termination of Executive’s employment, regardless of the ground or reason therefor, being referred to in this Agreement as the “Termination Date”), nor (y) sooner than five (5) days after the Termination Date.

(ii) Notwithstanding anything to the contrary set forth in this Agreement, in the RSU Agreements or in the Equity Plan (but without limiting any rights or entitlements of Executive in addition to the following that may be provided elsewhere in this Agreement, the RSU Agreements or the Equity Plan), in the event of any Change in Control described in clause (B) or (C) of Section 5(e)(iii), or any Change in Control described in Clause (A) of Section 5(e)(iii) pursuant to which holders of the Company’s common stock generally are entitled to receive cash and/or non-cash consideration for all or substantially all of their shares: (A) if such Change in Control occurs before the 2007 RSU Grant has otherwise been made to Executive, then (x) the 2007 RSU Grant shall be granted (or if not granted, shall be deemed to have been granted) to Executive on the “Change in Control Reference Date” (as defined below) and the Change in Control Reference Date shall be the Grant Date of the 2007 RSU Grant, provided that (y) the number of restricted stock units included in the 2007 RSU Grant shall be the number determined using the Change in Control Reference Date as the Grant Date of the 2007 RSU Grant, or such lesser number of restricted stock units, if any, as may be determined by dividing (I) $8 million by (II) the consideration per share (including the fair value per share of any non-cash consideration as specified by the governing legal documents in connection with such Change in Control or otherwise determined in good faith by the Board of Directors) to be received by holders of the Company’s common stock generally for their shares pursuant to such Change in Control transaction; (B) if such Change in Control occurs before all restricted stock units included in the Special RSU Grants (including those granted or deemed granted pursuant to clause (A) of this paragraph 4(d)(ii) and including those subject to the 2006 RSU Grant, whether or not such Change in Control occurs prior to the Grant Date of the 2006 RSU Grant) have vested (except by reason of forfeiture pursuant to the terms of Section 5(j) of this Agreement or the terms of Section 5(a) or 5(c) of this Agreement and the applicable RSU Agreement), then all such unvested restricted stock units shall fully vest and become non-forfeitable as of the Change in Control Reference Date; (C) any and all shares of the Company’s common stock underlying vested restricted stock units included in the Special RSU Grants (including those granted or deemed granted pursuant to clause (A) of this paragraph 4(d)(ii) and those vested pursuant to clause (B) of this paragraph 4(d)(ii)) that have not otherwise been delivered as of the time of the Change in Control shall be deemed to have been delivered to Executive at the latest date and time that shall entitle Executive to receive for such shares, in the manner described in clause (D) below, the consideration payable to holders of the Company’s common stock generally for their shares pursuant to such Change in Control transaction (provided, for the avoidance of doubt, that no such shares shall be deemed to have been delivered to Executive if such Change in Control transaction is not consummated and holders of the Company’s common stock generally receive no such consideration for their shares pursuant thereto); and (D) Executive shall be entitled to receive for shares of the Company’s common stock underlying vested restricted stock units included in the Special RSU Grants (including those granted or deemed granted pursuant to clause (A) of this paragraph 4(d)(ii) and those vested pursuant to clause (B) of this paragraph 4(d)(ii)), at substantially the same time and as to

(e) 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 therefor in accordance with the Company’s standard procedures.

(f) Use of Company Aircraft . Executive shall have use of the Company’s “Flight Options” fractional ownership aircraft, or any substitute or replacement private aircraft wholly or partially owned, or leased, chartered by the Company or otherwise made available by the Company to any executive officers of the Company (collectively, the “Company Plane”) for personal use, provided that such personal use shall not interfere with the business use of the Company Plane. Family members and/or other guests may accompany Executive on Company Plane flights, whether such flights are for personal use, business use or a combination thereof, as seating permits. When using the Company Plane for a flight that is exclusively for personal use, Executive shall reimburse the Company for the out-of-pocket cost to the Company of such flight as invoiced by Flight Options LLC or a successor owner, charterer, lessor or servicer of the Company Plane, as the case may be (the “Invoiced Amount”). When using the Company Plane on a flight that has a bona fide business-related purpose (whether or not such business-related purpose is the sole purpose of such flight), Executive shall reimburse the Company for any personal use in respect of such flight in an amount that is computed in accordance with the provisions of section 274(e) of the Code and regulations promulgated thereunder and any applicable interpretations by the U.S. Internal Revenue Service (the “IRS Amount”); provided, however, that if the IRS Amount is greater than the Invoiced Amount for such flight, then Executive shall reimburse the Company for the Invoiced Amount, instead of the IRS Amount, for such flight.

(g) 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; provided, however, that Executive shall be eligible to participate in such insurance, benefit, fringe benefit and perquisite plans and programs on terms and conditions at least as favorable to Executive as the most favorable terms and conditions offered to any other employee of the Company. 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.

(h) Residual SERP Benefit. Executive’s aggregate retirement benefit under the Company’s Supplemental Executive Retirement Plan, as amended, restated and

(i) Taxes . Payment of all compensation and benefits to Executive specified in this Section 4 and in Section 5 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 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 (but is not required) 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 5 of this Agreement, Executive consents to the Company adopting such conforming amendments as the Company or Executive deems necessary, in its or his reasonable discretion, to comply with Section 409A (including, but not limited to, delaying payment until six months following termination of employment)

(j) Registration . The Company will use its best efforts to file with the Securities and Exchange Commission and thereafter maintain the effectiveness of one or more registration statements registering under the Securities Act of 1933, as amended, the offer and sale of shares by the Company to Executive pursuant to stock options or other equity-based awards granted to Executive under Company plans and this Agreement.

(a) Termination by Executive for Other than Good Reason. Executive may terminate his employment hereunder for any reason or no reason upon 45 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” shall not constitute a

(b) Termination by Reason of Death . If Executive dies during the Term, the Company shall pay to the last beneficiary designated by Executive by written notice to the Company or, failing such designation, to Executive’s estate, the following amounts:

(c) Termination by the Company for Cause . The Company may terminate Executive’s employment hereunder for Cause by giving a Cause Termination Notice (as defined below) in accordance with and subject to the provisions of this Section 5(c). For purposes of this Agreement, the term “Cause” shall mean Executive’s gross misconduct (as defined herein) or willful and material breach of Section 6.1(a) (other than the first sentence thereof), 6.1(b), 6.2 (other than the first and penultimate sentences thereof) or 6.3. “Gross misconduct” shall mean (i) Executive’s conviction (including conviction on a nolo contendere plea) in a court of law of a felony, or (ii) Executive’s willful and continued failure substantially to perform his material duties under this Agreement. For purposes of this Agreement, an act or failure to act on Executive’s part shall be considered “willful” if it was done or omitted to be done by him knowingly, purposefully and not in good faith and shall not include, without limitation, any act or failure to act resulting from any disagreement or difference of views between Executive and one or more directors or officers of the Company or any of its affiliates with respect to any matter(s) relating to the business, affairs or operations of the Company and/or any of its affiliates (including, without limitation, with respect to any management, business or operational matter, strategy, plan, proposal, initiative or decision, any issue regarding the hiring, firing, appointment or removal of any director, officer, employee, agent, consultant, advisor or contractor, any proposed transaction, venture, affiliation or alliance, or any change in business, structure, organization, management or operations). Executive may not be terminated for Cause unless and until there shall have been delivered to him, within ninety (90) days after the Company first had actual knowledge of the most recent conduct or event comprising an element of the alleged ground for termination for Cause (it not being necessary that all elements comprising the alleged ground for termination for Cause have occurred within such ninety (90) day period), a copy of a resolution duly adopted by the Board of Directors by a vote of Directors constituting a majority of the Board of Directors (excluding Executive) at a meeting of the Board of Directors at which a quorum is physically present in person and which is called and held for such purpose (after giving Executive reasonable notice of the specific grounds for such termination including a reasonably detailed statement of the facts and circumstances claimed as the basis for such termination and, except if a felony conviction is the grounds for termination, 30 days to correct such grounds, and affording Executive and his counsel the opportunity to be heard before the Board of Directors) finding that, in

(d) Termination By Reason of Total Disability; Termination by the Company Without Cause or by Executive for Good Reason. The Company may terminate Executive’s employment (x) by reason of “Total Disability” (as defined below) or (y) at any time, without Cause, for any reason or no reason, and Executive may terminate his employment hereunder for “Good Reason” (as defined below). 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 Executive’s “Total Disability.” For purposes of this Agreement, “Total Disability” shall mean Executive’s 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 as determined by a physician or physicians selected by the Company and reasonably acceptable to Executive, unless, within 30 days after Executive has received written notice from the Company of a proposed termination due to such failure (as determined in accordance with the foregoing provisions of this sentence) which notice shall include a copy of the findings of such physician or physicians and shall refer to this Section 5(d), Executive shall have returned to the full performance of his duties hereunder and shall have presented to the Company a written certificate of Executive’s good health by a physician selected by Executive and

(e) Termination in Connection with Change in Control .

(f) Timing of Certain Payments Under Section 5. Unless otherwise expressly provided in this Section 5(f) or in the other provisions of this Agreement, all payments pursuant to this Section 5 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 necessary to comply with Section 409A(a)(2)(B)(i) of the Code, and applicable administrative guidance and regulations, a payment pursuant to Section 5(a)(iv), 5(d)(ii), 5(d)(iii), 5(d)(vi), 5(d)(vii) or 5(e)(i) shall be made in a lump sum on the date that is six months plus one day following the Termination Date.

(g) No Obligation to Mitigate . Executive shall not be required to seek other employment or otherwise to mitigate Executive’s damages upon any termination of employment; provided, however, that, to the extent Executive receives from a subsequent employer health or other insurance benefits substantially similar to the benefits referred to in Section 4, any such benefits to be provided by the Company to Executive following the termination of his employment shall be correspondingly reduced.

(h) Set-Off . Amounts required to be paid by the Company to Executive pursuant to this Agreement shall not be subject to offset with respect to any amounts Executive otherwise owes the Company except for any amounts that are owed to the Company by Executive due to his receipt of funds as a result of his fraudulent activity.

(i) 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.

(j) Release of Employment Claims; Compliance with Section 6 . Executive agrees, as a condition to receipt of any termination payments and benefits provided for in this Section 5 (other than the Standard Termination Payments and the Basic Equity Award Benefit (as defined in Section 5(c)(ii)), 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) and Executive will not in the future seek employment at the Company or any of its subsidiaries or affiliates. The Company’s obligation to make any termination payments and benefits provided for in this Section 5 (other than the Standard Termination Payments and the Basic Equity Award Benefit, all of which shall be paid by the Company) shall immediately cease if a court of competent jurisdiction or an arbitral tribunal determines that Executive (x) willfully and materially breached Sections 6.1, 6.2, 6.3, 6.4, or 6.8 and (y) failed to cure such breach within thirty (30) days after his receipt of written notice from the Board of Directors, attaching a copy of a resolution duly adopted by the Board of Directors by a vote of Directors constituting a majority of the Board of Directors (excluding Executive) at a meeting of the Board of Directors at which a quorum is physically present in person, in which resolution the Board of Directors sets forth such breach in reasonable detail and expressly elects the remedy provided in this Section 5(j), and which notice is delivered to Executive within ninety (90) days after the Company first had knowledge of such breach (the foregoing, collectively, a “Section 5(j) Notice of Breach”) (and which cure by Executive, in the case of a breach of Section 6.4, may be effected, without limitation, by correction or retraction of the disparaging statements). During the pendency of any court or arbitration proceeding regarding such a determination, the Company shall pay into escrow with a third-party bank or trust company the amount of any payments or benefits provided for in this Section 5 (other than the Standard Termination Payments and the Basic Equity Award Benefit) pursuant to an escrow agreement in form reasonably acceptable to Executive which provides that the amount of such payments or benefits (together with interest earned thereon), upon the conclusion of such proceeding, shall be returned to the Company if Executive is determined by such proceeding to have willfully and materially breached any of such Sections and otherwise shall be paid to Executive. If a court of competent jurisdiction or

(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 management of related marketing and distribution programs; manufacture, sale, operation or management of on-line lottery systems (Lotto-type games); involving development and commercialization of licensed and other proprietary game entertainment for all lottery product channels; involving 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 is then or was within the previous twenty-four months engaged or in which the Company, to Executive’s actual knowledge, intends to engage during the Term or the Covered Time; and (ii) which Competing Business is conducted or planned to be 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; provided, further, that this Section 6.1(a) shall not restrict Executive from engaging in (and the term “Competing Business” shall not include) any business in which the Company no longer engages or plans to engage; and provided further that activities of the Company, or activities engaged in by Executive for or on behalf of the Company, are not restricted by this Section 6.1.(a) and shall not constitute a “Competing Business.” Ownership of (i) the securities of any entity for which a Competing Business represents less than 10% of net sales or net income (as determined in accordance with generally accepted accounting principles) for the most recent fiscal year (or if such entity has not completed a fiscal year, net sales or net income projected for its first fiscal year) or (ii) not more than two percent of the equity securities of any company having securities listed on an exchange or regularly traded in the over-the-counter market shall not, of itself, be deemed inconsistent with this Section 6.1(a). Nothing herein shall require Executive to sell or otherwise dispose of any securities of

(b) In further 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 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, (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) 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 Termination Date and ending twenty-four (24) months after the Termination Date.

6.2 Proprietary Information; Inventions.

(a) Executive acknowledges that during the course of Executive’s employment with the Company Executive necessarily will have access to and make use of (and during any employment of him by the Company prior to the Term has had access to and made 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 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 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 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 Executive’s work with the Company, are related in any manner to the business

(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 or where the parties are located at the time a dispute arises.

(b) Arbitration. 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 judgment 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 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 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 or venue and any defense of inconvenient forum. Thus, except for the claims carved out above, this agreement to arbitrate 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.

(c) Notwithstanding any provision in this Section 13, Executive shall be entitled to seek in any court of competent jurisdiction specific performance of Executive’s right (which is hereby acknowledged and agreed to by the Company) to be paid all compensation, benefits and other amounts required to be paid during the pendency of any dispute or controversy arising under or in connection with this

(d) All reasonable costs and expenses (including, without limitation, reasonable fees and expenses of counsel) incurred by Executive in seeking to enforce rights pursuant to this Agreement shall be paid by the Company on behalf of Executive (or, if already paid by Executive, reimbursed to Executive by the Company) to the extent that Executive prevails in enforcing such rights before a court of competent jurisdiction or arbitral tribunal.

(e) 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. Subject to Section 13(d) hereof, each party shall pay that party’s own costs and attorney fees, if any. 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.

(f) 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.

(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 hereunder; (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 Executive shall be entitled to receive only the Standard Termination Payments (as defined in Section 5(a)).

(j) 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.

(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 management 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

(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 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, (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 twelve (12) 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 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 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 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

(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 judgment 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 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

(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.

(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 hereunder; (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 Executive shall be entitled to receive only the Standard Termination Payments (as defined in Section 5(a)).

(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) and Executive will not in the future seek employment at the Company. 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.

(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 management 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 eighteen (18) 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 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 her, 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, (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.

(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 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 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 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.

(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 judgment 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 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 gender, 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.

(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 hereunder; (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 Executive shall be entitled to receive only the Standard Termination Payments (as defined in Section 5(a)).

(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 management 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 eighteen (18) 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 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 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, (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.

(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 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 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 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.

(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 judgment 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 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 gender, 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.

(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 hereunder; (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 Executive shall be entitled to receive only the Standard Termination Payments (as defined in Section 5(a)).

(l) 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) and Executive will not in the future seek employment at the Company. 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.

(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 management 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 eighteen (18) 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 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 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, (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.

(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 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 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 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.

(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 judgment 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

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 gender, 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.

(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.

(ii) A lump sum payment equal to Executive’s annual Base Salary, payable within 30 days of termination.

(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.

(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.

(i) Any accrued but unpaid Base Salary (as determined pursuant to Section 4(a)) for services rendered to the Termination Date, payable on the next regular payday following the Termination Date;

(ii) All vested nonforfeitable amounts owing or accrued at the Termination Date under compensation and benefit plans, programs, and arrangements set forth or referred to in Section 4 hereof in which Executive theretofore participated (including, without limitation, any earned and vested annual incentive compensation and the SERP benefit) will be paid under the terms and conditions of such plans, programs, and arrangements (and agreements and documents thereunder);

(iii) Reasonable business expenses and disbursements incurred by Executive prior to such termination will be reimbursed in accordance with Section 4(e).

(iv) In lieu of any incentive compensation under Section 4(b) for the year of termination, an amount equal to the amount of annual incentive compensation payable to Executive assuming achievement of the maximum performance targets for such year, multiplied by 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. Such amount shall be payable in a lump sum in accordance with Section 5(f) of this Agreement;

(v) Stock options held by Executive at termination, if not then vested and exercisable, will become fully vested and exercisable at the date of such termination, except to the extent otherwise specifically provided under the terms of any “Non-Ordinary Course Grant or Award” (as defined below) made to Executive after December 31, 2005, and any such options shall remain exercisable until the earlier of three years after the date of such termination or the scheduled expiration date, and, in other respects, all such options shall be governed by the plans and programs and the agreements and other documents pursuant to which such options were granted;

(vi) Except to the extent otherwise specifically provided under the terms of any Non-Ordinary Course Grant or Award made to Executive after December 31, 2005 (including, without limitation, the RSU Agreements governing the 2006 RSU Grant and the 2007 RSU Grant), all deferred stock, restricted stock and other equity-based awards will become fully vested and non-forfeitable, and all restrictions and conditions with respect to such awards shall lapse, and all such awards and arrangements will be settled in accordance with the plans and programs under which the awards were granted or governing such arrangements including, if so permitted by the plans or programs, Executive’s duly executed deferral election forms or the terms of any

(vii) Executive may elect continued participation after termination in the Company’s health and medical coverage for himself and his spouse and dependent children after such coverage would otherwise end until such time as Executive becomes eligible for Medicare; provided, however, that in the event of such election, Executive shall pay the Company each year an amount equal to the then-current annual COBRA premium being paid (or payable) by any other former employee of the Company.

For purposes of this Agreement, a “Non-Ordinary-Course Grant or Award” shall mean any grant or award conferring the right to acquire equity-based securities of the Company, other than a “Normal Course Award”, and a “Normal Course Award” shall mean and be limited to a grant or award to acquire equity-based securities of the Company made under the annual equity incentive program of the Company’s management incentive compensation program, or under any amended, replacement or supplemental plan or program that is established to take the place of, modify, or supplement such equity incentive program (as the same may be hereafter amended, replaced or supplemented), or to reinstitute such a plan or program, in order to carry out the Company’s regular program of equity grants to senior executives generally.

(i) The payments and benefits referred to in clauses (i) through (iii), inclusive, of Section 5(a) (collectively, the “Standard Termination Payments”);

(ii) A lump sum payment equal to (A) Executive’s annual Base Salary, plus (B) 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, payable within 30 days of the Termination Date;

(iii) Stock options held by Executive at termination, if not then vested and exercisable, will become fully vested and exercisable at the date of such termination, except to the extent otherwise specifically provided under the terms of any Non-Ordinary Course Grant or Award made to Executive after December 31, 2005, and any such options shall remain exercisable until the earlier of three years after the date of such termination or the scheduled expiration date, and, in other respects, all such options shall be governed by the plans and programs and the agreements and other documents pursuant to which such options were granted; and

(iv) Except to the extent otherwise specifically provided under the terms of any Non-Ordinary Course Grant or Award made to Executive after December 31, 2005, all deferred stock, restricted stock and other equity-based awards will become fully vested and non-forfeitable, and all restrictions and conditions with respect to such awards shall lapse, and all such awards and arrangements will be settled in accordance with the plans and programs under which the awards were granted or governing such arrangements including, if so permitted by the plans or programs, Executive’s duly executed deferral election forms or the terms of any mandatory deferral under such plans or programs.

(i) The Standard Termination Payments (as defined in Section 5(b)(i)); and

(ii) 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 (the “Basic Equity Award Benefit”);

(i) The Standard Termination Payments (as defined in Section 5(b)(i));

(ii) If such termination occurs on or prior to December 31, 2008, an amount equal to the sum of (A) the Base Salary that would have been payable to Executive through December 31, 2009 had Executive’s employment not terminated and (B) Executive’s “Severance Bonus Amount” (as defined below), or, alternatively, if such termination occurs subsequent to December 31, 2008, an amount equal to the sum of (A)

(iii) In lieu of any incentive compensation for the year in which such termination of employment occurs (but in addition to and not in lieu of the Severance Bonus Amount), 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. Such amount shall be payable in a lump sum in accordance with Section 5(f) of this Agreement;

(iv) Stock options held by Executive at termination, if not then vested and exercisable, will become fully vested and exercisable at the date of such termination, except to the extent otherwise specifically provided under the terms of any Non-Ordinary Course Grant or Award made to Executive after December 31, 2005, and any such options shall remain exercisable until the scheduled expiration date, and, in other respects, all such options shall be governed by the plans and programs and the agreements and other documents pursuant to which such options were granted;

(v) Except to the extent otherwise specifically provided under the terms of any Non-Ordinary Course Grant or Award made to Executive after December 31, 2005, all deferred stock, restricted stock and other equity-based awards will become fully vested and non-forfeitable, all restrictions and conditions with respect to such awards shall lapse, and all such awards and arrangements shall be settled upon such termination, without regard to any stated period of deferral or other restrictions or conditions remaining in respect of such awards; provided, however, if necessary to comply with Section 409A(a)(2)(B)(i) of the Code, and applicable administrative

(vi) Executive shall be entitled to receive an amount equal to the amount accrued under any deferred compensation plan or agreement in effect at the Termination Date in which Executive is a participant or party, less required withholding taxes under Section 4(i); such amount to be paid in a lump sum in accordance with Section 5(f) hereof and to be equal to Executive’s account balance on the Termination Date of Executive’s employment if the deferred compensation amount is in the form of an account balance or, if the deferred compensation amount is not in the form of an account balance, the present value of the deferred compensation on the Termination Date calculated using a discount rate (the “Discount Rate”) equal to the yield, at the time of determination, for U.S. Treasury securities having a maturity of thirty years; provided, however, that if Executive elects to receive payment under this Section 5(d)(vi), Executive shall forfeit all rights under any such deferred compensation plan or agreement, and such deferred compensation plan or agreement shall have no force and effect with respect to Executive; and

(vii) For (A) a period of 3 years after such termination other than due to Total Disability or (B) the period from termination due to Total Disability until Executive attains age 65, Executive shall continue to participate in all employee and executive benefit plans, programs, and arrangements under Section 4(g) of this Agreement providing health, medical, disability and life insurance benefits in which Executive was participating immediately prior to termination, the terms of which allow Executive’s continued participation, as if Executive had continued in employment with the Company during such period or, if such plans, programs, or arrangements do not allow Executive’s continued participation, Executive shall receive in a lump sum a cash payment equivalent on an after-tax basis to the value of the additional benefits Executive would have received under such plans, programs, and arrangements in which Executive was participating immediately prior to termination, as if Executive had received credit under such plans, programs, and arrangements for service and age with the Company during such period following Executive’s termination as provided in clause (A) or (B) above (as applicable), with such benefits payable by the Company at the same times and in the same manner as such benefits would have been received by Executive under such plans (it being understood that the value of any insurance-provided benefits will be based on the premium cost to Executive, which shall not exceed the highest risk premium charged by a carrier having an investment grade or better credit rating).

(i) In the event Executive’s employment is terminated by the Company without Cause or by Executive for Good Reason and the termination occurs upon or within two years immediately following a Change in Control, this Section 5(e) and not Section 5(d) shall apply, and Executive (A) shall receive the “Section 5(d) Payments and Benefits” (as defined above) and, for the avoidance of doubt, shall have such rights, if any, in respect of the Special RSU Grants as may be provided pursuant to Section 4(d)(ii) or 4(d)(iii) hereof, and (B) shall receive the “Change in Control Payment.” The “Change in Control Payment” shall mean an amount payable in a lump sum in accordance with Section 5(f) of the Agreement equal to the sum of (x) the Base Salary and (y) 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.

(ii) In the event Executive’s employment is terminated by the Company without Cause or by Executive for Good Reason and the termination occurs “In Anticipation of a Change in Control” and the Change in Control actually occurs within six (6) months after the termination, unless the relevant facts and circumstances clearly demonstrate that the possibility that such Change in Control would occur was remote as of the date of such termination, Executive shall receive the amounts and benefits provided for in Section 5(e)(i), less any amounts paid to Executive pursuant to Section 5(d).

(iii) A “Change in Control” shall be deemed to have occurred if: (A) 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 the Company and any subsidiary or affiliate and any employee benefit plan sponsored or maintained by the Company or any subsidiary or affiliate (including any trustee of such plan acting as trustee), directly or indirectly, becomes the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act) of securities of the Company representing at least 40% of the combined voting power of the Company’s then-outstanding securities; (B) the stockholders of the Company approve a merger, consolidation, recapitalization, or reorganization of the Company, or a reverse stock split of any class of voting securities of the Company, 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 the Company 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 the Company outstanding immediately prior to such transaction; provided that, for purposes of this Section 5(e)(iii)(B), such continuity of ownership (and preservation of relative voting power) shall be deemed to be satisfied if the failure to

(iv) For purposes of this Section 5(e) a termination shall be considered “In Anticipation of a Change in Control” (A) if the termination occurs after: (1) the issuance of a proxy statement by the Company with respect to an election of directors for which there is proposed one or more directors who are not recommended by the Board of Directors or its nominating committee where the election of such proposed director or directors would result in a Change in Control or (2) the announcement by any person of an intention to take actions which might reasonably result in a Change in Control; and (B) the Change in Control actually occurs within six (6) months after the termination unless the relevant facts and circumstances clearly demonstrate that the possibility that a Change in Control was remote as of the date of such termination.

6.1 Noncompetition; Nonsolicitation.

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 Executive 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.

6.4 Nondisparagement. Executive shall not, during the Term and thereafter, disparage in any material respect the Company, any of the Company’s businesses, any of the Company’s officers, directors or employees, or the reputation of any of the foregoing persons or entities. Notwithstanding the provisions of Sections 5(j) and 6.6, a breach of this Section 6.4 occurring more than two (2) years after the Termination Date shall not constitute grounds for cessation of payments and benefits pursuant to Section 5(j) or for forfeiture of options pursuant to Section 6.6 (provided that the Company may pursue any other available rights and remedies with respect to such breach). After the expiration of the Term and the Covered Time, the foregoing prohibition shall continue to apply as to circumstances and matters arising during or relating to the period of Executive’s employment by the Company and the Covered Time, but shall not apply to circumstances or matters newly arising after the Covered Time. Notwithstanding the foregoing, nothing in this Agreement shall preclude Executive from making what he reasonably believes in good faith to be truthful statements that are

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 a court of competent jurisdiction or an arbitral tribunal determines that Executive (x) willfully and materially breached Sections 6.1, 6.2, 6.3, 6.4 or 6.8 and (y) failed to cure such breach within thirty (30) days after his receipt of written notice from the Board of Directors, attaching a copy of a resolution duly adopted by the Board of Directors by a vote of Directors constituting a majority of the Board of Directors (excluding Executive) at a meeting of the Board of Directors at which a quorum is physically present in person, in which resolution the Board of Directors sets forth such breach in reasonable detail and expressly elects the remedy provided in this Section 6.6, and which notice is delivered to Executive within ninety (90) days after the Company first had knowledge of such breach (the foregoing, collectively, a “Section 6.6 Notice of Breach”) (and which cure by Executive, in the case of a breach of Section 6.4, may be effected, without limitation, by correction or retraction of the disparaging statements), then all options (whether granted prior to, contemporaneously 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 thereupon such options shall be cancelled, such forfeiture to be effective at the later of the time of such failure to comply or Executive’s termination of employment. If a court of competent jurisdiction or arbitral tribunal finds that the Company is entitled to cause the forfeiture of Executive’s options in accordance with the foregoing terms of this Section 6.6, Executive shall be required to forfeit such options immediately. If any option is exercised after delivery of the Section 6.6 Notice of Breach and if such forfeiture subsequently occurs pursuant to the foregoing terms of this Section 6.6, Executive shall be required to return to the Company all shares acquired upon such exercise; provided further that if Executive has sold any shares he acquired upon such exercise, Executive shall pay to the Company an amount equal to the difference between the aggregate sale price of the shares sold and the aggregate exercise price paid by Executive for such shares. If a court of competent jurisdiction or arbitral tribunal does not find that the Company is entitled to cause such forfeiture in accordance with the foregoing terms of this Section 6.6, the Company shall pay (or reimburse, if already paid by Executive) all reasonable expenses actually incurred by Executive in connection with contesting such attempted forfeiture.

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 be 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, 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 to assist the Company in any such action, suit, or proceeding by providing information and meeting and consulting with the Board of Directors 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. Notwithstanding the provisions of Sections 5(j) and 6.6, a breach of this Section 6.6 occurring more than seven (7) years after the Termination Date shall not constitute grounds for cessation of payments and benefits pursuant to Section 5(j) or forfeiture of options pursuant to Section 6.6 (provided that the Company may pursue any other available rights and remedies with respect to such breach).

6.9 Survival. The provisions of this Section 6 shall survive the termination of Executive’s employment.

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.

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549

Form 10-Q

{Mark One}

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

	For the quarterly period ended September 30, 2006

	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		81-0422894
(State or other jurisdiction of		(I.R.S. Employer Identification No.)
incorporation or organization)

(Address of principal executive offices)

(Zip Code)

(212) 754-2233

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports 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 x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer x Accelerated filer o Non-accelerated filer o

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

APPLICABLE ONLY TO CORPORATE ISSUERS:

Indicate the number of shares outstanding of each of the issuer’s classes of common stock as of November 7, 2006:

Class A Common Stock: 91,608,161

Class B Common Stock: None

SCIENTIFIC GAMES CORPORATION AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
AND OTHER INFORMATION

THREE MONTHS ENDED SEPTEMBER 30, 2006

PART I.	FINANCIAL INFORMATION

Item 1.	Consolidated Financial Statements:

	Balance Sheets as of December 31, 2005 and September 30, 2006

	Statements of Income for the Three Months Ended September 30, 2005 and 2006

	Statements of Income for the Nine Months Ended September 30, 2005 and 2006

	Condensed Statements of Cash Flows for the Nine Months Ended September 30, 2005 and 2006

	Notes to Consolidated Financial Statements

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations

Item 3.	Quantitative and Qualitative Disclosures About Market Risk

Item 4.	Controls and Procedures

PART II.	OTHER INFORMATION

Item 2	Unregistered Sales of Equity Securities and Use of Proceeds

Item 6.	Exhibits

SCIENTIFIC GAMES CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Unaudited, in thousands, except per share amounts)

	December 31,			September 30,
	2005			2006
ASSETS
Current assets:
Cash and cash equivalents	$	38,942		37,817
Accounts receivable, net of allowance for doubtful accounts of $6,149 and $7,062 at December 31, 2005 and September 30, 2006, respectively	129,250			162,003
Inventories	40,148			63,877
Deferred income taxes	14,242			23,018
Prepaid expenses, deposits and other current assets	31,971			44,810
Total current assets	254,553			331,525
Property and equipment, at cost	666,469			775,108
Less accumulated depreciation	300,250			342,691
Net property and equipment	366,219			432,417
Goodwill, net	339,169			574,782
Other intangible assets, net	87,289			138,359
Other assets and investments	125,283			152,140
Total assets	$	1,172,513		1,629,223

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Current installments of long-term debt	$	6,055		3,256
Accounts payable	54,223			47,776
Accrued liabilities	80,305			118,623
Interest payable	779			5,078
Total current liabilities	141,362			174,733
Deferred income taxes	9,759			8,249
Other long-term liabilities	59,879			68,290
Long-term debt, excluding current installments	574,680			878,515
Total liabilities	785,680			1,129,787

Commitments and contingencies

Stockholders’ equity:
Class A common stock, par value $0.01 per share, 199,300 shares authorized, 89,869 and 91,434 shares outstanding at December 31, 2005 and September 30, 2006, respectively	899			914
Class B non-voting common stock, par value $0.01 per share, 700 shares authorized, none outstanding	—			—
Additional paid-in capital	425,750			457,205
Accumulated earnings (losses)	(33,309		)	25,565
Treasury stock, at cost	(9,556		)	(9,556	)
Accumulated other comprehensive income	3,049			25,308
Total stockholders’ equity	386,833			499,436
Total liabilities and stockholders’ equity	$	1,172,513		1,629,223

See accompanying notes to consolidated financial statements.

SCIENTIFIC GAMES CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

Three Months Ended September 30, 2005 and 2006
(Unaudited, in thousands, except per share amounts)

	2005			2006
Operating revenues:
Services	$	155,925		198,921
Sales	40,899			18,469
	196,824			217,390
Operating expenses
Cost of services (exclusive of depreciation and amortization)	86,956			107,265
Cost of sales (exclusive of depreciation and amortization)	30,064			13,406
Selling, general and administrative expenses	31,489			34,676
Depreciation and amortization	17,130			36,424
Operating income	31,185			25,619
Other deductions:
Interest expense	7,139			12,154
Equity in net (income) loss in joint ventures	60			(1,722	)
Other (income) loss, net	(530		)	10
	6,669			10,442
Income before income tax expense	24,516			15,177
Income tax expense	5,331			3,650
Net income	$	19,185		11,527

Basic and diluted net income per share:
Basic net income available to common stockholders	$	0.21		0.13
Diluted net income available to common stockholders	$	0.21		0.12

Weighted average number of shares used in per share calculations:
Basic shares	89,689			91,346
Diluted shares	92,890			94,433

See accompanying notes to consolidated financial statements.

SCIENTIFIC GAMES CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

Nine Months Ended September 30, 2005 and 2006
(Unaudited, in thousands, except per share amounts)

	2005			2006
Operating revenues:
Services	$	472,546		590,113
Sales	106,258			75,043
	578,804			665,156
Operating expenses
Cost of services (exclusive of depreciation and amortization)	259,637			320,808
Cost of sales (exclusive of depreciation and amortization)	75,841			57,198
Selling, general and administrative expenses	84,942			102,414
Depreciation and amortization	48,724			79,241
Operating income	109,660			105,495
Other deductions:
Interest expense	20,361			30,471
Equity in net (income) loss in joint ventures	1,558			(6,455	)
Other income, net	(1,252		)	(859	)
	20,667			23,157
Income before income tax expense	88,993			82,338
Income tax expense	24,029			23,464
Net income	$	64,964		58,874

Basic and diluted net income per share:
Basic net income available to common stockholders	$	0.73		0.65
Diluted net income available to common stockholders	$	0.70		0.62

Weighted average number of shares used in per share calculations:
Basic shares	89,118			90,909
Diluted shares	92,293			94,795

See accompanying notes to consolidated financial statements.

SCIENTIFIC GAMES CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Nine Months Ended September 30, 2005 and 2006
(Unaudited, in thousands)

	2005			2006
Cash flows from operating activities:
Net income	$	64,964		58,874

Adjustments to reconcile net income to cash provided by operating activities:
Depreciation and amortization	48,724			79,241
Change in deferred income taxes	2,802			(7,423	)
Share-based compensation	—			14,035
Tax benefit from exercise of employee stock options	7,295			—
Changes in operating assets and liabilities, net of effects of acquisitions	(31,927		)	(38,494	)
Change in short-term investments	47,475			—
Other	9,439			(2,697	)
Net cash provided by operating activities	148,772			103,536

Cash flows from investing activities:
Capital expenditures	(14,426		)	(12,360	)
Wagering systems expenditures	(72,391		)	(96,777	)
Other intangible assets and software expenditures	(13,571		)	(33,012	)
Change in other assets and liabilities, net	(12,509		)	(18,006	)
Business acquisitions, net of cash acquired	(24,774		)	(263,659	)
Net cash used in investing activities	(137,671		)	(423,814	)

Cash flows from financing activities:
Borrowings (repayments) under revolving credit facility	(22,750		)	155,500
Borrowings (repayments) of long-term debt	(6,377		)	145,392
Excess tax benefit from equity-based compensation plan	—			4,487
Net proceeds from issuance of common stock	6,803			12,607
Net cash provided by (used in) financing activities	(22,324		)	317,986
Effect of exchange rate changes on cash and cash equivalents	(4,466		)	1,167
Increase (decrease) in cash and cash equivalents	(15,689		)	(1,125	)
Cash and cash equivalents, beginning of period	66,120			38,942
Cash and cash equivalents, end of period	$	50,431		37,817

Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest	$	13,579		24,304
Income taxes, net of refunds	$	2,394		26,618

See accompanying notes to consolidated financial statements.

SCIENTIFIC GAMES CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited, in thousands, except per share amounts)

Notes to Consolidated Financial Statements

(1) Consolidated Financial Statements

Basis of Presentation

The consolidated balance sheet as of September 30, 2006, the consolidated statements of income for the three and nine months ended September 30, 2005 and 2006, and the consolidated condensed statements of cash flows for the nine months ended September 30, 2005 and 2006, have been prepared by Scientific Games Corporation (together with its consolidated subsidiaries, the “Company”) without audit. In the opinion of management, all adjustments necessary to present fairly the consolidated financial position of the Company at September 30, 2006 and the results of its operations for the three and nine months ended September 30, 2005 and 2006 and its cash flows for the nine months ended September 30, 2005 and 2006 have been made.

Certain information and footnote disclosures normally included in consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted. These consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s 2005 Annual Report on Form 10-K. The results of operations for the period ended September 30, 2006 are not necessarily indicative of the operating results for the full year.

The following represents a reconciliation of the numerator and denominator used in computing basic and diluted net income per share available to common stockholders for the three and nine months ended September 30, 2005 and 2006:

	Three months ended September 30,			Nine months ended September 30,
	2005		2006	2005		2006
Income (numerator)
Net income (basic)	$	19,185	11,527	$	64,964	58,874
Shares (denominator)
Basic weighted average common shares outstanding	$	89,689	91,346	89,118		90,909
Effect of dilutive securities-stock options, warrants and deferred shares	3,201		2,409	3,175		2,719
Effect of dilutive shares related to convertible debentures	—		678	—		1,167
Diluted weighted average common shares outstanding	$	92,890	94,433	92,293		94,795

Basic and diluted per share amounts
Basic net income per share available to common stockholders	$	0.21	0.13	$	0.73	0.65
Diluted net income per share available to common stockholders	$	0.21	0.12	$	0.70	0.62

The weighted-average diluted shares outstanding for the three- and nine-month periods ended September 30, 2006 excludes the effect of approximately 553,043 and 87,903 out-of-the-money options, respectively, as their effect would be anti-dilutive. The weighted-average diluted common shares outstanding for the three- and nine-month periods ended September 30, 2005, excludes the effect of approximately 40,434 and 405,020 out-of-the-money, respectively, as their effect would be anti-dilutive.

The aggregate number of shares that the Company could be obligated to issue upon conversion of its $275,000, 0.75% convertible senior subordinated debentures due 2024 (the “Convertible Debentures”), which the Company sold in December 2004, is approximately 9,450. The Convertible Debentures provide for net share settlement upon exercise and the Company has purchased a bond hedge to mitigate the potential economic dilution from conversion. During the second and third quarters of 2006, the average price of the Company’s common stock exceeded the specified conversion price. For the three and nine months ended September 30, 2006, the Company has included 678 and 1,167 shares, respectively, related to its Convertible Debentures in its diluted weighted average common shares outstanding. Such

shares were excluded from the three and nine months ended September 30, 2005 calculation, as they were anti-dilutive. The Company has not included the offset from the bond hedge as it would be anti-dilutive; however, when the Convertible Debentures mature, the diluted share amount will decrease because the bond hedge will offset the economic dilution from conversion.

(2) Acquisitions

On April 20, 2006, the Company acquired The Global Draw Limited and certain related companies (“Global Draw”). Global Draw is a leading United Kingdom supplier of fixed odds betting terminals and systems, and interactive sports betting systems and also operates terminals and betting systems in Austria and the United Kingdom. The Company expects that the acquisition of Global Draw will strengthen its role in the worldwide sports betting and video lottery business. The purchase price was approximately $183 million (subject to adjustment), plus an earn-out to the selling shareholders, as well as contingent bonuses to certain members of the management team, based on the future financial performance of the business. The aggregate amount of such payments would total one-third of an amount equal to Global Draw’s EBITDA (EBITDA, for such purposes, is defined as the consolidated earnings before interest, tax, depreciation and amortization) for the year ended December 31, 2008 multiplied by a specific price multiple depending on the level of EBITDA earned. In accordance with current accounting standards, any such payments made to selling shareholders will be capitalized as additional purchase price and any such payments made to management will be expensed. The acquisition was recorded using the purchase method of accounting. Approximately $2 million of the preliminary estimate of goodwill of approximately $152 million from the acquisition of Global Draw is deductible for tax purposes. All other assets and liabilities acquired in the transaction were included in the preliminary purchase price allocation. The Company financed the acquisition through a combination of borrowings under its existing revolving credit facility and a new $100,000 term loan. The operating results of Global Draw have been included in the Company’s Diversified Gaming segment since the beginning of the second quarter of 2006. The following table represents the unaudited pro forma results of operations for the three and nine months ended September 30, 2005 and 2006 as if the transaction had occurred at the beginning of the periods presented.

	Three Months Ended			Nine Months Ended
	September 30,			September 30,
	2005		2006	2005		2006
Operating revenues	$	214,657	217,390	$	642,764	710,607
Operating income	$	36,130	25,619	$	135,640	128,635
Net income	$	21,071	11,527	$	78,384	73,507
Basic net income per share	$	0.24	0.13	$	0.88	0.81
Diluted net income per share	$	0.23	0.12	$	0.85	0.78

These pro forma results have been prepared for comparative purpose and do not purport to be indicative of what would have occurred had the acquisition been consummated on January 1, 2005, or the results that may occur in the future.

On April 5, 2006, the Company acquired certain assets of The Shoreline Star Greyhound Park and Simulcast Facility (“Shoreline”) located in Bridgeport, Connecticut. The Company expects that the acquisition of Shoreline will allow it to maximize the potential of its Connecticut operations. Additionally, the deal eliminates existing restrictions on the Company’s ability to simulcast live racing in certain portions of the state. The purchase price was approximately $12 million (subject to adjustment) plus an earn-out, based on the future financial performance of the business. The Company paid cash for the acquisition which was recorded using the purchase method of accounting. The operating results of Shoreline are included in the Diversified Gaming segment and have been included in the Company’s Statement of Operations since the date of acquisition. The acquisition of Shoreline was not material to the Company’s operations.

On March 22, 2006, the Company acquired substantially all of the online lottery assets of Swedish firm EssNet AB (“EssNet”) which specializes in online lottery systems and terminals to run online lotteries, sports betting, instant tickets and mobile games on a national level. EssNet’s lottery customers include seven states in Germany, the national lottery of Norway, Golden Casket and Tattersall’s Lottery in Australia, and other national lotteries. The Company expects that its acquisition of EssNet will enable it to further expand into the European lottery market. The purchase price was approximately $60 million in cash. The acquisition was recorded using the purchase method of accounting. The operating results of EssNet are included in the Lottery Systems segment and have been included in the Company’s Statements of Operations since the date of acquisition. Approximately $55 million of the preliminary estimate of goodwill of approximately $75 million from the acquisition of EssNet is deductible for tax

purposes. Additionally, other assets and liabilities acquired in the transaction, such as certain intangible assets, property and equipment, current assets and liabilities were included in the preliminary purchase price allocation. The acquisition of EssNet was not material to the Company’s operations.

In conjunction with the purchase of EssNet, the Company has a plan to integrate certain operating locations as part of the integration of EssNet. The Company has recorded approximately $27 million in liabilities, primarily related to involuntary employee terminations, termination of leases and termination of service contracts that will result from the integration.

The table below summarizes the payments made to date, adjustments and the balance of the accrued integration costs as of and for the period ended September 30, 2006 (in thousands):

Cost Summary	Accrued Costs at Closing	Payments		Adjustments to Goodwill		Accrued Balance September 30, 2006
Severance pay and benefits	17,644	(5,245	)	(6,163	)	6,236
Lease termination	1,475	(501	)	—		974
Contractual obligations	7,598	(4,111	)	2,653		6,140
	26,717	(9,857	)	(3,510	)	13,350

In the third quarter of 2006, the Company received an extension to the term of its option to acquire 69% of the shares of International Lotto Corp., SRL (“ILC”) from September 30, 2006 to November 30, 2006. ILC is a member of a consortium agreement with certain charities in Peru which gives them the right to participate in the operation of a lottery. The Company’s option to acquire 69% of the shares of ILC was granted as consideration for approximately $15.5 million of advances made to ILC since December 2003.

(3) Operating Segment Information

SFAS No. 131, “Disclosures about Segments of an Enterprise and Related Information” (“SFAS No. 131”), defines operating segments to be those components of a business for which separate financial information is available that is regularly evaluated by management in making operating decisions and in assessing performance. SFAS No. 131 further requires that segment information be presented consistently with the basis and manner in which management internally disaggregates financial information for the purposes of assisting in making internal operating decisions.

As previously reported in its Quarterly Report on Form 10-Q for the quarter ended March 31, 2006, the Company determined that its previously reported segments consisting of Lottery, Pari-mutuel, Venue Management and Telecommunications Products no longer reflected the way the Company managed the business. Beginning in the first quarter of 2006, the Company began reporting its business in three segments – Printed Products, Lottery Systems and Diversified Gaming. The Printed Products segment includes the instant lottery ticket business and the pre-paid phone card business (formerly the Telecommunications Product Group). The Lottery Systems segment includes the Company’s online lottery business. The Diversified Gaming segment includes the Company’s pari-mutuel wagering systems business (formerly the Pari-mutuel Group) and the Company’s off-track wagering business (formerly the Venue Management Group). All prior period amounts have been restated to conform to the current segment reporting format.

The Printed Products Group provides instant ticket and related services that includes ticket design and manufacturing as well as value-added services, including game design, sales and marketing support, inventory management and warehousing and fulfillment services. Additionally this division provides lotteries with over 80 licensed brand products and includes prepaid phone cards for cellular phone service providers. The Lottery Systems Group offers online, instant and video lottery products and online and instant ticket validation systems. Its business includes the supply of transaction processing software for the accounting and validation of both instant and online lottery games, point-of-sale terminal hardware sales, central site computers and communication hardware sales, and ongoing support and maintenance for these products. The Diversified Gaming Group provides computerized wagering systems and services such as race simulcasting and communications services and telephone and internet account wagering to the pari-mutuel wagering industry. It owns and operates licensed pari-mutuel wagering facilities in Connecticut, Maine and the Netherlands. Additionally, with the acquisition of Global Draw, this division is a supplier of fixed odd betting terminals and systems, and interactive sports betting terminals and systems throughout Europe.

In the quarter ended September 30, 2006, the Company recorded a $10,200 charge in its Diversified Gaming segment related to the impairment of certain hardware and software assets in the pari-mutuel business as a result of the roll-out of our new terminal and two Quantum Data Centers and the write-off of hardware and accrual of losses of $500 on certain under-performing pari-mutual contracts. Of this amount, approximately $9,700 was recorded as depreciation and amortization and approximately $500 was recorded as cost of services in the Company’s Statement of Operations for the quarter ended September 30, 2006.

The following tables represent revenues, profits, depreciation, amortization, and capital expenditures for the three and nine month periods ended September 30, 2005 and 2006, by current reportable segments. Corporate expenses, interest expense and other (income) deductions are not allocated to the reportable segments. All prior period amounts have been restated to reflect the current reportable segments.

	Three Months Ended September 30, 2005
	(Unaudited)
	Printed Products Group		Lottery Systems Group	Diversified Gaming Group	Totals
Service revenues	$	79,107	42,318	34,500	155,925
Sales revenues	16,854		21,760	2,285	40,899
Total revenues	95,961		64,078	36,785	196,824

Cost of services (exclusive of depreciation and amortization)	40,669		21,700	24,587	86,956
Cost of sales (exclusive of depreciation and amortization)	12,185		15,742	2,137	30,064
Selling, general and administrative expenses	10,698		7,159	6,472	24,329
Depreciation and amortization	4,547		8,829	3,460	16,836
Segment operating income	$	27,862	10,648	129	38,639
Unallocated corporate expense					7,454
Consolidated operating income					$	31,185

Capital and wagering systems expenditures	$	1,676	35,063	6,645	43,384

	Three Months Ended September 30, 2006
	(Unaudited)
	Printed Products Group		Lottery Systems Group	Diversified Gaming Group	Totals
Service revenues	$	91,135	50,877	56,909	198,921
Sales revenues	10,619		7,205	645	18,469
Total revenues	101,754		58,082	57,554	217,390

Cost of services (exclusive of depreciation and amortization)	46,906		27,937	32,422	107,265
Cost of sales (exclusive of depreciation and amortization)	8,656		3,846	904	13,406
Selling, general and administrative expenses	10,894		7,284	5,170	23,348
Depreciation and amortization	6,640		13,270	16,247	36,157
Segment operating income	$	28,658	5,745	2,811	37,214
Unallocated corporate expense					11,595
Consolidated operating income					$	25,619

Capital and wagering systems expenditures	$	5,262	19,364	4,040	28,666

	Nine Months Ended September 30, 2005
	(Unaudited)
	Printed Products Group		Lottery Systems Group	Diversified Gaming Group	Totals
Service revenues	$	246,050	125,096	101,400	472,546
Sales revenues	53,518		46,579	6,161	106,258
Total revenues	299,568		171,675	107,561	578,804

Cost of services (exclusive of depreciation and amortization)	126,300		63,139	70,198	259,637
Cost of sales (exclusive of depreciation and amortization)	39,073		31,928	4,840	75,841
Selling, general and administrative expenses	30,206		20,037	13,505	63,748
Depreciation and amortization	13,365		23,764	10,736	47,865
Segment operating income	$	90,624	32,807	8,282	131,713
Unallocated corporate expense					22,053
Consolidated operating income					$	109,660

Assets at September 30, 2005	$	455,325	361,575	121,407	938,307
Unallocated assets at September 30, 2005					210,949
Consolidated assets at September 30, 2005					$	1,149,256

Capital and wagering systems expenditures	$	5,676	68,166	12,975	86,817

	Nine Months Ended September 30, 2006
	(Unaudited)
	Printed Products Group		Lottery Systems Group	Diversified Gaming Group	Totals
Service revenues	$	285,329	160,253	144,531	590,113
Sales revenues	36,558		34,313	4,172	75,043
Total revenues	321,887		194,566	148,703	665,156

Cost of services (exclusive of depreciation and amortization)	145,892		89,304	85,612	320,808
Cost of sales (exclusive of depreciation and amortization)	28,635		24,299	4,264	57,198
Selling, general and administrative expenses	33,099		22,812	12,145	68,056
Depreciation and amortization	17,966		34,804	25,742	78,512
Segment operating income	$	96,295	23,347	20,940	140,582
Unallocated corporate expense					35,087
Consolidated operating income					$	105,495

Assets at September 30, 2006	$	517,086	549,447	376,361	1,442,894
Unallocated assets at September 30, 2006					186,329
Consolidated assets at September 30, 2006					$	1,629,223

Capital and wagering systems expenditures	$	16,121	71,152	21,864	109,137

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

	Three Months Ended September 30,					Nine Months Ended Septemer 30,
	2005			2006		2005			2006
Reported consolidated operating income	$	31,185		25,619		$	109,660		105,495
Interest expense	7,139			12,154		20,361			30,471
Equity in net (income) loss of joint ventures	60			(1,722	)	1,558			(6,455	)
Other income, net	(530		)	10		(1,252		)	(859	)
Income before income tax expense	$	24,516		15,177		$	88,993		82,338

In evaluating financial performance, the Company focuses on operating profit as a segment’s measure of profit or loss. Operating profit is before investment income, interest expense, equity in net (income) loss in joint ventures, corporate expenses and income taxes. The accounting policies of the reportable segments are the same as those described in the summary of significant accounting policies (see Note 1 of the Company’s Notes to Consolidated Financial Statements in the Company’s Annual Report on Form 10-K for the year ended December 31, 2005).

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

(4) Income Tax Expense

The effective tax rates for the three and nine months ended September 30, 2006 of 24.0% and 28.5%, respectively, were determined using an estimated annual effective tax rate, which was less than the federal statutory rate of 35% due to lower tax rates applicable to the Company’s operations outside the United States and the tax benefit of the 2004 debt restructuring. The effective income tax rates for the three and nine months ended September 30, 2005 of 21.7% and 27.0%, respectively, differed from the federal statutory rate due to benefits from expanded business outside the United States, the 2004 debt restructuring and increased research and development activities.

(5) Comprehensive Income

The following presents a reconciliation of net income to comprehensive income for the three and nine month periods ended September 30, 2005 and 2006:

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2005		2006		2005			2006
Net income	$	19,185	11,527		$	64,964		58,874
Other comprehensive income (loss):
Foreign currency translation	213		4,071		(8,439		)	22,787
Unrealized loss (gain) on investments	131		(17	)	1,776			(528	)
Other comprehensive income (loss)	344		4,054		(6,663		)	22,259
Comprehensive income	$	19,529	15,581		$	58,301		81,133

(6) Inventories

Inventories consist of the following:

	December 31,		September 30,
	2005		2006
Parts and work-in-process	$	20,694	35,982
Finished goods	19,454		27,895
	$	40,148	63,877

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

(7) Accrued Liabilities

Accrued liabilities consist of the following:

	December 31,		September 30,
	2005		2006
Compensation and benefits	$	21,992	18,253
Customer advances	6,667		3,066
Deferred revenue	8,873		12,703
Taxes, other than income	4,489		5,947
Accrued licenses	5,396		2,923
Liabilities assumed in business combinations	—		23,469
Accrued contract costs	9,461		11,823
Other	23,427		40,439
	$	80,305	118,623

(8) Long-Term Debt

On September 30, 2006, the Company had approximately $88,208 available for borrowing under the Company’s revolving credit facility under the July 2006 Amended and Restated Credit Agreement. There were $155,500 of borrowings and $56,292 in letters of credit outstanding under the revolving credit facility at September 30, 2006.

On July 7, 2006, the Company amended (the “Amendment”) its existing Credit Agreement dated as of December 31, 2004, as amended and restated as of March 31, 2006 (the “March 2006 Amended and Restated Credit Agreement”), to provide for a new $150 million senior secured term loan (the “Term Loan D”) and to make certain other changes to the March 2006 Amended and Restated Credit Agreement (the March 2006 Amended and Restated Credit Agreement and the Amendment are collectively referred to as the “July 2006 Amended and Restated Credit Agreement”). The proceeds from the Term Loan D were used to repay, in full, the remaining $98.5 million of existing Term Loan B and to pay down approximately $51 million of borrowings under the Company’s existing revolving credit facility The interest rate with respect to the Term Loan D will vary, depending upon the Company’s consolidated leverage ratio, from 75 basis points to 150 basis points above LIBOR for eurocurrency loans and from zero basis points to 50 basis points above the higher of (i) the prime rate or (ii) the Federal Funds Effective Rate plus 0.50%, for base rate loans. The Company paid approximately $0.5 million in banking, legal and other fees in connection with the Amendment. The July 2006 Amended and Restated Credit Agreement will terminate on December 23, 2009.

The July 2006 Amended and Restated Credit Agreement contains certain covenants that, among other things, limit the Company’s ability, and the ability of certain of the Company’s subsidiaries, to incur additional indebtedness, pay dividends or make distributions or certain other restricted payments, purchase or redeem capital stock, make investments or extend credit, engage in certain transactions with affiliates, engage in sale-leaseback transactions, consummate certain asset sales, effect a consolidation or merger, sell, transfer, lease or otherwise dispose of all or substantially all assets, or create certain liens and other encumbrances on assets. Additionally, the July 2006 Amended and Restated Credit Agreement contains the following financial covenants that are computed quarterly on a rolling four-quarter basis as applicable:

· A maximum Consolidated Leverage Ratio of 3.75 until December 2009. Consolidated Leverage Ratio means the ratio of (x) the aggregate stated balance sheet amount of the Company’s indebtedness determined on a consolidated basis in accordance with Generally Accepted Accounting Principles (“GAAP”) as of the last day of the fiscal quarter for which such determination is being made to (y) Consolidated Earnings Before Interest, Taxes, Depreciation and Amortization (“EBITDA”) for the four consecutive fiscal quarters ended on the last day of the fiscal quarter for which such determination is being made.

· A maximum Consolidated Senior Debt Ratio of 2.50 until December 2009. Consolidated Senior Debt Ratio means the ratio of (x) the aggregate stated balance sheet amount of the Company’s indebtedness, less the amount of the Company’s 6.25% senior subordinated notes due 2012 (the “2004 Notes”) and the Convertible Debentures determined on a consolidated basis in accordance with GAAP as of the last day of the fiscal quarter for which such determination is being made to (y) Consolidated

EBITDA for the four consecutive fiscal quarters ended on the last day of the fiscal quarter for which such determination is being made.

· A minimum Consolidated Interest Coverage Ratio of 3.50 until December 2009. Consolidated Interest Coverage Ratio means, as of any date of determination, the ratio computed for the Company’s four most recent fiscal quarters of (x) Consolidated EBITDA to (y) the total interest expense less non-cash amortization costs included in interest expense.

For purposes of the foregoing limitations, Consolidated EBITDA means the sum of (i) consolidated net income, (ii) consolidated interest expense with respect to all outstanding indebtedness, (iii) provisions for taxes based on income, (iv) total depreciation expense, (v) total amortization expense and (vi) certain adjustments, in each case for the period being measured, all of the foregoing as determined on a consolidated basis for the Company and its subsidiaries in accordance with GAAP.

The Company was in compliance with its covenants as of March 31, 2006, June 30, 2006 and September 30, 2006.

(9) Goodwill and Intangible Assets

The following disclosure presents certain information regarding the Company’s acquired intangible assets as of December 31, 2005 and September 30, 2006. Amortizable intangible assets are amortized over their estimated useful lives, as indicated below, with no estimated residual values. For the three and nine months ended September 30, 2006, intangible assets were impacted by foreign currency translation adjustments of approximately $400 and $700, respectively.

Intangible Assets	Weighted Average Amortization Period	Gross Carrying Amount		Accumulated Amortization	Net Balance
Balance at December 31, 2005
Amortizable intangible assets:
Patents	15	$	5,201	811	4,390
Customer lists	14	18,813		8,804	10,009
Customer service contracts	15	3,793		1,392	2,401
Licenses	4	14,458		6,906	7,552
Lottery contracts	5	31,902		13,441	18,461
		74,167		31,354	42,813
Non-amortizable intangible assets:
Tradename		32,574		2,118	30,456
Connecticut off-track betting system operating right		22,339		8,319	14,020

		54,913		10,437	44,476
Total intangible assets		$	129,080	41,791	87,289

Balance at September 30, 2006
Amortizable intangible assets:
Patents	14	$	8,586	1,061	7,525
Customer lists	10	28,139		11,039	17,100
Customer service contracts	15	3,546		1,756	1,790
Licenses	4	26,389		10,990	15,399
Intellectual property	4	20,804		2,712	18,092
Lottery contracts	5	34,920		18,222	16,698
		122,384		45,780	76,604
Non-amortizable intangible assets:
Tradename		37,873		2,118	35,755
Connecticut off-track betting system operating right		34,319		8,319	26,000

		72,192		10,437	61,755
Total intangible assets		$	194,576	56,217	138,359

The aggregate intangible amortization expense for the three month periods ended September 30, 2005 and 2006 was approximately $2,900 and $5,900, respectively. The aggregate intangible amortization expense for the nine month periods ended September 30, 2005 and 2006 was approximately $8,200 and $14,100, respectively.

The table below reconciles the change in the carrying amount of goodwill, by reporting segment, for the period from January 1, 2006 to September 30, 2006. In 2006, the Company recorded (a) a $489 increase in goodwill associated with the final purchase price valuation and allocation adjustments of Promo-Travel International, Inc., (b) a $618 decrease in goodwill associated with the acquisition of IGT OnLine Entertainment Systems, Inc., (c) a $314 decrease in goodwill associated with the acquisition of the remaining 35% minority interest in Scientific Games Latin America S.A., (d) a $78,404 increase in goodwill in connection with the acquisition of the online assets of EssNet, (e) a $56 increase in goodwill for the acquisition of an off-track betting operation, (f) a $147,891 increase in goodwill for the acquisition of Global Draw, (g) a $2,247 increase in goodwill for the acquisition of Printer Associates International and (g) a $7,458 increase in goodwill, as a result of foreign currency translation.

Goodwill	Printed Products Group		Lottery Systems Group	Diversified Gaming Group	Totals
Balance at December 31, 2005	$	243,439	95,115	615	339,169
Adjustments:	3,045		80,542	152,026	235,613
Balance at September 30, 2006	$	246,484	175,657	152,641	574,782

(10) Pension Plans

The Company has two funded defined benefit pension plans. It has a defined benefit plan for its U.S. based union employees. Retirement benefits under this plan are based upon the number of years of credited service up to a maximum of 30 years for the majority of the employees. It also has a defined benefit plan for certain U.K. based employees. Retirement benefits under the U.K. plan are based on an employee’s average compensation over the two years preceding retirement. The Company’s policy is to fund the minimum contribution permissible by the respective tax authorities.

The Company has a 401(k) plan covering all U.S. based employees who are not covered by a collective bargaining agreement. Company contributions to the plan are at the discretion of the Company’s Board of Directors. The Company has a 401(k) plan for all union employees which does not provide for Company contributions.

The following table sets forth the combined amount of net periodic benefit cost recognized for the three and nine month periods ended September 30, 2005 and 2006:

	Three Months Ended					Nine Months Ended
	September 30,					September 30,
	2005			2006		2005			2006
Components of net periodic pension benefit cost:
Service cost	$	814		547		$	2,441		1,642
Interest cost	788			551		2,363			1,653
Expected return on plan assets	(625		)	(562	)	(1,876		)	(1,685	)
Actuarial loss	419			275		1,258			826
Net amortization and deferral	16			20		48			60
Amortization of prior service costs	192			—		576			—
Net periodic cost	$	1,604		831		$	4,810		2,496

The Company previously disclosed in its financial statements for the year ended December 31, 2005, that it expected to contribute approximately $2,500 to its defined benefit pension plans in 2006. As of September 30, 2006, approximately $1,000 and $20 of contributions to the U.K. Plan and U.S. Plan, respectively, have been made. The Company presently anticipates contributing an additional $1,480 of contributions to its defined benefit pension plans, in 2006.

(11) Stockholders’ Equity

At September 30, 2006, the Company 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.

(12) Stock-Based Compensation

On January 1, 2006, the Company adopted, using the modified prospective application, Statement of Financial Accounting Standards No. 123 (revised 2004), “Share-Based Payment ” (“SFAS 123(R)”). SFAS 123(R) requires all share-based payments to employees, including grants of employee stock options and shares purchased under an employee stock purchase plan (if certain parameters are not met), to be recognized in the financial statements based on their fair values and did not change the accounting guidance for share-based payment transactions with parties other than employees provided in SFAS 123, “Accounting for Stock Based Compensation” (“SFAS 123”), as originally issued and Emerging Issues Task Force (“EITF”) 96-18, “Accounting for Equity Instruments That Are Issued to Other Than Employees for Acquiring, or in Conjunction with Selling, Goods or Services.” SFAS 123(R) did not address the accounting for employee share ownership plans, which are subject to Statement of Position (“SOP”) 93-6, “Employers’ Accounting for Employee Stock Ownership Plans.” Under the modified prospective method the Company’s prior interim periods and prior fiscal year financial statements will not reflect any restated amounts for the adoption of SFAS 123(R).

Upon its adoption of SFAS 123(R), the Company began recording compensation cost related to the continued vesting of all stock options that remained unvested as of January 1, 2006, as well as for all stock options granted, modified or cancelled after the Company’s adoption date. The compensation cost to be recorded is based on the fair value at the grant date. The adoption of SFAS 123(R) did not have an effect on the Company’s recognition of compensation expense relating to the vesting of restricted stock grants.

Prior to the adoption of SFAS 123(R), cash flows resulting from the tax benefit related to equity-based compensation was presented in the Company’s operating cash flows, along with other tax cash flows, in accordance with the provisions of EITF 00-15, “Classification in the Statement of Cash Flows of the Income Tax Benefit Received by a Company upon Exercise of a Nonqualified Employee Stock Option,” (“EITF 00-15”). SFAS 123(R) superseded EITF 00-15, amended SFAS 95, “Statement of Cash Flows,” and requires tax benefits relating to excess equity-based compensation deductions to be prospectively presented in the Company’s statement of cash flows as financing cash inflows.

The effect of adopting SFAS 123(R) on the Company’s income from operations, income before income taxes, net income, net cash provided by operating activities, net cash provided by financing activities, and basic and diluted earnings per share for the three and nine month periods ended September 30, 2006, is as follows (in thousands, except per share data):

	Three Months Ended September 30, 2006			Nine Months Ended September 30, 2006
Income from operations, as reported	$	25,619		$	105,495
Effect of adopting SFAS 123(R) on income from operations	2,635			9,796
Income from operations	$	28,254		$	115,291

Income before income taxes, as reported	$	15,177		$	82,338
Effect of adopting SFAS 123(R) on income before income taxes	2,635			9,796
Income before income taxes	$	17,812		$	92,134

Net income, as reported	$	11,527		$	58,874
Effect of adopting SFAS 123(R) on net income	1,710			6,358
Net income	$	13,237		$	65,232

Net cash provided by operating activities, as reported	$	13,293		$	103,536
Effect of adopting SFAS 123(R) on net cash provided by operating activities	2,115			10,845
Net cash provided by operating activities	$	15,408		$	114,381

Net cash provided by financing activities, as reported	$	25,184		$	317,986
Effect of adopting SFAS 123(R) on net cash provided by financing activities	(405		)	(4,487		)
Net cash provided by financing activities	$	24,779		$	313,499

Net income per share, as reported:
Basic	$	0.13		0.65
Diluted	$	0.12		0.62

Effect of adopting SFAS 123(R) on net income per share:
Basic	$	0.01		0.07
Diluted	$	0.02		0.07

Net income per share:
Basic	$	0.14		0.72
Diluted	$	0.14		0.69

Prior to its adoption of SFAS 123(R), the Company accounted for equity-based compensation under the provisions and related interpretations of Accounting Principles Board (“APB”) No. 25, “Accounting for Stock Issued to Employees” (“APB 25”). Accordingly, the Company was not required to record compensation expense when stock options were granted to its employees as long as the exercise price was not less than the fair market value of the stock at the grant date. Also, the Company was not required to record compensation expense when the Company issued common stock under its Employee Stock Purchase Plan as long as the purchase price was not less than 85% of the fair market value of the Company’s common stock on the grant date. In October 1995, FASB issued SFAS 123, which allowed the Company to continue to follow the guidelines of APB 25, but required pro-forma disclosures of net income and earnings per share as if the Company had adopted the provisions of SFAS 123. In December 2002, the FASB issued SFAS 148, “Accounting for Stock-Based Compensation — Transition and Disclosure — an Amendment of FASB 123,” which provided alternative methods of transition for an entity that voluntarily changes to the fair value based method of accounting for equity-based employee compensation. The Company continued to account for equity-based compensation under the provisions of APB 25 using the intrinsic value method.

Had compensation cost for the Company’s equity-based compensation plans been determined based on the fair value at the grant dates for awards under those plans in accordance with the provisions of SFAS 123, the Company’s net income and net income per share for the three and nine month periods ended September 30, 2005, would have been as follows (in thousands, except per share data):

	Three Months Ended September 30, 2005			Nine Months Ended September 30, 2005
Net income, as reported	$	19,185		64,964
Equity-based compensation included in net income, as reported	52			155
Equity-based compensation under SFAS 123	(2,811		)	(6,588	)
Pro forma net income	$	16,426		58,531

Reported net income per share:
Basic	$	0.21		0.73
Diluted	$	0.21		0.70

Pro forma net income per share:
Basic	$	0.19		0.67
Diluted	$	0.18		0.65

The Company grants stock options to employees and directors under the Company’s equity incentive plans at not less than the fair market value of the stock at the date of grant. 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.

The Company grants restricted stock units to employees and directors under the Company’s equity incentive plans. Restricted stock units have only been granted over the last year and have generally been exercisable in five equal installments beginning on the first anniversary of the date of grant with a maximum term of five years.

Stock Options

A summary of the changes in stock options outstanding under the Company’s equity-based compensation plans in 2006 is presented below:

	Number of Options		Weighted Average Remaining Contract Term (Years)	Weighted Average Exercise Price		Aggregate Intrinsic Value
	(In thousands except share price and year)

Options outstanding at December 31, 2005	9,701			$	15.52	$	—
Granted	405			31.76		—
Exercised	(1,241	)		7.27		31,523
Canceled	(772	)		26.79		—
Options outstanding at March 31, 2006	8,093		7.1	$	16.54	$	149,610
Granted	155			37.04		—
Exercised	(148	)		13.42		3,657
Canceled	(30	)		21.16		—
Options outstanding at June 30, 2006	8,070		6.8	$	16.98	$	144,007
Granted	25			33.06		—
Exercised	(123	)		9.10		2,502
Canceled	(36	)		15.87		—
Options outstanding at September 30, 2006	7,936		6.6	$	17.16	$	116,217

Options excercisable at
March 31, 2006	3,001		4.8	$	7.49	$	82,659
June 30, 2006	3,080		4.5	$	7.39	$	84,492
September 30, 2006	3,158		4.5	$	8.46	$	73,690

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:

	Nine Months Ended
	September 30, 2006

Assumptions:
Expected volatility	33	%
Risk-free interest rate	4.4% - 5.2	%
Dividend yield	—	%
Expected life (in years)	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 over the expected term of the option. There are no dividends to be paid.

For the three and nine month periods ended, September 30, 2006, the Company recognized equity-based compensation expense of approximately $2,600 and $9,800, respectively, related to the vesting of stock options and the related tax benefit of approximately $1,000 and $3,200, respectively. At September 30, 2006, the Company had unearned compensation of approximately $37,000 relating to stock option awards that will be amortized over a weighted-average period of approximately two years. At September 30, 2006, the Company had 2,100 options and restricted stock units available to be granted under its equity-based compensation plans.

Restricted Stock Units

A summary of the changes in restricted stock units outstanding under the Company’s equity compensation plans in 2006 is presented below:

	Number of Restricted Stock		Weighted Average Grant Date Fair Value
	(In thousands except share price)

Non-vested shares at December 31, 2005	363		$	27.57
Granted	541		30.84
Canceled	(2	)	28.11
Non-vested shares at March 31, 2006	902		$	29.53
Granted	124		38.08
Canceled	(2	)	27.68
Non-vested shares at June 30, 2006	1,024		$	30.67
Granted	251		29.16
Exercised	(9	)	30.14
Canceled	(2	)	27.68
Non-vested shares at September 30, 2006	1,264		$	30.37

For the three and nine months ended September 30, 2006, the Company recognized equity-based compensation expense of approximately $2,000 and $4,200, respectively, related to the vesting of restricted stock units and the related tax benefit of approximately $700 and $1,700, respectively. At September 30, 2006, the Company had unearned compensation of approximately $31,000 relating to restricted stock units that will be amortized over a weighted-average period of approximately two years.

Employee Stock Purchase Plan

In 2002, the Company adopted, and its stockholders approved, an Employee Stock Purchase Plan (“ESPP”) under which a total of up to 1,000 shares of Class A Common Stock may be purchased by eligible employees under offerings made by the Company 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 2005, the purchase price for offering periods beginning in 2006 will represent 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). The Company issued 18 shares under the ESPP during the quarter ended June 30, 2006.

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

The Company conducts substantially all of its business through its domestic and foreign subsidiaries. The 2004 Notes, the Convertible Debentures and the July 2006 Amended and Restated Credit Agreement are fully, unconditionally and jointly and severally guaranteed by substantially all of the Company’s 100% owned domestic subsidiaries (the “Guarantor Subsidiaries”).

Presented below is condensed consolidating financial information for (i) Scientific Games Corporation (the “Parent Company”), (ii) the 100% owned Guarantor Subsidiaries and (iii) the 100% owned foreign subsidiaries and the non-100% owned domestic and foreign subsidiaries (collectively, the “Non-Guarantor Subsidiaries”) as of December 31, 2005 and September 30, 2006 and for the three and nine months ended September 30, 2005 and 2006. 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, Guarantor Subsidiaries and Non-Guarantor Subsidiaries, assuming the guarantee structure of the July 2006 Amended and Restated Credit Agreement, the Convertible Debentures and the 2004 Notes were in effect at the beginning of the periods presented. Separate financial statements for Guarantor Subsidiaries are not presented based on management’s determination that they would not provide additional information that is material to investors.

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

Scientific Games Management Corporation has been reclassified from the Parent Company to the Guarantor Subsidiaries for the three and nine months ended September 30, 2005.

SCIENTIFIC GAMES CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL CONDENSED CONSOLIDATING BALANCE SHEET
December 31, 2005
(Unaudited, in thousands)

	Parent Company			Guarantor Subsidiaries	Non- Guarantor Subsidiaries		Eliminating Entries		Consolidated
ASSETS
Cash and cash equivalents	$	—		15,575	23,367		—		38,942
Accounts receivable, net	—			98,704	30,585		(39	)	129,250
Inventories	—			29,653	10,920		(425	)	40,148
Other current assets	4,938			22,102	19,173		—		46,213
Property and equipment, net	—			261,027	105,759		(567	)	366,219
Investment in subsidiaries	417,182			187,577	(26,482	)	(578,277	)	—
Goodwill	183			300,015	38,971		—		339,169
Intangible assets	—			74,638	12,651		—		87,289
Other assets	11,446			91,140	28,798		(6,101	)	125,283
Total assets	$	433,749		1,080,431	243,742		(585,409	)	1,172,513

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current installments of long-term debt	$	1,000		—	5,055		—		6,055
Current liabilities	(7,465		)	96,259	46,398		115		135,307
Long-term debt, excluding current installments	573,000			—	1,680		—		574,680
Other non-current liabilities	(13,673		)	61,143	22,162		6		69,638
Intercompany balances	(698,987		)	658,194	40,793		—		—
Stockholders’ equity	579,874			264,835	127,654		(585,530	)	386,833
Total liabilities and stockholders’ equity	$	433,749		1,080,431	243,742		(585,409	)	1,172,513

SCIENTIFIC GAMES CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL CONDENSED CONSOLIDATING BALANCE SHEET
September 30, 2006
(Unaudited, in thousands)

	Parent Company			Guarantor Subsidiaries		Non- Guarantor Subsidiaries	Eliminating Entries		Consolidated
ASSETS
Cash and cash equivalents	$	—		(4,703	)	42,520	—		37,817
Accounts receivable, net	—			108,853		53,150	—		162,003
Inventories	—			52,473		11,829	(425	)	63,877
Other current assets	18,620			24,540		24,668	—		67,828
Property and equipment, net	—			296,943		136,074	(600	)	432,417
Investment in subsidiaries	706,673			194,548		85,745	(986,966	)	—
Goodwill	183			302,133		272,466	—		574,782
Intangible assets	—			97,000		41,359	—		138,359
Other assets	11,149			102,922		43,355	(5,286	)	152,140
Total assets	$	736,625		1,174,709		711,166	(993,277	)	1,629,223

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current installments of long-term debt	$	2,500		—		756	—		3,256
Current liabilities	7,987			73,137		90,274	79		171,477
Long-term debt, excluding current installments	877,125			—		1,390	—		878,515
Other non-current liabilities	(15,464		)	70,929		21,068	6		76,539
Intercompany balances	(738,016		)	689,353		48,663	—		—
Stockholders’ equity	602,493			341,290		549,015	(993,362	)	499,436
Total liabilities and stockholders’ equity	$	736,625		1,174,709		711,166	(993,277	)	1,629,223

SCIENTIFIC GAMES CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL CONDENSED STATEMENT OF INCOME
Three Months Ended September 30, 2005
(Unaudited, in thousands)

	Parent Company			Guarantor Subsidiaries		Non- Guarantor Subsidiaries		Eliminating Entries		Consolidated
Operating revenues	$	—		152,032		48,010		(3,218	)	196,824
Cost of services and cost of sales (exclusive of depreciation and amortization)	—			85,843		34,395		(3,218	)	117,020
Selling, general and administrative expenses	693			22,899		7,917		(20	)	31,489
Depreciation and amortization	27			13,349		3,754		—		17,130
Operating income (loss)	(720		)	29,941		1,944		20		31,185
Interest expense	6,880			119		140		—		7,139
Other (income) expense, net	(1,044		)	(3,673	)	4,246		1		(470	)
Income (loss) before equity in income of subsidiaries, and income taxes	(6,556		)	33,495		(2,442	)	19		24,516
Equity in income of subsidiaries	28,655			—		—		(28,655	)	—
Income tax expense	2,914			1,575		842				5,331
Net income (loss)	$	19,185		31,920		(3,284	)	(28,636	)	19,185

SCIENTIFIC GAMES CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL CONDENSED STATEMENT OF INCOME
Three Months Ended September 30, 2006
(Unaudited, in thousands)

	Parent Company			Guarantor Subsidiaries		Non- Guarantor Subsidiaries	Eliminating Entries		Consolidated
Operating revenues	$	—		143,348		77,347	(3,305	)	217,390
Cost of services and cost of sales (exclusive of depreciation and amortization)	—			78,652		45,631	(3,612	)	120,671
Selling, general and administrative expenses	717			26,398		7,278	283		34,676
Depreciation and amortization	—			25,440		10,984	—		36,424
Operating income (loss)	(717		)	12,858		13,454	24		25,619
Interest expense	11,747			357		50	—		12,154
Other (income) expense, net	(5,778		)	(154	)	4,216	4		(1,712	)
Income (loss) before equity in income of subsidiaries, and income taxes	(6,686		)	12,655		9,188	20		15,177
Equity in income of subsidiaries	20,178			—		—	(20,178	)	—
Income tax expense	1,965			326		1,359			3,650
Net income (loss)	$	11,527		12,329		7,829	(20,158	)	11,527

SCIENTIFIC GAMES CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL CONDENSED STATEMENT OF INCOME
Nine Months Ended September 30, 2005
(Unaudited, in thousands)

	Parent Company			Guarantor Subsidiaries		Non- Guarantor Subsidiaries	Eliminating Entries		Consolidated
Operating revenues	$	—		446,030		142,771	(9,997	)	578,804
Cost of services and cost of sales (exclusive of depreciation and amortization)	—			245,002		100,469	(9,993	)	335,478
Selling, general and administrative expenses	1,946			65,812		17,244	(60	)	84,942
Depreciation and amortization	54			38,130		10,540	—		48,724
Operating income (loss)	(2,000		)	97,086		14,518	56		109,660
Interest expense	19,432			382		547	—		20,361
Other (income) expense, net	(1,044		)	(3,550	)	4,218	682		306
Income (loss) before equity in income of subsidiaries, and income taxes	(20,388		)	100,254		9,753	(626	)	88,993
Equity in income of subsidiaries	101,709			—		—	(101,709	)	—
Income tax expense	16,357			4,454		3,218	—		24,029
Net income (loss)	$	64,964		95,800		6,535	(102,335	)	64,964

SCIENTIFIC GAMES CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL CONDENSED STATEMENT OF INCOME
Nine Months Ended September 30, 2006
(Unaudited, in thousands)

	Parent Company			Guarantor Subsidiaries	Non- Guarantor Subsidiaries	Eliminating Entries		Consolidated
Operating revenues	$	—		452,934	226,801	(14,579	)	665,156
Cost of services and cost of sales (exclusive of depreciation and amortization)	—			242,320	150,572	(14,886	)	378,006
Selling, general and administrative expenses	2,172			80,733	19,304	205		102,414
Depreciation and amortization	—			55,557	23,684	—		79,241
Operating income (loss)	(2,172		)	74,324	33,241	102		105,495
Interest expense	29,248			918	305	—		30,471
Other (income) expense, net	(15,794		)	3,610	4,933	(63	)	(7,314	)
Income (loss) before equity in income of subsidiaries, and income taxes	(15,626		)	69,796	28,003	165		82,338
Equity in income of subsidiaries	92,136			—	—	(92,136	)	—
Income tax expense	17,636			1,324	4,504	—		23,464
Net income (loss)	$	58,874		68,472	23,499	(91,971	)	58,874

SCIENTIFIC GAMES CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL CONDENSED STATEMENT OF CASH FLOWS
Nine Months Ended September 30, 2005
(Unaudited, in thousands)

	Parent Company			Guarantor Subsidiaries		Non- Guarantor Subsidiaries		Eliminating Entries		Consolidated
Net income (loss)	$	64,964		95,800		6,535		(102,335	)	64,964
Depreciation and amortization	583			37,601		10,540		—		48,724
Deferred income taxes	3,392			(1,187	)	597		—		2,802
Equity in income of subsidiaries	(101,709		)	—		—		101,709		—
Changes in operating assets and liabilities, net of effects of acquisitions	15,406			8,948		(1,313	)	(198	)	22,843
Other non-cash adjustments	5,143			4,193		103		—		9,439

Net cash provided by (used in) operating activities	(12,221		)	145,355		16,462		(824	)	148,772

Cash flows from investing activities:
Capital and wagering systems expenditures	70			(51,870	)	(36,643	)	1,626		(86,817	)
Business acquisitions, net of cash acquired	—			(4,094	)	(20,680	)	—		(24,774	)
Other assets and investments	(1,926		)	(15,292	)	(16,756	)	7,894		(26,080	)

Net cash provided by (used in) investing activities	(1,856		)	(71,256	)	(74,079	)	9,520		(137,671	)

Cash flows from financing activities:
Net borrowings (repayments) on long-term debt	(30,395		)	—		1,268		—		(29,127	)
Net proceeds from issuance of common stock	6,803			38		2,875		(2,913	)	6,803
Other, principally intercompany balances	37,962			(94,826	)	87,520		(30,656	)	—

Net cash provided by (used in) financing activities	14,370			(94,788	)	91,663		(33,569	)	(22,324	)

Effect of exchange rate changes on cash	(293		)	398		(29,444	)	24,873		(4,466	)

Increase (decrease) in cash and cash equivalents	—			(20,291	)	4,602		—		(15,689	)
Cash and cash equivalents, beginning of period	—			41,515		24,604		1		66,120
Cash and cash equivalents, end of period	$	—		21,224		29,206		1		50,431

SCIENTIFIC GAMES CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL CONDENSED STATEMENT OF CASH FLOWS
Nine Months Ended September 30, 2006
(Unaudited, in thousands)

	Parent Company			Guarantor Subsidiaries		Non- Guarantor Subsidiaries		Eliminating Entries		Consolidated
Net income (loss)	$	58,874		68,472		23,499		(91,971	)	58,874
Depreciation and amortization	—			55,557		23,684		—		79,241
Deferred income taxes	(3,224		)	(131	)	(4,068	)	—		(7,423	)
Equity in income of subsidiaries	(92,136		)	—		—		92,136		—
Changes in operating assets and liabilities, net of effects of acquisitions	1,770			(54,701	)	14,608		(171	)	(38,494	)
Other non-cash adjustments	3,055			7,783		500		—		11,338

Net cash provided by (used in) operating activities	(31,661		)	76,980		58,223		(6	)	103,536

Cash flows from investing activities:
Capital and wagering systems expenditures	—			(70,598	)	(38,539	)	—		(109,137	)
Business acquisitions, net of cash acquired	—			(14,710	)	(248,949	)	—		(263,659	)
Other assets and investments	(296,229		)	(37,517	)	(130,954	)	413,682		(51,018	)

Net cash provided by (used in) investing activities	(296,229		)	(122,825	)	(418,442	)	413,682		(423,814	)

Cash flows from financing activities:
Net borrowings (repayments) on long-term debt	305,625			—		(4,733	)	—		300,892
Net proceeds from issuance of common stock	12,609			2,710		411,067		(413,779	)	12,607
Excess tax benefits from equity-based compensation plans	4,487			—		—		—		4,487
Other, principally intercompany balances	5,262			23,188		(53,866	)	25,416		—

Net cash provided by (used in) financing activities	327,983			25,898		352,468		(388,363	)	317,986

Effect of exchange rate changes on cash	(93		)	(331	)	26,904		(25,313	)	1,167

Increase (decrease) in cash and cash equivalents	—			(20,278	)	19,153		—		(1,125	)
Cash and cash equivalents, beginning of period				15,575		23,367		—		38,942
Cash and cash equivalents, end of period	$	—		(4,703	)	42,520		—		37,817

(14) Subsequent Event

On November 2, 2006, the Company’s Board of Directors approved a stock repurchase program under which the Company is authorized to repurchase, from time to time in the open market through December 31, 2007, shares of its outstanding common stock in an aggregate amount up to $200 million. Purchases are expected to be funded by cash flows from operations, borrowings, or a combination thereof. The timing and amount of purchases will be determined by the Company's management based on its evaluation of market conditions, share price and other factors. The stock repurchase program may be suspended or discontinued at any time.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion addresses the financial condition of Scientific Games Corporation (together with its consolidated subsidiaries, “we” or the “Company”), as of September 30, 2006 and the results of our operations for the three and nine months ended September 30, 2006, compared to the corresponding periods in the prior year. This discussion should be read in conjunction with Management’s Discussion and Analysis of Financial Condition and Results of Operations for the fiscal year ended December 31, 2005, included in our 2005 Annual Report on Form 10-K.

As previously reported in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2006, we determined that our previously reported segments consisting of Lottery, Pari-mutuel, Venue Management and Telecommunications Products no longer reflected the way we manage the business. Beginning in the first quarter of 2006, we began reporting our business in three segments – Printed Products, Lottery Systems and Diversified Gaming. The Printed Products segment includes the instant lottery ticket business and the pre-paid phone card business (formerly the Telecommunications Product Group). The Lottery Systems segment includes our online lottery business. The Diversified Gaming segment includes the pari-mutuel wagering systems business (formerly the Pari-mutuel Group) and the off-track wagering business (formerly the Venue Management Group). All prior period amounts have been restated to conform to the current segment reporting format. Beginning in the second quarter of 2006, Global Draw was included in the Diversified Gaming segment.

The first and fourth quarters of the calendar year traditionally comprise the weakest season for our Diversified Gaming segment. As a result of inclement weather during the winter months, a number of racetracks do not operate and those that do operate often experience missed racing days. This adversely affects the amounts wagered and our corresponding service revenues. Additionally, the fourth quarter is the weakest quarter for Global Draw due to reduced wagering during the holiday season. Wagering and lottery equipment sales and software license revenues usually reflect a limited number of large transactions, which do not recur on an annual basis. Consequently, revenues and operating results of our Lottery Systems Group can vary substantially from period to period as a result of the timing of revenue recognition for major equipment sales and software licensing transactions. In addition, Printed Products sales may vary depending on the season and timing of contract awards, changes in customer budgets, inventory ticket levels, lottery retail sales and general economic conditions.

Operating results may also vary significantly from period to period depending on the addition or disposition of business units in each period.

Printed Products Group

We provide instant tickets and related services. Instant ticket and related services includes ticket design and manufacturing as well as value-added services, including game design, sales and marketing support, inventory management and warehousing and fulfillment services. Additionally, this division provides lotteries with over 80 licensed brand products, including Major League Baseball®, NASCAR®, Mandalay Bay®, National Basketball Association®, Harley-Davidson®, Wheel-of-Fortune®, Hasbro®, Corvette®, World Poker Tour® and The World Series of Poker®. This division also includes promotional instant tickets and pull-tab tickets that we sell to both lottery and non-lottery customers.

We are also a worldwide manufacturer of prepaid phone cards, which entitle cellular phone users to a defined value of airtime. Prepaid phone cards offer consumers a cost-effective way to purchase cellular airtime, without requiring phone companies to extend credit or consumers to commit to contracts.

Prepaid phone cards utilize the secure process that we employ in the production of instant lottery tickets. This helps to ensure integrity and reliability of the product, thus providing consumers in more than 50 countries with access to prepaid cellular phone service.

Lottery Systems Group

Our lottery systems business includes the supply of transaction processing software for the accounting and validation of instant ticket and online lottery games, point-of-sale terminal hardware sales, central site computers and communication hardware sales, and ongoing support and maintenance services for these products. This business also includes software and hardware and support services for sports betting and operation of credit card processing systems.

Diversified Gaming Group

We are a leading supplier of fixed odds betting terminals and systems, and interactive sports betting terminals and systems. We supply our products and services on the basis of revenue participation to customers who are licensed bookmaking operators in the United Kingdom. We also operate terminals and betting systems in Austria and the United Kingdom.

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

In our North American pari-mutuel business, we enter into service contracts, typically with an initial term of five years, pursuant to which we are paid a percentage of all wagers processed by our wagering systems, and we receive additional fees for our ancillary services, on either a per event or a monthly subscription basis. In most international markets, we sell our pari-mutuel wagering systems and terminals to pari-mutuel operators.

We have the right to operate in perpetuity substantially all off-track pari-mutuel wagering in Connecticut, subject to our compliance with certain licensing requirements. Our Connecticut operations consist of 11 OTB facilities, including video simulcasting at two teletheaters and four other branches, and telephone account wagering for customers in 25 states.

We have the right to operate all on-track and off-track pari-mutuel wagering in the Netherlands under a license granted by the Dutch Ministry of Agriculture which extends through June 2008. We currently conduct operations in 28 OTB locations and four racetracks throughout the Netherlands.

We also operate one OTB location in Maine and provide facilities management services to four non-company owned OTBs.

Results of Operations

Three Months Ended September 30, 2006 Compared to Three Months Ended September 30, 2005

The following analysis compares our results of operations for the quarter ended September 30, 2006 to the results for the quarter ended September 30, 2005.

Overview

Revenue Analysis

For the quarter ended September 30, 2006, total revenue was $217.4 million compared to $196.8 million, for the quarter ended September 30, 2005, an increase of $20.6 million or 10%. Our service revenue for the quarter ended September 30, 2006 was $198.9 million compared to $155.9 million for the quarter ended September 30, 2005, an increase of $43.0 million, or 28%. The increase was attributable to the acquisitions of EssNet and Global Draw, strong sales of instant lottery tickets and the addition of new Lottery Systems and instant ticket contracts. Our sales revenue for the three months ended September 30, 2006 was $18.5 million compared to $40.9 million in the prior year quarter, a decrease of $22.4 million, or 55%. This decrease was primarily due to the absence of a one-time sale of Instant Ticket Vending Machines to Pennsylvania that accounted for $16.1 million of revenue in the quarter ended September 30, 2005 , a decline in phone card sales, and a decrease of $1.7 million for German instant ticket sales now being classified as service revenue because of the expansion of the services being offered in the German markets.

Expense Analysis

Cost of services of $107.3 million for the quarter ended September 30, 2006 were $20.3 million or 23% higher than for the quarter ended September 30, 2005. This increase is primarily related to the acquisitions of EssNet and Global Draw and the addition of new Lottery Systems and instant ticket contracts. Cost of sales of $13.4 million for the quarter ended September 30, 2006 were $16.7 million or 55% lower than the quarter ended September 30, 2005 due to lower sales revenues in each of our business segments.

Selling, general and administrative expenses of $34.7 million for the quarter ended September 30, 2006 were $3.2 million or 10% higher than for the quarter ended September 30, 2005. This increase was primarily related to a $4.6 million non-cash charge for stock

based compensation expense associated with the adoption of SFAS 123(R) and restricted stock awards , partially offset by cost reduction initiatives begun in the second half of 2005.

Depreciation and amortization expense of $36.4 million for the quarter ended September 30, 2006 increased $19.3 million from the same period in 2005, primarily due to the acquisitions of Global Draw and EssNet, the addition of new Lottery Systems contracts and a $9.7 million charge related to the impairment of certain hardware and software assets in the pari-mutuel business as a result of the roll-out of our new terminal, the two new Quantum Data Centers and the write-off of hardware and the accrual of losses on certain under-performing pari-mutuel contracts.

Interest expense of $12.2 million for the quarter ended September 30, 2006 increased $5.0 million or 70% from the same period in 2005, primarily attributable to higher market rates on our floating rate debt and increased borrowings to fund our purchases of EssNet and Global Draw.

Equity in net income of joint ventures primarily reflects our share of the net income of the Italian joint venture in connection with the operation of the Italian Gratta e Vinci instant lottery. For the quarter ended September 30, 2006, our share of the Italian consortium’s net income totaled $1.7 million compared to a loss of $0.1 million in the quarter ended September 30, 2005. The income for the quarter ended September 30, 2006 reflects the continued growth of instant ticket sales in Italy.

Income tax expense was $3.7 million for the quarter ended September 30, 2006 and $5.3 million for the quarter ended September 30, 2005. The effective income tax rate for the quarter ended September 30, 2006 and 2005 was 24.0% and 21.7% respectively. The effective income tax rate for the quarter ended September 30, 2006 does not include any benefit from the Research and Development credit that was available in earlier years because the credit expired at December 31, 2005 and it has not been reinstated by the U.S. Congress.

Segment Overview

Printed Products

For the quarter ended September 30, 2006, total revenue for Printed Products was $101.8 million compared to $96.0 million in the quarter ended September 30, 2005, an increase of $5.8 million, or 6%. For the quarter ended September 30, 2006, service revenue for Printed Products was $91.1 million compared to $79.1 million in the corresponding period in the prior year, an increase of $12.0 million, or 15%. The increase was primarily attributable to strong sales of instant lottery tickets and the addition of new instant ticket contracts.

Printed Products sales revenue for the quarter ended September 30, 2006, was $10.6 million compared to $16.9 million for the quarter ended September 30, 2005, a decrease of $6.2 million, or 37%. The decrease was primarily the result of $1.7 million of German instant ticket sales now being classified as service revenue because of the expansion of the services being offered in the German markets and a $4.4 million decline in phone card sales reflecting a continuing market driven shift to lower priced products.

Cost of services of $46.9 million for the quarter ended September 30, 2006 were $6.2 million or 15% higher than from the same period in 2005. This increase is due to higher operating costs as a result of the addition of new customers and higher revenue in the quarter. Cost of sales of $8.7 million for the quarter ended September 30, 2006 were $3.5 million or 29% lower than the quarter ended September 30, 2005 due to decreased sales revenues as discussed above.

Selling, general and administrative expenses of $10.9 million for the quarter ended September 30, 2006 were $0.2 million or 2% higher than in the quarter ended September 30, 2005. This increase is the result of stock compensation expense of $0.2 million in the quarter ended September 30, 2006.

Depreciation and amortization expense of $6.6 million for the quarter ended September 30, 2006 increased $2.1 million or 46%, as compared to the quarter ended September 30, 2005, primarily due to the depreciation of the new printing press in the U.K. and amortization of acquired licensed properties.

Lottery Systems

For the quarter ended September 30, 2006, total revenue for Lottery Systems was $58.1 million compared to $64.1 million in the quarter ended September 30, 2005, a decrease of $6.0 million, or 9%. Lottery Systems service revenue for the quarter ended September 30, 2006 was $50.9 million compared to $42.3 million for the quarter ended September 30, 2005, an increase of $8.6

million, or 20%. The increase was primarily due to the acquisition of EssNet ($3.2 million) and the addition of new Lottery Systems contracts, partially offset by lower performing lotteries including Colorado, Catalunya and Oklahoma.

Lottery Systems sales revenue for the quarter ended September 30, 2006, was $7.2 million compared to $21.8 million for the quarter ended September 30, 2005, a decrease of $14.6 million, or 67%. The decrease was due to the absence of a one-time sale of Instant Ticket Vending Machines to Pennsylvania that accounted for $16.1 million of revenue in the quarter ended September 30, 2005, partially offset by increased sales of lottery systems and terminals in Europe. Lottery terminal sales usually reflect a limited number of large transactions, which do not recur on a quarterly or annual basis.

Cost of services of $27.9 million for the quarter ended September 30, 2006 was $6.2 million or 29% higher than in the quarter ended September 30, 2005. This increase is due to additional operating costs as a result of the acquisition of EssNet, the addition of new customers and higher service revenue in the quarter. Cost of sales of $3.8 million for the quarter ended September 30, 2006 were $11.9 million or 76% lower than during the quarter ended September 30, 2005 primarily due to a one-time sale of terminals to Pennsylvania in the quarter ended September 30, 2005, partially offset by lottery systems sales in Europe.

Selling, general and administrative expenses of $7.3 million for the quarter ended September 30, 2006 were $0.1 million or 2% higher than in the quarter ended September 30, 2005.

Depreciation and amortization expense of $13.3 million for the quarter ended September 30, 2006 increased $4.4 million or 50%, as compared to the quarter ended September 30, 2005, primarily due to the amortization of deferred installation costs of new Lottery Systems contracts and the acquisition of EssNet.

Diversified Gaming

For the quarter ended September 30, 2006, total revenue for Diversified Gaming was $57.6 million compared to $36.8 million in the quarter ended September 30, 2005, an increase of $20.8 million, or 57%. Diversified Gaming service revenue for the third quarter of 2006 was $56.9 million compared to $34.5 million from the quarter ended September 30, 2005, an increase of $22.4 million, or 65%. The increase in service revenues primarily reflects the acquisitions of Global Draw ($21.2 million) and Shoreline ($2.3 million), partially offset by lower dollars wagered, or Handle, in the domestic and foreign pari-mutuel businesses. We believe the trend in reduced pari-mutuel wagering will continue in the future.

The Diversified Gaming sales revenue for the quarter ended September 30, 2006 was $0.6 million compared to $2.3 million in the prior fiscal quarter a decrease of $1.6 million. The decrease was due to reduced system sales in Europe during the third quarter of 2006. Pari-mutuel system sales usually reflect a limited number of large transactions, which do not recur on a quarterly or annual basis.

Cost of services of $32.4 million for the quarter ended September 30, 2006 were $7.8 million or 32% higher than the quarter ended September 30, 2005. This increase is primarily due to the acquisitions of Global Draw and Shoreline and $0.5 million of loss accruals on underperforming pari-mutuel contracts. Cost of sales of $0.9 million for the quarter ended September 30, 2006 were $1.2 million lower than the quarter ended September 30, 2005 due to decreased sales revenues.

Selling, general and administrative expenses of $5.2 million for the quarter ended September 30, 2006 were $1.3 million or 20% lower than in the quarter ended September 30, 2005. This decrease is primarily due to cost savings initiatives initiated in the second half of 2005.

Depreciation and amortization expense, including amortization of service contract software, of $16.2 million for the quarter ended September 30, 2006 increased $12.8 million as compared to the quarter ended September 30, 2005, primarily due to the increased depreciation resulting from the acquisition of Global Draw and a $9.7 million charge in the quarter related to the impairment of certain hardware and software assets in the pari-mutuel business as a result of the roll-out of our new terminal, the two new Quantum Data Centers and the write-off of hardware and accrual of losses on certain under-performing pari-mutuel contracts.

Nine months Ended September 30, 2006 Compared to Nine Months Ended September 30, 2005

The following analysis compares our results of operations for the nine months ended September 30, 2006 to the results for the nine months ended September 30, 2005.

Overview

Revenue Analysis

For the nine months ended September 30, 2006, total revenue was $665.2 million compared to $578.8 million, an increase of $86.4 million or 15%, as compared to the nine months ended September 30, 2005. Our service revenue for the nine months ended September 30, 2006 was $590.1 million compared to $472.5 million for the nine months ended September 30, 2005, an increase of $117.6 million, or 25%. The increase was primarily attributable to the acquisitions of EssNet ($9.3 million) and Global Draw ($42.0 million), strong sales of instant lottery tickets and the addition of new Lottery Systems and instant ticket contracts during the first nine months of 2006. Our sales revenue for the nine months ended September 30, 2006 was $75.0 million compared to $106.3 million in the nine months ended September 30, 2005, a decrease of $31.2 million, or 29%. This decrease was primarily due to the absence of a one-time sale of Instant Ticket Vending Machines to Pennsylvania that accounted for $16.1 million of revenue in the quarter ended September 30, 2005, a decline in phone card sales, and a decrease of $5.1 million for German instant ticket sales now being classified as service revenue because of the expansion of the services being offered in the German markets.

Expense Analysis

Cost of services of $320.8 million for the nine months ended September 30, 2006 were $61.2 million or 24% higher than for the nine months ended September 30, 2005. This increase is primarily related to the acquisitions of EssNet and Global Draw, and the addition of new Lottery Systems and instant ticket contracts. Cost of sales of $57.2 million for the nine months ended September 30, 2006 were $18.6 million or 25% lower than for the nine months ended September 30, 2005 due to lower sales revenues in Lottery Systems and Diversified Gaming.

Selling, general and administrative expenses of $102.4 million for the nine months ended September 30, 2006 were $17.5 million or 21% higher than for the nine months ended September 30, 2005. This increase was primarily related to a $14.0 million non-cash charge for stock based compensation expense in 2006, $2.5 million in higher costs for international business development activities and professional fees and $1.1 million related to a reduction in force in the first quarter of 2006.

Depreciation and amortization expense of $79.2 million for the nine months ended September 30, 2006 increased $30.5 million or 63% from the nine months ended September 30, 2005, primarily due to the addition of new Lottery Systems and instant ticket contracts, the acquisitions of EssNet and Global Draw and a $9.7 million charge in the quarter related to the impairment of certain hardware and software assets in the pari-mutuel business as a result of the roll-out of our new terminal, the two new Quantum Data Centers and the write-off of hardware and accrual of losses on certain under-performing pari-mutuel contracts.

Interest expense of $30.5 million for the nine months ended September 30, 2006 increased $10.1 million or 50% from the nine months ended September 30, 2005, primarily attributable to higher market rates on our floating rate debt and increased borrowings to fund our purchases of EssNet and Global Draw.

Equity in net income of joint ventures primarily reflects our share of the net income of the Italian joint venture in connection with the operation of the Italian Gratta e Vinci instant lottery. For the nine months ended September 30, 2006, our share of the Italian consortium’s net income totaled $6.5 million compared to a loss of $1.6 million in the nine months ended September 30, 2005. The income in the first nine months of 2006 reflects the continued growth of instant ticket sales in Italy.

Income tax expense was $23.5 million for the nine months ended September 30, 2006 and $24.0 million for the nine months ended September 30, 2005. The effective income tax rate for the nine months ended September 30, 2006 and 2005 was 28.5% and 27.0% respectively. The 2006 tax rate does not include any benefit from the Research and Development credit that was available in earlier years because the credit expired at December 31, 2005 and it has not been reinstated by the U.S. Congress.

Segment Overview

Printed Products

For the nine months ended September 30, 2006, total revenue for Printed Products was $321.9 million compared to $299.6 million for the nine months ended September 30, 2005, an increase of $22.3 million, or 7%. For the nine months ended September 30, 2006, service revenue for Printed Products was $285.3 million compared to $246.1 million in the nine months ended September 30,

2005, an increase of $39.2 million, or 16%. The increase was attributable to new contracts, strong sales of instant lottery tickets and the launch of the Major League Baseball licensed games in 2006.

Printed Products sales revenue for the nine months ended September 30, 2006 was $36.6 million compared to $53.5 million for the nine months ended September 30, 2005, a decrease of $17.0 million, or 32%. The decrease was primarily the result of $5.1 million of German instant ticket sales now being classified as service revenue because of the expansion of the services being offered in the German markets, a decrease in the sales of non-lottery printed products in Germany, and a $10.2 million decline in phone card sales reflecting a continuing market driven shift to lower priced products.

Cost of services of $145.9 million for the nine months ended September 30, 2006 were $19.6 million or 16% higher than in the nine months ended September 30, 2005. This increase is due to higher operating costs as a result of the addition of new customers and higher revenue in the first nine months of 2006. Cost of sales of $28.6 million for the nine months ended September 30, 2006 were $10.4 million or 27% lower than in the first nine months of 2005 due to a decrease in sales revenues as discussed above.

Selling, general and administrative expenses of $33.1 million for the nine months ended September 30, 2006 were $2.9 million or 10% higher than in the nine months ended September 30, 2005. This increase is primarily the result of $1.1 million of start-up costs for the German cooperative services business and $1.5 million in higher costs for international business development activities and professional fees.

Depreciation and amortization expense of $18.0 million for the nine months ended September 30, 2006 increased $4.6 million or 34%, as compared to the nine months ended September 30, 2005, primarily due to depreciation of the new printing press in the U.K., and amortization of acquired licensed properties.

Lottery Systems

For the nine months ended September 30, 2006, total revenue for Lottery Systems was $194.6 million compared to $171.7 million in the nine months ended September 30, 2005, an increase of $22.9 million, or 13%. Lottery Systems service revenue for the nine months ended September 30, 2006 was $160.3 million compared to $125.1 million for the nine months ended September 30, 2005, an increase of $35.2 million, or 28%. The increase was primarily due to the acquisition of EssNet, a strong demand for online lottery tickets in the first quarter of 2006 and the addition of new Lottery Systems contracts, partially offset by the loss of approximately $2.5 million of revenues on the Florida online lottery contract, which ended in January 2005 and lower performing lotteries including Colorado, Catalunya and Oklahoma.

Lottery Systems sales revenue for the nine months ended September 30, 2006, was $34.3 million compared to $46.6 million for the nine months ended September 30, 2005, an decrease of $12.3 million, or 26%. The decrease was primarily due to the absence of a one-time sale of Instant Ticket Vending Machines to Pennsylvania that accounted for $16.1 million of revenue in the quarter ended September 30, 2005, partially offset by increased lottery systems sales in Europe. Lottery terminal sales usually reflect a limited number of large transactions, which do not recur on a quarterly or annual basis.

Cost of services of $89.3 million for the nine months ended September 30, 2006 was $26.2 million or 41% higher than in the corresponding period in the prior year. This increase is due to higher operating costs of $9.8 million as a result of the acquisition of EssNet and the $13.5 million related to the addition of new customers and higher revenue in the quarter, partially offset by reduced operating costs on the Florida online lottery contract. Cost of sales of $24.3 million for the nine months ended September 30, 2006 were $7.6 million or 24% lower than in the nine months ended September 30, 2005 due to a 26% decrease in sales revenues in the first nine months of 2006 and a $9.1 million sale of third party terminals to a customer in Europe at a lower margin than would have otherwise been earned if we had manufactured the terminals ourselves.

Selling, general and administrative expenses of $22.8 million for the nine months ended September 30, 2006 were $2.8 million or 14% higher than in the nine months ended September 30, 2005. This increase is primarily the result of the acquisition of EssNet and $1.1 million in severance costs in the first quarter 2006 in conjunction with a reduction in force, offset by cost cutting measures initiated in the second half of 2005.

Depreciation and amortization expense of $34.8 million for the nine months ended September 30, 2006 increased $11.0 million or 46%, as compared to the nine months ended September 30, 2005, primarily due to the acquisition of EssNet and the amortization of deferred installation costs of new Lottery Systems contracts.

Diversified Gaming

For the nine months ended September 30, 2006, total revenue for Diversified Gaming was $148.7 million compared to $107.6 million for the nine months ended September 30, 2005, an increase of $41.1 million, or 38%. Diversified Gaming service revenue for the nine months ended September 30, 2006 was $144.5 million compared to $101.4 million from the nine months ended September 30, 2005, an increase of $43.1 million, or 43%. The increase in service revenues primarily reflects the acquisitions of Global Draw and Shoreline, partially offset by lower Handle in the domestic and foreign pari-mutuel businesses. We believe the trend in reduced pari-mutuel wagering will continue in the future.

The Diversified Gaming sales revenue for the nine months ended September 30, 2006 was $4.2 million compared to $6.2 million in the nine months ended September 30, 2005, a decrease of $2.0 million. The decrease was due to reduced system sales in Europe in the nine months ended September 30, 2006. Pari-mutuel system sales usually reflect a limited number of large transactions, which do not recur on a quarterly or annual basis.

Cost of services of $85.6 million for the nine months ended September 30, 2006 were $15.4 million or 22% higher than in the nine months ended September 30, 2005. This increase is due to the acquisitions of Global Draw and Shoreline and $0.5 million of loss accruals on underperforming pari-mutuel contracts. Costs of sales of $4.3 million for the nine months ended September 30, 2006 were $0.6 million lower than in the nine months ended September 30, 2005 due to decreased sales revenue in Europe during the first nine months of 2006.

Selling, general and administrative expenses of $12.1 million for the nine months ended September 30, 2006 were $1.4 million or 10% lower than the nine months ended September 30, 2005 due to cost savings initiatives initiated in the second half of 2005.

Depreciation and amortization expense, including amortization of service contract software, of $25.7 million for the nine months ended September 30, 2006 increased $15.0 million as compared to the nine months ended September 30, 2005, primarily due to the increased depreciation resulting from the acquisition of Global Draw and a $9.7 million charge in the quarter related to the impairment of certain hardware and software assets in the pari-mutuel business as a result of the roll-out of our new terminal, the two new Quantum Data Centers and the write-off of hardware and accual of losses on certain under-performing pari-mutuel contracts.

Critical Accounting Policies

There have been no material changes to our critical accounting policies from those discussed under the caption “Critical Accounting Policies” in “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2005.

Liquidity, Capital Resources and Working Capital

On July 7, 2006, we amended (the “Amendment”) our existing Credit Agreement dated as of December 23, 2004, as amended and restated as of March 31, 2006 (the “March 2006 Amended and Restated Credit Agreement”), to provide for a new $150 million senior secured term loan (the “Term Loan D”) and to make certain other changes to the March 2006 Amended and Restated Credit Agreement (the March 2006 Amended and Restated Credit Agreement and the Amendment are collectively referred to as the “July 2006 Amended and Restated Credit Agreement”). The proceeds from the Term Loan D were used to repay, in full, the remaining $98.5 million of existing Term Loan B and to pay down approximately $51 million of borrowings under our existing revolving credit facility The interest rate with respect to the Term Loan D will vary, depending upon our consolidated leverage ratio, from 75 basis points to 150 basis points above LIBOR for eurocurrency loans and from zero basis points to 50 basis points above the higher of (i) the prime rate or (ii) the Federal Funds Effective Rate plus 0.50%, for base rate loans. We paid approximately $0.5 million in banking, legal and other fees in connection with the Amendment. The July 2006 Amended and Restated Credit Agreement will terminate on December 23, 2009.

The July 2006 Amended and Restated Credit Agreement 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, sell, transfer, lease or otherwise dispose of all or substantially all assets, or create certain liens and other encumbrances on assets. Additionally, the Amended and Restated Credit Agreement contains the following financial covenants that are computed quarterly on a rolling four-quarter basis as applicable:

· A maximum Consolidated Senior Debt Ratio of 2.50 until December 2009. Consolidated Senior Debt Ratio means the ratio of (x) the aggregate stated balance sheet amount of the Company’s indebtedness, less the amount of the Company’s 6.25% senior subordinated notes due 2012 and the Convertible Debentures determined on a consolidated basis in accordance with GAAP as of the last day of the fiscal quarter for which such determination is being made to (y) Consolidated EBITDA for the four consecutive fiscal quarters ended on the last day of the fiscal quarter for which such determination is being made.

We were in compliance with our covenants as of March 31, 2006, June 30, 2006 and September 30, 2006.

On September 30, 2006, we had approximately $88,208 available for borrowing under the Company’s revolving credit facility under the July 2006 Amended and Restated Credit Agreement. There were $155,500 of borrowings and $56,292 in letters of credit outstanding under the revolving credit facility at September 30, 2006. Our ability to borrow under the Amended and Restated Credit Agreement will depend on our remaining in compliance with the limitations imposed by our lenders, including the maintenance of the specified financial covenants.

In August 2005, we paid cash of $8.1 million, including a $0.5 million redemption premium, to redeem all of the remaining 12 1 ¤ 2 % Senior Subordinated Notes due 2010.

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

Periodically, we bid on new online lottery systems service and pari-mutuel and fixed odds wagering contracts. Once awarded, these contracts generally require significant up-front capital expenditures for terminal assembly, customization of software, software and equipment installation and telecommunications configuration. Historically, we have funded these up-front costs through cash flows generated from operations, available cash on hand and borrowings under our credit facilities. Our ability to continue to procure new contracts will depend on, among other things, our then present liquidity levels and/or our ability to borrow at commercially acceptable rates to finance the initial up front costs. The actual level of capital expenditures will ultimately largely depend on the extent to which we are successful in winning new contracts. Furthermore, our pari-mutuel wagering network consists of approximately 26,000 wagering terminals. Periodically, we elect to upgrade the technological capabilities of older terminals and replace terminals that have exhausted their useful lives. In the next year, we expect to replace approximately 2,000 and 9,000, respectively, existing pari-mutuel and fixed odds betting terminals for a total cost of approximately $60 million. 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.

At September 30, 2006, our available cash and borrowing capacity totaled $126.0 million compared to $258.6 million at December 31, 2005. The amount of our available cash fluctuates principally based on the timing of collections from our customers, cash expenditures associated with new and existing online lottery systems service and pari-mutuel and fixed odds wagering contracts, borrowings or repayments under our credit facilities and changes in our working capital position.

The $1.1 million decrease in our available cash from the December 31, 2005 level principally reflects the net cash provided by operating activities for the nine months ended September 30, 2006 of $103.5 million along with $300.9 million of additional net borrowings, offset by wagering and other capital expenditures and other investing activities totaling $160.2 million and acquisition related payments of $263.7 million and the effects of exchange rates. The $103.5 million of net cash provided by operating activities is derived from approximately $142.0 million of net cash provided by operations offset by approximately $38.5 million from changes in working capital. The working capital changes occurred principally from an increase in accounts receivable, inventory and other current assets plus a decrease in accounts payable, partially offset by an increase in accrued interest and other current liabilities. Capital expenditures of $12.4 million in the nine months ended September 30, 2006 are less than similar expenditures totaling $14.4 million in the corresponding period in 2005. Wagering system expenditures totaled $96.8 million in the nine months ended September 30, 2006, compared to $72.4 million in 2005. This increase is primarily due to the new lottery contracts in Mexico, Oklahoma and Maryland. Other intangible assets and software increased primarily due to licensing arrangement with Major League Baseball entered into during the first quarter of fiscal year 2006. Cash flow from financing activities principally reflects the borrowings under the July 2006 Amended and Restated Credit Agreement.

We believe that our cash flow from operations, available cash and available borrowing capacity under the July 2006 Amended and Restated Credit Agreement will be sufficient to meet our liquidity needs, including anticipated capital expenditures, for the foreseeable future; however, there can be no assurance that this will be the case. While we are not aware of any particular trends, our contracts periodically renew 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 any difficulty obtaining such bonds, there can be no assurance that we will continue to be able to obtain performance bonds on commercially reasonable terms or at all. While we are not aware of any reason to do so, if we need to refinance all or part of our indebtedness, 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.

Further, the terms of the indenture governing the Convertible Debentures give holders the right to convert the Convertible Debentures when the market price of our Class A Common Stock exceeds a defined target market price. The terms of such indenture require us to pay cash for the face amount of the Convertible Debentures which have been presented for conversion, with the value of the difference between the stated conversion price and the prevailing market price payable by our issuance of additional shares of our Class A Common Stock. We cannot offer any assurance that we will have sufficient available cash to pay for the Convertible Debentures presented to us for conversion nor can we offer any assurance that we will be able to refinance all or a portion of the converted Convertible Debentures at that time.

Impact of Recently Issued Accounting Standards

In July 2006, the FASB issued FASB Interpretation No. 48 (FIN 48) “Accounting for Uncertainty in Income Taxes”, which prescribes a recognition threshold and measurement process for recording in the financial statements uncertain tax positions taken or expected to be taken in a tax return. Additionally, FIN 48 provides guidance on the derecognition, classification, accounting in interim periods and disclosure requirements for uncertain tax positions. This standard is required to be adopted by us on January 1, 2007. We are in the process of determining the effect, if any, the adoption of FIN 48 will have on our financial statements.

In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements”. This standard establishes a standard definition for fair value, establishes a framework under generally accepted accounting principles for measuring fair value and expands disclosure requirements for fair value measurements. This standard is effective for financial statements issued for fiscal years beginning after November 15, 2007. The adoption of SFAS No. 157 is not expected to have a material impact on our consolidated financial statements.

In September 2006, the FASB issued SFAS No. 158, “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans—an amendment of FASB Statements No. 87, 88, 106 and 132(R).” This standard requires an employer to recognize the overfunded or underfunded status of a defined benefit postretirement plan as an asset or liability in its statement of financial position and to recognize changes in that funded status in the year in which the changes occur as a component of comprehensive income. The standard also requires an employer to measure the funded status of a plan as of the date of its year-end statement of financial position.

The requirement to recognize the funded status of a defined benefit postretirement plan is effective December 31, 2006. The requirement to measure plan assets and benefit obligations as of the date of the employer’s fiscal year-end statement of financial position is effective for the fiscal years ending after December 15, 2008. The adoption of SFAS No. 158 requires us to fully recognize a liability for the underfunded status of our benefit plans. The offset to the liability will be posted to other comprehensive income. The underfunded status of our benefit plans at December 31, 2005 was approximately $36 million. We expect, upon the adoption of SFAS No. 158, that a similar amount will be recorded as a liability in our balance sheet at December 31, 2006.

In September 2006, the SEC staff added Section N to Staff Accounting Bulletin (SAB) Topic 1 through the issuance of , “Financial Statements – Considering the Effects of Prior Year Misstatements when Qualifying Misstatements in Current Year Financial Statements” (SAB 108). SAB 108 addresses how a registrant should evaluate whether an error in its financial statements is material. The guidance in SAB 108 is effective for fiscal years ending after November 15, 2006. The adoption of SAB 108 is not expected to have a material impact on our consolidated financial statements.

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

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

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

For fiscal 2005 and the first nine months of 2006, 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 for the balance of 2006, but we currently do not anticipate any substantial changes that will materially affect our operating results.

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

In the normal course of business, we are exposed to fluctuations in interest rates and equity market risks as we seek debt and equity capital to sustain our operations. At September 30, 2006, approximately 54% of our debt was in fixed rate instruments. The following table provides information about our financial instruments that are sensitive to changes in interest rates. The table presents principal cash flows and related weighted-average interest rates by expected maturity dates. (See “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Liquidity, Capital Resources and Working Capital”.)

Principal Amount by Expected Maturity – Average Interest Rate
September 30, 2006
(Dollars in thousands)

	Twelve Months Ended September 30,
	2007			2008			2009			2010			2011			Thereafter			Total			Fair Value
Long-term debt:

Fixed interest rate	$	818		$	453		$	369		$	12		$	13		$	475,481		$	477,146		$	523,710
Interest rate	5.4		%	5.6		%	5.1		%	6.2		%	6.2		%	3.1		%	3.1		%
Variable interest rate	$	2,500		$	2,500		$	2,500		$	397,125		$	—		$	—		$	404,625		$	404,977
Average interest rate	6.6		%	6.6		%	6.6		%	6.8		%	0.0		%	0.0		%	6.8		%

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 the United Kingdom, Germany, the Netherlands, Spain, Sweden, Mexico, Austria, Chile and Ireland. 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 the second quarter of 2006 we made a material acquisition in the United Kingdom. This acquisition has increased our market risk associated with foreign currency movements. Our most significant transactional foreign currency exposures are the Euro and the Sterling in relation to the United States dollar. Fluctuations in the value of foreign currencies create exposures, which can adversely affect our results of operations. 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. In addition, a significant portion of the cost attributable to our foreign operations is incurred in the local currencies. 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.

Throughout this Quarterly Report on Form 10-Q we make “forward-looking statements” within the meaning of the United States Private Securities Litigation Reform Act of 1995. In some cases, forward-looking statements can be identified by the use of forward-looking terminology such as “may,” “will,” “estimate,” “intend,” “continue,” “believe,” “expect” or “anticipate,” or the negatives thereof, variations thereon or similar terminology. The forward-looking statements contained in this Quarterly Report on Form 10-Q are generally located in the material set forth under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations” but may be found in other locations as well. These forward-looking statements generally relate to plans and objectives for future operations and are based upon management’s reasonable estimates of future results or trends. Although we believe that the plans and objectives reflected in or suggested by such forward-looking statements are reasonable, such plans or objectives may not be achieved.

Actual results may differ from projected results due, but not limited, to unforeseen developments, including developments relating to the following:

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

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

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

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

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

· an inability to renew or early termination of our contracts;

· an inability to engage in future acquisitions;

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

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

Actual future results may be materially different from what we expect. We will not update forward-looking statements even though our situation may change in the future.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

We have evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) as of the end of the period covered by this Form 10-Q. The evaluation was conducted under the supervision and with the participation of our management, including our Chief Executive Officer and our Chief Financial Officer. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective in alerting management in a timely fashion to all material information required to be included in our periodic filings with the Securities and Exchange Commission.

There were no changes in our internal control over financial reporting during the quarter ended September 30, 2006 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

SCIENTIFIC GAMES CORPORATION AND SUBSIDIARIES
Nine Months Ended September 30, 2006

PART II. OTHER INFORMATION

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

ISSUER PURCHASES OF EQUITY SECURITIES

Period	Total Number of Shares Purchased	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Maximum Number of Shares (or Approximate Dollar Value) of Shares that May Yet Be Purchased Under the Plans or Programs
July	—	—		N/A	N/A
August	2,975	$	29.36	N/A	N/A
September	—	—		N/A	N/A

(1) During the third quarter of 2006, a total of 2,975 shares with a market value of $29.36 per share were withheld by the Company to satisfy the withholding taxes associated with the vesting of restricted stock awards.

Item 6. Exhibits

	Exhibit Number

	10.1		Employment Agreement dated as of January 1, 2006 by and between the Company and A. Lorne Weil (executed on August 8, 2006)

	10.2		Employment Agreement dated as of January 1, 2006 by and between the Company and Robert C. Becker (executed on August 2, 2006)

	10.3		Employment Agreement dated as of January 1, 2006 by and between the Company and Sally L. Conkright (executed on August 2, 2006)

	10.4		Employment Agreement dated as of January 1, 2006 by and between the Company and Larry Potts (executed on August 2, 2006)

	10.5		Employment Agreement dated as of August 1, 2006 by and between Scientific Games International, Inc. and William J. Huntley (executed on August 2, 2006)

	10.6		Employment Agreement dated as of January 1, 2006 by and between Scientific Games International, Inc. and Steven M. Saferin (executed on August 2, 2006)

	10.7		Employment Agreement dated as of August 1, 2006 by and between Scientific Games International, Inc. and Cliff O. Bickell (executed on August 2, 2006)

	10.8		Employment, Separation and General Release Agreement dated as of October 5, 2006 by and between Scientific Games International, Inc. and Cliff O. Bickell (which superseded his Employment Agreement dated as of August 1, 2006)

	10.9		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 June 17, 2005 (effective as of January 1, 2006)

	10.10		Letter Agreement dated as of August 2, 2006 by and between the Company and DeWayne E. Laird, which amended Mr. Laird’s Employment Agreement dated November 1, 2002 (effective as of January 1, 2006)

	10.11		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)

	31.1		Certification of the Chief Executive Officer of the Company pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934.

	31.2		Certification of the Chief Financial Officer of the Company pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934.

	32.1		Certification of the Chief Executive Officer of the Company 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 the Chief Financial Officer of the Company pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	SCIENTIFIC GAMES CORPORATION
	(Registrant)


	By:	/s/ DeWayne E. Laird
	Name:	DeWayne E. Laird
	Title:	Vice President and Chief Financial Officer
		(principal financial officer)


Dated: November 8, 2006

SCIENTIFIC GAMES CORPORATION AND SUBSIDIARIES
Three Months Ended September 30, 2006

INDEX TO EXHIBITS

Exhibit Number

10.1		Employment Agreement dated as of January 1, 2006 by and between the Company and A. Lorne Weil (executed on August 8, 2006)

10.2		Employment Agreement dated as of January 1, 2006 by and between the Company and Robert C. Becker (executed on August 2, 2006)

10.3		Employment Agreement dated as of January 1, 2006 by and between the Company and Sally L. Conkright (executed on August 2, 2006)

10.4		Employment Agreement dated as of January 1, 2006 by and between the Company and Larry Potts (executed on August 2, 2006)

10.5		Employment Agreement dated as of August 1, 2006 by and between Scientific Games International, Inc. and William J. Huntley (executed on August 2, 2006)

10.6		Employment Agreement dated as of January 1, 2006 by and between Scientific Games International, Inc. and Steven M. Saferin (executed on August 2, 2006)

10.7		Employment Agreement dated as of August 1, 2006 by and between Scientific Games International, Inc. and Cliff O. Bickell (executed on August 2, 2006)

10.8		Employment, Separation and General Release Agreement dated as of October 5, 2006 by and between Scientific Games International, Inc. and Cliff O. Bickell (which superseded his Employment Agreement dated as of August 1, 2006)

10.9		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 June 17, 2005 (effective as of January 1, 2006)

10.10		Letter Agreement dated as of August 2, 2006 by and between the Company and DeWayne E. Laird, which amended Mr. Laird’s Employment Agreement dated November 1, 2002 (effective as of January 1, 2006)

10.11		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)

31.1		Certification of the Chief Executive Officer of the Company pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934.

31.2		Certification of the Chief Financial Officer of the Company pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934.

32.1		Certification of the Chief Executive Officer of the Company 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 the Chief Financial Officer of the Company pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

Exhibit 10.1

This EMPLOYMENT AGREEMENT (this “Agreement”) is made as of January 1, 2006 (the “Effective Date”), by and between SCIENTIFIC GAMES CORPORATION, a Delaware corporation (the “Company”), and A. Lorne Weil (“Executive”).

W I T N E S S E T H :

WHEREAS, Executive has been employed pursuant to an Amended and Restated Employment Agreement with the Company, dated as of February 28, 2003 (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:

references to the Term hereafter in this Agreement shall include the initial Term and any Extension Term. It is 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 ; it being understood that for all such purposes Executive’s tenure at the Company commenced on August 1, 1990.

the same percentage of common stock held, any consideration payable to holders of the Company’s common stock generally for their shares pursuant to such Change in Control transaction, as if Executive held, as of the Change in Control Reference Date, all shares of the Company’s common stock underlying all the vested restricted stock units included in the Special RSU Grants (including those granted or deemed granted pursuant to clause (A) of this paragraph 4(d)(ii)) and those vested pursuant to clause (B) of this paragraph 4(d)(ii)). The “Change in Control Reference Date” shall mean the date of, and the time immediately prior to the time of, the Change in Control, or such earlier date and/or time as shall entitle Executive to receive pursuant to such Change in Control transaction, at substantially the same time and as to the same percentage of common stock held, any consideration payable to holders of the Company’s common stock generally for their shares, as the holder of the common stock underlying all the vested restricted stock units included in the Special RSU Grants (including those granted or deemed granted pursuant to clause (A) of this paragraph 4(d)(ii) and those vested pursuant to clause (B) of this paragraph 4(d)(ii)). For purposes of this paragraph 4(d)(ii), references to common stock underlying restricted stock units shall include securities substituted or resubstituted therefor in accordance with the terms of the RSU Agreements and the Equity Plan.

(iii) Notwithstanding anything to the contrary set forth in this Agreement, in the RSU Agreements or in the Equity Plan, in the event that Executive’s employment is terminated by reason of Executive’s death or Total Disability, or by the Company without Cause, or by Executive for Good Reason (including, without limitation, a deemed termination by the Company without Cause due to a Failed Termination for Cause (as defined in Section 5(c) hereof) pursuant to Section 5(c) hereof): (A) if such termination of employment occurs before the 2007 RSU Grant has otherwise been made to Executive, then (x) the 2007 RSU Grant shall be granted (or if not granted, shall be deemed to have been granted) to Executive on the day immediately preceding the Termination Date, and such day shall be the Grant Date of the 2007 RSU Grant; and (y) the number of restricted stock units included in the 2007 RSU Grant shall be the number determined using the day immediately preceding the Termination Date as the Grant Date of the 2007 RSU Grant; and (B) if such termination of employment occurs before all restricted stock units included in the Special RSU Grants (including those granted or deemed granted pursuant to clause (A) of this paragraph 4(d)(iii) and including those subject to the 2006 RSU Grant, whether or not such termination occurs prior to the Grant Date of the 2006 RSU Grant) have vested (except by reason of forfeiture pursuant to the terms of Section 5(j) of this Agreement), then all such vested restricted stock units shall fully vest and become non-forfeitable as of the Termination Date and Executive shall be entitled to the benefits thereof, as provided in Section 5(b) (in the case of termination by reason of Executive’s death) or 5(d) (in the case of termination by reason of Executive’s Total Disability, by the Company without Cause, or by Executive for Good Reason).

finally terminated as of December 31, 2005 (“SERP”) had a value equal to $9,853,046 (representing the lump sum present value of his SERP benefit as of December 31, 2005) which will accrue interest at a rate of four percent (4%) per annum, compounded annually, for the period from December 31, 2005 through the date of distribution (the “SERP Benefit”). Executive shall receive his aggregate SERP Benefit in a lump sum payment on the date that is six months plus one day after the Termination Date. Notwithstanding anything to the contrary contained in the SERP, in any other plan or policy of the Company or in this Agreement, it is hereby acknowledged and agreed that the SERP Benefit is and shall remain a fully vested and nonforfeitable benefit and shall be payable to Executive, in the manner provided above, following any termination of his employment by the Company regardless of the reason or grounds for such termination of employment.

termination by Executive for other than Good Reason pursuant to this Section 5(a). In the event Executive terminates his employment for other than Good Reason, Executive shall be entitled only to the following compensation and benefits:

mandatory deferral under such plans or programs; provided, however, if necessary to comply with Section 409A(a)(2)(B)(i) of the Code, and applicable administrative guidance and regulations, such settlement shall be made on the date that is six months plus one day following the Termination Date; and

the good faith opinion of the Board of Directors, Executive was guilty of conduct constituting Cause (the “Cause Resolution”). The Company’s delivery of the Cause Resolution to Executive shall be accompanied or followed by delivery by the Company to Executive of a written notice of termination for Cause referring to this Section 5(c), stating the grounds for such termination (which shall be the same grounds as set forth in the Cause Resolution) and specifying the effective date of such termination for Cause, which date shall be no earlier than 31 days after the date on which Executive receives such written notice of termination for Cause (the “Cause Termination Notice”), provided that at any time prior to the effective date of such termination, the Board of Directors may, in accordance with the next sentence, relieve Executive of all or a portion of his duties and treat him as a suspended employee of the Company, and until the Termination Date Executive shall be entitled to continue to receive all compensation and benefits under this Agreement as if he had not been suspended or given notice of termination (and such suspension for the avoidance of doubt shall not constitute “Good Reason” for purposes of this Agreement). Any such suspension shall be effected either (i) pursuant to the Cause Resolution or (ii) pursuant to a resolution otherwise approved (which approval need not be by meeting on formal notice) either by a majority of the Board of Directors (excluding Executive) or, if a majority of the Board of Directors cannot reasonably be convened promptly in person or by telephone, by a majority of the Executive Committee of the Board of Directors (excluding Executive), in each case determining, in the good faith opinion of the participants, that Executive was guilty of conduct constituting Cause and that prompt suspension of Executive is reasonably required in the best interests of the Company, which resolution is confirmed within 10 days by a Cause Resolution. Notwithstanding any such suspension, Executive shall be afforded such opportunity as may be reasonable under the circumstances to correct grounds for termination as contemplated by the fifth sentence of this Section 5(c) until the expiration of the 30-day period provided therein.

If Executive disputes the Company’s allegation of Cause by initiating arbitration pursuant to Section 13 of this Agreement and the arbitration panel finds that the Company properly terminated Executive’s employment for Cause in accordance with the provisions of this Section 5(c), Executive shall, within 30 days of the arbitration award, repay the amount (if any) by which (A) the amounts provided to him by the Company in respect of periods commencing after the termination date of his employment set forth in the Cause Termination Notice, including but not limited to salary continuation and the value of all benefits provided to Executive in respect of periods commencing after his termination date, exceed (B) the amounts to which he is entitled under this Agreement upon a termination for Cause. If the amount in (A) does not exceed the amount in (B), the Company may reduce any amounts owed to Executive by the amount in (A). If the arbitration panel does not find that the Company properly terminated Executive’s employment for Cause in accordance with the provisions of this Section 5(c) (a “Failed Termination for Cause”), then (x) Executive’s employment shall be deemed to have been terminated by the Company without Cause as of the date (the “Deemed Termination

Date”) which is 31 days after the date on which the Cause Resolution and the Cause Termination Notice were delivered to Executive; (y) the Company shall provide Executive with the payments and benefits set forth in Section 5(d) hereof as if the Company had terminated Executive without Cause as of the Deemed Termination Date, provided that any amounts previously paid to Executive by the Company as a suspended employee in respect of periods commencing on or after the Deemed Termination Date shall be credited against amounts owed to Executive under Section 5(d) hereof; and (z) the Company shall pay (or reimburse, if already paid by Executive) all reasonable expenses actually incurred by Executive in connection with contesting such Failed Termination for Cause.

In the event that Executive’s employment is terminated by the Company for Cause in accordance with this Section 5(c), Executive shall be entitled to receive only the following payments and benefits:

The Company hereby acknowledges and agrees that, as of the date on which this Agreement is executed by the Company, the Company is not aware of grounds for terminating Executive for Cause.

reasonably acceptable to the Company. For purposes of this Agreement, “Good Reason” shall mean that without Executive’s prior written consent, any of the following shall have occurred, within sixty (60) days after Executive first had actual knowledge of the most recent conduct or event comprising an element of the alleged ground for termination for Good Reason (it not being necessary that all elements comprising the alleged ground for termination for Good Reason have occurred within such sixty (60) day period),: (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 any significant duties to Executive which are materially inconsistent with Executive’s positions or offices held under Section 3; (III) a decrease in Base Salary or material decrease in Executive’s compensation opportunities or in the aggregate benefits provided under this Agreement; (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; (V) a relocation of the principal executive offices of the Company more than 35 miles from their existing location in New York, NY, or a change in the location of Executive’s office to a location other than the Company’s principal executive offices; or (VI) any failure to secure the agreement of any successor corporation or other entity to the Company to fully assume the Company’s obligations under this Agreement in a form reasonably acceptable to Executive; provided, however, that a termination by Executive for Good Reason under any of clauses (I) — (VI) of this Section 5(d) shall be effective only if, within thirty (30) days following delivery of a written notice by Executive to the Company that Executive is terminating his employment for Good Reason and setting forth in reasonable detail the facts and circumstances allegedly constituting Good Reason, the Company has failed to cure the circumstances giving rise to Good Reason. In the event that Executive’s employment is terminated (A) by reason of Total Disability, (B) by the Company without Cause or (C) by Executive for Good Reason (as to (B) and (C), including, without limitation, a deemed termination by the Company without Cause or by Executive for Good Reason pursuant to the delivery of a Nonrenewal Notice in accordance with Section 2 hereof; and as to (B), including, without limitation, a deemed termination by the Company without Cause due to a Failed Termination for Cause pursuant to Section 5(c) hereof), the Company shall pay the following amounts, and make the following other benefits available, to Executive (such payments and benefits, the “Section 5(d) Payments and Benefits”):

Executive’s annual Base Salary as of the Termination Date and (B) Executive’s “Severance Bonus Amount” (as defined below), provided in each case that such amount shall be reduced by any disability payment provided to Executive as a result of any disability plan sponsored by the Company or its affiliates providing benefits to Executive. Such amount shall be payable in a lump sum in accordance with Section 5(f) of this Agreement. For purposes of this Agreement, “Severance Bonus Amount” shall mean (i) if such termination occurs on or prior to December 31, 2008, an amount equal to (1) a fraction the numerator of which is the number of calendar months during the period from and including the calendar month in which the Termination Date occurs to and including December 2009 and the denominator of which is 12, multiplied by (2) 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), or, alternatively, (ii) if such termination occurs subsequent to December 31, 2008, 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 Executive’s Target Bonus for the year of termination;

guidance and regulations, such settlement shall be made six months plus one day following the Termination Date;

Notwithstanding the foregoing, if a reduction in Base Salary or other level of compensation was a basis for Executive’s termination for Good Reason, the Base Salary or other level of compensation in effect before such reduction shall be used to calculate payments under this Section 5(d). For the avoidance of doubt, nothing in this paragraph is intended to broaden the definition of Good Reason contained above.

meet such 60% threshold is due solely to the acquisition of voting securities by an employee benefit plan of the Company or such surviving entity or of any subsidiary of the Company or such surviving entity; (C) the stockholders of the Company approve a plan of complete liquidation of the Company or an agreement for the sale or disposition by the Company of all or substantially all of its assets (or any transaction having a similar effect), or the Company sells all or substantially all of the stock of the Company to any person or entity other than an affiliate of the Company; or (D) during any period of two consecutive years, individuals who at the beginning of such period constitute the Board of Directors, 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 (A), (B), or (C) hereof) whose election by the Board of Directors or nomination for election by the Company’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 of Directors.

arbitral tribunal does not find that Executive willfully and materially breached one of the Sections referred to above, then the Company shall pay (or reimburse, if already paid by Executive) all reasonable expenses actually incurred by Executive in connection with contesting such alleged breach.

any entity if the acquisition of such securities did not violate the terms of this Section 6.1(a) at the time of such acquisition.

(commercial or experimental) of the Company 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 years after the termination of 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 B to this Agreement.

required by applicable law, regulation or legal process or in connection with any investigation by the Company or any governmental authority or are reasonably required to describe the conduct, decisions, or policies of the Company or any of its affiliates, or their respective businesses, officers, directors or employees.

conduct himself in accordance with it, as it may be amended or supplemented from time to time, it being understood that any termination of employment of Executive shall occur pursuant to and in accordance with Section 5 of this Agreement.

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.

Agreement, which, to the extent such amounts are paid by the Company shall be credited against the total amounts otherwise finally determined to be owed to Executive pursuant to this Agreement.

To the Company :

Scientific Games Corporation

750 Lexington Avenue

New York, N.Y. 10022

Attention: General Counsel

To Executive :

A. Lorne Weil

51 East 90th Street

Penthouse B

New York, New York 10128

With a copy to:

Hogan & Hartson L.L.P.

875 Third Avenue

New York, New York 10022

Attention: Andrew J. Trubin

IN WITNESS WHEREOF, each of the parties hereto has duly executed this Agreement on August 8, 2006, to be deemed effective as of the date first above written.

	SCIENTIFIC GAMES CORPORATION


	By:
	Name:
	Title:


	EXECUTIVE



	Name: A. Lorne Weil

EXHIBIT B

LIST OF PRE-EXISTING INVENTIONS OF EXECUTIVE

Exhibit 10.2

This EMPLOYMENT AGREEMENT (this “Agreement”) is made on August 2, 2006 but as of January 1, 2006 (the “Effective Date”), by and between SCIENTIFIC GAMES CORPORATION, a Delaware corporation (the “Company” or “SGC”), and Robert Becker (“Executive”).

W I T N E S S E T H

WHEREAS, Executive has been employed pursuant to an agreement with the Company which has been modified from time to time by the Board of Directors (the “Original Agreement”); and

WHEREAS, the Company and Executive desire that this Agreement replace and supersede the Original Agreement;

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. As part of the termination of the Original Agreement, amounts paid to Executive during 2006 as transportation allowances are eliminated as of the Effective Date and shall be deducted from the lump sum catch-up payment of base salary payable under Section 4 as a result of the increase in Executive’s base salary rate which will be implemented as of August 1, 2006.

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, 2008, 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 ninety (90) 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 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 Vice President and Treasurer 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 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, Chief Operating Officer, Chief Financial Officer 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 and eleven thousand dollars ($311,000) 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 therefore 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.

(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 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 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).

(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:

(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 amounts, 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.

(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” (as defined below) if the Company has failed to cure the event or condition constituting Good Reason within thirty days after Executive gives written notice to the Company setting forth in reasonable detail the facts and circumstances allegedly constituting Good Reason and specifically referencing this Section 5(e). For purposes of this Agreement, “Good Reason” shall mean that without Executive’s prior written consent, any of the following shall have occurred within ninety days prior to the delivery of such notice: (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 any 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. 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));

(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);

(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; and

(vi) Reasonable closing costs incurred by Executive for the sale of Executive’s residence in New York shall be reimbursed on an after-tax basis following receipt of proof of such costs, provided however, that such sale occurs within six months of termination of employment.

(f) 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 lump 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), 5(e)(iv) and 5(e)(vi) of this Agreement, shall instead be paid six months following the date of termination.

(g) 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 employer or insurer during the year following the Executive’s separation from employment (without regard to when such compensation is paid).

(h) 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.

(i) 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.

(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 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.

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.

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.

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 be in addition to rights and remedies otherwise available to the parties hereunder or under any other agreement or applicable law.

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 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 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 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.

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 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.

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.

To the Company :

Scientific Games Corporation

750 Lexington Avenue

New York, N.Y. 10022

Attention: General Counsel

To Executive :

Robert Becker

7 Hialeah Court

Wilmington, DE 19808

[Remainder of Page Intentionally Left Blank]

IN WITNESS WHEREOF, each of the parties hereto has duly executed this Agreement on August 2, 2006, to be deemed effective as of the date first above written.

SCIENTIFIC GAMES CORPORATION


By:
Name:	DeWayne Laird
Title:	Vice President & CFO


EXECUTIVE


Name:		Robert Becker

EXHIBIT A

LIST OF PRE-EXISTING INVENTIONS OF EXECUTIVE

Exhibit 10.3

W I T N E S S E T H :

WHEREAS, Executive has been employed pursuant to a letter agreement with the Company dated September 30, 2002, as been modified from time to time by the Board of Directors (the “Original Agreement”); and

WHEREAS, the Company and Executive desire that this Agreement replace and supersede the Original Agreement;

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, 2008, 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 ninety (90) 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 5. It is also intended that your previous term of employment with the Company shall be included when calculating your tenure at the Company for all purposes.

3. Offices and Duties. During the Term, the Executive will serve as Vice President of Administration and Chief Human Resources Officer 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, the Chief Operating Officer 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 her ability in such capacities, devoting substantially all of her 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 four hundred and twenty-two thousand dollars ($422,000) 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 66.7% of Base Salary as Incentive Compensation at Target Opportunity (“Target Bonus”) and up to 133% of Base Salary as Incentive Compensation at Maximum Opportunity.

(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.

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 her 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 her 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;

(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).

(i) The Standard Termination Payments (as defined in Section 5(a)); and

(c) Termination By Reason of Total Disability . Executive and the Company agree that Executive may not reasonably be expected to be able to perform her duties and the essential functions of her 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 amounts, 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(g) 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;

(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 her employment hereunder for “Good Reason” (as defined below) if the Company has failed to cure the event or condition constituting Good Reason within thirty days after Executive gives written notice to the Company setting forth in reasonable detail the facts and circumstances allegedly constituting Good Reason and specifically referencing this Section 5(e). For purposes of this Agreement, “Good Reason” shall mean that without Executive’s prior written consent, any of the following shall have occurred within ninety days prior to the delivery of such notice: (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 any 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. 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));

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 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 stockholders 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 lump 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. If the lump sum amounts described in Section 5(f) of this Agreement become payable, Executive shall receive payment within thirty (30) days of termination; provided, however, that if necessary to comply with Section 409A of the Code, and applicable administrative guidance and regulations, such payment shall instead be made in a lump sum six months following the date of termination. In addition, notwithstanding any other provision with respect to the timing of payments under this Agreement, including pursuant to Sections 5(c)(iii) or 5(e)(iv) of this Agreement, if necessary to comply with Section 409A of the Code, and applicable administrative guidance and regulations, such payments shall instead be made in a lump sum 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 during any period of continued payments pursuant to this Section 5. The Company’s obligation to make continued payments to the Executive shall be reduced by any compensation earned by the Executive during the severance period (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.

To the Company :

Scientific Games Corporation
750 Lexington Avenue
New York, N.Y. 10022

Attention: General Counsel

To Executive :

Sally Conkright
33 Pier 7
Charlestown, MA 02129

[Remainder of Page Intentionally Left Blank]

IN WITNESS WHEREOF, each of the parties hereto has duly executed this Agreement on August 2, 2006, to be deemed effective as of the date first above written.


	SCIENTIFIC GAMES CORPORATION


	By:
	Name:	Ira H. Raphaelson
	Title:	Vice President and General Counsel


	EXECUTIVE



	Name: Sally Conkright

EXHIBIT A

LIST OF PRE-EXISTING INVENTIONS OF EXECUTIVE

Exhibit 10.4

W I T N E S S E T H

WHEREAS, Executive has been employed pursuant to a letter agreement with the Company dated July 30, 2004, as modified from time to time by the Board of Directors (the “Original Agreement”); and

WHEREAS, the Company and Executive desire that this Agreement replace and supersede the Original Agreement;

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. As part of the termination of the Original Agreement, amounts paid to Executive during 2006 as housing and transportation allowances are eliminated as of the Effective Date and shall be deducted from the lump sum catch-up payment of base salary payable under Section 4 as a result of the increase in Executive’s base salary rate which will be implemented as of August 1, 2006.

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, 2008 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 ninety (90) 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 5. It is also intended that your previous term of employment with the Company shall be included when calculating your tenure at the Company for all purposes.

3. Offices and Duties. During the Term, the Executive will serve as Vice President, Chief Compliance Officer and Director of Security 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 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 his ability in such capacities, devoting substantially all of his 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 four hundred and twenty-two thousand dollars ($422,000) 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 66.7% of Base Salary as Incentive Compensation at Target Opportunity (“Target Bonus”) and up to 133% 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 therefore in accordance with the Company’s standard procedures.

(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 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 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:

(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;

(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).

(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(g) 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;

(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” (as defined below) if the Company has failed to cure the event or condition constituting Good Reason within thirty days after Executive gives written notice to the Company setting forth in reasonable detail the facts and circumstances allegedly constituting Good Reason and specifically referencing this Section 5(e). For purposes of this Agreement, “Good Reason” shall mean that without Executive’s prior written consent, any of the following shall have occurred within ninety days prior to the delivery of such notice: (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 any 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. 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));

(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.

(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 lump 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. If the lump sum amounts described in Section 5(f) of this Agreement become payable, Executive shall receive payment within thirty (30) days of termination; provided, however, that if necessary to comply with Section 409A of the Code, and applicable administrative guidance and regulations, such payment shall instead be made in a lump sum six months following the date of termination. In addition, notwithstanding any other provision with respect to the timing of payments under this Agreement, including pursuant to Sections 5(c)(iii) or 5(e)(iv) of this Agreement, if necessary to comply with Section 409A of the Code, and applicable administrative guidance and regulations, such payments shall instead be made in a lump sum six months following the date of termination.

(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) and Executive will not in the future seek employment at the Company. 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 .

To the Company :

Scientific Games Corporation

750 Lexington Avenue

New York, N.Y. 10022

Attention: General Counsel

To Executive :

Larry Potts

17670 Braemar Place

Leesburg, VA 20175

[Remainder of Page Intentionally Left Blank]

IN WITNESS WHEREOF, each of the parties hereto has duly executed this Agreement on August 2, 2006, to be deemed effective as of the date first above written.

	SCIENTIFIC GAMES CORPORATION


	By:
	Name:	Ira H. Raphaelson
	Title:	Vice President and General Counsel


	EXECUTIVE



	Name:	Larry Potts

EXHIBIT A

LIST OF PRE-EXISTING INVENTIONS OF EXECUTIVE

Exhibit 10.5

This EMPLOYMENT AGREEMENT (this “Agreement”) is made as of August 1, 2006 (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 William J. Huntley (“Executive”).

W I T N E S S E T H

WHEREAS, Executive has been employed pursuant an Employment and Severance Benefits Agreement with the Company September 6, 2000 as modified by letter agreement of December 18, 2002 (the “Original Agreement”); and

WHEREAS, the Company and Executive desire that this Agreement replace and supersede the Original Agreement;

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 February 1, 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 ninety (90) 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 5. It is also intended that your previous term of employment with the Company shall be included when calculating your tenure at the Company for all purposes.

3. Offices and Duties. During the Term, the Executive will serve as President of Scientific Games Racing, Sports and Gaming Technology, a division of the Company, as Vice President of SGC, 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 President 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 or SGC may in good faith determine. The Executive hereby agrees to accept such employment and to serve the Company to the best of his ability in such capacities, devoting substantially all of his 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 five hundred and fifteen thousand dollars ($515,000) per annum, payable biweekly (except to the extent deferred under a deferred compensation plan) 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.

(f) Residual SERP Benefit. Executive’s aggregate retirement benefit under the Company’s Supplemental Executive Retirement Plan, as amended, restated and finally

terminated as of December 31, 2005 (“SERP”) had a value equal to $3,788,461.00 (representing the lump sum present value of his SERP benefit as of December 31, 2005) which will accrue interest at a rate of four percent (4%) per annum, compounded annually, for the period from December 31, 2005 through the date of distribution. Subject to the terms of the SERP and this Agreement, Executive shall receive his SERP benefit in a lump sum payment in accordance with Section 409A after termination of employment.

(g) 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 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 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:

(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;

(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 (unless accelerated as part of other termination provisions herein); and

(iv) Reasonable business expenses and disbursements incurred by Executive prior to such termination will be reimbursed in accordance with Section 4(d).

(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.

(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(h) 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;

(i) The Standard Termination Payments (as defined in Section 5(a));

(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(h) 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.

representing at least 40% of the combined voting power of SGC’s then-outstanding 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 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 stockholders 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 ) Retirement. In the event Executive retires on or after February 1, 2009 from full-time employment with the Company and in the industry by giving notice no later than ninety days prior to such event, he shall receive the same benefits as though he had terminated his employment for “Good Reason” above.

(h) 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 lump 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. If the lump sum amounts described in Section 5(f) of this Agreement become payable, Executive shall receive payment within thirty (30) days of termination; provided, however, that if necessary to comply with Section 409A of the Code, and applicable administrative guidance and regulations, such payment shall instead be made in a lump sum six months following the date of

termination. In addition, notwithstanding any other provision with respect to the timing of payments under this Agreement, including pursuant to Sections 5(c)(iii) or 5(e)(iv) of this Agreement, if necessary to comply with Section 409A of the Code, and applicable administrative guidance and regulations, such payments shall instead be made in a lump sum six months following the date of termination.

(i) 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 during any period of continued payments pursuant to this Section 5. The Company’s obligation to make continued payments to the Executive shall be reduced by any compensation earned by the Executive during the severance period (without regard to when such compensation is paid).

(j) 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.

(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 to participate in any other plan, arrangement or benefit provided by the Company, with respect to any future period after such termination or resignation.

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.

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 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.

Three Months
Ended
September 30,
2006

Nine Months
Ended
September 30,
2006

Weighted average per-share fair value of options granted during the period

To the Company :

Scientific Games Corporation

750 Lexington Avenue

New York, N.Y. 10022

Attention: General Counsel

To Executive :

William J. Huntley

6305 Holland Drive

Cumming, GA 30041

[Remainder of Page Intentionally Left Blank]

IN WITNESS WHEREOF, each of the parties hereto has duly executed this Agreement on August 2, 2006, to be deemed effective as of the date first above written.

	SCIENTIFIC GAMES INTERNATIONAL, INC.


	By:
	Name:
	Title:


	EXECUTIVE



	Name:	William J. Huntley

EXHIBIT A

LIST OF PRE-EXISTING INVENTIONS OF EXECUTIVE

Exhibit 10.6

This EMPLOYMENT AGREEMENT (this “Agreement”) is made as of January 1, 2006 (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 Steven M. Saferin (“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 effective January 17, 2003 (the “Original Agreement”), which contract expired on December 31, 2005; and

WHEREAS, the Company and Executive desire that this Agreement replace and supersede the Original Agreement;

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, 2008, 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 ninety (90) 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 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 President of Properties (formerly known as Ventures), a division of the Company, as Vice President of SGC, 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 President 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 or SGC may in good faith determine. The Executive hereby agrees to accept such employment and to serve the Company to the best of his ability in such capacities, devoting substantially all of his 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 four hundred and fifteen thousand dollars ($415,000) per annum, payable biweekly 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.

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 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 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).